Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

It is why the additional revenue from carbon tax will be used to invest in a socially progressive national retrofitting programme.

The 2019 climate action plan recommended the development of "an enabling framework for micro-generation which tackles existing barriers and establishes suitable supports within relevant market segments". To that end, I am proposing a modest tax disregard in respect of personal income received by households who sell surplus electricity that they generate back to the grid.

VEHICLE REGISTRATION TAX (VRT)

I made significant changes to the VRT system in last year’s budget to strengthen the environmental rationale of the tax in line with Government commitments to radically reduce emissions from road transport. The structure of new car sales for 2021 compared to 2020 is evidence of the success of this approach, with an increase in vehicles registered at the lower end of the VRT scale. I am proposing further changes in this regard to strengthen this approach. From January 2022, a revised VRT table is being introduced. The 20-band table will remain with an uplift in rates, as follows: a 1% increase for vehicles that fall between bands 9 to 12; a 2% increase for bands 13 to 15; and a 4% increase for bands 16 to 20. In addition, to continue to incentivise the uptake of electric vehicles, I am extending the €5,000 relief for battery electric vehicles to the end of 2023.

ACCELERATED CAPITAL ALLOWANCES

Finance Act 2020 extended the accelerated capital allowance, ACA, scheme for energy efficient equipment.

In accordance with wider Government policy to reduce reliance on fossil fuels, I am providing that equipment directly operated by fossil fuels will no longer qualify. The scheme seeks to support the transition to lower-emission fuels in the heavy-duty land transport sector. Therefore, I am extending the ACA scheme for gas vehicles and refuelling equipment for three years. As a transport fuel, renewable hydrogen offers significantly higher carbon savings than fossil fuels. I am also extending the scheme to include hydrogen-powered vehicles and refuelling equipment. This policy is aligned with wider Government policy to reduce our greenhouse gas emissions and to achieve net zero carbon emissions by 2050.

AGRICULTURAL RELIEFS

Farming families have, of course, a central role to play in protecting the environment over the long term. Supporting the next generation of farming families is essential to guarantee the long-term future of agriculture and the agribusiness sector. They too have an important role to play in the national recovery from the pandemic. As such, I intend to extend the various farming stock relief measures.

General stock relief will continue to the end of 2024.

Stock relief for young trained farmers and farm partnerships, and the young trained farmer stamp duty relief, will continue to the end of next year.

These measures, designed to support young farmers, are deemed to be a state aid by the EU, allowable under the agriculture block exemption regulation. The current exemption is scheduled to expire on 31 December of next year. Therefore, I can only extend all three reliefs until that date.

However, I have been advised by the Department of Agriculture, Food and the Marine that it is confident that reliefs of this nature will continue to be considered an acceptable form of state aid under the terms of any revised regulation. I am hopeful, therefore, that I will be able to provide for a further extension of this relief, as well as the stock reliefs for young trained farmers and farm partnerships, next year.

INDEPENDENT BREWERS

The reviewed and revised EU alcohol directive now permits the granting of up to 50% excise relief to independent small producers of cider and other fermented drinks products. I see this relief as having a similar positive effect as that provided for small independent producers of beer and have asked my officials to engage with the sector to allow for the implementation of this relief in next year’s finance Bill.

SUPPORTING BUSINESS

Supporting entrepreneurs and the wider business community will be central to our broader national recovery. They are indeed the backbone of our domestic economy, supporting tens of thousands of jobs across the country. This is why I am implementing a package of measures to support our smaller businesses and entrepreneurs.

EMPLOYMENT INVESTMENT INCENTIVE

The employment investment incentive scheme has the potential to become a real driver of investment in early stage companies and high-potential start-ups. Changes have been made to the scheme in recent years, but it has yet to reach its potential.

Today, I am announcing an extension of the scheme for a further three years and I am also bringing forward a number of important improvements, the effect of which will be to make the scheme more attractive to investors to the ultimate benefit of companies in their start-up years and to the economy through job creation.

More significantly, and following engagement with relevant stakeholders, I intend to open up the scheme to a wider range of investment funds and I am confident that this measure on its own will result in greater investment in early stage enterprises.

In addition, subject to certain conditions, I am relaxing the rules around the so-called "capital redemption window" for investors. I am also removing the 30% expenditure rule, which is unduly restrictive in the context of the self-assessment principles that now apply to the relief.

INNOVATION EQUITY FUND

In last year’s budget, I announced that the Government would commit a €30 million investment through the Ireland Strategic Investment Fund, ISIF, to establish an innovation equity fund with a mandate to invest in domestic high innovation enterprises.

Today, I can announce that the Government intends to commit a further €30 million investment to this fund through Enterprise Ireland. This will be matched by €30 million from the European Investment Fund, subject to board approval.

Through a memorandum of understanding being agreed by all three parties, ISIF expects to participate with its €30 million as a co-investor, leading to potential investments of up to €90 million for predominantly early stage Irish SMEs. It will launch in early 2022 and will increase the availability of early stage funding for our entrepreneurs and youngest companies. It will be consistent with other priorities, such as promoting regional development, supporting female entrepreneurship and climate change initiatives.

RELIEF FOR START-UP COMPANIES

Today I am also announcing an extension of the section 486C corporation tax relief for certain start-up companies to the end of 2026. Data shows that this relief continues to support employment and businesses in a cost-efficient manner. In view of the challenges companies currently face in accessing the relief, start-up companies will now be able to avail of the relief for up to five years, in place of the current three years.

These changes will provide greater certainty to recently established companies and those seeking to commence or launch as we recover from the pandemic. Further details can be found in the review of the relief, which is being published today.

TAX CREDIT FOR DIGITAL GAMING

As I announced in my budget speech last year, I am introducing a new tax credit for the digital gaming sector. This sector has seen exponential growth across the world in the past decade. However, employment growth in the sector in Ireland has not matched this trend. It should.

The relief will support digital game development companies by providing a refundable corporation tax credit for expenditure incurred on the design, production and testing of a game. The relief will be available at a rate of 32% on eligible expenditure of up to a limit of €25 million per project.

There are synergies with our established film and animation sectors that will support quality employment in a creative and digital arts sector that has so much potential.

Full details of the relief will be published in the finance Bill. As European state aid approval is required for the introduction of the credit, it will be introduced subject to commencement orders.

TOBACCO

To support public health policy to reduce smoking in Irish society, I am also increasing excise duty on a pack of 20 cigarettes by 50 cent, with a pro rataincrease on other tobacco products. This will bring the price of cigarettes in the most popular price category up to €15.

EXTENSION OF BANK LEVY

Since its introduction in 2013, the bank levy has been extended on several occasions and currently applies to the end of the year. The annual yield of this levy has been approximately €150 million.

I am extending the levy for a further year. However, as Ulster Bank and KBC are leaving the market in 2022 I intend to exclude them from the charge. In addition, I am proposing that the remaining banks will pay the same amount in 2022 as they did this year. This equates to approximately €87 million in total.

I have also instructed that the levy and its future be assessed over the course of the coming year.

ANTI-TAX AVOIDANCE DIRECTIVE

In accordance with our commitments to international tax reform, this year's finance Bill will complete our transposition of the anti-tax avoidance directives. I am providing for the introduction of a new interest limitation ratio and new anti-reverse hybrid rules, both of which have been developed over the year with the input of stakeholders through a public consultation.

CORPORATION TAX

This leads to corporation tax. The Government has taken the historic decision to join the global political agreement on the future of corporate taxation. The importance of our 12.5% rate is well known to the House. Budget speeches by my predecessors and, indeed by myself, made the case for this rate.

However, I strongly believe that our national interest is now best served by joining this agreement. It maintains our tax competitiveness and strengthens our position in the world. The agreement, which we shaped, is balanced and represents a fair compromise. While there will be a cost to the Exchequer, it provides long-term certainty for businesses and investors for the benefit of Irish jobs.

As a small open economy that depends on rules and order in global tax and trade, an agreement was in our interests.

The question of the rate was the biggest challenge for Ireland. We successfully made our case. Due to our efforts, the minimum effective rate was set at 15% for larger multinational companies. It could have been far higher. It could have been more uncertain. We avoided those risks.

That is why it is in our interest to be in.

When it comes into effect, Ireland will apply the new minimum effective rate of 15%. This will be still less than the rate of many of our key competitors.

Importantly, Ireland will continue to offer the 12.5% rate for businesses with revenues of less than €750 million. This means no change for 160,000 businesses employing 1.8 million people.

We will remain an attractive location for investment and we will continue to play to our strengths, centred on a highly educated and dynamic workforce that has consistently delivered innovation and profitability over many decades to businesses that have made Ireland their home.

I knowthis was a major decision. However, it is the right decision for Ireland, for our jobs, for our economy and for our ability to attract and keep investment in our country.

COMMISSION ON TAXATION AND WELFARE

On the broader challenges associated with taxation into the future, last year I announced the establishment of an independent Commission on Taxation and Welfare.

The commission was tasked with considering how best the tax and welfare systems can support economic activity and promote increased prosperity, while ensuring that there are sufficient resources available to meet the costs of our public services and supports over the medium to longer term. This work will be essential in continuing to put our public finances on a sustainable basis over the coming years.

The commission will have particular regard to the impact of the pandemic as well as long-term developments such as ageing demographics, the move to a low-carbon economy and the rise of digital disruption and automation.

We will continue with this work. A public consultation will be launched over the coming weeks and will seek input from our country. This will inform the commission in completing its important work.

I look forward to considering the commission's recommendations when they are published next summer.

CONCLUSION

I want to conclude by again paying tribute to the heroes of the Covid pandemic, both seen and unseen, including those involved in the roll-out of our vaccination programme. Without all of them we would not be where we are today, planning for the resumption of safer times.

For those whose jobs have not yet returned, let me again reiterate that this Government stands with you.

For those concerned about the rising cost of living, this budget will help you.

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