Paschal Donohoe (Dublin Central, Fine Gael)

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

We are here today to begin our consideration of the Finance Bill 2025, 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. In budget 2026, the Minister, Deputy Chambers, and I announced a budgetary package of €9.4 billion, as set out in the summer economic statement. Some €8.1 billion has been allocated for public spending and €1.3 billion for taxation measures. The budgetary measures we announced seek to protect our economic stability, support our citizens and prepare Ireland for challenges and opportunities that await.

The Finance Bill implements a range of targeted tax changes, including specific measures to support households, jobs and businesses and to encourage and promote investment. The changes provided for in the Bill also seek to address the many challenges facing our society, including those of housing and climate change. It also contains a number of administrative changes to the tax code to reflect recent international developments and seeks to protect and enhance the integrity of our tax system. I look forward to bringing this important legislative instrument through the Oireachtas in the coming weeks.

We are making the best possible use of the resources available to invest in our future and to strengthen our foundations. That is why I introduced a tax package of a certain scale that does not put our economy at risk. It safeguards against risk by running budget surpluses, reducing public debt as a share of income, and building up funds so that we are prepared for the future. As we navigate uncertainty in our international trading environment, it is more pressing than ever that this Government chooses to prioritise measures that support jobs and growth.

The measures announced in the budget, such as the enhancements to the research and development tax credit, the participation exemption and audiovisual incentives, will protect jobs and build on our progress, enhancing our country as one with which and in which business can be done. Looking ahead, we expect to add a further 63,500 jobs by the end of next year, with the economy remaining at full employment in the coming period.

Housing continues to be one of the biggest challenges facing our country. In preparing for the budget, the challenges facing people seeking to access housing - either a home to rent or a home to buy - was to the fore of my mind. I have considered how the tax system can contribute to supporting additional supply, promoting and encouraging regeneration and tackling dereliction.

I am introducing in this Bill a range of measures, including a reduction in the rate of VAT applying to the sale of completed apartments from 13.5% to 9%. This was introduced via financial resolution on budget night, and the Bill will provide for it for a further five years, until 31 December 2030. I will bring forward an amendment on Committee Stage to clarify that the 9% rate applies to purpose-built student accommodation that falls within the definition of apartment blocks. That is in line with policy intention. In order to maximise the impact of this measure on the supply of new apartments, I have asked my officials to examine the potential to broaden the scope of the rate of 9% to include site and construction services provided for qualifying new apartment developments. This is with a view to bringing more apartments within the scope of that rate. Accordingly, I may bring forward further amendments during the legislative process, subject to further advice.

I am also providing another opportunity for landowners to seek to have their land rezoned to reflect the genuine economic activity being carried out, and for those who do so to apply for an exemption from the RZLT in 2026. Further changes to enhance the operation of this tax are also included in the Finance Bill.

In line with the Government's commitment to accelerate the delivery of affordable homes, I am exempting the rental profits arising from homes that fall within the cost-rental scheme from corporation tax. This exemption will apply to developments that are designated as falling within the cost-rental scheme by the Minister for Housing, Local Government and Heritage on or after 8 October 2025.

I am also introducing an enhanced corporate tax deduction for certain costs incurred on the construction of apartment developments and for the conversion of non-residential buildings into apartments to improve the viability of such developments. It will be available for projects where a first commencement notice is submitted on or after 8 October 2025 and on or before 31 December 2030.

To support more people to live in our city centres, I am making substantial changes to strengthen the living city initiative to support the enhancement of older homes and commercial properties in the designated special regeneration areas in Cork, Dublin, Galway, Kilkenny, Limerick and Waterford.

In this year's Finance Bill, I am extending the residential development stamp duty refund scheme until the end of 2030 and making a number of amendments, including providing for a full stamp duty refund to be claimed in respect of a multiphase development at the commencement of the first phase of that development.

I am also extending the income tax deduction for small landlords who retrofit their properties for three more years. To support renters, I am extending the rent tax credit for a further three years, until 31 December 2028.

In line with the programme for Government, I am reducing the rate of VAT that applies to hairdressing services and the sale of food and certain drinks in the hospitality sector from 13.5% to 9% from 1 July 2026. This will help protect the jobs of the many people employed in our small coffee shops, restaurants and hairdressers.

I am also extending the 9% rate of VAT on gas and electricity bills. This measure will support households across the country as energy prices remain high. This was introduced by way of financial resolution on budget night, and the Bill gives effect to it until 31 December 2030.

This Finance Bill confirms the budget night increase in tobacco products tax. Smoking remains Ireland's leading cause of preventable death, and the Government is committed to reducing smoking prevalence. This public health policy objective drives our tobacco tax: our annual rate changes are designed to raise the price in order to lower the level and uptake of smoking. Such a tax policy is promulgated by the World Health Organization for supporting public health, and in 2022 the Commission on Taxation and Welfare endorsed using tobacco taxation to fight tobacco consumption.

I now turn to the contents of the Bill itself. It is substantial, running to 102 sections and over 140 pages. The first sections deal with income tax items. Section 2 increases the USC 2% ceiling by €1,318 to €28,700 for the 2026 year of assessment onwards. This change is made in line with the national minimum wage applicable in 2026 and ensures that the 2% rate remains the highest rate of USC that is charged on the income of a full-time worker on the national minimum wage. It also provides for a two-year extension of the reduced rate of USC for medical card holders.

Section 3 extends the rent tax credit in its current form for a further three years, until 31 December 2028. Section 4 extends the mortgage interest tax relief for the 2025 and 2026 years of assessment. For claims relating to 2025, the maximum value of the credit will remain at €1,250, with a 50% reduction applying for claims relative to 2026. Section 5 updates the underlying legislative provisions for the compensation payable to a living donor of a kidney or a lobe of a liver under conditions defined by the Minister for Health in order that such payments remain exempt from income tax.

Sections 6 to 10, inclusive, relate to amendments pertaining to charities and sporting organisations. Section 11 extends the income tax disregard of €400 for income received by households who sell electricity from microgeneration back to the grid for a further three years, to the end of 2028. Sections 13 to 17, inclusive, relate to pensions. They introduce a new reporting obligation for qualifying fund managers in respect of approved retirement funds and set out the taxation and relief rules for the automatic enrolment retirement savings scheme.

Section 18 provides for an extension of the KEEP until 2028. The extension is subject to a commencement order as the scheme is a notified state aid and must be approved by the Commission of the EU. Section 21 extends the foreign earnings deduction scheme until 31 December 2030. From 1 January 2026, the level of relief is increased to €50,000, and the Philippines and Türkiye are included as relevant states for the purpose of the scheme. The Bill includes additional amendments to simplify the relief while ensuring it is appropriately calibrated. Section 22 extends the special assignee relief programme until 31 December 2030. From 1 January 2026, the minimum salary requirement is increased to €125,000. Additional amendments are being introduced to make the relief more practical.

Section 23 introduces a new vehicle category for zero-emission cars, where the lowest benefit-in-kind rates will apply. This section also extends the temporary reduction in the original market value for the purpose of determining the BIK payable on certain categories of cars. The OMV will be reduced by €10,000 for the 2026 year of assessment, €5,000 for 2027 and €2,500 for 2028. Section 24 provides for the same reduction in the OMV for vans, including electric vans, for the purpose of determining BIK.

Section 25 provides for an extension, until 31 December 2030, of the accelerated wear and tear allowances on capital expenditure incurred on certain energy-efficient equipment used for the purpose of carrying on a trade.

Section 26 provides for an extension, until 31 December 2030, of the acceleration of wear and tear allowances on capital expenditure incurred on gas and hydrogen vehicles and refuelling equipment used for the purposes of carrying on a trade.

Section 28 provides for an extension of the accelerated capital allowances scheme for capital expenditure incurred on slurry storage to the end of December 2029.

Section 29 provides for the changes to the living city initiative I referenced earlier in this speech. This includes an extension until the end of 2030 and an expansion in scope to include properties built before 1975, among other measures.

Section 30 extends the deduction that is available to landlords that incur certain retrofitting expenditure in respect of rented residential properties until the end of December 2028.

Section 31 inserts a new section in the Taxes Consolidation Act to allow Revenue to estimate the income tax or corporate tax due for those that are registered for these taxes but that fail to make returns in line with their statutory obligations.

Section 32 provides for a corporate tax exemption for rental income arising from dwellings designated as cost rental under Part 3 of the Affordable Housing Act 2021.

Section 34 makes changes to the research and development tax credit, including increasing the rate of the credit from 30% to 35% and in the first-year payment threshold from €75,000 to €87,500.

Section 36 reduces from 41% to 38% the rates of taxation that apply to investments in Irish-domiciled funds and life assurance policies and to equivalent offshore funds and certain foreign life assurance products.

Section 38 introduces a dividend withholding tax exemption for investment limited partnerships and equivalent EU-EEA partnerships. This seeks to support opportunities for growth in the funds industry.

Section 40 introduces the new section I mentioned at the start of my speech, which provides for the enhanced corporate tax deduction for apartment construction expenses.

Section 43 amends the film corporation tax credit to introduce an enhanced credit of 40% for qualifying visual effects projects, subject to certain conditions.

Section 44 extends the digital games corporation tax credit for a period of six years until 31 December 2031. It also extends the scope of the credit to the development of post-release digital content.

Section 49 enhances the existing capital gains tax revised entrepreneur relief by increasing the lifetime limit on gains to which the relief applies from €1 million to €1.5 million for disposals made from 1 January 2026.

Section 53 provides for 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 the other tobacco products.

Section 66 provides for an extension of the 9% rate of VAT on gas and electricity until 31 December 2030.

Section 67 provides for the 9% rate of VAT to apply to the sale of new apartments until 31 December 2030.

Section 68 provides for the application from 1 July 2026 of the 9% rate of VAT to the supply of hairdressing services, food and certain drinks supplied in the hospitality sector.

Section 79 introduces a new market cap exemption stamp duty threshold of €1 billion for Irish SMEs and start-ups trading on regulated markets. For companies below this threshold, the 1% stamp duty charge paid on share transactions will not apply.

Section 80 extends the bank levy for a further year.

Section 82 provides for a four-year extension of the stamp duty relief that is available for qualifying young, trained farmers.

In the miscellaneous provisions section of the Bill, section 89 inserts a new section in the Taxes Consolidation Act for the transposition of Part I of the OECD international standards for automatic exchange of information in tax matters, with regard to the crypto-asset reporting framework.

Sections 94 to 98 provide for technical and care and management amendments.

Section 99 makes a number of changes to the residential zoned land tax, including to provide a further opportunity to landowners whose land will appear on a revised map to be published by 31 January 2026 to request the rezoning of such land by the local authority in whose functional area the land is situated.

Given the time available, I have not spoken to every section of the Bill but further detail is set out in the explanatory memorandum published alongside the Bill. As is customary with the Finance Bill, there are still a number of matters under consideration that I may bring forward as amendments during future legislative Stages.

The Bill sets out the provisions necessary to bring effect to the tax measures announced in the budget. They seek to support households, businesses, jobs and investment and to protect our economy. I look forward to working with all in the House as we bring forward this important legislation in the coming weeks. I commend the Bill to the House.

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