Mairéad Farrell (Galway West, Sinn Fein)
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Níl aon leithscéal faighte againn. No apologies have been received.

Is mian liom na riachtanais bhunreachtúla seo a leanas a mheabhrú do chomhaltaí. Agus páirt á glacadh acu i gcruinnithe poiblí, caithfidh comhaltaí a bheith i láthair go fisiciúil laistigh de theorannacha suímh Theach Laighean. Ní cheadóidh mé do comhaltaí páirt a ghlacadh i gcruinniú poiblí nuair nach bhfuil siad ag cloí leis an riachtanas bunreachtúil seo. Mar sin, má dhéanann aon chomhalta iarracht páirt a ghlacadh ó lasmuigh den suíomh, iarrfaidh mé orthu an cruinniú a fhágáil. Maidir leis seo, iarraim ar chomhaltaí a dheimhniú go bhfuil siad i láthair laistigh de phurláin Theach Laighean sula ndéanann siad aon ionchur sa chruinniú ar MS Teams.

Iarrtar ar chomhaltaí cleachtadh parlaiminte a urramú, nár chóir, más féidir, daoine nó eintiteas a cháineadh ná líomhaintí a dhéanamh ina n-aghaidh ná tuairimí a thabhairt maidir leo ina ainm, ina hainm nó ina n-ainmneacha ar shlí a bhféadfaí iad a aithint. Chomh maith leis sin, fiafraítear díobh gan aon rud a rá a d’fhéadfaí breathnú air mar ábhar díobhálach do dhea-chlú aon duine nó eintiteas. Mar sin, dá bhféadfadh a ráitis a bheith clúmhillteach do dhuine nó eintiteas aitheanta, ordófar dóibh éirí as an ráiteas láithreach. Tá sé ríthábhachtach go ngéillfidís leis an ordú sin láithreach.

I advise members of the constitutional requirement that members must be physically present within the confines of the Leinster House complex in order to participate in public meetings. I will not permit a member to participate where they are not adhering to this constitutional requirement. Therefore, a member who attempts to participate from outside the precincts will be asked to leave the meeting. In this regard, I ask any member partaking via Microsoft Teams that prior to making their contribution to the meeting that they confirm they are on the grounds of the Leinster House campus.

Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entities by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if members' statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

We will now consider the Finance Bill 2025. I welcome the Minister for Finance, Deputy Paschal Donohoe, accompanied by his officials to the meeting here today. The Bill was referred to the select committee of Dáil Éireann on 21 October last. There are 91 amendments tabled for consideration and I wish to refer members to the groupings of amendments for the purposes of the debate.

Regarding the arrangements for the consideration of the Bill, I propose the meeting continue from now until approximately 12 p.m. and resume at 1:30 p.m., with a short break at 3 p.m. to 3.30 p.m. and a short break at 6 p.m. to 6.30 p.m. The meeting will finish no later than 10 p.m. this evening. The meeting will then resume its consideration of the Bill tomorrow, Thursday morning at 9:30 a.m. in committee room 1, with a break between approximately 12 p.m. and 2:30 p.m. We will then continue the meeting at 2.30 p.m. in committee room 3. There will be a short break at 5 p.m. to 5.30 p.m. and a short break at 7.30 p.m. to 7.45 p.m. The meeting will finish no later than 9 p.m. that evening.

If necessary, the meeting will resume its consideration of the Bill at 2.30 p.m. on Wednesday, 12 November in committee room 3 until the Bill is completed. I understand the Minister is unavailable on the Wednesday. As people will be aware, we were due to have it on the Tuesday but due to the inauguration, that is not possible. The meeting will also be suspended for any Dáil votes. Does anyone have anybody have any questions? No. Is that agreed? Agreed.

In order to provide for the smooth running of the meeting, any member acting in substitution for a member of the committee should formally notify the clerk now, if they have not already done so. Divisions will be taken as they arise and a member attending this meeting in accordance with Standing Order 115(3) should be aware that pursuant to that Standing Order, he or she may move his or her amendment but cannot participate in voting on that amendment.

Pearse Doherty (Donegal, Sinn Fein)
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Cuirim fáilte roimh an Aire agus a chomhghleacaithe ón Roinn Airgeadais chuig an choiste.

Section 2 deals with universal social charge, USC, and changes to the universal social charge. As we know, there are only really two measures relating to the income tax package that is in this Bill. One is a small measure, which relates to the universal social charge and which reflects the increase in the minimum wage. The other measure is a huge tax provision relating to the special assignee relief programme, SARP. Those who earn above €125,000 can receive over €100,000 of a tax reduction. Those are the only two income tax proposals in this legislation.

We have dealt with finance bills over the years and have had different approaches in relation to taxation. However, the Minister has always made the case that the income tax bands needed to be adjusted to reflect rising wage pressures. I want to put it to him at the start of consideration of this Finance Bill, when we deal with this issue, that this is a Bill which leaves workers worse off than they were last year and that has been reflected right across the State in terms of their anger at what the Government has brought forward with the €9.4 billion package that actually leaves workers worse off.

Does the Minister still believe that not adjusting income tax is the equivalent, if he is really honest, of raising taxes?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank Deputy Doherty and wish everybody a good morning. I accept that, in the absence of indexation of tax bands and credits, it does have an effect on workers within our economy and society. At the same time, we will continue to see wage growth take place in our economy, meaning that across next year with wages going up, once workers have paid their taxes, I expect to see a net increase in after-tax income.

Overall, in the construction of the budget, we have to ensure the budget is of a certain size. The reason for that is my view that if the budget was any larger than €9.4 billion - it is already a very big budget - and I were to add on top of that a personal package of indexation with regard to bands and credits, it would have taken the overall size of the budget up to anywhere between €10.5 billion and nearly €11 billion. My assessment is that a budget of that scale could pose real challenges to our ability to afford some of the changes we have made.

This is a budget that is largely defined by investment and how we try to support jobs within our economy. The Deputy is correct; there are some areas within that on which we have disagreed over a number of years. I look forward to continuing that debate in this Finance Bill. The way I am trying to support workers and growth in their income is by investing in jobs and in their future. My concern is that if I had added on top of that a personal taxation package of €1 billion to €1.5 billion, it would have posed real, long-term risks to our ability to afford the changes in this budget.

My aim, on completion of this budget, is to be able to do what I have done in other budgets in other years, which is to accompany it, on an annual basis, with changes in spending and changes in regard to indexation of bands and credits.

Pearse Doherty (Donegal, Sinn Fein)
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On that question, it appears that the Minister agrees that not adjusting income tax rates is the equivalent of tax rises. I take it from the Minister's answer that he agrees with that sentiment. Am I right? I want to follow on from that but-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I would not accept that it is equal to a tax rise per se. I do not accept that. I understand the Deputy's line of thinking with regard to it, as I always do - it is very clear - but I have different view in relation to it.

Pearse Doherty (Donegal, Sinn Fein)
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That is fine. Just to clarify-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I will briefly recap why, because I think it is important to be clear about this. The way I would have understood a tax increase is that there will be a decrease in people's take-home pay as a result of different changes that are being made. We expect to see incomes grow within our economy next year. We expect that, as a result of incomes growing by and large, people's after-tax income will be higher.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. I appreciate that. For clarification, we have had these debates in the past and the Minister disagrees with, as he says, my thinking on this. For transparency, the following are not my words, but the words of the Minister's party leader, Simon Harris, when he said with regard to not adjusting income tax: "That's the equivalent, we just need to be honest, of saying there will be tax rises". The Minister disagrees with that statement. He obviously thought it was my statement. It is actually that of his party leader. It is the Tánaiste's statement. Is that not a fact? I understand the Minister is not going to be in a position to say that today because the Tánaiste said it at a time when he promised the public there would be tax reductions but that was before the election. After the election, the Minister has come forward with a Finance Bill - it is not a case of him having to increase the budget package, as he could have made other choices in relation to taxation, but we will come to them later on - where he has allowed developers and landlords to pay very little and, in some cases, no taxes. He has allowed very wealthy people - we will see the statistics on people who earn over €3 million - to get a tax reduction of over €100,000 in this Finance Bill. These are all choices the Minister has decided to make. I wanted to make that very clear. What the Minister is talking about here is not a contrary position to mine. It is a contrary position to that of his party leader, the Tánaiste, Simon Harris, before the election. I wanted to clarify that.

Paschal Donohoe (Dublin Central, Fine Gael)
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In a clarification on that, I was present with the Tánaiste when he made statements like that. Of course, I have made statements like that myself in the past but what the Tánaiste and I went on to say in the general election campaign, too, is that we would never make choices that would endanger our public finances. My hierarchy has always been, in every budget I have done, first to not do anything that can cause harm to our public finances in the long run. That has always been our priority. That was made clear by the Tánaiste in many debates and by myself. After we have delivered against that priority, our further priorities are what we can do from a spending and taxation point of view. Both the Tánaiste and I reached a view that if we were to bring forward an overall tax package that, as I said, would have been well in excess of €2.5 billion, it would have posed risks. That was the Tánaiste's and my judgment and it is one I stand over and will stand over in this discussion.

Pearse Doherty (Donegal, Sinn Fein)
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The Tánaiste claims the Minister is raising taxes on people. That is the point.

Paschal Donohoe (Dublin Central, Fine Gael)
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We have already seen the debate, which will continue within this, regarding the scale of the budget as it is and how big it is. Both the Tánaiste and I were very clear in many of the debates that our first priority was always the safety of our public finances. My view and that of the Government is that if we had brought forward a budget that increased capital spending by the scale in which it has, had a current spending increase in excess of 6% and brought forward a personal tax package of €2.5 billion at a time in which we can see all of the change that is taking place around the world, that would have been the wrong thing to do. It would be wrong for the long-term health of our economy. What I hope and believe we will be able to do is that, if our economy does perform in the way I expect it will perform across the next year, we will be in a position to accompany the next number of budgets with changes in personal taxation.

Edward Timmins (Wicklow, Fine Gael)
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I want to come in on that conversation. I am on record as supporting indexation but I completely recognise the fact that one makes choices in a particular year. With regard to people's income tax, PRSI and USC, that is something that happens over time. We are going to have five different budgets. Each year has its own priorities. People will understand that if tax credits and bands are increased over a couple of years, we cannot suddenly think that there has to be X amount happening every year. People's finances and the economy of this country are more long-term things. One makes choices, as the Minister has done, at a particular point in time that are the most sensible choice for the economy. That is the responsibility. It is not always the most popular thing but sometimes it is the right thing.

I wish to raise a new issue as such, which is around Deputy Doherty's reference to the USC. Would the Minister consider, over time, incorporating the USC charge into our income tax system, given that it is effectively an income tax, though it obviously does not have the breaks and anomalies that our income tax system has? For the purpose of transparency and simplicity, the USC is effectively income tax. People think our top rate of tax is 40%; it is not. You pay 8% USC over 70-something thousand euro. Over time, to make our income tax system more transparent, the USC should be incorporated into our income tax system and we should get rid of the term "USC" altogether.

Paschal Donohoe (Dublin Central, Fine Gael)
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Before I deal with the latter part of Deputy Timmins's question, I acknowledge that he has made the case to me, both privately and publicly, for continued indexation of our personal tax code. He has made the case for that and I recognise it.

In relation to his question on integration between the USC and income tax, I think there would be difficulties with regard to that. If we were to do something like that, the goal would have to be how we would preserve the revenue that is still coming from the USC and income tax because it makes such a vital contribution to our public services. In essence, what that would then mean is that we would have to make income tax, in the Deputy's integrated proposal, more applicable at lower levels of income than it currently is. That could have some adverse reactions.

A number of years ago, I considered the integration of PRSI and the USC. One of the reasons I decided that was not something we could move forward on was that, once you look to integrate two different forms of taxation that are applicable on different levels of income, it can create quite significant winners and losers when you bring them forward together. Yes, of course, it is something that can be considered but my own view is that it would be an awful lot more difficult to do than it might look.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Cuirim fáilte roimh an Aire agus roimh na hoifigigh. On this issue of tax indexation, what the Government parties were discussing during the election campaign was not tax indexation; it was promises about tax cuts, which we have not seen delivered on. We pointed out during that campaign that you could not have a whole range of expenditure increases while reducing our tax take and that that was an irresponsible approach to take. We now see that yesterday the Minister published a report about future constraints we will be under relating to the lower number of workers versus the number of people who are retired, the ratios there and the risk of increased budget deficits. We already have an underlying budget deficit. There is a real issue with promises being made during election campaigns not just on 40,000 homes or reduced childcare or student fees but also about tax cuts that the Government then does not deliver on. I think that can make people cynical.

Mairéad Farrell (Galway West, Sinn Fein)
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We might try to keep the discussion to this section of the Bill. I realise we are at the start of the Bill. Minister, do you want to come back in?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, I will come in to respond briefly on that. First, at least the proposals my party brought forward during the election campaign were based on the premise of indexation and the need to do that. Again and again in the election campaign I made clear that I would never do anything that would cause what I believe would be a risk to our public finances. That has always been my starting point in many different election campaigns and all the different budgets I have done. The first priority has to be that you have to make choices, and the key choice is not to bring forward a budget that could be of such a scale that it might influence in a bad way choices that have to be made in the budgets that follow. I emphasise again that a budget that, overall, had increased investment at the scale that this budget has, that still involved an increase in current spending and that had brought forward an overall tax package of, let us say, €2.5 billion to €2.7 billion or €2.8 billion, I believe, would have been the wrong thing to do. I accept and understand that this is a tough argument to make with everything that is going on in people's live at the moment, but I think it would be a cause of greater cynicism in the long run if we were to bring forward budgets that we knowingly believe could create risks and for those risks to happen.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 1:

In page 8, between lines 6 and 7, to insert the following: “Report on Universal Social Charge

3. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on removing the Universal Social Charge from the first €40,000 a person earns.”.

This relates to the USC again and reflects the commitment we in Sinn Féin made in relation to the general election, which was less than a year ago. I am surprised the Minister has stood over a package from just a year ago that he has literally thrown out the window. I have looked at his commitments. It was interesting and very helpful that Deputy Timmins mentioned merging the USC with PRSI. That was not just something the Minister examined. It was another commitment that was given by Fine Gael in the election. It was in its manifesto. It followed from a commitment in a previous election campaign where Fine Gael promised to abolish the USC as well. There is a trend here. The abolition of the USC, a commitment in an election, was gone and was dumped after the election. Merging USC with PRSI, a commitment in the Fine Gael manifesto, was dumped after the election. The commitment it made in the last election was that it would increase bands by €2,000 per year every year and not, as Deputy Timmins says, within five years. Fine Gael was explicit. It was every year. That is nowhere to be seen either. This is by choice. The Minister has made choices and he will defend those choices and defend hundreds of millions of euro going to developers. I cannot see that anywhere in Fine Gael's manifesto, and that is the sneakiness for which the public have low regard. It is that broken promise and it breaks down trust in relation to political representatives. I know the Minister is hanging on to the idea that he did not want to do a package beyond that, but there were options within that, and this is one of the options we are putting forward. We have other amendments, and there are amendments from others here, as to how additional revenue could be raised to pay for the likes of a personal taxation proposal, or others may have other proposals in terms of increased expenditure. It is not the case, however, that if you do something it just increases the package. It can be offset by other measures or deciding not to go ahead with a tax cut, for example, for developers or for landlords or maybe looking at higher taxes in relation to banks, which are making super profits.

This proposal is about the abolition of the USC on the first €40,000 that individuals earn. It is something Fine Gael once campaigned on. The Minister stood for photo shoots with a policy that went way beyond this. It was to abolish it not just on the first €40,000 but for everybody. This would benefit people in the here and now as we are dealing with the cost-of-living crisis. It would benefit people to the tune of nearly €750. In my view, it is a part of a package of supports that is required, particularly now, given the cost-of-living crisis we have.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy for bringing this forward. Before I deal with the amendment itself, I want to put on the record of the committee the changes that have been made with regard to personal taxation over recent years. Looking at where we were in budget 2021, the entry point to the higher rate of income tax was €35,300. In budget 2025, it now stands at €44,000 for a single person, so the entry point into the higher rate of income tax has increased by €8,700. It has gone up by a quarter during that period. The entry point for a married couple with two earners has gone up from €70,600 in 2021 to €88,000 in budget 2025, an increase of 24.6%. During that period, the 4.5% rate of USC, which is the main rate of USC that most people in our economy pay most of their USC on, has gone from 4.5% to 3%. In the debate on what we could do in the future, I just wanted to refer to what we have done in the recent past and the changes that have happened.

In relation to the amendment Deputies Doherty and Farrell have brought forward, they are seeking a report on removing the USC from the first €40,000 a person earns. The USC was designed and incorporated into the Irish taxation system in 2011 to replace two other charges, namely, the health and income levies. 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. The USC is a more sustainable charge than those it replaced and is applied at a low rate on a wide base. It is important to acknowledge the significant contribution the USC has made in meeting the many spending demands placed on the Exchequer. The yield of the USC was €5.7 billion in 2024, with a yield of €5.6 billion forecast for 2025. If it were to be significantly altered, it would be necessary to consider how this yield could be generated from alternative sources.

With regard to the Deputies' proposal, I am advised that the estimated cost would be €1.44 billion in the first year and €1.65 billion in a full year. Not only would this measure be very costly, it would have the effect of hollowing out the USC base by removing approximately 1.17 million taxpayer units from this charge. As it stands, it is estimated that 29% of all taxpayer units will not be liable for the USC in 2026. This proposal would significantly narrow our tax base as it would mean that 63% of taxpayer units would not be liable to pay the USC. In my opinion, this would be a policy choice that could create a real vulnerability for funding our public services and weaken the original policy intention of the USC to widen our tax base and provide a stable and sustainable source of revenue for the State.

We have a very progressive income tax code in Ireland, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. Deputies will be aware that during the economic crisis, it reached a point that 45% of all income earners were exempt from income tax, which was unsustainable and placed an unfair burden on those earners who were contributing to the income tax base, and only created the vulnerability that was ultimately exposed by shock. It is my view that a broad-based, progressive income tax system, where the majority of income earners make some contribution according to their means, is the fairest and most sustainable income tax system in the long run. Having regard to all this, as well as the very large erosion of the tax base which this measure would cause, I believe there is no need to carry out a further analysis of the proposals outlined by the Deputies given the debate we have had up to this point and for that reason I cannot accept this amendment.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendments Nos. 2 to 5, inclusive, are related and will be discussed together.

Pearse Doherty (Donegal, Sinn Fein)
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I want to make a point on the grouping of the amendments. I do not want to hold things up, but I do not see why amendments Nos. 2 and 3, on the rent tax credits, are grouped with indexation. It is ridiculous. It is not a right call. It is completely different and they should not have been grouped.

Mairéad Farrell (Galway West, Sinn Fein)
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That is noted and it is on the record. Go raibh maith agaibh, a Theachtaí.

Gerald Nash (Louth, Labour)
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It is something I wanted to refer to myself. There is no relationship policy-wise between rent tax credits and the general tax policy of indexation. I would appreciate clarification, if it is available, as to why the decision was made to group.

Mairéad Farrell (Galway West, Sinn Fein)
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We will seek clarification and as soon as we get it, we can bring it back to the committee. I will start with Teachta Doherty.

Pearse Doherty (Donegal, Sinn Fein)
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That is fine. I move amendment No. 2:

In page 8, between lines 13 and 14, to insert the following: “Report on Rent Tax Credit

4. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the Rent Tax Credit operating in the absence of a cap on rents, making a direct comparison between the amount of the credit and rent increases across the State for each year that the credit has been in operation.”.

Amendments Nos. 2 and 3 are in my name. While I wish to speak on the amendments that have been brought in by colleagues regarding indexation and refundable tax credits, for the purposes of this section, I am just going to deal with rent tax credits. I will come in later and discuss the other ones. I know they are grouped but there are no time limits on the committee and therefore, we can decide which way we want to deal with them and that is the way I am going to deal with them. On the renter's tax credit, as the Minister will recognise, there is a bit of a trend here. This is another area where he has broken his promise to the public. He promised the public that he would increase the renter's tax credit. He said he would increase it to €1,500 but it is still at €1,000. He made it clear that it would be €100 extra per year, so it was not the case that it might happen some time in the future; it was an explicit commitment that this would be happening every year. The Minister has chosen to provide tax reductions for others instead. Fianna Fáil actually went further in its manifesto; it wanted to see the number increase to €2,000.

I made the case many years ago that we needed to see the renter's tax credit. In fairness to the Minister and the rare occasions that we do agree on some things, he made the point that the reports, including that of the Commission on Taxation, which looked at the previous iteration of the renter's tax credit introduced in the 1980s, called for its abolition and for it to be phased out, which happened a number of years ago. The Minister made the point that it had the impact of pushing up rents. He rightly made the point that a renter's tax credit would have the same impact and that in reality, it would be a transfer to landlords. I agree with that point. That is why we have never argued solely for a renter's tax credit on its own. On its own, it will do exactly as the Minister and the Commission on Taxation have said, that is, pushing up the price of rent. Unfortunately that is what we have been seeing before the renter's tax credit and since it has been introduced. The Government always needed to introduce this measure with a ban on rent increases, thereby ensuring that a renter's tax increase went into the pockets of the tenants and not those of the landlords. That is what is happening here.

I have two issues in respect of these amendments. The first is for the Minister to lay a report before the Dáil on the renter's tax credit operating in the absence of a cap on rents, making the direct comparison between the amount of the credit and the rent increase across the State each year that the credit has been in operation. We can see some of that from the ESRI and RTB figures, and some of it from the Daft rental index, which shows there has been a significant increase in rents since this measure was introduced. We are talking about people who are paying thousands of euro extra each year because of the runaway rents we are seeing. Amendment No. 3 also calls on the Government to bring forward a report on the changing real value of the renter's tax credit in respect of rent prices, and the decision not to increase the rent tax credit. Again, that brings into focus the Minister's broken promise. There will be a list of broken promises as we go through the Finance Bill but we are only on section 4 and we have already come to two main ones. There is a broken promise in terms of the commitment he gave workers to reduce their taxation. Now there is a broken promise to renters, which was not about extending the rent tax credit. I am sure the Minister will talk about that; it has happened. He went way further than that. He said he recognised the pressures that were on individuals and that he was going to increase the renter's tax credit. Renters will get no increase next year. They will get what they got. Landlords will get an increase next year. Well done. Priorities are very clear. Landlords get €1,000 of a rent increase. It is not in this Finance Bill but was stitched into a previous Finance Act. Renters do not get an increase on what they already got. The reality is that what the renters get is going to end up in the pockets of the landlords, because the Government refuses to bring in meaningful measures that would prevent rents increasing during this period of absolute crisis for renters.

Paschal Donohoe (Dublin Central, Fine Gael)
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Am I speaking to all of the amendments or to the ones brought forward by Deputy Doherty? Just in the interest of focusing my comments, that is all.

Mairéad Farrell (Galway West, Sinn Fein)
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I understand that some other members want to come in.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am in your hands. I just want to do justice to the different amendments, that is all.

Mairéad Farrell (Galway West, Sinn Fein)
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Does Teachta O'Callaghan want to come in now?

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I think it would be best if we could deal with the renter's tax credits and then I can come in after that.

Mairéad Farrell (Galway West, Sinn Fein)
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They are all being discussed together.

Pearse Doherty (Donegal, Sinn Fein)
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We can structure it differently.

Mairéad Farrell (Galway West, Sinn Fein)
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A Aire, if you want to come in first and then we will-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Just on the rent tax credits.

Mairéad Farrell (Galway West, Sinn Fein)
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Yes.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is fine. On the rent tax credits, first, Deputies Doherty and Farrell are requesting a report on the rent tax credit operating in the absence of a cap on rents, making a direct comparison between the amount of the credit and rent increases. They are therefore suggesting, as has just been done, that the rent tax credit should be complemented by rent caps. However, there are currently certain limits to rent increases. Rent increases in a rent pressure zone cannot exceed general inflation. While there is not a freeze in place, the rent pressure zones are in operation. The ESRI published research on this. Rent pressure zones now cover the entire country. The consumer price index identifies that the standardised average rent for new private tenancies increased by 5.9% in 2022, 9.2% in 2023 and 6.2% in 2024.

More broadly, the Government is placing its main focus on delivering on the Housing for All strategy. The aim in doing so is that additional supply over time will help to moderate housing costs for those who want to rent and those who want to buy.

Additional measures are being brought forward with regard to housing supply. This year, the Government has allocated €6.8 billion in capital expenditure for housing delivery. This represents a sixfold increase in just a decade. More than 4,500 cost-rental homes have been delivered since the launch of this tenure through various different channels including local authorities, AHBs, the LDA and the cost-rental tenant in situ scheme.

In relation to increases in the credit, for the years 2022 and 2023, the rent tax credit was valued at a maximum of €500 per single individual and €1,000 per jointly assessed couple. For the years 2024 and 2025, it was doubled to €1,000 per single individual and €2,000 per jointly assessed couple. It has now been extended for a further three years, benefiting - and they need this benefit - 315,000 taxpayer units, equating to almost 400,000 individuals. The programme for Government contains a commitment to "progressively increase the Rent Tax Credit". However, due to the many different demands that were there in relation to the budget, while this is something I hope and believe will be done in future budgets, as I said, due to the size of the overall budget and the other issues on which I had to make progress, I did not bring it forward at this particular time.

For the reasons I have outlined, I do not believe that the reports suggested by the Deputies are needed. As a result, I do not accept the amendments.

On the other proposals, first, on the measure that applies to landlords, we anticipate the overall cost for 2025 will be approximately €111 million. That is the best figure we have available to us. The rent tax credit in place at the moment involves an overall cost for this year of €350 million, so it is significantly higher in cost than the measure which has been brought forward with regard to landlords. The only reason measures are being brought forward in respect of landlords and - we will debate this later - to support developers is to increase supply and ensure that more apartments in particular will be built. The purpose is to try to keep landlords within the sector, because it remains the case that it will not be possible to make progress on the affordability and cost-of-living issues for tenants in particular in the absence of measures which stabilise and increase supply in the years ahead. That is the sole reason why measures are there with regard to landlords and supporting the private sector. I reiterate that if you look at the measure that is being funded and extended for renters, you can see that it is considerably in excess of the landlord-related measure.

Mairéad Farrell (Galway West, Sinn Fein)
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We will take these thematically, because there were issues raised in relation to the groupings.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister does not deny the fact that if you are a landlord today, you will be better off next year as a result of the Finance Bill. You will get an extra bonus. Up until now, you would get €800. Next year, it will be €1,000. If you are a tenant today, you will get the same next year as you did this year. That is the reality. That is the fairness. The Minister also will not deny that if we look at the figures from the RTB for last year, we can see that the rent increase alone exceeds the amount of the tax credit. That is the reality. That is in relation to new tenancies, by the way. The amounts relating to existing tenancies are also going up significantly.

We had discussions about the rent pressure zones and how effective or ineffective they are. Does the Minister not acknowledge, and this is what the amendment seeks to deal with, that the annual increase imposed on renters in the past couple of years was massive? It amounts to thousands of euro. When we talk, therefore, about providing a tax credit of €1,000 to an individual when rents continue to increase, there is a hole in the bucket. That is the problem. This money is ending up in the pockets of landlords. That is why the Minister made the point that this is what would happen. That is why the Commission on Taxation made the point that it would happen. That is why the evidence was that in the absence of a cap, we will see increases in rents - this is because it is baked in - and that is exactly what is happening.

Whether he likes it or not, the Minister is overseeing runaway rents. That is very much the responsibility of the Minister and the Government. Without a cap, this measure will actually fuel that. Worse still, it suggests that the Minister is doing something for tenants when he is not. That is because this will end up being baked into rent costs and will increase costs for everybody. It needs to be done, and I argued for this rent credit for years. I made the argument for it year after year, but the Minister stood steadfast against it because he was only taking one part of it. However, a two-pronged approach was always required. The Minister was right to stand against it if we were only doing it without a cap. With a cap, it could be effective in terms of the prices tenants are being charged and, crucially, it would make sure money went into tenants’ pocket at a time of very high rents. Even if a cap had been introduced three years ago, rents were still far too high at that stage. That is without talking about the rents as they are today.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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There is a significant and serious issue here - and the Minister provided some of the data - in relation to existing tenancies and new tenancies. It must be remembered that new tenancies primarily relate to existing rental stock as opposed to new builds. In both cases, where a tenancy changes over, rent increases year after year have broken what is allowable under law. A 2% increase has been allowable under law. Every year, in both instances, that has been broken significantly. When I raised this with the Taoiseach and others, they stated that if we regulate too hard, we will drive landlords out. It is as if the laws in this area are somehow optional. Laws are not optional. However, proper measures have not been put in place to enforce these laws. In the absence of such measures, what we are seeing is that at least a portion of renters' tax credits are simply driving up rents. That has to be tackled in order that we get value out of the tax expenditure here.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies for their contributions. First, I will deal with the relationship between the credits that are available for landlords and for renters. The landlord-related measure stood at €600 in 2024. At the same time, the rent tax credit stood at €1,000. The rent tax credit was not changed in this year’s budget, but in previous budgets it was doubled. In previous budgets, it has gone up by amounts of €200. In the budget before last, the rent tax credit was changed by an amount of €500. The landlord-related measure is going up in a preprogrammed way by €200. Where we are now at a point that both the rent tax credit and the landlord credit for 2026 will both stand at €1,000. As I said, the value and cost of the measure in relation to renters, at €350 million, is three times the amount of the measure that is in place regarding landlords. The reason the measure relating to landlords was brought forward by my predecessor was in an attempt, which I support, to try to retain smaller landlords within our rental sector and to stabilise and maintain the number of landlords who are providing the rental accommodation that is needed.

I go back to the argument I have made in this budget overall, which I have made in every budget I have done and election campaign I have been involved in, namely, the need to keep our public finances safe and not bring forward budgets that are so big they could create risks for our society and our people in the years ahead.

We have increased capital investment in our economy to €19 billion next year. When I started off doing debates in this room a number of years ago it was €3.7 billion, so it has gone up nearly fivefold during that period. If we were to meet all the different issues and needs that are there at the moment we would have brought forward a budget that would have been so big it would have created issues we would then need to respond to in the years ahead. I have seen what that can do to an economy and what it can do to the faith people have in the ability of politicians and of Government to make progress on issues that matter to them.

On the argument that has been made on the cap, again we are going to rehearse arguments we have had in the past but I still stand over the view I have advanced that if we were to bring forward a cap with regard to rent increases within our economy it would have really adverse effects on the willingness of new landlords to come into the sector and increase supply in the future. I am aware of other cities that have rent caps in place. I see debates continuing to rage in many of those cities regarding the affordability of rent and the availability of rental accommodation. I emphasise again that while I understand the real benefit a rent increase cap would bring to those who currently have rental accommodation, the huge risk is that over time it could mean even less rental accommodation is available, not to mention we do not encourage new landlords to come into the sector to provide additional rental accommodation. That is why we have the rent pressure zone in place, which is not a cap but aims to moderate the increase in rents that is possible within properties covered by the rent pressure zone.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Amendment No. 4 concerns refundable tax credits. According to the CSO 6% of those in employment are experiencing poverty. A refundable tax credit would allow low income workers who do not earn enough to use their full credits to have the unused portion refunded. This would essentially be a cash payment to those who are already dealing with low pay to ensure they do not miss out on the benefits of tax credits. This would help a lot of people who are on very low incomes who are working and struggling, especially given the withdrawal of the energy credits and the failure to replace them with enough targeted measures. That section of people who are working but who are on very low incomes and are finding it hard to get by would be helped by a measure like this. Social Justice Ireland has long put forward the case for it. It is equitable and based around the philosophy that work should pay, which I am sure the Minister agrees with. I am sure it was not the intention but the evidence shows in previous budgets – there is a strong case, of course, for doing indexation – that low paid workers have missed out compared with high paid workers. A measure like this is targeted and aimed at those who need additional support and should be getting it. It would be better if we could get low paid workers into better paid employment and get their wages up, but that is going to take time. While that is happening a measure like this would really help and support them. It needs to be looked at and I ask that the Minister do that.

Paschal Donohoe (Dublin Central, Fine Gael)
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Before I respond to the substance of the Deputy's amendment I acknowledge the important point he has made, which is on my mind and needs discussion, regarding if and when we go back to personal tax changes based on indexation. The reality I have grappled with is that even when you do that it means there are workers in our economy who will not see much of a change in their after-tax income. That is a really important point we have to consider. The Deputy will be aware, and indeed he said there, that this is a consequence of the fact we have a progressive tax code in the first place. That means the lower income you have, the lower tax amount you pay. The Deputy may not have said it but I will say he was acknowledging it in his contribution. If we move back to indexation it means those who do not pay much income tax and USC in the first place will not see a big change in their after-tax income and then if you were to try to adjust that it would lead to a narrowing of the number of people who pay income tax or USC in the first place, which is something we should try to avoid doing over time. That simply means discussions that are had in other committees and on budget day regarding the role of targeted spending measures will continue to be really important in supporting those who are on low incomes within our society and who are paying a relatively low level of USC or income tax, even though in their eyes it is still a large share of the income they earn.

On the measure the Deputy has brought forward to try to address that, the issue of refundable tax credits was recently examined as part of the tax strategy group, TSG, process in advance of budget 2024 and the analysis and findings of the review were published in the income tax TSG paper, which is available on the Department of Finance’s website. The review explored the concept of refundable tax credits, provided an overview of previous relevant studies and an overview of refundable tax credits in other countries and provided an economic analysis of refundable tax credits. The review identified a number of issues concerning their operation. It noted they would represent a fundamental change to the personal tax system. On the one hand refundable tax credits would help tackle in-work poverty, as the Deputy said, and would increase a measure of 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. That is the point I made a moment ago. Additionally, the introduction of refundable tax credits could potentially 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 utilise their tax credits in the first place. Take, for example, a single individual. The entry point to income tax will be €20,000 per annum in 2026. However, a single full-time worker earning the national minimum wage will have income of €28,700 in 2026. They will actually utilise all of their personal tax credits and therefore a tax credit that is refundable will not be of benefit to them. This is somebody who is on the minimum wage.

In addition, such credits could have behavioural impacts on labour supply and could reduce the incentive to take on additional work, though I should say that is a judgment and my experience continues to be that the vast majority – nearly everybody I meet – wants to work and find some kind of work, whether that is part-time or full-time work. God knows we have ample evidence of that in the number of people at work in our economy. The overall estimate provided by Revenue at the time of the review suggested a cost in the region of €1 billion for making tax credits refundable. This would be a really big operational change to implement. We have just done a detailed review of this, which has been published. It is for that reason I do not believe a further analysis is needed at the moment and that is why I am not accepting the Deputy’s amendment. As I said a moment ago, we did a review of this quite recently.

The overall policy issue I have with the measure that is being proposed by the Deputy is the number of people who are on low incomes within our society who are still in a position to avail of the tax credits that are available. Therefore, I am not sure making them refundable would deliver the benefit I understand the Deputy wants to deliver. I am strongly of the view that the only way we are going to make progress on the issue he is identifying is targeted measures that are spending in nature rather than taxation.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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First, I welcome the Minister's acknowledgement that there is an issue here in terms of low-paid workers and poverty. Nobody should be in poverty but the idea that people are working hard, are on an income where they are in poverty and the way the taxation system is designed is part of the problem, should not be the case. We should not have 6% of working people in poverty. That needs to be tackled. I welcome the Minister's acknowledgement of that and the detailed response. Regarding the examples the Minister was giving, the key thing here is that for a lot of low-paid workers who are in poverty, many of them are on the minimum wage or just above and many are in part-time work. There could be very good reasons they are in part-time work in terms of other responsibilities they have or what work is available for them in practical terms. They should not be in poverty when they are working. The Minister is right. My experience is that people seek as much work as they can. For people in part-time work who are in poverty, it is not because there is an element of choice there. They could be caring for a sick relative or elderly parents. There are different factors there that limit their availability. It is not a choice to be in poverty and to be working. This does need to be tackled and this is the way to do it. However, if the Minister is not convinced on this measure, there is a responsibility for him to look at what way this will be tackled. It is not simply enough that it should be tackled through other supports and transfers because, ultimately, if you are working you should not be in poverty and the way the taxation system is designed should support that. Therefore, it needs to be addressed.

Pearse Doherty (Donegal, Sinn Fein)
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I support the amendment from Deputy O'Callaghan. It is something we have raised ourselves on many occasions. It is a fundamental shift in relation to how taxation would apply but it looks at the issue of fairness. I was going to raise an issue regarding section 5 of the Bill but it may be appropriate to mention it here when we are dealing with the issue of refundable tax credits and particularly the Minister's comments regarding direct expenditure being the most appropriate way to support certain individuals. The issue is that this is not the case at the minute. If we look at amendment No. 4, it looks at refundable tax credits and "making personal tax credits refundable for low-income earners". If we look outside of personal tax credits and look at what else is available through the taxation system, there is a wide range of ways that we have, over many years, used the taxation system to support individuals who are in challenging difficulties. We know that from, perhaps not the tax credits but looking at it from the flat-rate expenses, that we do it for employees who are going to work and have to buy PPE and whatever but we also do it for individuals such as, for example, disabled drivers. The issue I was going to raise in section 5 was in respect of kidneys, that is, kidney donors. I have a connected person who would not benefit from this issue but is in a similar situation. If we take as an example that you are working and are currently going through home dialysis, you can avail of a flat-rate expense in excess of €4,000 for electricity costs because you have a machine that is going for about eight hours every single day and it costs electricity. Therefore, the taxation system has recognised that there is a flat-rate expense there in excess of €4,000 to assist you in terms of those additional costs. There are additional telephone costs and laundry costs because there are a lot of issues there. At this point, if you are one of the unfortunate people, including children, who have kidney disease and are doing home dialysis, you can benefit. Home dialysis is of huge benefit to the health system and it is great that this technology exists and that there are hundreds now doing it. If you are working you will get a flat-rate expense in excess of €7,000, which means that the benefit to you is about €2,800 in after-tax income. If you are not working you get none of that - not a penny - and that is not fair. In some cases, there will be a situation where people were working but because they are going through dialysis and chronic kidney disease they are not in a position to work.

I agree with what the Minister has said to a certain degree as regards direct expenditure being the best way to support these individuals but that is not the system we have. We have a system that has looked at the taxation code to be able to support different individuals at different times, and rightly so, but it leaves out so many others. There is an issue even for people who are currently working, just to take that situation of home dialysis as an example. The problem with that is people may not get that allowance until next year and their bills are increasing now. We all know the rip-off costs in electricity. There is a real issue here. Taking two people living side by side who are on home dialysis, one is supported by the State through taxation costs and because of their illness an additional need is recognised by the State. The other person, who may be working part-time but does not have a tax liability, is not able to benefit from that. That is not good or fair. That is our taxation code. Refundable tax credits would address that. This is not a credit; it is an allowance but the refundable nature of this would allow for that. We have to find a way of dealing with this. This is just one example of this but there are numerous other examples. These are individuals who would not be entitled to medical cards and so on. These are real pressures that are on the system at this point. The system needs a proper overview of how we are using the taxation code to assist individuals. That is fine in terms of assisting individuals. However, who does it leave behind? That is what is at the core of Deputy O'Callaghan's amendment. How can we ensure that those who are left behind are not left behind? It is not fair that just because a person is in employment that allows for a tax liability that one person on home dialysis is supported to the tune of nearly €3,000 by the State and another person is not. I do not think that was ever the intention. The intention behind bringing forward these types of flat-rate expenses is a good intention. It is about supporting people but people are being left behind in this regard. This a very real issue that exists now but there are many others. That is just one example I wanted to bring up because we are dealing with human donors in section 5. I may revisit that at that stage. However, there are other examples in the taxation code. I mentioned disabled drivers but there are other measures. Incapacitated tax credits are another example. Children are not supported if there is not a tax liability there. There are many examples where the taxation code does a really good thing to support individuals who have health conditions in particular, or disabilities, but so many people are not able to avail of that because they do not have a tax liability.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the two Deputies for their contribution. To deal with the issue regarding the role of refundable tax credits, I will inform it by some examples. If you are a married couple on a gross income within our country of €30,000, the amount of income tax you will be paying on that is zero.

Therefore, a married couple on €30,000 are not paying any income tax on their income overall. This just highlights the point I am making, which is that, because our income tax code is so progressive in the first place, the level of tax somebody on a relatively low level of income within our economy pays meansthe amount of gain they will get back by making a tax credit refundable would be a relatively low share of their overall income but with a very significant cost to the Exchequer overall. This is a feature of the fact that our tax code is progressive.

To deal with the Deputy's point regarding how we could better make progress in supporting people like that, it would be through seeing wages grow within our economy overall. That is why I believe changes that have been made with regard to minimum wages within our economy in recent years have been justified because they play a role in dealing with this kind of issue. My own assessment continues to be that there would measures that help with, for example, the affordability of childcare, measures like the working family payment and measures to help with the cost of going to school. For a smaller amount of the taxpayers' money, we can have a bigger benefit for those who are on a lower income within our country than we can by the implementation of refundable tax credits. I agree with the Deputy's diagnosis of the issue. I just have a different view regarding the best way of responding to it.

I take Deputy Doherty's point. It is also the case, as he will know, that we have other credits that are available within our tax code to help those who are in hardship, whether it is a widow, someone involved in dealing with a disability or so on. There are credits available there, which I guess builds on the point the Deputy is making.

On the point he made in relation to the cost of dialysis, I do not have direct personal experience of it. He may well do, and while I know it is obviously not influencing in any way the policy point he is making, it probably just demonstrates to him the issue we have to deal with here. I remember meeting on their doorstep a number of years ago a constituent who was on dialysis. They talked to me about the costs involved and the fact they were able to get that dialysis at home. Deputy Doherty mentioned the impact it had on our hospitals. Therefore, I very much understand the general point the Deputy is making. I remember that, as I was speaking to this person, I could hear the dialysis machine in the background. It really brought home to me the personal impact for somebody who has to use health equipment like that for hours every day to have some kind of standard of living and deal with a really serious health condition. I will certainly take away the point the Deputy is making regarding the lack of support that might be available for somebody who is not working and, therefore, does not access the tax reliefs that are available with regard to health expenses. I thought there would be some kind of support in place, but I will take on board the general point the Deputy is making and examine it further. It goes back to the general point I am making, though, that for some of these very specific issues, I think - I am convinced, in fact - that they are better off dealt with through spending measures than through our tax code. Otherwise, it leads to questions about the use of taxpayers' money and about how, while the level of tax paid by those we want to give it to the most is, in their eyes, a large share of their income, it is actually a low effective rate of income tax. For many of them, making the tax credit refundable would not offer too much of a benefit.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will make two quick points. The costing we have in terms of making refundable tax credits available for lower income workers is €125 million. I will look into the differences between the Minister's figure and the costing I have because I want to get to the bottom of that.

Not this budget, but recent budgets have had the effect of changes being made around indexation and around the taxation system, meaning that a high earner earning more than €100,000 per year has been €1,000 better off as a result of that budget than a low-paid worker. There is something very unjust about that, especially for low paid workers. Everyone feels the brunt of cost-of-living pressures, but for low-paid workers, it is particularly difficult keeping food on the table, getting the kids out to school, keeping the heat on and everything else. We should not have a situation like that. I will, therefore, press the amendment when we come to it.

Mairéad Farrell (Galway West, Sinn Fein)
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Did Deputy Nash want to come in on this? We are going to do it numerically.

Gerald Nash (Louth, Labour)
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I was in the Chamber speaking, so I have no problem doing it sequentially.

Mairéad Farrell (Galway West, Sinn Fein)
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Does the Aire want to come back in?

Paschal Donohoe (Dublin Central, Fine Gael)
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Deputy Doherty is signalling to speak.

Mairéad Farrell (Galway West, Sinn Fein)
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Okay. I call an Teachta Doherty.

Pearse Doherty (Donegal, Sinn Fein)
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Thanks a million. I heard what the Minister said in relation to this. For the record, while I do have experience in terms of home dialysis, there is nobody I know who would benefit from the measure. I know the Minister has not said that, but-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I was not suggesting that.

Pearse Doherty (Donegal, Sinn Fein)
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It is just because we do have to declare. There are people I know and who are connected to me who are using home dialysis and are able to benefit from the existing system.

To my knowledge and looking at the HSE, there is no support. There is lots of training in terms of home dialysis and a lot of support, including online support, but there is no financial support for home dialysis. I recognise that this is a good thing that has been done. We can look at what is happening in terms of home dialysis and something that is probably reasonably new. The latest figures show that there are probably 360 people who are using home dialysis across the State. When we think about the population in the State and the number of people who are using home dialysis, it is actually great that there is a measure in our taxation code that supports them. However, some of them are not getting supported and that is the point I am making. I think the figures from the HSE identified that 16 children were included.

As I mentioned and the Minister acknowledged, there is a benefit to our hospital system. The cost, if you want to put a cost on this, is huge. The HSE estimates that somebody who is doing home dialysis - it does not or will not work for everybody - on average saves 150 trips to the hospital. That is just massive when we think of 150 trips per person in terms of the inconvenience, the cost of having to go and all of those issues. Where we have a code that can support people through taxation, there needs to be an alternative that supports people through direct payments. That is why I am raising this. There is a way to do this where it could be refundable, whether that is through the taxation code or otherwise. If it is not, and if the Minister is setting his face against that for his own reasons, then there has to be a recognition of the fact that, in our tax code, we have already recognised a number of health-related and disability-related issues. There are schemes in relation to the purchase of disability aids, but it is a VAT refund, so everybody is going to get it. That is great; there is nobody left behind in relation to that. Continuous ambulatory peritoneal dialysis, CAPD, is another example. However, the numbers we are discussing are small. We need to look at how we support those individuals who have the same issues and the same costs but because they are either not in employment or are in employment without a tax liability, they cannot be supported. I am asking the Minister as a senior person in government to bring that back, consider it and look to see whether it can be done within our tax code or whether there should be a complementary measure within the Department to make sure this cohort is supported. There was a recognition at a point in time, probably by Deputy Donohoe as Minister for Finance, to bring forward a measure to support these individuals. That recognition has to be there for some of those who are left behind. In this example, we are talking about very small numbers, but we are also talking about big costs for people whose lives have been upended because of the situation in which they find themselves.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will certainly take that matter away and examine it further. I understand the point the Deputy is making regarding the costs for somebody who is accessing the healthcare they need and the fact that support is available through our tax code, but not if someone is not paying tax, which is the nub of the Deputy's point.

I understand that and I will take it away. In relation to Deputy Cian O'Callaghan's point, I emphasise again that the core of this challenge we are discussing is if you earn, for example, €25,000, your effective tax rate is 5.4%. The actual effective tax rate for those who earn low incomes within our society - it is a big share of their own income, they notice it going out of their wage slip, which I understand - but their effective tax rate is very low. It limits the degree to which tax policy can play a role in redistribution for those on our lowest levels of income. Comparatively speaking, if you are earning €50,000, your effective income tax rate is 10%. Your income is doubled and your effective tax rate is doubled. That is a feature of progressivity. That is the nub of the issue that I want to emphasise again.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The point I am making is changes in taxation and in budgets should not disproportionately benefit people on higher incomes compared to lower incomes. There is a range of reasons that should never happen.

Gerald Nash (Louth, Labour)
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On amendment No. 5-----

Mairéad Farrell (Galway West, Sinn Fein)
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We are taking them thematically, yes.

Gerald Nash (Louth, Labour)
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Yes. I thank the Chair. This relates to developing a system where the cost of indexation of personal tax rates, credits and so on would be reflected in the summer economic statement published every year so there is clarity about what the cost would involve. The Minister will be aware there are forms of automatic indexation for personal tax rates and social protection systems in existence for some time in countries like Sweden, Belgium, Canada, Iceland, the Netherlands, Switzerland and many others. I have been reading quite a lot of OECD information on this recently. They are policy decisions those countries decide to make in their own contexts. These are countries against which we like to compare ourselves in terms of how our economy is managed and how our society is evolving. I was not always persuaded of introducing indexation on personal tax rates and credits but the more I read about it, the clearer the case is, especially in the context in the past two to three years of rising wages and the risk of people on very modest incomes being pushed into higher tax brackets and the challenging cost-of-living situation households find themselves in at the moment. I would like to hear the Minster's views on the proposition and if it is something the Government is prepared to consider.

Paschal Donohoe (Dublin Central, Fine Gael)
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There are two points in response to what the Deputy said. The information should be made available in a structured way. In recent years, we have aimed to do that through the TSG process that has provided the costs with regard to indexation. On foot of the Deputy's amendment, I will make sure this is done in on a regular basis through the TSG process so that everybody is aware of the costs of that measure. I do not believe we should do it through the summer economic statement because it sets out the parameters of the budget, whereas the Deputy is looking for information regarding choices in the budget. I will make sure that is available through the tax strategy group process. I differ not so much with the Deputy's amendment but a point he went on to make. We should take care in making this an automatic decision. It should be a conscious political decision on budget day and as part of the budgetary process regarding whether this is something that should be done or not. I know from engaging with other finance ministers in Europe that making this an automatic decision can in harder times cause difficulties and crowd out other choices a government might want to make when developing a national budget. I agree with the Deputy's point on information and believe we can do it in a different way and meet the Deputy's need, which is why I am not accepting the amendment. I believe this should always be a conscious policy decision that is part of the budgetary process.

Gerald Nash (Louth, Labour)
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Obviously a conscious policy decision was taken this year not to do that. Politics, of course, is always about choices and resource allocation. That is the meat and drink of politics as it should be. This year, clearly choices were made to cut VAT, for example, on apartment development and hospitality. Frankly, given the constraints we are operating under, that choice was made at the expense of a degree of indexation for working people who will, in some cases at the very least, experience tax increases next year and may not experience net increases in their take-home pay. We can argue that back and forward. The point that has been argued already this morning so I do not want to belabour it. This is absolutely about choice. I am more persuaded than ever about the efficacy of doing this based, for example, on the Commission on Taxation and Welfare report of a couple of years ago, which clearly laid out the option available to us in raising revenue form alternative sources and not having as much of a focus on raising taxes on income. Income tax is a very significant and important tax head. We should pride ourselves on the fact that we have a progressive tax system in this country. That should remain the case. By addressing issues around indexation and introducing that as a feature of our system, that then forces us to make other choices. I do not think that is a bad thing, given that we are not good in this country, in international comparators at least, on raising revenue in terms of non-productive assets and wealth. They are the choices made. I accept that. These are political choices.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 3:

In page 8, between lines 13 and 14, to insert the following: “Report on Rent Tax Credit

4. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the changing real value of the Rent Tax Credit in relation to rent prices and the decision not to increase the Rent Tax Credit.”.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I move amendment No. 4:

In page 8, between lines 13 and 14, to insert the following: “Report on refundable tax credits

4. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the fiscal and distributional impact making personal tax credits refundable for low-income earners.”.

Gerald Nash (Louth, Labour)
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I move amendment No. 5:

In page 8, between lines 13 and 14, to insert the following: “Report on taxation and the cost of indexation

4. The Minister and the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation shall include in their Summer Economic Statement in each year a report setting out the estimated cost to the Exchequer of adjusting—

(a) tax rate bands and tax credits and allowances in relation to income tax, and

(b) benefits and allowances payable under the Social Welfare Acts,

to reflect any changes in the All Items Consumer Price Index numbers published by the Central Statistics Office in the 12 months before the date of the Statement.”.

Gerald Nash (Louth, Labour)
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I move amendment No. 6:

In page 8, between lines 13 and 14, to insert the following: “Report on employee share ownership trusts

4. The Minister shall, within 12 months of the passing of this Act, lay a report before Dáil Éireann on any proposals to amend Chapter 2 of Part 17 and Schedule 12 of the Principal Act, relating to employee share ownership trusts, so as to facilitate the establishment of a greater number of such trusts and their smooth and efficient functioning.”

This amendment proposes some changes to the policy environment in which employee share ownership trusts operate and, simply put, seeks a report that would lead to some policy evolution in that area. I believe it is an area that does need some attention. There have been significant changes to that policy area, for example, in the UK since 2014 in respect of the particular scheme they have in place there, which the Minister and officials in his Department might be familiar with. They introduced significant changes in the corporation tax regime as it applies to employees who are disposing of shares they have based on their employment in an organisation. It is a very underdeveloped area in Ireland and we know the reality is that of the number of businesses that are sold in Ireland every day, very few end up being owned on a majority basis by their employees. The Minister knows only too well that we have a disproportionate reliance in terms of successfully operated companies in Ireland of scale that are in the foreign direct investment side of the economy.