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

I move: "That the Bill be now read a Second Time."

We are here today to begin our consideration of the Finance Bill 2022, which will give the necessary legal basis to the decisions announced in the budget and make a number of other necessary changes to tax legislation. This year's Bill sets out the legislative provisions to bring effect to the tax measures announced in budget 2023, which is a cost-of living budget that underlines the Government's commitment to help individuals, families and businesses to deal with the challenge of rising prices. The Bill implements a range of targeted tax changes, including specific measures to support families and businesses and to address the many challenges facing our society, including housing and climate change. It also contains a number of administrative changes to the tax code, reflects recent international developments and seeks to protect and enhance the integrity of our code of taxation. I look forward to bringing this important legislative instrument through the Oireachtas over the coming weeks.

To help families, individuals and businesses deal with the rising cost of living, the Minister for Public Expenditure and Reform, Deputy McGrath, and I have announced a package of one-off measures worth €4.1 billion. They are accompanied by additional budgetary measures for 2023 worth €6.9 billion. This brings the total size of budget 2023 to €11 billion. In addition, there is a further €300 million in public service support measures funded from the National Surplus (Exceptional Contingencies) Reserve Fund. I appreciate these are very significant figures. However, I also appreciate the needs of families and businesses are very significant. The strength in tax revenues, particularly domestic tax revenues, has provided us with the additional means to undertake such a response.

One of the core objective in budget 2023 is to ensure workers do not find themselves in a position where they pay more income tax solely because of inflation. There are many people who work hard but whose earnings push them outside of access to any additional support from the State. We need to help them too. We need to put money back into their pockets. On budget day, therefore, I announced an income tax package to the value of more than €1.1 billion. I am increasing the standard rate cut-off point by €3,200 to €40,000, with proportionate increases for married couples and civil partners.

I am also increasing the main tax credits for personal, employee and earned income credit by €75. I am increasing the home carer tax credit by €100 to support stay-at-home parents. The basic personal tax credit available to married persons and civil partners who are jointly assessed to tax will increase from €3,400 to €3,550. In all other cases, the value of the tax credit will increase from €1,700 to €1,775. The value of the home carer tax credit will be increased from €1,600 to €1,700. The value of both the employee tax credit and earned income tax credit will also increase from €1,700 to €1,775. Where an individual is entitled to both the employee tax credit and the earned income tax credit in the same year of assessment, the aggregate of credits available to him or her under the two provisions will not exceed €1,775. Furthermore, I am increasing the second universal social charge, USC, rate band of 2% from €21,295 to €22,920 in line with the 80 cent per hour increase in the national minimum wage.

Housing continues to be one of the biggest challenges facing the country and a whole-of-government approach is being taken to address this challenge.

In the Finance Bill, a number of provisions will make their contribution to this challenge, including the rental tax credit of €500, changes to the help-to-buy scheme, and changes to the pre-letting expenses regime to assist landlords preparing properties for rent. The introduction of the vacant homes tax and changes to the residential zoned land tax aim to increase the supply of homes for rent and purchase.

Also in the property sector, I am providing for a defective concrete blocks levy to raise some of the funding required for the defective concrete blocks grant scheme. Following the announcement of this levy on budget day and in light of subsequent comment on the measure, I have determined that the rate at which the levy will apply will be halved from the planned 10% to 5%. The move will come into effect on 1 September 2023 as opposed to 3 April 2023. This will allow all parties more time to prepare for its introduction. I have also reduced the range of products to which the levy will apply. This Finance Bill provides that the levy will apply to pouring concrete and concrete blocks under two harmonised EU standards. It will not apply to precast concrete products.

As I have said, the Government appreciates the challenges that businesses are facing with significant increases in electricity and gas costs. These challenges come on top of Brexit and the Covid-19 pandemic with the necessary public health restrictions and closed premises. Therefore, I am introducing a temporary business energy support scheme, TBESS, to provide appropriate support to businesses during the winter months. When I announced the scheme on budget day, it was to apply, at that point, to tax compliant businesses carrying out a case I trade. This has been extended and the Bill provides that it will also apply to those carrying out a case II profession. The scheme will also apply to new businesses, and eligibility for relief in such cases will be calculated using a deemed unit price provided by the Sustainable Energy Authority of Ireland, SEAI. This will be based on data provided by suppliers and the Commission for Regulation of Utilities, CRU. A monthly cap of €10,000 per trade or profession will be applied. However, in certain circumstances qualifying businesses that operate across more than one location and that have multiple meter point reference numbers may qualify for increased relief. In such cases, the monthly cap of €10,000 may be increased to a maximum of €30,000. The scheme falls under the European Commission temporary crisis framework, TCF, and is subject to state aid approval. As I announced on budget day, it is intended the scheme will operate in respect of energy costs relating to the period 1 September 2022 to 28 February 2023. However, pending revision of the TCF, which is expected to occur by the end of this month, it was not possible to provide for an end date to the scheme beyond 31 December 2022. I hope to amend the legislation on Committee Stage to include the 28 February end date after the anticipated amendment of the TCF.

Another regulation under discussion at European level is the agricultural block exemption regulation, ABER. There are a number of budget proposals that are dependent on the outcome of these negotiations. These include the introduction of the provision for accelerated capital allowances for the construction of slurry storage, and the extension of a number of agricultural tax measures due to expire at the end of December 2022. Again, and subject to the outcome of negotiations, I would hope these can be addressed by Committee Stage amendments. The provisions relating to the key employee engagement programme, KEEP, will also be addressed during the passage of the Bill. As I indicated at budget time, the clear intention remains to legislate, through amendments introduced on Committee Stage, so as to provide for the buy-back of KEEP shares by the company from the relevant employee and to raise the lifetime company limit for KEEP shares from €3 million to €6 million.

I now turn to the contents of the Bill itself. It is a substantial Bill, running to more than 200 pages. The first sections deal with income tax items, some of which I discussed earlier. I draw Members’ attention to section 6, which provides for the increase in the small benefit exemption to €1,000 and the increase in the number of vouchers from one to two. Members will recall this measure was introduced by financial resolution on budget night and therefore takes effect in the current tax year.

Section 4 deals with the Covid-19 related lay-off payment. This payment is intended to plug the gap for employees who lost the opportunity to accrue reckonable service due to lay-offs caused by the Covid-19 public health restrictions. Statutory redundancy payments are exempt from income tax, and therefore these Covid-19 related lay-off payments will also be exempt from income tax.

Section 7 extends the benefit-in-kind exemption to cargo bicycles and e-cargo bicycles by increasing the threshold to €3,000. This is a further fulfilment of a commitment in the Programme for Government: Our Shared Future to provide an increased proportionate allowance for e-bikes and cargo bikes. The changes will apply from 1 January 2023.

Deputies will recall that a number of tax exemptions are not currently reported to Revenue. Section 8 provides for the automatic reporting to Revenue in respect of three specific measures that are made without the deduction of tax. These are the remote working daily allowance of €3.20, travel and subsistence expenses and the small benefit exemption to which I referred earlier.

Section 9 gives effect to the budget announcement to increase the standard rate band and a number of tax credits from 1 January 2023.

Section 12 introduces a new €500 tax credit for renters, with each tax-paying tenant in a particular property being eligible for the credit in their own right. The credit is aimed at, and will be only available to, renters who do not receive State housing supports. The credit will also be available in certain circumstances to parents who pay rent on behalf of their student child who is in third level education.

Sections 16 and 17 provide for the taxation and relief rules for the pan-European personal pension product, PEPP, which has been introduced as required under Regulation (EU) 2019/1238 of the European Parliament and of the Council of 20 June 2019.

Section 20 provides for an exemption of up to €20,000 from income tax for certain profits arising from the production, maintenance and repair of certain musical instruments. These instruments are early Irish harps, Irish lever harps and uilleann pipes.

Section 25 increases the cap on allowable pre-letting expenses from €5,000 to €10,000, and reduces the minimum period for which a property must be vacant from 12 months to 6 months.

Section 34 extends the final date when films can be certified as qualifying for the film corporation tax credit from 31 December 2024 to 31 December 2028. This amendment will be commenced at a future date, subject to EU state aid approval.

Section 37 confirms the budget changes to mineral oil tax rates to come into effect from 12 October 2022, and provides for further rate changes to come into effect from 1 March 2023. The section provides for the extension of reductions in certain mineral oil tax rates which were introduced earlier in 2022. Provision was made in the Finance (Covid-19 and Miscellaneous Provisions) Act 2022 for these rate reductions to be reversed from 12 October 2022. The reversal of these reductions will now be implemented from 1 March 2023.The section also provides for increases in mineral oil tax rates, as set out in Schedule 2 of Finance Act 1999, on auto fuels, effective from 12 October 2022. These rate changes arise from increases in carbon charge rates, as set out in Schedule 2A of Finance Act 1999, which came into effect on 12 October 2022.

Section 38 provides for the budget increases in the rates of tobacco products tax of 50 cent on a pack of 20 cigarettes in the most popular price category, on a VAT-inclusive basis, with pro rataincreases on other tobacco products.

Section 44 provides for the extension of the 9% VAT rate on the supply of electricity and gas until 28 February 2023.

Section 47 provides for the reduction of the flat rate addition for farmers to 5%.

Section 55 provides for the zero rating of VAT on newspapers, including e-newspapers, certain period products, non-oral hormone replacement therapy medicines, non-oral nicotine replacement therapy medicine and automated external defibrillators.

The Bill makes a number of amendments in respect of stamp duty, including clarifying aspects of the higher stamp duty rate of 10% charged where a person acquires 10 or more residential units in any 12-month period.

As I announced in the budget, the bank levy will be extended for a further year and will only apply to those banks that will continue to operate in the Irish market, going forward. This means that the levy is expected to generate in the region of €87 million in 2023.

With regard to capital acquisitions tax, section 65 of the Bill makes a number of amendments to the Act of 2003 to take account of recent amendments to the Succession Act 1965 made by the Birth Information and Tracing Act 2022.

Section 67 provides an exemption from tax for any payments made under the Covid-19 death in service scheme for healthcare workers.

In the miscellaneous provision section of the Bill, section 84 provides for a new vacant home tax, VHT, to be introduced in 2023. The measure aims to increase the supply of homes for rent or purchase, rather than raise revenue. The VHT will be self-assessed and administered by the Revenue Commissioners and will apply to long-term habitable vacant residential property that is subject to local property tax, LPT. The bill will be paid by property owners. A property will be considered vacant for the purposes of the tax if it is occupied for fewer than 30 days in a 12-month period. The first chargeable period will commence on 1 November 2022 and the owners of vacant properties will be required to file a return in November 2023. Payment of the tax will be due on 1 January 2024 at a rate equal to three times the property's base LPT rate. It will be in addition to LPT.

The Bill also provides for a number of exemptions to ensure property owners are not unfairly charged for temporary vacancy arising from genuine reasons. This will include properties recently sold or currently listed for sale or rent, properties vacant due to the occupier's illness or long-term care and properties vacant as a result of significant refurbishment work. The measure seeks to achieve an appropriate balance between incentivising owners of vacant homes to bring their properties back into use and not penalising homeowners for normal, temporary vacancy, with the primary objective of the tax being to change behaviour rather than raise revenue.

Section 86 provides for the defective concrete block levy.

Sections 87 to 90 deal with the temporary business energy support scheme, TBESS, and there are the usual technical amendments and care and management sections.

The Bill sets out the legislative provisions to bring effect to the tax measures announced in the budget. It is a cost-of-living budget that underlines, as I said, the Government's commitment to helping individuals, families and businesses to deal with the rising cost of living and the rising cost of doing business. The Bill implements a range of targeted tax changes, including specific measures to support individuals, families and business. I commend the Bill to the House.

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