James Lawless (Kildare North, Fianna Fail) | Oireachtas source

I thank all the Deputies who spoke today and contributed to the debate. I will respond to as many of the points raised as I can in the time available to me. Some of the points made were very interesting and thought-provoking but they may have strayed outside the parameters of the Finance Bill, so I may not be in a position to respond to them. I will, however, note them for future reference.

I will take a number contributions together and go through them, starting with the income tax package. Deputies Doherty, Nash, Conway-Walsh, Shortall and Ó Murchú engaged on that particular point. They focused on the personal income tax packages, among other issues. A key objective of the Government has been to continually support low and middle-income earners as incomes have risen. That policy objective has informed the tax package implemented by the Government in recent years. The budget tax package is built around three key pillars, namely, changes to tax credits, the standard rate band and the USC. These levers have been used to spread the benefit of the available package as effectively as possible. As Ireland's income tax system is one of the most progressive in all of the advanced economies, any reductions in income tax may be somewhat regressive. This is because those outside the tax net cannot benefit from tax reductions. They will, however, benefit from the wider suite of supports and cost-of-living measures announced by the Government. For example, married one-earner couples on lower incomes with children will benefit from the significant enhancements to the working family payment. Therefore, when considering the impact of the budget it is necessary to consider the budget package in the round, looking at tax and welfare changes together, as well as other budget measures that aim to improve the living standards of our citizens, rather than zooming in to the specific impact of one particular provision in isolation, which is an incorrect way to look at it.

With regard to USC, an exemption for those earning up to €45,000 was proposed by Deputies Doherty and Ó Murchú. Deputy Boyd Barrett proposed the complete abolition of the USC, making him the only socialist in the House who wants to cut taxes. These proposals would have a significant impact on the make-up of Ireland's tax base and alternative revenue streams would then have to be found. Deputy Nash's support for the USC is welcome given it is a stable and sustainable source of revenue for the State. Ireland's progressive personal income tax system plays a crucial role in the process of income redistribution. A redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. The Government is of the view that a broad-based and progressive income tax system where the majority of income earners make some contribution, but from each according to their means, is the most fair and sustainable income tax system in the long term.

Points were made on the renters' tax credit. Deputies Doherty and Ó Murchú both called for rent controls in general. Research shows that while rent controls may be of some effectiveness in the short run in limiting them to inflation, ultimately they cost renters in the long run by resulting in less market efficiency and reduced availability of units to rent, in other words, a throttling of supply. It is also worth bearing in mind that there is already a form of rent control in the market, in the system of rent pressure zones which are in place in the majority of urban areas in the State. Under this system, rent increases are capped at 2% per annum in any rent pressure zone. Any further rent controls to lower the rental price below would-be market rates would reduce any return on investment, which disincentivises the adding of new stock or additional supply.

Additional regulations in response to rapid rising rents do not address the underlying cause of the problem, namely supply, on which the Government is absolutely focused in its Housing For All strategy. It is one of the reasons we brought forward the rent tax credit, a measure that had long been proposed by Deputy Doherty.

The increase up to €800 in the residential premises rental income relief was provided for in the Finance (No. 2) Act 2023, not the current Bill. The amendments to the relief in this year's Bill are mainly technical in nature to ensure that the relief operates as intended. For every tenant there must be a landlord. There would not be a tenant without a landlord. The rental sector in Ireland is not dominated by large institutional investors. If fact, the majority of landlords in Ireland are private individuals with only one or sometimes two rental properties - sometimes called "mom and pop" landlords - often with a view to providing an alternative to a pension income in retirement.

Looking at the help-to-buy measures, as the Minister for Finance said on budget day, ensuring people have access to home ownership is a key priority for this Government. That is why the help-to-buy scheme is being extended in its current form for four years, up to 31 December 2029. I note in reply to Deputy Nash who queried this in his contribution, that this approach gives certainty to future home buyers and to the market, while housing output is ramping up. The scheme is specifically designed to encourage and support the construction of an additional supply of homes. Ultimately, increasing supply is the best way to get to a well functioning housing market.

Regarding Deputy Doherty's comments on the scheme and affordable housing, help-to-buy has always been available for affordable houses that qualify for the scheme. The amendment in this year's Finance Bill is a technical one requested by the Department of housing to ensure that in some rare occurrences where an approved affordable purchaser is delayed from making the purchase, a local authority can purchase the new-build property from a developer on a temporary basis and then resell it to the affordable purchaser, without their eligibility for the help-to-buy scheme being affected. This is a scenario that I would like to think all of us in the House would encourage and be pleased to see addressed.

Deputy Nash raised mortgage interest tax relief. In light of the impact high interest rates continue to have on households, the relief is being extended for one more year. Interest rates remain at an historic high, compared to the previous two decades. While the rates are beginning to marginally fall, they are still above what they might have been when people made expectations and calculations about mortgage affordability in recent years. Regarding Deputy Doherty's comments on the measure, it is still the Government's view that taxpayers with mortgage balances of less than €80,000 on 31 December 2022 are, in general, more likely to be in a stronger position compared to those with larger mortgage balances. In addition, such individuals are likely to have significant equity built up and have relatively low loan-to-value ratios. This means that such individuals should have better opportunities to switch their mortgages and obtain more favourable interest rates under their own steam, which will ultimately reduce the interest liability without the need for additional Government interventions. As the Deputies will appreciate, it is neither possible or desirable for the Government to always alleviate the full impact of higher interest rates for all mortgage holders. It must be on a needs basis.

Turning to the vacant homes tax and comments made by Deputies Nash and Boyd Barrett on vacancy and dereliction, this is just one of a suite of measures introduced by the Government to incentivise the increased use of existing housing stock. It is appropriate that all possible levers be utilised to address vacancy, including the proposed increase to the rate of that tax. The vacant property refurbishment grant under the Croí Cónaithe towns fund is another important and successful measure that supports the return of vacant and derelict properties into use. Croí Cónaithe towns along with the original initiative now span the remit of rural and urban dwellings. It is an excellent scheme that is beginning to see take-up in bringing derelict and disused properties back into use. At the end of quarter 2 2024, some 8,600 applications for the scheme had been received, of which 5,400 were approved with 480 grants paid out.

The residential zoned land tax was mentioned by Deputies Doherty and Canney. This is an important mechanism to activate land for residential use. The provision within this Bill will allow those undertaking economic activity on their land to make an application to have the land zoned to reflect the use of the land. If landowners such as a farmer think their land is incorrectly zoned, they can apply to change it. It will come into effect in 2025 and is chargeable at 3% of the value of the land. The intention is to activate land for residential development.

Looking at stamp duty changes, the Government's approach to the issue of investment funds acquiring new house builds in bulk involves a higher rate of stamp duty on bulk acquisitions, which is being increased from 10% to 15%. In addition, planning measures have ensured that a very low percentage of transactions have fallen within the remit of the levy. Any further intervention to reduce bulk acquisitions could have a limited impact, due to the level of those acquisitions already being very low.

The planning measures brought in by my colleague, the Minister, Deputy O'Brien, in May 2021, have resulted in close to 50,000 houses being prohibited from bulk purchase through conditions imposed by local authorities or An Bord Pleanála at the point of application. I welcome the fact that those 50,000 homes are available to first-time buyers and others, as opposed to any bulk funds.

Deputy McGrath made an extremely curious comment when he said that four out of ten properties were being bought by vulture funds. I can see no evidence whatsoever for anything of the sort. A couple of hundred properties out of perhaps 30,000 new builds, not forgetting second-hand and other transactions, is the actual figure, which is less than 1%. I struggle to see how the Deputy arrived at that figure. He made reference to the sale of large farms in Tipperary. With all due respect to the Deputy and to those buying and selling large farms, this is not the preserve of first-time buyers. They are unlikely to be competing in that market. He is comparing apples and oranges; in fact, it is orchards and oranges.

Looking at PRSAs, Revenue has actively monitored developments since the introduction of these changes in the Finance Act 2022. An examination of employer contributions to PRSAs in 2023 identified a small number of cases that gave rise to concerns. I assure Deputies that there is no evidence that such practices are widespread. Nonetheless, it is only right that I bring forward amendments to curtail such undesirable activity and the Bill will introduce a new limit of 100% salary for employer contributions to PRSAs.

Regarding the standard fund threshold and the point raised by Deputy Doherty, the changes being introduced follow from the conclusion of a report by independent expert Dr. Donal de Buitléir. That had remained unchanged since 2014 and the changes made ahead of the Bill were agreed by Government and well flagged in advance. They are important retention measures that give certainty and clarity to those pursuing promotion in the workplace. The Deputy's characterisation of the changes as a tax break requires clarification. Tax relief for contributions to pensions is more properly considered as tax deferred, rather than tax foregone. Pensions are subject to income tax at the point of drawdown, apart from a tax-free lump sum.

I want to mention the film industry, which was referred to by a number of Deputies. The scéal uplift measure is being introduced. I take note of the concerns expressed regarding employment practices. There has been extensive engagement in recent years between officials at the Department of Finance and the film sector and representative bodies. Collective agreements have been arrived at in some cases. The issue of copyright has also been examined and progress is being made with Screen Ireland on this issue.

The bank levy is not intended to punish the liable banks but rather to recoup some of the State investment that was made at the time of its inception. It only applies to those banks that received financial assistance from the State during the financial crisis and those that are still operating. The target for the year ahead is €200 million to be recouped from those measures.

Deputy Michael Healy-Rae queried VAT refunds for farm equipment. Revenue recently issued new guidelines on such purchases to make clear what was in or out of scope. There has been no change in Revenue's approach to this.

On the issue of the VAT on hospitality businesses, we are all aware of the VAT 9 lobbying campaign. I know many people, as every Member of the House does, who are campaigning for this, with some good cause. However, the reality is that the cost of such a measure for a full year would be close to €1 billion at €868 million. I challenge the Deputies calling for such a measure and proposing the votes on it tonight to outline what €1 billion in spending would they cut instead. What other measures would be sacrificed in order for that to happen? There may be other ways to support the industry such as the power up grant, which supports businesses with energy costs. There is also a higher VAT entry point for entering the VAT code.

Deputies Berry and Shortall asked about the charity GP practices. The Minister for Finance has engaged on that issue. There are limitations under the legislation on contract law. The Department is engaging with the GP Care for All group. The Minister is aware of the issue and there is engagement on it. It is a worthy cause and efforts are being made to address the issue.

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