Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank Deputies for their considered and useful contributions today and last week. During the course of this Second Stage debate, a number of Deputies raised the future prospects of the Irish economy and Irish society. The Government is acutely aware of the challenges the Irish people have faced over the past few years and the resolute way they have faced them. The difficult decisions that have been taken are bearing fruit. The public finances have been put on a sustainable path and the economy is being rebalanced. However, more work needs to be done. For this reason, with Government agreement, my Department and the Department of Public Expenditure and Reform are drawing up a medium-term economic strategy to cover the period from 2014 to 2020.

The Government's focus is firmly fixed on achieving a successful and durable exit from the EU-IMF programme of financial assistance, which runs until December of this year. It is doing all it can to this end. All options that assist in supporting durable and sustainable future market funding will be considered in light of what is appropriate for Ireland. I am aware of the concerns some consumers may have about the domestic banking landscape. Deputies should be aware that under the provisions of section 149 of the Consumer Credit Act 1995, as amended, regulated financial institutions must apply to the Central Bank for permission if they wish to increase charges and fees.

A number of Deputies spoke about the local property tax, which does not fall within the scope of this Bill. I reiterate that there is no requirement on any property owner to pay the local property tax for 2014 before 1 January 2014. I can absolutely state that no penalties will apply if a person does not pay before then, as the tax is not due until 1 January next. Perhaps it is worth mentioning that other specific issues which were raised by Deputies during this Second Stage debate are not primarily the responsibility of my Department. Therefore, I cannot address them in this reply.

I would like to respond to some specific points that were made about the Bill. Some Deputies referred to the decision to replace the one-parent family tax credit with the single person child carer tax credit. They sought to portray this as an attack on separated fathers. Ultimately, the number of single fathers affected by this measure will depend on the family circumstances in each case. This cannot be described as an attack on single fathers. It is important to point out that the child benefit payment will not be the determining factor in deciding who can claim the new tax credit. That payment is being used as the initial indicator to ease the transition from the old credit to the new. It should be noted that this new policy has been agreed by the Government on the basis of the Commission on Taxation's recommendation that the credit should be retained, but should be confined to the principal carer only. As I outlined in my opening speech, I intend to propose a Committee Stage amendment to provide that the new credit can assist the non-primary carer to take up or remain in employment where the primary carer has no tax liability.

A number of Deputies referred to the budget decision to restrict tax relief in respect of medical insurance premiums. I am advised by the Revenue Commissioners that based on 2012 data, it is estimated that up to 577,000 policy holders, which equates to almost 53% of all policies, may be affected by this measure. Of those that are affected, many will only be affected marginally, depending on the cost of the policies that individuals purchase.

Deputy Lawlor mentioned the sportspersons relief. I want to be clear about this issue. Following the concerns raised by the European Commission, we had two options. We could choose to extend the relief to allow sportspersons to live in another European Union or European Free Trade Association country, or choose to abolish it altogether.

Deputy Michael McGrath suggested that the home renovation incentive is too cumbersome for individuals. The incentive is designed to be very easy to claim. All claims are handled online through the Revenue website. Deputy Lawlor asked whether invoices can be accumulated to reach the €5,000 threshold under the home renovation incentive. The threshold can be reached by carrying out several jobs. It does not have to result from a single job. Therefore, any qualifying job undertaken can be included to reach the €5,000 threshold.

I acknowledge that Deputy Michael McGrath and Deputy Pearse Doherty both welcomed the change introduced in section 38 of the Bill to ensure Irish companies cannot be "stateless" for the purpose of their tax residence. I welcome Deputy Michael McGrath's positive response to the enhancements to the research and development tax credit that I have announced. These enhancements include the phasing out of the base year when resources allow.

Deputies Michael McGrath, Shortall, Mitchell and McDonald made a number of comments about my dealings with the pensions sector and the additional 0.15% pension fund levy that will apply to pension fund assets next year and in 2015. I acknowledge Deputy McGrath's welcome for the changes being made to the standard fund threshold regime. However, I must correct one misapprehension that he and others seem to be under. It has been suggested that individuals in the public service have been singled out for preferential treatment under the regime. This is incorrect. The changes to the standard fund threshold regime apply, as appropriate, to both defined benefit and defined contribution pension arrangements in both the private and public sectors. I would not categorise my engagement with the pensions sector on the proposed changes to the standard fund threshold regime as a "bargain", in the manner suggested. The assessment that the changes to the regime required to deliver on the budget 2013 commitment to cap taxpayer subsidies to higher value pensions would have a considerably lower yield than originally estimated meant that the achievement of our overall budgetary objectives, including the continuation of the reduced VAT rate for the tourism sector which the Deputy and many others have rightly welcomed, necessitated among other things the imposition of the additional 0.15% pension fund levy for 2014 and 2015.

Deputy Shortall pointed out that the levy does not apply to unfunded public service pension schemes. While this is the case, of course, she omitted to mention that public service pensions above €12,000 per annum have been cut by an average of 4% since 2011 by means of the public service pension reduction, with much more severe cuts at higher pension levels. Deputy Michael McGrath accused me of penalising and not incentivising pension savings. He quoted figures from the Irish Brokers Association in this regard. That association and other groups have made it clear to me previously that the most significant incentive to pension savings is the marginal rate tax relief on pension contributions, which I am maintaining. Deputy Pearse Doherty said that I blindly accepted the pensions sector proposals for their changes to the standard fund threshold regime and the yield associated with those changes. This is clearly incorrect.

Deputies Michael McGrath, Boyd Barrett and Simon Harris referred to the capital gains tax relief for entrepreneurs which I announced in budget 2014. In light of the required increases in capital gains tax rates over recent years, and the need to encourage entrepreneurship in the economy, there is a case for a targeted and time-bound capital gains tax relief to encourage investment in assets used in specified new trading activities which would give rise to economic benefits and employment.

DIRT was mentioned by several Deputies. In certain cases, deposit interest can be paid without deduction of DIRT or individuals can get a refund of DIRT deducted. There is no exemption for children. One Deputy mentioned accounts owned by children in credit unions, but there is no reason such accounts should be treated differently from accounts held by children in other financial institutions.

I assure Deputy Boyd Barrett that the Finance Bill provisions relating to real estate investment trusts do not involve any policy changes. They are purely technical changes intended to correct minor errors in the legislation enacted earlier this year. While I note the Deputy's comments in relation to section 33, I strongly refute his characterisation of this measure as a bailout of the banks. The removal of this restriction will serve to level the playing field between participating institutions and other companies.

Deputies Pearse Doherty, McLellan, Nash and Deasy raised issues concerning the living city initiative, which was announced earlier this year as part of the Finance Bill 2013. I said at the time that the proposed scheme would be subject to a full ex ante cost-benefit analysis and would require EU state aid approval from the European Commission. Following the receipt of a report, an application for EU state aid approval will be submitted shortly to the European Commission. The evidence presented in the cost-benefit analysis will form part of this application.

Deputy Michael McGrath mentioned that the Government announced a reduction in the air travel tax in July 2011. He suggested that we did not follow through on it. The July 2011 announcement was subject to agreement being reached with the airlines to bring in additional passenger numbers. Such an agreement was not forthcoming. I have been heartened by the response of Ryanair to last month's budgetary announcement.

Deputy Pearse Doherty argued that the increase in excise duty on alcohol is a revenue-raising measure. It is estimated that these increases will raise €145 million in 2014. This has helped me to retain the lower rate of VAT for the tourism sector. I point out that the percentage of excise on a pint of beer is less than it was ten years ago in 2003.

Deputy Doherty also stated that the extension of betting duty to remote operators would raise €20 million in a full year. The Betting (Amendment) Bill 2013 was published in July. Deputies will be aware that under the technical standards directive, the EU Commission had to be consulted about the Bill following its publication and this led to a standstill period of a minimum of three months. It is my intention, subject to agreement with the Whips, to progress the Bill in this session.

I acknowledge the references made by many Deputies from both sides of the House to the retention of the 9% reduced VAT rate for tourism-related services. The outcome has been very positive with an estimated 15,000 additional jobs created in the sector. I am therefore happy to confirm the retention of this arrangement under the Finance Bill which, in tandem with the reduction of the air travel tax to zero, will reinforce and build on the progress already achieved in the important hospitality sector of the economy.

Various Deputies raised the issue of changes to the income tax pay and file arrangements. I am aware of the concerns that have been raised by various stakeholders and have recently completed a consultation process on this very issue.

Unfortunately time does not permit me to address all the issues raised during our debate here and as I mentioned in my opening statement there are still a small number of matters under consideration for inclusion by way of amendment on Committee Stage. I thank my colleagues for their very constructive contributions and I commend the Bill to the House.

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