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.

We need to be conscious of that. I would appreciate the Minister's views on the amendment and more broadly whether he is considering any taxation changes that would support employee participation in the ownership of the companies within which they work.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I speak in support of this proposal. It is an area that we need to have taxation reform in. It warrants a careful consideration and I have urged the Minister to do this. There are a number of benefits for having employee ownerships. We have a situation at the moment where there are good enterprise supports for people establishing businesses and enterprises. They often reach a certain scale where the founder or founders want to sell. That could be after 20 years or it could be more. What often happens then at that point is that a private equity firm may come in and buy the enterprise or business into which a huge amount of blood, sweat and tears has gone and into which a huge amount of State supports, which are often very effective, has gone.

At that stage, there can be an asset stripping of that company or there can be rationalisations. The kind of long-term work that has gone in is sometimes lost and a lot of the value from that is lost. Getting a company where the owners and founders want to get that into the ownership of the employees is much better for that business and enterprise in the long run but it has also got real benefits in productivity. All the evidence shows that companies, businesses and enterprises owned by the employees in them are much more productive. They are better at problem solving, creating efficiencies and driving innovation and growth. These are all things that we want to do and support in our economy. This is good proven model of doing this and is an absolute win-win. However, at the moment the taxation code is prohibitive against people selling into employee shares or ownership trusts. At the very least, the taxation system should be changed in order that it is a level playing field at least for this type of company, if not actually incentivised. I urge the Minister to look at this.

Paschal Donohoe (Dublin Central, Fine Gael)
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I acknowledge the growing interest that there is in this policy area. Deputy Nash has requested to have a report on proposals to amend the Taxes Consolidation Act 1997 to facilitate the establishment of a greater number of employee share ownership trusts and their smooth and efficient functioning. As Deputies may be aware, an independent review of share-based remuneration carried out by Indecon Economic Consultants on behalf of my Department has been published. This review included a public consultation considering employee share ownership trusts and made a specific recommendation in this area suggesting that there “is merit in considering reforming the taxation of employee ownership trusts ... in line with the treatment of such arrangements in the UK". The term "EOT" does not appear in Chapter 2 of Part 17 of, or Schedule 12 to, the Taxes Consolidation Act. However, as alluded to by the recommendation of the Indecon review and by Deputy Nash, preferential tax treatment exists for the equivalent structure in the UK and it is not available here.

We will give consideration to this particular recommendation and my Department has engaged with stakeholders in this area and will do so again. Specifically, officials have now met representatives of the Irish Proshare Association, IPSA, to discuss proposals on employee ownership trusts in the past few months. Following these discussions, I have been informed that changes to several taxes have been raised with us by stakeholders and will need further consideration by my Department. These refer to the discretionary trust tax, DTT, capital gains tax, CGT, and to the close company surcharge. As part of any consideration of the amendments to the tax Acts in light of this recommendation, it is important to be more precise regarding what would be the potential benefits, and of course, what will be the costs of implementing changes to facilitate the establishment of employee ownership trusts, which is in line with my Department's guidelines for tax expenditure evaluation.

Given that an independent review of this has been published, made recommendations in this area and that my Department is now engaging with relevant stakeholders in this regard, it is not necessary to carry out a further review, which is why I will not propose to accept the amendment but I assure the committee that work in this area is now ongoing.

Gerald Nash (Louth, Labour)
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I thank the Minister for his response and Deputy O'Callaghan for articulating his support for the proposal. It is an area that is ripe for more work. It might be an area that the Ministers, Deputies Donohoe and Burke, and their officials could potentially continue to explore. My colleague, Deputy George Lawlor, has done a considerable amount of work in this regard. I am aware that the IPSA has met officials from the Department and that was a positive engagement. I am convinced that the Department understands the area and the barriers as well. It is certainly an area that can be developed here. Our systems, whether it be our taxation system, legal system and so on, are directly comparable with the UK. They have managed to successfully reform the situation there since 2014. The last time I checked, it was probably about 1,600 or 1,700 firms that may otherwise have been sold to private equity firms and others but which went on to be majority owned by their employees since those reforms were introduced in 2014.

As Deputy O'Callaghan said, there is a lot of evidence available that would suggest there are productivity gains to be had. As I said in my earlier contribution, there are very few, if any, Irish firms of a scale that are being bought or have a majority stake in them from their staff because of the barriers that exist at the moment. The barriers are one of the reasons. There are other reasons as well. Certainly, founders I speak to and engage with all the time in my constituency and elsewhere state that this is an area they would like to explore and that they would like their staff to be able to benefit in the success of a company. This is a kind of a modern reform of stakeholder capitalism, if we can describe it as such. It is an interesting area. It is something that we need to explore. It is evolving all the time. We are behind the curve here in Ireland. There are too many Irish firms where the only option for a founder is to sell to private equity and to people with deep pockets from outside of this jurisdiction and outside of the European Union. We have a focus and I know the Minister is aware of the risks here of our excess reliance on foreign direct investment. This is one way we can shift the dial a little.

Paschal Donohoe (Dublin Central, Fine Gael)
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I take the Deputy's points. This is something I can see the growing interest in. Deputy Nash's colleague, Deputy Lawlor, has approached me about it and indicated the interest that he and others have in it. I can see the role it could play. I can see how we are relatively underdeveloped versus the UK. I am aware of the other ownership structures that exist elsewhere within Europe. My officials and I have met in this regard. I am aware of the submissions that are there. As the Deputy has acknowledged, it needs a bit more work but we are happy to do that work and see if we can move this issue forward.

Pearse Doherty (Donegal, Sinn Fein)
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This section extends the mortgage interest relief.

The Minister will be familiar with this. It is a proposal I put forward a number of years ago which has found its way into the tax code. It was put forward as a result of very high interest rates being charged at a time when interest rates were probably increasing at the European Central Bank. We have now seen that reverse, with interest rate reductions in the last period. The interest rate has stayed stable over the last three ECB meetings but there has been a gradual decrease in the ECB rate, which has stood at 2% since June. The problem is that very high interest rates are still being charged by traditional banks and lending non-banks across the State. Nearly 30% of all mortgage holders with traditional banks are paying over 4% at this time and 30% are paying over 5% with the lending non-banks. A substantial number of people are actually paying above that if they are in the lending non-bank space.

The average interest rate across the eurozone in September was 3.3%. All these percentage points are big money for the average mortgage. A quarter of a percent could amount to a couple of hundred euro per month, which is a couple of thousand euro per year that should be in the householder's pocket as opposed to the pockets of the banks. The traditional banks in the State have made huge profits, totalling €5 billion between them last year. When we have a eurozone average interest rate of 3.3% and over one in four people here paying over 4%, there is an issue. I have made the point that the Government needs to stand up to the banks a bit more. Banks used to be called in and were told what was expected of them. Obviously, we cannot dictate or direct the policy – the Minister has ensured the shareholding of the State has been sold on, with PTSB to be the next to be sold – but there is a really big issue here. Certain customers are being ripped off. There are no two ways of describing that. If these banks were not making bumper profits, we would say customers were not being ripped off and this was just the market and businesses have to be profitable. Of course, they have to be profitable but €5 billion profit combined is a lot of profit. When mortgages are being charged well above the European average, there is an issue.

We also have the issue of what I call mortgage prisoners. These are people whose loans have been sold to vulture funds with the support of the Government parties at the time. These people have really been screwed over. There are about 70,000 mortgage prisoners, of whom about 10,000 are paying over 6.5% interest rate. That is extortionate in anybody’s books. When the ECB rate is 2% and average eurozone rates are 3.3%, a 6.5% interest rate for nearly 10,000 people as of June this year is pure and utter greed and extortion. It is licensed and allowed, which is ridiculous in my view.

This measure is necessary in this section because the banks are not passing on the interest rate reductions as would be expected. We know they did not increase them blow for blow as they went up. We do not expect them to reduce them blow for blow as they come down, but we do expect reductions and something more in line with the eurozone average. We definitely cannot stand over a situation where 10,000 families are being charged over 6.5% in interest on their mortgages. This measure is necessary but it should not be necessary because the banks should be doing their job and we should be in a more normal lending-rate environment in this State. Unfortunately, we are not. I am also concerned the relief will be phased out. Of course, it should be phased out because the banks should be reducing interest rates, but to make sure it can be phased out, we need to be able to stand up to the banking sector and ensure the banks are not making these bumper profits at the expense of mortgage holders.

In amendment No. 7 to this section, I am seeking a report on mortgage interest. The amendment has been ruled out of order at the direction of officials in the Minister’s Department. Is that the case?

Mairéad Farrell (Galway West, Sinn Fein)
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The Deputy can come in under section 5.

Pearse Doherty (Donegal, Sinn Fein)
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It does not relate to section 5, which deals with kidney donors. It relates to section 4 and was to be inserted before section 5. I will come in on section 5 but it deals with kidney donors. This amendment was to insert a new section after the section on mortgage interest relief and before the section on kidney donors. It was to provide for a report on the banks passing on ECB rates in a timely manner to mortgage holders in the form of lower interest rates. I understand that has been ruled out of order, citing a Standing Order which is about relevance. How in God’s name could this not be relevant when we are talking about taxpayers’ money having to go to support mortgage holders as a result of banks not passing on ECB interest rates? I am deeply shocked and I want direction from the Chair. Did the Department or the Journal Office come up with this? This cannot happen. As a TD, I am elected and it is my responsibility and job to bring forward amendments to the Finance Bill. I have had amendments to Finance Bills ruled out of order and I understand why but there is no way this amendment should be ruled out of order. Somebody is preventing me from tabling legislation here and that is not acceptable in my view.

Paschal Donohoe (Dublin Central, Fine Gael)
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On the procedural point, that is a decision made by the Bills Office.

Pearse Doherty (Donegal, Sinn Fein)
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On advice.

Paschal Donohoe (Dublin Central, Fine Gael)
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We give a view but we do not make the decision.

Pearse Doherty (Donegal, Sinn Fein)
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No, but the advice from the Department would have been to refuse it. Is that not the case?

Paschal Donohoe (Dublin Central, Fine Gael)
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We give a view but the Deputy gives a view too. We do not make the decision.

Pearse Doherty (Donegal, Sinn Fein)
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No, I do not give a view. I am not entitled to give a view in relation to whether an amendment is in order or not. If the Minister's officials have given advice that this amendment is not in order, I ask him to please state that advice to the committee.

Paschal Donohoe (Dublin Central, Fine Gael)
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We did give that advice-----

Pearse Doherty (Donegal, Sinn Fein)
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Why?

Paschal Donohoe (Dublin Central, Fine Gael)
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-----but we do not make the decision.

Pearse Doherty (Donegal, Sinn Fein)
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Okay, but why is it not in order?

Paschal Donohoe (Dublin Central, Fine Gael)
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Our view is that it is not consistent with a discussion of the Finance Bill.

Pearse Doherty (Donegal, Sinn Fein)
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We are dealing with mortgage interest relief. How could the issue of banks not passing on ECB rate cuts to mortgage holders not be consistent with the Bill?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Finance Bill is about tax measures. We do not decide; we give a view, and I am being open about it here. I have underlined the rationale for it. The Finance Bill is about tax. That is why.

Pearse Doherty (Donegal, Sinn Fein)
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It is about the policy.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am happy to have a general debate with the Deputy on any matter, as I demonstrate by my willingness to be here at any point. The Chair may or may not facilitate that but-----

Pearse Doherty (Donegal, Sinn Fein)
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The Minister’s officials raised-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Hold on. The Deputy asked me a question and I am answering it.

Pearse Doherty (Donegal, Sinn Fein)
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No, that is fair enough.

Paschal Donohoe (Dublin Central, Fine Gael)
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The Finance Bill is about tax measures. That is why we gave the view in relation to it but the decision is made by the Bills Office. I am happy, at the discretion of the Chairperson, to have a debate with the Deputy on any policy matter.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister is obviously not happy to do so because he has given advice that a policy measure be excluded from being debated at the finance committee. This year, his officials also raised concerns about another amendment we brought forward until we pointed out that the amendment was previously submitted to a Finance Bill and had been accepted. This is not a reflection on anybody but I want to raise the fact that I have a responsibility and a right to bring forward proposals. If we are going to get into the situation where we are spending taxpayers’ money on a measure to support people as a result of mortgages but we cannot look for the detailed policy that underpins that, namely, the rates that are being charged and whether the banks are passing them on, then that is nonsense. It is ridiculous. The shutters should not be coming down on this. It is the first time we have seen this in a long time. As I say, I have seen amendments ruled out of order and I have accepted those decisions. I just do not want to see this happen again.

Paschal Donohoe (Dublin Central, Fine Gael)
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I disagree with the Deputy.

I have been a Member of the Houses and attended committees of the Oireachtas for as long as the Deputy. He knows there is ample opportunity to raise policy matters under the section of the Bill. The amendment that the Deputy brought forward, in our view, is not about taxation policy. That is why we gave the recommendation we did. I do not accept the idea that we are shuttering down debate in any way. The Deputy knows that there is ample opportunity for him to raise broader policy matters by raising them on the section of the Bill. He knows that. He does not need to bring forward an amendment in order to do that.

Pearse Doherty (Donegal, Sinn Fein)
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I need to bring forward an amendment for the Minister to publish a report on whether the banks are passing on interest rates, which, as a result of them not doing, is forcing us, as a State, to ensure that mortgage interest relief - taxpayers' money - is used to actually support mortgageholders at a time when banks are charging them way above the European average. There is only one way for me to ensure that that report is published and that is to table an amendment. The advice of the Minister's Department has been not to allow me to table that amendment and that it is not relevant. Under God, it is relevant. It is completely relevant to the fact that we are spending millions of euro in taxpayers' money on an issue as a direct result of the banks charging high interest rates. Minister, if the banks were charging lower interest rates, then mortgage interest relief would not exist this year or next year. That is the reality of it. This is a policy decision. This is the only way that we can force this. This is democracy in action. I am entitled to bring forward an issue. The Minister is making the point that this is not relevant to the Finance Bill. Of course it is relevant to the Finance Bill.

Paschal Donohoe (Dublin Central, Fine Gael)
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No, I was very careful in what I said. I said the Finance Bill contained tax measures. Amendments that should be brought forward in relation to it should be about taxation. There are a million ways in which the Deputy could rephrase his amendment to have it consistent with the Standing Orders of the House, and whether he chooses to do that is a matter for himself. If the Deputy wants to have a debate on interest rates and the impact they are having on the development of policy, then he can do it through two other ways - either through a debate on a section of the Bill or through a differently phrased amendment. As to the idea that there is any shuttering of democracy going on here, I completely disagree with the Deputy. He and I are both speaking as TDs who are going to be present here until 10 o'clock tonight.

Pearse Doherty (Donegal, Sinn Fein)
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Absolutely. I am just going to make my last point about this.

Mairéad Farrell (Galway West, Sinn Fein)
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I will make a point as Chair.

Pearse Doherty (Donegal, Sinn Fein)
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Okay.

Mairéad Farrell (Galway West, Sinn Fein)
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I will let Deputy Doherty in and then the Minister, and unless there is a new substantive issue on the section, we will move to the question.

Pearse Doherty (Donegal, Sinn Fein)
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This amendment has been ruled out of order and it can only be ruled out of order on the basis of Standing Orders. Standing Order 194, which is used to rule this out of order, says, "It shall be an instruction to all Committees to which Bills may be committed that they have power to make such amendments therein as they shall think fit, provided that such amendments be relevant to the provisions of the Bill and are not in conflict with the principle of the Bill as read a second time." It does have to be tax related, as the Minister stated. It has to be "relevant". The Minister has given a reason for this amendment not to be tabled. Under this Standing Order, it either has to be not relevant to the provisions of the Bill or in conflict with the principles of the Bill. The amendment is clearly not in conflict with the principles of the Bill. Therefore, there is only one other area, that being, the Minister is claiming it is not relevant to the provisions of the Bill. The provisions of the Bill, under section 4, provide millions of euro in taxpayers' money to support mortgageholders, which is something that I support, but the reason for that support is the high interest mortgage rates at this point in time. I seek a report on what the banks are charging at this point in time and if they are passing on the ECB interest rates. I will leave my point there. If this is a trend that is going to happen within the Department - giving advice of this nature - then it will be challenged robustly by me.

Paschal Donohoe (Dublin Central, Fine Gael)
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And I will equally defend robustly the rationale that we are bringing forward for doing it and making the case for it. It is entirely appropriate for the Department to make the point that, as the Finance Bill is about tax measures, an amendment in relation to the Finance Bill should be about a specific tax measure. As I look at the Deputy's amendment again, it does not make reference to a specific tax measure.

Mairéad Farrell (Galway West, Sinn Fein)
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Does anybody else wish to comment on section 4? No.

Mairéad Farrell (Galway West, Sinn Fein)
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The two amendments in the names of Deputies Doherty and Farrell have been ruled out of order.

Pearse Doherty (Donegal, Sinn Fein)
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I have made my substantial points on the issues that I was going to raise in relation to section 5 earlier when we dealt with the refundable tax credit amendment tabled by Deputy O'Callaghan. I support the section, as it ensures that income or compensation payable to a living donor of a kidney or a lobe of a liver under conditions defined by the Minister for Health shall be exempt from income tax and shall not be reckoned in computing income for the purposes of income tax. It is important that the Minister puts it on the record that there is no payment in relation to the donation of organs. That would be highly unethical and illegal in this State but there is obviously compensation that would be paid in terms of somebody who would be in employment and would be off sick and so forth after a kidney transplant. I ask the Minister to put on record his note on section 5, for transparency purposes.

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course. It deals with the point that the Deputy has just made about the kinds of expenses to which this provision will apply. Section 5 amends section 204B of the Taxes Consolidation Act to provide for an exemption from income tax for compensation payments made to an eligible living donor of a kidney or lobe of a liver. This amendment updates the reference to the relevant legislation to ensure that the compensation paid to living donors shall continue to be exempt from income tax. In relation to the expense, given the matter the Deputy raised, donors would generally incur expenses associated with travel and accommodation as well as suffering loss of income during the process of providing a donation. The reimbursement may apply to vouched expenses of travel and accommodation up to a maximum of €8,000, loss of income relating to a donation of up to a maximum of €15,000, and childcare costs that would otherwise not have been incurred, up to a maximum of €6,750.

Pearse Doherty (Donegal, Sinn Fein)
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To clarify, there are obviously travel and accommodation costs in relation to pre-op assessment and, indeed, the operation, in terms of travelling to and from one's home to Dublin, in particular, where the donation would be carried out. In terms of the loss of income, if a person is working and he or she recuperates for, say, six weeks after the transplant and he or she would normally be paid a gross income of €10,000 during that period, does this proposal mean there will be no income tax whatsoever on that gross payment? Is that the clarification?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, that is correct. There are a number of conditions that are laid down by the Department of Health with regard to the operation of the scheme and if it meets those conditions, the Deputy is correct. The intention of it overall is to minimise the financial disincentives for potential living donors. It is on foot of a scheme that was put on statutory footing with the introduction of the human tissue regulation Act of 2025, which contains within it the different conditions.

Pearse Doherty (Donegal, Sinn Fein)
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This section deals with a replacement. Is that a replacement of the EU regulation with the 2004 Act? Is that correct? It is the opposite, is it not?

Paschal Donohoe (Dublin Central, Fine Gael)
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I think it refers to the replacement of section 204B of the taxes Act. Actually, hold on. This refers to the updating of the 2024 Act that, in turn, refers to a statutory instrument, so it is the other way round.

Pearse Doherty (Donegal, Sinn Fein)
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Yes. So, we are taking the 2024 Act, which is obviously the most recent Act in terms of the human tissue Act and we are replacing a section in that Act for the regulation of 2012, which is an older regulation. The timing kind of confused me in relation to that.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is correct.

Pearse Doherty (Donegal, Sinn Fein)
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Why is that?

Paschal Donohoe (Dublin Central, Fine Gael)
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This is just a consequence of the way the Department of Health has handled the matter.

Pearse Doherty (Donegal, Sinn Fein)
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Okay.

Paschal Donohoe (Dublin Central, Fine Gael)
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I can certainly get some information for the Deputy on it if he wishes to find out why that is being made.

Pearse Doherty (Donegal, Sinn Fein)
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No. That is fine. I just wanted the clarification that we are replacing a section in a new Act with an older piece of secondary legislation. That is the intention here.

Paschal Donohoe (Dublin Central, Fine Gael)
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No, what we are doing is removing the older section of the old regulation with a new Act.

Pearse Doherty (Donegal, Sinn Fein)
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So we are removing a section of the 2024 Act?

Paschal Donohoe (Dublin Central, Fine Gael)
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No. To be specific, what we are doing is substituting the reference to Regulation 21(2) of the 2012 regulations with subsections (3) and (4) of section 12 of the 2024 Act. Is that okay? Does that make sense?

Pearse Doherty (Donegal, Sinn Fein)
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Yes, I understand that. That would make complete sense to me but reading the amendment I thought it was the opposite that is happening. Maybe I am just reading it wrong. It states:

Section 204B of the Principal Act is amended by the substitution of "subsections (3) and (4) of...the Human Tissue...Act...for “Regulation ...".

So we are substituting that "for Regulation". Does that not mean that we are putting the regulation in instead of that?

Paschal Donohoe (Dublin Central, Fine Gael)
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What was the last question?

Pearse Doherty (Donegal, Sinn Fein)
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When we look at the wording of the section, we are substituting a section of the human tissue Act for the regulation of a statutory instrument from 2012? Is that not correct?

Paschal Donohoe (Dublin Central, Fine Gael)
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That is correct. I have the Act in front of me here. What we are saying is "Section 204B of the Principal Act is amended by the substitution of 'subsections (3) and (4) of section 12 of the...Act [of] 2024'".

Pearse Doherty (Donegal, Sinn Fein)
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Okay.

Paschal Donohoe (Dublin Central, Fine Gael)
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I think both of us are saying the same thing.

Pearse Doherty (Donegal, Sinn Fein)
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That is fine. It is obviously written in a complex way, but that is fine. Okay, I will leave it at that.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

Mairéad Farrell (Galway West, Sinn Fein)
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Does anyone else want to speak on section 5? No.

Pearse Doherty (Donegal, Sinn Fein)
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This is the scheme of tax relief for approved sporting bodies. Could the Minister elaborate on the individual's decision in relation to whether they would claim the relief or the relief would be provided to the organisation? Could he outline the changes that take effect in relation to this Finance Bill and step them out in terms of that area? The fact is that there is a certain deadline now in respect of making that decision irrevocable.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will just speak to the section itself. This section makes a number of amendments to section 847A of the Taxes Consolidation Act. It provides for a scheme of tax relief for donations to approved sports bodies for funding certain approved capital projects. Both PAYE and self-assessed income tax donors can elect for the tax benefit to apply to either the body or themselves. They can make that decision.

Section 847A is being amended so that the donor's decision as to whether the approved sports body or the individual gets the tax relief is irrevocable. In addition, the approved sports body should advise the donor of the Department of sport of the issued project number and a unique number on each receipt for a donation, and the claimant will need to include these on their tax return.

Finally, an amendment is being made to ensure that donations do not reduce the age-related percentage of earnings against which donors can claim pension tax relief. I am advised that last year's budget provided for decisions to be made by the individual to incentivise more donations and the amendments that we are making here are just more consequential in nature.

Pearse Doherty (Donegal, Sinn Fein)
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Yes.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is all about making sure that it is irrevocable and they cannot change their mind after a decision is made.

Pearse Doherty (Donegal, Sinn Fein)
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This section and section 10 are similar in that they are about tax relief for sporting organisations or elite athletes. I do not oppose the proposals in either this section or in section 10 but there is a wider issue, given that two sections of the Finance Bill deal with tax incentives on donations for capital projects or to bodies. It is great that people are making donations to sporting organisations or for particular capital projects. This section deals with the fact that if it is a particular project, there has to be unique identifier code. It could be for the development of the Finn Harps stadium, which we are still waiting for, or it could be for something else. The problem here is that in some affluent areas of the State, there are people who are maybe more able to make those donations to support in a larger way the organisations or the clubs, but there are many areas where that is not the case. The Minister's own constituency is a case in point of where capital funding has been granted. Drumcondra AFC is an example of that. Where are they going to get the matched funding from? When we talk about sports facilities in working-class areas, the problem here is there is a wider issue.

The tax code is there to support people who can actually contribute to the development of a stadium in an area or whatever it is; it could be a golf club, a tennis club or whatever else. It could be a capital project. Through the tax code, a donation can be made to support the development of that sports facility. That is good. I welcome it and I am not opposing it. The problem is when we look at the need for the sport, club or facilities in a more working-class area where fewer people are in a position to make that donation. We have projects right across the State which have been granted significant and sizeable amounts of funding that are not moving ahead because of the co-funding requirement. In some cases, these co-funding requirements will be met through measures like this that will encourage people to make a donation and the beneficiary will benefit from the fact that the individual is not claiming the relief themselves. However, that is not the case in a lot of the country. I just want to raise that point. I do not have an issue with sections 8 and 10. They will benefit sporting organisations and clubs, but the situation, if not this measure specifically, has led to an uneven playing field in relation to the development of facilities across the State. Where they are needed most, in our working-class communities, they are finding it difficult to meet the challenges of co-financing and they do not have people who are living in their locality and who are in a position to dig deep into their pockets and to make donations to those clubs of the size that is required to develop the type of facilities that are required. Obviously, people are very generous and make donations as they can. I wanted to raise that point on this section.

Gerald Nash (Louth, Labour)
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Deputy Doherty is not wrong. I echo the points he has made. He made particular reference to the Finn Harps stadium. The Minister has been very involved in the operation to redevelop Dalymount Park and is more than familiar with the challenges it has faced over the years. Hopefully, the works will now proceed. We have similar challenges in Drogheda United, a club in whose rescue from examinership I was centrally involved a number of years ago. We are not going to go around the table and start advocating for our own clubs – I know that – but there is a general point to be made. I support the point made by Deputy Doherty.

I assume the definition of "approved sports body" refers to registered national associations as opposed to, for example, individual League of Ireland clubs that are registered companies. What is the definition of "approved sports body" as it applies to the provisions in this section?

Paschal Donohoe (Dublin Central, Fine Gael)
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In dealing with the various points made, I will begin with Deputy Nash's because it is most on my mind at the moment. Section 10 can apply only to donations made to national governing bodies. Under section 8, which refers to section 847A, donations can be made to a wider variety of sports organisations.

On the general point made, the Deputies have already acknowledged the breadth of sports capital funding already being made available. It is reasonable to ask that if the State and taxpayer are making significant funding available for the delivery of sports facilities at local level, a contribution be made by the club or sports organisation receiving it. That is appropriate and can help with the ownership and long-term maintenance of facilities.

I am delighted Deputy Doherty raised Drumcondra AFC. I am familiar with the challenges it has faced. It accessed sports capital funding in the past and this has played a very important role in its development. The same applies to other football, GAA and athletics clubs in Dublin Central alone and also to clubs in every other constituency. While the requirement to match funding can pose a difficulty, there are good reasons for it. The majority of clubs I am familiar with do find a way of drawing down the sports capital funding made available to them, and that is certainly the case in Dublin Central.

With regard to the operation of this scheme, it is important to bring some information to bear on the discussion we are having here. At the moment, 70% of donations made to access the scheme are below €300. The full cost of the scheme in the last year for which full information is available was €800,000. The total number of taxpayer donations in 2021 was 1,289, and of those only 34 had a value greater than €1,000. Therefore, the vast majority of donations made are in the order of hundreds of euro. I imagine they are made by people associated with clubs with a view to contributing towards what is needed if the facilities are to go ahead.

Pearse Doherty (Donegal, Sinn Fein)
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Can the Minister provide the committee with the geographical breakdown in relation to the donations, if possible?

Paschal Donohoe (Dublin Central, Fine Gael)
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Sure. I will be very happy to ask the Revenue Commissioners for that and to provide it to the committee.

Mairéad Farrell (Galway West, Sinn Fein)
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I am conscious that in approximately five minutes we are due to take our break. I will try to get through as many sections as we can before then. We will have more debate afterwards.

Pearse Doherty (Donegal, Sinn Fein)
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I support the proposal but am interested in finding out why the Revenue Commissioners were looking for this. Has an issue been flagged, or what is the rationale behind the proposal in section 13? I agree that qualifying fund managers should have to provide an annual return of each approved retirement fund they administer.

Paschal Donohoe (Dublin Central, Fine Gael)
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The Revenue Commissioners did not believe we had enough data regarding the implementation of existing tax policy and requested these changes so that information and data could be supplied to it. This will commence for the year of assessment 2026. The data will allow us to better understand the implementation of policy in this area.

Mairéad Farrell (Galway West, Sinn Fein)
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As there are amendments proposed to the next section, I suggest, given that it is now approaching 12 noon, the time at which the committee agreed to take a sos, that we take a sos now.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 9:

In page 28, between the lines 19 and 20, to insert the following:

“Report on restriction of share based renumeration to SMEs 19. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the impact of the PRSI exemption for share based remuneration for large corporations on the sustainability of the social insurance fund.”.

This amendment calls for a report within three months of the passing of the Act to be laid before the Dáil. The report would deal with the impact of the PRSI exemption for share-based remuneration for large corporations on the sustainability of the social insurance fund. There is no PRSI that applies to share-based remuneration. The question here is the appropriateness of that policy and whether that should be restricted to SMEs as opposed to larger companies.

I note that the 2024 Indecon review on the taxation of share-based remuneration found that Ireland's PRSI exemption appeared generous compared with many countries, where such exemptions are more focused on SMEs. It is probably stemming from that finding in the report that I questioned whether we needed to look at share-based remuneration, the exemption from PRSI, and the importance of the Social Insurance Fund and that fund being able to provide supports for people in need of those supports in terms of whether this restriction should apply to SMEs. We know that, unsurprisingly, larger firms have the highest volume or value of share-based remuneration schemes. It is 83% in total. However, the growth in the micro or SME firms is disproportionately low and stagnant. If we look at micro firms, the share-based remuneration value in 2023 is at the same level as it was in 2019. The value has increased by 21% for small firms, 130% for medium firms and 139% for large firms. If you take the total value of share-based remuneration schemes at just over €2.1 billion, €1.8 million of that goes to larger firms. That comes as a substantial cost to the Social Insurance Fund. That is the proposal before us and it is worthy of consideration.

Paschal Donohoe (Dublin Central, Fine Gael)
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Share-based remuneration refers to compensation provided to employees in the form of company shares or stock options. It is often used to incentivise and retain workers. The Deputy has proposed a report on the impact of PRSI exemption for share-based remuneration for large corporations on the sustainability of the SIF. As Deputies will know, employer PRSI generally does not apply to share-based remuneration. The employer's PRSI exemption does not apply to cash, settled awards or any cash payment that follows the value of the shares.

Last year, an independent review of share-based remuneration carried out by Indecon on behalf of my Department was published. This review makes a number of recommendations pertaining to share-based remuneration and this exemption specifically. The review found that the PRSI exemption was regarded as an important support for SMEs and other businesses in Ireland. Recommendation No. 1 of the review suggests that a cap on the level of the employer PRSI exemption should be considered. As part of the process of determining future policy in the area, consideration is now being given to recommendations in the review. In relation to this, my Department has now engaged with relevant stakeholders and will continue to do so. Consequently, I do not consider it necessary to carry out a further review of the PRSI exemption for share-based remuneration at this time.

This is related, in a way, to the discussion that we had earlier on with Deputy Nash. While Deputy Nash was raising a very different policy matter in relation to the need to look at how we could support the development of ESOPs, I stated in that discussion that my Department was going to be doing more work in the entire area of share-based remuneration. While I do not believe a report on this matter is merited in the way Deputy Doherty articulated, this is a matter that I would be happy to engage with him and the committee on. I know that shares are an important part of the compensation of employers and are an important way of keeping valued workers in a company that has employed them, but I accept that there are different policy issues we have to tease out regarding the level of support that is available to those schemes, whether it is appropriate and whether it should be increased or decreased. We heard one call earlier on in relation to ESOPs - I know that was a different matter to this - and Deputy Doherty is now making a call in a different area. My takeaway on this is that it is an issue that, in general, needs more work. I would be happy to engage with the Deputy and the committee on this as we analyse further and maybe make decisions in advance of future finance Bills.

Pearse Doherty (Donegal, Sinn Fein)
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I welcome the Minister's comment in relation to this. I am sure he is well aware that we do not really want a report, but if I do not say that it is a report, the amendment will be ruled out of order and I do not want to have a repeat of the conversation we had before the break. What we really want, and what we submitted in our alternative budget, is the PRSI exemption to be restricted to SMEs. Therefore, it would provide the support that, as the Minister rightly mentioned, the Indecon report found was important for SMEs while restricting it to that cohort of businesses, with the dual purpose of underpinning the Social Insurance Fund.

I hear what the Minister is saying. He is obviously not going to bring it forward in this Bill. I would argue that it should have been brought forward. The Indecon report is a 2024 report. There has been enough time to action this, but I take it that the Minister is not going to do that. We will continue to engage with him, but I will press this amendment.

Paschal Donohoe (Dublin Central, Fine Gael)
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I accept that, in this and as is the case with many matters, we have a different view. Where we do have some common ground is our belief that €310 million is an awful lot of money. I believe that €310 million is used in a way that is effective within our economy and delivers against economic goals. Overall, though, it is an area that needs further discussion and evaluation. That report has been with us now for a little bit of time. It is a matter I want to prioritise, as does my Department. I will leave it at that.

Pearse Doherty (Donegal, Sinn Fein)
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I will make a minor point in relation to section 19. I want to make this point because it is right to do so. The State has passed legislation regarding the naming of agencies of the State, whose names have to be in Irish. That has not been given effect to yet; only the logos of the names having to be bilingual has been given effect to. It annoys me that we see listed in this section five agencies of the State, three of which have got their Gaelic names, and rightly so, but whereby two of the newly established ones, including the Gambling Regulatory Authority of Ireland, which was only established last year, have no Irish name. I wanted to make that point.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 10:

In page 28, between lines 31 and 32, to insert the following:

“Report on expansion of Professional Services Withholding Tax (PSWT) to private sector

20. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the expansion of Professional Services Withholding Tax (PSWT) to the private sector to assess the potential of designating large contractors of professional services as accountable persons.”.

This again relates to the expansion of the professional services withholding tax to the private sector and assessing the potential of designating large contractors of professional services as accountable persons. We tabled this amendment just to tease the matter out. It needs a bit of work to see whether this measure would be appropriate. That is why I want to see a report on this or some work on it. What is the thinking within the Department in relation to the expansion of the professional services withholding tax to the private sector and assessing the potential for designating large contractors of professional services as accountable persons?

Ireland takes a sensible approach in applying a withholding tax whenever a public body is contracted. We dealt with circumstances where a public body contracts somebody for professional services in section 19, but what that does is simplify tax collection for the individuals, for the companies providing the services and for Revenue. The question here is whether there is potential to extend this well-established practice to the private sector by treating large contracting companies the same way as public bodies. Has the Department or Revenue looked at this? Is there merit in that proposal?

Paschal Donohoe (Dublin Central, Fine Gael)
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The professional services withholding tax is a deduction at the standard rate of income tax of 20% from relevant payments made by accountable persons to specified persons in respect of certain professional services. Accountable persons include Departments, commercial and non-commercial State agencies and bodies, local authorities, the HSE and authorised medical insurers. The tax only applies to payments for professional services made by the State sector and plays an important role in ensuring the tax compliance of specified persons in receipt of payments that originate from Exchequer funds.

Deputies will be aware that the professional services withholding tax is a payment on account of the income tax or corporate tax liability. The extension of the professional services withholding tax to large contractors of professional services in the private sector would therefore result in no extra tax yield to the Exchequer, assuming current rates of compliance. To consider doing so would impose an administrative burden on those accountable persons required to operate the tax, the specified persons who incur the tax and Revenue, which administers the tax, provides customer service and ensures that accountable persons fulfil all their obligations in relation to the operation of the tax. Furthermore, specified persons who have incurred the professional services withholding tax and who satisfied the eligibility requirement for a repayment may submit repayment claims to Revenue but, in the meantime, could suffer from cash-flow issues as a result of moving from a situation where they currently receive full payment for their services to a situation where 20% of the payment is withheld as a withholding tax.

As Deputies will know, I announced on budget day that a joint Department of Finance and Revenue public consultation on withholding taxes would take place. The consultation will be launched in the coming weeks, in line with the announcement on budget day. This public consultation will explore opportunities to modernise, digitalise and further expand the scope of withholding taxes in general. The associated report will then be available and should address the issue raised by Deputy Doherty. For that reason, I do not propose to accept this amendment.

To go to the question the Deputy raised regarding the broadening of the use of the tax, this is something the consultation would consider, but I indicated the different trade-offs in relation to that. Overall, this will not deliver a tax gain to the State. It is about the timing of cash payments, as the Deputy knows. We need to be convinced from the point of view of administration by the tax collector, and the taxpayer, there is a good rationale for doing this. We will complete that report and share it with the committee.

Pearse Doherty (Donegal, Sinn Fein)
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That is fine. I look forward to seeing the report when it is compiled following the completion of the consultation process. This area is captured within it, which was the intention of bringing forward the amendment.

Edward Timmins (Wicklow, Fine Gael)
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The Minister's amendments seek to add two countries that will qualify for the foreign earnings deduction, that is, Türkiye and the Philippines. I welcome that and have no issue with it, but I raise the issue of Russia being part of the foreign earnings deduction scheme. I suggest that Russia be removed from that foreign earnings deduction list in line with European economic and trade policy.

Pearse Doherty (Donegal, Sinn Fein)
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I have a wider point in relation to the foreign earnings deduction scheme, but I will stay on Deputy Timmins's point because I was going to raise the matter myself. I intend to bring forward an amendment on Report Stage unless we are able to deal with this. The rationale behind the foreign earnings deduction scheme at the time was to encourage companies, through the taxation system, to explore and find new markets and to deepen our relationships with emerging markets. The countries that have been included in the scheme have grown and expanded over different finance Bills, and there are areas the Department of enterprise and others, including IDA Ireland, have looked at as areas where we could deepen integration and increase exports to.

In the context of the illegal invasion by Russia of Ukraine, and at a time when we have supported the European Union in a deepening of the sanctions against Russia as a result of the invasion and the war it is perpetrating on the Ukrainian people, the idea that we have in this tax code a restatement that we are facilitating a deeper integration with Russia at this time is seriously problematic. I looked at the exports between Ireland and Russia; they have actually increased in the past year. The Ukrainian Embassy has reflected on that, and not in glowing terms, in relation to Ireland. This measure is about encouragement. It is not appropriate to be encouraging that type of relationship at this point. An amendment to this section, which would allow for the Minister to suspend this measure in relation to a country, through strategy, would be appropriate. It would then allow the Minister, please God, because we need this war to finish and to end, if the Minister so wished, to readmit a country into this measure.

I think it is appropriate and I think it is rational. As I have said, if the Minister is not willing to move on that, I flag to him that I will look to bring this forward as an amendment on Report Stage. This would enable the Minister of the day to suspend a country from the list for any period of time. It could be another country on that list in the future. I believe it would be an appropriate provision to have.

Gerald Nash (Louth, Labour)
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This was an area I wanted to raise myself and I am glad that Deputy Timmins did, supported by Deputy Doherty. I would imagine there may have been discussions in any case, at some level, within the Department on this proposition about excluding, suspending or removing - whatever words we want to put against it - in the context of Russia. Given the EU sanctions regime and Ireland's position on Russia's illegal invasion of Ukraine, and the stated purpose of the foreign earnings deduction policy that it is designed to extend that business relationship between countries, I would imagine the Minister understands the argument. I would support and may myself bring forward amendments to exclude or suspend Russia from coverage under the foreign earnings deduction scheme, for all the reasons that we are aware of. This is a moral question as well.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank all the Deputies who have raised this important matter. As opposed to speaking down through the section, because we all know what is in the section, I will just deal with the matter that has been raised. I understand the concern colleagues have in relation to this. The setter of policy in this area is the Department of Foreign Affairs and Trade. I am happy to consult with the Tánaiste and his officials with regard to this. In relation to the implementation of a change here, I need to gain legal advice to see if the use of a statutory instrument would be sufficient to nullify a provision in this area. On foot of this matter being raised here in the committee, I will do so. I can understand why Deputies are raising it. I have checked to see if this is being claimed in the context of Russia. For the last year that I have information available to me, which is 2023, no claimants claimed this relief for use in Russia, which I imagine is a direct consequence of the implementation of the sanctions packages that all Deputies on this committee would be supportive of, 19 rounds of which Ireland has implemented up to this date. On foot of this matter being raised, I can assure the committee that it has not been used for the last year we have information for. In the previous year, 2022, less than ten claims were made with regard to Russia. Coming out of this committee I will consult with the Department of foreign affairs on this and if the Department of foreign affairs has the view that something like this was no longer appropriate, consider what would be the best way of giving legal effect to this. I will ask my officials to engage with the Department of foreign affairs as soon as possible and I will raise this matter with the Tánaiste. It is a reasonable point for Deputies to raise. We should not have any Irish business operating in a way that is not in line with the sanctions that have been implemented. It is reasonable to therefore ask if the scheme plays any unintended role with regard to that.

Edward Timmins (Wicklow, Fine Gael)
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We are on section 21.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I could not comment while I was in the Chair. I have a similar view to that expressed by the other Deputies here. I welcome what the Minister has said. If it is not addressed, I too will look at bringing forward an amendment on Report Stage.

Pearse Doherty (Donegal, Sinn Fein)
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I thank the Minister for his response on the issue of Russia. On the broader issue of section 21, I will make a point on the sanctions. There are exemptions from the sanctions. This is why our exports have increased in the last while. There is a number of key areas here. Pharmaceuticals, for example, are exempt. Ore is one of the other main drivers in terms of our exports to Russia. Whether it is captured by the sanctions or not, we should not be encouraging it. I think the Minister is in that space so I will leave it at that.

On the broader issue of the foreign earnings deduction, there is an expansion here to two countries, namely, the Philippines and Türkiye. Will the Minister explain to the committee the rationale for the expansion to these two territories at this time while other territories in Latin America or Africa or some areas in Indonesia are not included? What is the rationale? As the years go on, more and more of the map of the world gets coloured in as being covered, and all the rest, and that is okay. How does the pecking order work in this? That is the first part.

The second part is that there is a bit of tightening up in this legislation that requires an employee to show that he or she has to be there for work. Will the Minister tease out what this means? It was a criticism of this provision in the Finance Bill in the past that the person did not necessarily have to be there solely for work reasons. People could, therefore, be going to destinations but not need to be there for work reasons. The 2022 report of the Commission on Taxation and Welfare recommended that the qualifying criteria for this foreign earnings deduction be reviewed to ensure that the measure was utilised in a manner where claimants were consistent with the original policy objective. It is fair to say that the original policy objective was to encourage businesses to explore other export market opportunities. In this provision there is no requirement for businesses' work to be related to exports at all. That is a problem. There is no limit to the sectors it applies to. My understanding of the section, and the Minister may elaborate or correct me if I am wrong, is that it is open to any employee in a business to be able to avail of this foreign earnings deduction and it does not matter if the business ever intends to export. That is an issue.

The welcome part, while only a small welcome part, is that the employee must now show that he or she has to be there for work purposes. For example, an employee cannot go to Dubai to enjoy the weather, work remotely from Dubai and then get this foreign earnings deduction. The employee must now prove that he or she has to be there for work-related purposes. There are also changes whereby the qualification is being taken down from three days to one day. Will the Minister specifically outline why the recommendations and concerns raised by the report of the Commission on Taxation and Welfare are not being addressed here, particularly the recommendations on limiting it to particular sectors and the need for the work to be export-related activities?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will group the Deputy's questions together. First, as to why the scheme has been extended to the Philippines and Türkiye, this is on foot of engagement my Department had with the Department of Enterprise, Tourism and Employment and Enterprise Ireland. We are guided by them in the expansion of the scheme. I very much want to avoid a situation where the scheme is made broadly available across the world, for the simple reason that we already have healthy exports to the majority of the world. Enterprise Ireland and the Department of enterprise have advised us that they believe there is potential with these two countries to deliver against the Government's aim of trade diversification and to grow our exports within those two economies.

This will accompany supports that Enterprise Ireland either has made available or plans to make available regarding Türkiye and the Philippines in order to help Irish companies grow there.

The Deputy made the point, as I understand it, that a company may not have exports within a particular market but that this scheme is available to somebody who is working for that company and is present within that market. I understand the Deputy's point, but it is very possible for somebody representing a company to visit a market repeatedly over many years while they have no business there in order to get business there in the future. For some of the markets in which our companies operate, and I am sure the Deputy will understand this, it can take some time to develop business relationships to grow exports. For the period in which that business engagement is taking place, it is appropriate that this scheme be made available.

The Deputy made a point about conditions that are being made here. My view is that an increase in remote working arrangements, which has happened, could dilute the policy intention of this relief, which, as I have said, is all about helping Irish businesses to grow exports in places they do not currently have them or where they are at a very low level. That is why we are bringing forward conditions regarding the fact that they must be present in the relevant state for the purposes of the performance of the duties of their office or employment. The amendment aims to make it so that they have to be present in this country for reasons of work, that the work relates to the location they are in and that they are present in this relevant state, and reasonably required to be so, for the performance of their duties. We have also laid down some further criteria in the scheme regarding the number of days in a tax year. We have made clearer what needs to be a qualifying day for it to be one of the days that counts.

Pearse Doherty (Donegal, Sinn Fein)
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Approximately 700 people will avail of the deduction this year. Their tax reduction comes to about €7,000, as far as I understand it from the latest data I was able to ascertain. A proposal such as this, intending to assist companies to develop emerging markets for exports, is good. I have no problem with it. I have a problem with the fact that we are extending it with Russia included, notwithstanding the fact that the Minister is going to go away and look at that. I cannot support that at this point because it is an extension rather than a continuation of existing policy. However, I hope that will be dealt with.

The wider issue is that it does not have to relate to export-related activities. That is the problem. The intention was always about new markets. I hear what the Minister said, which is that a company may not be involved in exports at this time but the person who is on the ground is creating the opportunity for exports next year or the year after. I understand that. Let us consider a scenario, and I ask the Minister to tell me if it is feasible. Can an individual benefit from the foreign earnings deduction if the company is not involved in exporting? Let us say that I set up a company that is involved in retail. I sell products to the Irish market. Those products are produced in, for example, China, as many products are, and I have people on the ground there managing that activity for my company in Donegal or wherever. I have no intention ever to sell whatever I am selling, perhaps Leprechaun images or whatever else, in China. I have no interest in that. Therefore, I am not involved in exports. Because those people in China are employees of the company and have to be there, because they need to be hands-on and looking at what the manufacturers are doing, they are able to avail of this deduction but their activity is not export related. Is that not the case?

Edward Timmins (Wicklow, Fine Gael)
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On a similar point, we should consider broadening the scheme. From my experience of working with companies involved in exporting and setting up overseas, often you might send someone overseas to source supplies, raw materials or whatever else for your operation in Ireland, or you might look at establishing an overseas entity to support your exports in foreign entities. That is something that Enterprise Ireland has always encouraged for Irish-based companies to set up overseas. We should look at a broader consideration of the benefits of the foreign earnings deduction.

Paschal Donohoe (Dublin Central, Fine Gael)
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The situation outlined by Deputy Doherty is possible, but there is one caveat, which is that the person must be resident in Ireland. People availing of the deduction must be resident in Ireland and abroad doing the work in order to qualify for the scheme. While it is possible for that to happen, and I am happy to go away and examine the scheme to see if there is any evidence of it happening, from the engagement we have had with Enterprise Ireland and the Department of enterprise, all the evidence we have is of a scheme that is being implemented in line with how we would want. It is always possible that a small number of people could be operating the scheme in a way that is not in line with the spirit of it, which is what the Deputy has described. I am happy to go away and see if there is any evidence of that. However, the indication we have is that the scheme is being implemented in line with how we would want, which is to deliver market diversification and grow exports. The answer to the Deputy's question is that it is possible. If there is any evidence of it, I will certainly ask Revenue to look at it and follow up.

Pearse Doherty (Donegal, Sinn Fein)
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On a point of order, on the schedule for today, we are now going through to 3.30 p.m.

Edward Timmins (Wicklow, Fine Gael)
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I think it is to 3 p.m.

Pearse Doherty (Donegal, Sinn Fein)
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It is 3 p.m. We are then breaking for half an hour and resuming at 3.30 p.m. until 6 p.m. and then resuming at 6.30 p.m. Can I propose, if it is in line with other members, that the 6 p.m. to 6.30 p.m. break be extended to an hour? That is so people have time to get something to eat. We are making good progress.

Edward Timmins (Wicklow, Fine Gael)
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It would go to 7 p.m. then. What do members think?

Mairéad Farrell (Galway West, Sinn Fein)
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We might as well stick with the schedule of the Chair at that point to see about the hour.

Edward Timmins (Wicklow, Fine Gael)
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Is that agreed?

Mairéad Farrell (Galway West, Sinn Fein)
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Agreed.

Edward Timmins (Wicklow, Fine Gael)
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The break will be from 6 p.m. to 7 p.m.

Edward Timmins (Wicklow, Fine Gael)
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Section 22 is being opposed by Deputy Doherty. Does the Deputy wish to speak on that?

Pearse Doherty (Donegal, Sinn Fein)
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Yes. Deputy O'Callaghan is also opposing this.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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As I have to go, can I-----

Edward Timmins (Wicklow, Fine Gael)
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Carry on, Deputy.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On section 22, the SARP scheme is an extension of this tax relief. In the context of this budget that is being proposed where we have older people in poverty according to the Parliamentary Budget Office as a result of decisions being made that is going from just over 13% last year to 19% now. As a result of budget choices, the removal of cost-of-living measures and a lack of sufficient alternatives, its analysis shows how on average, low and middle income households are facing losses from budget 2026. This is not my analysis, it is the independent analysis of the Parliamentary Budget Office.

Given the need for sustainable taxation, it seems to me to be absolutely unjustifiable to have a group of workers like this, who are on high incomes, singled out for very special tax treatment. I do not see the justification for it. In fact, we need to broaden our tax base and tax take in the report the Minister launched yesterday. The future of the country says as much.

The Minister has said as much in his comments so far on this Bill. There are old people in my constituency and every Teachta's constituency who are afraid to put the heat on in the context of paying energy bills. Yet we have this incredible special treatment, which includes one tax-free trip a year and tax exemptions on discounted private school fees. I fundamentally think that everybody needs to pay their fair contribution and share, and this is utterly unjustified.

Pearse Doherty (Donegal, Sinn Fein)
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I will come in as well if that is okay. I want to echo what has been said in relation to this. This is a policy matter we have discussed long and wide. SARP is obviously coming to an end at the end of this year but the Minister has brought forward a proposal to continue with this measure. I find this is just a grossly unfair measure. I have made the point on numerous occasions that if a lot of members of the public knew what was contained in this section of the Finance Bill, they would be rightly annoyed. We discussed earlier how the Minister made a deliberate choice not to provide tax cuts to workers who are really struggling due to the cost of living but in this section, he is making a deliberate choice to reward 99 millionaires with a tax cut of €105,000 per year. People are gobsmacked at that idea. Nineteen of them earn over €3 million and the Minister's proposal is to give those 19 individuals a tax cut of €105,000 each year for the five years for which they can claim this. That is just madness.

The number of people who claim this, from recent statistics - and it may have increased because they are increasing year on year - is 2,925 individuals but these individuals, under this new section, have to earn above €125,000. They cannot be formerly employed in the State. They have to have come from outside and have to be a key individual. There is a policy here. Multinationals have an issue with regard to wage equalisation where employees are not discommoded in terms of their take-home pay as a result of where they are located. I find this just very difficult to stomach. I could not, in all conscience, support a policy that is making millionaires richer to the tune of €105,000 of a tax cut when I know that so many people in my constituency and right across the State are really struggling to heat their homes, keep the lights on and put food on the table. They are left worse off as a result of the budget and this Finance Bill yet there is this measure here, which costs €60 million. For less than that, the Minister could have made different decisions. He could have increased the standard rate band by €200. That would have supported hundreds of thousands of workers but the Minister decided not to do it and they are the choices that are made.

I know the Minister will say this is about employment and all the rest but in my view, there is no justification. The Minister is asking members of Fianna Fáil and Fine Gael, who I am sure will row in behind him and vote to ensure that people who are earning - in some cases, as the statistics show us - over €3 million are going to get a tax cut of €105,000. That is absolutely bizarre. It is unethical and wrong. I would not be able to walk in to my local hospital and talk to the person who is serving me a cup of tea or the nurse who may be treating me and say, "By the way, I supported a measure that ensures some of the wealthiest in this State pay less tax than you do as a proportion of their income". That is what it does. It allows, for somebody who is earning up to €1 million, €262,000 of their wages to be disregarded for tax purposes. It is absolutely madness. I am not supporting this. It is systematic of a Government that brings forward proposals that have an extension or deadline that keeps on getting extended and extended again. A measure that is supposed to cost a small amount of money then costs tens of millions of euro and I have no doubt this will continue to grow.

Mairéad Farrell (Galway West, Sinn Fein)
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First, I welcome the Minister and all the officials to the meeting. Earlier in the committee, there was a discussion regarding the fact that there are people working who are living in poverty and how much they are struggling. Then we see this proposal we have seen in the past number of years and we have had this discussion in Finance Bills over the past number of years where extremely wealthy individuals receive a benefit and tax break that other people, those working flat out day and night who, as I said, are living in poverty and just cannot make ends meet, could only dream of.

There are things the Minister sometimes brings forward and we might have a disagreement on the approach but maybe I can see where he is coming from. However, in relation to this particular proposal, I can in no way see where he is coming from. In 2023, we know that it cost the Exchequer €56 million to give a tax cut to fewer than 3,000 of some of the most wealthy individuals in this State. We know high earners in this State already benefit from a very low maximum income tax rate relative to our EU neighbours and I do not see where the rationale comes from on this. Whether there is a rationale or not, we also know how much people are struggling at the moment and the Minister is aware of that, too. We are all aware of how much people are struggling. At a time when people are struggling this much and did not see benefits in the budget for them, they see benefits being given to people who earn this level of money. To be honest, I think most people are not actually aware that this is something that is in the budget year in, year out. If people were aware that this is in the budget year in, year out, there would be absolute uproar about it. People know much they are struggling. They can see how much their neighbours and family members are struggling yet some of the most wealthy individuals get these tax breaks.

First, I ask the Minister to reconsider his position on it. Could he also outline what evidence there is that this tax relief is remotely effective? How can he do this in good conscience at a time when we know there are so many children, specifically, living in poverty? That does not even look at how many children are living in deprivation.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies for raising the points there. The reason I am extending this scheme is I believe that schemes like this play an important role in the retention of certain jobs and the individuals who do those jobs within our State. That, in turn, is part of the competitiveness of our economy that, in turn, creates the tax revenue we need to pay for that nurse or teacher and our public services. That is the rationale for it. I am absolutely aware of the need that is there within our society. I am aware of how hard it is for many at the moment but to have the resources to meet those needs, foreign direct investment in particular is very important to our economy. Within our economy and those companies, a certain number of jobs and the individuals who do them play an important indirect role in the total amount of jobs we have in our country and the total amount of tax revenue we are able to collect.

As I put this scheme in place and continue with the extension of the scheme, albeit with modifications I have made in recent years, it is important that the House is aware of the environment we are in and of other schemes that exist across Europe that we have to be competitive with regard to. I will give three examples. In Italy at the moment, for certain jobs and the scheme they have, 50% of employment income up to €600,000 may be exempt from income tax. In Portugal, they have a scheme where relevant employment income is subject to a 20% flat rate of tax. In Malta, income from relevant employment income can be subject to a favourable 15% flat rate of tax.

That is the competitive environment which we are in. There are certain jobs in certain sectors in our economy that have a disproportionate effect on jobs in Ireland and the amount of tax revenue that we collect. The tax revenue that we collect in turn creates the resources that we need to meet the needs that I am very much aware of in our society. I understand that there are equity concerns about the scheme. That is why in recent years I have made modifications to it. It is also why, every year just before the budget, I write to finance spokespeople in the Oireachtas to indicate how this scheme has operated in the previous 12 months. The nub of it is that for a small, open economy that needs a high level of tax revenue to fund public services and meet needs that are present for us, a certain number of jobs in certain sectors are really important and there is a really competitive environment around those jobs. That, in turn, is why I believe the extension of a scheme like this is merited.

Mairéad Farrell (Galway West, Sinn Fein)
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Does the Minister mind if I ask a question? We have had the conversation about this every year in which I have been on the finance committee. Would the Minister agree that this measure increases inequality? We have seen an increase in the number of people who are in work and in poverty. We have seen that the number of children who are in poverty is increasing. We see the number of people in homelessness increasing. Would the Minister agree that it increases the inequality that we have at the moment?

Paschal Donohoe (Dublin Central, Fine Gael)
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I do not believe that the scheme has a material effect on inequality, because of the relatively low number of people who claim it.

Mairéad Farrell (Galway West, Sinn Fein)
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The hypothetical would be if there was more, but we are not talking about hypotheticals. To me, this is a policy of increasing inequality and of the Government choosing what side it is on. That is why I fundamentally disagree with this. It is shocking, at a time like this when we are seeing how people are struggling, that this is the approach of Government.

Edward Timmins (Wicklow, Fine Gael)
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Amendments Nos. 11 and 12 are related and will be discussed together.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 11:

In page 33, to delete lines 30 to 32 and substitute the following:

“ “(II) €10,000 for each of the years of assessment 2023 to 2028 (both years inclusive),”.”.

These amendments are similar. They relate to an issue that we dealt with a number of years back in a Finance Bill. As a result of major issues that were raised at the time, a temporary solution was found whereby the original market value, OMV, of a vehicle was further reduced by €10,000 and, therefore, would reduce the benefit-in-kind that would be applicable to an individual who was provided with a company vehicle. At that time, the vehicles kept falling within categories A to D. The proposal in this amendment is not to do what the Minister intends to do, which is to phase out that €10,000 reduction in the OMV, but to leave it there in sections 23 and 24. I would be interested to hear the Minister's views on what the additional tax will be. This is a tax increase on individuals. What will be the tax increase for an individual as the result of the OMV eventually decreasing from €10,000 to zero in different categories of vehicles? Obviously, the benefit-in-kind will be judged on whether they fall into categories A to D, and also on the mileage they incur. Will the Minister give us some assessment in relation to that?

Paschal Donohoe (Dublin Central, Fine Gael)
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The amendments relate to the temporary reduction applied to the OMV of cars in categories A1 to D, inclusive, and all vans for the purpose of determining the benefit-in-kind, BIK, payable. The amendments seek to have the OMV reduction remain at €10,000 until 31 December 2028 in contrast to the tapering out of the relief provided for in the Bill as it stands.

The Government remains committed to the environmental rationale behind the current emissions-based vehicle BIK regime, which has been in operation since 1 January 2023. Temporary changes were made to BIK in 2023 in light of the inflationary context at the time, and it is now appropriate that these changes are gradually phased out. As part of the Finance Bill 2025, the OMV deduction is being extended for three further years of assessment on a tapered basis, to end on 31 December 2028. The OMV will be reduced by €10,000 for the 2026 year of assessment, a figure that will reduce thereafter to €5,000 for the 2027 year of assessment and €2,500 for the 2028 year of assessment.

With the temporary changes made to BIK in recent years, there has been a level of uncertainty for employers when it comes to planning long-term fleet investments. A more strategic approach is required to give policy certainty to employers and employees. The tapering out of the temporary universal OMV relief and the introduction of a new BIK rate for zero-emission cars provides greater long-term certainty in this area. The gradual phase-out of the relief will ensure that, by 1 January 2029, BIK will revert to the structure as initially legislated for in the Finance Act 2019.

The large-scale transition to electric vehicles, EVs, is crucial to Ireland meeting its national and EU emissions reduction targets. The climate action plan aims to have 945,000 EVs and low-emission vehicles on the road by 2030. Continuing to support fossil-fuelled vehicles through the BIK system is incompatible with delivering these targets, but I am extending the relief on a tapered basis to provide more time for employers to provide lower emission cars to employees in order to reduce BIK liability.

To respond to the question put by Deputy Doherty, I have asked whether the information is available on what would be the change in the tax liability on a per car or per category basis due to the implementation of the policy in this Finance Bill. I am informed that Revenue does not have the information available on a per car basis or per category basis. We only have the total value involved in the implementation of the BIK relief.

Mairéad Farrell (Galway West, Sinn Fein)
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In the context of what we were just discussing in relation to the special assignee relief programme, SARP, and the tax breaks, this is something that really could be a helping hand to workers who might otherwise struggle to afford travel for work, which is also extremely essential. It shows the priorities of the Government. The Minister said he did not have a breakdown in terms of the type of vehicle. I would be interested in knowing what analysis was done of the impact on the construction workforce in particular. Has such an analysis been done? We are always talking about the need for more people to work in the construction sector to ensure we can build the homes we need. I have seen the ads the Government had out in Australia. Is this provision not saying something very different to those people that the Government is trying to bring back from Australia?

Paschal Donohoe (Dublin Central, Fine Gael)
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We do not do a sectoral analysis on what impact this policy would have on particular forms of employment. I am reminded, however, that the BIK rate for vans is already very low. It is at a low level. I will just emphasise the point I made a few moments ago that many years have passed since the Finance Bill 2019 and by the time we get to 2029, a decade will have passed since the original policy intent was communicated.

We are looking to give employers and employees a further year at the full €10,000 OMV and to then give a further two years at a tapered rate to allow them to make the changes we believe are necessary. I appreciate the inconvenience and the impact this could have on costs. I emphasise that we will taper it out over a number of years. In the absence of introducing measures like this, it is very unlikely that we would get to having a car fleet consistent with our goal of reducing carbon emissions in our economy. I appreciate the difficulty involved in, but if we are to get to a point that carbon emissions from private transport begin to change direction, we have to put in place measures like this to support the changing fleet. What we are doing is extending it in an unchanged way for another year and then looking to taper it out over a number of years after that.

Mairéad Farrell (Galway West, Sinn Fein)
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I live in Galway city. It takes me an hour and a half to get to Clifden. It also takes me an hour and a half to get to the likes of Carna and Cill Chiaráin. Somebody may be going all the way from Carna to work in construction in Dublin, as people do early on a Monday morning or whenever. Unfortunately, some people cannot avail of the option of buying an electric car because of the lack of infrastructure in more rural areas. We need to factor in that the necessary infrastructure is not in place in some of our more rural areas. We might wish it was there, but it simply is not.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister talked about the change in the fleet and the ambition to move to having more electric vehicles. What is the Government's target in that regard? Is it 1 million electric vehicles in the next four years? Good luck with that. I would say it is well off the target there. This also applies to electric vehicles, does it not? This is a tax increase for people who are driving carbon-neutral vehicles with zero emissions, is that not correct?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes. Will I deal with the questions now?

Pearse Doherty (Donegal, Sinn Fein)
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I will elaborate on the wider point. The fact is that this is not just for diesel-guzzling vans and cars; it is a tax increase for an individual driving a zero-emissions electric car. I know the Minister said he could not provide the details and all that, but I presume they are easy enough to work out. Is it not the case that from next year, people can reduce the OMV by €30,000? This means that for somebody driving an electric car doing about 35,000 km, the OMV of the car will be 12% against the value of the car, which will drop from €50,000 to €20,000. What is allowed at the moment is a €30,000 reduction in the value of the car. That will go to zero over the next four years. Therefore, there will be an extra €30,000 which will be part of the calculation for benefit-in-kind. That will be over €3,500. As a result, there will be a substantial hit involved. I have just given an example of an electric vehicle with zero carbon emissions. Those driving other cars will be hit much harder. For the type of vehicle that costs €50,000, there will be an increase in benefit-in-kind, a notional amount, of €3,600 over the next number of years as a result of this section.

This amendment would not stop the tapering that is already legislated for in previous Finance Acts, but it would stop the tapering in this Bill. That is what it disrupts. It disrupts the fact that the €10,000 will not be reduced over the next number of years.

Paschal Donohoe (Dublin Central, Fine Gael)
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I emphasise to Deputy Farrell that the higher the business mileage, the lower the rate of BIK. That is the way aim to deal with the point she referred to. For a car in category A doing under 26,000 km, it is 22.5%. If the same vehicle is used to deliver over 48,000 km, the BIK rate falls to 9%. That is the way the tax code aims to deal with the issue she referred to.

Deputy Doherty asked if this change would have an effect on the costs involved in using a carbon-neutral vehicle. The answer to that question is "Yes", because the OMV is coming down. On the other hand, we are bringing in a new rate of BIK, the A1 rate, which, over time and after this OMV issue has been phased out, will result in a more attractive tax code for the use of carbon-neutral vehicles.

I do not deny for a moment that the implementation of this will create a cost for people who are using these cars. I accept that it will. However, while Deputy Doherty's proposal would just defer what we are doing, this is the second year in which we have looked to defer it. I am not looking to remove the €10,000 in a single go. I am extending it for a further year and phasing it out over time. We run the real risk that if we do not eventually make a decision like this, the difficulty of getting anywhere close to our EV targets will only continue to grow. From the analysis that has been done, we know that one of the areas in our economy in which we are furthest from where we need to be in emissions reductions is that relating to private transport. I accept that there are difficulties and trade-offs involved. That is why we are looking to phase it out over a number of years and why I believe the approach that we have taken in this Bill is the appropriate one.

Pearse Doherty (Donegal, Sinn Fein)
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I have two points. The Minister mentioned that he is bringing in a new category A1 for zero-emissions electric vehicles. The example I gave of an extra €3,600 of notional pay as a result in benefit-in-kind is for that category of car. If it was another category of car, it would actually be higher. However, as the Minister said to Deputy Farrell, on the basis of the Schedule, somebody driving a category D car would actually pay a lower percentage if they increase their mileage compared with somebody driving an A1 car on lower mileage. There are anomalies there when we look at it from an environmental point of view. A category D car is obviously one that emits far more carbon. I wanted to make that point first in relation to the tax increase that we are seeing here, which is not a couple of hundred euro. We are talking about thousands here, which is a significant amount for individuals to pay over the next number of years.

When the Minister says the reduction has been deferred for a number of years, the point I would make is that even if this amendment were to be accepted, we would still see a reduction in the OMV. The sliding scale is already there in the legislation. It is going down from €30,000 to €20,000 to €10,000. That is happening anyway. The point is that this temporary additional reduction was brought in. When this was attempted initially, people obviously identified that they would be hit with serious tax bills. Most people will not notice this, but it is mad when we think about what is happening. The Minister has introduced a tax package of €2.5 billion for a full year. That is the full-year effect of the package contained within this Bill. The Minister introduced a budget of €9.4 billion.

This is just another example of how people are going to be worse off next year than they were the previous year or the year after. There are plenty of examples of that in this Bill. I think it is the wrong approach to take, that we would start to see a lowering of this €10,000 temporary reduction from 2027. The scale that we have needs to be reassessed. I made the point about the 1 million electric vehicles. I do not think we are anywhere on target to meet that policy objective, which is s noble one, but really there is no point in plucking numbers out of the sky, saying this is what we are going to do, and then not planning to do it. This is a tax increase on people on drive, not just people who drive electric vehicles, but it is also a tax increase on people who drive electric vehicles at a time when we are really trying to encourage them and businesses to move in that direction, because businesses are involved in buying them in the first instance.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will make two points. The removal of the OMV applies to all cars. It applies to electric vehicles as well. The intent is not to try to make people worse off but I accept that it will, over a number of years, have an effect on people and the cost involved in the running of cars. While we are not where we need to be with the availability of electric vehicles and the reduction of carbon emissions through the use of private cars, in the absence of measures like this, we could even be worse off and further away. On the point the Deputy made about comparing A1 with category C or D, he is correct that category D, for 48,000 miles and above, is at 13.5%. The corresponding rate for A1 is 6%.

Pearse Doherty (Donegal, Sinn Fein)
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Just to make my point, the corresponding rate at the same mileage is, but somebody who is driving an electric vehicle with less mileage, for example doing less than 40,000, would be paying more as a rate. This section, which reduces the OMV for cars, does not apply to all cars because it does not apply to category E cars, which are the most carbon-emitting cars. I will leave it at that.

Paschal Donohoe (Dublin Central, Fine Gael)
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There are very few cars in category E.

Pearse Doherty (Donegal, Sinn Fein)
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I know. I just, for the record, wanted to make the point that the worst polluters will not have the increase because they never got the benefit of the temporary OMV in the first instance.

Paschal Donohoe (Dublin Central, Fine Gael)
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They do have the highest rates of BIK, however.

Edward Timmins (Wicklow, Fine Gael)
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It is 3 p.m. I propose that we take the question after the break, in 30 minutes' time.

Mairéad Farrell (Galway West, Sinn Fein)
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We had finished the discussion on amendments Nos. 11 and 12, which were discussed together. Is amendment No. 11 being pressed?

Pearse Doherty (Donegal, Sinn Fein)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 12:

In page 35, to delete lines 10 to 13 and substitute the following:

“ “(B) €10,000 for each of the years of assessment 2023 to 2028 (both years inclusive),”.”.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendments Nos. 13 and 15 are related and will be discussed together.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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I move amendment No. 13:

In page 35, between lines 16 to 17, to insert the following:

“Amendment of Schedule 23B to the Principal Act (Pensions (standard fund threshold))

25. Schedule 23B to the Principal Act is amended by the substitution of the following Table for the Table to that Schedule:

“Table

Gerald Nash (Louth, Labour)
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This again is an area that requires attention. It should be capable of review at this point. The Minister will be familiar with Donal de Buitléir's report, which was published in September 2024, just ahead of the last general election. It is understandable that the issue was not addressed in the Finance Bill a few weeks after that, given that the political system was attending to other matters. The Department has had a year to examine this issue. I am particularly drawn to the point Dr. de Buitléir made in his report that it is imperative that this be tackled urgently. We are well aware that this can be a particular issue in certain areas of the public service, most notably for the recruitment and retention of senior gardaí. I recall that it was, and in fact may still be, an issue that affects the Judiciary as well.

This measure was framed in a very different time. I think it was in budget 2013 that the then Minister, Michael Noonan, introduced the €2 million threshold. We are now 11 or 12 years on. I do not think he necessarily had senior gardaí in his mind when he was drafting these proposals at the end of 2013, which came into effect then in the 2014 financial year. This is a real problem, especially for An Garda Síochána, and it would be useful for the Minister to put his views on the record. Will he establish whether the recommendations from Donal de Buitléir's report will be addressed at any point soon?

Pearse Doherty (Donegal, Sinn Fein)
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The Minister has increased the standard fund threshold to €2.8 million. I have raised concerns in relation to this in the past because obviously that is a huge windfall for people who are able to amass a pension pot of that nature. Again, the vast majority of people in the State are not going to get a whiff of a €2.8 million pension pot. What he has done in relation to the standard fund threshold will mean that the State will support individuals building up a pension pot to €2.8 million, but after that the support stops. I really question whether it is appropriate for the State to contribute to somebody's pension pot when it has reached that level.

My answer in that regard is "No". That is my view. There is obviously a requirement for ongoing support, for the State to support the pensions of individuals, and, therefore, tax relief is appropriate. However, there must be a question as to the point at which you stop giving that support. The Minister has taken the position that people can avail of pension pots up to €2.8 million. That is what my amendment considers. It looks at a report on the issue of the standard fund threshold, clearly outlining how much it is going to cost, because let us call a spade a spade: the numbers coming from the Minister and the Department are wishful thinking. If they think that this measure is going to cost €10 million, it is laughable. There is going to be behavioural change as a result of this measure.

What we are talking about in Deputy Brennan's amendment is separate. These are individuals who have no option but that the contribution is made. We are now going to have people who put money into their pensions. These would be higher wealth individuals, obviously. They are going to put money into their pensions and when their pension reaches €2.2 million, they will stop doing so because they will be hit by the chargeable excess tax. That is going to change now. Therefore, there is going to be a larger cost to the State as a result of the measures that were introduced. We sometimes have fake rows about what things cost or getting costings wrong, but there is no way that this measure will cost only €10 million.

We talked earlier about SARP and how it benefited to the tune of €105,000 some of the highest paid individuals. That measure in terms of the standard fund threshold will benefit people to the tune of €325,000 of a tax reduction. That is mental stuff. At that level, the supports should not be given. Those are my points on the amendment.

I will move to the issue of Deputy Brennan's proposal, which, as he indicated, is the proposal that exists in the de Buitléir report. He looked at how to deal with recruitment and retention for the higher levels of the public sector in particular. It was mentioned earlier that the Garda, in particular, was in focus in that regard. One of the ways to do that is to deal with age-related factors. There are a number of ways to do this. We need to deal with it. These are individuals who are not personally contributing. There is obviously a deduction that is going into a pension pot. However, these are notional payments, as such. When you have a defined benefit pension, the value of your pension pot is calculated using an age-related factor, which did not exist 15 years ago. The factors that exist today did not exist 15 years ago. It was a smaller factor and was not age-related. The age-related factor makes sense because the earlier you retire, the longer you will benefit from the pension. Therefore, the notional value of your pension pot is increased.

The Garda has fast-accumulating pensions and gardaí must retire at a certain age. They have to retire at the age of 63. I am not sure if that is the correct age, but they have to retire at a certain time. They are in a situation whereby the age-related factor hits them harder because they are not able to work on. Deputy Nash talked about the Judiciary. Members of the Judiciary are entitled to work on and, therefore, the age-related factor does not impact them or make it as difficult.

My view is that we should not be increasing the standard fund threshold. I know the Minister will say that increasing the standard fund threshold will assist a number of these individuals. That is correct. I do not think what the Minister has done will address the issue in totality. We are talking here about individuals at the higher end with large defined pensions. We are talking about at least 80,000 people hitting the standard fund threshold as it exists, never mind where it is going. We are talking about people in very senior roles. We are talking about a small cohort. To move the standard fund threshold to deal with them is madness. If I were an adviser to anybody with wealth, I would say that the first thing to do is to put money into a pension. That is what advisers tell people to do. The State is going to pay 40% of what you put in. If your pension pot is worth €2 million, the Minister has now allowed you to put it up to €2.8 million, with a tax reduction of €325,000. That is what people with wealth would do and that is what will happen. It will cost the State a lot of money. It is not the way to resolve the issue in relation to very senior people who, as a result of the way the defined benefit pension is calculated, have pensions that will hit the standard fund threshold amount.

There are two other ways to do it. One is to exempt a category of employees from the standard fund threshold. That could be considered. The second way, as Deputy Brennan has suggested, is to deal with the age-related factor, which is what the de Buitléir report suggested. There is absolutely no doubt that we have to deal with this.

This measure applies to all defined benefit pensions. When these measures were introduced, there were a lot of defined benefit pensions in the private sector. There are not many any more. Defined benefit pensions are primarily in the public sector. This a broader issue and most of the defined benefit pensions in the public sector will not hit the standard fund threshold. Within our own ranks, you would have to be a Minister for a number of years to reach the standard fund threshold. We are talking about very senior civil servants. Most people in the health and education systems will not hit the threshold at this point.

This proposal could work if it captures the individuals we are talking about. Is there a group of defined pensions within the private sector that would benefit? Is there an ability for defined pensions to re-emerge in the private sector because of the treatment they would receive as a result of the relevant age-related factor? As we know, there are valid reasons, particularly after the crash, that so many people moved away from defined benefit to defined contribution.

I have said a lot on this but I wanted to make my points about the standard fund threshold. The issue in Deputy Brennan's amendment affects a small cohort of individuals. There is an absolute need to deal with it. Because we are talking about a small number of individuals, surely to God we can find a way of dealing with the issue.

Gerald Nash (Louth, Labour)
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To clarify, the purpose of my contribution was absolutely to support Deputy Brennan's position. The de Buitléir report focused very much on the age-related factor piece and not the threshold. As I said, the former Minister, Michael Noonan, introduced the €2 million threshold in 2013. It has been in operation since 2014. He was targeting, if I can use that phrase, high rollers in the private sector who were using the generous reliefs and so on to put money away into their pensions. I want to be clear on that.

Exempting certain categories of workers may be constitutionally problematic. If there is some way of doing this, perhaps in the way outlined by Deputy Brennan, there may be a degree of consensus about it.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies. I will speak to both amendments as they both relate to the standard fund threshold, which sets the maximum amount for tax-relieved pension at retirement.

Where a pension exceeds the SFT, the excess over the threshold is subject to an upfront, ring-fenced income tax charge at 40%. The SFT forms part of the taxation framework for pensions that applies to all pensions in the public and private sector. It has remained unchanged since 2014. In that context, it is timely to consider the review of it.

In December 2023 an independent expert, Dr. Donal de Buitléir, was appointed to carry out a targeted review of the SFT regime. The report makes a number of recommendations to modernise and update the operation of the SFT, which reflects developments in the pensions landscape and the impact of wage growth since 2014. It considers the level of the SFT, the rate of tax payable and the method of valuing benefits for the application of the SFT regime and makes significant recommendations for reform in these areas. It also makes several recommendations regarding the operation of the regime in relation to encashment, pension adjustment orders and the reporting of chargeable excess tax, CET, as well as for changes in the methodology for estimating the cost of pension tax expenditures. In relation to the level of the SFT, the report recommends that the current value of the SFT be increased in line with the increase in the earnings, hours and employment costs surveys, with most recent data suggesting a new level of €2.8 million. It also recommends ongoing automatic adjustment of the SFT in line with future earnings increases. In addition, the report proposes that the link between the SFT and the amount of a lump sum that is taxable at the standard rate of tax should be removed.

The Finance Act 2024 modified three specified aspects of the regime, the first two of which were designed to implement the recommendations in relation the level of the SFT while the third was a technical change. The first revision provided for increases in the SFT to €2.2 million in 2026, €2.4 million in 2027, €2.6 million in 2028 and €2.8 million in 2029. After that, the level of the SFT will increase in line with earnings growth between 2025 and 2029. From 2031 there will be an automatic adjustment in line with earnings growth. In a year which shows a decrease in average earnings, the SFT will remain the same as the previous year. The first increase in the level of the SFT will be for the year of assessment 2026, when the SFT will be raised to €2.2 million.

The objective of these reforms was to put in place a more equitable treatment between public and private sector pensions and to ensure that the SFT regime reflects wage growth since it was last reviewed in 2014. It is important to acknowledge that the CET is an additional tax levied on top of the normal income tax, USC and possibly PRSI that apply when a pension is drawn down.

The second revision provided that the threshold for the higher rate of taxation to apply to a pension lump sum is €500,000 rather than a proportion of the standard fund threshold. This means that the threshold will not increase as the level of the SFT rises.

Finally, Finance Act 2024 addressed an anomaly with respect to the application of the SFT where an individual has more than one PRSA, to put beyond doubt that such transfers from a PRSA which is not a vested PRSA, to a vested PRSA, are considered a benefit crystallisation event, BCE, and will, therefore, be subject to the SFT.

Deputy Brennan has proposed that the current table of age-related valuation factors in schedule 23B to the Taxes Consolidation Act be replaced with a table of new and lower valuation factors which correspond to those proposed in Dr. de Buitléir’s report. As was outlined by the Minister for Finance at the time the report was published in September 2024, the Government agreed that an independent evaluation of the proposed valuation factors which apply to defined benefit pensions be carried out by the Society of Actuaries, SOA. The SOA subsequently undertook this independent evaluation and indicated that the proposed valuation factors were appropriate.

However, as I said before, budgets are about choices. As indicated on budget day, the purpose of budget 2026 is to boost our economic resilience and to keep our public finances safe. In this context, the scope for significant personal tax changes is limited, thus explaining why from an equity perspective I am not bringing forward further changes to the SFT regime in this year’s Finance Bill. I am open to considering the future application of the recommendations. In this regard, an implementation group has been convened to consider further Dr. de Buitléir’s report. It is chaired by the Department of Finance with representatives from Revenue Commissioners, the Department of Justice, Home Affairs and Migration, the Department of Social Protection and the Department of public expenditure. The group has commenced its examination of the recommendations and will report in quarter 2 of 2026. At that point, I will consider further the impact of the recommendations with a view to deciding how they can best be addressed in the context of broader considerations. Given the work of the interdepartmental evaluation group and taking into consideration that Finance Act 2024 provided for a graduated increase in the SFT which will commence in 2026, I am not in a position to accept this recommendation.

Deputies Doherty and Farrell then proposed that I prepare a report on the costs of increasing the SFT to €2.8 million and that it be prepared and laid before the Dáil. There are difficulties in relation to the costing of changes to the SFT. Information on the numbers and values of individual pension funds or on individual accrued benefits in pension schemes are not generally required to be supplied to the Revenue Commissioners. There is, therefore, no underlying data or methodology available to Revenue on which to base reliable estimates of the full cost that would arise specifically from a change to the SFT. However, in the context of the examination of the SFT and my intention to implement the recommendations in relation to increasing the SFT, my officials examined the issue of examining the impact of changes to the SFT using only the available information about previous payments of chargeable excess tax. Indicative estimated costs were prepared and they were shared with Deputy Doherty and others in the House in response to parliamentary questions on this matter, most recently on 21 October. Using this model, the indicative estimated costing of increasing the standard fund threshold proposed by the Government is as follows: for 2026, an indicative cost of €10.5 million; for 2027 an indicative cost of €14.5 million; the following year an indicative cost of €8 million; and for 2029 an indicative cost of €5 million.

While the change in the SFT for 2030 is not set and will depend on the change in earnings over the period 2025 to 2029, an estimated cost of €0.5 million has been included in the costing for this change. However, I accept that these estimated costs do not take account of behavioural changes and are based on a reduction of the current CET yield. Any assessment of behavioural changes would be speculative but I accept they are there. I am not convinced of the value of doing such an exercise.

I have also shared with the House through responses to parliamentary questions the fact that we do not have exact figures regarding the number of individuals who have paid CET. In addition, the data that is available is currently being verified and it is not possible to provide exact figures for the numbers who have paid CET and the amounts paid. I would note that the information that is available indicates that there were over 200 returns of CET through RevPay in 2023. However, I am advised that pension administrators sometimes make bulk payments and therefore some payments may relate to more than one taxpayer. This figure would also not include situations where the retirement benefit exceeded the SFT in those years but where the chargeable excess tax due was reduced to nil by being offset against tax paid on a retirement lump sum. The amount of CET reported in 2023 was €39.6 million.

It is also not possible to provide an estimate of the number of people that will benefit from the increases in the SFT.

The numbers of the SFT mean there are many variables that affect the value of retirement benefits when it is being compared to the SFT, and the valuation will depend on the individual's circumstances. Individuals can choose to retire at a range of ages and for a variety of reasons, therefore it is not possible to forecast how many will retire in 2029, with an SFT of between €2 million and €2.8 million, and not possible to provide a figure regarding the number of taxpayers who might benefit from this change, which is why I believe a report at this point would not be useful and which is why I will not accept the amendment. I should indicate that in any changes to this area it is not possible to ring-fence the SFT to certain workers or cohorts. I have examined that matter and any changes in this area would apply to all workers who are in this situation.

Pearse Doherty (Donegal, Sinn Fein)
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I want to pick up on that issue and the Minister's examination of it. Is it not the case that the tax code on the standard fund threshold and how it is applied already differentiates between public sector workers and private sector workers?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will get the answer to the Deputy's question and if he has any other question I will put the answers together and come back to him.

Pearse Doherty (Donegal, Sinn Fein)
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That is the point, which is that there are a number of ways to deal with this. There was a consultation going back two years, we had the de Buitléir report as has been mentioned and there are serious challenges, albeit for a small cohort of individuals, which we have an obligation to try to resolve. The Minister made the point we cannot differentiate but we already do it. It already exists in the Irish tax code under how the chargeable excess is actually paid. Our tax provision already differentiates between private sector individuals and public sector individuals in a quite significant way. I think it is section 787TA that provides a facility for members of public sector pensions arrangements whereby the tax liability from the chargeable excess can be discharged over a period of 20 years and, on the death on an individual, the chargeable excess dies with him or her, that is, the remaining part that was never paid. Whereas for a private individual, the tax code makes it clear he or she has to pay chargeable excess within three months of the crystallisation and there is no refund if the individual passes away within the next month or year. I want to make that point that our tax code does allow, and has facilitated unencumbered provisions that differentiate between public sector employees and private individuals on the issue of the chargeable excess. My argument and contention is, and I am not saying this about Deputy Brennan's proposal because I want to hear some of the answers, that is definitely one way of addressing that issue. I want to make sure there are no unintended consequences but there are other ways of doing it as well where we can actually bring forward provisions, as has been done in relation to certain types of employees in terms of the chargeable excess.

Shay Brennan (Dublin Rathdown, Fianna Fail)
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I appreciate that the importance of lowering the multiplier is understood and what that will do for retention. As time has passed since the report was published, the urgency is increasing on this. I welcome the establishment of a working group. I look forward to a report, which I believe is due in quarter 2 of next year. I appreciate what Deputy Doherty said that potentially there are other ways to do it also. However, my preferred method would involve lowering the multiplier rate. It would be useful were the report to examine that and other potential measures that may also be more or less appropriate. In light of what the Minister said, I do not feel the need to press my amendment. I will end my contribution by encouraging rapid movement on this issue in time for future budgets.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, there are indeed some differences with regard to how chargeable excess tax is paid between private pensions and public sector pensions. The main difference is that public sector workers are permitted to spread their CET over 20 years and the reason is that the State administers the pension, and that option is not available for individuals in the private sector. However, this is something that needs examination and consideration. The advice I have received very clearly on the use of any change of the age related factors is that it would apply to all workers, that is, to anybody who is in that pension scheme, and that it is not possible to ring-fence particular groups of workers. If there was a way in which this could be ring-fenced, we might well be having a different discussion but it is applicable to anybody who has a pension to which these arrangements apply.

Pearse Doherty (Donegal, Sinn Fein)
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There is no doubt but that the amendment, and the proposal from the report, would apply to all workers. There is no suggestion that will not be the case. That is why the questions I asked the Minister were about how wide will that be. First, my understanding is that because the majority of workers do not have a defined benefit pension, the age related factors do not apply to them.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is correct.

Pearse Doherty (Donegal, Sinn Fein)
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The vast majority of workers are in a different ball game anyway. What I do not have any of the detail of are those who have defined pensions, or, the right, because if the CET is crystallised it is already dealt with. The tax has been paid or the individual is in an arrangement to pay the tax. The question is, how many people have a right to a defined pension at this point in time? How many of those have the right to a defined pension that would be in excess of the standard fund threshold? If we are looking at these age related factors, yes they apply to all workers. The change would apply to a nurse in my local hospital or the teacher in my local school but it will not make a difference to them because they will not hit the standard fund threshold anyway and there is no chance of them doing so. How many people would the de Buitléir proposal capture? The vast majority, I assume - and assumptions can be worrying, which is why I am asking the question - will be public sector workers who have defined pensions. I do not know how many in the private sector are still offering defined pensions.

There is a second option. This proposal applies to everybody and that is why I want the information as to how widely it could apply or what the unintended consequences could be. Given that we have already differentiated in our tax code in relation to pensions and the chargeable excess from public sector pensions and private sector pensions, then it will be possible to also take that further. I am not suggesting this is the proposal but could there be a higher standard fund threshold for a public sector employee? Could there be a different age related factor? It would not be this amendment, it would have to be changed. For a defined contribution in respect of public sector workers - who are able to avail of what section 787 of the tax code does, which is to expand or pay their CET over a period of 20 years - it was obviously permissible in law to differentiate between two different types of individuals who both have a tax liability. Therefore, is it permissible, notwithstanding how this is drafted or what was recommended, to look at a carve-out for those who have fast-accruing pensions whereby, because of the onus the State placed on them to retire at a certain stage, that should not be captured in terms of the CET?

Paschal Donohoe (Dublin Central, Fine Gael)
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First, in relation to individuals, in the answer I gave to Deputy Doherty I outlined the great difficulty we face in terms of trying to estimate the number of individuals this could apply to and how we have used the CET to try to surmise the number of people who could be affected.

In each year from 2026 to 2030, our estimate - it is only an estimate - is that there are 224 individuals who will become liable for the CET. However, a proportion of people will have funds that are greater or less than the average value of €2.58 million. It is estimated that 124 individuals will have a fund valuation of the average of €2.58 million, 50 individuals will have a fund valuation of €2.2 million and a further 50 individuals will have a fund valuation of €3 million. They are the best figures we have available to us.

In relation to the Deputy's point on differentiation, particularly with regard to the application of age-related factors, yes, there is a degree of differentiation that is already in place. From our consideration of this issue, which we did, to try to treat people differently with regard to the application of the age-related factor, our view was that would be in excess of the degree of differentiation that would be possible. It would raise really fundamental equity issues regarding how different groups are being treated. That is one of the reasons, and is in fact a key reason, that I believe treating different groups or workers differently with regard to an age-related factor would not be possible.

Pearse Doherty (Donegal, Sinn Fein)
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First, on the numbers the Minister provided, I did not write them down so I cannot remember them. I think the Minister said-----

Paschal Donohoe (Dublin Central, Fine Gael)
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I can give them to the Deputy again.

Pearse Doherty (Donegal, Sinn Fein)
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-----it was 234 that-----

Paschal Donohoe (Dublin Central, Fine Gael)
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It was 224.

Pearse Doherty (Donegal, Sinn Fein)
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It is 224, okay. The issue here - and this only gives us an indication of what happened in that particular year - is that of those 224, does the Minister have the detail of how many of them used the provision in the tax code that allows them to pay their taxation liability over the 20-year period? For any public sector worker who has a CET liability, some people might just want to get rid of it and all the rest. That is fine but for most people, there is no interest accruing in this over 20 years and it dies with you on your death. Any financial adviser would say you should be using this mechanism. Do we know how many of those 224 actually use the mechanism? Do we know what proportion?

Paschal Donohoe (Dublin Central, Fine Gael)
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We do not have that information.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. I presume Revenue has and will be able to give us that information at some point, if that would be helpful to the committee.

Paschal Donohoe (Dublin Central, Fine Gael)
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Revenue is obviously hearing this exchange and if the information can be obtained, I am sure it will make it available to me. This is an area in which the data and figures we have are not as high as I would want it to be. I am not sure that information is actually going to be available but Revenue will check.

Pearse Doherty (Donegal, Sinn Fein)
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My understanding is that to give effect to that section in the taxation code you have to apply for it. The question, then, is whether that is collated centrally.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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I hear what the Minister is saying. That is fine. If it is there, we will get it.

Paschal Donohoe (Dublin Central, Fine Gael)
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If it is there, it will be shared.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. Going back to the issue, I hear what the Minister has said about the age-related factor regarding public sector workers and that may be a stretch. I do not know if the Minister has got the Attorney General's advice to suggest whether it is allowable or not. Has he looked at other options, for example, to allow some of these employees to opt out? They have got a defined pension so, therefore, they have a right to the pension of €70,000 or €80,000 when they retire. The problem is that for as long as they work, they keep on building up a pot, even though the pot means nothing to them because they have the right to this pension. It is a kind of notional pot in a way but if that pot goes over a certain point, they have a big tax liability. That tax liability could be hundreds of thousands of euro. I think the media reported that one individual might have a tax liability of €1 million. I am not sure if that is chargeable, in excess of €1 million. The tax liability might be a bit less than that. Has the Minister looked at options where some individuals might be able to opt out, or a carve-out for certain workers? That is not the age-related thing but a complete carve-out for certain employees.

Paschal Donohoe (Dublin Central, Fine Gael)
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I looked at that issue a lot when I was Minister for public expenditure and the answer is that we do not facilitate opt-outs or carve-outs. If you, in the operation of a public pension scheme, begin creating the option for people to opt out or for certain workers not to participate in it, either for part of their career or for a number of years, it creates all kinds of issues with equity and the funding of the scheme in the future. The Deputy is only asking us to consider this as an option, I should say. He is not saying we should do it but, from all the experience I have had with the operation of our existing public pension scheme, it is not something we should do.

Pearse Doherty (Donegal, Sinn Fein)
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If people were allowed to opt out left, right and centre, the issues and concerns the Minister has would materialise, but if he allowed for an opt-out where the standard fund threshold has been met, then we would be talking about a very small cohort of individuals. We are talking about the issues that are then addressed in terms of recruitment and retention. I am not saying it is simple but I am saying there are ways in which this needs to be dealt with. The problem is that this issue has been going around for quite a while. It has problems. What the Minister is telling us here is that after we had an expert looking at this issue and coming up with recommendations, we are now going to have another expert group coming up with this and looking at recommendations. It is going to be another year, at least, before anything is dealt with, with no actual certainty that anything is going to be dealt with. This report was published a year ago. There was plenty of time to actually look at this.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have to say I am quite encouraged by the discussion we are having here. It is very interesting to hear Deputy Doherty's views on it and I will certainly take them into account. I do not make decisions because of how the Deputy may respond to them or not. I have to try to make decisions based on what I think is the right thing to do overall. I have outlined that for equity reasons overall in the budget, I believed it was not a decision that should be made now. I know that when you consider other options in regard to this, it will come back to the age-related factors. I know that because this has been looked at for some time and I am familiar with how it operates. I equally know that with regard to saying we can apply the age-related factors to particular cohorts or groups of workers or particular levels within our public sector, we will not be able to do that. It will have to be done for everyone. This is an interesting discussion to have had and it will be useful to come back to this issue later on in the year, particularly when we do further consideration of this.

I will go back to the Deputy's point where he said we should consider the idea that - again, it was only an option - we would facilitate an opt-out from our public sector pension scheme for people who hit or are about to hit the standard fund threshold, which will be €2.8 million in a few years' time. That would cause real issues of equity with lots of other people where we ask them to continue to pay into their pension scheme - real, serious issues. Again, it is worth evaluating that when we are thinking about how this issue could be dealt with.

Pearse Doherty (Donegal, Sinn Fein)
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I thank the Minister. I will leave it at that. The points have been made clear. I know the Minister said he is going to go away and look at this. What is missing from our end is information. I still do not know, for example, with regard to defined benefit pensions, how many exist within the private sector and how many are in the public sector that would hit the standard fund threshold. Meaningful policies cannot be proposed without having that information.

There are two things I want to say to the Minister on this. The point was made, and I want to make it again, that there is, in some cases within our public sector, a requirement on them to retire early. Therefore, that, in my view, could allow the basis for a differentiation with regard to how you would deal with those individuals. Second, while it is not where I think we should be at, the Minister said he is going to go away and look at this. There is an expert group being established again - another one. When are we likely to see proposals coming forward in relation to this matter? Is it in the mouth of the Finance Bill? Is it early next year that would give an indication of where the direction of travel is? When are we likely to see something? For us in the Opposition, data are absolutely crucial to being able to formulate a policy and say whether this is worth doing or captures a broader audience, which is not the intention and is therefore not worth doing.

Paschal Donohoe (Dublin Central, Fine Gael)
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First, the data on this will not have improved in a few months' time. I will try to get the information for the Deputy in relation to the point he asked about when people pay the CET, whether it is up front or over time, but the information in relation to the number of people it may affect - the information I am giving here today - will not change in six months' time or in a year's time for the data capture reasons that I outlined earlier.

Second, in relation to when we will bring this matter forward again, we will aim to do that in the second quarter of next year to facilitate further discussion on it then.

Third, it will not be the case that it is possible to introduce a degree of differentiation in relation to the application of the age-related factor. There will need to be a decision made that will be of benefit to everybody who finds themselves in this situation. That would be the choice. The group that we will put together will consider all these matters in the round but that substantive choice I do not believe will change.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendments Nos. 14 and 16 are related and will be discussed together. I see the person who submitted amendment No. 14 is not here. Is someone else from the Government looking to move it?

Edward Timmins (Wicklow, Fine Gael)
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Deputy Nash's amendment is so similar that-----

Mairéad Farrell (Galway West, Sinn Fein)
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Okay. Nobody else is moving it, basically. However, we will still take amendment No. 16 in this section. We will come to amendment No. 15 and then amendment No. 16.

Mairéad Farrell (Galway West, Sinn Fein)
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We will take amendment No. 15 because Deputy Nash's amendment is amendment No. 16. Amendment No. 15 in ainmneacha na dTeachtaí Doherty agus Farrell.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 15:

In page 35, between lines 16 and 17, to insert the following:

“Report on costs of increasing the Standard Fund Threshold to €2.8 million 25. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the costs of increasing the Standard Fund Threshold to €2.8 million taking account of behavioural change, clearly outlining the cost to the exchequer, as well as the number of likely beneficiaries.”.

Gerald Nash (Louth, Labour)
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I move amendment No. 16:

In page 35, between lines 16 and 17, to insert the following:

“Feasibility report on Taxsaver scheme 25. The Minister shall, within six months of the passing of this Act, lay a report before Dáil Éireann on the feasibility of amending the Taxsaver scheme provided for by section 118(5A) of the Principal Act, to both cover more forms of shared mobility and to use digital account technology so as to provide more flexibility and interoperability to commuters.”.

As Deputy Timmins said, Deputy Currie has a very similar amendment and I will not dwell for too long on it. It is self-explanatory but I will explain a little bit more about the context. It is really about the ambition to see the TaxSaver scheme that is currently in place cover more forms of shared mobility, such as the bike share scheme and car sharing arrangements. I would appreciate the Minister's view on whether he thinks it is in order for the scheme to be reviewed or if it is feasible to include those kinds of areas under the existing TaxSaver scheme.

Paschal Donohoe (Dublin Central, Fine Gael)
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Deputy Nash has requested a report on the feasibility of amending the TaxSaver scheme provided for in section 118(5A) of the principal Act to both cover more forms of shared mobility and to use digital account technology so as to provide more flexibility and interoperability to commuters, which will allow all these different systems to join up and work together with one another. As the Deputy rightly says, section 118(5A) of the Act of 1997 provides for an exemption from benefit-in-kind where an employer purchases a travel pass for one of their employees or directors. This is known as the TaxSaver scheme. An expansion of the benefits of the BIK-related element of the scheme could create a cost to the taxpayer.

While the conditionality around the BIK exemption of the TaxSaver scheme falls under my remit as the Minister for Finance, the scope, digital underpinning and conditions of travel passes on offer are a matter for the individual transport providers as per the terms and conditions of the ticket purchased. This is outside of my remit. In respect of the day-to-day operations of public transport, including TaxSaver ticket offerings, it is the NTA that has responsibility in respect of public transport services provided under public service obligation contracts.

As is the case with all tax expenditures, it is kept under review by my officials. At present, I believe it is operating as intended and I do not have any specific plans to change this scheme. That is why I do not propose to accept the amendment. If Deputy Nash has any specific further concerns in relation to the operation of the scheme and ways in which we can deliver more flexibility to commuters, please share them with me. If they relate to the operation of the TaxSaver scheme, I will take them on board. If they do not and they relate to the actual transport schemes themselves, I will certainly pass that on to the NTA and Minister for Transport.

Paschal Donohoe (Dublin Central, Fine Gael)
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I advise the committee that there is a possibility that I may need to bring forward a consequential amendment to section 28 that relates to the extension of the accelerated capital allowances for slurry storage to remove the commencement provision in this section. This is in the event the European Commission approves the extension of the measure under the agriculture block exemption regulation in the coming days. If the approval from the European Commission is not received before the deadline for report stage amendments, the commencement order will remain in place.

Gerald Nash (Louth, Labour)
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Section 29 relates to the living city initiative, am I right?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

Gerald Nash (Louth, Labour)
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The Minister will be aware that I have given a broad welcome to the idea that the living city initiative be extended to cover, for example, Drogheda and Dundalk in my own constituency. I have brought a number of amendments over successive Committee Stages of various Finance Bills to try to achieve that objective. It is a positive way in which we can address vacancy and dereliction. The Minister will know well that the initial scheme was introduced in the early 2010s and only came into effect in about 2015, having spent quite a considerable amount of time being examined by the European Commission in terms of state aid rules and so on.

The number of changes the Minister proposed to the scheme are very positive in terms of the inclusion of properties that are dated prior to 1975. There are various other changes proposed to the scheme that will have a positive impact. Local authorities will now be required to develop and map special regeneration zones - areas in which the scheme will be applicable. It makes sense where there are business improvement district schemes that local authorities would actually use those particular areas and have them readily available. If that could be used to expedite the implementation of the scheme in areas like Drogheda and Dundalk, that would be useful.

Insofar as I can recollect, I think most, if not all, of the areas that will now be covered in terms of this new iteration of the scheme have business improvement district schemes. I was involved in getting the one in my own hometown up and running a number of years ago. It may be the case that some of the local authorities have already been in touch with the Department to urge that approach. Vacancy and dereliction are an absolute scourge. They are a real problem and I could speak at length about some of the things we need to do to address the issue.

On a related matter, I welcome the decision to move the derelict sites levy to what will now be a derelict sites tax that is capable of being collected by the Revenue Commissioners. It is related to this overall question of vacancy and dereliction.

I would like to see Revenue collecting the proposed new derelict sites tax as early as possible. If it is in order, the Minister might comment on his plans in that regard. To the best of my recollection, he will be required to introduce a series of statutory instruments once the special regeneration areas have been mapped in order to ensure that the scheme can become operational.

Two questions arise. First, when does the Minister expect the scheme to come into operation and when will he be in a position to sign those statutory instruments. Second, will the Minister provide an update - or his best guess at least - as to when Revenue will be in a position to start collecting the derelict sites tax? I know there is an amount of work to be done in preparation. Ideally, it should be up and running as soon as possible. I have always made the point that local authorities and their demands around the derelict sites levies are simply ignored. Their attempts to collect some of these levies are frustrated. For those people who are wealthy enough to allow a building to become vacant or derelict and not sweat the asset, the only language they understand is a letter from the Revenue making a demand. If they are not tax compliant, they cannot operate their businesses. This is an extremely positive initiative that we have been calling on for years. The two areas are in a way connected.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will answer the different questions the Deputy put to me. I acknowledge the point he made in the context of the amendment from a timing point of view-----

Gerald Nash (Louth, Labour)
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To be fair, I think it was ruled out of order.

Mairéad Farrell (Galway West, Sinn Fein)
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That was section 30. We are on section 29.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am on section 29. The Deputy is speaking to section 29.

Mairéad Farrell (Galway West, Sinn Fein)
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Yes.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Cathaoirleach. I will answer the Deputy's different questions. From a timing point of view, this is really dependent on the local authorities. The Deputy makes a very interesting point regarding the parameters relating to the business investment district already being in place. That certainly would appear to me to be a sensible position to start from or even, more ideally, to conclude with. If I have learned anything about the application of measures like this - and I have a lot of experience in this now and with the residential zoned land tax - it is that once we get into the territory of asking local authorities to conduct mapping exercises it takes longer than one expects and it generates all kinds of issues which it did not consider, particularly when the maps begin to expand. This relates to the other question, which I will come to, regarding the period involved in the application of the derelict sites tax, which I will deal with.

There are five local authorities that are going to be able to benefit from the expansion of this scheme, two of which are within the Deputy's constituency. I certainly hope that the local authorities will be pragmatic and will try and get this work done reasonably quickly. We, in turn, should try to turn it around at our end as quickly as possible. On a timeframe in relation to this, it depends on how much change happens with regard to the map. It is certainly our intention that we would get all of this up and running in a year. We will do it quicker if we can but we are dependent on the maps that come in from local authorities.

On the scheme, I will just generally make the point that the changes we have made here have real potential to make an impact on the issue of dereliction. I am very hopeful that if we work with local authorities, we will see properties that are currently vacant and derelict, particularly those that are above commercial properties that are empty, being incentivised for use by this scheme. While every word and detail we bring forward about schemes like this is pored over by people who might benefit or those who might advise them, I draw the committee's attention to the great efforts we have made to ensure that the part of this initiative that refers to living over the shop or changing commercial into residential use has an impact. The fact that a building age rule does not apply to this part of the scheme should mean that it will have a big impact in areas that are included within the maps. I really hope this will have an impact on the issue of dereliction, which we all know is having such an effect on the standard of living, on access to homes, and a big effect on the feel that towns and cities have, which we all want to see improve.

On the length of time for the implementation of the derelict property tax, we really want to get this up and running as soon as we can. With all the learnings we have had, I expect it will be 2027 before we get to a point where we have preliminary registers in place. Having considered this matter a lot in the past number of months, the main reason is that there is such an uneven application of the current derelict property registers by local authorities. There are many local authorities that will have a lot of work to do. A target of 2027 for a preliminary register is still going to be demanding. This is such a big issue and we have tried everything else so it is an appropriate deadline. As soon as those preliminary registers in are in place, we will move as quickly as possible to implement the tax.

There is only one point on which I would respectfully differ from the Deputy. This is an issue we will have to consider. There is no doubt that there are groups of derelict properties that people allow to become derelict and they can afford to do so. For those people, there is a really clear message that the Revenue Commissioners will be collecting this tax. There will be a register in relation to those properties that will be in effect for 2027. It will be in the best interests of everybody that they avoid being on this register in the first place and that they get these properties into a good condition in order that people can live in them. There are a number of properties that are derelict for reasons other than choice. I have no doubt that when we go to implement this tax, we will experience properties that are derelict where it is not clear who owns them. There will be complex stories behind those individual properties. Personal difficulties may well come to light as well. That will all be there, but we still have to try something different because what we are doing is not working in the way it should.

Gerald Nash (Louth, Labour)
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I thank the Minster for the comprehensive response. To be fair to him, I do detect an appetite to comprehensively address this real social problem across our country. It is a scourge that affects every community. The Minister said quite correctly that dereliction is complex. I do not pretend that it is not. We have been dealing with this in my community for a long time. We are trying to come up with innovative ways in which this problem can be addressed. We encounter all of the time questions over ownership. Properties are in probate for a period of time and maybe it is difficult to establish who the owner is. However, these are not the people we are necessarily concerned about. Those problems are objective facts. There are situations where people allow their properties to simply go to rack and ruin and they then become public health and public safety problems. The Administration in Scotland has declared dereliction to be a public health issue. If we map it, we will see that for lots of different reasons, dereliction is particularly pronounced in areas that are marginalised. We need to look at this problem through that lens as well.

One area we also need to discuss and properly interrogate is initiatives that have been taken elsewhere, such as those, for example, in countries that have introduced compulsory sales orders. Compulsory purchase orders can be a challenge. A number of years ago, a law review group came up with proposals to streamline the process relating to such orders. The Minister for housing is looking at that at the moment.

The question of how we go about compulsory purchase orders also is an important issue. In my view, with regard to dereliction and property more generally, we need to look at the public interest factor rather than the primacy of private property because this has got out of hand and is causing real problems in the middle, as we are all aware, of a housing crisis. For many different reasons and in particular from a sustainability point of view, it is much easier to turn around an existing property than to build on a new site. On those sites where there are derelict properties, the chances are there are services already available that can be easily plugged into to accommodate people. In terms of the proposals the Minister has made in the context of this Bill, and changes to the living cities initiative, the living over the shop proposal is very positive in terms of breathing new life back into our towns and city centres. That is really important.

I take the point the Minister made in relation to the onus and obligation on local authorities to deal with this efficiently. I have made a proposal and I hope that it flies with local authorities. As I said earlier, my own local authority is interested in using the existing business improvement district scheme zone and applying it in terms of the operation of this scheme. That may short-circuit and address any complications the Department may be anticipating. The Minister is absolutely right. When we start remapping areas, it could go on forever. It is subject to lobbying and so on from individuals. That is the clearest and cleanest way to deal with it. I thank the Minister for his response. This is a welcome initiative.

Mairéad Farrell (Galway West, Sinn Fein)
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I live on the east side of Galway city where there has been and continues to be an awful lot of serious dereliction for a long time. There was a serious campaign by local people in respect of one site, because it became a hazard. It got dismantled but is still lying empty. That is the site of the former Corrib Great Southern Hotel and now we have the former Dawn Dairies site that is still lying derelict and is an absolute eyesore. Not to mention the fact that in the middle of a housing crisis and given the fact there are so many services that are not there for the people of the east side of Galway city, it is an outrage that this type of a site can be lying the way it is.

It is not just that. That is a symptom of a problem across the State. Where I live obviously is the place I know best and that is an indication that the living cities initiative has not worked. We need to be honest and upfront in relation to it. What we need to make sure of is that we ramp up how we deal with these sites, because of the housing crisis we are trying to deal with, but also because of the services that so many different communities simply do not have. I am talking about health services and all those kinds of things. We need to have this as a priority for the Government to look at. If the Minister is serious about tackling this kind of vacancy, we need to make sure we have all the data on vacancy and dereliction and we can at least then fully monitor exactly what is happening. As someone who campaigned heavily on the former Corrib Great Southern Hotel site, I found it was very difficult to get any information required to be able to try to push it ahead. I am worried this is something that has now become the norm and people feel that with those sites that is the way they are, rather than seeing the potential they have. We all want to live in cities that can live up to the potential they have. I wanted to say that as it is very close to my heart but also something I see in my own local area.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies for their contributions.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I had indicated previously and the Leas-Chathaoirleach told me I could come in after others.

Edward Timmins (Wicklow, Fine Gael)
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I thought the Deputy might come in-----

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Leas-Chathaoirleach wanted to bring me in later?

Edward Timmins (Wicklow, Fine Gael)
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The Deputy can come in now, it is okay.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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No, it is okay.

Paschal Donohoe (Dublin Central, Fine Gael)
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I would prefer to have everybody in so I can respond in the round.

Edward Timmins (Wicklow, Fine Gael)
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Go ahead, Deputy.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the Minister. It is very positive to hear his commitment in this area. When I am in my constituency going door to door, I come across well-built homes that have been empty for 20 or 30 years. I appreciate there are complexities around why that happens but it is not a situation that can be tolerated. It should not be tolerated under any circumstances but with the gravity of the housing crisis we have, there is no justification for it.

When I started my first election campaign to my local council and was campaigning in my local community, I was knocking around areas in which people were pointing at derelict houses, boarded up badly with corrugated iron and grass growing out of the roof, that had been empty for years. People were telling me they were owned by the local authority. I thought it could not be true that the worst, most derelict homes in the area were owned by the local authority. It turned out they were, and that the four had been empty for a collective period of approximately 60 years. I got that changed as a local councillor and they were put back into use a few years later. Families are now living there and they have been put to great use. However, it shows the institutional attitude around this in the past that the worst offender in a community as regards dereliction was actually a local authority. That has changed and it is welcome.

There is a lot that we need to do on this. The issue does not stop here. Compulsory sales orders are a very good idea. A streamlined CPO process needs to be done. It is very long and complex and there are proposals from the Law Reform Commission that need to be implemented. I urge the Minister, who clearly is committed on this, that when he does encounter difficulties, challenges and complexities during the implementation of the process, to hold firm as it is so important.

Pearse Doherty (Donegal, Sinn Fein)
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On the living city initiative, as was mentioned, it has not worked. The low take-up is an example of how it has not worked. We have had numerous iterations of and changes to this, such as accelerated reliefs. It started off as ten years and it is now seven. We had additional cities and maps changed and still the number of claimants is quite low. The cost of this is €1 million or something like that. It is very small in relation to the actual figure. The figure I have for 2022 is 89 claimants at a cost of €1.1 million. The changes the Minister is bringing forward are quite substantial. The fact the Bill has moved from pre-1915 to pre-1975 buildings is very significant. It is a huge expansion.

I had to pop out to speak in the Dáil so if I am asking questions that have been asked and answered I will look back at the transcripts later but if not, I ask the Minister to talk to us about why he chose 1975 as a point in time. We know that if we look at the housing stock within the State, of all houses in the State, 9% was built before 1919. By expanding this to 1975, we take in another 23%, that is, one quarter of housing stock. That obviously does not apply across the State but within the designated areas. Nonetheless, it is quite significant.

I diverge, but when we look at this graph, we can see that 25% of our existing housing stock was built within ten years. It shows how terribly the Government has been doing over the past while when housing is a crisis. We have the ability to really wrap it up but that is another issue.

This is quite a large expansion, so will the Minister tell us why the year 1975 was identified? Also, the Minister is allowing for commercial premises that are developed into rented residential elements. The commercial and rented residential elements are now being amended to allow for an enhanced capital relief system of over two years, as opposed to seven years for the rest. What is the policy consideration for that? If the Minister believes it is necessary to go to two years for those elements, why not have two years for everything? I am not advocating for two years for everything but am interested in the assessment the Department has made.

In regard to the age profile of these buildings, I hear what colleagues have said abut dereliction. I know Letterkenny is to be added to this and I will speak about that in a second. There are derelict buildings, particularly in parts of the centre of Letterkenny. One derelict building creates a situation where we end up with more and more of them. This will apply to buildings that are not derelict as well but are now being upgraded and refurbished for residential or rental elements above a shop, or indeed an entire commercial building being changed into residential, as far as I understand. In terms of commercial to residential, there are no age limits whatsoever. Will the Minister explain his thinking on that? I think the legislation talks about the rateable premises. Does that mean that, within the catchment area, a commercial building that was built maybe two years ago and is rateable could actually avail of this? Could the person who built the commercial building and left it as a shell avail of this? Could a person who is building a commercial building today avail of this scheme in two years' time to benefit from the living city initiative, because there is an extension to five years? They may leave the upper part of the building gutted to allow for the refurbishment to be able to fall under this scheme which allows for up to €300,000 of an allowance in terms of their tax bill?

When we dealt with all of the variations of the initiative, there were very clear anti-avoidance mechanisms put into this, and that mechanism was that developers and connected parties were not able to benefit from this. That has now changed. Developers and connected parties will be able to benefit from this in certain circumstances. Will the Minister speak to that? There are quite a number of questions there but I am sure the officials have taken a note of them.

In regard to the designation of the new areas, obviously we are dealing with the Finance Bill and the Minister announced in the budget that a number of other areas, including Letterkenny, Sligo, Dundalk, Athlone and Drogheda will be included in this. I am interested to hear why those areas were selected. I know all of the areas, but I know some of them well, or better than others. There is absolutely a need for regeneration in parts of those areas but I also know towns that are not too far away from them that equally need the same. If the Minister believes in this, why are we not applying this more broadly?

Paschal Donohoe (Dublin Central, Fine Gael)
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Great. Thanks very much everyone. I will begin with Deputy Nash and his different points. I fully agree with him regarding the maps and I hope the expedition of these maps in a timely way by local authorities will in turn allow us to implement the changes we are making here. What we have been doing up to this point has not worked in the way I want it to and we need it to. With the combination of changes we have made, I am making it available to five more cities in order to do more to tackle the issue of dereliction and the use of property that is already built.

The Cathaoirleach reminded us of the really significant issues we have in relation to the use of properties that are derelict or vacant. It is the case that this changed scheme will still have real focus and limit to it, from a geographical point of view. I suspect it is the case that some of the property the Deputy is referring to will still be excluded from it. It is the reason we also have the urban regeneration development fund, which is a fund of €150 million that does aim to support plans that can end dereliction and long-term vacancy. We also have the croí cónaithe fund which provides a grant of up to €50,000 or €70,000 for vacant properties. We also have the vacant property refurbishment grant, with 9,979 grants having been approved at the moment and a further 2,856 having been paid out to a value of €155 million. I am just making the point that while we are understandably focusing on the living city initiative today, there are other schemes that are spending-related and aim to make a difference to this.

In relation to Deputy O'Callaghan and his point about local authority homes that have become voids, a void is just a description for properties owned by local government that do not have anybody living in them and have decayed over time. I have seen the same thing myself. In fairness, it has been an area of focus for the Department of housing and more funding has been made available to quickly turn properties that local authorities own into homes. While I cannot speak to the Deputy's constituency, I can see within Dublin Central now the number of homes that have been owned by the local authority that are now being turned into liveable homes and have people living in them. I greatly welcome that and want to see that progress continue.

I have taken a note of the questions Deputy Doherty has put to me. First, we have not expanded the maps or cities for some time. This is the first revision of the cities that has happened for many years. Even in what I am doing here today, I am not proposing a revision of the maps for existing areas that are in the scheme because I believe that would be a counterproductive thing to do, given all the other experience I have had with maps and the need for mapping from local authorities. It is some time now since we have had any significant revisions to the scheme and there has been no change for many years with regard to the cities or maps.

On the point about why we went to 1975, it previously stood at 1915, as Deputy Doherty said. The aim was to try to maximise the number of properties within the existing parameters of the scheme that would benefit from this because of the shift in gear we need in regard to the use of these properties. To bring some figures to it, at the moment, the number of properties that qualify within the existing special regeneration areas is 14,000 properties. We estimate that will rise to 34,000 properties. That is not the same thing as saying all of these properties would then access the scheme but that is the number of properties that qualify for it.

As a result of the decision that we have now made with regard to so-called regional centres, that will further increase it by another 7,000 properties, bringing the number of properties that will be applicable to the scheme up to 41,000. It is currently 14,000.

On why the owner-occupier provision is able to be drawn down over a seven-year period, owner-occupied properties will be set against either PAYE income tax or the self-employed tax. For that reason that is applicable over a seven-year period, whereas commercial and residential properties will be applicable only over a two-year period.

The Deputy noted that private developers will be able to access the scheme. That is the case because the private sector is going to play a role in dealing with the issue of dereliction, but I have made the point that the maximum that is applicable under a property here in this scheme is €300,000 per undertaking due to the application of our state aid rules. A cap is in place regarding the maximum that can be drawn down in relation to this per undertaking. Yes, I am bringing the development sector into the operation of this scheme because I am trying to use, in a targeted and responsible way, the tax code to make a difference to the availability of homes within city centres, recognising that tax in a targeted way can play a role with regard to it.

On the point made about the number of areas, they are informed by the designation of regional centres within the national planning framework, and the national planning framework lays out a number of cities that are classed as regional centres. I am using that classification to expand the scheme.

That leads to the question put to me on whether I believe in it. I do believe in the changes that we are making. As for why we do not do more and not expand the maps further and bring more cities into it, there is still a balance we need to strike. These are significant changes that are being made here. I believe that changes of this nature should be targeted and I do not believe they should be broadly available across our country. I also do not believe that, for example, they should be operating without maps or that the maps should be massively expanded. What I do not want to see happen is the owner-occupied residential relief being used as some kind of scheme that would facilitate, for example, extensions or upgrades of existing homes. That is not the intention of this. The intention of this is that it is used in a targeted way. The best way I have of delivering that targeted policy objective, which is about delivering new homes and trying to do that in the best way possible, is through maintaining maps and extending it in a targeted way to five more cities in a way that is consistent with the national planning framework.

Gerald Nash (Louth, Labour)
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I can understand the logic that is applied in terms of using the five regional development centres, as defined under the terms of the national planning framework, but there may very well be scope to expand this initiative to towns - for example, as I explained in the proposed amendment that was ruled out of order, towns of over 20,000 - because of the extent of vacancy and dereliction in order to prompt redevelopment. There may be a time when that can happen. Of course, this will be open to review, I have no doubt, on a very frequent basis.

When it was originally put forward that the scheme would be open to developers, I was maybe not as concerne as most because my experience of this scheme, understanding how it works and understanding some of its deficiencies, was that individuals who wanted to take on a property in certain parts of Dublin, for example, found it very difficult themselves to resource that renovation project because of the nature of the renovation works. My own area of Drogheda has dozens of architectural conservation areas so buildings can be tricky to renovate, such as old Georgian homes and so on that are vacant, and we do need to be mindful of that. It is often the case that only small-scale local developers have the resources and know-how to be able to turn around some of these properties and ensure that they do provide high-standard accommodation. We are often dealing here with tricky buildings. They may have been derelict or vacant for some time but may be architecturally important and preserved structures, so we need to be careful about how we proceed on that basis. There is also a degree of protection in terms of the two-year period for undertakings and the €300,000 cap, which would, I hope, mean that this would not in any way be open to any form of abuse, for want of a better term, by undertakings because the whole objective is to turn around buildings and make urban centres liveable and viable 24-7 communities where people live.

Paschal Donohoe (Dublin Central, Fine Gael)
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I agree with that; it is just about trying to get the balance right. Planning restrictions and planning conditions still apply in all of these cities that we are referring to. Dublin and Limerick are examples of where the kind of development that local authorities will allow to happen on properties is quite limited because they want to preserve the architectural heritage of the buildings. That is the reason that, after consideration, I did decide that there could indeed be a role for developers in relation to it, and if somebody acquires a building that is currently vacant and this scheme plays a role, ultimately leading to a new home being built, then I think that is appropriate.

Pearse Doherty (Donegal, Sinn Fein)
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To clarify, this will only apply where there is residential accommodation in relation to the allowable expenditure. Is that correct?

Paschal Donohoe (Dublin Central, Fine Gael)
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For over the shop.

Pearse Doherty (Donegal, Sinn Fein)
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Yes, but there has to be an element of residential.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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It cannot work otherwise.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, that is correct.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister mentioned that the reason that the seven-year, as opposed to two-year, capital allowance will apply only to an owner-occupier. I believe it should only be seven years is if the Minister feels they would not have a tax liability and would not be able to benefit from seven years. There is a cap of €300,000, however. Obviously, it is not €300,000 of a tax reduction and a person must apply his or her personal tax rate against it and then over seven years. That is the maximum. For somebody doing €50,000 worth of work to a piece of property to bring it to a liveable point, the tax benefit to that individual, paying a 40% tax rate, would be €20,000 and that benefit would be spread over seven years. Why not have an enhanced capital allowance for those individuals as well?

I asked the Minister about commercial premises. Can somebody who builds a commercial premises avail of this scheme after two years to create a residential property upstairs? Does that open up a concern for the Minister that people could now stage their development or works so they are able to do that?

If somebody is building a commercial development in an area that is mapped out, you could nearly decide to get the ground floor sorted and get the shop open and all the rest of it and apply for it next year and get €300,000 of allowable expenditure off your tax bill and finish the upstairs part under the living city initiative. What protections are there to make sure that does not happen because the Minister has got rid of the timeframe completely?

Paschal Donohoe (Dublin Central, Fine Gael)
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On the third question, what the Deputy is referring to is, of course, possible but given the maximum available is up to €300,000 for somebody involved in the construction of a commercial property, I am not sure that is enough money to act as an incentive for that kind of behaviour. That would be my judgment on it. However, I can see the point the Deputy is making and I will certainly keep it in mind because the last thing we are looking to do here is to fund a conversion that somebody is already planning to deliver. We do not want to see that happen. That risk is there but I think it is worth seeing what the broader benefit of this could be regarding all those properties across the different cities, including the five additional cities that will be included within this scheme, that have a retail presence on the ground floor and have floors above them which could be used for a home but which are not being used. I do not think this scheme is all of the answer to it but I think it is going to be part of it.

Regarding the Deputy's second point, I will get a note prepared for him on that to better explain it in advance of Report Stage of the Bill so that I can give a fuller answer to the committee between the difference in terms of the six years and two years. I hope that will give a further answer to the Deputy's question in advance of this coming back to the Dáil.

Gerald Nash (Louth, Labour)
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Will the information be available to everyone?

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course, I will make it available to the whole committee.

Regarding the Deputy's first question, I want to reconfirm that in order for this to be applicable, residential property has to be made available as part of it. I will clarify what I mean by this. The Finance Bill will create a new category of relief which will apply to the part or a full conversion of commercial properties into residential properties. The building age rule, as I said before, will not apply to these conversions and the accelerated capital allowances can be claimed at a rate of 15% over two years and, if not fully absorbed, can be utilised for up to ten years. The maximum level of actual tax relief, as I said at the start of my answer to the Deputy, would be capped at €300,000. Residential accommodation has to be provided.

Pearse Doherty (Donegal, Sinn Fein)
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On the qualifying expenditure for certain properties, can the provisions here differentiate between rateable properties and non-rateable properties? Will the Minister explain the issues here in terms of what is the requirement to be able to fulfil the conditions under the living cities initiative for these types of properties?

Paschal Donohoe (Dublin Central, Fine Gael)
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Bear with me for one moment and I will provide that information. To qualify for it to be commercial, it needs to be rateable before it can be converted.

Pearse Doherty (Donegal, Sinn Fein)
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The definition of "rateable" will come from local authorities and legislation but instead of me having to check it, does that mean it is possible to have it rated or is it a case that there has to have been evaluation carried out on it? If something is termed "rateable", it sounds as if it is a building that is possible to be rateable.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will come back to the Deputy on that.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 17:

In page 43, between lines 34 and 35, to insert the following:

“Report on policy objectives and financial safeguards for Living Cities Initiative

30. The Minister shall, within 1 month of the passing of this Act, prepare and lay before Dáil Éireann a report on policy objectives and the financial safeguards that are in place given the scale of the reform and expansion of the scheme in geographical scope, eligibility and granting access to developers to the scheme.”.

Much of this has already been discussed in relation to my concern about the anti-avoidance tax measures that are now gone from the scheme in terms of developments. I have discussed some of the issues with the Minister and, in fairness, he has said he will look into them.

I think this scheme came in in 2012. It came in very early on. I think it was John Moran's brainchild at the time. It was restricted to Georgian buildings back in the day when the then Minister, Michael Noonan, introduced it. However, it is obviously not working. There is not a huge expenditure on it but this is a big expansion in terms of the relevant properties and it does allow developers into it even though there are limitations. What are the policy objectives and financial safeguards that are in place in relation to the reform and expansion of the scheme, particularly with the reference in terms of developers? That is what the amendment I have put down refers to because we have seen property-related schemes which do take off and then they become turbocharged and they cost a fortune and we find out then that the objectives are not being fully met.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have done my best answer to the questions the Deputy put to me earlier on, in particular the point he put to me regarding the role of developers and the fact they will be able to access that scheme. I have made the case to the Deputy that given the nature of planning regulation in many of these cities, it will be the case that we need to broaden the scheme to allow developers to play a role within it. I will make a few points on the safeguards that are there in relation to it. Conscious of the experience we have had in the past with schemes like this, it is very limited geographically. The number of properties that may be able to apply and that would be able to qualify for it is 41,000, which is a relatively small share of the total number of properties we have within our State and, critically, it has a cap of €300,000. I believe they are reasonable safeguards to have in place.

Pearse Doherty (Donegal, Sinn Fein)
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Does that 41,000 include the five new towns?

Paschal Donohoe (Dublin Central, Fine Gael)
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It does.

Pearse Doherty (Donegal, Sinn Fein)
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Does the Minister know the maps of the towns already, or how is that figured out?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is an estimate regarding the properties that could be included.

Pearse Doherty (Donegal, Sinn Fein)
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Okay.

Paschal Donohoe (Dublin Central, Fine Gael)
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At the moment it is 34,000 and we estimate there will be up to a further 7,000 properties included in the new scheme. That is 41,000 in total.

Pearse Doherty (Donegal, Sinn Fein)
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I thank the Minister.

Mairéad Farrell (Galway West, Sinn Fein)
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Is the amendment being pressed?

Pearse Doherty (Donegal, Sinn Fein)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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This is in relation to retrofitting for landlords. Will the Minister outline the rationale for the Department to propose that the number of properties landlords can avail of now is three as opposed to two in relation to this relief? Why has the Minister chosen the figure of three?

Paschal Donohoe (Dublin Central, Fine Gael)
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The reason we are making these changes is that I am trying to encourage some uptake of the scheme. At the moment, the take-up of the scheme is extremely low. By allowing this to be applicable against a higher number of properties, I am hoping that it will play a larger role in the retrofitting of properties that are rental in nature.

Pearse Doherty (Donegal, Sinn Fein)
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What is the thinking behind that? They are all individual. It is not as if the retrofitting can happen all together unless we are talking about apartments or something like that which we would not really be looking at in terms of retrofitting. What is the thinking in allowing landlords to do this, if they are not willing to do it for one property?

Paschal Donohoe (Dublin Central, Fine Gael)
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The number of claims that were made in relation to this scheme was less than ten in the last year we have data available for. There is an exceptionally low drawdown on it at the moment. I am attempting to see if there is a way in which we can have a higher uptake of the scheme than is currently there.

Mairéad Farrell (Galway West, Sinn Fein)
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Does any other member want to speak on section 30? The question is-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Another point worth making is that I have been reminded that in the operation of the rent pressure zones, RPZs, having up to three properties is the definition of a small landlord, so it is consistent with that as well.

Pearse Doherty (Donegal, Sinn Fein)
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Will the Minister tell me if this is a precedent or is it common in the tax law that the expenses would be allowable in the year as opposed to the following year?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are bringing it in line with normal practice now. It is in line with precedent.

Pearse Doherty (Donegal, Sinn Fein)
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I presume that will be the bigger change-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes-----

Pearse Doherty (Donegal, Sinn Fein)
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-----if it is to work.

Paschal Donohoe (Dublin Central, Fine Gael)
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-----that could be the case.

Pearse Doherty (Donegal, Sinn Fein)
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Yes, okay.

Pearse Doherty (Donegal, Sinn Fein)
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I appreciate what is behind this section. Those with a smaller tax liability will now be given an estimate of €1,000, whereas those with a larger tax liability, say €100,000, will be given €100,000. When you read this, you see that they can get out of this by just submitting their own tax liability. Are there any penalties as a result of that? How widespread does the Minister think this will be? It is obviously an issue that returns are not being made. How widespread is it?

Paschal Donohoe (Dublin Central, Fine Gael)
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We have estimated that there are approximately 139,000 cases of non-filing. It is quite significant, and it is 139,000 for each year from 2020 to 2023.

Pearse Doherty (Donegal, Sinn Fein)
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Has Revenue estimated what proportion of those 139,000 cases will fall below the €1,000 threshold? Revenue is going to overestimate the tax liability of quite a large number of individuals and companies. I assume the overestimation is an administration issue. Is that why it is being brought in? Why are we going to estimate those who have a tax liability of over €1,000 accurately, but are deliberately overestimating those who have a smaller tax liability, which will be small companies or those companies or self-assessed businesses that are not doing as well?

Paschal Donohoe (Dublin Central, Fine Gael)
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I understand the €1,000 would be for taxpayers who have not filed previously. Our judgment is that all of this refers to administration issues in relation to filing the tax returns, but then it does become an issue for Revenue when the administration falls on them. This is just a reasonable change to try to deal with that.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister says it is for people who have not filed previously. If somebody filed last year, will Revenue base it on last year's tax liability? My reading of this estimate was that it was either €1,000 or whatever was the greater. Will the Minister clarify that?

Paschal Donohoe (Dublin Central, Fine Gael)
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Revenue will take an average of the past two years of most recent returns if someone has filed before. As I said to the Deputy a moment ago, the estimate will be €1,000 if someone has not filed a return before.

Pearse Doherty (Donegal, Sinn Fein)
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I do not want to drag this out but the legislation states, as the Minister has mentioned, that Revenue will take the average of the tax due, including the two most recently filed returns delivered by the chargeable person, or €1,000, whichever is the greater. For an individual or a company that had a return of €500 one year and €400 in the other year, their liability under section A is €450. Under this piece of legislation, Revenue will say their liability is €1,000.

Paschal Donohoe (Dublin Central, Fine Gael)
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In turn, the hope is that it will prompt them to file a return.

Pearse Doherty (Donegal, Sinn Fein)
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I understand that; they should file a return. It is staggering that there are 139,000 cases. That is very high, but the point I am making is that we are penalising those with a lower tax liability this year. If the Government wants to penalise them, it should penalise everybody. I am not arguing for that, but that is the way the Government is doing it. Someone with a higher tax liability who is doing better or whose business is doing better is going to get an accurate tax liability based on their previous returns, whereas someone with a lower tax liability who may not be doing as well is going to be deliberately overestimated by Revenue.

Paschal Donohoe (Dublin Central, Fine Gael)
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I do not follow the Deputy.

Pearse Doherty (Donegal, Sinn Fein)
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If I am in this category and my tax liability over the past two years is €500 each year and I have not filed, Revenue will say my tax liability is €1,000. If my tax liability for the past two years was €500,000 each year, Revenue will say my tax liability is €500,000. If my tax liability is greater, Revenue will give me the accurate tax liability based on the past two years, but if it is below €1,000 it is going to send me a letter informing me that my tax liability is greater than what it actually is likely to be.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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The Government is penalising people who have a smaller tax liability.

Paschal Donohoe (Dublin Central, Fine Gael)
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In theory, I can understand-----

Pearse Doherty (Donegal, Sinn Fein)
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Well, in legislation.

Paschal Donohoe (Dublin Central, Fine Gael)
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The whole idea is to create an incentive for people to pay their taxes-----

Pearse Doherty (Donegal, Sinn Fein)
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One hundred per cent, but we do not do that for people who have a tax liability of €500,000 and did not file. That is what I am saying. It is not that we penalise them by giving them a letter with a higher number on it than what their average was over the past two years; we give them what their tax liability was for the past two years because they have a higher tax liability. We penalise people with smaller tax liabilities. They can get out of it by filing their returns, but if the incentive is to get them to pay it, why not do it for everybody? Why just pick on those who have a smaller tax liability in the first instance?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are not looking to pick on anybody. I understand the point the Deputy is making, but I think it is a fair trade-off in order to incentivise people to file an accurate tax return.

Pearse Doherty (Donegal, Sinn Fein)
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I do not understand, unless there is an administration reason for it. I cannot understand why there would be an administration reason because under this section Revenue will have to look at people's or companies' filings over the past two years. If their filings over the past two years was on average below €1,000, Revenue will hit them with a bill for €1,000. If the Government believes this is the incentive that is required, then it should be built in for everybody. There is a differentiation in this section which impacts those with smaller tax liabilities. These are individuals with lower incomes or businesses that are struggling and not doing as well. Unless there is a rationale I have not heard, I do not get it.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have done my best to explain it to the Deputy. I understand the point he is making. What we are trying to do here is change the incentives for the 139,000 people who are not filing tax returns the way they should.

Pearse Doherty (Donegal, Sinn Fein)
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This is about cost rental. It will apply to cost-rental accommodation designated from budget day, 8 October, onwards. When people hear about this, they think it is a good policy that will result in cheaper rents but is it not the case that this is not going to result in any cheaper rents? Should this not be available to the thousand or so cost-rental units that are already in existence, allowing for people's rents to be recalculated? Nearly all of those units are in Dublin. I just do not understand why that is the case. Will the Minister confirm that this will not allow for cheaper rents as such? What is the reason it will not be applicable to existing stock, allowing the LDA to recalculate rents based on this tax break?

Paschal Donohoe (Dublin Central, Fine Gael)
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The exemption applies only to cost-rental homes designated from 8 October onwards, as projects designated prior to this date have already been financially modelled with the cost of corporation tax on rental properties included in the cost and rent calculations. The Department of housing has advised that cost rents are set using this project modelling and that it would not be possible to now change rents for active tenancies. As applying the exemption retroactively would not result in reduced rents for tenants in accommodation designated as cost-rental accommodation prior to that date and could not retrospectively reduce the secure tenancy affordable rental investment scheme, STAR, funding provided to projects, the exemption will apply to new projects designated as cost rental post budget day only. This will ensure the value of the exemption is passed on either through reduced STAR subsidy or reduced cost rents. Those who already in cost-rental accommodation are already paying rents that are lower than market rents, as they are fully entitled to. They are already receiving a reduction on what the market rents would otherwise be.

Pearse Doherty (Donegal, Sinn Fein)
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Does the Minister expect that exempting rental income from cost rental will result in reductions being passed on to renters or will it just make cost rental more viable, particularly with the private sector now being involved?

Paschal Donohoe (Dublin Central, Fine Gael)
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I expect that this will primarily be about viability. The aim is to further incentivise the delivery of more homes through the cost-rental scheme. In many cases, it will be about viability. The lower level of rent should be delivered through the cost-rental scheme the properties are in.

Pearse Doherty (Donegal, Sinn Fein)
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On the issue of existing stock, the LDA will now have cost-rental properties on whose rental income it pays no corporation tax along with about 1,000 units on whose rental income it will pay corporation tax. My view and that of my party is that corporation tax should never have applied to the LDA's rental income in the first instance. I do not have a problem with the exemption but I do believe it should apply to the existing stock and that those rents should be recalculated, passing the benefit on to the customers. These cost-rental units are not in private hands but in the hands of the State, are they not? Is that not still the case? It is therefore within the gift of the State to ensure this rental income is treated like everybody else's income from cost rental will now be treated and that the rents are recalculated on that basis. It is definitely doable.

Paschal Donohoe (Dublin Central, Fine Gael)
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Fairness applies in another way, however. My aim in doing this is to improve viability as opposed to reducing the level of rent for properties that are not yet built. In that sense, we are treating future tenants and existing tenants in the same way. The aim of bringing this forward is not necessarily to adjust the rent that future cost-rental tenants will pay. It is to help to have more cost-rental properties built in the first place.

Pearse Doherty (Donegal, Sinn Fein)
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That is obviously the big issue here on the Government side. The Minister has made the point that we need the supply, which we obviously do, but the Government is turning a blind eye to another major issue, which is that it has overseen runaway rents. Even with cost rental, where costs are 25% below the market rate, rents are still extremely high. I will leave my point at that.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If the aim of this is to improve viability in the sector, which I accept is the Minister's aim, surely applying it to current stock would help the overall viability of the sector because it would help the LDA and the AHBs that currently have a cost-rental stock with the management of that stock and with expanding the sector. It would give them the ability to reduce rents and it would also improve the income they have. It could achieve both and put them in a stronger position to expand the current stock.

Paschal Donohoe (Dublin Central, Fine Gael)
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That goes back to the advice I received from the Department of housing, which has said that these rents are now set and that they are already set at a level significantly below levels in the market. There are two different issues. There is that issue and then the second issue, which is that, in policy terms, I am not looking at this measure as something that will influence the level of rent for cost-rental properties. Rather, I am hoping that it will contribute to the LDA and the AHBs being able to deliver more cost-rental properties full stop.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I appreciate the answer. It just sounds like the Minister is saying that, with rents now set in the cost-rental sector, if there are options to reduce those rents and make them more affordable in the future, the Government does not intend to look at those options because the rents are now set. There is a view that it is locked in. It should only be locked in if there are no viable ways to make those rents more affordable. That should be on the table. Of course, it should be locked in that rents will not go above the current level. For the viability of the schemes and paying back the financing of them, they have to be at that level but, if ways can be found to make them more affordable, they should be on the table and should be considered. It should not be that they are simply locked in and there you go.

Paschal Donohoe (Dublin Central, Fine Gael)
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The rents are already at a reduced rate versus the market rents. When the rents are calculated and an agreement is made with tenants, this must be done on the basis of the policy framework at that point in time. That is what has happened here with regard to the LDA. In any event, the total number of cost-rental properties available makes up a relatively small share of what the LDA is going to have to deliver in the years ahead. I hope this change will allow us to give the LDA a better chance of delivering its future cost-rental aims.

Pearse Doherty (Donegal, Sinn Fein)
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With rents of approximately €1,500, you are looking at a tax benefit of about €4,500 per unit, or somewhere in that space.

That would be of benefit to the LDA. The rate of tax in relation to the income would be 25%. On the cost of this measure, where does the Minister see things going? Is this in any way designed for the LDA to offload cost-rental properties to the private sector? Is this not really about the viability of building but actually about the ability of the LDA to sell on and to allow the investors to have a return? Obviously, they would benefit from the built-in return that exists in relation to the LDA, but also now from the uplift of no tax on rental income. Is that part of the Minister’s consideration?

Paschal Donohoe (Dublin Central, Fine Gael)
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The estimated cost of the measure is based on estimates of profitability of current rental units subject to tax. The full-year considerations take into account expected growth in the number of units to meet the target of 18,000 by 2030 and assumes that the current portion, of around 60%, will be delivered by local authorities and AHBs, with the balance delivered by taxable entities.

The first-year cost estimate was reduced to reflect the potential availability of capital allowances, which would reduce taxable profits. We estimate that in year one, the figure would be €4 million, rising to approximately €20.4 million per annum over time. It is also likely, however, that STAR expenditure will decrease on a project-by-project basis once this relief becomes available and that will offset the costs to a degree.

On the second question, it is not at all my intention that this measure would facilitate the LDA in disposing in any way of cost-rental properties in the future. If anything, my view is the opposite, namely, that the income the LDA generates over time from having a larger amount of cost-rental accommodation will help it to achieve and do more.

Pearse Doherty (Donegal, Sinn Fein)
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On the numbers the Minister has provided, there is going to be a ramping up. He stated the figure related to the measure to exempt tax on cost-rental properties will go up from an initial €2 million to €20 million. Can he outline the position? The issue is that we are talking about future cost rentals. Rising rents will mean the average rent will be quite substantial. My own back-of-the-envelope figures show the figure would be substantially more than €20 million. How many cost-rental properties are we assuming if we are hitting the €20 million in terms of costs?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are assuming 18,000 units.

Pearse Doherty (Donegal, Sinn Fein)
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So, the cost per unit is significantly reduced. Are there reasons? Is there any factor I am not aware of that is reducing the figure to that level? The Minister is assuming a tax liability of around €1,100 per cost-rental unit.

Paschal Donohoe (Dublin Central, Fine Gael)
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We are also assuming that within this there will be cost-rental properties delivered by entities other than local authorities and AHBs, and perhaps that will influence the cost. I am very happy to see if we can break down the cost further to explain to the Deputy the granular detail of how we get to €20 million.

Mairéad Farrell (Galway West, Sinn Fein)
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Deputy Ó Broin indicated a desire to contribute. I am conscious that we are due to suspend in five minutes. We will be suspending at 6 p.m. but I am happy to allow Deputy Ó Broin to contribute first. Then we will take an hour’s break and come back to the debate. I would like us to stick to the schedule we have.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the Chair. I am sorry for the intrusion into her committee but I am obviously keenly interested in cost rental and the LDA. I have been following the debate upstairs.

Let me refer to one of the things that strikes me as strange about the corporation tax exemption. My view is that the LDA should never have been paying corporation tax. It made no sense. AHBs and local authorities do not pay it, and it adds considerably to the rental charge on the cost-rental tenant. The LDA has been campaigning on this for a while. When the new measure was introduced, my view was that it was positive, but then I started wondering whether the real intention behind it is actually to incentivise increased private-sector investment into the sector, in the following way. In the Minister’s Department’s report on the future funding of the LDA, completed in February and published in the summer, one of the recommendations suggested by his officials was that, to resolve the problem of the absence of a medium- to long-term funding option for the LDA, the LDA should sell properties off. Given the fact that it is buying most of its properties from private developers, through Project Tosaigh, it is an odd proposal, but that is one of the proposals that exist. The difficulty is that the LDA currently makes a commercial return, as required, of under 3%, in line with the capitalisation from ISIF. Private sector investors are not going to be interested in a commercial return of 3%. We know from our market analysis that they typically look for 5%. Therefore, is the intention not actually to address the viability issues, because the STAR scheme does that to some extent, but rather to create a scenario where a current, reluctant private sector investor might now be more attracted because the return they will get is higher? The reason I ask is because there is already a crisis in cost rental. The rents are too high and huge numbers of people applying for cost-rental cannot gain access to it because of the affordability tests. The very people for whom cost rental is designed are being turned away because the rents are too high. If we then move to a situation where private sector investors become major players, rents will continue to increase even further. Has there been any discussion of that as part of the rationale? Is this in any way connected to the recommendation from the report on the future funding of the LDA of the Minister’s own officials?

Paschal Donohoe (Dublin Central, Fine Gael)
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No. I have been dealing with an issue that the LDA raised with us, and I do not have any intention behind this particular policy decision to create an environment in which the LDA would be disposing of cost-rental properties.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Therefore, the recommendation in the report of his officials, which is a soft one, is not something he would support.

Paschal Donohoe (Dublin Central, Fine Gael)
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I did not say that; I said it was not germane to this decision. This decision responds to an issue the LDA raised with us. After some consideration, I accepted it was a fair point, and we made the change. I want to see more cost-rental accommodation made available in the future. I want to see the LDA play a larger role in that and I believe the private sector can play a role too. However, it is not my intention, through a change like this, to create an incentive for the LDA to dispose of cost-rental portfolios that it itself has already been developing.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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However, is it the Minister’s intention, or part of it, to make it more financially attractive for private sector investors to be involved in cost rental, because it would create a larger margin than currently exists, for example under the LDA business model?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes. I would like to see the private sector play a role in the delivery of cost-rental accommodation because we need more cost-rental accommodation full stop. However, that was not part of my thinking through of this particular change. While that change will be of benefit to the LDA, I do not believe it will be on a scale that would materially change whether a private sector company would want to be involved in the delivery of cost-rental accommodation.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I have a quick supplementary question. Going back to the challenge within the cost-rental sector, an increasing number of people – particularly those between the second and third income deciles, who are above the eligibility threshold for social housing and for whom cost rental is key – are being denied access because they fail the affordability test requiring rent to be over a third of their net disposable income. Also, given that this measure does not really knock an awful lot off the viability challenge – the STAR scheme is really the vehicle to do that – would it not have made more sense to have initiated this change as an affordability measure? This was the point that Deputy Doherty was raising earlier. It would have a very significant impact on affordability and therefore would increase access to cost rental among those who cannot access social housing or private-rental or private-purchase accommodation. It is a very weak viability measure but it could have been an important affordability measure.

My understanding is that the LDA is not going to pass it on to tenants in new cost-rental units. Was that part of the Minister's consideration at all?

Mairéad Farrell (Galway West, Sinn Fein)
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It is now 6 p.m. If the Minister does not have a brief response, we can go into more detail at 7 p.m.

Paschal Donohoe (Dublin Central, Fine Gael)
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I do not have a brief response.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am happy to come back at 7 p.m.

Mairéad Farrell (Galway West, Sinn Fein)
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I want to stick with the times that we have laid out for the sake of everybody involved. We will suspend.

Edward Timmins (Wicklow, Fine Gael)
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The meeting is now resumed. We were on section 32 and members had raised various questions. I ask the Minister to respond, if he remembers the questions.

Paschal Donohoe (Dublin Central, Fine Gael)
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Just to go back to the points I was making to Deputy Ó Broin, it is not at all my intent to make any of these changes with regard to the Land Development Agency in any way discharging its cost-rental portfolio at any point in the future. I do envisage - and this may be a point of difference between the Deputy and me - a cost-rental scheme in the years ahead in which the private sector plays a role, in conjunction with the Land Development Agency. They are meeting needs that the LDA cannot meet on its own, but the motivation for this change was not driven by anything with regard to the existing portfolio of cost-rental accommodation and its future ownership.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I thank the Minister for that. I have three additional questions. Will the Minister explain how he understands this to be a measure to address the viability challenge? The viability challenge is the gap between the price the market is willing to pay for something and the all-in cost of development, including the margin for whoever is producing the unit. The issue of the charging of corporation tax does not feature in the costings of a developer, whether that is the Land Development Agency or somebody the LDA is buying the units from. The corporation tax is actually borne by the tenant in the rent setting. A couple of years ago, the LDA gave some testimony to our committee and talked about its rent settings. It said at that stage that the average monthly rent was €1,400. It has a standard 40%, which covers costs, management and maintenance and for which there is no corporation tax liability. That means that the tax liability of approximately €210 a month would be on the rent, not on the costs of the development. I am interested in how, in the Minister's understanding of this measure, he thinks this will assist viability, given that it is not part of the calculations of the all-in development costs and, therefore, not part of the gap between the purchase price and the development costs.

Paschal Donohoe (Dublin Central, Fine Gael)
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That is different from the presentation and argument we received from the LDA. The argument we received from the LDA - we are cognisant of it also being the case for the wider cost-rental sector - is that tax is included in the calculation of cost. The presentation we received is that the various components with regard to cost are capital cost, management and maintenance cost, financing cost, financial risk and also tax. The presentation we received - the case the LDA made to us - was presented in such a way that tax is included in the cost. In addition, my understanding is that tax also features in the cost calculations that the broader cost-rental sector could make in the future and the yield that could also be gained in future. I am bringing this forward with a view to it being a viability measure.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Just to be clear, it is obviously a cost to the LDA, as is its commercial return, but it is not a cost in terms of how the construction sector or the housing committee understands that viability challenge. When the LDA is either going to build or acquire something through Project Tosaigh - and we have spent so much time talking about the viability gap - there is no corporation tax or commercial return costing at that point. The cost is to the LDA after the fact.

I know the Minister will get on to discussing, for example, the VAT reduction, but I am struggling to understand the way in which he is attempting to deal with the viability challenge by reducing the all-in costs of development. The Minister's argument, which I disagree with, is that if we reduce VAT, for example, it will reduce the cost. This is not part of those costings. The LDA will have given the Department information that it may not have shared with us, but it would be helpful if the Minister could enlighten us as to how that reduction, which works out, on average, at €2,520 per unit per year, makes the unit more viable. I am interested in understanding that.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have just given the answer to the Deputy. We may just have nearly a theological difference, as it were, here. The presentation and information I have received from the LDA is that tax is part of the cost calculations it has to bear. At what point it appears in its calculations and on the balance sheet is a matter for it to further explain, both to me and to this committee, but the LDA has been clear in the case it made to us that it is a component of its cost. If it is a component of its cost, then any reduction in that regard should help with viability.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Just to pick up on the conversation the Minister was having earlier with my colleague, Deputy Doherty, before I came in, there was a discussion on an eventual cost to the Exchequer of €20 million and there was talk about 18,000 units. If we go back to the average cost from last year or the year before that – although it may be slightly out of date – the corporation tax liability on the average unit of €1,400 a month would be €2,520 a year. If we multiply that by 18,000, we would get a cost of €45 million, not €20 million. I understand from the Minister's conversation with Deputy Doherty that he suggested part of the difference may be that some would be LDA and some would be private sector. The rent setting is going to be pretty similar between the LDA and the private sector and therefore the cost of the tax exemption should be similar. If I am wrong, I am happy to accept that, but I am interested in hearing the Minister explain how he gets the figure on which he is basing the €20 million, because it is less than half of what the current corporation tax liability would be on an average LDA unit.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have said I am very happy to furnish Deputy Doherty with the granular detail behind that cost, and to make it available to Deputy Ó Broin as well.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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My last question-----

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Could the Minister make it available to me also?

Paschal Donohoe (Dublin Central, Fine Gael)
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I should have said that, in the spirit of being helpful, if any Deputy asks for information, it will be available to all members of the committee.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the Minister.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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The last point is that one of the things I do not understand – again, the Minister might have a very credible explanation – is that obviously there is a proportion of LDA units that are already tenanted. Those tenants – or the LDA – are going to continue to pay corporation tax. What was the reason the Minister could not apply the exemption from the date of the passing of the budget to all LDA or private cost-rental tenancies, including those that became cost-rental tenancies prior to the passing of the resolution?

Paschal Donohoe (Dublin Central, Fine Gael)
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I guess this comes back again to the case I am making with regard to the fact that I intended this to be a viability measure as opposed to a measure that would affect the level of rent within the cost-rental unit itself. The aim of bringing this measure forward is, in a relatively moderate way, to try to make a contribution to the Land Development Agency to allow it to deliver more cost rental in the future. For that reason, the matter of it being a rent reduction that should be passed on to existing tenants is not one I considered with the Minister for housing. In any event, in the engagement that we had with the Minister for housing and his officials in the run-up to this particular decision, the case was made clear to us that the starting rent is set in year 1. It is set in a way that reflects the policy environment of the time and then it creates a legal contract that will be in place for a 40-year period, with a clear understanding of how it would be reviewed, which I gather is in line with consumer inflation. What I am saying to the Deputy is that I did not develop this measure with a view to it being a measure about reducing cost rents. I am not trying to be pedantic with him; I am just trying to explain my line of thinking. For that reason, I did not raise with the Minister for housing that this is a measure that should reduce rent downwards for existing tenants in the cost-rental scheme. It was also made clear to us, for the legal reasons that I have outlined to Deputy Ó Broin, that rent is set in a way at the start of the contract that would not allow such an intervention.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I presume the LDA would have made the case to the Minister that, accepting, as it would have done, that it was not a rent reduction measure, it would have benefited from the waiving of corporation tax on its existing tenancies and that additional capital it would have had would have assisted it in addressing potential future viability challenges. Was that discussed or considered at any stage?

Paschal Donohoe (Dublin Central, Fine Gael)
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The LDA did not raise the matter with me. I should say the engagement that I had on this was with the Department of housing rather than the LDA. It is appropriate that the Department of housing should raise the matter with me. Given that I believe it is likely that the LDA would see a degree of gain in its post-tax income due to this change, my firm anticipation was that the gain, whatever it is, would be repurposed to then play a role in the delivery of more accommodation.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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That gain is only on future cost-rental properties, not existing cost-rental tenancies.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, but in relation to the tax the LDA pays on existing cost-rental accommodation, a measure like this will alleviate that tax. My expectation is that the gain would then be used in a way that would allow further cost-rental accommodation to be provided in the future.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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I am sorry, but I am a bit confused. What gain is the Minister talking about in this instance? There is no gain. The LDA will continue to pay the tax on the existing tenancies.

Paschal Donohoe (Dublin Central, Fine Gael)
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Actually, Deputy Ó Broin is correct because it only takes effect from 8 October.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Exactly, so there is no gain from the existing tenancies; it is only from the future tenancies.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes. That is a fair point. That is exactly it.

Eoin Ó Broin (Dublin Mid West, Sinn Fein)
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Okay.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Tá ceist amháin agam. To be absolutely clear on it, while there will be no effect on all existing tenancies, it will apply to any cost-rental units under construction at the moment by the Land Development Agency.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, and other accommodation in the future that would be designated as cost rental, so it could be built by AHBs or by the private sector.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I just asked that question because the Minister talks about this in terms of the viability measure, the costings and rents. The costings have been done on some of the homes under construction at the moment but it still applies to them. As the Minister said, the rent is set at the beginning of the tenancy, so that has not occurred yet.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, that is correct.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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This would mean, therefore, that even if there is a notional idea of what the rent would be, we should see a reduction in the potential rent for the new stock that is currently under construction.

Paschal Donohoe (Dublin Central, Fine Gael)
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As I have explained, legally I have been informed that is not possible for the LDA properties.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Those that are currently under construction.

Paschal Donohoe (Dublin Central, Fine Gael)
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No, those that are built.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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This is obviously a substantial change to our offering here, and follows on from last year's Finance Bill where the research and development tax credit was increased to 30% from 25%. This sees an increase to 35%. Could the Minister outline the costs associated with this measure? That would be the first thing.

The second issue here is that, as the Minister knows, this credit mainly goes to larger companies. Many of them are within the scope of pillar 2. If the Minister has the detail on that – I think he provided it to the finance committee before – that would be helpful. I have serious concerns about bringing in such a measure in the absence of the review of R&D.

I understand the Department has done the review and has not published it. There has not been a review on the research and development tax credit for a number of years. The Minister is asking Members of this Oireachtas to increase the tax break to 35% without any benefit of the review that followed the consultation. First and foremost, that is bad practice. There is a suggestion that the review may be published before the Finance Bill is enacted but it should be published now so that we can inform discussion, debate and dialogue as to whether this is an appropriate move in the context of what is happening globally, which there could be a strong argument for.

I would like to have seen that review. I would like to have seen the concentration. I would like to have seen measures that would encourage the uptake by small and medium-sized enterprises of this tax credit. Approximately one fifth of it goes to small and medium-sized enterprises. Such enterprises make up by far the largest number of enterprises that exist in the State but only a fraction of the tax credit goes in that regard. Of the 1,600 or so claimants, I understand a significant amount of the value of this credit goes to companies with significant turnover in the State. That is not to say that we should not be supporting research and development in those companies. The question is whether in a period of 24 months we should go from 25% to 35% in relation to the credit.

I would also like to see whether the review has looked at other ways that the research and development tax credit can be structured. There are research and development tax systems in other jurisdictions that target SMEs with more favourable provisions. I have argued that for probably the last decade with the Minister in relation to that issue because encouraging research and development is the engine to enterprise and the levels of uptake by SMEs are far too low. The Singapore scheme allows companies to claim a deduction of up to 400% on the first $400,000 of qualifying research and development expenditure. Australia offers SMEs a rate of 43%. The Netherlands is offering 40%. Germany has introduced an SME credit at 35%. There are different jurisdictions taking an approach to say that they need to see SMEs doing more and, therefore, they will provide an enhanced system to SMEs.

What we have here is a blanket increase of 35% so it benefits everybody who avails of this. In 2023, there were over 1,800 companies availing of it. The price tag for this is €1.4 billion. It is by far the largest corporation tax relief in Ireland, and for good reason, but it has increased substantially over the last couple of years. In 2023, it was €1.4 billion. Two years before that, it was half that. I do not know what it will be in 2025, obviously, because we have increased the rate, which I supported, and what it could be in 2027 and 2028 when we see returns when the rate goes up further. These increases were happening without rates increases and as I said, SMEs are only claiming 20% of the cost, with 80% going to larger firms.

I am reluctant to support this measure in the absence of the review that has been conducted and I do not understand why that has not been published. Maybe the Minister could answer. Has he seen the review? Is it completed? Is it on the Minister's desk? What is the delay in publishing it?

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I have similar concerns about this. Obviously, research and development is important. It needs to be supported but I have serious concerns about the imbalance in terms of the take-up of this. When you look at productivity more broadly, there is a big gap between smaller enterprises and the strength and productivity in the multinational sector. You will see that reflected in the uptake of this.

By their nature, smaller enterprises may find it harder to engage in research and development but that is probably all the more reason they need to be supported more in the area. Has how they can be better supported and how supports can be more targeted in this area been looked at?

I read a recent interview with one of the Minister's colleagues, the Minister, Deputy Burke, and he was saying he was conscious of these issues in visiting small businesses and seeing many of them still dealing in paper when they should be using more modern forms of technology and innovation. He had that worry as a Minister for many of the businesses that he is meeting of where will they be in five or ten years' time although they may be getting by now. It is harder for small businesses to engage in the kind of research and development that this tax credit specifically supports and that is a challenge for them. Is this being looked at? Is it being considered?

As a country, we compare badly to many of our peers in terms of public research and development, for example, through universities and direct grants. There has been a lot of reliance on the tax credit. Are those measures being looked at as well? Have they been looked at in the review? When will we see the review and can the Minister give us some insight into that?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies.

Edward Timmins (Wicklow, Fine Gael)
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Sorry, Deputy Farrell wants to have a quick word.

Mairéad Farrell (Galway West, Sinn Fein)
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A lot of it has been said but it is quite an interesting point. I am sure it is the case for all of us that when we meet with local businesses in our estates or wherever, the ones that we talk to all the time, they always say there can be a huge access issue for a lot of supports and they do not have the expertise that others have. A lot of people go into business having maybe just left school, they develop that business and it can be a family thing, and they want to grow and succeed but there can be an access issue. I echo what Deputy O'Callaghan said in relation to that.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank all the Deputies for their points. I will deal with each of them in turn.

First, with regard to cost, the estimated first-year cost of the Finance Bill 2025 enhancement to the research and development tax credit is €169.9 million. The estimated Exchequer cost of the enhancement is €305.9 million. The difference in the first-year cost and the full-year cost is due to the manner in which a company claims the research and development tax credit in three instalments over three years. In year one, the first instalment of a claim is equal to 50% of the total claim other than for smaller claims in the scope of the first-year payment threshold. In year two, the second instalment is equal to 30%. In year three, the final instalment is 20%. Therefore, the full-year cost does not crystalise in year one, as claimant companies do not receive the full value of their tax credit until the third instalment in year three. For the third year, it would be expected that the first, second and third instalment amounts which are payable would all be in respect of the research and development tax credit claims at the 35% rate and, therefore, the projected full-year cost would be the relevant estimate.

In terms of take-up and the point that the three Deputies have made regarding small and medium-sized companies and their ability to access this, we have over three different Finance Bills made a number of changes to the operation of this credit and I will talk in a moment about the impact that we are now seeing regarding the drawdown of the credit.

The measures in previous finance legislation removed certain caps on payable credit and the process of first offsetting the credit against corporation tax liabilities and provided instead a fixed three-year payment schedule. They also provided that the first €25,000 claim would be payable in full in the first year instead of being spread over three annual payments. The policy rationale behind that was to try to provide a cash-flow benefit for smaller research and development projects to encourage more companies to engage with the research and development corporation tax credit regime. Those changes were made. They will benefit anyone to whom they apply and applies to the scheme. The change with regard to the €25,000 claim was made in the hope that it would be of help to companies of a certain scale.

What is interesting is that the figures we have available for the most recent year, 2023, and the breakdown of the number and size of the different companies which are availing of the tax credit show that the value of the credit small and medium-sized companies are drawing down has increased. The total value of the tax credit companies with fewer than ten employees, namely microcompanies, are obtaining is €46 million. That is an increase of 24% on where we were in 2020. The value of the credits companies with between 11 and 49 employees are obtaining now stands at €95 million, which is a 69% increase on where we were in 2020. The value of the credits companies with between 50 and 249 employees have obtained has gone up by 51%. Thus, there are some signs that the various changes we made have been successful in encouraging more smaller companies to claim this credit and increase the value of the research and development they are involved in, which, in turn, allows them to gain a higher share of the research and development tax credit, as I have just outlined.

I have not yet received the review, but I believe I will in a few weeks' time. The reason is that my officials who are involved in this area and their colleagues are also involved in work relating to the OECD and the ongoing international tax negotiations. I have asked that that work be prioritised, and it has received their focus. My aim is to be in a position, in a few short months, to publish the review of the research and development tax credit in conjunction with the compass document, which will outline the kinds of issues we will consider regarding the implementation of the research and development tax credit in the years ahead.

Deputy Cian O'Callaghan referred to other ways in which we can support research and innovation in the economy a moment ago. This is the reason the Minister, Deputy Lawless, is taking legislation through the Oireachtas to allow the surplus in the National Training Fund, NTF, to be accessed and spent. My anticipation is that this surplus will be spent in a way that is supportive of research and development in universities. I take the Deputy's point that research and development cannot only happen in the private sector. We have to look at how we can support it in the public sector too, and the change in the NTF aims to make a difference to that.

I acknowledge the point Deputy O'Farrell touched on. I apologise, Deputy Farrell. I am called "O'Donoghue" all the time-----

Mairéad Farrell (Galway West, Sinn Fein)
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Yes, I-----

Paschal Donohoe (Dublin Central, Fine Gael)
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-----so am sensitive to it. I take the Deputy's point. One of the things we have to look at is how we can simplify our tax code in this area. We are getting feedback from small and large companies that this is a particularly complex part of our corporate tax regime. I am conscious that we have to see whether we can clarify matters and make it easier for companies to access.

Figures shared with me show that through the Department of Further and Higher Education, Research, Innovation and Science, the Government is directly involved in the funding of €1.14 billion of research and development through our universities.

Edward Timmins (Wicklow, Fine Gael)
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Are there any other comments in respect of section 34?

Pearse Doherty (Donegal, Sinn Fein)
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I still do not understand how a significant measure that will cost more than €300 million is being brought forward without the Minister having seen the review, which he has just told us is the case, or the committee having seen it. How long has the review been going on? This is definitely a cart-before-the-horse issue. I cannot support it in that context. The review may show that it is necessary.

I asked for a breakdown of the full-year cost relating to this €300 million. How much of that will fall within pillar 2 in scope companies?