Mairéad Farrell (Galway West, Sinn Fein)
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We adjourned the debate yesterday while we were considering section 40. The Minister had introduced his amendments. The amendments we are considering, which are grouped for the purposes of debate, are amendments Nos. 24 to 44, inclusive. They are related and are being discussed together. Then we will take the section in its entirety.

Pearse Doherty (Donegal, Sinn Fein)
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I will come in on the section.

Mairéad Farrell (Galway West, Sinn Fein)
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That is fine.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 25:

In page 56, lines 22 to 24, to delete all words from and including “date” in line 22 down to and including “development” in line 24 and substitute “relevant date”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 26:

In page 56, line 27, to delete “subsection (3)” and substitute “subsection (4)”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 27:

In page 57, between lines 24 and 25, to insert the following: “ ‘qualifying trade’, in relation to a relevant contractor, means a trade carried out by the relevant contractor, which—

(a) is not an excepted trade, and

(b) consists wholly or mainly of the construction or refurbishment of buildings or structures;”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 28:

In page 57, between lines 27 and 28, to insert the following: “ ‘relevant beneficial owner’ means a beneficial owner of a completed development that is not a relevant person in respect of that completed development;”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 29:

In page 57, between lines 36 and 37, to insert the following: “ ‘relevant contractor’, in relation to a completed development, means a company that develops the completed development pursuant to a contract entered into with the beneficial owner, or where there is more than one beneficial owner, the beneficial owners, of that completed development;

‘relevant date’, in relation to a completed development, means the date on which the relevant certificate of compliance on completion is lodged with the relevant local authority in respect of that completed development;

‘relevant declaration’ means a declaration that is made under and in accordance with subsection (3);”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 30:

In page 58, to delete lines 1 to 7 and substitute the following: “ ‘relevant person’ means—

(a) a property developer that—

(i) in the course of a relevant property development trade, develops a completed development, and

(ii) on the relevant date is a beneficial owner of the completed development,

or

(b) a relevant contractor—

(i) that, in the course of a qualifying trade, develops a completed development, and

(ii) to which a relevant declaration has been made by a relevant beneficial owner, or where there is more than one relevant beneficial owner, a relevant declaration has been made by each relevant beneficial owner, in respect of that completed development;”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 31:

In page 58, between lines 21 and 22, to insert the following: “(3) (a) Where, on the relevant date, a completed development is beneficially owned by a relevant beneficial owner, then—

(i) the relevant beneficial owner, or

(ii) where there is more than one relevant beneficial owner, each relevant beneficial owner,

may make a declaration in accordance with paragraph (c) to a relevant contractor for the purposes of the relevant contractor making a claim for an enhanced deduction under this section.

(b) A relevant declaration shall not be made to more than one relevant contractor in respect of a completed development and, where a relevant declaration is made to more than one relevant contractor in respect of the same completed development, it shall be deemed that no relevant declaration has been made to any relevant contractor in respect of that completed development.

(c) A relevant declaration shall be a declaration in writing to a relevant contractor which—

(i) is made by a relevant beneficial owner of a completed development (in this paragraph referred to as ‘the declarer’) for the purposes of the relevant contractor making a claim for an enhanced deduction under this section,

(ii) is signed by the declarer,

(iii) is made in such form as may be prescribed or authorised by the Revenue Commissioners,

(iv) declares—

(I) that on the relevant date the declarer is a relevant beneficial owner of the completed development and the percentage of the completed development of which the declarer is a relevant beneficial owner on the relevant date,

(II) that the relevant contractor developed the completed development pursuant to a contract entered into by the declarer and the relevant contractor,

(III) that the declarer is not a relevant person,

and

(v) contains—

(I) the name, address and tax reference number of the declarer and relevant contractor,

(II) the address of the completed development and the number of apartments in the completed development, and

(III) such other information as the Revenue Commissioners may reasonably require for the purposes of this section.

(d) Where, in respect of a completed development—

(i) a relevant declaration is made by the relevant beneficial owner, or

(ii) where there is more than one relevant beneficial owner, a relevant declaration is made by each relevant beneficial owner,

to a relevant contractor, then, for the purposes of this section, the relevant contractor shall be deemed to be the beneficial owner, on the relevant date, of the percentage of the completed development beneficially owned on the relevant date by each relevant beneficial owner, who makes the relevant declaration.

(e) A relevant contractor to which a relevant declaration has been made shall keep and retain the relevant declaration for a period of 6 years from the end of the accounting period in which a return has been delivered making a claim under this section in respect of the completed development to which the relevant declaration relates.”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 32:

In page 58, line 22, to delete “(3) Where—” and substitute “(4) Where—”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 33:

In page 58, line 26, to delete “relevant property development trade” and substitute “relevant property development trade or a qualifying trade, as the case may be,”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 34:

In page 58, line 34, to delete “subsection (4)” and substitute “subsection (5)”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 35:

In page 58, to delete line 35 and substitute “(5) Subject to subsections (6) and (7), the amount of the enhanced”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 36:

In page 59, lines 3 and 4, to delete “relevant property development trade” and substitute “relevant property development trade or a qualifying trade, as the case may be,”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 37:

In page 59, to delete line 6 and substitute the following:

“(6)The amount of the enhanced deduction in respect of a completed”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 38:

In page 59, to delete lines 13 to 16, and substitute the following: “beneficially owned by the relevant person, or in the case of a relevant person who is a relevant contractor is deemed, by virtue of subsection (3)(d), to be beneficially owned by the relevant person, on the relevant date.”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 39:

In page 59, to delete line 17 and substitute the following:

“(7)Any amount of eligible expenditure incurred by a relevant person in”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 40:

In page 59, line 31, to delete “subsection (4)” and substitute “subsection (5)”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 41:

In page 59, to delete line 32 and substitute the following:

“(8)Where expenditure is incurred by a relevant person in connection with”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 42:

In page 59, to delete line 37 and substitute the following: “(9) (a) A claim under this section shall be made by a relevant person”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 43:

In page 60, to delete lines 8 and 9 and substitute the following: “(10) (a) Where, in computing for tax purposes the profits of a relevant property development trade or a qualifying trade, as the case may be, an enhanced deduction has been”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 44:

In page 60, line 16, to delete “relevant property development trade” and substitute “relevant property development trade or a qualifying trade, as the case may be,”.

Pearse Doherty (Donegal, Sinn Fein)
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Ar dtús báire, ó thaobh an phíosa seo, mír 40, níor chuir mé in éadan na leasuithe. I did not oppose the amendments, many of which are technical in nature and which look at clarifications in relation to different definitions. The reason I did not oppose the amendments is because I am completely opposed to this section. This section provides significant tax breaks for developers who are involved in the construction of apartments. That is absolutely the wrong priority of the Government in this Finance Bill. I made the point yesterday that the Government has decided to break its election promises to workers and families. The Government promised them there would be a tax break for them, but in this year's budget the Minister has decided instead to prioritise other areas. In this section the Minister is asking us to support the idea that a developer can build 50 apartments, make a profit of €2.5 million and pay no tax whatsoever. Up until now they would have had to pay tax. That is not acceptable in my view. This measure will only kick in where profits are being made in the construction of apartments. The Minister wants to boost the profits of developers. It is interesting to see details, that are all publicised, of the largest developers in the State, Cairn Homes and Glenveagh. These reports show that the gross profit margin for Cairn Homes for 2024 was 21.7%. For Glenveagh, its gross margin was 21.2%. This is not surprising. There is a whole issue in Britain where there has been an examination and the Government there looked at a competitive review. There are super profits in excess of 17% being made there.

There has been a deep dive into the hoarding of land, the selective release of property at selected times and the use of their dominant nature to ensure developers would get more benefits from Government. At the core of this, and with all of that left aside and whether it is other people who develop these apartments as opposed to these two entities, what the Minister is asking us to sign up to today is to allow a developer to make €2.5 million profit on the back of 50 apartments and my understanding is that they would pay no tax on those profits. That is wrong. It is especially wrong when the Minister put it to us yesterday that he had to make tough choices. This is the wrong choice. It is the wrong choice to choose the profits of developers, who are making millions of euro in profits, as opposed to the real pressures that are on ordinary workers and families who the Minister has left worse off as a result of this Finance Bill. For those reasons, I cannot support this section.

Mairéad Farrell (Galway West, Sinn Fein)
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Before an Teachta O'Callaghan comes in, just to be clear, there is no other committee room available, so we have to have a break between 12 noon and 2.30 p.m.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The figures we just heard in terms of the profits for the two publicly-listed developers are extremely high gross profit levels. In the middle of a housing crisis where there are huge issues with affordability and people accessing housing, they do not need additional subsidies that increase their profits further. There are a couple of principles in terms of any kind of subsidies that are used on housing that should be absolutely fundamental. The first is that if there are subsidies - subsidies need to be well-designed and well-targeted - and they are being used in housing, they should always be explicitly linked to affordability. General subsidies that do not make housing more affordable for people and are not tied in with that are wasteful.

Second, as the Minister will be well aware, subsidies in an area must be well-designed and well-targeted. There has been a range of subsidies in housing going on for years, a lot of them tax subsidies and tax incentives. If they are not well-designed and well-targeted, what happens in any sector - it applies to housing as well - is that underlying issues in the sector that need to be addressed, such as productivity, are not addressed and the subsidies mask over the need for that. If we just look at productivity in housing, for example, the Central Bank Quarterly Bulletin No. 2 2025 states: "The relatively poor productivity performance of the construction sector in Ireland is also evident in a cross-country setting, and in 2024 was second lowest across comparable European countries." We have a real issue with productivity in our construction sector and it is not getting addressed. These kinds of further subsidies that will boost the profit levels for developers is not going to address it. Therefore, it is not tackling the underlying productivity issues that need to be addressed to ensure we have more high-quality housing and make sure it is more affordable. These subsidies are not tied in specifically with affordability.

Most European countries, if they are doing things in the area of housing, ask how can we boost affordable output? What measures do we need to invest in to ensure that? They do not go for these blanket types of measures that are not linked in with affordability, not well-designed, not well-targeted and do not incentivise productivity. I have huge concerns, therefore, and I am heavily opposed to this approach.

Gerald Nash (Louth, Labour)
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We in Labour are opposed to this provision too for a range of different reasons. On budget night, indeed, accepting that this would go ahead, we did seek to introduce amendments to the resolutions that evening to at least establish a condition and connect the condition to these measures to provide for affordability, at least as a driver or a condition if these measures were to go ahead. Clearly, this, and, for example, the 9% VAT rate reduction, which we will discuss later on, are going ahead. I would be interested, although we are not going to be able to obtain this today, in the advice of the Minister's own officials on this matter. If it follows a trend in terms of the kinds of subsidies we have seen over the past few years, whether it is help to buy or any other subsidy, then I can imagine that the advice of officials in the Department and others would be to avoid this because of the potential unintended consequences. It is very difficult as well to measure the impact - positive or, indeed, negative - of this in isolation because we have got a range of other costly measures as well that the Minister will insist are designed to improve output and increase supply.

Like the other measures, is the Minister convinced that this will not, for example, drive up land prices in the context of the development land that is available at the moment? Is he persuaded that this will not have a deadweight effect like some of the other subsidies introduced in recent years? In other words, is it supporting, and will it support, development that will happen in any case without this measure? It just does not make sense to me for a range of different reasons. However, I am interested to establish whether the Minister has received advice and whether it is his view that this will promote supply. I am not so sure it will. I think the only thing it is going to do is to benefit the bottom lines of development companies, sadly.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the three Deputies for the contributions they have made. First, the reason I am proposing the section to the committee today is because of my view that this will lead to more apartments being built. If we look at the apartment trends we saw develop across last year, we have seen that the number of new apartments that are being commenced and completed is going in the wrong direction. If we are going to, and I believe we can, significantly shift the number of new homes that are being built within our country and do that in an upward direction, we have to build more apartments. We are also aware of the viability challenge with regard to new apartments being even more acute than it is with regard to the delivery of houses. That is why we are bringing forward this measure - I will address the issue of targeting in a moment - that is focused on apartments and on trying to address the viability issues that exist with regard to apartments.

The whole purpose of doing this is not to add to the profitability of anybody who is involved in delivering apartments. It is to put in place a measure that we think gives us the best chance of trying to lead to more apartments being built. It is not about lining the pockets of developers. It is not about trying to support a small number of people involved in the delivery of apartments and their profits and their earnings. It is about trying to lead to more apartments being built in Ireland and, in particular, in our larger cities across the coming years. That is why we are bringing forward this measure.

With regard to what has been said about two listed companies, just to link that back to the comments that were made about productivity, it is also the case that if we look at the Irish economy and the number of large companies involved in the delivery of homes, we have a smaller number of large construction companies involved in delivery of those homes, and in recent years many of those companies have been pretty focused on the delivery of houses. What we now need to do is change the construction mix over time to complement the delivery of new houses to lead to more apartments being built.

The real challenge we face is that no matter what the State does, and I will come on to the role of the State in a moment, we need the private sector to be delivering more homes than it is delivering at the moment. It is just not possible for the State and the Government to build every home in our country, as we all know. We need the private sector to be delivering more than it is delivering at the moment. If I look at the different analyses that have been done with regard to this, including by my own Department, they indicate that if we are going to get to a point that we are delivering 50,000 homes per year, we need the private sector in different ways to be committing around €20 billion to get to that point. We are not at that point. We are a long way away from it, and that €20 billion is going to need to play a role in the delivery of more apartments than it is at the moment.

When it comes to the role of the State and what the Government is doing at the moment, it is worth emphasising to the committee that the funding available to the Department of Housing, Local Government and Heritage over the next number of years is, after the NDP, €35.9 billion. The majority of that funding will go against the delivery of more homes and infrastructure that is needed to deliver more homes.

The national development plan and the recent decisions we have made have now resulted in an additional allocation of €15.5 billion to the Department of housing to directly or indirectly support the delivery of more homes. This measure, which is supporting the private sector, is complemented by the large amount of additional funding in capital that the State will be using to directly or indirectly build more homes in the time ahead.

In relation to linking this to an affordability measure, we already have many different measures and policies available to support the delivery of more affordable homes within our State. If we were to bring forward a measure like this, which would also be an affordability measure, logically, it could not be a viability measure at the same time. It cannot be both. At the moment, the great challenge we have is that we are just not building enough apartments. A measure like this is designed to deliver some support to try to deliver more apartments in the times ahead.

I have a few points regarding the critique of this section’s targeting. It is capped at up to 125% of certain construction costs. We have listed what those construction costs are. The main way in which we are aiming to make this a targeted measure is that it is against the construction of apartments as opposed to all construction within our State. That makes it a very different measure to other measures we have had in the past.

In respect of the Deputy’s point on productivity, we need to increase the productivity of the housing sector, but we have other measures that are being worked on in that regard. All the different measures that the Department of housing is working on with regard to building information technology, supporting off-site construction and training and apprenticeships in this area are happening anyway. One point I would argue when it comes to productivity is that the growth in productivity within the sector, with the private sector playing a role in that, is related to the fact that we have very few large construction companies within our country at the moment. The reality that we will need to confront in the time ahead is whether we can do two things, namely, can we grow productivity in all companies involved in construction – we want to work with all of them to do it - and are we capable of delivering the additional housing that we want to deliver when we have a relatively low number of large companies involved in doing that? It is a challenge. If you compare us to the UK or other European jurisdictions, they have a larger number of large companies involved in doing that than we do. Over time, this will become a capacity constraint we will hit against.

Deputy Nash asked whether there was a deadweight risk with this. That risk exists with many taxation decisions that we make, to be truthful. The Deputy will know that already. I believe that it is a risk that is manageable in the context of the scale of growth needed in apartment commencements in the time ahead. While no measure is without risk - I am keenly aware of that - the steps that we have taken to cap it and to focus on certain construction expenses, as well as the fact that it is not made available for all forms of home construction within our State but rather solely apartment construction, are reasonable and credible efforts to ensure that this measure is ring-fenced and those risks are managed.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the Minister for his response. I have a few points. On the issue of productivity, we have a very serious productivity issue in this country in the construction sector. It is bordering on market failure in terms of very high profit levels for developers but extremely low private sector investment in technology, modern methods of construction and capital machinery that is used in construction. We are way out of kilter with other countries, both in terms of our productivity levels in construction but also our private sector levels of investment that would actually boost productivity in construction. It is not happening. The Minister referenced various initiatives the State is taking in relation to productivity, and that is absolutely correct. The private sector, however, is not doing what it should be doing to address and invest in productivity. It is taking the profits and its benefits from the different subsidies and tax expenditures the Government has put in over the past number of years without investing in productivity. That needs to be addressed. It is not the entire solution of the housing crisis by any means, but it is a part of it and it must be addressed.

In respect of these various proposals, has analysis been carried out on how they will impact the price of development land?

Colm Burke (Cork North-Central, Fine Gael)
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Following up what was said on productivity levels, I was on a site on Friday. I know we are talking about apartments here, but this is in relation to semi-detached houses. The average timeframe for building a house is 28 weeks. I was on a site on Friday where they can turn around, build and complete a house in 12 weeks. They are working with Enterprise Ireland on this project. More than 170 houses have been built in a very short time. This is from the private sector and the private sector is driving it. There is another project involving apartments where the target is 217 apartments. It is a 24-storey block. The target is to have the whole project completed within two years. Again, it is private enterprise doing that. A lot of work is being done by private enterprise to try to get housing completed in a fast and efficient manner while also being cost effective. Those are two things that are happening at the moment. It is important that we give recognition to the work being done in the private sector in this area.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister says it is not about adding profits to developers or lining their pockets, but he has to admit that is exactly what it will do. He cannot deny the effect of this section. This section states that they can assume a 125% deduction for certain costs in the construction of apartments, up to €50,000. In many cases in this city, there is a requirement regarding a minimum number of apartments, which is approximately 40 or 50 apartments. A small apartment block of 50 units will allow a developer to make a profit of €2.5 million without paying any tax. That is the definition of lining the pockets of developers. That is the consequence of this section, regardless of whether the Minister wants to admit that was the intention behind it or there was a different intention. The effect of this section is to boost the profit of developers in that regard. There may be other intentions the Minister hopes will materialise regarding this section, but he is making the wrong choice.

When we look at the problem in terms of Fianna Fáil and Fine Gael and the housing crisis, we talk about when the penny will drop. The proposals they continue to have look at issues through the lens of tax reliefs, cuts and so on and so forth. It is a developer-led approach and has resulted in a housing crisis. I made the point yesterday that the crisis did not fall from the sky. It has resulted from the policies Fianna Fáil and Fine Gael have created.

The housing crisis is not just about the shortage of supply, but also about affordability. The Minister talks about apartments, but if we strip out the apartments the LDA or approved housing bodies are purchasing in the city, the vast majority of apartments built in this city over the last number of years – over 90% - have been for the buy-to-let sector, which charges extremely high rents in the city. There is an affordability issue in this regard also. I do not know whether this is part of the Minister’s proposal to end the housing crisis in four years. Is that a Government policy?

Maybe the Minister can elaborate on that. Does he also believe the housing crisis will be ended in the next four years or is he at odds with the Minister, Deputy Browne, on that matter? Maybe the Minister could help us define what the housing crisis is.

On this section, when we look at the resources that are available - the Minister made the point very clearly yesterday about difficult choices, priorities and all the rest - he is asking us to vote for a measure the effect of which will be to boost the profits of the construction industry. That is the answer. It will be interesting to hear the Minister's analysis or the Department's analysis of what the appropriate profit margin is. What is the appropriate profit margin for developers before the Minister would decide they already have enough profit and he is not going to bring forward a tax measure that asks for ordinary taxpayers' money to go into the pockets of developers? Is it 10%, 20% or 30%? Does Fine Gael want property developers to have 35% profit margins? What was the metric used for profit margins? This will have the effect of increasing them. The only way this can result in, as the Minister said, the desired effect in terms of viability, is that property developers will say they are going to do this now because they are going to get more profits as a result of it. The question, which is a genuine one, is: what level of profit is available because this measure would allow for a developer to make 30% profit and still get this tax break? There is no brake in relation to that. They would still be able to get that additional offset that boosts their profits because if they were previously going to get 30% their profit margin will increase as a result of this due to their being able to use the 125% metric.

Mairéad Farrell (Galway West, Sinn Fein)
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Does anyone else want to come in before I go to the Minister? They do not but I ask everyone to clearly indicate.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies very much for those questions. I accept there is an issue with productivity in the private sector, and indeed in the public sector, with regard to the delivery of more homes but in the answer I gave to Deputy O'Callaghan, I made the point the Department of housing already has many different measures under way to support productivity within the sector. I outlined what they are. I do not believe the private sector is making a choice to, by and large, pocket the different supports that are being made available and to avoid using those supports to deliver more homes. All the different spending measures available that are overseen by the Department of housing are all based on the delivery of more homes, whether that is the STAR programme, the different programmes that are in place to deliver affordable housing or the funding made available through the AHB sector, the ability of the construction sector to access those supports is tied into homes being delivered. If we significantly increase the level of homes available, as I believe we can, we will need a bigger private sector to do that. The role of the State, the funding that has been made available through the State in recent years to deliver more homes has massively increased, but even with the funding that is going to be made available directly by the State to support the delivery of more homes and the infrastructure that will deliver more homes up to 2029 - as I said earlier, it is an additional €15 billion - we need the private sector to deliver more homes. In the absence of that, the ability of the State to deliver the homes we know need to be built will be increasingly challenged because it will have to step into the place of the private sector, which would create financial risks and we would not be able to get to a point where we are able to deliver the 60,000 homes we know are needed. I accept this is just a point of difference between me and the members of the Opposition here but the private sector has a role to play in the delivery of more homes. That is being accompanied by the State playing a very large role, and a bigger one, in the years ahead in the delivery of those homes.

On the point Deputy O'Callaghan made about the impact it is going to have on the price of development land, it is not a matter that has been raised with me so far in the analysis we have done on this, but it is obviously something we will monitor. The reason for this is we look at this particular issue and the fact we have tens of thousands of apartments - I think it is between 30,000 and 40,000 apartments - that have planning permission but are not being built. Those apartments will have planning permission in which the cost of land is already baked into the economics of the particular projects. As for the different issues or risks we have considered in relation to this proposal, my analysis and judgment is the effect a measure like this could have on the price of development land is relatively muted. There are other forces that could affect the price of land in the time ahead but that is the reason we have the zoned land tax to try to deal with that kind of issue and create the incentives and sanctions that are necessary to ensure homes are built where land is zoned with the intention of having homes built on it, which is not happening on the scale we want.

On the point made about the profitability of apartments, I accept this is a measure that is going to increase the profitability of apartments but in turn we are hoping it is going to lead to those apartments being built and the tens of thousands of unbuilt homes that have planning permission to be built, and those homes will be apartments. I go back to the point I made at the very beginning, which is we cannot deliver the scale of additional housing we want in our country without the private sector playing a role in it. This is a targeted measure that aims to facilitate that.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On what the Minister said about this measure increasing profitability, it is reasonable to ask what level of profitability is needed because we have gross profitability in the sector from the two main publicly-listed companies of more than 21%. How much higher does profitability need to go to make the activity viable? That is a very high profit level. Why does the Minister think we need profitability levels in the sector that are above that again?

There is a key issue I have been raising here and I was very happy to hear the contribution from Deputy Burke, which shows there are examples in the private sector of being able to innovate and improve productivity. My point is not about individual actors in the sector, some of whom are doing what needs to be done, but about the sector as a whole. There is an issue with this. In the past number of years we have had profits increasing but according to analysis from the Central Bank investment in capital stock, meaning machinery, equipment and technology, has been declining every year for the last decade. Profits are going up and investment in the capital stock we need to make the sector more productive, make housing more affordable and allow delivery of more housing is declining by 2.5% every single year in the private sector. At the same time, our productivity levels are the second-lowest in Europe among comparable countries. We are going in the wrong direction on this.

I recognise the different Government initiatives on this, which are all welcome, but it is not having the desired effect on productivity in the construction sector. We are going in the wrong direction in terms of technology, machinery and equipment. That is all happening while subsidies for the private sector have been increasing, tax expenditures have been increasing and the firms’ profit levels have been increasing, so there is something fundamentally wrong with the approach the Government is taking here when we are not getting the desired outcomes.

If we look at what is happening with land prices over the same period, and we bear in mind there have been a number of government subsidies and initiatives since 2018, we had figures from the CSO yesterday showing the price of residential zoned land has increased by 42% since that year.

If we want to make the delivery of housing, including apartments, more viable and if we want to make housing more affordable and accessible for people, we should be trying to get the cost of development land down. Rather than taking measures that lead to increases in that cost and in profits for developers, we should invest in measures that would make housing more affordable, viable and productive. Such investment is declining and that is a fundamental problem that needs to be addressed.

Paschal Donohoe (Dublin Central, Fine Gael)
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This is the reason we have the residential zoned land tax, RZLT. It is a measure that is now being implemented. It is designed to deal with the issue the Deputy is referring to. If people have land that is zoned for residential land and the value of it goes up and the commencement of homes is not happening on it, they are now taxed on the increased value of that land. That is the reason we have it. This has not been an easy measure to implement. It has caused various challenges and difficulties. The very reason we have the RZLT is to deal with the issue he is describing. If somebody has land and the value of that land is going up but they are not choosing to go ahead and facilitate the commencement of homes on that land, land which is serviced by the State, that weakens the public good and we are now taxing that value. That is the way the Government and the State are aiming to deal with that issue.

There is some growing evidence that this tax, which, in fairness, this committee supported when I brought it in, is working in terms of the number of transactions we are now seeing involving the disposal of land that has planning permission on it but is not being used to deliver more homes. The Deputy made a point regarding the issue of the value of land going up and the social ill that is caused by the Government and the State servicing land and zoning it for housing, homes not being delivered and somebody benefiting from that. That is a big issue. That is why the RZLT is in place.

In relation to productivity, again I understand where the Deputy is coming from. We can directly influence the productivity within the homes that we are involved in building and supporting. There are various measures in place to do this. The homes that are being delivered in the largest housing project within my own constituency, O'Devaney Gardens, are being funded by the State. The use of technology in the delivery of those homes is amazing. I have seen with my own eyes homes that are constructed offsite being virtually erected off the North Circular Road and the difference that makes in the speed of the delivery of the homes. I can see the work that is happening there to do that at the moment. Yes, the private sector needs to play its role in the delivery of that and in increasing the productivity within it. It appears to me from the engagement I have had with the private sector on it that they are working to deliver that because it is in their own interests as well.

The only point I would push back to the Deputy on is in terms of the point he made earlier on. The various supports we have available to the private sector to deliver more homes, particularly on the spending end, which is where the vast majority of the supports are, are directly involved with the commencement and the delivery of more homes. I listed them all earlier on. I refer, for example, to the work that the LDA does, to the STAR programme, to croí cónaithe or to the different programmes overseen by the Department of the Minister, Deputy Browne. All of those supports are ultimately tied into a home being built and somebody living within that home. It is not the case that somebody can redirect the supports that are available to additional profitability. The homes have to be built.

On the issue of profitability, particularly with regard to the delivery of more apartments, a publication that was issued by the Department of housing last September indicated that the level of profit that is being delivered on a two-bedroom apartment, for example, in an urban or suburban environment is between 8.4% and 9%, which is significantly below some of the figures the Deputy quoted. The challenge we face is that with that level of profitability, we are still not seeing anywhere near enough apartments being built. I go back to the very reason I am making the case for this section today. Yes, it does increase the profitability that is available to those who are building apartments in the first place, but the aim of that, in turn, is to lead to more apartments being built in our city centres in particular. In the absence of that, we will not be able to get up to the 60,000 homes per year that we have to be building in the years ahead.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Does the Minister see a problem with a sector that is receiving growing subsidies from the State, including the measures we are discussing now, has growing profits year after year, and, for the last decade, year after year, is investing less in machinery, equipment and technology? A total of 2.5% less is being invested each year according to a Central Bank analysis. There is something fundamentally wrong there. Does he see that as a problem? Does he accept that if we were talking about another sector in the context of subsidies, growing profits and a lack of private sector investment in technology and innovation, it is quite likely that people independently looking at that would be saying there is something fundamentally wrong here?

Paschal Donohoe (Dublin Central, Fine Gael)
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I accept there is an issue. There is equally a profound issue with the challenge that we have. As of quarter 1 of 2025, for example - I am sure there are more recent figures available with regard to this - 39,000 apartments within our State were permitted but not commenced. I am trying to find a way in which we can increase the ability for those 39,000 apartments to be built. It would have a really significant effect on the delivery of the housing targets which we need to deliver on behalf of those people who need more homes. Yes, I believe what the Deputy has described is indeed an issue, but no Government can direct to the private sector what it does from a productivity point of view. We cannot do that, but what we can do is ensure that the subsidies and supports we make available are tied into the delivery of homes. That is the case at the moment.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will make a final comment on this. There is a very clear and strong case that when tax expenditures and subsidies are effectively not creating efficiencies in the sector - in fact, they are propping up inefficiencies in the sector, and I have given the evidence for that from the Central Bank - it is much better to use the resources in direct State investment where you have the type of market failures that we clearly have in this instance. That is the case I am making. I will be opposing this section.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will make a concluding point. I have pointed again and again to the fact that the funding and investment that is available to the State to deliver more homes has massively gone up. It is going to go up again by a further €15 billion. This measure is accompanied by the State playing a larger and larger role in the direct building of homes within our country, which is exactly what it should be doing.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I move amendment No. 45:

In page 60, between lines 23 and 24, to insert the following: "Report on tax expenditures for property developers

41. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the fiscal and housing-market effects of tax reliefs and incentives available to property developers, and on alternative approaches to achieving housing-supply objectives without such tax expenditures.".

This is related to much of the discussion that we have just had. It is one of these report amendments. I have not written it as a report amendment because I could not get the amendment in in any other way. I genuinely feel that a report and analysis on this would be extremely beneficial.

As we were discussing earlier, there have been a range of different subsidies and tax expenditures, and tax reliefs and incentives, over a number of years that I do not believe collectively are working. As I outlined previously, there are significant issues in the sector that need to be addressed around productivity and private sector investment on the capital stock side, etc. There needs to be an analysis done of all the different measures, subsidies and tax expenditures that are in place and a cold, hard look at what effect they are having or not having, what distortions they are creating or not, whether they are incentivising what they were intended to incentivise originally and what level of dead weight there is. We have a situation of growing profits in the sector, but certainly not growing affordability. In fact, it is the opposite. We see important input costs, such as the price of development land, increasing year after year.

Everybody knows that a lot of what needs to be done to ensure that we have more affordable housing that people can access simply is not happening. A range of tax expenditures and reliefs have been put in and they are not working so this needs to be urgently reviewed at this stage.

Paschal Donohoe (Dublin Central, Fine Gael)
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The Deputy has requested a report on the budget and housing market effects of tax reliefs and incentives available to property developers and on alternative approaches to achieving housing supply objectives without such tax expenditures.

Targeted tax incentives to encourage developers to build more apartments and increased capital investment in infrastructure to support new schemes form the main housing measures of budget 2026. I would remind the Deputy that all decisions regarding taxation measures must have regard to the sound management of the public finances and my Department's tax expenditure guidelines. The guidelines make clear that any policy proposal that involves tax expenditures should only occur in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention.

Where data are available in relation to the Exchequer cost of tax relief for housing market development, these data are publicly available and included in the Department of Finance report on tax expenditures, published in July 2025 in advance of the budget last month, as well as Revenue's publication on the cost of tax measures.

I note that, as part of the normal schedule of tax expenditure reviews, my Department has undertaken a review of the residential development refund scheme, which is the partial refund of stamp duty paid on the building of residential dwelling units, in light of its sunset clause of the end of this year. In 2024, the Exchequer cost was estimated to be €28.1 million, up from €21.2 million in 2023.

The most recent independent review of the help to buy scheme was conducted by external consultants Mazars in 2022 with an Exchequer cost estimate of €185.2 million in 2023 and €225.5 million in 2024. The Department, with support from Revenue, will continue to monitor the operation of this and all housing market incentive schemes and will continue to liaise with the Department of Housing, Local Government and Heritage with regard to the contribution of all measures in complementing the Government's housing policy goals.

Having regard to the fact that indicative costings have already been prepared and there is ongoing work to improve the approach to assessing the fiscal and housing market effects of tax reliefs and incentives available to the private sector, I do not believe an additional report is necessary at this time. Therefore, I cannot accept the amendment.

Alternative approaches to achieving housing supply objectives without such tax measures are a matter for the Minister for Housing, Local Government and Heritage. I made reference to many of those measures in the exchanges we had earlier on the previous section of the Bill.

For the reasons outlined, I do not propose to accept this amendment.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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This is what a spending review published in 2021 by the Department of Public Expenditure and Reform, entitled "An Overview of the Irish Housing Market and Policy", had to say about tax expenditures in housing and their effect on the price of development land. This is in the section of the report called "The Land Trap". I will read out just a couple of lines of it.

... competition in the development sector takes place at the land bidding phase ... Developers will calculate the price per unit they can attain in sales as well as their projected development costs and price these into their bids for available development land.... Thus high housing unit prices are locked into the system at the land bidding stage, which is realised by landowners as inflation in the value of their land. This dynamic is highly counterproductive for affordability and viability; it essentially means that any reductions in development costs and higher profits, either through tax breaks or labour/material cost falls, are priced into what developers will bid for land, thereby increasing bidding rates, and dissipating any savings in costs achieved elsewhere.

That is very heavy criticism in this spending review from the Department of Public Expenditure and Reform on the effect of tax breaks and what they do for the price of development land, basically saying that various tax breaks, reliefs and expenditures get baked into the price of development land. The review very strongly makes the case against those. It shows why we urgently need all of these different subsidies, expenditures and reliefs to be urgently reviewed, as shown in our previous discussion about figures from the Central Bank where we had an issue of increasing profits but decreasing investment in productivity levels in the private sector and, at the same time, increased subsidies. There is a very serious issue here that has to be addressed. We have that analysis from the Department of Public Expenditure and Reform. There is a very strong case for removing a lot of these reliefs and instead using that expenditure directly to make housing more affordable. Our goal should be to make housing more affordable in order that more people can access it and to reduce some of the costs rather than measures that are failing to do that.

Paschal Donohoe (Dublin Central, Fine Gael)
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This is why we brought in the residential zoned land tax-----

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Which I support, but it is not sufficient.

Paschal Donohoe (Dublin Central, Fine Gael)
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What else-----

Mairéad Farrell (Galway West, Sinn Fein)
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I ask Members to speak through the Chair.

Paschal Donohoe (Dublin Central, Fine Gael)
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This is why we brought in the RZLT.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Yes, and as I said, it is a good measure, but it is not sufficient on its own. Actually, combined with these other measures that are fuelling land prices, they are kind of working against one another. I support the RZLT. It is a good measure. Is the price of development land falling? No. Is housing becoming more affordable? No. It is all going in the wrong direction, so more clearly needs to be done. As the Minister knows, there is a large amount of expenditure in this area, both through direct investment and these tax expenditures, that, to be frank, are not working in a combined sense. I do not think anyone would say that it is at an optimum level in terms of outcomes, so we need at the very least to review the levels of some of these tax expenditures and see whether we could get better outcomes through more direct investment. The Minister, in our previous exchange on this, cited a very good example of productivity and innovation from the public sector delivery on this. I am not against private sector delivery at all - it has to be a key part of what happens - but I am just saying we need to look at the supports and see whether they are increasing productivity or are actually not increasing productivity, as the evidence from the Central Bank clearly shows.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is kind of an intellectual leap to say the subsidies we are making available are having an adverse effect with regard to productivity in the private sector. I really do not follow that argument, particularly given that the subsidies we are making available and those that are spending related are tied into the commencement of homes. You cannot get secure tenancy affordable rental, STAR, unless there is cost-rental accommodation. You cannot avail of the help to buy scheme unless there is a home in front of you that you are purchasing. You do not get funding from an affordable housing scheme unless an affordable home is delivered. You do not access croí cónaithe unless an apartment is built. We can have a debate about the efficiency of these schemes, and that is an important debate to have, but I am just pushing back against the idea that these schemes are being made available and are going into the black hole of increased profitability for a small number of developers. These schemes are being made available and they are delivering more homes. In the absence of these schemes being available, fewer homes would be built today than would otherwise be built. Each scheme I have referred to is subject to its own individual review. That individual review is frequently published. It is frequently used in the different discussions we have here in the Oireachtas, including in this committee. Yes, the price of land continues to go up, but I would argue to the Deputy that the reason we see the price of land, including the price of development land, going up is that there are two different factors at play. First, the supply of land that has planning permission being used to actually build more homes is not as high as I want it to be, and that is why we brought in the RZLT. Second, on the demand end of the equation, there is a demand from the private sector and the State to acquire land to build homes on it. I think they are bigger forces in influencing the price of land going up than the impact of any of the tax schemes in place.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We have discussed a lot of this previously, but I reiterate that the evidence is that subsidies have been increasing, profits have been increasing, land prices have been increasing, affordability has been decreasing and investment in productivity has been decreasing every single year for the past decade. There is, therefore, something fundamentally wrong with this approach, which I am asking to be reviewed.

Paschal Donohoe (Dublin Central, Fine Gael)
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And the number of new homes being built under these schemes is going up.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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It is way short of what is needed. The case I am making is that this money could be better used in more direct investment. I am not making a case for abolition of these initiatives in their entirety and have nothing to replace them; I am saying we should use the resources better elsewhere, or at least review this.

Paschal Donohoe (Dublin Central, Fine Gael)
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I agree with the need to review these schemes individually, which we are doing. The Deputy makes a fair point, namely, that we should take a step back and look at the interplay between all of these different schemes. However, as regards the number of schemes that are available to facilitate the delivery of new homes, a smaller number of those schemes are available on the tax end of things than are available on the spending end of things at the moment.

We have a number of measures, many of which the Deputy has opposed. He has opposed them in discussion of the Finance Bill. We have the help-to-buy scheme. Various measures are coming in through this Finance Bill. Cumulatively, they are smaller than both the number of schemes and the value of spending that is available through the Department of housing.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Ceist amháin, le do thoil. The Minister said there is a need to look at the interplay of these different schemes. When and how is that going to be done?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is a matter I will have a look at as we move into next year. The Deputy will continue to make the point that the only way he has of amending Bills is through calling for a report. I will also be saying back to Deputies this morning that I do not believe the commencement of reports is a matter that should be dealt with within legislation. However, the Deputy is making a fair point. We should be looking at the interplay of different tax schemes that are there. I will see during the year if there is some way we can respond to that.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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To clarify, I think a report here is absolutely justified. This is not in lieu of a different type of amendment, to be clear.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 46:

In page 61, to delete lines 38 and 39, and in page 62, to delete lines 1 to 22 and substitute the following: “ “(7B) (a) Where the trade consists of the carrying on of relevant activities (within the meaning of section 291A(5)(a))—

(i) the predecessor shall not be entitled to any relief under section 291A(6)(b)(i) in respect of an excess amount (within the meaning of section 291A(6)(b)(i)), or portion thereof, as the case may be, which relates to a specified intangible asset which transferred from the predecessor to the successor on the transfer of the trade (in this subsection referred to as ‘the transferable excess amount’), and the successor shall be entitled to relief under section 291A(6)(b)(i) in respect of the transferable excess amount, for which the predecessor would have been entitled to claim relief if the predecessor had continued to carry on the trade, and

(ii) the predecessor shall not be entitled to any relief under section 291A(6)(b)(ii) in respect of excess interest (within the meaning of section 291A(6)(b)(ii)), or portion thereof, as the case may be, which was incurred in connection with the provision of a specified intangible asset which transferred from the predecessor to the successor on the transfer of the trade (in this subsection referred to as ‘the transferable excess interest’), and the successor shall be entitled to relief under section 291A(6)(b) (ii) in respect of the transferable excess interest, for which the predecessor would have been entitled to claim relief if the predecessor had continued to carry on the trade.

(b) (i) For the purposes of subparagraph (i) of paragraph (a), where an excess amount referred to in that subparagraph relates to both—

(I) a specified intangible asset which transferred from the predecessor to the successor on the transfer of the trade, and

(II) a specified intangible asset which did not so transfer,

when determining the transferable excess amount, the excess amount shall be apportioned on a just and reasonable basis. (ii) For the purposes of subparagraph (ii) of paragraph (a), where excess interest referred to in that subparagraph was incurred in connection with both— (I) the provision of a specified intangible asset which transferred from the predecessor to the successor on the transfer of the trade, and (II) the provision of a specified intangible asset which did not so transfer, when determining the transferable excess interest, the excess interest shall be apportioned on a just and reasonable basis.”.

(2) Subsection (1) shall have effect for accounting periods commencing on or after 1 January 2026 in respect of a transfer of a trade to which section 400(5) of the Principal Act applies which occurs on or after 1 January 2026.”.

The background to this amendment is that section 400 of the Taxes Consolidation Act 1997 enables the transfer of certain tax attributes from a predecessor company to a successor company upon the transfer of a trade. Section 42 of the Finance Bill 2025 amends section 400 and provides that where excess allowances and excess interest of the predecessor company are carried forward, such amounts will transfer to the successor company provided all of the necessary conditions of section 400 are satisfied, including that the assets to which the excess allowances and excess interest relate are also transferred.

Following publication of the Finance Bill it was noted that the legislation does not specify how amounts carried forward are to be apportioned in cases where a predecessor company may have multiple assets that qualify for section 291A capital allowances and, upon the transfer of a trade, only some of the assets transfer to a successor company.

Therefore, I am bringing forward a Committee Stage amendment to provide that where some of the assets transfer from the predecessor company to the successor company and some of the assets do not, an apportionment of the excess amount or excess interest between assets which transferred and assets which have not transferred is required, and the apportionment is to be made on a just and reasonable basis.

A further minor drafting issue is also addressed in relation to the commencement provisions of the legislation. Following the amendment, the legislation will specify that the provisions apply for the accounting periods commencing on or after 1 January 2026 and in respect of a transfer of a trade which occurs on or after 1 January 2026. This will ensure that the legislation operates as intended.

Edward Timmins (Wicklow, Fine Gael)
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Amendments Nos. 47 to 50, inclusive, and amendment No. 57 are related and will be discussed together.

Mairéad Farrell (Galway West, Sinn Fein)
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I move amendment No. 47:

In page 64, between lines 17 and 18, to insert the following: "(I) by the insertion of ", including the development of the film industry in all the regions of Ireland," between "Irish film industry" and "and/or the promotion",".

This amendment relates to the promotion of the film industry in all regions. As the Minister is well aware, I am from Galway. One of the issues is, of course, film development across Galway. Much of the film industry is concentrated in Dublin and the Leinster area. We have had fantastic films over recent years, including the likes of "An Cailín Ciúin", "Kneecap" and "The Banshees of Inisherin". The aim is that we continue to build on that because we have expertise in the area.

We know that in 2024, 70% of recipient projects were based in Leinster, with over 54% in the Dublin-Wicklow region alone. That is obviously our main film production hub. The total estimated value was over €400 million. By contrast with these 62 Leinster projects, just 13 were supported in Munster, with eligible expenditure of €25.5 million, and 11 were supported in Connacht, to the tune of €29 million. Even those productions that were in those regions were of a small scale. It is, of course, much more difficult for film to be made further away from the major production hub, which is why we need to incentivise production in other regions to ensure balanced development.

I cannot remember if the Minister was before the Committee on Budgetary Oversight on this topic at the time, but I remember during the last Dáil the Committee on Budgetary Oversight took an awful lot of time to look at this particular issue. The aim of this particular amendment is to empower the State to include measures within the section 481 industry development test to promote the development of audiovisual production outside the main production hub.

This is an issue that arises regularly for me at a local level. Of course, we have some fantastic productions, such as "Ros na Rún", which happen every week in the likes of Galway and other areas. There are many courses and so on for students, at third level in particular, in film and TV. It would be good if we could get that promoted more. I would be interested to hear the Minister's response in terms of what the Government will do to address the gap that has arisen in support for regional film.

Since they are being taken together, will I go through each of the amendments? Okay. Amendment No. 48 is quite interesting because it relates to the music aspect of things.

The Screen Composers Guild Ireland collected data that show the number of productions in receipt of the section 481 tax credit that employ an Irish-based composer or use an Irish-based music contribution continues to remain static at just 30%. None of those included in that are high-budget projects. This falls far short of what should be seen as an acceptable level of benefit for something that is a key creative part of our film industry. The Irish Music Rights Organisation, IMRO, in its pre-budget submission, highlighted this, stating that despite music being a vital component in any film's success, most section 481 schemes do not specifically mention music creation. This is done differently in Britain and a variety of other countries. We need to look at this. That figure of 30% is quite low. We can be very proud of our artistic community but there are issues in relation to that. I ask the Minister to address amendments Nos. 47 and 48.

Edward Timmins (Wicklow, Fine Gael)
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Deputy Nash also has an amendment to this section. Does he wish to speak to it?

Gerald Nash (Louth, Labour)
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They are all grouped. It would be useful to have the Minister respond on the point Deputy Farrell made before I make an intervention.

Edward Timmins (Wicklow, Fine Gael)
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I have been informed the grouping has to be discussed in its entirety.

Gerald Nash (Louth, Labour)
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My amendment is amendment No. 44. In many ways, it is in honour of our colleague-----

Edward Timmins (Wicklow, Fine Gael)
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It is amendment No. 52.

Gerald Nash (Louth, Labour)
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It is. In many ways, it is in honour of our colleague, Deputy Richard Boyd Barrett, who we referenced offline earlier on. It is great to see him back. For many years, I have been introducing amendments connected to some of the issues raised consistently by Deputy Boyd Barrett. My amendment is in respect of the section 481 film relief that has been broadened and deepened in recent years to support our film industry. This is specifically to do with intellectual property rights issue, copyright issues and connected matters pertaining to the pay, terms and conditions of workers and performers operating on productions here in the Republic of Ireland. There is a view in Irish Equity, one that I support, that there is a problem in that, for example, where there are co-productions here on the island of Ireland, it is often the case that there are lesser terms and conditions for performers based in the Republic of Ireland. There is a UK agreement in place, a template agreement, that Irish Equity would like to use. This is, in many ways, an industrial relations matter between Irish Equity and Screen Producers Ireland but it is worth making the point again that when we are using significant State resources for good public policy reasons to support our thriving film industry, which is developing all the time, as part of that, we need to send out a message that there ought to be a form of conditionality around ensuring those who work and perform in the sector - the lifeblood of the sector and industry - are rewarded adequately and that we take, insofar as we possibly can, an all-island approach to this. These are points that have been consistently made in recent years by our colleague Deputy Boyd Barrett, and by Deputy Ó Snodaigh, me and others, in support of those who work in what is a very vibrant and thriving sector.

Edward Timmins (Wicklow, Fine Gael)
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We have a link to amendment No. 57. Does Deputy Doherty or Deputy Farrell wish to speak?

Pearse Doherty (Donegal, Sinn Fein)
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Yes, I want to move that amendment when we come to it. This is a similar issue, one we have discussed over many years. It relates to a report on the supportive measures, which we support, regarding the industry. As Deputy Farrell pointed out, we would like to see targeted enhancements of these measures. We also want to ensure that the industry is a good employer. The amendment we propose requires a report to be carried out on the effect of supportive tax measures on increased economic activity in this sector, to show whether they are working or not. As Deputy Farrell stated, the regionality of that would be important.

The amendment also calls for the analysing of the working conditions in the sector and the potential for greater conditionality in tax measures to protect workers. This is an issue we have discussed at length with the Minister and how some workers are treated in the industry with respect to their rights. We have had cases before the Workplace Relations Commission. We have had entities established that claim they are not the employers of the employees when, for all intents and purposes, they are. Elaborate structures are being put in place and, therefore, it is necessary to highlight this issue and request that the Department examine it. We are providing tax incentives to this industry for good reasons. They have many benefits, not least for the industry itself, employment, the promotion of our regions, the tourism potential that stems from the industry, the economic activity that flows from it and the cultural importance of some of the programmes made as a result. We also need to make sure there are good employment conditions. That is what this amendment is about.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will speak briefly in support of the amendments. As with other Deputies, I have heard from people working in the sector who have had very poor experiences with regard to working conditions and precarity. When a sector is being supported through tax measures like these, we should ensure good working conditions for the people working in the sector. They should have good working conditions anyway, as everyone should. However, in the context of the supportive tax measures, we should look at how that conditionality around improving working conditions, which can be very poor for some in the sector, can be improved and strengthened.

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies for raising this matter. In our voting session earlier on, we all reflected on the contribution that Deputy Richard Boyd Barrett has made to all of this. It is great to hear his voice back on the airwaves and to hear that he is recovering. I would describe Deputy Boyd Barrett as being a leading proponent of the unscripted creative sector through the contributions he has made on it on many different occasions. I wish him all the best and acknowledge the impact he has had on this issue. In the Deputy's absence, the Deputies have raised matters that I will respond to. Quite a variety of matters have been raised, so I ask them to bear with me as I do my best to go through each of them in turn.

On amendment No. 47, under the proposed amendment, the Deputy suggests including “the development of the film industry in all the regions of Ireland” as a factor that the Minister for Culture, Communications and Sport shall have regard to when issuing a cultural certificate in accordance with film regulations. I respectfully suggest to the Deputy that this wording is unnecessary as the legislation already states that “the development of the film industry in the State” is a factor the Minister shall have regard to when issuing a cultural significance certificate. This includes all regions of the State and would appear to sufficiently cover what the Deputy seeks from a legislative perspective. Therefore, I cannot accept the amendment.

In relation to amendment No. 48, the introduction of additional criteria to the credit relating to Irish music requires careful consideration of the impact such an amendment could have. Section 481 already plays a key role in attracting international productions to Ireland and any additional qualifying criteria would have to be considered in light of the impact on the attractiveness of the credit globally. Film is also a creative medium, and the imposition of limitations on the type of music that can be used in projects could prevent productions being made in Ireland where qualifying music fitting with the creative vision is not available. It is worth noting that, while the culture test does not specifically reference Irish music, it can still play a role in the Minister for Culture, Communications and Sport determining where a production company presents its case for cultural certification for a film. Taking these factors into account, I cannot accept the amendment.

I now turn to amendment No. 50 in relation to theatre productions. The Government, as indicated in the programme for Government launched in January of this year, has already committed to examine the tax treatment of production costs for theatre productions.

The programme for Government is a comprehensive five-year strategy that sets out to reflect policy objectives over the lifetime of Government. This remains a longer term objective and, as such, officials in my Department have not yet commenced work on this commitment at this early stage. Given the commitment already in this area, I cannot accept the amendment. However, I look forward to engaging with the Deputy, as with other stakeholders, on the issue once work commences.

I will now deal with amendments Nos. 49, 51, 52 and 57 together. First, I acknowledge the input of Members of this House on matters concerning the audiovisual sector in recent years, including though examinations at the Committee on Budgetary Oversight. My officials have directly engaged with all relevant representative bodies in the sector, including those representing crew, cast and producers, to understand the issues affecting the audiovisual sector and to chart a pathway forward. The attention brought to issues in the sector by representative bodies and by Members of this House has contributed to real progress being achieved on a number of fronts.

In relation to copyright, I first note that copyright law falls within the remit of the Department of Enterprise, Tourism and Employment. Copyright is relevant for many workers in the film sector, including authors, producers, broadcasters and performers, and there are, however, complex legal issues involved. Deputies may be aware from previous discussions in the House that a process is under way to address these issues. An independent facilitator was retained by Screen Ireland in 2023 to meet with a group of key stakeholders to identify and understand issues relevant to the digital Single Market directive. As a result of this process, industry stakeholders have agreed interim best practice industry guidelines while they pursue a path towards a collective bargaining agreement.

With regard to terms and conditions for film workers, it is not my place as Minister to dictate to actors and other creative professionals what their stance on their pay and conditions should be. This is a decision for the workers themselves and for their representative unions to seek agreement in negotiations with employer representatives. There are clear precedents for this form of progress in the sector. Deputies will be aware that there has been significant progress on terms and conditions provided to film workers over the last number of years, including negotiated crew agreements for film and construction crews. For example, the construction crew agreement, in addition to setting pay rates, provides for the extension of coverage for pension, sick leave and other benefits to industry construction workers under the construction workers pension scheme. It has provided for the establishment of a joint monitoring structure that helps to ensure the agreement is appropriately implemented. Furthermore, I do not believe it is appropriate for legal rights to be linked to only one set of circumstances where a company avails of a tax credit. It is very important to recognise that the laws that underpin both copyright and employment rights apply regardless of whether a company applies for section 481. They apply equally.

On the request by Deputies Doherty, Farrell and Ó Snodaigh for reports on the impact of incentives that support the sector, I advise that section 481 is regularly reviewed in line with my Department’s tax expenditure guidelines. The most recent review took place in 2022. However, it is also outside the remit of my Department to produce a report on working conditions in the sector, which is why I cannot accept the amendments put forward by the Deputies.

With regard to the regional uplift, which was touched on by Deputy Farrell, we had a regional uplift in place. I brought it in myself at 5%, which was available for 2019 and 2022. In the Finance Act 2020, given the health environment we were in at that point, the uplift was extended to include a further year at 5%. It was then tapered out at 3% in 2022 and 2% in 2023. I am well aware of how well the uplift was received upon its introduction. However, I note that the main film tax credit remains available to qualifying productions in all areas of the country, and the main credit is set at a very competitive rate of 32% on qualifying expenditure of up to €125 million. Furthermore, the scale uplift enhanced credit of 8%, which is available to feature film projects with qualifying expenditure of less than €20 million, enhances the viability of smaller projects which are more likely to film in regional locations.

Regarding some of the final matters that were raised by Deputy Nash in particular, I am aware of the UK agreement that has been negotiated by UK representative bodies which has regard to UK law, but in January in 2025, an interim set of guidelines in relation to copyright was agreed by stakeholders in the sector of Ireland. It is very welcome. I hope this leads to a permanent agreement. I believe the engagement that I and we have had on this matter in this committee in recent years has been a small catalyst in these developments taking place.

Mairéad Farrell (Galway West, Sinn Fein)
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I have a few points on the Minister's response there. One is in relation to the regional and that the Minister already has a role there. The issue is that it is not working on a regional basis if everything is concentrated in one area. We could do better. Regarding the music and the limitations, we see that in Britain there are amendments to ensure more promotion of local music. Has any analysis been done to see if that has had an impact on the film scene in Britain?

Paschal Donohoe (Dublin Central, Fine Gael)
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First, regarding the regional point Deputy Farrell makes, I take that on board. In her own contribution earlier, she acknowledged that parts of our country have a long-established heritage and excellence in the film and audiovisual sector. I know in the area she represents, great efforts are being made at the moment to develop that sector as well. I understand these efforts are being successful but I know the Deputy wants to see them being even more successful in the time ahead. I would go back to the point I made to her regarding the Scéal Uplift that is now in place. While this is an uplift that is in place across our entire country, the fact that it is focused on qualifying expenditure of less than €20 million with regard to expenses from the production of the film is having an effect with regard to the development of smaller productions within our country, which in turn, I hope, is playing a role in all regions across our country having the opportunity to participate in this sector. I believe other sectors beyond the south east are growing. When I brought in that change in 2020 in the regional uplift, we did say it was going to be for a certain period of years. We then made it available for a further year because of Covid. That was in 2020 and it is now five years of that being in place. It is a fair period of time to try to help other sectors within our country further develop their role in the creative sector.

Regarding the point made by the Deputy about music, we have not done any work there as to whether this has had an impact on the development of the music sector within the UK. I outlined in my earlier answer to the Deputy some of practical difficulties that could be involved in the implementation of her policy here and I think they are reasonable concerns to have. What I am really encouraged by, when I was heavily involved in this sector a number of years ago as we were revising the different supports we had in place, is regardless of whether the music is national or local, it is Irish musicians who are involved in the performance of it and it is a flourishing sector within our country at the moment.

It is great to see that our musicians, composers and studios involved in that part of the creative sector of our economy are doing well at the moment.

Mairéad Farrell (Galway West, Sinn Fein)
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Just for clarity, it is my understanding that the number of productions in receipt of section 481 tax credits which employ an Irish-based composer or use any Irish-based music contribution continues to remain static at just 30%. My question was not in relation to Britain's music scene getting bigger. The Minister said that if we decided that Irish-based composers had to be used, it could impose a limit. Has analysis been done in Britain that the measure would have a knock-on impact on the number of films produced in Britain?

Paschal Donohoe (Dublin Central, Fine Gael)
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I am sorry, would the Deputy mind repeating the last part of her contribution?

Mairéad Farrell (Galway West, Sinn Fein)
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Yes, no problem. My question was on whether analysis had been done in Britain to see if the clauses related to British-based musicians or composers have had an impact on the number of films that are made in Britain. It was not about the music scene in Britain. The Minister may not have that information to hand. For clarity purposes, I wanted to make that clear.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am not aware that the UK has done it, but we can certainly see if we can find out. The Deputy is correct about the point I made about people in the music sector. I was referring in particular to the scale uplift that we have in place, where there is a requirement that it must be an individual who is a national of, or ordinarily resident, in Ireland or another EEA state who must be engaged in a key creative role in the production.

Mairéad Farrell (Galway West, Sinn Fein)
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I think the Minister and I will differ on that.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will certainly see if we can find the information the Deputy is looking for. Section 481, as many Deputies have acknowledged, is playing a really positive role within the sector. We have raised a number of different matters here today, from the music sector to the various issues in relation to working terms and conditions. Good progress is being made.

Mairéad Farrell (Galway West, Sinn Fein)
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I move amendment No. 48:

In page 64, between lines 17 and 18, to insert the following:

“(I) in subparagraph (ii) by the insertion of the following after “expression of Irish culture”: “, including the intended use of music in the film which satisfies two or more of the following conditions:

(A) the music or lyrics are composed or written by a resident of the island of Ireland;

(B) at least one of the artists involved in the performance of the music is a resident of the island of Ireland;

(C) the music is recorded entirely on the island of Ireland;

(D) the music incorporates songs with lyrics in the Irish language,”,”.

Mairéad Farrell (Galway West, Sinn Fein)
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I move amendment No. 49:

In page 64, line 22, to delete “appropriate,”,” and substitute the following:

“appropriate,

(vii) a condition that the qualifying company shall, in respect of the qualifying film concerned, comply fully with the Copyright and Related Rights Act 2000 and the Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019,

(viii) a condition that the qualifying company shall make every effort to ensure that performers, writers, composers, artists and other film workers resident within the jurisdiction will not be subject to lesser terms and conditions regarding the licencing or assignment of their intellectual property rights than persons resident outside the jurisdiction engaged in similar roles when employed on the same qualifying film, and

(ix) a condition that the qualifying company shall not require performers, writers, composers, artists or other film workers to sign away their rights to future residual payments for their work on a qualifying film, or to agree to a so-called ‘buy-out’ contract, as a pre-condition of working on the qualifying film,”,”.

Mairéad Farrell (Galway West, Sinn Fein)
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I move amendment No. 50:

In page 65, between lines 16 and 17, to insert the following: “Report on developing a tax relief for live theatre productions

44. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the options for, and potential impact of, developing a tax relief for live theatre productions building on the model in place for film productions under section 481 of the Principal Act.”.

Mairéad Farrell (Galway West, Sinn Fein)
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I move amendment No. 51:

In page 65, between lines 16 and 17, to insert the following: “Report on working conditions in the film industry in Ireland and performance of related tax measures

44. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the effect of supportive tax measures on increased economic activity in the film sector, analysing in particular the working conditions and employer-employee relations in the sector and the impact of such measures on the delivery of sustainable quality employment and training for Irish workers.”.

Gerald Nash (Louth, Labour)
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I move amendment No. 52:

In page 65, between lines 16 and 17, to insert the following: “Amendment of Film Regulations 2019

44. The Film Regulations 2019 (S.I No. 119 of 2019) made by the Revenue Commisioners under section 481 of the Principal Act are amended by the insertion of the following after Regulation 3(4):

(5) In this Regulation quality employment means employment—

(a) provided under agreements and in accordance with procedures that both facilitate compliance with and comply with—

(i) all relevant employment law requirements, and

(ii) the Copyright and Related Rights Acts 2000 to 2019 and the European Union (Copyright and Related Rights in the Digital Single Market) Regulations 2021 (S.I No.567 of 2021), including in particular the provisions of those enactments that relate to the entitlement of an author or performer to receive appropriate and proportionate remuneration for the licensing or transfer of exclusive rights for the exploitation of works or other subject matter,

and

(b) that, having regard to international comparisons, particularly with Great Britain and Northern Ireland, is reasonably well remunerated and provides reasonable employment security.”.

Edward Timmins (Wicklow, Fine Gael)
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Amendments Nos. 53 to 56, inclusive, are related and may be discussed together.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 53:

In page 69, line 39, to delete “clauses (i) to (iii) of subsection (28A)(c)” and substitute “subparagraphs (i) to (iii) of subsection (28A)(c)”.

This section amends section 481A of the Taxes Consolidation Act 1997, which relates to the digital games corporation tax credit. The Finance Bill 2025 extends the digital games tax credit for a period of six years, to 31 December 2031, and also introduces an enhancement to the credit to allow for claims in respect of post-release content work, subject to certain conditions. Both measures are subject to commencement orders, pending receipt of state aid approval from the European Union.

Subsequent to the publication of the Finance Bill, some minor technical issues have been identified in this section that are required to be corrected on Committee Stage. These are the correction of a minor drafting error and a clarification to one of the commencement provisions to ensure that provisions relevant to the extension of the post-release content are not linked to the commencement provision for the extension of the credit.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 54:

In page 73, line 13, to delete “paragraph (c)” and substitute “subparagraphs (i) to (xiv) of paragraph (c)”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 55:

In page 73, line 15, to delete “paragraph (c)” and substitute “subparagraphs (i) to (xiv) of paragraph (c)”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 56:

In page 73, line 20, to delete “paragraph (c)” and substitute “subparagraphs (i) to (xiv) of paragraph (c)”.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No 57:

In page 74, between lines 27 and 28, to insert the following: “Report on working conditions in film industry in Ireland and performance of related tax measures

45. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the effect of supportive tax measures on increased economic activity in the sector, and analysing the working conditions in the sector and the potential for greater conditionality in tax measures to protect workers.

Pearse Doherty (Donegal, Sinn Fein)
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This section deals with the exemption of foreign distributions. We had changes in the Finance Bill 2024 in relation to this and now there are further changes. Until now, it would be the case that under the tax and credit system, corporations would have to show they were sufficiently taxed in another jurisdiction. Now, it appears that foreign dividends will automatically assumed as exempt and that they were taxed. I do not think this is appropriate. What is the objective of this measure? Is it to make Ireland more attractive to multinationals by allowing them to reduce their corporation tax bills? Why are we moving away from the system that multinationals had to show they were taxed elsewhere to this position of assuming that they have been taxed elsewhere?

Paschal Donohoe (Dublin Central, Fine Gael)
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The participation exemption provides for a double relief tax mechanism, delivered through a participation exemption from Irish corporation tax. It applies to a relevant distribution made from profits or qualifying assets on, or after, 1 January. Distributions made out of either profits or qualifying assets cannot be deductible for foreign tax purposes and must constitute income in the hands of the recipient.

To avail of the exemption, a relevant subsidiary tax resident in an EU-EEA jurisdiction or a jurisdiction that has a double tax agreement which makes a relevant distribution to a parent company. The participation exemption is not available to subsidiaries in a jurisdiction listed on the EU list of non-co-operative jurisdictions for tax matters. The parent company must be tax resident in Ireland or in a non-Irish EEA country and hold a relevant participation in the relevant subsidiary. The parent company must hold a 5% direct or indirect holding of ordinary share capital in the relevant subsidiary and have a 5% entitlement in the relevant subsidiary and have this held for at least 12 months with regard to the ownership of ordinary share capital profits and a distribution or share of assets on a winding-up.

This legislation provides for a targeted anti-avoidance rule that sets out that the participation exemption does not apply where an arrangement has been put in place for obtaining a tax advantage and it is not genuine. What I am outlining here, and I appreciate this is quite technical, is that it is about anti-avoidance and making our anti-avoidance rule more precise to try to deal with any arrangement that could be about gaining a tax advantage. We have here a number of enhancements and clarifications that are coming in to improve the operation of the regime.

If it would help Deputy Doherty, I could provide a further note to him on this.

Pearse Doherty (Donegal, Sinn Fein)
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Perfect, yes, before Report Stage.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am extremely conscious, even as I explain this, that it is highly technical. I can provide a further note to the Deputy in advance of Report Stage to clarify this further.

Pearse Doherty (Donegal, Sinn Fein)
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That would be helpful.

Edward Timmins (Wicklow, Fine Gael)
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Amendments Nos. 58 to 60, inclusive, are related and may be discussed together.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 58:

In page 78, between lines 25 and 26, to insert the following: “(b) in subsection (7), by the substitution of the following paragraph for paragraph (a):

“(a) where, other than the holding of shares in an investing company or investing companies, the only business of the first-mentioned company is the on-lending to the investing company or investing companies of moneys which the first-mentioned company has borrowed from persons who are not connected with either or both the first-mentioned company and the investing company or investing companies;”,”.

Section 840A of the Taxes Consolidation Act 1997 is an anti-avoidance provision. The provision generally denies a corporate tax deduction for interest payable on a loan used for the acquisition of an asset from a company connected with the investing company. The section applies where the loan is made to the investing company, that is, the acquirer of the asset, by a connected person. This section of the Bill, as initiated, seeks to allow an interest deduction against trading profits for the acquirer of an asset where, subject to certain conditions, there is an intra-group sale of the asset for commercial purposes. The interest deduction will be allowed where the seller was entitled to a deduction for interest payable on a loan used to acquire the asset concerned immediately before the intra-group sale. The deductible interest for the acquirer will be limited to the amount of interest arising on the principal outstanding on the borrowings of the seller, in respect of the asset concerned, at the time immediately prior to the intra-group sale.

I am proposing two further amendments to address two aspects of the operation of section 840A. The first is an amendment to section 840A(7)(a). This subsection operates as a relief from the general restriction on deductibility of interest where the sole business of the connected lender is the on-lending of funds to an investing company from an external lender. I am expanding this relief to address practical difficulties in its operation such that the connected lender may on-lend to more than one investing company and may hold shares in such investing companies.

The second amendment clarifies the operation of the relief set out in the Bill, as initiated, where there is more than one intra-group acquisition of an asset to which that relief applies.

Edward Timmins (Wicklow, Fine Gael)
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Would any of the members like to comment?

Mairéad Farrell (Galway West, Sinn Fein)
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I just wonder if more of a note could be provided before Report Stage, if that is okay.

Paschal Donohoe (Dublin Central, Fine Gael)
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Sure, we can do that.

Mairéad Farrell (Galway West, Sinn Fein)
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I thank the Minister.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 59:

In page 79, to delete lines 18 to 30 and substitute the following: “(c)(i) For the purposes of calculating the amount of interest to which paragraph (b) applies, the principal on the connected loan shall not exceed—

(I) the principal outstanding on the borrowings of the connected seller in respect of the asset concerned at the time immediately prior to the acquisition of the asset by the investing company, or

(II) where subparagraph (ii) applies, the maximum principal amount.

(ii) (I) This subparagraph shall apply where, by virtue of paragraph (b), subsection (2) has not applied to an amount of interest on a connected loan made to a company that is connected with the investing company (referred to in this subparagraph as the ‘previous investing company’) in respect of a previous acquisition of the asset concerned from a company connected with the previous investing company (referred to in this subparagraph as the ‘previous connected seller’).

(II) Where this subparagraph applies, the ‘maximum principal amount’ shall be an amount equal to the principal outstanding on the borrowings of the previous connected seller at the time immediately prior to the acquisition of the asset concerned by the previous investing company and, where there has been more than one previous acquisition referred to in clause (I) in respect of the asset concerned, the maximum principal amount shall be an amount equal to the principal outstanding on the borrowings of the previous connected seller at the time immediately prior to the acquisition of the asset concerned by the previous investing company in the earliest such previous acquisition of the asset concerned to occur.

(iii) For the purposes of calculating—

(I) the principal outstanding on the borrowings of the connected seller in respect of the asset concerned at the time immediately prior to the acquisition of the asset by the investing company, or

(II) where subparagraph (ii) applies, the maximum principal amount,

where only a portion of the borrowings relate to the asset that is acquired by the investing company, then the principal outstanding on the borrowings or the maximum principal amount shall be apportioned on a just and reasonable basis.”.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 60:

In page 79, line 31, to delete “a transfer” and substitute “an acquisition”.

Mairéad Farrell (Galway West, Sinn Fein)
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Would the Minister mind speaking to the section?

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course. This section amends section 891H of the Taxes Consolidation Act 1997, which was introduced in the Finance Act 2015 and provides for country-by-country reporting. Section 891H gives effect to the OECD base erosion and profit shifting, BEPS, project recommendations for country-by-country reporting and Council Directive EU 2016/881 of 25 May 2016, which brought the OECD BEPS recommendations for country-by-country reporting into EU legislation.

This reporting was developed by the OECD as part of its package of measures to tackle BEPS. It provides tax authorities with a clear overview of where profits, sales and employees of large multinational groups are located, and where taxes are paid and accrued. It facilitates transparency as these reports can be shared on a confidential basis with tax authorities in other jurisdictions through government-to-government exchange of information.

Section 891H requires an Irish resident ultimate parent company of a large multinational group to provide a country-by-country report to the Revenue Commissioners. The report must contain a breakdown of the amount of revenue, profits, taxes and other indicators of economic activities for each tax jurisdiction in which the multinational group does business. Country-by-country reporting applies to multinational groups where the annual consolidated revenue in the preceding fiscal year is €750 million or more.

This section of the Finance Bill amends section 891H in order to provide that country-by-country legislation is to be interpreted, and country-by-country reports are to be completed in accordance with the relevant OECD guidance.

Section 891H is also amended to legislate for the OECD approach adopted by Ireland for specific circumstances where the OECD guidance provides flexibility in determining whether a group is within scope of the country-by-country reporting requirements, for example, where the preceding fiscal year of the ultimate parent company of the multinational group is shorter than 12 months. This amendment shows our continued commitment to meeting international standards in the area of tax transparency and administrative co-operation.

Mairéad Farrell (Galway West, Sinn Fein)
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Go raibh maith agat. I thank the Minister for that information.

Edward Timmins (Wicklow, Fine Gael)
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This section is being opposed. Does Deputy Farrell wish to speak on it?

Mairéad Farrell (Galway West, Sinn Fein)
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I just want a bit of clarity, more than anything else. Will the Minister give us an idea of or explanation in relation to the increase here in terms of the benefit of the scheme?

Paschal Donohoe (Dublin Central, Fine Gael)
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Overall, in terms of the increase in the value of the scheme, at the moment, as the Deputy knows, it has a lifetime limit of €1 million with regard to the disposal or disposals of chargeable business assets made by a relevant individual on or after 1 January 2016.

The Bill will amend the existing lifetime limit of €1 million, increasing it to €1.5 million for gains arising on disposals made on or after 1 January. This section gives effect to that. It is an increase of €500,000.

Mairéad Farrell (Galway West, Sinn Fein)
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The reason I am asking is that the Indecon review of 2019 said it was clear the relief did not have a significant impact on initial investment decisions. Can the Minister tease out why he believes this change needs to happen?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Indecon report, at that point, recommended that we increase the lifetime limit to €12 million. I think it was recognising that the overall limit in place of €1 million might not be of sufficient scale to incentivise investment in entrepreneurial activity. It believed we should be making a very, very significant increase of it all the way up to €12 million. That is not possible to achieve from a budgetary perspective and instead I am making a more modest increase of €500,000. The overall aim of this is that entrepreneurs might consider that in respect of the gain they are getting, benefit disposal of an asset, they are getting a larger share as a result of the change we are making. It might encourage them to participate in another venture in the future and that might in turn encourage them to grow the value of the venture they are involved in at the moment because the lifetime limit has now been increased. To be frank with the Deputy, it is a relatively modest increase in the value of this threshold in comparison with some of the requests that have been made.

Mairéad Farrell (Galway West, Sinn Fein)
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What does the Minister think the impact will be?

Paschal Donohoe (Dublin Central, Fine Gael)
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I hope the impact will be that those numbers of people who were involved in the set-up of businesses might either decide to be involved in the creation of new ventures in the future as a result of this change or might decide that they will further grow the venture they are involved in over the time ahead because the gain they will get out of the disposal of a share in that business is now increased as a result of this change. I hope it will further reward entrepreneurial activity within our State and thereby be beneficial for investment in jobs.

Edward Timmins (Wicklow, Fine Gael)
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Amendment No. 61 has been ruled out of order.

Edward Timmins (Wicklow, Fine Gael)
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Amendments Nos. 62 and 65 are related and will be discussed together.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 62:

In page 83, between lines 29 and 30, to insert the following: "Amendment of Chapter 1 of Part 2 of Finance Act 1999 (Mineral Oil Tax)

51. (1) Chapter 1 of Part 2 of the Finance Act 1999 is amended—

(a) in section 94(1), by the insertion of the following definitions:

" ‘appropriate procedure’ means—

(a) in relation to biofuel for use as a propellant, and vehicle biogas, the procedure established by the National Oil Reserves Agency under Regulation 4(1) of the European Union (Biofuel Sustainability Criteria) Regulations 2012 (S.I. No. 33 of 2012), and

(b) in relation to biofuel for use other than as a propellant, the procedure established under Regulation 7(1) of the European Union (Renewable Energy) Regulations (2) 2022 (S.I. No. 350 of 2022) by the competent authority referred to in the said Regulation 7(1) or, where no such procedure has been established, the procedure referred to in paragraph (a);

‘sustainability and greenhouse gas emissions saving criteria’ means the sustainability and greenhouse gas emissions saving criteria laid down in Article 29 of Directive (EU) 2018/2001 of the European Parliament and of the Council of 11 December 2018;",

and

(b) in section 100—

(i) in subsection (1), by the substitution of the following paragraph for paragraph (f):

"(f) to be intended solely for use, or to have been solely used, to produce electricity, where that electricity is—

(i) subject to electricity tax under section 58(1) of the Finance Act 2008 or is supplied for consumption outside the State, and

(ii) produced in an installation that is covered by a greenhouse gas emissions permit.",

(ii) by the insertion of the following subsection after subsection (1):

"(1A) Subject to such conditions as the Commissioners may prescribe or otherwise impose, a relief from mineral oil tax exclusive of the carbon charge, shall be granted on any mineral oil that is shown to the satisfaction of the Commissioners to be intended solely for use, or to have been solely used, to produce electricity, where that electricity is subject to electricity tax under section 58(1) of the Finance Act 2008 or is supplied for consumption outside the State.",

(iii) by the substitution of the following subsection for subsection (5):

"(5) Subject to such conditions as the Commissioners may prescribe or otherwise impose, a relief from the carbon charge shall apply—

(a) to any mineral oil that is—

(i) shown to the satisfaction of the Commissioners to be biofuel, and

(ii) demonstrated, in accordance with the appropriate procedure, to be in compliance with the sustainability and greenhouse gas emissions saving criteria,

or

(b) where biofuel which meets the requirements of paragraph (a) has been mixed or blended with any other mineral oil, to the biofuel content of any such mixture or blend.",

(iv) by the substitution of the following subsection for subsection (5A):

"(5A) Subject to such conditions as the Commissioners may prescribe or otherwise impose, a relief from the carbon charge shall apply—

(a) to any vehicle gas that is—

(i) shown to the satisfaction of the Commissioners to be vehicle biogas, and

(ii) demonstrated, in accordance with the appropriate procedure, to be in compliance with the sustainability and greenhouse gas emissions saving criteria,

or

(b) where vehicle biogas which meets the requirements of paragraph (a) has been mixed or blended with any other vehicle gas, to the vehicle biogas content of any such mixture or blend.",

(v) by the insertion of the following subsection after subsection (5A) (amended by subparagraph (iv)):

"(5B) (a) Where—

(i) relief from mineral oil tax has been availed of in respect of biofuel or vehicle biogas in accordance with subsection (5) or (5A), as the case may be, and

(ii) it is determined, in accordance with the appropriate procedure, that the said biofuel or vehicle biogas is not in compliance with the sustainability and greenhouse gas emissions saving criteria,

then, a liability to mineral oil tax, equal to the amount of relief availed of in respect of that biofuel or vehicle biogas, shall arise.

(b) Notwithstanding paragraphs (a) and (b) of section 95(2), where a liability to mineral oil tax arises under paragraph (a) of this subsection, the liability shall apply from the date on which the person who availed of the relief is notified, in accordance with the appropriate procedure, of the determination referred to in the said paragraph (a) of this subsection.",

and

(vi) in subsection (6)(a), by the insertion of ", other than in the case of mineral oil to which subsection (1)(f) applies," after "greenhouse gas emissions permit,".

(2) Subsection (1) shall come into operation on such day or days as the Minister for Finance may, by order, appoint and different days may be so appointed for different purposes or different provisions.". Section 100 of Finance Act 1999 is being amended to restrict the scope of certain carbon tax reliefs so that Ireland complies with requirements for derogation from the EU’s extended Emissions Trading System, or ETS2. Our national carbon taxes apply to fuels used in ETS2 sectors so participation in trading in ETS2 allowances would effectively give rise to double taxation. To avoid this, we have applied for derogation and must demonstrate that carbon taxes are applied to ETS2 sectors.

To ensure that carbon tax reliefs do not extend to ETS2 sectors, the existing full relief from mineral oil tax for fuels used for electricity production under section 100(1)(f) is being restricted to apply only where the electricity production is carried out in an installation covered by a greenhouse gas emissions permit. As ETS2 entities do not qualify for the relevant greenhouse gas emissions permit, fuel they use for electricity production will be excluded from the scope of full mineral oil tax relief. However, fuel used for electricity production in an installation not covered by a greenhouse gas emissions permit will continue to qualify for relief from the non-carbon component of mineral oil tax. A new subsection (1A) is introduced to provide for this.

As the amendment to the full relief from mineral oil tax for fuels used for electricity production introduces a greenhouse gas emission permit condition, it is necessary to amend the relief provided for in section 100(6)(a) as the provisions already include a greenhouse gas emissions permit condition. Section 100(6)(a) is amended so that the relief applies to fuel used other than for electricity production. This amendment does not alter the scope of the existing relief under section 100(6)(a) and is made to ensure that section 100(6)(a) continues to operate independently of section 100(1)(f).

Further amendments to section 100 of the Finance Act 1999 are made to restrict existing carbon tax reliefs for biofuels and vehicle biogas. Currently the reliefs under sections 100(5) and 100(5A) apply to all biofuels and biogas which are produced from biomass. To comply with ETS2 derogation requirements, renewable energy criteria are being added to the relief provisions. The amendments will result in qualification for relief being conditional on the biofuel or vehicle biogas fulfilling the sustainability and greenhouse gas emissions saving criteria set out in Article 29 of the renewable energy directive, Directive 2018/2001. Suppliers will be required to demonstrate compliance with these criteria in accordance with the State’s renewable energy regulatory regimes.

The amendments also include the insertion of a new subsection (5B) which will provide for clawback of any relief granted on biofuel or vehicle biogas that is subsequently determined by the National Oil Reserves Agency, or the relevant competent authority, not to have fulfilled the required sustainability and greenhouse gas emissions saving criteria.

This section is subject to commencement.

Mairéad Farrell (Galway West, Sinn Fein)
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What impact will this have on electricity production or prices?

Paschal Donohoe (Dublin Central, Fine Gael)
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The restrictions of carbon tax reliefs are anticipated to have a very minimal effect. This is for two reasons. All the big energy producers are in the ETS1 sector and the relief is not being restricted for them. Also, renewable energy used to generate electricity is exempt from carbon tax and electricity tax. Additionally the provision will not be commenced until 2027 at the very earliest. I think it will have a very minimal effect.

Mairéad Farrell (Galway West, Sinn Fein)
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In terms of the effect, will it be an increase?

Paschal Donohoe (Dublin Central, Fine Gael)
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We think it could be close to zero.

Mairéad Farrell (Galway West, Sinn Fein)
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But if it is not zero?

Paschal Donohoe (Dublin Central, Fine Gael)
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Close to zero or a few euro.

Edward Timmins (Wicklow, Fine Gael)
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Does Deputy Farrell want to speak to her amendment No. 65?

Mairéad Farrell (Galway West, Sinn Fein)
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If the Cathaoirleach will give me a moment, all my notes are over there.

Edward Timmins (Wicklow, Fine Gael)
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It is to increase rates of mineral oil tax.

Mairéad Farrell (Galway West, Sinn Fein)
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No, I will not speak to it.

Mairéad Farrell (Galway West, Sinn Fein)
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I have a question on section 52. Is any of the electricity produced fed into the national grid for public consumption?

Paschal Donohoe (Dublin Central, Fine Gael)
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I am sorry. I just need a moment. I need to get my new folder. Would the Deputy mind repeating the question?

Mairéad Farrell (Galway West, Sinn Fein)
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I need my notes too. I am asking for clarification on the electricity production. Is that electricity fed into the national grid for public consumption? Perhaps the Minister would like to speak to the section.

Paschal Donohoe (Dublin Central, Fine Gael)
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As I understand the Deputy's question, it goes back to the answer I gave her a moment ago. All of this relates to the interplay between our carbon tax regime and emissions trading system 2, ETS2. The majority of our energy for domestic purposes is generated from the ETS1 sector. With regard to household energy consumption, these changes will have minimal effect. Again, we are talking about a number of euros.

Mairéad Farrell (Galway West, Sinn Fein)
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Will the Minister speak on this section? This is obviously something that comes in every year. We know the financial impact it has on people who smoke. A 50 cent increase is quite large. Will the Minister speak on that?

Paschal Donohoe (Dublin Central, Fine Gael)
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This section provides for excise duty increases on tobacco products with effect from 8 October 2025. The increase amounts to a 50 cent inclusive increase on a pack of 20 cigarettes in the most popular price category together with pro rata increases for other tobacco products. Assuming full pass-through to the retail price point, the price of a pack of 20 cigarettes in the most popular price category increases to €18.95. The excise duty component of this price is €11.33 and the total tax, inclusive of VAT, will stand at €14.88, which represents approximately 79% of the price. The pro rata increase on the price of a typical pouch of roll-your-own tobacco will increase by 69 cent to €27.66. This measure supports Government policy to impose high taxes on tobacco products to help to reduce smoking prevalence in Ireland.

Mairéad Farrell (Galway West, Sinn Fein)
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This is something that comes up every year. Since when has this increase been going? How much of a difference has it made? It has increased every year I have been here.

Paschal Donohoe (Dublin Central, Fine Gael)
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It has gone up in every year I can remember. It has certainly gone up in every budget in which I have been involved, in one way or another, since 2016. Of course, it is always difficult to disentangle the impact of price and the impacts of changes in behaviour and attitudes to health. However, the advice I continue to receive from the Department of Health is that changes with regard to price are beneficial from a health point of view and are playing a role in influencing the consumption of tobacco. As the Deputy will be aware, against all that, we have to be mindful of how the influence of price might lead to people bringing cigarettes into our State whether legally, which people are entitled to do up to a certain point, or illegally for sale. That has influenced our budgetary work in that the Revenue gain from changes such as this has been reduced downwards. I acknowledge that tobacco has increasingly been sourced in other ways over the years.

Mairéad Farrell (Galway West, Sinn Fein)
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Has analysis been done as to how much has come in on the black market as a result of the increases?

Paschal Donohoe (Dublin Central, Fine Gael)
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It will probably be provided to me in a moment. I know Revenue regularly does such analysis and it has pointed to growing evidence as regards what is unfortunately quite a significant illegal sourcing of tobacco, including cigarettes. The most recent survey I have access to today, which was conducted in 2024, found that the level of illegal cigarettes had increased from 19% to 26% between 2023 and 2024. The level of illegal RYO, which I assume means roll-your-own tobacco although it is an acronym I have not heard before, has increased from 20% to 26%, according to the same survey. On the other hand, the efforts of Revenue with regard to the seizure of cigarettes being brought in illegally continue to be highly effective. In 2024 alone, 112 million cigarettes with a value of €95.6 million were seized and 39,407 kg of tobacco was seized, with this being valued at €32.2 million. As of the end of August of this year, Revenue had seized 39.8 million cigarettes at a value of just under €36 million. The Deputy may be aware of the success Revenue had in March of this year, when there was the detection and dismantling of an illegal commercial cigarette factory in County Louth.

Mairéad Farrell (Galway West, Sinn Fein)
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I know we are coming up to 12 noon but has analysis been done as to how much money has been spent on Revenue's increased focus on that kind of illegal tobacco trade or cigarettes being brought in illegally?

Paschal Donohoe (Dublin Central, Fine Gael)
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In my Second Stage speech, I outlined that the central driver for Ireland's tobacco tax is our public health ambition to reduce smoking prevalence, and the Deputy and I have just had an exchange with regard to that. In this regard, as part of its work in tackling illicit trade, Revenue has identified the increased abuse of a particular excise duty relief that is available for private individuals travelling into the State from another EU country with tobacco products for their own use. The increased level of abuse is concerning as it directly undermines the effectiveness of the tax in disincentivising smoking. Tomorrow, Revenue will be making regulations to adjust the control arrangements to address this. It is a necessary part of the overall work to keep this tax working as effectively as possible. The more effective the tax is, the better it will serve a vital public health objective. Tomorrow, Revenue will publish information about this new arrangement, which will come into effect in early December.

Edward Timmins (Wicklow, Fine Gael)
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As Deputy Emer Currie is not in attendance, her amendment No. 63 falls.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I move amendment No. 64:

In page 87, between lines 14 and 15, to insert the following:

“Report on increasing the Betting Levy 62. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential revenue, behavioural and industry impacts of increasing the betting duty.”.

This amendment is about the betting levy and a report on increasing the levy on betting. The current betting levy is very low in comparison to other European countries. The owners of Paddy Power, to use an example of one betting company, have forecast a profit of €2.45 billion this year. The ESRI estimates that one in 30 adults in Ireland suffers from gambling addiction. Some are incredibly serious. Most public representatives will have come across this. Gambling addiction can cause absolute devastation to people's lives. They can lose everything. It causes family breakdown, relationship breakdown and people can become homeless. I have seen that, and it can happen quite fast. It can have an absolutely devastating impact on people's lives. This is an industry that profits from that addiction. It makes absolute sense to increase the levy.

We had a discussion earlier about the film industry and there are lots of different industries and different ways they are treated under the tax code. To contrast them for a second, the film industry harnesses people's creativity, provides employment, showcases Ireland and its talent and provides enjoyment and intellectual stimulation. I do not deny that plenty of people involved in gambling and betting do not have addiction issues and it does not cause chaos and wreak havoc in their lives but there is a very substantial number of people it can have devastating impacts on. There is a very strong case for increasing the levy and for this to at least be examined with a report, as I am proposing.

Paschal Donohoe (Dublin Central, Fine Gael)
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Amendment No. 64 from Deputy O’Callaghan seeks a report on the possible impacts of increasing the rate of betting duty. In any discussion around betting duty, it is important to acknowledge the potential harm to society from problem gambling and the need for a robust framework of regulation in this sector. In this regard, I welcome the establishment of the Gambling Regulatory Authority of Ireland which is a progressive step towards replacing our outdated gambling laws with a streamlined and simplified licensing framework.

Betting duty in Ireland is applied as a turnover based tax, whereby the tax charged is based on the amount of the bet placed by customers in the State. Betting intermediaries are also liable for betting intermediary duty on the commission charged by them to persons in the State. In budget 2019, the betting duty rate for retail and online operators increased from 1% to 2% and the duty for betting exchanges also increased from 15% to 25% of commissions earned on a bet. The rate increases introduced in 2019 were significant and resulted in a doubling of betting duty receipts since that time. It is still overwhelmingly paid by a very small number of large firms. To offset the impact of the 2019 increase on smaller operators, budget 2020 introduced a relief in the form of a tax credit of €50,000 per year, to be applied on a single undertaking basis. This relief is subject to EU state aid rules.

In consideration of any potential change to betting duty, it is important to take account of wider changes affecting the industry such as the increased level of regulation and compliance that the new Gambling Regulation Act involves. Any potential changes to betting duties are kept under review as part of the tax strategy group and budgetary cycle. This is in line with how the Department develops tax policy, and I will not be asking for additional reports. Taking these considerations into account, I do not propose to accept this amendment.

To respond to some of the points the Deputy made, I believe the majority of betting that takes place in the State is done in a responsible and low-impact way by people who are involved in it. However, I, like the Deputy, have come across a number of examples where it has grown into an addiction, and it has inflicted a huge harm on those who have ended up with addiction difficulties and caused huge harm to their families and loved ones. That is why the setting up of the Gambling Regulator is an important action. Deputy O'Callaghan may be aware that one of the steps the Gambling Regulator will be taking will be to introduce a social impact fund that will be based on the profits after payout in a percentage that will be determined by the Minister for justice. That fund will support organisations involved in dealing with the very difficulties the Deputy referred to. This is a very welcome proposal.

I have heard the argument made that we should increase betting duties so we can fund an organisation in that kind of work. There are all kinds of challenges in making sure that if tax goes up in one area, it is then used for a very specific purpose. This is a far more effective way of dealing with the matter because it will be a fund overseen by the regulator. It will be able to ensure it is used to fund organisations involved in addiction prevention and addiction support. I look forward to seeing that fund set up and the Gambling Regulator play its role ensuring those who profit from this sector do so in a responsible way because the majority of betting takes place in a responsible way. The harm that a small number of people suffer is something we have to do a better job of responding to.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I accept that the only approach to an issue is not always a taxation matter. There are other approaches to be taken. Of course, we are discussing the Finance Bill, which is dealing with taxation matters, so that is why I am looking at this from a tax angle. I do think it is a sound principle to say that activities that cause great harm to some people certainly should be more liable for taxation, and higher levels of taxation, than activities that are in society's interest and that we are trying to encourage and so forth. I accept some people bet. It is recreational and it does not harm them. However, it causes great harm to others.

There is considerable evidence from people who have worked in the industry, and from people with gambling addiction issues, of very bad practice in the industry and that it has not behaved responsibly.

There is a role for regulation there. When this level of harm is caused, with good lives, good jobs and good family relationships coming into contact with this industry and it all being destroyed, there is a case for much stronger levels of taxation. What is the Minister's view on the betting levy being much lower than in other European countries? Given that we are out of sync, does the Minister not think there is a strong case for change?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is something we looked at in the past. I remember this discussion because I took up the betting duty the last time, in 2019. I remember lots of discussion around it, although that being said, there was also much support in the Oireachtas for doing it. We are not sure that we are that far out of sync with everybody else. For example, the UK's charge or tax is applied with regard to profitability whereas ours is applied with regard to the value of the bet. Even though our rate may be lower, the base against which it is applied is far bigger. I remember when we made the change, there was a significant reaction to it on this point. We held to the change because I believed it was important to do, but the Deputy will see that the following year, a change was brought in for a tax credit for very small bookmakers, which was obviously an attempt to make sure that very small independent bookmakers were not put out of business or had their viability heavily compromised by a move like that. In summary, I am not sure we are that far out of sync because the base against which we apply it is wider than happens in other jurisdictions.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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This is the very point of the report. The Minister is right that different countries apply the taxation levy in different countries, so making comparisons on it is quite complex and difficult, but all the Minister is able to tell me is that, because of the complexities around it, we are not too sure that we are that much lower than the other countries. That is exactly why we need to have a proper study into how it is applied and how we compare it with other countries. If we are out of sync and that is the view that is generally being taken, and the Minister is not able to provide hard data to the contrary, just a view that we may not be out of sync, that is exactly what we would uncover from a process like this.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 65:

In page 87, between lines 26 and 27, to insert the following:

"Report on Increased Mineral Oil Tax 64. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the legislated increase to rates of Mineral Oil Tax, including an analysis of the distributional impact.".

Pearse Doherty (Donegal, Sinn Fein)
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There is huge opposition in the farming sector to this proposal of a flat-rate addition to the poultry sector in terms of broilers. I am conscious that a statutory instrument was brought forward that took effect on 1 September this year. Can the Minister explain the intention of this section and how it interacts with the statutory instrument that is in place?

Paschal Donohoe (Dublin Central, Fine Gael)
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This section amends section 6(1)(a) of the Value-Added Tax Consolidation Act, which sets out the obligation for farmers, as defined for VAT purposes, who supply certain agricultural goods and services, to register and account for VAT. Following the proposed amendment, these farmers will be assessed for VAT in line with the recent amendments introduced for other taxable persons as part of the transposition of Council Directive (EU) 2020/285, otherwise referred to as the SME directive. From 1 January, turnover on certain agricultural goods and services, as provided for in section 6(1)(a), will be assessed based on actual turnover in the current and previous calendar years as distinct from the likely turnover over the next 12 months. In addition, from 1 January, turnover to be assessed will also include turnover from the supply of agricultural goods and services excluded from the flat-rate addition scheme on foot of an order issued under section 86A. An amendment is also proposed to section 6(2)(c) to include goods and services covered by an order issued under section 86A in the anti-fragmentation rules applied to farmers.

Amendments are also proposed to be made to sections 4(1)(b) and 17(2) of the VAT legislation, which will align how a farmer's horse training activities turnover is assessed for VAT registration in domestic VAT law with the aforementioned SME directive.

An amendment is proposed in Schedule 3, paragraph 12(1A), to similarly align how the VAT services threshold is assessed on turnover derived by public bodies from the provision of facilities for sporting and physical education activities, with the provisions of the SME directive.

These proposed amendments will ensure that Ireland complies with its mandatory legal obligation to transpose SME provisions from the EU VAT directive. It also brings goods and services excluded from the flat-rate addition on foot of an order issued under section 86A into the normal VAT registration provisions.

Pearse Doherty (Donegal, Sinn Fein)
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In the normal course of engagement on VAT, there are thresholds at which you have to register for VAT if you are above them. It is €85,000 or thereabouts. A business below that could opt to register anyway, but it is not mandatory. For these farmers, that option has been taken away. Is it not the case that they have to register for VAT now?

Paschal Donohoe (Dublin Central, Fine Gael)
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They only have to register if they are above the VAT threshold.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. The analysis some farmers have carried out indicates that this section will put an additional cost of up to €30,000 on them as a result of what is being done here and raises the complexity of what farms will be asked to do, particularly mixed farms, in dividing their operations, whether they want to charge the flat-rate addition on other parts of their farm income, and the fact that 95% of poultry farmers are mixed farms and mixed enterprises.

Paschal Donohoe (Dublin Central, Fine Gael)
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I accept that there will be consequences of the change that has been made here, but this is on foot of a very long-running issue with regard to the implementation of the flat-rate VAT system within the farming sector overall, but very specifically within the poultry sector. I am sure the Deputy is aware of the background of it, but just to give a very brief synopsis about it, an allegation was made regarding the operation of the business model in the poultry sector.

This was the subject of work by Revenue, which investigated the poultry sector and found that there could be arrangements in place which could be used to engineer excess compensation for VAT borne on input costs in that sector. This matter was examined again across a two-year period. It was found at the end of this examination that there was no evidence that these practices had changed. Regrettably, I reached the conclusion that it was important to make this change to the flat-rate system and how it operated within the poultry sector.

I met the IFA on two separate occasions to discuss this and explained why it was being done and that it happened after many years of engagement on the topic. I acknowledged at the time of the change, and when I engaged with the IFA, that this could pose difficulties. In the absence of this action, I am certain we would be standing over the operation of part of our tax code while having clear evidence that it was not being implemented in the way it was expected to be under law and that there would be consequences for this beyond the poultry sector.

Pearse Doherty (Donegal, Sinn Fein)
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I understand that. I take it that the Minister has acknowledged that there will be serious challenges for farmers. Some have suggested the additional costs could be up to €30,000. I assume the Minister is not contesting that there are real challenges in relation to this. He can contest it if he feels that is not the case.

I hear what the Minister is saying. We were involved in those discussions over a long period, but the statutory instrument which took effect from 1 September has removed these farmers from the flat-rate addition. That is what my original question was about. Taking what the Minister said about how the flat-rate addition was operating and how some may have benefited unintentionally or not in the way envisaged under the legislation, has the statutory instrument not removed them from the flat-rate addition as of 1 September? What is this section doing that is additional to the statutory instrument? If they are gone from the flat-rate addition, they are gone. Is this not about registration for VAT purposes?

Edward Timmins (Wicklow, Fine Gael)
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Most of the points have been covered by Deputy Doherty, but I would like to emphasise that there are a lot of farming businesses where poultry plays only a minor part. Now, they have to register for VAT because of what has been introduced. An issue that has been raised with me is that they do not have the time to do so. The Minister has had a lot of engagement with farming organisations over the years, but the issue is how quickly they have to decouple the poultry part of their businesses, which is losing the flat rate, from the other parts. There seems to be a timing issue. They would like this to be delayed a little longer.

Paschal Donohoe (Dublin Central, Fine Gael)
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In relation to the figure of €30,000, I am not familiar with where that comes from. I am happy to look at any documentation. I accept there will be an impact as a result of this change.

On the point regarding the nature of the amendment, in effect, it will bring that part of farming within the normal operation of our VAT code. Under section 86A of the 2010 Act, the Minister for Finance excluded from the flat-rate addition the supply of any agricultural service of stock minding, rearing or fattening during the production of broiler chickens. From 1 September last, flat-rate farmers who provide broiler chicken services can no longer add the flat-rate addition percentage to the price of these services. Prior to this, they could add the flat-rate addition percentage if the supplies were made to VAT-registered businesses. This puts broiler chicken services on the same footing as other agricultural supplies that do not fall within the scope of the flat-rate scheme. The deadline of 1 September was the latest I could opt for without creating further issues regarding the confidence I have in the operation of our flat-rate VAT system. This issue has been going on for years. The poultry sector has been aware of the difficulty and complexity of this. When I engaged with a number of public representatives and, in particular, the farming sector overall earlier in the year, I indicated that this was the point at which this change would have to take effect.

Pearse Doherty (Donegal, Sinn Fein)
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It has already happened. That was my question. This has already taken effect, so what is the purpose of the section? What is the additionality? I hear what the Minister is saying about circumstances were we have information about worked-out costs, but a farm is a farm. The farmer operates a mixed farm. Poultry is 95% mixed. There will now have to be two different systems within a farm. There is huge crossover in agriculture. The farmer will have to set up two different systems. It would not make sense to bring everything under the VAT system. It is not the case that there is a lead-in period. The Minister said he had to deal with it, but it is not even a case of saying "This is taking place next year." There has been engagement and all the rest, and this has been around for a while. I acknowledge all of that, but the viability of farmers and the industry in general is important. If there is a possibility, as has been presented to us, that there could be a cost of €30,000 involved and also the challenge of trying to separate a farm, which would not have been separated up to now, that creates a viability issue. In the Minister's eyes, this would not be a sudden shock because he has been dealing with this for a long time. For farmers, however, this is the first time that it is crystal clear that things are going to change. The question that arises relates to what the lead-in period is going to be.

Paschal Donohoe (Dublin Central, Fine Gael)
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The lead-in period for registration, when it is required, will be after 1 January 2026 when they exceed the threshold with regard to VAT. There is still some time. I assure the committee that this is the latest date upon which this change could be made.

Pearse Doherty (Donegal, Sinn Fein)
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Why?

Paschal Donohoe (Dublin Central, Fine Gael)
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It is because of the concern I have regarding the operation of the flat-rate VAT system in the poultry sector.

Pearse Doherty (Donegal, Sinn Fein)
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They have already been taken out of the flat-rate addition by means of the statutory instrument that took effect on 1 September. This is an issue in respect of registration.

Paschal Donohoe (Dublin Central, Fine Gael)
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They have to register now.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister spoke about the operation of the flat-rate addition. They cannot use the flat-rate addition at this point. It does not exist for the poultry sector.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, and they now have to register for VAT as normal businesses would. That message has been conveyed very clearly. In the engagement I have had, not just with representatives of the poultry sector but also with the many people who contacted me on both this matter and the statement I made on it earlier in the year, I made this clear. We have significant evidence of issues relating to the operation of this tax code within that sector. It is very serious that we received an allegation in respect of this matter. The work our authorities have done indicates the scale of the problem. Action is needed now. I have flagged this action for some time. It is pretty well known in the sector that a change like this was coming.

Pearse Doherty (Donegal, Sinn Fein)
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Has the Department done any analysis of the costs that will be associated with business as a result of this move?

Paschal Donohoe (Dublin Central, Fine Gael)
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We have seen various case studies. I accept that it will have an impact. I am aware of that.

Pearse Doherty (Donegal, Sinn Fein)
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What type of range was there in the case studies?

Paschal Donohoe (Dublin Central, Fine Gael)
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I have had case studies presented to me by representatives, which I accept. I do not doubt the veracity of what Deputy Doherty represented a moment ago. I know this will have an effect. Over time, it will probably be an effect of cash flow, but upfront, it is an effect that I accept. I have outlined the argument and the background.

While I accept there are issues that would be created in relation to this, I am very confident that the issues that could be created in the absence of this action would be very significantly bigger.

Pearse Doherty (Donegal, Sinn Fein)
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I welcome section 66 but want to make one point on a separate matter as I was doing Leaders' Questions earlier. I want to flag that I will be looking to take an amendment through in respect of the previous section we dealt with, in respect of the VAT application. It falls under this section but it is connected with a previous section, which was in respect of gambling, and to clarify how Revenue is treating the sale of so-called lottery tickets which are not lottery but gaming tickets. Lottery is exempt but gaming is not exempt from VAT. I raised this with the Revenue Commissioners a number of years ago. I have declared an interest before. We operate a lottery licence for a not-for-profit music festival that we run. There have been concerns that others can operate without a licence in the State because they are a game as opposed to a lottery. They ask a question such as, "Where do you find sand - on the moon, in your television or on the beach?". That moves it from a lottery to a game of skill. Therefore it should result in VAT applying to the sale of the ticket. Issues have been raised by those operating these games looking for advice as to whether they have to pay VAT. I would like to seek clarification on that with Revenue. I just wanted to flag that because I missed the previous section when we dealt with the gambling elements of the legislation.

Paschal Donohoe (Dublin Central, Fine Gael)
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I move amendment No. 66:

In page 89, between lines 17 and 18, to insert the following:

“Amendment of section 46 of, and Schedule 3 to, Principal Act (reduced rate for housing as part of a social policy)

67. (1) The Principal Act is amended, with effect as on and from 8 October 2025—

(a) in section 46(1)—

(i) in paragraph (a), by the insertion of “(cab),” after “(caa),”,

(ii) in paragraph (c), by the insertion of “, (cab)” after “(caa)”, and

(iii) by the insertion of the following paragraph after paragraph (caa):

“(cab) during the period from 8 October 2025 to 25 November 2025, 9 per cent in relation to goods of a kind specified in paragraph 9A of Schedule 3 on which tax would, but for this paragraph, be chargeable in accordance with paragraph (c);”,

and

(b) in Schedule 3—

(i) in Part 2, by the insertion of the following paragraph after paragraph 9:

“Housing as part of a social policy.

9A. The supply of housing, as part of a social policy, being the supply of an apartment, used or to be used for residential purposes, in an apartment block within the meaning of section 31E of the Stamp Duties Consolidation Act 1999.”,

(ii) in Part 3, by the substitution of the following paragraph for paragraph 14:

“14. Subject to paragraph 9A, the supply of immovable goods used or to be used for residential purposes.”.

(2) The Principal Act is amended, with effect as on and from 26 November 2025— (a) in section 46(1)—

(i) in paragraph (a) (amended by subsection (1)(a)(i)), by the insertion of “(cac),” after “(cab),”,

(ii) in paragraph (c) (amended by subsection (1)(a)(ii)), by the insertion of “, (cac)” after “(cab)”, and

(iii) by the insertion of the following paragraph after paragraph (cab) (inserted by subsection (1)(a)(iii)):

“(cac) during the period from 26 November 2025 to 31 December 2030, 9 per cent in relation to—

(i) goods of a kind specified in subparagraph (2) of paragraph 9B of Schedule 3, and

(ii) services of a kind specified in subparagraph (3) of paragraph 9B of Schedule 3,

on which tax would, but for this paragraph, be chargeable in accordance with paragraph (c);”,

and

(b) in Schedule 3—

(i) in Part 2—

(I) in paragraph 9(1), by the insertion of “(not being services referred to in paragraph 9B(3))” after “Services”, and

(II) by the insertion of the following paragraph after paragraph 9A (inserted by subsection (1)((b)(i)):

“Supply and construction of housing as part of a social policy.

“9B.(1) In this paragraph, ‘apartment block’ means a multi-storey building that comprises, or will comprise, not less than 3 apartments with grouped or common access.

(2) The supply, as part of a social policy, of—

(a) one or more than one apartment, used or to be used for residential purposes, in an apartment block, or

(b) an apartment block, used or to be used for residential purposes, but excluding any part of the apartment block that is not used or to be used for residential purposes.

(3) Services consisting of the construction until completed (within the meaning of section 94), as part of a social policy, of—

(a) one or more than one apartment, used or to be used for residential purposes, in an apartment block, or

(b) an apartment block, used or to be used for residential purposes, but excluding any part of the apartment block that is not used or to be used for residential purposes.”,

(ii) in Part 3, by the substitution of the following paragraph for paragraph 14 (amended by subsection (1)(b)(ii)):

“14. Subject to paragraphs 9A and 9B(2), the supply of immovable goods, used or to be used for residential purposes.”,

and

(iii) in Part 4, in paragraph 15(2), by the insertion of “or 9B(3)” after “paragraph 9(1)”.”.

This section, which I am now amending, provides for a temporary 9% rate of VAT on the supply and construction of apartments and apartment blocks as part of our social policy. The temporary 9% rate of VAT on the supply of apartments came into effect on budget night. The extension to the construction of apartments, and the supply and construction of apartment blocks, including student accommodation, will come into effect on 26 November 2025 which is Report Stage. The 9% rate will apply until 31 December 2030.

The VAT treatment of goods and services is subject to EU VAT law, which Irish VAT law is required to comply with in general. The relevant directive provides that all goods and services are liable to VAT at the standard rate, which in Ireland is currently 23%, unless they come within provisions that permit the application of a lower rate. Under the EU VAT directive, member states may apply a reduced rate to the supply and construction of housing as part of a social policy. Ireland has two reduced rates, 13.5% and 9%. Currently in Ireland, VAT is chargeable at the rate of 13.5% on the sale of all residential property. This is utilising a "parked rate" in line with the EU directive. Parked rates cannot be reduced below 12%.

In order to stimulate the development of apartments, which are high-density homes, it has been decided, on social policy grounds, to apply the second reduced rate of VAT to the supply and construction of apartments, and apartment blocks. The legislation around VAT on property is indeed complex. There are additional complexities with drafting this provision to ensure that it is within the parameters of the EU directive, and that it delivers the policy intention but does not disturb the application of the parked rate.

Delaying the effective date of the amendment to Report Stage provides additional time to ensure maximum applicability to current business models utilised for the supply and construction of apartments and apartment blocks. My officials are continuing to engage with stakeholders on the draft legislation to achieve this. I want to advise the committee that in the event that it is determined that a further change in text is required, I will bring forward a Report Stage amendment to ensure that the text of the legislation best reflects the policy intention in line with the VAT directive. I also want to advise the committee that as a consequence of the various amendments made in relation to VAT, it may be necessary for me to bring a Report Stage amendment to the definition of a qualifying residence in respect of the help to buy scheme under section 477C(1) of the Taxes Consolidation Act of 1997.

Colm Burke (Cork North-Central, Fine Gael)
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I welcome the introduction of the 9% rate, which is reduced now from 13.5%. When originally proposed, it was 9% on sales and then there was a problem with housing agencies that own their own site and were getting apartments built. It turned out that it would be 13.5%. Since this amendment is being made, where they are getting them built the rate is down to 9%. The problem still arises that a developer who has a site and planning and is building, and who is dealing with a housing agency, the 9% rate will only deal with the building and not with the site cost. The site cost will still be at 13.5%. I am coming from a legal background on this. If I was acting for a housing agency that was buying a site from a developer and having the developer build the property, I would be advising it to make sure the site was transferred to its name to protect the housing agency. If something went radically wrong with the building, they would be protected because the site would be in the name of the housing agency, or likewise if it was a local authority that it would be in its name. Therefore, the site would be transferred at an early stage. My understanding is that the VAT rate will still apply on the site at 13.5% and on the building at 9%. I am wondering if it can be worked out that the 9% would apply across the board for the building and site cost, where there is a clear case that this is for social housing, through either a housing agency or a local authority.

Pearse Doherty (Donegal, Sinn Fein)
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I will come in on the more substantive issues when we deal with the section as opposed to the amendment. For clarification in respect of the amendment, in section 9B(1) it specifies that it is not less than three apartments with grouped or common access. I ask the Minister to speak to that, particularly in the context of the other section of the Bill we dealt with in which the definition of an apartment block is three apartments. Previously, in another section of the Bill, the Minister proposed a larger offset of 125% of costs to boost the profits of the developer, the apartment block was defined as ten or more apartments.

Gerald Nash (Louth, Labour)
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The point I wanted to make has mostly been covered by Deputy Doherty. I will make a couple of related points on this amendment and will then speak more generally on the section. The Minister indicated that he may want to nuance a potential amendment on Report Stage and that he would be engaging with stakeholders ahead of that. Which stakeholders will he be engaging with to finesse the amendment?

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On the definition in respect of Schedule 3, Part 2, paragraph 9B of the principal Act, the amendment provides that "'apartment block' means a multi-storey building that comprises, or will comprise, not less than 3 apartments with grouped or common access."

In order that we are all clear as to what this means, this will not apply to ground-floor apartments with their own access, as opposed to grouped or common access, such as front-door access for a ground-floor apartment maybe with a duplex above it. Does that mean they are not in this? The Minister might explain in more detail the definition of what is and is not covered in terms of apartments. If it is the case that some of these are covered, where there are mixed types of development, what is in, what is out and how is that calculated?

Gerald Nash (Louth, Labour)
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I wish to elaborate a little on what Deputy O'Callaghan said. I am certainly confused as to how this applies to mixed-use developments where there may be various types of residences on the site that are directly connected with the apartments. Deputy O’Callaghan described duplexes with other kinds of arrangements attached to that building. Very commonly, in all of our constituencies, especially in our urban areas, we would see mixed-use developments with commercial-retail developments on the ground floor and apartments above. There are potentially risks there in terms of the operation of the scheme vis-à-vis compliance. Somebody could decide to make a claim for what might be described as an entirely apartment-driven development with retail at the bottom, and then decide to exploit this provision to maximise their own return. I hope the Minister understands the picture I am trying to paint. Will he respond to that and clarify what we are dealing with?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputies for their questions. I will begin in the order in which they were put to me, but I am going to need clarification on one.

In relation to Deputy Burke's question, that is the case, with regard to his comment on the land itself. In the scope of what we are implementing, the 13.5% will still apply. We are examining that matter. I need to consider whether we can we resolve that matter and still be consistent with the EU VAT directive, so the Deputy’s understanding is correct, and we are examining this.

In relation to Deputy Doherty's question, I wonder if he could put it to me again after my response. I did not quite follow and I want to make sure I fully understood. I will either answer it now or furnish him with an answer before we come back.

On the question that was put to me by Deputy O'Callaghan on the definition of what grouped access would mean, and this relates to the point that was put to me by Deputy Nash, it means that at least three apartments in the building have grouped or common access to the building as a whole, that is, the same main entrance door or a shared external stairwell. The fact an apartment may have its own front door will not preclude it from coming within the meaning of an apartment for the purpose of the measure. However, this is once at least three apartments in the block have grouped or common access. The Deputy asked whether a duplex is included within this, and the answer is that it is not, because it would not meet the requirement that is there.

On the questions that were put to me by Deputy Nash, this would only apply to the apartment element of any building or development. In relation to his question about the risk of abuse with regard to it, separate VAT rates for certain completed apartments and other housing may indeed present additional challenges for businesses that are supplying mixed-use developments in relation to record-keeping, invoicing and compliance costs. However, developers should account for VAT at the appropriate rate applicable to each party supplied under mixed-use developments. The law is pretty clear in this area, which is why we have precision on the definition of an apartment, which will indeed lead to the exclusion of some elements, like a duplex. That is because we are very clear on who it will apply to.

With regard to the engagement that is happening, I anticipate that most of the engagement in relation to this between Commission and Report Stages will be with the Department of housing, which we have been working on this measure with. However, I would not rule out our receiving further submissions in this area, and that does include the private sector. In the period of time since the publication of the original Finance Bill and where we are today, while we have received contact from the private sector in relation to it, we have also received a very significant amount of contact from AHBs. In fact, the Deputy raised this issue with me on Second Stage. In relation to the VAT contract at the end of the transaction, this amendment is now aiming to deal with that.

The final matter is Deputy Doherty's question. Would he mind sharing that question with me again? If I cannot answer it now, I will come back to it.

Pearse Doherty (Donegal, Sinn Fein)
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The section and the amendment do not have a definition of an apartment block aside from what is in the amendment. The amendment states that an apartment block for the purposes of this paragraph - I am not sure how widely it applies - is a multi-storey building that comprises not fewer than three apartments with grouped or common access. Can a multi-storey house that has been converted into apartments or built as apartments have as few as three if it has common access? Iis that the definition of an apartment block? In a previous section of the Bill, where the Minister introduced a tax break for the development of apartments, an apartment block was defined as having a minimum of ten apartments. In this section, it is defined as having a minimum of three. It does not seem as though there is any consistency in this.

Paschal Donohoe (Dublin Central, Fine Gael)
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On the Deputy’s first question, the answer is "Yes". I will come back to him on his second question before Report Stage.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I thank the Minister for the answer. I am not clear on a couple of aspects of the definition, which I hope he can clarify. It appears from what the Minister is saying that apartments with own-door access do not qualify under this definition, but then it is not entirely clear, in terms of how it is written, that they would not. The wording simply refers to three apartments with grouped or common access. It does not refer to common internal access only. There could be grouped or common access and 20 ground-floor apartments with one common access point through one set of gates or one driveway and so on, but none of this is clear. Will the Minister be explicitly clear so there is no doubt about this? It could be interpreted in many different ways.

Own-door access can be a good element of design. If the Minister is ruling it out through this, does he have any concerns about disincentivising a good element of design and about the distortion that could create? Has he considered that?

Paschal Donohoe (Dublin Central, Fine Gael)
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On the Deputy’s second point, my concern is that if we were to allow own-door access, it would be harder to target this measure, and that was the thinking behind that. He raised a fair point earlier in our debate. He made some important points regarding the design of subsidies. While he is against this, he made points I have sympathy and understanding with.

Our view was that bringing in this kind of definition was necessary so that it would be targeted in a way that would lead to more apartments being built. Yes, it could have an effect but I believe that effect is justified in order for it to be as clearly targeted as possible.

In relation to Deputy O'Callaghan's first question, I do think the definition we have of grouped or common access is reasonably clear. Deputy O'Callaghan understood it the first time, when I said it means having at least three apartments in a building that have grouped or common access to the building as a whole. I was able to answer his clear enough question regarding whether a duplex is in or out of it but then he went on to outline a number of different reasonable other things that could happen, albeit they are more likely to happen with a smaller number of residential units than a duplex. It is not possible for us to deal with all of these kinds of eventualities in the Finance Bill, as Deputy O'Callaghan will appreciate. What is happening at the moment is the Revenue authorities are developing the guidance regarding the execution of the Bill. When that guidance is developed it will make these kinds of issues very clear and precise.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Maybe this will be covered in the guidance, but just for clarity, if a five-storey apartment block with 100 units had 20 units on the ground floor, each with their own door, is it the case those 20 units with their own doors would not be covered by this but the other 80 units with common internal access would be? Is that the way it would work?

Paschal Donohoe (Dublin Central, Fine Gael)
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They would need to be-----

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Because they are in a block-----

Paschal Donohoe (Dublin Central, Fine Gael)
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If they are in a block and if they have own-door access, so in other words if there is one door just going into that apartment and there is no other access beyond going into that apartment, then they are included within it.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Because they are in a block-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Because they are in a block.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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-----with a lot of apartments that are included.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes.

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

Pearse Doherty (Donegal, Sinn Fein)
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But we could have 100 apartments at ground floor and three upstairs and the whole block would be included technically. That is the way it is.

Paschal Donohoe (Dublin Central, Fine Gael)
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If there is common access to upstairs.

Pearse Doherty (Donegal, Sinn Fein)
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To the three upstairs, obviously there would be common access.

Edward Timmins (Wicklow, Fine Gael)
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Just to point out that acceptance of this amendment involves the deletion of section 67 of the Bill. Is this amendment agreed?

Pearse Doherty (Donegal, Sinn Fein)
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On section 67, can we deal with the section?

Edward Timmins (Wicklow, Fine Gael)
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We will deal with the amendment first and the section afterwards.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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If the section is removed, will we still be able to speak to it? We want to speak to section 67.

Pearse Doherty (Donegal, Sinn Fein)
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Then we agree that the new section stand part of the Bill. Is that it?

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, if the amendment goes through, then you would be opposing the amended section.

Pearse Doherty (Donegal, Sinn Fein)
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Will there be a separate vote on it?

Edward Timmins (Wicklow, Fine Gael)
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Yes. There will be two separate votes.

Pearse Doherty (Donegal, Sinn Fein)
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So there will be two votes, one on this amendment and then a vote on whether the amendment stands as the new section.

Paschal Donohoe (Dublin Central, Fine Gael)
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Exactly.

Pearse Doherty (Donegal, Sinn Fein)
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Okay. Very good.

Pearse Doherty (Donegal, Sinn Fein)
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It will come as no surprise to the Minister that we strongly oppose this section. On Second Stage I raised a number of reasons we oppose it, not least the fact there is so much deadweight in this proposal. The reality is that the cost to the Exchequer associated with it, which will be in the hundreds of millions next year, is for apartments that have already been built. The Minister speaks about this as a viability issue. Every penny that will be paid out as a tax reduction in relation to this measure next year, and for a good part of the following year at least, will be for apartments currently under construction in the State. As the Minister knows, the fact is that 19,277 apartments are currently under construction and all of these will benefit from this reduction, which is in the region of €20,000. Even if the Minister were to apply it to new apartments that have not commenced, I would still be opposed to it because I still have bigger issues, but at least this would make it more palatable. We spoke about a previous section, with which I also do not agree, that has a different definition of an apartment block. Its definition is ten units as opposed to a minimum of three units in this section. That section was clear that it was for apartments commencing after budget day. The Minister makes the point it is not possible to differentiate and apply two different rates to the sale of a product and that there is a principle in terms of fiscal neutrality that has to be adhered to. I will question some of that in relation to this here, but before I do, this is a huge tax break for developers and I want to ask how many years it will last.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is due to last until the end of 2030.

Pearse Doherty (Donegal, Sinn Fein)
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We are talking about at least €1 billion. How much will it cost cumulatively over the period?

Paschal Donohoe (Dublin Central, Fine Gael)
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Our estimate is that by the time we get to 2030 the cost at that point will be €390 million.

Pearse Doherty (Donegal, Sinn Fein)
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So the Minister is talking about the guts of €1.5 billion for the lifetime of the measure. As I have said, the issue here is that the vast majority of the money this year, all of it next year and a good bit the following year will be for apartments that are already under construction.

If we take the issue of whether it can be applied just to new builds, the Minister says it cannot and that is fair enough - I take him at his word - but he also told us that we could not do what we are doing now. That is a fact. I am not suggesting the Minister was misleading us at the time but that is the case. There is also a suggestion, as I have said, and the Minister claimed that if legislation were introduced that sought to apply different rates of VAT to the sale of identical goods at the same point in time, based on the circumstances of timing of when work on those goods began, it could breach the principle of fiscal neutrality. I would like to tease this out. The Minister is saying it would breach fiscal neutrality with regard to the sale of the same types of goods at the same time if there was differentiation based on when the production of those goods started. However, what does not breach fiscal neutrality is the sale of the same types of goods, but the size of the goods does not breach fiscal neutrality. The definition means an apartment block which does not include three units with common access will not benefit from this. There are other conditions as well that would mean not benefiting from the measure. There are differentiations in relation to the same product that would be sold because of how we are defining an apartment block in relation to this code.

Fiscal neutrality is not defined anywhere in the VAT directive. It is not a rule of primary law. We have had the Court of Justice of the European Union set out that it is a principle of interpretation to be applied concurrently with other principles of interpretation. The court has also described fiscal neutrality as a principle under which economic operators carrying out the same transactions may not be treated differently in relation to the levying of VAT. It is also widely accepted that there are two aspects to fiscal neutrality. The first, which does not really apply here, entails that VAT should be exactly proportional to the price of the goods and services, and deals with the reduction of VAT output by the amount of VAT input, whereby businesses can deduct the VAT paid in the producing of goods or delivering of services. This is not relevant in this context. The second aspect of the neutrality principle in VAT reflects the general principle of equal treatment. It is not clear that using a commencement date to qualify for a lower rate would constitute a breach of equal treatment, and it is even less likely it would override the social policy aspect. I say this genuinely and in the context that I have acknowledged the Minister has provided the committee, us as Deputies and the Dáil record with information that is no longer correct today.

In my view, that was not done out of malice but with the best advice and the best interpretation of where things were at the time. There has been a change to the EU VAT directive, but I am talking about information that was provided post that change to the EU VAT directive. In a way, that does not surprise me because some of this is down to interpretation and how we look at it.

Going back to 2017, the Minister told us the VAT directive does not allow us to differentiate between different categories of house purchase, which is fine. Again, it was restated in 2021 that it is not permissible to differentiate between the supply of different types of residential property, such as apartments and housing, for the purposes of applying VAT rates. That was fine. Then, as we know, in April 2022, Annex III of the VAT directive allowed for different flexibilities, which we are now using. The tax strategy papers prepared by the Department of Finance clearly stated in 2023 that it was “not permissible to differentiate between the supply of different types of residential property, such as apartments and housing, for the purpose of applying VAT rates.” We are doing that now.

As I said, for the previous year, under Annex III of the VAT directive, it became possible for Ireland to apply a reduced rate of VAT of 9% to the supply and construction of housing as part of a social policy, and to the repair and renovation of residential housing. Non-residential construction was not within the scope of the reduced rate. In providing for this reduced rate for social policy purposes, there was a requirement for member states to define social policy. Therefore, that has existed since 2022. Fast-forward to the next year, and we had the tax strategy papers as I have described. Of course, the tax strategy papers for budget 2023 are from 2022, so we have to bear that in mind.

The then Minister, Michael McGrath, in the following year, 2023, made the point, “It is possible for Ireland to apply the 9% reduced VAT rate to the supply and construction of housing as part of a social policy”. The following year, he put on record, “There is ... no expectation or requirement that a VAT reduction would result in lower prices for consumers.” That is fine. We then have the tax strategy papers post the changes to the EU VAT directive stating very clearly, “it is not permissible to differentiate between the supply of different types of residential property, such as apartments and housing, for the purpose of applying VAT rates.” That information is not correct today, as we know. The tax strategy papers went on to look at that. They said that we cannot differentiate between different types of properties, such as apartments, but, because we could just decide to take everything in construction down to 9%, they went on to say that consideration would need to be given to whether developers of high-yield apartment blocks and short-term rental properties should benefit from a further reduced VAT rate. I agree with them on that.

We then have the tax strategy papers for budget 2025, which are from last year. Again, they state, “it is not permissible to differentiate between the supply of different types of residential property, such as apartments and housing, for the purpose of applying VAT rates.” The papers went on to suggest that if we were to reduce everything to 9%, great care would be needed in designing such a policy in order to prevent the inappropriate exploitation of such a measure by the construction sector. I see no measures here to deliver that great care.

The reason I put all of that on the record is not, as I said at the start, that wrong information was given. I believe the right information was given at the time. This was the interpretation the Department and the Minister had, and I do not see any malice in it. However, the reason I say that is that it is not clear-cut. This is an issue of interpretation. The people who support the Minister in Fianna Fáil and Fine Gael are going to do this because they support giving more money to developers anyway. They may not admit it but they have no problem in relation to that. Surely to God, however, it would make sense to change this. This is hundreds of millions of taxpayers’ money that the Government has decided not to give in a cost-of-living package but to give to developers for apartments that they are already building. It makes no sense.

The Minister said it is not possible to carve out a commencement date. I would say there is a very good chance it is possible because the Minister is already differentiating between the sale of products. For example, to allow this to happen, it has to be in the context of social policy, and the section has defined social policy. What is social policy? For the first time ever, the Bill states that a social policy is “The supply of housing, as part of a social policy, being the supply of an apartment, used or to be used for residential purposes, in an apartment block within the meaning of section ... of the Stamp Duties Consolidation Act”. I would argue there is a provision that would allow for the supply of an apartment that was commenced prior to such and such a date. It would not differentiate between the sale and there would be equal treatment of all apartments beyond that date. As I said, an apartment block that is going to be sold in two years' time could end up being subject to a higher rate of tax if it does not comply with the conditions that exist.

I strongly disagree with this. Over €1.5 billion of taxpayers’ money is going to be given to developers. It comes on the back of a previous amendment that also provides additional support to developers. Some of these developers, the biggest in the State, are looking at profit margins of 20% or 21%. The amount of deadweight here is spectacular. I have been a good number of years at the finance committee, as has the Minister, on and off, in his different Departments. I do not think I have seen a measure that for the next year has 100% deadweight. That is what the Minister is bringing forward. He is bringing forward a measure that is not a couple of hundred thousand euro or even a couple of million euro. We are talking about millions and millions of euro and all of it is deadweight, that is, every one of these apartments is being built anyway, yet they are going to benefit from this reduction next year.

What was it that the Minister told me in reply to a parliamentary question? Was it that it is costing €20 million a month already? Since this was introduced through a motion on budget night, this measure has already cost us €20 million, or close to that, for apartments that were ready to be sold. Everybody thought they were going to be sold at a higher rate of VAT but the Minister has ensured they are being sold with a nice wee bonus for the developers in the run-up to Christmas. It is completely and utterly wrong.

Mairéad Farrell (Galway West, Sinn Fein)
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An Teachta Doherty has outlined a lot of this already. One area where the mind boggles is that it is effective immediately, although the reality is that many of these will already have been built. When the Minister says this has something to do with the impact on the supply of housing through the supply of apartment blocks, it does not make sense to me. It seems this policy has a significant lag, realistically, and will have no impact in the immediate term on the supply of housing. An Teachta Doherty has outlined this already. For me, a question is why this was implemented straightaway rather than being delayed until it would actually be effective. If the Minister believes this will be effective, we can argue the point on that. However, if he believes this is something that will have an impact on the delivery of apartment blocks, why would he do that now?

What frustrates me even more is the fact that in recent months, the Government cut the design standards for new apartments and now its flagship housing policy is to focus on cutting VAT on apartments. I have raised this a number of times at this committee. As somebody who comes from the west of Ireland - I am from Galway city - I want to know what is the analysis regarding these apartments. Let us say we are all wrong and the Minister is correct, and what he is saying is absolutely right. If so, what kind of impact is this going to have outside Dublin, realistically? Of course, while it is important to tackle the housing crisis in Dublin, unfortunately, on the Government’s watch, there is a housing crisis in Galway city, in cities across the State and in the most rural areas, including our offshore islands.

I am not really sure how this will have any impact in those areas either.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I have significant concerns about this in terms of deadweight, the massive tax break for developers and the opportunity costs of this as well. The millions of euro here could be better spent subsidising the construction of affordable homes to buy or rent. There would be no deadweight in that. We would get thousands of additional homes that people could afford. There would be no question of it boosting profits, boosting land prices or anything like that. We would know what we were getting for the cost of this. It would be a much better approach.

I also have huge concerns about the failure to link this with affordability measures, which would be a normal practice in most European countries. If a government was making substantial interventions like this, it would be to drive affordability or to provide more affordable homes. There is no consideration of that. Indeed, there does not seem to have been any assessment around home ownership. Has this been assessed in terms of its impacts on home ownership?

I want to make a point on the distorting effect that this section could have. There is no question that apartments will go in on high-density sites. It is the only thing that is appropriate on high-density sites. On medium-density sites, you could have apartment blocks of three to four storeys or what are effectively ground floor own door apartments. I do not mean apartments per the previous definition, but something apartment-sized with a duplex above. They do not require the same separation distances that apartments blocks do, so you can get in as much housing in with that format design as you can with three-to-four-storey apartment blocks. It would be an excellent design use for medium-density sites. It is quite viable in terms of construction costs and can be more affordable. You can get higher levels of home ownership from it. The ground floor apartments can be a really good design for older people, people with reduced mobility and people with disabilities. People living in these communities long term do not have the same ongoing maintenance costs through management companies’ annual fees because they do not have the shared common areas or lifts that have to be maintained and all of that. It is a really good design solution for those medium-density sites. It is not a runner for higher density sites at all.

This section could have a distorting effect by driving away from that type of design by creating incentives for the traditional apartment block-style development, which will saddle residents with the ongoing costs. Was the potential distorting effect of the section considered? Was the impact on home ownership levels also considered?

Paschal Donohoe (Dublin Central, Fine Gael)
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I thank the Deputy. I will deal with the questions that were put to me. Before I respond, I will check if Deputy Nash wants to come in. I am conscious that I have to step out at 4 p.m.-----

Gerald Nash (Louth, Labour)
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No.

Paschal Donohoe (Dublin Central, Fine Gael)
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-----and I do not want to not respond to the Deputies on what is a significant element of the Finance Bill, given that Minister of State, Deputy Troy, would not have heard what the speakers said in the way that I have.

In relation to the point regarding this measure taking effect from 8 October, the advice I have received is clear. VAT is a consumption tax that is placed on a product whenever value is added at each stage of the supply chain from production to the point of sale. If legislation was introduced that sought to apply different rates of VAT to the sale of identical points at the same point in time, based on the circumstances or timing of when work on these goods began, it would breach the principle of fiscal neutrality. This is the principle that the supply of goods and services that are identical or sufficiently similar from the perspective of a consumer should be taxed in the same way.

The advice I have received is clear. I have to go back to what is the bigger picture in relation to why I am bringing this in. Yes, it will be improve the profitability of apartments, but we have tens of thousands of apartments that are not being built. We have to find ways in which they can be built and their delivery through the private sector can be accelerated. The numbers with regard to that at the moment are stark. We now have 98,000 apartments that have planning permission but no projected start date. That is 98,000 homes that could make a huge difference to people who could be living in them and paying a mortgage or rent.

What I am trying to do is identify ways in which we can accelerate the delivery of those homes. While I understand the deadweight argument clearly, I have also been clearly advised that because this is VAT, and VAT refers to point of sale, I cannot differentiate with regard to the point of commencement. The advice has been clear with regard to that.

There is a further question to consider that is independent of the advice and does not arise because the advice to me has been so clear. If I said that the rate of VAT would be applied at some point in the future but not immediately, what effect would that have on the apartments currently being commenced and would it make a difference to the point at which somebody would be able to purchase them? That matter does not arise because the advice I received was so clear, but it is an additional policy matter that I would have considered if the advice was not as clear as it is.

In relation to the question of where the principles I have been advised of come from, they come from the first EU directive and the ruling of the Court of Justice of the European Union with regard to the matter. I heard what Deputy Doherty said with regard to it and his recognition of the general principle of equal treatment and the second category of the general principle of equal treatment, which I am aware of, but the advice I have on this matter is very clear. To differentiate based on the point of consumption and the point of commencement is something that is not possible to do because we are talking about VAT. That is why it is being implemented in the way I am recommending to the committee this afternoon.

With regard to the assessment of this that has been there in the past, I am bringing forward this measure on the basis of the social grounds I outlined earlier. Accelerating the delivery of more homes is very consistent with an area of social policy and offers the best prospect that we have of meeting the homes targets that we need to deliver through apartments. If we do not build more apartments, it will be extremely difficult to meet the target that is there for more homes because of the planning needs we have to get more homes in higher density environments.

Is this giving more to developers? I acknowledge that it is an economic support that is being made available to developers. It is a means to an end. The end is to get more homes built and to get the apartments that have planning permission but are not a reality built and turned into homes.

Deputy Farrell asked me a question regarding what this could me for outside of Dublin. Of the 98,000 apartments I referred to earlier, some 42,000 are in Dublin, which means there are 56,000 allocated in different parts of our country, maybe including in Deputy Farrell’s own city. That figure is so big, I want to find a measure that can be targeted and play a role in accelerating their delivery.

Deputy O’Callaghan questioned whether this could influence the density of homes being built. I heard his description of the benefits of medium-density developments, and I agree. These are really good products when they are delivered, but we are delivering enough of them. In the part of Dublin I am most familiar with, they are not happening at the scale they need to happen. What we are doing could affect the density of homes that are built in the future by seeing more apartments built, but they still have to meet planning regulations. The density still has to be of a certain level. They have to be delivered up to a very high quality. We have a choice between the imaginary potential of homes that have planning permission but are not being built and the reality of trying to find a way of putting that forward and leading to them being delivered.

Have we done any analysis on the effect this could have on different patters of home ownership?

We have not done that. However, we have looked at the additional homes that could be delivered through this measure and that is the argument I have taken the committee through.

Edward Timmins (Wicklow, Fine Gael)
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Before I go any further, it is proposed to take a short break of five minutes for the Minister to change. We will facilitate that.

Mairéad Farrell (Galway West, Sinn Fein)
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On the breakdown of 56,000 outside Dublin, could the Minister furnish the committee with that? It would be of interest.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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The Minister should have done an assessment of how this will affect home ownership. The reason I say that is that most apartments that are constructed - the Minister is putting in a preferential VAT rate for apartment construction - end up as rental accommodation only. Very few are available to buy and in the past 15 years, home ownership rates have collapsed, particularly among people under the age of 40. Many people would like to be able buy. They would like to be able to buy new apartments and they are often simply not available for sale. That is why having a measure like this and not tying it to affordability or home ownership will have an impact on home ownership. Largely, it is the rental-only sector that is being stimulated, which has expensive rents as well. That is not what most people want. They want the opportunity to buy, including to buy apartments. The Government could have brought forward measures to combine this with planning measures whereby, for example, 50% of new build apartments would have to be available for individuals and families to buy. It has not done that.

On the planning permissions for 98,000 apartments that have not been activated, where the private sector has been unable to build them over many years, where there is movement on that, it is usually when an approved housing body signs a forward purchase contract or buys the site or, significantly, when the Land Development Agency does that. For example, in my constituency, a very large site the private sector was unable to build on for 20 years was bought by the LDA and it is building affordable apartments that are now under construction. They are going up and families will be living in them soon. That is after 20 years of no movement and no viability in the private sector. However, a measure like this means the acquisition price for that land will be higher so when the LDA or an AHB goes to buy it, it will pay a higher price. That will be one of the costs of this measure.

Pearse Doherty (Donegal, Sinn Fein)
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I am not going to into the broader issue of why we are opposed to this because I have dealt with that. The Minister has heard it and his time is short. However, regarding the points I raised, perhaps he could give the committee the understanding of the Department or his understanding as to when it appeared that the previous information that was put on the record by Ministers, including Deputy Donohoe, including in the tax strategy papers, subsequent to the change of the directive, was not the case and that there was greater flexibility. I welcome that it was identified. I am not saying it is a reflection on any officials. How was it determined? It is a good position. It is not minor. It was pushed quite often. We met officials and discussed this idea and so on and it is good that the flexibility is there. My understanding - and it is only my understanding - is that the social policy gives flexibility. The Minister is shaking his head but-----

Paschal Donohoe (Dublin Central, Fine Gael)
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No, I did not mean that in a pejorative way.

Pearse Doherty (Donegal, Sinn Fein)
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Okay, fair enough.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have had this debate myself; that is all.

Pearse Doherty (Donegal, Sinn Fein)
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The social policy gives us the flexibility to differentiate residential property for the first time, which the Minister and his officials thought was not possible until now. There have been no changes to this at European level to my understanding. I am not suggesting that the Minister stop this or defer it for a year with the impact that would have. That is not what I am saying. I am saying we should look at the definition of social policy. Why does the VAT directive allow us to deal with social policy? It is because it recognises that there is a social issue. There is a policy and flexibility. It is the supply of housing as part of social policy, being the supply of a Department, which was commenced before a certain date.

Has the Minister spoken to European authorities about their definition or has it been put to them? I do not know what the system is or how it happens. Has this been tried at a European level to test whether it is allowed? This is not a hard law. It is a principle and it will be about how it is interpreted. Second, if it materialises that the Government is entitled to do what I have suggested or a version of it, which would mean it would only apply to apartments that are newly built and from now, would the Government do it?

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

If the information Deputy Farrell asked about is available on a regional basis or at a more granular level, we will share it with her and make it available to the committee.

On Deputy O'Callaghan's points, it would be difficult for us to anticipate the effect of a change like this on future levels of home ownership. We would have to make a huge amount of behavioural assumptions and I am not at all clear about how we could model the effects of a change in tax policy on ownership rates because there are many different ways in which the private sector could respond to this and ways in which those purchasing homes might decide to amend their behaviour. I understand why he believes it is needed. I am not at all certain it could be done in a way that would help.

He is right in saying that this is most likely to lead to an increase in the quantity of rental accommodation. That is a fair assumption. It is my expectation, as least in the early years of it being implemented, that the apartments most likely to be built will be for rent. However, the Deputy knows as well as I do that we have a dire need of rental premises and homes. If we want to make more homes available to rent so we can deal with the needs of tenants, we will need the private sector to build additional rental accommodation at scale. The State is trying to build cost rental but it cannot build them all on its own. The Deputy will be concerned about affordability and rents not being affordable. I understand that, but I have never come across a problem of affordability that has improved by building less of something. That is why I am confident this measure is merited and will make a difference.

The Deputy made the point earlier that the change in tax will have an effect on the value of land. It could, but I believe it will be moderate. The effects that are driving the valuation of land are far bigger than the effect of a change like this. It has to do with the quantity of land being supplied at the moment - land that people are choosing to make available and that is serviced - and the demand for that land. If this tax change is going to have an effect on the price of land, it will be a small effect in the context of the bigger, macro forces.

Deputy Doherty asked at what point we decided a change like this would be possible. It was in the context of preparing this budget and the deliberations I have had on this topic in recent months and my need to come up with a measure that was targeted. My view was that if we were to make a measure like this available to the entire construction sector, deadweight risks and uses regarding taxpayers' money would become significant for me. It was in the context of preparing this budget, the work I asked my officials to do and the questions I had about it, that we decided this was a measure that could be taken.

Pearse Doherty (Donegal, Sinn Fein)
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What was the change? The advice until then on exactly the same question was that it could not be done. That is the point.

Paschal Donohoe (Dublin Central, Fine Gael)
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I will have a look back at that advice. I am not doubting-----

Pearse Doherty (Donegal, Sinn Fein)
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That is fair enough.

Paschal Donohoe (Dublin Central, Fine Gael)
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-----what the Deputy is saying for a moment, but I will have a look at the advice that was provided over the past number of years and give him a further answer on it. The reason we ended up with this in regard to apartments is because of my view that this should be targeted and not applicable to the entire construction sector.

I found myself shaking my head and then nodding my head at different points in relation to what the Deputy said earlier. Some of the line of thought he has had on this I had myself in trying to adjudicate on what we do. What I am referring to is whether social policy, and the Deputy made the case on this, allows us to move ahead so this is implemented at the point of commencement. That is the point he has been making very clearly. Ultimately, it was not just about the advice - officials give excellent advice but I have to make a decision on it because I am accountable to the committee, the Oireachtas and the country for it - but that the flexibility granted in the parameters of social policy was not sufficient to offset the prerogative that this be fiscally neutral. That fiscal neutrality mandate with regard to VAT made it very clear to me that it has to be made avoidable at the point of sale. I understand the point the Deputy made. I went through this myself. It may surprise him but I do not want to cause dead-weight issues in the use of our country's money.

To answer his question, that in the absence of this kind of legal hierarchy being there, would I then have made it available at the point of commencement? My assessment is I am not sure that I would have. I am concerned that there may well then have been an effect within the market that may well have saved us money fiscally in terms of the alleged dead weight the Deputy referred to, but could have had an effect on how the market is operating over the number of months or longer by which I, in effect, deferred to the operation of this move. I am not sure-----

Pearse Doherty (Donegal, Sinn Fein)
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The Minister does not defer it. He makes it applicable from budget night for everything that commenced, just as he did with the previous section.

Paschal Donohoe (Dublin Central, Fine Gael)
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Yes, but the previous section refers to corporate tax.

Pearse Doherty (Donegal, Sinn Fein)
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I know that but if the Minister were able to put the commencement, there would be no deferring. It would be immediate so there would be no lag.

Paschal Donohoe (Dublin Central, Fine Gael)
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They are two different taxes.

Pearse Doherty (Donegal, Sinn Fein)
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I know. The point is the only reason they are different taxes is the Minister is saying it cannot be done, but in the context of if it could be done-----

Paschal Donohoe (Dublin Central, Fine Gael)
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It cannot be done.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister is answering the question in the context of if it could be done, whether he would go ahead with it or not.

Paschal Donohoe (Dublin Central, Fine Gael)
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Then the matter is academic because it cannot be done.

Pearse Doherty (Donegal, Sinn Fein)
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We were told that numerous times by the Minister, his predecessor, his officials and in the tax strategy papers, but we found out it can be done.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am referring to the difference between a tax that is levied on profitability and a tax that is levied on consumption. That is the difference.

On the Deputy's final question on consultation with European authorities, we did not engage with the Commission on this, which we would not. We have our own legal advice. I have the work of my officials and it is their advice to apply to me whether this is consistent with the law of the European Union.

Edward Timmins (Wicklow, Fine Gael)
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I will put the question. Is it agreed that section 67 be deleted from the Bill?

Pearse Doherty (Donegal, Sinn Fein)
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Not agreed.

Edward Timmins (Wicklow, Fine Gael)
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Even though the Deputy proposed it.

Pearse Doherty (Donegal, Sinn Fein)
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I did not propose it. Sorry, is this to delete it from the Bill?

Paschal Donohoe (Dublin Central, Fine Gael)
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I will correct the record. I have just been informed that my officials, at official level, made contact with the Commission to notify it that this was going to happen. We did not get a response that altered the policy intention.

Pearse Doherty (Donegal, Sinn Fein)
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The Minister never asked about the commencement, but that is fair enough.

Edward Timmins (Wicklow, Fine Gael)
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Is it agreed that section 67 be deleted?

Paschal Donohoe (Dublin Central, Fine Gael)
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No.

Edward Timmins (Wicklow, Fine Gael)
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We all agree it.

Paschal Donohoe (Dublin Central, Fine Gael)
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No, we do not.

Pearse Doherty (Donegal, Sinn Fein)
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It is apt that it is section 67 now that "6-7" has made its way into the dictionary.

Paschal Donohoe (Dublin Central, Fine Gael)
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I think it is pretty straightforward. I want to keep it; they want to delete it.

Edward Timmins (Wicklow, Fine Gael)
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Amendment No. 66 involves the deletion of section 67, which the Minister proposed. Deputies Doherty and Farrell also proposed that section 67 be deleted. Both the Deputies and the Minister looked for it to be deleted, but obviously under different circumstances.

Mairéad Farrell (Galway West, Sinn Fein)
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Was section 66 not-----

Edward Timmins (Wicklow, Fine Gael)
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The Minister was looking for it to be replaced, but the Deputies just want it to be deleted, full stop.

Mairéad Farrell (Galway West, Sinn Fein)
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The amendment passed, so the Minister's new amendment would be put in. We now want to delete that amendment. We are now voting against the amended section-----

Paschal Donohoe (Dublin Central, Fine Gael)
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We are now voting on the section.

Mairéad Farrell (Galway West, Sinn Fein)
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-----but the Minister is voting for it.

Paschal Donohoe (Dublin Central, Fine Gael)
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I am voting for the section.

Mairéad Farrell (Galway West, Sinn Fein)
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It is the amended section we are voting on. We want to vote against it.

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

Edward Timmins (Wicklow, Fine Gael)
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Is it agreed that the amended section 67 be deleted?

Pearse Doherty (Donegal, Sinn Fein)
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Agreed.

Mairéad Farrell (Galway West, Sinn Fein)
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No, we want it to be deleted. It is not deleted-----

Paschal Donohoe (Dublin Central, Fine Gael)
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Are you are putting the negative there?

Mairéad Farrell (Galway West, Sinn Fein)
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Yes.

Pearse Doherty (Donegal, Sinn Fein)
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Yes, that it is deleted. The proposal is that section 67 be deleted.

Edward Timmins (Wicklow, Fine Gael)
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Is it the new section 67 then? We have replaced the old section 67 so now there is a new section 67.

Pearse Doherty (Donegal, Sinn Fein)
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Exactly.

Paschal Donohoe (Dublin Central, Fine Gael)
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We are voting-----

Pearse Doherty (Donegal, Sinn Fein)
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-----to delete it.

Edward Timmins (Wicklow, Fine Gael)
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The Deputy is proposing to delete the new section 67.

Pearse Doherty (Donegal, Sinn Fein)
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Yes.

Edward Timmins (Wicklow, Fine Gael)
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On the proposal to delete the new section 67, those in favour-----

Mairéad Farrell (Galway West, Sinn Fein)
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No.

Edward Timmins (Wicklow, Fine Gael)
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The Deputies are proposing to delete section 67.

Mairéad Farrell (Galway West, Sinn Fein)
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We are. Is the question that section 67, as amended, be agreed?

Paschal Donohoe (Dublin Central, Fine Gael)
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We are "Tá" and they are "Níl".

Edward Timmins (Wicklow, Fine Gael)
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The Government proposal is to delete section 67 from the Bill.

Pearse Doherty (Donegal, Sinn Fein)
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That is the old section 67 because it has been replaced by the amendment. When that happens, and we asked for guidance on this, is there then a subsequent proposal in relation to deleting? We asked for clarification on that, so we have to go back to the amendment.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We were told there would be a vote on the new section.

Pearse Doherty (Donegal, Sinn Fein)
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We have to go back to the amendment, which is allowed under the committee, but we did ask for direction that there would be another vote on this.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We were told we would get it-----

Pearse Doherty (Donegal, Sinn Fein)
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We were told we would get it.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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-----in good faith.

Edward Timmins (Wicklow, Fine Gael)
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We will get the advice and come back after the break. There will be a suspension for five minutes.

Edward Timmins (Wicklow, Fine Gael)
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I welcome the Minister of State at the Department of Finance, Deputy Robert Troy. We go back to section 67. Is it agreed that section 67 be deleted from the Bill?

Pearse Doherty (Donegal, Sinn Fein)
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I want to flag that due to the advice we have been given, I would have opposed the amendment. I intend to table an amendment to Report Stage of this Bill to delete the entirety of the new section 67.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We want to also flag that we had been expecting we would have the opportunity to oppose this new section. Given we do not, I intend to table an amendment to that effect on Report Stage.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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In the first quarter of 2025, compared with the first quarter of 2023, 13,000 more people were working in the sector to which this section relates. The rate in the UK stands at 20%. As a result, the 13.5% rate currently in place here is considerably advantageous in comparison with the rate that applies in the UK, our nearest neighbour. In the context of the profits of some of the fast-food chains, McDonald's stand at €42 million and Supermac's at more than €43 million.

When he was here yesterday, the Minister said that his absolute priority in terms of the Finance Bill and the budgetary process is to protect the public finances. This measure does not protect the public finances. It is very costly. It will be costly this year. It will be even more costly next year and in the years to come. Given that we have had warning after warning from the ESRI, the Central Bank and the Irish Fiscal Advisory Council regarding our budgetary position to the effect that we cannot continue to increase spending while cutting taxes and narrowing our tax base because that is irresponsible.

The Minister said yesterday in the context of cáin chorparáide - corporation tax - that it is a highly volatile revenue stream and that there are elevated levels of receipts that cannot be relied upon to continue indefinitely. Here we are, reducing the tax take significantly and another revenue stream at a time of high volatility when our underlying budget deficit, when you remove the windfall corporate tax element, is projected to be €13.6 billion. We have an economy running at full capacity and yet we have an underlying deficit when we remove windfall corporations tax of €13.6 billion. This is not a time to be making the situation worse by making our reliance on volatile windfall corporation tax receipts even greater.

There is also an opportunity cost. If this measure was not happening, we could, for example, abolish the means test for carers, which would be a much use of resources, or introduce measures such as the second tier of child benefit in order to lift 40,000 children out of poverty. We are in a situation where these are exactly the kind of things that the State should be able to do and should be able to afford. If we are not able to tackle child poverty now, in relatively good economic times, when are we going to be able to do it?

This is a measure that stimulates a sector of the economy that does not need stimulation and that is in a very healthy state. The Tánaiste, a matter of days ago, stated that he is going to cut back on migration levels and on the number of migrant workers entering the country. How on earth are we stimulating a sector with high levels of employment at a time when we are having difficulty filling jobs in that sector?

Gerald Nash (Louth, Labour)
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This is just plain stupid. It makes no economic sense whatsoever. We are paying the price now for a stupid promise made by the Tánaiste on the campaign trail this time last year. There is no economic case whatsoever for this. Working people around the country are going to pay the price for it. I am not even persuaded that the Minister for Finance is on board with this. Clearly, this is the agreement. It does not make sense. It is a transfer of wealth from working people to an economic sector that is adding jobs every day. There are multiple more businesses opening than closing, and suddenly we think it is a good idea to spend cumulatively, between 1 July next year and the end of 2030, approximately €2.25 billion on this. Unlike the position with the reduced VAT rate for the sale of apartments where, at least, a sunset clause applies, there is no sunset clause whatsoever here.

We know the difficulty that successive Governments have had in removing this reduced VAT rate and bringing it back up to 13.5%. Whatever thin rationale existed has withered away. As a result, future Governments are going to be burdened with this. In addition, it seems that this Government has abandoned its commitment to indexation for PAYE workers. If you look at the figures, they tell an interesting story. The expenditure of the €2.25 billion on this over the next three to three-and-a-half years equates to two years of indexation. In terms of bringing the band thresholds up, that is €4,000. These are political choices that are being made at the expense of indexation this year or, as Deputy O'Callaghan said, the opportunity to finally rid us of the scourge of child poverty. A political price will paid for this.

There is no rationale whatsoever for this. Anyway, if the Government thought that this was the best way in which to assist the hospitality section, it has a peculiar way of showing it. Bord Bia figures for consumption across the food sector show, in fact, that 40% of the benefit of this VAT cut will go to the large multiples like McDonald's, Supermac's etc., which do not exactly have an extraordinary record in terms of the pay and terms and conditions of their workers. This is not going to be passed on to consumers. It is not going to be passed on to workers in a sector that is absolutely addicted to low pay and poor terms and conditions.

The reduced rate was first introduced in 2011, for good reason. I was involved in developing the idea because there was an opportunity to stimulate a sector where there was some low-hanging fruit and a possibility of it generating quick wins in terms of our economic recovery at a time when over 15% of workers were unemployed. The difficulty successive Governments have had unravelling this has been extraordinary, and there is little or no economic benefit to the wider economy.

This is going to simply boost the bottom line, most disproportionately, of the larger multiples. Even if the Government thinks it is going to assist the local operators we all want to assist, namely the cafés and restaurants that are the backbone of local economies across the country, it will not. It will sustain them for a period but it will not address the fundamental problems we have in the hospitality sector in this country, which independent analysts would say - I agree with them - are energy costs, commercial rates and the attraction and the retention of skilled staff. If the Government wants to do that, it should be approaching this in a different way.

This makes no sense whatsoever. It is a stupid idea - plain and simple. There is no rationale for it whatsoever. It does not make sense. We are constantly being told by this Government, correctly, that our tax base is at risk in terms of our excessive reliance on corporation tax. Here we are, however, narrowing the tax base and doing so at the expense of indexation. As a result, working people are going to pay the price for this next year.

Good luck to the Minister of State when he is explaining this to his constituents in Westmeath over the next period, because it is going to be a challenge. It just does not make sense at all. There is no rationale for it.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Leas-Chathaoirleach for welcoming me here today. I will not say it was the highlight of my week, but, anyway, I am glad to be here to engage with the select committee on such important legislation.

Deputies O'Callaghan and Deputy Nash are opposing this section. If the section were to be deleted, it would result in the VAT rate on food and catering services and hairdressing remaining at 13.5% in July next year and negate the budget 2026 decision to provide for the reintroduction of the 9% rate for these services.

In light of the continuing cost pressures on businesses and the importance of maintaining competitiveness in the hospitality and personal services sectors, the Government has now concluded that the 9% rate is appropriate for long-term stability in these sectors. As outlined in the budget speech by the Minister, Deputy Donohoe, the objective of the measure is to support businesses in the services sector that are facing increased cost pressures. The measure is expected to support over 150,000 jobs in the various sectors across the country.

The available CSO data for these sectors indicate that over 99% of the businesses are SMEs, with over half of them being micro-enterprises with fewer than ten employees. Regarding the benefit of this measure, the available data suggest in the region of 85% of the benefit will go to SMEs.

On the point made that the sector is not under pressure, between January 2024 and March 2025, 675 hospitality businesses closed. The number of businesses that have availed of debt warehousing in the sector is the second highest of any sector. In the region of €180 million in debt is warehoused, representing 1,453 employers and 41,000 employees. That very much signifies a sector that is struggling.

The Government has not abandoned indexation. It is very clear that it remains a commitment in the programme for Government. However, not all commitments in a programme for Government are introduced in the first year of a Government cycle. There are four more budgets to be introduced. The measures will be dealt with in subsequent budgets. The Government’s priority in this budget was to protect and maintain jobs so we would have a stronger economy in subsequent budgets, allowing us to invest in other areas.

This measure is primarily about the hospitality sector. Coming from a rural constituency, I know that sometimes hospitality-sector jobs are the only ones available in some of the smaller villages and other areas we represent. This may not be an issue for Deputies representing larger urban areas, but in rural constituencies the hospitality sector provides some of the few available jobs. There may be four or five jobs, and they are very important.

The hospitality sector is also important in supporting our tourism industry. The village I come from, which Deputy Nash will know well, his former colleague having represented it for many years, is Ballynacargy. The greenway has opened there and extends to Abbeyshrule. The associated businesses are providing real jobs in the rural community. They are supporting the work being done by Fáilte Ireland to create jobs in the tourism sector also. When you bring tourists to an area, you at least need to be able to feed them in a restaurant or a café.

I accept that ideally it would be great if we could exclude multinationals from this measure, but the Deputy is acutely aware that this is not permissible. The reality is that the vast majority of those who benefit from this measure are SMEs. A significant proportion of these are micro-enterprises with fewer than ten people. The areas that will benefit most significantly are rural areas.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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There are some points that the Minister made with which I agree. Hospitality businesses in rural towns and villages where there is not much economic activity and not many business open, and equally those in urban areas that may be economically deprived and have very few local business, have a function that goes well beyond their economic activity. They have a social function. They can be the equivalent of the rural post office in that they might be places where an older person living alone has their only daily contact with others. They are important.

The difficulty I have with this measure is that it is a blunt one. It is not targeted. In general, I have an issue with blunt, non-targeted measures, not just in this sector. What we should have been contemplating was a targeted reduction. As Deputy Nash said earlier, the measure under discussion was introduced at a time of economic crisis when there was a need to retain some jobs and ensure stimulation. A blunt blanket measure when we are in a very different situation does not make sense. We should have been considering targeted measures. In our alternative budget, we proposed targeted measures that would support small rural cafés or businesses with a social or community function rather than a very large, expensive, non-targeted blunt measure that is not needed across the board. I would certainly support a targeted measure.

The lobbying on this made much of the number of closed businesses. However, this is a growing sector, with growing employment and a growing number of businesses. Not just in Ireland but also in other countries, businesses in the sector, including cafés and restaurants, do not remain open for ten to 50 years; there is a lot of turnover. It can be very difficult for individuals who have put their hearts and souls into a business if it does not work out. Are we now getting into a situation where State policy is about subsidising all small businesses to stay open, regardless of whether they are viable? I am all for State intervention, but it must be strategic and in areas where it is really needed. It cannot simply be to maintain small businesses that are not viable.

After many of the closures, especially of many of the high-profile businesses on which the lobbying was done, we see a new hospitality business open in the premises a month to eight weeks later. That is very different from the rural areas we have talked about, where if one of one or two businesses closes, it may not be replaced. That is why I favour targeted supports to keep those businesses with a social function open. However, a blunt VAT rate of the kind under discussion does not achieve that.

Let me quote what Nevin Economic Research Institute submitted to us this week:

... the decision to cut taxes for the hospitality sector at a time of full employment – the lowest paying and least productive sector in the economy no less – is a particularly bizarre one. Wasting €700 million annually on a policy that will generate little to no new jobs is a breathtaking waste of resources. The opportunity cost is enormous. We could have hired over 11,000 nurses, made public transport free, or taken 50,000 children out of poverty with that money, or alternatively, we could have just saved the money in order to reduce the need for tax increases in the future.

Unfortunately, the evidence free tax breaks for the loudest business lobby follow a well-worn pattern of responding to complex policy issues with a blunt, ineffective and regressive tool. This measure will do precisely nothing to promote the economy’s productivity – indeed it will have the opposite effect.

That is an independent commentary on the measure.

Gerald Nash (Louth, Labour)
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What happens with these kinds of interventions is that sectors become dependent on them and do not innovate or reform. I am actually surprised that a party that describes itself as pro-business would propose an initiative like this. I was astounded to hear about it this last year from the Tánaiste and that he persisted with it. It needs interrogation. I will be very interested in seeing, when we finally obtain it, the advice departmental officials gave in advance of the decision. I can imagine what that advice involved. It was the same advice that was provided some years ago when the rate went back up to 13.5%. There were periods over the last decade and a half when, for all the reasons we outlined in respect of stimulating the economy, it was absolutely justifiable to reduce the rate.

During the pandemic as well, when jobs were at risk, there was absolutely a case to support these businesses. The record shows I lobbied the then Minister for Finance, Michael McGrath, when he was in that chair, to extend the debt warehousing period to give those businesses every chance to get back to viability and to prove their viability. That was always going to be the case when warehousing was ended. Revenue was very understanding. That was the policy. It understood the position businesses were in and understood when that ended and that tide went out, people were going to be exposed. However, to pick up on a point made and articulated very well by Deputy O'Callaghan, are we at the point now in our economy where we continue to bed this idea of corporate subsidies and corporate welfare into our system regardless of the evidence? We are in a dangerous place if that is the case because we do not have limitless resources. This was a choice that was made and it is a choice that this Government is going to have to stand over.

The Minister was being a little selective in quoting the numbers. What we did not hear about was the number of businesses that have opened over the past number of years. There is always churn in this sector. That is the nature of the sector. Historically, that has been the case. That is the case everywhere. There is churn in hospitality sectors and industries right across the globe.

I am not callous enough to say that every business in the sector is doing well. They are not. There are regional variations; there is no doubt about that. The importance of some businesses to particular communities varies as well, especially across the country. In rural areas and areas that very much depend on tourism, that is absolutely the case. The Minister put it on record himself. It is fiendishly difficult - in fact, impossible - to separate this out and target it at one business over another. All kinds of problems are generated in pursuing an objective like that. It is simply not possible. However, it is fundamentally dishonest for anybody, including lobbyists, to suggest this is the panacea for all the problems the hospitality sector is experiencing. It evidently is not. The longer we pretend that it is, the longer it will take to finally realise what needs to happen to sustain what is an industry that employs the second-highest number of people in terms of the indigenous SME economy.

A number of years ago, we identified the importance of the retail sector and I helped to establish the retail consultation forum identifying the fact that this was a really important sector in our indigenous economy. Why can we not do the same for hospitality? Is it the case that the Restaurants Association of Ireland and others are just happy that we fork out endless streams of cash rather than look at the structural issues facing us? That is the easy thing to do. The difficult thing to do is to professionalise the sector. Why do we not re-establish something like the Council for Education, Recruitment and Training, CERT, for example? CERT was a very successful national agency that helped to train people in the hospitality sector for good sustainable jobs in the sector that we should have. We do not have that. In a lot of cases, people cannot have a career in hospitality any longer because it is a sector that is addicted, as I said earlier on, to low pay and to precarity. Precarious work is a common feature in this sector. However, if we want to fundamentally address the problems of the sector, let us do that. Let us look at skills and support them in that way. Why do we not fundamentally review our local rates system? It is an absolute anachronism. It makes no sense at all in the modern economy to be operating the kind of system that we do.

Why can we not fundamentally address the fact we have the second- or third-highest energy costs in Europe? That is a critical issue in the hospitality sector. This is not the answer. It is a very expensive solution to, in some cases, a problem that does not exist. However, where the problems do exist, this is not the answer.

Pearse Doherty (Donegal, Sinn Fein)
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I will come in briefly. I support this measure. I welcome the fact the accommodation sector is not included in this. Originally, the advice was that we could not do that and then it became clear that it could be done. I agree with the other speakers and I will agree with the amendment later on in relation to reviewing this. It is really important. That is my position on all of these types of measures that are introduced. They have to be reviewed and the effectiveness and all the rest looked at. VAT is a blunt instrument. I definitely agree that it would be far more desirable if we could use this to target companies with particular turnover. If there is a better way to target this, we need to be open to that idea. I supported the reduction at different points, as others have said who have been involved in the reduction to this rate. When it was reduced, others benefited as well, who should not have benefited. However, VAT is VAT at that point in time and the same challenges would have existed then as exist today that cannot be carved out.

I have put my own view on the record for quite a while. The interesting thing here is that we are obviously not reducing the VAT rate on hotel accommodation or accommodation services, which is at odds with what happens in Europe. In Europe, in terms of the EU 27, what you have is either the same rate for both sectors, namely, for hotel and accommodation services and for restaurant and catering services. Either you have the same rate or you have a reduced rate for the hotel sector. That is the trend in Europe. Therefore, Germany would have a lower rate for the hotel sector than it would for catering and hospitality. In a number of other countries, such as Portugal, for example, the rate for hotels is 16% and 13% for restaurant and catering services. It is right that we are doing that because there are rip-off costs that are being charged in the hotel sector, although there are challenges. This is problem here. Just like the catering services, there are companies that are doing well but there are others that are really struggling and that is also the case in terms of hotels, particularly where you have regional variances. I come from Donegal. We used to have the issue of people coming into tourist offices in Dublin to ask how to get to Donegal. They thought you would have to go up to the North and ask there. That was the reality. As the season is not as long as in other areas, it is challenging. The issue I raised - I have said in the past that I was always open to this type of idea, particularly if it was targeted - was because when we look at our European competitors, we are out of sync.

As Deputy O'Callaghan pointed out, our closest competitor has a far higher VAT rate than us. We should put that on the record. However, looking across Europe, 18 countries in Europe have a lower VAT rate than us in the hospitality sector. Only eight of them have higher rates than us. In some of those cases, where the eight have a higher rate than us, they may have a lower rate in terms of the accommodation sector. Therefore, it is the case that we needed to do this. Is 9% the right figure? We are not at the top of the list. Others have lower rates than us but there are very few now. There are only about six or seven that either have equal or lower rates than us at this stage, so we are currently in the top third. That is the problem when we are dealing with VAT rates where only two reduced VAT rates are available and there is the impact of moving it up to 10%. All of that was teased out during the election. Therefore, I wanted to put that on record.

I have another amendment in terms of the wider sector that availed of the 9% rate in the past, which I will deal with later on.

Edward Timmins (Wicklow, Fine Gael)
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Does the Minister of State wish to say anything more?

Robert Troy (Longford-Westmeath, Fianna Fail)
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I thank the Deputies for their contribution. I do not for a minute think I am going to change the minds of Deputies Nash or O'Callaghan to get them to withdraw their amendment but I share their views in relation to this. Every business cannot be saved. There will be business failures and that is the nature of businesses. In a previous role, I introduced the small company administrative rescue process, SCARP, to protect businesses that were under a shroud of debt to give them an opportunity to come out, restructure and trade again. Many independent commentators will acknowledge it was a good scheme to be introduced and it helped small businesses that were sustainable to survive into the future.

In this area a number of policy measures were introduced, and rightly so, for anyone on the side of the worker. There was the introduction of the extra bank holiday, the increase in the minimum wage and in statutory sick pay, and now auto-enrolment. That has put pressure on SMEs, in particular, but it was done because we wanted to give better terms and conditions to employees. In acknowledgement of the additional pressures put on SMEs, an intervention was designed. It was felt this was the best way to support the hospitality sector for the reasons I have outlined. Ideally, we could have introduced a different VAT rate. If that was practical, it could have been considered but Deputy Doherty has acknowledged it could not happen. What could happen was we could split away the accommodation sector which, I think everyone can agree, is performing well, generally speaking, and identify the area with the smallest margin and highest element of waste. It was done to protect jobs, particularly in the regions. The companies which will benefit most are SMEs and within that cohort, those which benefit most will be microenterprises, that is, those employing ten or fewer people.

I do not accept that not introducing a sunset clause will tie the hands of future finance Ministers. The tax strategy review papers that are published will indicate how certain taxation measures are performing. It is the option and prerogative of a future finance Minister to change taxation at any subsequent budget. Not putting in the sunset clause gives certainty to the sector at the moment but if it goes off the Richter scale and performs extraordinarily well at some point in the future, any finance Minister can make changes, if that is deemed necessary.

It is about protecting jobs and ensuring we have a good economy into next year and subsequent years so we have the necessary wherewithal and bandwidth to make interventions in other areas, such as indexation and honouring our commitment to abolishing the means test for the carer's allowance, which we made a good inroad into in the first year of a five-year programme this year. Everything cannot be done in year one. Choices have to be made. Regardless of who the Minister of finance is, choices have to be made every year. This is about protecting jobs, particularly in the regions.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendments Nos. 67 and 68 are related and will be discussed together.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 67:

“Report on impact of exclusion of entertainment sector from lower VAT rate

69. 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 exclusion of the entertainment sector from lower VAT.”.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Many of the issues relating to this topic were discussed during the previous session. I will not repeat them. I will move and press amendment No. 68 when appropriate, but I will not go over-----

Mairéad Farrell (Galway West, Sinn Fein)
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The Deputy will formally move the amendment.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will. There is no need to repeat the discussion we have had, although this is slightly different.

Pearse Doherty (Donegal, Sinn Fein)
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I will speak briefly to the amendment tabled by Deputy O'Callaghan. It seeks a "report on the consequences for employment, prices, and Exchequer revenue arising from the reduction in the VAT rate". As I said before, all of these issues should be kept under review. Especially with a major proposal such as this, it is important to see the impacts and the consequences. I support the Deputy in respect of amendment No. 68.

The amendment in my name and that of Deputy Farrell states:

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 exclusion of the entertainment sector from [the] lower [rate of] VAT.

While considering the previous section, we had a debate about the 9% VAT rate. We heard form Deputy Nash that he was involved with the introduction of the 9% VAT rate when he was in government in 2011. We had a 9% VAT rate during the Covid-19 pandemic, between 2020 and 2022. What we see now is very different from what was originally there, and rightly so. In 2011, hotels, guesthouses and bed and breakfast accommodation were also included. It would not be appropriate to include them today. However, other areas were also included, namely cinemas, theatres, museums, galleries, exhibitions, amusement parks, fairgrounds and admission fees to some sporting facilities. A number of areas that were included then are not included now.

One of the areas in particular that I want to reference is a part of the entertainment sector. I raised in the Dáil last year the issue of the hosting of concerts. For transparency, I am the founder, chairperson and director of a music festival that has taken place in Donegal since 2018. I ask members to bear that in mind. It is a not-for-profit organisation, so I have no benefit, but if the VAT rate were reduced to 9%, the festival would benefit. I make that transparent.

I have raised the wider issue, and there is a serious issue here in relation to the music industry. When people look at what is happening with concerts, they are not seeing the full picture. They are seeing people such as Zac Brown, Bruce Springsteen and others coming to Dublin to play in the Phoenix Park or Croke Park. We have big concerts coming up next year. The prices for some of these tickets are massive. There is huge appetite for them, which is all well and good. In the main, international artists are coming here. It is great to see some of our local, homegrown talent being able to perform very large concerts now in Ireland. I am thinking of Fontaines DC, Kneecap and others that have evolved from small acts that used to play in Teach Hiudaí Beag many years ago to now playing all over the world.

The issue here is that the acts in the music industry who aspire to play at Croke Park or the RDS someday must cut their teeth at local venues. They will cut their teeth in some cases at a very early stage in very small venues, but they need to be able to progress to larger festivals, with capacities of 2,000, 3,000 and up to 5,000. Across the State, that industry is shutting down. That sector is closing. While you might see considerable ticket sales and attendance at very large concerts in particular, with people coming from all over the country, which is great, our artists are not, in the main, going to be backing up those acts. They are not going to have that opportunity. If we do not have regional music festivals, we will ensure that the industry of bands across the State will not get an opportunity to make a go of it in the industry to keep the show on the road in terms of revenue and also will be unable to create a wider audience.

It is not just the bands that are affected. There is a whole industry around them, including stage managers, production and sound teams, engineers, audiovisual professionals and local suppliers who provide Portaloos, barriers and fencing. All of those are involved in the provision of facilities.

The reason I refer to the music industry in the context of the debate about the 9% VAT rate is that in the past, the sector was included. There would have been an expectation and anticipation that the sector would be included in this scheme but it has been excluded. When you consider the costs associated with the 9% VAT rate, and there was a debate on the matter during consideration of the previous section, to actually include this section of the entertainment sector would have a small impact.

Perhaps there are better ways of doing it. I do not think there is a need to reduce the VAT rate on ticket sales to see Bruce Springsteen or somebody else playing in Croke Park. It is not going to make a blind bit of difference to MCD or whomever is hosting that event. The ticket prices are so big that the extra couple of per cent is not going to be material to the individual but more so to the promoter. In terms of smaller music festivals, it is a question of whether they are going to survive or not. Many festivals are not breaking even. There has been a change to music festivals, particularly since Covid. Unless it is an established and well-ingrained festival, there has been a behavioural change on the part of a lot of people. The idea of going to a festival and camping for two nights is no longer as appealing as it was. Covid had an impact in that regard because all festivals, including our own, were closed for a number of years. What we are seeing across the State, and this is not unique to us because the same is happening in Britain, is that regional festival after regional festival is closing. We have many excellent festivals in Donegal. They are regional and local festivals. Some are festivals of traditional music. Some are literary festivals, and all the rest. I am talking here about music festivals of a high enough degree.

These are places where we would be looking at anything from 2,000 up to 5,000 capacity. They are closing down all over the State, so we either act or we ignore it and just let it continue to happen. It has already happened in a lot of areas, but there are still a lot of festivals that are surviving and struggling. However, what we are going to see if there is no intervention in this entire sector is that, not all but a large number of the independent regional festivals will close down. I made a contribution in the Dáil last year in relation to nine festivals that had closed down in the last two years. There have been another two since. I am aware of others that are struggling and that have incurred losses. Some have incurred losses for a while in trying to see if they can keep going. Therefore, 9% VAT would be for a lot of these, not a lifeline - it is not going to be a lifeline for any festival; that is not what it is going to be - but the potential and hope that it would be perhaps €6,000 or €7,000 more they would have next year than they had this year, so if they broke even or lost a couple of grand next year and kept on going, they might be able to do that. I take the opportunity to raise that now.

I have declared my own interest, but it is not a personal interest as such because it is not for profit, and nobody is paid in terms of our festival. That is not the big issue. However, if we look at what has happened across the State, and these are well-established festivals, not things that sprung up overnight, Body and Soul is gone, Wild Roots is gone, Forever Young festival is gone, Far West Fest in Mayo is gone, The Playing Fields festival is gone, Life Festival is gone, Bandon Music Festival is gone, Indiependence festival, which was hugely established in Cork, is gone, Donegal Town festival is gone, and Sea Sessions, one of the biggest festivals in County Donegal, is gone. The last two are ones that have gone just in the last year. Beyond that, Beyond the Pale nearly went into liquidation and was rescued, and we had that whole issue in terms of tickets. This is all because of the viability of this sector. The Rory Gallagher Festival, which many will know, has been established again in Ballyshannon for many years, and they do excellent work - Members will have heard Barry on RTÉ - but it was in threat of closing down. They ran a GoFundMe, and they are able to continue to survive. The independent festival sector is going to get wiped out unless there is a level of support. I know from talking to different people who are promoting festivals at that level that they were quite shocked that the 9% VAT rate was not going to apply to them.

There is no scheme. There is no support at all from Government from this year, bar its regional festival fund, which is about two grand or something like that from the local authority through Fáilte Ireland. There is a serious issue here. As I said, 9% VAT in the entertainment sector is very broad and all the rest, but there has to be a way to actually look at how we support these types of festivals. There are loads of other festivals - not loads, but there are some other festivals still continuing. If we want to support the sector and the bands that need a livelihood, the musicians, artists, audiovisual technicians, sound technicians and all that, then the Government is going to have to find a way to actually support this entire sector. VAT is one way of doing that. It was a way they expected. I thought that 9% VAT would happen, but I would actually prefer a more targeted approach.

Festivals need planning permission, but there is a very key issue in relation to the capacity of festivals. If we go through the State, we will find that a lot of festivals have a capacity of 5,000. The reason the capacity is 5,000 is that if it goes over 5,000, they need to go for planning permission under the Planning and Development Act. Therefore, we have two different types of festivals. We have a festival that has a capacity of 5,000 or less or something that is a lot bigger like concerts and all the rest. There should be a way to support those that are below that threshold and try to save this industry.

Mairéad Farrell (Galway West, Sinn Fein)
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Does the Aire Stáit want to switch?

Robert Troy (Longford-Westmeath, Fianna Fail)
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The answer is going to be the same regardless of which of us is giving it.

Mairéad Farrell (Galway West, Sinn Fein)
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I think the Minister of State's could be given. Who knows what will happen?

Robert Troy (Longford-Westmeath, Fianna Fail)
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I might as well finish off. Deputy Doherty makes a very valid point in relation to the need to support the arts and festivals in the regions. To be fair to him, he excludes Croke Park and the bigger gigs in Dublin, which are selling out very fast and do not need any support. The reason this measure in relation to the 9% and 13.5% VAT was introduced specifically for the hospitality sector was because it is labour intensive. It was about supporting jobs in the region. We cannot use this measure to support every sector that may be experiencing difficulty, but there are other grants available and other supports that are available through the Arts Council. There are grants through three different strands of €10,000, between €10,000 and €25,000, and between €25,000 and €45,000. They are annual grants that are available to festivals, and they actually prioritise festivals in the regions and where there are not other artistic opportunities available. For that specific reason, it is not intended to accept the Deputy's amendment.

To be fair to Deputy O'Callaghan, he did not rehash the points he made earlier and simply sought that we would look to prepare a special report at some stage in six months' time. I will make the point that taxation measures are always kept under review. There are annual reports, such as the tax strategy papers, which are published every summer, which feed into Government decisions in terms of what it is going to do in relation to taxation measures in the subsequent budgets. Employment levels will be assessed using the reports that are prepared on an annual basis as a matter of course. For that reason, the Minister, Deputy Donohoe, does not intend to commit additional resources to prepare a specific report because, to be fair, employment levels across the different sectors are captured in many of the reports that are prepared currently by the Department of Finance. For that reason, we do not intend to accept the Deputy's amendment.

Pearse Doherty (Donegal, Sinn Fein)
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I hear what the Minister of State is saying but the real-life workings of this are that those grants he talks about are not available to those types of festivals. They are not available because of the music they are putting on. That is for a different type of festival. They have all tried it. The Minister of State is not getting that. There is no other real support that is available. Even during Covid, we got no support, but the 9% VAT rate was a benefit. As I said, I did not expect the Government to accept this amendment. In reality, if I were the Minister, 9% on concerts, because it is not on festivals, would be on ticket sales and, therefore, would apply to Croke Park and all of that, and it should not; it should be targeted. It should be about a policy point of view.

There is a serious issue here. Ten festivals have closed down in the last couple of years. I am telling the Minister of State now, there are going to be more festivals closing down. The Government cannot say on one hand that it supports the arts and then not give a stage for the arts. It just cannot do it. MCD will do some festivals; it is doing some festivals. It is moving into those spaces and all the rest. However, we have to be able to do those independent regional festivals, such as the ones that are still operating in Cork, Galway and elsewhere. It is really important. It is great to see a new festival in Roscommon. There was no music festival in Roscommon up until a couple of years ago. However, there needs to be some type of support and there is no support whatsoever. I am making the point that they all expected it, or rather, because I cannot speak for all of them, there was an expectation that the 9% VAT rate would have applied to them. There is no reason in my view that it should not. It did in the past. If the Minister of State is not accepting this amendment, I am putting on record that the existing levels of support do not exist for this type of festival, as I said, bar the Fáilte Ireland grant, which is between €2,000 or €3,000. Local authorities are given it to dish out to all different types of festivals. That is the only type of support that we are giving. The Government cannot have it both ways. It is going to take the platform away from the artists and from that whole industry that supports them in the regions if we do not move.

We have already lost ten independent festivals in the space of a couple of years. Sixty have been lost in Britain. It is happening all over the place. It is because of behavioural change and costs. There has to be some type of response, or maybe the view is that they are not sustainable and we are just going to leave it Croke Park, the Phoenix Park and maybe Thomond Park in the future. If that happens, it will be a very sad day because a lot of musical acts who hope to play Croke Park need these platforms to get there.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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To briefly respond to the Minister of State, a six-month review of this is necessary to see what the level of deadweight on this is. It is a very significant expenditure that is going to prevent the Government from investing in other areas. The Minister of State talked about assessment of employment levels and so on, but the review I propose refers to prices as well. Given that there is such a significant expenditure involved, it is appropriate that we would have a review to see what the impact is, if any, on prices or profit levels for the larger fast food chains and so on.

Mairéad Farrell (Galway West, Sinn Fein)
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Does the Minister of State wish to respond?

Robert Troy (Longford-Westmeath, Fianna Fail)
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The position remains the same.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I move amendment No. 68:

In page 90, between lines 10 and 11, to insert the following: “Report on VAT cut for hospitality and hairdressing services

69. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the consequences for employment, prices, and Exchequer revenue arising from the reduction in the VAT rate applying to hospitality and hairdressing services.”.

Pearse Doherty (Donegal, Sinn Fein)
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On sections 71 and 72, will the Minister provide a detailed note to the committee on the implications of the sections before Report Stage?

Paschal Donohoe (Dublin Central, Fine Gael)
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Of course.

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

Gerald Nash (Louth, Labour)
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I move amendment No. 69:

In page 92, between lines 22 and 23, to insert the following: “Amendment of paragraph 2 of Schedule 1 to Principal Act (Medical and other services)

74. Schedule 1 to the Principal Act is amended, in Part 1, in paragraph 2, by the insertion of the following sub-paragraph after sub-paragraph (3):

‘(3A) Professional services supplied by counsellors and psychotherapists who are registered with the Counsellors and Psychotherapists Registration Board established under the Health and Social Care Professionals Act 2005.’.”

This is an amendment I have introduced periodically over the last few years. It seeks to provide a VAT exemption to professional psychotherapists and counsellors in order to expand access to mental health services, which is something I think we are all concerned about.

These are professionals working in the health and social care area. The point has been made that occupational therapists, speech therapists and other equivalent health and social care grades are VAT exempt and this is an area that does not attract a VAT exemption. I propose that this be considered.

Paschal Donohoe (Dublin Central, Fine Gael)
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In short, I understand where the Deputy is coming from. To provide background to it, under Irish VAT legislation professional medical care services supplied by recognised medical professionals who are registered on a statutory basis in the State are exempt from VAT. Regulations made some time ago, on 2 July 2018, under the Health and Social Care Professionals Act 2005 designate counsellors and psychotherapists as a regulated profession and establish the Counsellors and Psychotherapists Registration Board. However, I understand that the register of counsellors and psychotherapists envisaged by that legislation has not yet been opened by the relevant health authorities. Where a medical service is supplied by a person who is not registered in accordance with the appropriate Department of Health legislation, the supply of the service is liable to VAT at a reduced rate, which is currently 13.5%. That is the reason I cannot accept the Deputy’s amendment but I am going to follow up on this matter with the Department of Health. I have heard Deputy Nash raise this on a number of occasions, as other Deputies have. I am interested to understand myself why the register has not yet been set up. Maybe Deputy Nash is aware of it but I am not aware of the reason. Given the Deputy's amendment and interest in the matter, I will certainly pursue it further.

Gerald Nash (Louth, Labour)
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I thank the Minister. I intend to pursue it myself as it is not clear to me why that is the case and why the register has not opened yet under the aegis of CORU. It is something we all want to see happen. Far be it from me to put words in the Minister's mouth and anticipate what might happen in future finance Bills but clearly the door may very well be open in the future, once these professionals are registered under CORU, for them to be considered for VAT exemption based on precedent.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendment Nos. 70 and 72 are related and may be discussed together.

Edward Timmins (Wicklow, Fine Gael)
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I move amendment No. 70:

In page 92, between lines 29 and 30, to insert the following:

“Report on VAT on short-term bike hire 75. The Minister shall, within six months of the passing of this Act, lay a report before both Houses of the Oireachtas, on an assessment of the potential benefits of reducing the current VAT rate on short-term bike hire, including details of consultation to key stakeholders.”.

Gerald Nash (Louth, Labour)
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Amendment No. 72 is very similar to Deputy Currie's amendment No. 70. It seeks a report on the potential benefits of reducing the current VAT rate on short-term bike hire. The benefits of which would be obvious, so I do not intend to labour the point.

Paschal Donohoe (Dublin Central, Fine Gael)
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The VAT rating of goods and services is subject to the requirements of the EU VAT directive with which our law must comply. The service of hiring bicycles, including e-bikes, is included in Annex III and Ireland applies a reduced rate, currently 13.5%, to the supply of hiring bicycles, including e-bikes for a short period of time, no more than five weeks. Hire for longer periods is subject to VAT at the standard rate of 23%. While it may be possible for a reduced rate of VAT to be applied to short-term bike hire, it should be noted that there is no general expectation that a VAT reduction would benefit consumers. It should also be noted that a VAT reduction on the cost of bike rentals would only relate to the renting of the bike itself and not to the subscription fee to use a bike rental service. As such, any impact of a VAT reduction would be minor. For those reasons, I am not in a position to accept the amendment. In accordance with the Value-Added Tax Consolidation Act 2010, the sale of bicycles and e-bikes, including parts and accessories, is liable to tax at the standard rate which is currently 23%.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 71:

In page 92, between lines 29 and 30, to insert the following:

“Report on measures to support craft industry in Ireland 75. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on tax measures to support the craft industry in Ireland including through the use of VAT rates.”.

This amendment relates to the craft industry. It is looking at what opportunities are available to support the craft industry in Ireland. A number of people have been chatting to me about it. It is great to see as you travel through the State little co-operatives starting to spring up where there are shared spaces, maybe a shopfront and a number of different crafters selling their wares. They sometimes take turns or maybe somebody is employed to man the shop. Obviously, this is indigenous Irish craft where we are talking about baskets, sculptures and the typical crafts. They have raised concerns with me around the tax treatment of the products, and whether there was additional support that could be provided to try to encourage what is a cottage industry. The people are making a small amount of revenue. Can something be looked at in terms of the tax code to support an industry which, I am sure, all of us would like to see develop and flourish? That is the question.

I do not have a proposal as to what should happen. That is why I am asking for an examination to see whether the tax code, VAT or any other part of the tax code, could be used to try to assist something that is happening organically but probably needs a little bit of support to develop.

Paschal Donohoe (Dublin Central, Fine Gael)
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At this stage, everybody on the committee is aware of how the VAT code operates, so I will not go through all of that. I understand that within the craft sector a wide variety of VAT rates apply. For that reason, we are not clear that VAT would be an effective tool in supporting the sector. My contention to the Deputy would be that it would be through that the local enterprise offices, and in particular the Design and Crafts Council Ireland would be able to play a role in supporting the sector. That is better done through targeted measures rather than through the broad application of VAT law.

However, I will have a look at it. Things are beginning to shift. It has always been a sector doing quite well but I can see across the country that there are a few more openings and more shops opening than has been the case for a while. I hope some of that is due to the supports that are available. I know the standards within it are really high. There are great people working within it. I will ask my officials to have a look at this matter in advance of the budget next year. Just to manage expectations, I think VAT could be too blunt a way of doing this.

Pearse Doherty (Donegal, Sinn Fein)
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Of course, yes.

Paschal Donohoe (Dublin Central, Fine Gael)
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It is a sector which is doing well but could do even better.

Pearse Doherty (Donegal, Sinn Fein)
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On the amendment, I did not limit it to VAT, because it may not be the right approach and there may be other approaches. That is just what I put in. On the basis of the Minister's response, I withdraw the amendment.

Gerald Nash (Louth, Labour)
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It is a useful way to prompt an important discussion about the position of the craft sector in our economy. Unfortunately, we do not always look at economic value in the craft sector. The Design and Crafts Council Ireland is an important organisation but, to the best of my recollection, it is not on a statutory basis. It has a relationship with Enterprise Ireland and the local enterprise offices, and Enterprise Ireland staff do a very good job of promoting Irish craft and design abroad and developing the potential for professional crafts people and designers to export, but we need a wider conversation about Irish design more generally.

I did a lot of work on this a number of years ago. Design encompasses everything, whether it is from design of public services or craft, architecture and engineering. We could look at how they embed design, standards and qualities into everything they do in some of the countries we like to compare ourselves against, like the Nordic countries, the Netherlands and so on. However, it is a bigger point and it is something we have to have a national conversation on. One good way would be to better resource and we should look at the scheme of priorities around statutory bodies. I am open to correction but as far I know, the Design and Crafts Council Ireland has not been put on a statutory basis and then finds itself sometimes in a less than advantageous position when it is seeking multi-annual funding and so on.

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

Paschal Donohoe (Dublin Central, Fine Gael)
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No. What we will do in advance of the next budget is that we will have a look at this in the TSG process and look at the business supports that are there. I am reminded of our recent visit I had the National College of Art and Design. I saw the great work that is going on there and the young graduates who are coming out who want to stay in the sector and want to do so in Ireland. It is a fair point to raise.

Gerald Nash (Louth, Labour)
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I move amendment No. 72:

In page 92, between lines 29 and 30, to insert the following:

“Report of VAT on Short-Term Bike Hire

75. The Minister shall, within six months of the passing of this Act, lay a report before Dáil Éireann on the potential benefits of reducing the current VAT rate on short-term bike hire.”

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 73:

In page 97, between lines 10 and 11, to insert the following:

“Report on Gaeltacht stamp duty exemption

78. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the options for, and potential impact of, exempting the sale of second homes in a Gaeltacht area from stamp duty if they are sold as family homes to Irish speakers, Gaeltacht residents or to bodies such as Údarás na Gaeltachta or approved housing bodies for the purpose of renting to Irish speakers on the local housing list, in the context of the ongoing Gaeltacht housing crisis.”.

Is é an rud atá ar chúl an leasaithe seo ná go mbeadh tús áite tugtha do thithe atá le díol sa Ghaeltacht agus nach mbeadh stamp duty le híoc ag an úinéir le tacaíocht a thabhairt do thithíocht sa Ghaeltacht agus chun a dhéanamh cinnte de go bhfuil tithe sa Ghaeltacht atá le díol i seilbh clann atá ina gcónaí sa Ghaeltacht agus ag tógáil a bpáiste le Gaeilge nó faoi údarás áitiúil, áit a bhfuil siad á gceannach mar thithe sóisialta. Tá brú millteanach ann ó thaobh cúrsaí tithíochta de. Tá grúpaí cosúil le BÁNÚ ag tarraingt aird air seo le tamall fada agus obair mhór á déanamh acu. Is é sin an fáth go bhfuil an leasú seo don Bhille Airgeadais curtha chun tosaigh.

The amendment asks for a report on options on the potential impact of exempting the sale of second-hand homes in the Gaeltacht from stamp duty if they are sold as family homes to Irish speakers, Gaeltacht residents or other bodies, such as Údarás na Gaeltachta or other approved housing bodies for the purpose of renting to Irish speakers or on the local housing list. This is all in the context of the Gaeltacht housing crisis. We know we have a housing crisis but there is also a unique part in that in relation to the Gaeltacht. Organisations like BÁNÚ and others have shone a spotlight on this and have been campaigning on this for quite a while. The reason for this is to try to ensure that these homes remain within the Gaeltacht and Irish speaking families.

There is a huge issue in relation to the future of our language. We have seen in recent times tens of thousands of people come onto the streets of our capital demanding action. One of the elements, or pillars, to their demands was the issue of Gaeltacht housing. This is looking at this possibility. It will be small in terms of its impact but there are number of issues and levers that have be pulled in relation to supporting Gaeltacht housing, not least making sure that for local authorities, there would be a separate pot there for investment for the likes of roads, water and sewerage to enable housing in the Gaeltacht and other matters as well. This is just one part of it but an important part.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We obviously have a housing crisis across the country but the impact of the housing crisis in Gaeltacht areas and what it is doing to our language is incredibly serious. There has been huge disruption to limited housing supply for Irish speakers. This is something that has been caused by disruptive practices from the short-term letting sector. BÁNÚ has highlighted the situation well where we have had highly qualified Irish language speakers working in Gaeltacht areas and who are from those areas unable to get housing and sleeping in vans and in effect skilled workers with the language that we need in the Gaeltacht areas being driven out of the area because they cannot access housing. It is a serious issue that needs to be addressed. Addressing the issue has my full support.

Paschal Donohoe (Dublin Central, Fine Gael)
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Matters pertaining to the preservation of the Irish language from a policy point of view are the responsibility of my colleague, the Minister of Rural and Community Development and the Gaeltacht, Deputy Dara Calleary. One of the primary roles of his Department is to support the Irish language and to strengthen its use as the principal community language of the Gaeltacht. That Department funds and works closely with Údarás na Gaeltachta as the regional development agency for the Gaeltacht. It co-funds and works closely with Foras na Gaeilge in its work in supporting the Irish language on an all-island basis. It also funds the office of the language commissioner. That Department also has overarching responsibility for implementation of the 20-year strategy for the Irish language 2010-2030. It promotes a holistic integrated approach to the Irish language which is consistent with international best practice.

To address specifically the Deputy’s proposal that a stamp duty exemption, as outlined, be considered, I stress that such a measure, if introduced, would be extremely difficult, if not impossible, to administer or control. There could also be potential legal issues in seeking to apply such a measure that is selective on the grounds of region and-or a cohort of persons. Both Údarás na Gaeltachta and approved housing bodies already enjoy stamp duty exemptions under section 25 of the Údarás na Gaeltachta Act 1979 and section 93A of the Stamp Duties Consolidation Act 1999, respectively. For those reasons, I cannot accept this amendment.

Pearse Doherty (Donegal, Sinn Fein)
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I just want to flag that I am looking to table an amendment on Report Stage in relation to bulk purchases.

Mairéad Farrell (Galway West, Sinn Fein)
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Amendments Nos. 74, 75 and 78 are related and will be discussed together. Amendment No. 78 relates to section 92.

Pearse Doherty (Donegal, Sinn Fein)
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I move amendment No. 74:

In page 101, between lines 14 and 15, to insert the following:

“Report on Banking Levy

81. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the banking levy and, in particular, the effective rate of the levy relative to the net interest income and operating profits of in-scope credit institutions in each of the years since its introduction, and the effective rate of equivalent levies in EU Member States relative to the same base. Additionally make reference to the government’s decision to ignore senior legal advice on ensuring banks contributed to the defective concrete block scheme.”.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Amendment No. 75 is about the banking levy. Section 80 maintains the banking levy at what I consider to be a derisory rate of 0.1%. Given that the larger banks in Ireland are not contributing corporation tax, I do not think it is a sufficient contribution. At a minimum, the levy should be ensuring the contribution akin to a normal year’s corporation tax contributions. There should be a report and, furthermore, there should be a proper contribution through the banking levy until we get back to a situation where we have normal corporation tax contributions being made by the banking sector.

Pearse Doherty (Donegal, Sinn Fein)
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I agree wholeheartedly with what Deputy O’Callaghan said. Both of us are looking for the same thing here, that is, an increase in the banking levy. The banking levy is at way too low of a level. I know the Minister will say that €200 million is being brought in. Compared to the profits of the banks, however, it is only a fraction. It would be interesting to hear the Minister’s view on the direction of the banking levy, given State's involvement in the banks now, particularly with PTSB’s move and the field that will result in and how the levy will be applied in the future? I believe it needs to be continued. I said that it needed to be raised. We have argued for it to be at least double the rate that it is at the minute. The reality is that the banking levy does not take in €200 million because the levy can be offset against corporation tax to write down a corporation tax bill.

That takes me to my next amendment, which relates to a report on the taxation of the bailed-out banks. It is madness. I table this amendment every year. When Fine Gael and the Labour Party brought forward the proposal to end the very sensible amendment that the late Brian Lenihan brought forward, which was that only 50% of losses would be able to be carried forward, the argument at the time was that it was required for capitalisation to ensure that the banks were adequately capitalised. That argument does not stack up anymore. There were further arguments to say that it would not matter to the taxpayer because we were getting dividends from the banks. We are not anymore, however. Therefore, it does matter. Again, it screams of the priorities of this Government when we have banks making profits of €5 billion between them and paying no tax or have an effective tax rate of less than 1%. It is just not acceptable in terms of the corporation tax they should be paying. We should go back to the position at the time the banks were bailed out, which was a recognition that these losses would be used by the banks to write down their profits and taxation liability in the future. In fairness, and I have said it over and over again, at a time when the banks were bust and literally looking at liquidation, in the middle of all of that, Brian Lenihan recognised – I am sure his advisers advised him – that they would be profitable in the future and that they should not be allowed to carry these losses forward at a rate of 100%.

I have made the point as well that what we offer here is unique. The Minister will say that the banks are treated in the same way as any other business in how losses are carried forward, and that is actually true. The point, however, is that the bailed-out banks are not like any other business. They only exist today because they were bailed out at a huge price, not just in a monetary sense of the euros we pumped into them, but at a huge cost to Irish society, people, families and all so on. For that reason, they are not the same as any other business. That is why that legislation was amended at the time to ensure the banks were treated differently.

When we examine what we do in terms of carrying forward losses, we allow for losses to be carried forward indefinitely at a rate of 100%, which means they could be carried forward for 20 or 30 years. There is no cut-off point. We are an outlier by far in the OECD in this regard. In many countries, our competitors have a deadline of carrying forward losses of ten years or, if it is not ten years, they have a restriction on the amount that can be carried forward. We allow losses to be carried forward at a rate of 100% without any deadline, not even a ten-, 15- or 20-year deadline. It is quite unique that both of those would apply in the OECD the last time I looked at it, which was a while ago. It will not surprise me that the Minister will not accept the amendment, but defending a situation where banks are making €5 billion profit off the back of ordinary workers and families through interest rates that are way higher than the European average, and when banks are paying little to no taxation on those profits, is indefensible. That is what this amendment is about. I will press it to a vote when it comes to it.

Paschal Donohoe (Dublin Central, Fine Gael)
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There are two different issues covered in these three amendments, namely, the bank levy and the corporation tax loss relief for banks. I will, therefore, address them individually, starting with amendments Nos. 74 and 75 on the bank levy.

As I announced in the budget, the revised form of the bank levy that was originally announced as part of budget 2024 was extended by one year in budget 2025 and is being further extended by this Bill. That will apply for one additional year. Extending the bank levy in increments of one year at a time ensures that the form, scope and revenue target of the levy can be assessed and calibrated on an annual basis in a manner that accounts for various factors, including the level of profitability of the sector from year to year and the performance of the liable institutions relative to each other.

To avoid the possibility of disincentivising the liable banks from offering improved returns on savings, this levy will continue to be based on the value of relevant deposits held by each of them at the end of a base year, which was previously 2022 but, with effect from next year, will be 2024, and not, as was the case prior to the Finance Act 2023, on the amount of DIRT they paid to the Exchequer in a specified base year.

Deputies Doherty and Farrell are seeking a report on the rate of the levy relative to the net interest income and operating profit for all in-scope institutions since the levy was introduced and the effective rate of equivalent levies in EU member states relative to the same base, as well as the issue of banks and whether they should contribute to the defective concrete block scheme. Deputy O’Callaghan is seeking a report on the potential revenue and industry impacts to increasing the banking levy.

In relation to Deputies Doherty and Farrell’s amendments, they will be aware that the credit institutions licensed by the Central Bank do not necessarily have to publish net interest income on a sub-consolidated basis. Prior to the amendments made in Finance (No. 2) Act 2023, the levy had a wider application, and some in-scope banks only reported net interest income on a consolidated basis with no breakdown available for their Irish subsidiaries. Therefore, any such historical analysis as suggested by the Deputies would be incomplete.

The defective concrete blocks grant scheme is under the remit of my colleague, the Minister for Housing, Local Government and Heritage, Deputy Browne. However, the revenue raised by the bank levy is not hypothecated and the annual yield contributes to the general Exchequer.

In relation to Deputy O’Callaghan’s amendment, which seeks a report on the potential revenue and industry impacts that would arise from increasing the bank levy, as I have noted, extending the levy by one year at a time ensures it will be reviewed annually by my Department as part of the decision-making process surrounding any further extension. He should note that the target yield for the levy in 2024 was €200 million, but €202 million was received.

Following the passing of the 20 October due date, I am informed by Revenue that €202 million has again been received this year. A similar amount will be received through the levy in 2026. Therefore, for the two years - 2024 and 2025 - that it has been in operation in its current form, the levy has raised considerably more than twice what was raised in each of the previous two years and one third more than the €150 million targeted each year between 2014 and 2021. The levy is intended to ensure that banks make a specified additional contribution to the Exchequer to reflect the substantial assistance provided to them by the State in response to that crisis, at a level that will also ensure that their stability is not put at risk.

I now turn to the corporation tax aspect, as covered in amendment No. 78. As Deputies are aware, corporate tax relief is a long-standing feature of the Irish corporate tax system and a standard feature of corporate tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another.

In 2018, officials from my Department produced a detailed technical note for the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the subject of both bank losses and corporation taxes more generally. It considered in some detail the potential impact of restricting the use of losses carried forward and the introduction of specified-time relief, as they might apply to Irish banks, to the wider banking sector or to the corporate sector as a whole. Among other considerations, it examined the possible effect of such a restriction on consumers, with the possibility that an increased cost base for the banks would be passed on to the consumer in the form of higher fees and interest rates or lower deposit rates. It considered the impact it could have on competition within the banking sector in Ireland, a factor of increasing relevance as banks have since left the Irish market. It also considered potential negative consequences for capital levels with possible resulting regulatory impacts.

In the case of the banks, it is important to acknowledge that the value of these tax losses to the State has been, and will continue to be, realised through share sales, which, of course, is what has happened. Despite the scale of losses accumulated, the banks contribute to the Exchequer through the financial institution levy.

For all those reasons, it is my view that it would be detrimental to consumers and, in the long run, to the taxpayer if a restriction were to be placed on the use of losses carried forward by the banks. To conclude, and in light of what I have said, I do not intend to accept any of the three amendments.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Briefly, we have a situation where there are very considerable profits and a very low tax contribution, including the revenue that comes in from the levy, which is well below normal corporation tax levels, and at the same time a Minister asking what if this gets passed on to the individual bank customers. With regard to mortgage spreads, the amounts that the banks take in profit off mortgages in Ireland is way in excess of other countries. Is that going to be tackled? They are already taking way more in profit off people who have mortgages and that actually contributes to the housing crisis and our affordability crisis in housing. It is a contributory factor that needs to be tackled.

I will ask the Minister one thing. From the analysis that was done, how much longer will these losses be carried forward?

Paschal Donohoe (Dublin Central, Fine Gael)
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I do not have the information. If the Deputy bears with me for one moment, I will get it for him.

In regard to Bank of Ireland, it is estimated that the utilisation period will be the end of 2028. With regard to PTSB, it is estimated that it would be a further 12 years. I will come back to the Deputy with regard to Allied Irish Banks later on. I have a query in relation to something here myself.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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On the issue of the mortgage spreads being out of kilter with other countries, are there any plans to tackle that or raise the matter? The issue is the profits being taken on mortgages being out of kilter with other countries.

Paschal Donohoe (Dublin Central, Fine Gael)
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Ultimately, my view is the best way we have of making progress on that is through competition within the sector. It is why the decision in relation to the future of PTSB is so important. It is why we are trying to encourage and support more competition in the mortgage sector. That is the way we will do it. Neither the Central Bank nor the Government has the ability to intervene in the pricing decisions that banks make regarding the availability of mortgage products. We need more competition. We have two large banks and a smaller one, and we need more competition in the mortgage market in the long term to make a difference on that issue.

Pearse Doherty (Donegal, Sinn Fein)
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We are not going to see eye to eye here but the Minister's defence of the banks making €5 billion profit and paying no taxes is that if we make them pay taxes, it is going to be bad for the little people out there. That is just laughable. We need to let them keep on paying no tax on their billions of euro in profit because really what the Minister is trying to do is protect all of us, not the big banks, their bonuses they will get and all the rest; it is actually about protecting the individual. That does not wash with ordinary people. The Minister can try that on but that is not going to wash. His defence is that if we tax the banks, maybe they will pass it on. If that logic exists in the Minister's head, then why not get rid of taxes altogether because, otherwise, all businesses could pass them on? It is just nonsense. There is an issue of equity and equality here. These banks are making billions of euro from high interest rates. People are paying big interest rates on mortgage and if they were in other European jurisdictions, they would be paying thousands of euro less each year.

The Minister for Finance is supposed to be on the people's side, not the side of the banks. Sure we need banks. We need banks that are profitable and lending but, by God, when you are making €5 billion profit, pay a bit of tax. Do what Brian Lenihan said. You should not be able to carry forward all of your losses; you should only be able to carry forward half of them. Every single one of the excuses that Fine Gael put up in regard to why this was necessary is gone. It is not about capitalisation anymore. That issue is gone. It is not about dividends received by us, so why would we do it? That issue is gone. Now the defence from Fine Gael is that we are doing it because we are protecting the ordinary person. That does not wash.

The banks should be making a contribution to the defective building materials scheme. The Attorney General made it clear to the Government that the banks should be making a contribution in relation to that but I have seen no appetite from the Government to ask the financial institutions to put their hands in their pockets for the type of support required to bring a proper 100% redress scheme to people in my constituency and elsewhere. It is absolutely crazy. We are facing into a winter here. We talk about fuel poverty and all of the rest. The curtains are flapping in these houses. The draught is coming through their windows. There are many houses there. The Minister will talk about schemes and the commitments the Government has made. There are people in my constituency who will never be able to rebuild their houses because they will never have the €70,000, €80,000 or €90,000 that is required because the scheme has fallen so far short. Banks, which are going to see - of the ones that are going to be restored - their mortgages and assets restored to the balance sheets, are making no contribution to this at all.

Paschal Donohoe (Dublin Central, Fine Gael)
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We are in a country that two banks have left, with all of the consequences that means for the people who work in them, for the taxes we collect and for the lending we need to build more homes and support SMEs. Two banks left this country, including Ulster Bank, which was present here for decades. We get to a point where I understand the arguments the Deputy is making-----

Pearse Doherty (Donegal, Sinn Fein)
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So this would not apply to Ulster Bank.

Mairéad Farrell (Galway West, Sinn Fein)
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One person at a time.

Paschal Donohoe (Dublin Central, Fine Gael)
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I have a similarly dismal view of the Deputy's arguments. I find them similarly unconvincing. As regards the idea he continually peddles, which does not wash with people, that in some way I am protecting or standing over a guarded elite, he has been making that claim against me for long enough. It still does not wash. What I am trying to do is make a set of decisions that, in the round, are right for the long-term interests of the economy of Ireland. We have spent other points in our meeting talking about how we support SMEs. To support SMEs we need banks in this country that are willing to do so and lend to them in sufficient amounts and at interest rates that are competitive enough for those SMEs to make a difference. I have to consider that then in the decisions we make here. We have spent much of the afternoon talking about the need to build more homes, on which I agree. We need banks to do that as well. At the moment we have two large ones and a smaller one in PTSB. The reason I am making this decision overall to continue the banking levy to ensure that the banks continue to make a contribution is that I recognise the massive support the Irish taxpayer put in, at great expense and at a time when we were in such difficulty, to support the banks. That is why I am continuing the bank levy. The reason I am not supporting the policies for which Deputy Doherty has been making the case for many years is that I believe they would hurt our economy in other ways. Surely he can do me at least the courtesy of acknowledging there might be some serious policy considerations behind that without repeating the baseless claims he has been making for so long about me, which still the majority of people find unconvincing.

Pearse Doherty (Donegal, Sinn Fein)
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I do not see any such considerations. The Minister has asked a question; I will answer him. There is no policy reason to allow these banks to carry 100% of their losses forward - none whatsoever. The arguments the Minister has put forward, the straw men, are gone. It is not an issue of capitalisation; it does not exist. It is not an issue in relation to the dividends we would receive; it does not exist. This was in our tax code. A Minister for Finance from Fianna Fáil brought this into our tax code. It was there, it was sensible and it was accepted by the Department. It was brought out. It was changed for a particular reason that no longer exists. Those banks would be able to carry forward their losses but would be able to carry forward only 50% in any given year, which means they would have to pay tax now. The Minister asked me a question. I cannot acknowledge something that does not exist. I have no doubt he is doing this from what he believes in, but he should not try to pretend that this is about saving the interests of ordinary people out there, who are absolutely hammered by a cost-of-living crisis, and that he is doing this for their sake to make sure that banks that make €5 billion pay no tax in this State. Businesses recognise this. Businesses recognise that when they make profits they have to pay a bit of tax. Left, right and centre in my constituency, they are paying their tax. We are a decade and a half on from the crisis and we still see a situation where losses can be carried forward at a rate of 100% and will be carried forward for the coming years, with bumper profits.

Mairéad Farrell (Galway West, Sinn Fein)
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Go raibh maith agat. An Teachta-----

Paschal Donohoe (Dublin Central, Fine Gael)
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No, sorry, I am coming back in on that.

Mairéad Farrell (Galway West, Sinn Fein)
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An Teachta O'Callaghan first. It will be easier to get both Deputies in before the Minister.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I raised the issue of significant profits - €5 billion in profits - being made with a derisory tax contribution. The Minister in his argument said that if we were to take in more taxation, that could go on the customers, the people who have mortgages and so on. I pointed out that, actually, people who have mortgages are being ripped off. Comparing our country to others, people here are absolutely being ripped off in terms of the mortgage spreads in Ireland. They are very high by international standards. That needs to be addressed. I said that needs to be addressed; the Minister said the way to address it is competition. Competition would help, but in subsequent remarks he confirmed that we are going in the wrong direction on competition because lenders have left, so that is not working. We have a situation of large profits and very little tax contribution and people are really being ripped off with those mortgage spreads. It is unjustifiable as to why those rates are so high in Ireland. That is an easy profit to take off people. That needs to be tackled. One way to do so would be to say to the banking sector, "Make a fair contribution in taxation because you are ripping people off on their mortgages." Maybe if they were not doing that, we might look on them more benignly, but they are not treating mortgage customers in a fair way. Our spreads are about three times above the UK's.

Paschal Donohoe (Dublin Central, Fine Gael)
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On mortgage spreads, we also have a very different legal environment here in relation to the ability of the banking sector to repossess a non-performing loan. That has an impact. Look at the difference between the UK and Ireland or between Ireland and other jurisdictions in that regard. That has an impact as well in relation to different interest rates on the granting of new loans. Overall, we need a system in which we have more competition within the banking sector. Ours is a small open economy and we need more banks and more competition within our financial services. That is ultimately the way in which we can play a role in seeing our mortgage market become competitive and more competitive interest rates being offered on new mortgages. When it comes to new mortgages, I believe the gap is a lot narrower than it is in relation to existing mortgages.

In response to Deputy Doherty again, I will not give an inch on his argument and the claims he has made about me. He repeats the idea that I am making this decision for an elite out there as opposed to the ordinary people I represent in Dublin Central or whom he represents in Donegal. It is the ordinary people I am thinking of here, some of whom may actually work for these banks, or the ordinary people looking for future lending to be able to support a small business or to be able to get a mortgage to acquire a house or an apartment. They are the people I think about when I think about what the long-term interests for Irish banking are. That is what I have in my mind. My view is to move to a situation where, given that we have a banking levy that is bringing in revenue in recognition of the contribution that the taxpayer made to bailing out the banking sector, that is a way in which that issue is dealt with. If we were to treat the banking sector differently from a corporate tax point of view from how we treat the rest of our economy, I believe that would be the wrong thing to do. On a very practical note, I used to be continually asked in the Dáil, although I have not been asked this for a while, what I am doing to bring new banks into Ireland and to open up new bank branches. Does Deputy Doherty think that argument would be harder or easier to make if we were to tax banks in a different way from the rest of our economy?

Edward Timmins (Wicklow, Fine Gael)
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On a point of information, just to correct something there-----

Mairéad Farrell (Galway West, Sinn Fein)
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On the amendment?

Edward Timmins (Wicklow, Fine Gael)
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Yes. Irish mortgage rates are the seventh highest in the eurozone, out of 21 euro countries, so it is not fair to say they are the highest.

Pearse Doherty (Donegal, Sinn Fein)
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May I just make one point very briefly? I do not want to open the debate again-----

Mairéad Farrell (Galway West, Sinn Fein)
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Very briefly.

Pearse Doherty (Donegal, Sinn Fein)
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-----but this would not apply, as the Minister knows, to new entrants into the market because what the Minister's predecessor, the late Brian Lenihan, did applied only to bailed out banks.

Mairéad Farrell (Galway West, Sinn Fein)
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Go raibh maith agat. I am conscious of the time and I want us to try to get through the amendments. I understand these issues are very important and everybody feels passionately about them but I am aware of the time as well.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I move amendment No. 75:

In page 101, between lines 14 and 15, to insert the following:

“Report on increasing the Banking Levy 81. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential revenue and industry impacts to increasing the banking levy.”.