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

The scheme will be open to businesses that carry on a case 1 trade, are tax compliant and have experienced a significant increase in their natural gas and electricity costs. The scheme will be administered by the Revenue Commissioners and will operate on a self-assessment basis. Businesses will be required to register for the scheme and to make claims within the required time limits. It is proposed that the scheme will operate by comparing the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021. If the increase in average unit price is more than 50% then the threshold has passed and the business is eligible for support under the scheme. Once eligibility criteria are met, the support will be calculated on the basis of 40% of the amount of the increase in the bill amount. A monthly cap of €10,000 per trade will apply and an overall cap will apply on the total amount a business can claim. The scheme is being designed to be compliant with the EU state aid temporary crisis framework and will need to be approved by the EU Commission in advance of making payments.

This is a significant intervention by the Government in the Irish economy to protect employment. This scheme forms a large part of our once-off measures. We must weaken the ability of a shock to income becoming a loss of jobs. This new policy will help employers with their rising bills and will help to save their businesses.

SMALL BENEFIT EXEMPTION

The small benefit exemption allows an employer to provide limited non-cash benefits or rewards to their workers without the payment of income tax, PRSI and USC. I am increasing the annual limit provided for in the exemption from €500 to €1,000 and I will also permit two vouchers to be granted by an employer in a single year under the exemption. I propose that these changes will apply in the current tax year, so that additional benefits can be paid this year if an employer wishes to do so.

EXCISE - CIDER

Deputies should also note that I will be following through on the statement from last year in relation to the production of cider, by implementing the option in the revised EU alcohol directive to grant up to 50% excise relief to independent small producers of cider and pear cider, also known as perry.

EXCISE – SPECIAL EXEMPTION APPLICATION

The Government is committed to supporting the night-time economy, not just our hospitality sector but our musicians, venues, event operators and organisers who are fundamental to creating a vibrant cultural life. In line with a commitment in the programme for Government to modernise our licensing laws, I am today announcing that we will halve the cost of applying for a special exemption order, which late-night venues require in order to open. This will reduce the excise fees for a special exemption application order from €110 to €55. This aligns with a number of measures we have taken to support the night-time economy, and ahead of longer term reforms which will be announced when the general scheme of the sale of alcohol Bill is published within weeks. A financial resolution will be brought in tonight to enact this measure.

VAT – HOSPITALITY

As I have previously stated, the 9% VAT rate, which is currently in place to support the tourism and hospitality sectors, will continue until 28 February 2023.

VAT – NEWSPAPERS

The Government is also aware of the critical role that newspapers play in our society, from reporting on local communities to holding those in power to account.

For that reason, I will reduce VAT on newspapers from 9% to zero from 1 January 2023. This is in line with the Government’s commitment to supporting an independent press and the Future of Media Commission's recommendation on this matter.

VAT – HEALTH PRODUCTS

Many Deputies have contacted me seeking the removal of VAT on defibrillators. I told them on many occasions that doing so was not permitted under the EU VAT directive. However, after much negotiation, it is now possible for member states to apply a zero rate. I am happy to announce I will apply this rate to these life-saving devices from 1 January. I will also apply a zero rate of VAT to hormone replacement and nicotine replacement therapies, as well as the small number of period products that are currently subject to a 9% rate.

TAX CREDITS

Turning to the various business-related tax credits, I am extending the knowledge development box, which encourages companies to develop intellectual property in Ireland, for four more years. I am also providing for amendments to the payable element of the research and development tax credit to ensure it aligns with new international developments. In recognition of the long production cycle for audiovisual productions, I am legislating to extend the film corporation tax credit beyond the current end date of 2024 to December 2028.

In recent years, Ireland has emerged as a location of choice for new and innovative multimedia industries, such as animation and digital gaming. To continue building on these successes, I have asked my officials to explore the opportunities for Ireland in the so-called unscripted production sector to encourage international firms to locate here and help sustain employment in indigenous businesses.

As well as extending the key employee engagement programme until the end of 2025 and commencing some 2019 provisions following approval from the European Commission, I propose to make further important changes to this measure. Collectively, these steps represent progress that can be further built upon in 2023. I am also extending the special assignee relief programme until 2025, but increasing the qualifying income to €100,000.

WINDFALL ENERGY TAX

Turning to revenue-raising measures, much work is under way in the EU on capturing the windfall gains of energy companies. It is not fair for some companies to earn excess profits from the current volatility in the energy market while so many other companies are suffering. Ireland aims to be part of this EU-wide response to high energy prices. If this is not possible, the Government will bring forward our own measures.

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 this year. The current annual yield of this levy is approximately €87 million. I am extending it for a further year. Following the publication of the report of the retail banking review, I will consider the long-term future of this levy.

TOBACCO

To support public health policy to reduce smoking in society, I am increasing excise duty on a pack of 20 cigarettes by 50 cents, with a pro rataincrease on other tobacco products.

COMMISSION ON TAXATION AND WELFARE

A Cheann Comhairle, I would like to take a moment to look beyond these immediate issues of today and to consider some issues we will face over the medium to long term. I welcome the recent publication of the report of the Commission on Taxation and Welfare and thank its members for their hard work. They considered how the overall balance of taxation might shift to sustainably fund public services over the long term.

Its recommendations are clearly not intended to be implemented immediately, but suggest a clear direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved. The report has already fed into a number of policy actions being announced today.

As referenced earlier, I have requested that the Department of Finance consider the proposals relating to a range of recommendations across PRSI, USC and income tax in the coming months with a view to developing a medium-term roadmap for personal taxation reform to address these and other related issues.

In the area of property, I welcome the commission’s proposals on changes to the local property tax and a site value tax but these reforms are wide-ranging. They require careful consideration and consultation across government. I am also committing to commence a review of the real estate investment trust, REIT, and Irish real estate fund, IREF, regimes.

Institutional investment has played a key role in the provision of housing in recent years. This review will consider those structures and how best they can continue to support housing policy objectives. In addition, I also intend to commence a review of the use of section 110 regimes and to establish a working group to consider the taxation of funds, life insurance policies and other investment products.

Another area which the commission considered in great detail was corporation tax.

CORPORATION TAX

The pace of international tax reform over the past 12 months has been intense. In October of last year, Ireland, along with 140 other countries, signed up to a two-pillar solution to address the tax challenges arising from digitalisation. We have committed to the two-pillar agreement and I have engaged intensively at OECD and EU level to deliver that commitment.

The agreement is in line with the long-standing practice of our country position that co-ordinated multilateral action is the best approach to ensuring the international tax system keeps pace with changes in how business today is conducted. Work is continuing to develop the multiple new elements required to give effect to the pillar 2 minimum effective tax rate.

This work will continue over the coming months in conjunction with serious consideration of options for a move towards a territorial corporation tax system. Needless to say, our tax regime is a core element of the economic policy mix of this country and a long-standing anchor of our offering to attract foreign direct investment, FDI.

In addition to our current 12.5% headline tax rate, we will also ensure that we continue to play to our strengths, such as a forward-looking business environment and educated and dynamic workforce. As I acknowledged earlier, however, we need to be mindful of our reliance on corporate tax.

My Department has undertaken significant work on these vulnerabilities, showing that approximately €1 in every €8 collected by the State in tax comes from the corporate tax payments of a small number of firms. At the same time, our income tax system is heavily reliant on a small number of employees; just over 500,000 workers and ten companies account for one third of our revenue.

My Department estimates that so-called excess receipts - the amount which could be more vulnerable to a shock - could amount to €8 billion to €10 billion even in this year. While these receipts are extremely welcome, we are not using them to fund permanent expenditure. To do so would repeat the mistakes of the period of the global financial crisis.

It is, therefore, imperative that we treat these excess receipts differently, which we are doing first by identifying them, as my Department has done, through our recent paper entitled De-risking the Public Finances: Assessing Corporation Tax Receipts. Second, to provide a clearer picture of the underlying health of the public finances, my Department will now employ a new metric called GGB star to monitor the public finances, including any excess receipts. For example, for this year it would indicate a deficit of €8 billion compared to the surplus of €1 billion.

Third, and most important, I intend to start replenishing the national reserve fund with some of these excess receipts now to build up our economic resilience.

NATIONAL RESERVE FUND

Following so soon after Brexit and Covid, it is a major achievement for our country to be in a position to put additional resources aside in order to prepare for future challenges, and to run a surplus. Let me be clear; there are major challenges which we know are coming, and which we know will be very costly for the future: an ageing population, the digital transition, and climate change. Second, we also know that challenges which are largely unforeseen happen more often and they have a big impact. It is, therefore, imperative that we prepare our public finances appropriately. This year I will be directing €2 billion into the national reserve fund, and €4 billion in 2023. These contributions effectively mean that we will have banked a large share of additional corporate tax revenues; that they do not fund additional permanent expenditure; and it will supply our State with additional firepower to respond to the challenges of the future. I will be introducing the necessary Dáil resolution tonight in order to give effect to the transfers to the fund for this year and next.

CONCLUSION

I want to conclude, therefore, on an optimistic note, and that is because despite the many challenges facing our country, this Government is confident that we will be able to continue to support individuals, families and businesses. This confidence is based on the fact that we approach this test from a position of strength. We have a record number of people at work and a budget surplus and we are reserving money for the needs of the future, inside – not outside – efforts to reform global corporate tax and we are intervening today to help homes and businesses with rising costs.

We know we have many risks and we know how quickly they can develop. I know we need to do more, to build more homes, continue to improve public services and respond with courage and resolution to our defining challenge of climate change. We can and we will. The political centre of Ireland, that is pro-European, supportive of enterprise, committed to a sustainable future for our public finances and our environment has, with the hard work of the Irish people, helped get us ready for today, so soon after confronting a pandemic.

Many are looking at this budget today for confidence and help. We can, and we should be confident about our future. We know our citizens need help, we know our employers need help and this budget aims to give this help. I commend budget 2023 to the House.

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