Wednesday, 23 November 2022
Finance Bill 2022: Report Stage
I move amendment No. 2:
In page 9, between lines 18 and 19, to insert the following:
2. Within 3 months of the passing of this Act, the Minister shall lay a report before the Dáil, on the cost to the exchequer of abolishing the USC and replacing it with a High Income Social Charge of 10 per cent on all earnings over €90,000.”.
This amendment asks the Dáil to look at the cost of abolishing the universal social charge, USC, and replacing it with a higher income social charge of 10% on all earnings over €90,000. I will also make reference to amendment No. 3 in my comments.
The argument is very simple. We discussed it on Committee Stage but it is still important. I would not underestimate the sense of grievance working people still feel over the imposition of the USC. The Minister knows, but it is worth recalling, that working people in this country took an unprecedented hit for a financial and economic crisis that was not their fault. They had played no hand, act or part in creating it. It was a crisis entirely the responsibility of gambling bankers, gambling property developers and speculators and successive Governments that facilitated a sort of gold rush when it came to making money from property. That had dire consequences for this country and, it is worth saying, globally. That is not just a sort of history lesson because we are on so many different levels still dealing with the consequences of that, both in this country and internationally. The lesson has not been learned about the folly of turning to speculation on property for profit. It is still going on. It is still at the back of our current housing disaster and it crashed the entire global economy. It seems very few lessons were learned.
The point with this amendment is it was working people who took the hit. One of the most egregious hits taken, which people are still suffering, was the imposition of the USC, which resulted in a dramatic increase in the tax burden on ordinary workers. I do not have the figures directly to hand but I think I am roughly correct in saying that prior to the USC, workers were in total paying about €23 billion between them in tax. That jumped to well over €30 billion as a result of the USC and the various austerity measures taken. It is worth pondering those sorts of figures. That was a dramatic increase in the burden of tax imposed on working people. This year, in what is being considered a bumper year for corporation tax receipts, all the corporations in this country will yield €20 billion in corporation tax receipts. The gross profits being recorded by those companies, in the latest available figures, were €193 billion, which is far in excess of what the total aggregate earnings of PAYE workers are. On Committee Stage, I asked the Minister if he had estimates of what corporate profits were for 2022 given that he was able to project a possible €21 billion coming in via corporation tax receipts. Looking at the pattern of all the previous years, that would suggest there was an enormous jump in corporate profits in 2021 or 2022, or both, to allow us to get from a figure of €11 billion being paid in corporation tax in 2020 up to the currently projected €21 billion. Maybe the Minister could enlighten us on that. Either way, the net point is that all the workers in this country combined earn less in gross income than all the corporations earn in gross profits but the workers pay much more tax.
That is fundamentally unfair. A major contributory factor to that unfairness and inequality in who earns the most and pays the most is the universal social charge. That worsened an already iniquitous situation. Although the Government has made some adjustments to the universal social charge over the intervening years, it is still a very significant burden in people's pay cheques every week or month. It should be got rid of and we believe it could be paid for by first introducing the high earner income social charge I mentioned. Before the Minister says the charge we are proposing would not cover the full cost of abolishing the universal social charge, I will just say, as I said on Committee Stage and as we have made clear, that it is not the only measure we would take. We would also introduce new bands of income tax for the highest earners. There would be four bands for those earning in excess of €100,000. Between those two measures, we would cover the cost of abolishing the USC. That is not to mention the many other measures we proposed in our alternative budget, which I have here in front of me and which the Minister acknowledged he does actually read. Fair play to him. It sets out a number of other additional tax measures that would be taken to cover the cost.
I wish to speak to amendment No. 70, which is about income tax. Looking at the impact of the permanent changes in the budget, the reality is there are big issues in relation to the distributional effects of what is being done in tax, which will result in those changes being very regressive. In the last decade or so, successive Ministers have prided themselves on the fact that we have a genuinely progressive income tax system but the tax changes that were introduced in this budget would reverse that - they will make it regressive. It is impossible to see a justification for what has been done around income tax, where changes were made under the heading of indexation. Indexation is supposed to relate to wage increases. There is a case and justification for indexing the tax bands to allow for wage inflation but not to allow for overall inflation. That has been a problem. It is also a misrepresentation of what our tax system actually does. I have heard more than one Minister, including very senior Ministers, refer to the fact that we need to index our tax system to allow for inflation. We do not. That is not indexation. They have also said people are paying more tax because of inflation. That is something the Tánaiste said. He said people on middle incomes, as he called them, are paying more tax as a result of inflation. They are not. They are paying more tax because of wage inflation. Wage inflation is quite low; I think it was about 2.4% in the year up to the budget.
There is no justification on any grounds, whether grounds of fairness, equality or progressivity, to index the higher rate of tax in line with inflation. All that does is give a tax benefit to everybody who earns over €36,800. What exactly is the justification for that? Why is the Minister doing that? He is giving a significant tax benefit to everybody who earns over that level. Why would he do that for people on very high incomes? For example, why should anybody in this House get a tax benefit? We do not have a difficulty. All our bills are going up but everybody in this House has the capacity to absorb that increase in the cost of living pretty well without it impacting on any of us too much. That is at the level of Deputies. Then there is the level of Ministers of State, Ministers, the Taoiseach and Tánaiste and so on. What is the justification for giving that tax benefit to people who are high earners? Beyond those in here, there are many people earning in excess of what the Taoiseach is earning, for example, lots of higher civil servants and the many people in the private sector who are earning, in some cases, multiples of what Deputies earn. I cannot see any justification for giving a tax benefit to people earning over €100,000.
In our alternative budget, the Social Democrats proposed a clawback. If the Government is going to index the higher tax band, and if it is serious about fair distribution and maintaining progressivity in our tax system, then it must have a clawback at the higher end. The Social Democrats proposed a third rate of tax at 43% that would apply to individual incomes over €100,000, with adjustments for married couples and so on. That is what is proposed in amendment No. 70. The Minister talks about fairness a lot. He has been under extreme pressure from his party leader, the Tánaiste, to do something even more unfair by introducing a 30% tax rate. I am glad he did not go with that, at least in this budget. All the signals indicate that the Government is going to further erode the tax base. The Minister made that point very clearly in his budget statement. He started a process of eroding the tax base and making it less progressive in this budget. For the life of me, I cannot understand what the justification is. What is the rationale for doing that? I would appreciate if the Minister could outline that.
My amendment, No. 70, requests that the Minister arrange for a report to be done and to report back to this House on the impact of this change, including who the beneficiaries are, how many beneficiaries there are and the income levels at which those beneficiaries get that benefit from the Government's move on tax. Then, the report would look at the principle of a clawback. I would have thought the Minister would accept, on grounds of fairness, that there needs to be some clawback if there is no rationale for giving away tax money to people. Would the Minister consider a clawback? Will he at least consider producing a report to see what the potential is for raising revenue from that? We would then know how many tax units we are talking about and what could be raised from the introduction of such a third rate of tax. That is the purpose of my amendment. I hope the Minister will give it serious consideration.
There are three amendments in this group and all deal with the issue of the USC. I have made the point before that the leader of Fine Gael, the Tánaiste and former Taoiseach, Deputy Varadkar, made commitments around the USC on numerous occasions that he has broken. He used to parade around the streets of Dublin with big posters saying he was going to be the leader that abolished the USC. He then made a speech at his party Ard-Fheis saying he was going to merge it with PRSI. The Minister for Finance told us recently that neither of those things are on the cards. At the time, we called the Tánaiste's announcements populist because a tax that brings in over €5 billion cannot be abolished, as he proposed, without replacing it with another source of income.
The previous speakers, Deputies Shortall and Boyd Barrett, are correct on this in terms of narrowing the tax base and all of the challenges that are there. That is what that would have done at the time.
I can understand why people want to hear the likes of the pronouncements made by Fine Gael in that election campaign, namely that it would get rid of over €5 billion in tax. The reality, thankfully, is that people understand that we need to fix our health system and build social, affordable and cost rental housing. People in the State are more outraged about the fact that 11,000 people are in emergency accommodation than the fact they are paying the levels of tax they are. Time and again, in terms of polling data, we see that people want investment in public services.
Regarding the amendments in this group, I want to focus in particular on amendment No. 70 from the Social Democrats. It is not in line with what we would have argued, but I believe its spirit is the same, namely the principle that those on a higher income should shoulder a solidarity tax. Deputy Shortall referred to the €100,000 mark. She asked why people at that income level, including Deputies, Ministers and Ministers of State, would have their tax liability reduced by €800 as a result of the budget, despite the fact that people on higher incomes have the ability to shoulder an additional burden. We need to make sure such a policy addresses some of the issues I discussed.
Phasing out tax credits is a sensible solution. Once people reach an income of €100,000, the idea is that they should start to lose their tax credits. It was a policy introduced by the Labour Party in Britain many years ago. Even the former sister party of the Minister, the Tories, continue that policy to this day. Those on individual incomes above €140,000 have the ability to shoulder a 3% solidarity tax. I welcome that the amendment is being brought forward. I would welcome a report on the matter to be brought forward, as requested, within a period of three months of the passing of the Bill.
The amendment is not completely in line with what we in Sinn Féin have put forward for many years. However, the principle of the amendment is one with which I agree. It would begin a conversation about how and who we tax and the fairness of the system in the State. We have a progressive income tax system, but that does not mean we cannot make it more progressive. A measure like this would add to that debate.
We know what happens when we narrow the tax base, and that is exactly what is happening here. If the Government is to proceed with the plans enunciated by the Tánaiste, we are getting into a very dangerous zone. We know what will happen. We have been living with the consequences of narrowing the tax base and the fiscal challenges, to put it mildly, that has imposed on the State over the past decade. We have to learn lessons from that. There is nothing fair about a budget that introduces tax cuts to the tune of €800 per person for someone who is earning a significant salary compared with somebody who would benefit to the tune of €130 or €140 if he or she is earning between €25,000 and €35,000. In nobody's language is that fair or equitable.
On the question of clawback, the principle is well established regarding adjustments made to the higher rate of tax and to the taxation system more generally. I recall in budget 2015 that when the top rate of tax was reduced to 40%, a countervailing measure was argued for and introduced by the coalition which saw the rate of USC for those earning over €60,000 increased by 2% to claw back some of the benefits. That is a fair and progressive way of introducing changes to our tax code that does not disproportionately benefit those who are, objectively, better off. In no way are the tax changes made in the budget fair to those earning between €25,000 and €30,000 compared with those who are on much more handsome salaries.
With the permission of the Ceann Comhairle, I will raise a technical matter on a point of information and I beg his indulgence. I was a little late coming into the Chamber and did not have the opportunity to raise this matter at the start of the debate. Three of my amendments were considered on Committee Stage, but have been ruled out of order. We understand if an amendment proposes a charge on the Exchequer, the clear position is that an amendment of that nature would be ruled out of order. One of the amendments, amendment No. 25, refers to relief for certain disposal of rental property to a local authority or approved housing body. That proposes a reduction in the rate of an application of a tax. My understanding is that a proposal to reduce or abolish a tax or increase exemptions to a tax are not necessarily Government prerogatives.
I assume the amendments have been ruled out of order based on the belief that they would impose a charge on the Exchequer. I ask for a ruling from the Chair on that. We spend a lot of time in opposition trying to develop sensible amendment. There is little point in tabling amendments if they are all routinely ruled out of order. An explanation is required for the decision on that amendment. Others I understand, if there is a clear imposition of a charge on the Exchequer. It is hard to see why my amendment was ruled out of order and I would appreciate an interpretation on that from the Chair, if the Ceann Comhairle is in a position to give one at this point in time.
I hope I am. My understanding is that the three amendments were ruled out of order by me on advice because the matters had not been considered on Committee Stage and did not arise out of Committee Stage proceedings. I understand from what the Deputy has said that they may have been tabled for discussion on Committee Stage, but were not reached. It is only those matters that are reached and discussed that can subsequently form the subject matter of amendments. That is long established practice in the House.
With the permission of the Ceann Comhairle, I will speak to the amendments as a group and respond to all of them. A number of amendments have been grouped together, covering a report on the abolition or replacement of USC, as submitted by Deputies from People Before Profit and the Rural Independent Group, and a report from the introduction of a 43% income tax rate on individuals earning over €100,000 as put forward by the Social Democrats. A number of significant issues arise from the proposals. For example, they include significant Exchequer costs, the erosion of our tax base and adverse impacts on the competitiveness of our tax code.
Regarding the proposal submitted by People For Profit to abolish USC, it is estimated this would cost approximately €5 billion in a full year. The suggestion to replace USC with a high income social charge of 10% on all earnings over €90,000 would yield approximately €2 billion in a full year. This would give rise to a shortfall of €3 billion in the same year. It is estimated that it would be necessary to place an additional charge of around 26% on all earnings over €90,000 in order to raise an equivalent level of revenue for the proposal to be cost neutral to the Exchequer.
Turning to the Rural Independent Group's proposals to abolish the USC for those earning less than €70,000 and replace it with a national solidarity tax on those earning in excess of €150,000 for that year, I note the Deputies have not specified the rate of the new tax that would apply under the proposal. It is estimated by my Department that the removal of the application of USC on all incomes below €70,000, as suggested, would cost in the region of €1.84 billion in a full year.
Assuming no other policy changes to the structure of the charges, it is likely that if the new tax took the form of a new USC rate for those earning more than €150,000 it would need to be as high as 24% for PAYE workers and 27% for self-employed income earners in order to raise the same level of revenue for the Exchequer and ensure this is cost-neutral. These revenues do not take account of any behavioural changes. For example, the proposal would have the effect of increasing the top marginal tax rates from 52% and 55% to 68% and 71% for PAYE and self-employed income earners, respectively. The Social Democrats Deputies are seeking a report on the potential for the introduction of a 43% income tax rate on all individuals with incomes in excess of €100,000. I am advised by the Revenue Commissioners that this proposal would yield approximately €365 million in the first year of its introduction and €460 million in successive years. Approximately 132,500 taxpayer units would be impacted. The introduction of a 43% income tax rate on income above €100,000 would increase the top income tax rate by three percentage points and would have the effect of increasing the top marginal rates of tax to 55% for all employees and 58% for the self-employed.
I hope Deputies recognise that high marginal tax rates are a clear disincentive to work and could also affect our international competitiveness. The considerable progress that has been made in recent years to restore our competitiveness, particularly at a time of high inflation, cannot be taken for granted. As Deputies are aware, we have a highly progressive tax code with 10% of income earners contributing approximately 60% of the total income tax and USC collected each year. To put that in context, the bottom 80% of income earners will pay 20% of income tax and USC in 2023. As I have said on many occasions, this indicates how progressive our personal income tax structure is. This has been acknowledged by the International Monetary Fund, IMF, the OECD and the Economic and Social Research Institute, ESRI.
I note that the Rural Independent Group has also suggested raising money from companies with net profits in excess of €1.5 million per year. This could have serious consequences for the competitiveness of our corporation tax regime, with additional significant impacts for employment within our economy. To impose additional levies on corporate profits would involve increased complexity and would change the attractiveness of our corporate tax offering. I accept it is not possible to predict the effect the changes to the rate could have on the behaviour and decisions of large or multinational or domestic companies. This uncertainty makes it difficult to bring a reliable estimate of any additional yield that might accrue to the Exchequer. As the House is aware, we are part of and signed up to the OECD international tax process at the moment. I hope that the second pillar, on minimum effective tax rates, will yield an outcome soon.
I appreciate that the Social Democrats Deputies are seeking a report on the potential for the introduction of a 43% rate of income tax on all individuals' incomes above a certain level. However, to commission these reports could indicate an element of uncertainty in regard to the future direction of Government income tax policy. For all of those reasons, I am not in a position to accept these amendments.
The main question I asked the Minister was a political one: what was the rationale for giving a tax break of €830 a year to people earning more than €100,000? Let us personalise that. I think it is important to do that. Everybody in this House is going to get a gift of €830 from the State due to the Minister's decision. As I have said, there are great numbers of people with incomes hugely in excess of what anybody in this House earns, including the Taoiseach. The Minister has told me that the figure is 132,000. What is his rationale for this tax break? I cannot understand what that rationale is, in light of the enormous pressure on so many people and given that it will undoubtedly make our tax system less progressive. I am sure the Minister would agree that is not a desirable objective. He has provided us with some figures. I am not sure anybody here would notice an extra 3% in tax on our incomes above €100,000. Would we seriously notice that? Would somebody earning €500,000 seriously notice an extra 3% in tax? We need to be frank about this. The Minister says there is potential for raising almost €500 million from such a measure, which would improve productivity and would be fair to everybody. It would raise almost half a billion euro for a huge number of areas that are crying out for funding, for example across disability services, health and education. The Minister has the potential to raise a significant amount of money on the grounds of fairness. He says it would lead to a lack of competitiveness. There is no evidence of which I am aware to prove that. If there is, will the Minister kindly produce it?
I want to point out something that we do not consider very much in this House. An income of €100,000 may seem like an awful lot of money but we must also remember that anybody with an income of €80,000, €90,000 or €100,000 does not collect that. They get approximately 60% of it if they are lucky. When Deputies are thinking about these things, they must remember how it might backfire on themselves. The reality is that you do not collect it because it is already taxed. When you increase taxation and put an extra burden of taxation on top of that, all the executives who have such incomes automatically fall in for a loss. I cannot understand the reason for doing that. Is it because we dislike them? Is it because we do not want them here? Is it because they would be better off elsewhere? Maybe they should go elsewhere if we set out to penalise them in the clear knowledge that a person with €90,000 or €100,000 or any amount does not get that in their salary. They get a little more than half of it after all the deductions and tax. Maybe Independent Members or smaller party Members have a special resource that we do not know about, but that is the way it works. We all have to accept and understand that. We accept the lower amount. We do not object to it. We take it as it comes because we know that is what it amounts to. In the long run, you get roughly 60% of your income into your hand. Theoretically it is paid to you but you do not get it.
I will tell Deputy Durkan what I do not understand. All of the people in various categories who earn in excess of €100,000, such as Ministers, executives of companies, upper management in companies, bankers, consultant doctors and barristers - I am sure we could think of others - do valuable work. However, is their work more valuable than a nurse's work?
Should their work be better remunerated than a nurse' work? Should their work be better remunerated than a teacher's work? Should their work be better remunerated than a bus driver's work? According to the World Health Organisation, the second most stressful job anyone can possibly do is to be a bus driver. They are more likely to suffer from heart attacks than bankers, although we often have this image of the stressed-out banker or chief executive who is worried sick and is likely to drop dead of a heart attack. Actually, it is far more likely for that to happen to a bus driver.
Good point, and they should possibly pay an extra levy just for that. That is certainly the logic of our proposals to redress the balance in terms of net earnings ultimately, which is what we are trying to do through a myriad of means.
I would say in response to the Minister's direct response to our proposal that in order to cover the cost of abolishing the USC, which he promised he would get rid of and he reneged on that promise - it was an austerity tax and he promised to get rid of it - as well as introducing the higher income social charge, we are also proposing to introduce additional bands of taxation for the highest earners. That would cover the cost.
I move amendment No. 4:
In page 10, line 22, to delete “on or before 30 September 2022”.
The Minister for Children, Equality, Disability, Integration and Youth has implemented a scheme of once-off payments to the value of €3,000 to each individual whose incorrect birth registration has been confirmed by or to Tusla. The payment is to be provided on an ex gratia basis without any inference or otherwise of any liability or legal obligation. It is intended as a contribution towards costs related to an incorrect birth registration such as legal fees which may be incurred in respect of seeking information on the implications of birth registration. It is not intended as redress or as a full discharge of any costs incurred.
In the course of the Committee Stage debate, I indicated that the policy intention is that the ex gratiapayments made by the Minister for Education will be free from income tax irrespective of when they are made. However, although subsection (2) of the new section 192L, to be inserted into the Taxes Consolidation Act, does not contain any cut-off date, the preceding definition of qualifying individual as currently drafted does include such a restriction and refers to cases which were confirmed by the Child and Family Agency on or before 30 September 2022. I understand, following inquiries with the Department of Children, Equality, Disability, Integration and Youth, that while unlikely, the possibility cannot be ruled out that further individuals might be identified after 30 September who ought to qualify for an ex gratia payment. The section had been originally drafted on the basis that it was most unlikely there would be further persons qualifying for this particular payment, but now, after consultation with the Department of Children, Equality, Disability, Integration and Youth, this is less certain than originally thought.
To be clear, this amendment removes the cut-off date in the definition of qualifying individual. This will ensure that the policy intention of section 3 of the Finance Bill is given effect, irrespective of when ex gratiapayments are made and regardless of the date when cases are confirmed by Tusla. It will mean that if the Minister for Children, Equality, Disability, Integration and Youth were to extend the terms of the scheme beyond that date, any such payments will be exempt from income tax, USC and PRSI.
I move amendment No. 5:
In page 10, after line 38 to insert the following:
“Exemption in respect of payments under Covid-19 Death in Service Ex-Gratia Scheme for Health Care Workers
4. Chapter 1 of Part 7 of the Principal Act is amended by the insertion of the following section after section 192L (inserted by section 3):“Exemption in respect of payments under Covid-19 Death in Service ExGratia Scheme for Health Care Workers
192M.(1) In this section, ‘qualifying payment’ means a payment made by or on behalf of the Minister for Health under the Covid-19 Death in Service Ex-Gratia Scheme for Health Care Workers (that is to say the scheme administered under that title by the Minister for Health in furtherance of a decision of the Government of 8 March 2022).(2) A qualifying payment made on or after 1 January 2023 shall be exempt from income tax and shall not be reckoned in computing total income for the purposes of the Income Tax Acts or in computing amounts chargeable to universal social charge in accordance with Part 18D.
(3) A qualifying payment made before 1 January 2023 shall be treated as if it was exempt from income tax in the year of assessment in which it was made and shall not be reckoned in computing total income for the purposes of the Income Tax Acts or in computing amounts chargeable to universal social charge in accordance with Part 18D.”.”.
In March 2022, the Government approved the establishment by the Minister for Health of a Covid-19 death-in-service scheme for healthcare workers. Under the scheme, lump sum payments of €100,000 would be provided for health and social care workers whose deaths can be attributed to contracting the Covid-19 pandemic at work. The scheme is intended to recognise the increased risk faced during the pandemic by front-line health and social care workers and, in this spirit, the Government decision mandated that payments made under the scheme would be exempt from tax.
Section 74 of the Finance Bill 2022, as amended during Committee Stage, provided for an exemption from capital acquisitions tax. However, I am advised by Revenue that a further exemption in the Taxes Consolidation Act 1997 is also necessary to ensure the payment is fully tax-free as intended. Owing to this, I am now moving this amendment, which provides for the insertion of a new section in the Taxes Consolidation Act 1997 to exempt these ex gratiapayments from income tax, USC and PRSI.
Entitlement to payment under the Covid-19 death-in-service scheme for healthcare workers is limited to the families of a small number of healthcare workers. According to the Department of Health, there are currently approximately 25 recipients who may qualify for the scheme. The number of payments ultimately made from the scheme is dependent on the level of future Covid-19 cases in the State, the number of deaths arising from these cases and, of those deaths, how many are related to healthcare workers who were exposed to Covid-19 by virtue of the nature and location of the work which they were contracted to carry out.
That is a very welcome development. I want to raise a related matter which was raised on Committee Stage last week in the general discussion on this section. It directly relates to the recognition of the service of those who worked within our public health service, on the front line, during the darkest days of the pandemic - the people who put themselves in danger. They are non-HSE staff engaged by the HSE for contracted services such as contract cleaning, security and other ancillary services in our public hospitals, and they have yet to receive the €1,000 pandemic recognition payment. It is unconscionable that they continue to wait for approval from the Department of Health for a payment for which they are eligible. I hope the Minister, Deputy Donohoe, has spoken to the Minister for Health in this regard. It is an issue that was raised by several members at the committee last week. It is important that this gets resolved before Christmas. These people have waited far too long for a payment for which they are eligible.
I have passed this matter on to the Minister for Health and I know he is directly aware of the interest in this matter. However, it is a matter for the Minister for Health rather than for the Finance Bill. I will again make sure the Department of Health is aware of this matter.
I move amendment No. 6:
In page 11, to delete lines 15 and 16 and substitute the following:“(a) in subsection (1)—(i) by the insertion of the following definition:“ ‘Act of 2021’ means the Affordable Housing Act 2021;”,
(ii) in the definition of “qualifying period”, by the substitution of “2024” for “2022”, and
(iii) in the definition of “qualifying residence”—
(I) in paragraph (a), by the substitution of “dwelling,” for “dwelling, or”,
(II) in paragraph (b), by the insertion of “or” after “converted for as use as a dwelling,”, and
(III) by the insertion of the following paragraph after paragraph (b):“(c) a building which was not at any time used as a dwelling and was purchased by a first-time purchaser in accordance with an affordable dwelling purchase arrangement (within the meaning of section 12 the Act of 2021) and a direct sales agreement (within the meaning of section 7 of the Act of 2021),”,”.
This amendment is required to ensure that new homes delivered for affordable purchase under Project Tosaigh will continue to be considered as a new home for the purposes of the help to buy scheme. Project Tosaigh was initiated by the Land Development Agency as part of the Government's Housing for All strategy. There are two arms to the project: one is the delivery of cost rental units and the other is the delivery of homes for affordable purchase by local authorities. It is anticipated that the project will deliver up to 5,000 affordable homes for purchase or rent by the end of 2026.
The purchase arm of the project is aimed at accelerating the delivery of affordable purchase homes, on site with full planning permission, that are not currently being developed by the private sector due to financing and other constraints. Under this arm, eligible purchasers will be identified by local authorities in line with the criteria outlined in the Affordable Housing Act 2021. The LDA will take beneficial ownership of each property in order to facilitate the ownership transfer from the vendor-developer directly to the eligible purchaser.
However, the help-to-buy scheme is limited to new properties only. Although the properties being provided under Project Tosaigh will be new dwellings, the onward sale of the beneficial interest to the eligible purchaser is technically considered a second sale. For this reason, the property ceases to meet the current criteria for a qualifying residences for the purposes of the help-to-buy scheme, so the purchaser would not be eligible for help-to-buy support. For this reason, the definition of "qualifying residence" in section 477C of the Taxes Consolidation Act 1997 is being amended to ensure that certain new homes being delivered for affordable purchase by direct sale developers, which presently include the LDA under the Project Tosaigh initiative, will continue to be considered as new homes for the purposes of the help-to-buy scheme.
The amendment provides for such situations where a body has taken beneficial ownership of a new property for onward delivery as an affordable home and is approved to perform such activities under the Affordable Housing Act 2021. The LDA is the only body to do this. The amendment ensures that taxpayers who purchase a home under the Project Tosaigh initiative will be able to avail of help-to-buy support where all other conditions of the relief have been met.
I welcome the amendment. I wish to speak generally on the area of affordable housing and the interaction with the help-to-buy scheme. The Minister's Department commissioned a report from Mazars to review the help-to-buy scheme. I have submitted a proposal that I ask be further reviewed by the Department. Under the local authority affordable housing scheme currently, there are discounts of between 15% and 40% on private houses, with the local authority taking an equity stake in the amount of the discount. However, as a result of the way it is applied, if the discount is above 22.2%, the purchaser no longer qualifies for the help-to-buy scheme because the loan-to-value ratio and the market value compared with the mortgage is below 70%. My proposal, in line with the recommendation in the report from Mazars, is that where the discount is above 20% of market value, thereafter the ratio would be based on the purchase price to the purchaser, that is, after the discount, as a percentage of the mortgage. From 20% onwards, a loan-to-value ratio of the discounted price to the purchaser would be applied. The council would retain an equity stake in the discount amount and the loan-to-value ratio would be based on the market value of the purchase price. Every time the discount goes up by 1%, the loan-to-value ratio would go up by 1%. By the time one gets to a 40% discount, there would be a loan-to-value ratio of 90%. If it is a 25% discount, it would be a loan-to-value ratio requiring 75%. If the discount goes to 30%, it would be a loan-to-value ratio of 80%. At a 35% discount, it would be 85% and at 40% it would be 90%. It is one for one. That would ensure that people qualify for the help-to-buy scheme and it would take away the dead weight. It would ensure that people who require the help-to-buy scheme get it. In the context of the original intention of the scheme, there was a loan-to-value ratio of 70%. Those who made it below that may have had a large amount of savings. Such people got the help-to-buy scheme but did not require it.
This issue affects a certain category of people. The current mortgage lending limit is 3.5 times a person's salary. On 1 January, that will increase to four times a person's salary. With that, we are looking at the social income housing limits going up by €5,000 from 1 January. This means that at the top band, those with an income above €40,000 will not qualify for social housing. By my calculations, working off a limit of 3.5 times a person's earnings, a person with a salary of €46,000 will qualify for the help-to-buy scheme with a discount rate of 40%. If that limit goes to four times a person's salary, those with a salary of €40,500 will qualify. The key thing is that cohort will not qualify for social housing. I want those people to get affordable housing. A good example would be to take a house with a price of €300,000. A discount of 40%, or €120,000, would mean the price to the purchaser would be €180,000. The purchaser would get €18,000 from the help-to-buy scheme, and have a mortgage of €162,000. Using 3.5 times annual salary, that would put the person on a salary of €46,000.
I want people to be able to purchase their own homes. I have done this as best I can. I know the Department has considered it. I am asking for a review. I want people to be able to purchase their own homes if at all possible. If the State needs to take an equity stake, so be it. The problem is that if the discount rate is above 20%, the person will not qualify for the help-to-buy scheme. I am looking for an increasing loan-to-value ratio based on the purchase price to the mortgage. It is getting rid of the dead weight. If I have a mortgage of 75%, that means I have 25%. The help-to-buy scheme will get me a maximum of approximately 10% of the value, or €22,500, and I provide the balance in savings. I do not need that high discount. If I am on a salary of €46,000, however, I require it. The State still retains an equity stake. Is it not better to have the State take an equity stake of 40% rather than having those people being required eventually to go on the social housing list and the State having to invest 100% of the cost of the house? I am a proponent of house purchase. I want people to be able to afford their own homes. I want the State to assist them. There is no risk to the State here. There is a cost in the help-to-buy scheme and I accept that, but it is a small price to pay. These people will not have to avail of HAP. They will be able to pay their own mortgage. I am asking for an overall review of the help-to-buy scheme and its interaction with the local authority affordable housing scheme. I feel very strongly about this. I want us to have a model. We are seeking to cater for all categories. People whose income is below €40,000 can avail of social housing. Those whose incomes are higher can go for private housing and mortgages. There is a cohort in between. I am worried there is a lacuna whereby a cohort earning between €40,000 and €45,000 or €50,000 cannot get on the property ladder. We should assist them, with the State taking a stake with the discount. I have already made an initial submission. All I am asking is that the Department carry out a detailed review on this issue.
I do not think Deputy O'Donnell has tabled an amendment relating to his proposal, but I hear what he is saying with regard to targeting support for those trying to get on the property ladder and having a detailed review of the matter. I again put it to the Minister that he has carried out a detailed review in this regard. The review has shown there is substantial dead weight in the help-to-buy scheme. Was it 52% of individuals who benefited from the help-to-buy scheme who did not need its support to get onto the property ladder? That is different from what Deputy O'Donnell is talking about, which is people who genuinely cannot afford to purchase a house. The cost of the dead weight is more than €100 million. In the mouth of a housing crisis, it is not the right use of State resources, particularly when there is evidence that this is pushing up house prices.
We continually hear about how the help-to-buy scheme has benefited X number of individuals but what the Government does not say is that more than half of those individuals did not need that scheme to purchase their home. They had a deposit in excess of what the macroprudential rules lay down for their category.
There is a serious issue here. The report requested that the Minister look at the loan-to-value ratio; he has not done so. The report also requested other changes. There is a real issue here, as I said on Committee Stage, in that he and his party has driven policy on housing that has been an almighty disaster for people the length and breadth of this State. On Committee Stage, I told him that this was not just an issue anymore of people trying to afford to purchase their own home, or whether they could keep a roof over their heads when they were renting from their landlord. This crisis, catastrophe, disaster and emergency has now spread right across different facets. Since Committee Stage, we have heard six different teachers' unions come out very clearly on the Government's policy and the fact that it is now affecting the education sector being able to attract teachers. We also hear that in respect of the health sector. It is not just those areas but others as well.
It is clear that Fine Gael lives in some type of deluded bubble, when we hear the Tánaiste talk about the grass not always being greener on the other side and things are just as bad in other areas as they are here. I urge Fine Gael, as a party that is now in its twelfth year of government, as one of the architects of this crisis and as a party that has pursued policies, even if it did not know about it at the time and forgetting that the Opposition told the party this would have the consequences it would, to acknowledge the evidence is now clear. There is nowhere whatsoever to hide. Fine Gael's policies have collectively pushed up house prices to the highest level they have ever been in the history of the State. Its policies collectively over the past 12 years have resulted in a social nightmare, where 11,000 people are in emergency accommodation and where this Friday, my children and children throughout the State will look forward to "The Late Late Toy Show", but others will be in hotel rooms and emergency accommodation wondering how Santa Claus will visit them this year, maybe not for the first time in emergency accommodation. Others will enter that system because of the policies of Fine Gael.
Rents went up 20%, which is crazy stuff, and 19% in County Donegal in the past year, yet, if we listen to Fine Gael and Fianna Fáil, they swear they are doing a good job. If the intention is to create the largest number of homeless people, the largest house prices, the largest rent increases, or the largest rents we have ever seen then, fair play boys, the Government has nailed it out of the park, but that is not we should be doing. The help-to-buy scheme is a measure that is being brought in because of the desperation of so many people who cannot afford a house. Anybody who cannot afford a house and is offered €30,000 in State money will, of course, grab it with both hands. Why would they not? That money means there is possibly a light at the end of the tunnel for them but the problem is it drives up house prices. When the amount is increased, a finite number of houses are being chased at the end of the day.
We see that is the case with this scheme, in addition to the advice from numerous other individuals, including Secretaries General and external organisations funded by the State, which are telling the Government that some of its schemes are pushing up house prices, the shared equity scheme being another of them. That is the consequence of it and the Government cannot hide from that. It cannot hide from that anymore. That is why I have a serious issue with the fact that the Government is not dealing properly and sufficiently with the source of the problem. Indeed, by trying to remedy this and to recognise that so many people are locked out of homeownership, which has fallen under Fine Gael, and by introducing this scheme, which is so short term, the Government is having an impact on affordability across the board.
What we needed to do for many years, and what we still need to do, is to aim for far more ambitious targets on social, affordable and cost-rental housing. We need to cut the red tape for the delivery of housing, from the Department right through to all the different steps that are in place. I can bring the Minister to within 10 km of my home in west Donegal where one of the biggest issues I now face and deal with as an elected representative, which I never ever dreamed of living in a rural constituency, is so many people who face homelessness. I never thought in my life that would happen nor did the people who come to me. They thought it was an issue that affected people in the inner cities of Dublin and maybe Cork, not rural west Donegal, the heart of the Gaeltacht or elsewhere. It is now the reality for many families, most of whom hold down full-time jobs. The reality is we have to get to grips with this.
We need to drive forward - I am sure the Government will say it is doing this - the delivery of social, affordable and cost-rental houses to deal with the housing crisis. The Government cannot hide from the fact we have the highest house prices, highest rents and, shamefully, the highest number of homeless people in the history of the State. We see all the other indicators. The Minister appeared before us at the finance committee to tell us that commencements were going in the right direction. This is the deluded bubble Fine Gael lives in where it swallows its own spin and propaganda. Commencements have been falling for the past seven months. Over a 12-month period, commencements are down by approximately 8,000 compared to where they were seven months ago. There is a serious issue with the pipeline. The Government needs to wake up to the reality because so many people and families are suffering as a result of the disastrous policies it has introduced year after year in these type of finance Bills. Members of the Government stand there, think they know all the answers and all the rest, refuse to listen to the Opposition and, as a result, they have created a situation in this country that was completely and utterly avoidable. Now is the time to do the right thing.
I will respond to the proposal made by Deputy O'Donnell. As he will be aware, the Department has conducted a thorough review of the help-to-buy scheme. I appreciate the further point he raised. My officials and I received the paper he submitted and we will, of course, give it consideration. He knows the issue we grapple with, however, in that I accept there is an issue with the so-called deadweight effect of the help-to-buy scheme. A key factor driving that is the level of the loan-to-value ratio. If there is a change in that ratio for some people who are participating in the scheme, I certainly find it difficult to see how that would not lead to further changes in the help-to-buy ratio over time, raising further questions regarding the impact the scheme is having on helping those people buy their first home. That being said, the Deputy raised an important matter. We received his paper and we will give it consideration and thought but I want to be open with him regarding a key difficulty there.
On the assertions made by Deputy Doherty, I will be clear that while the Mazars report contained many points that were critical of the help-to-buy scheme, it also stated, "There is not definitive evidence that HtB [help to buy] pushed up the price of new houses." That was the conclusion of that report on houses. I will not make the case for a second that our housing policies are yet making the necessary progress for those worried about being homeless or not being able to afford their rent. Were I to do so, I would indeed be in the kind of bubble the Deputy referred to but because I am not, I will simply say that the policies we have in place are leading to more homes being built. Our objective is to increase supply, not increase pricing. We remain clear on the impact the lack of homes is having on too many and are ever determined to strengthen and review our policies to make a difference in the time ahead.
I thank the Minister for taking my paper on this particular issue. I look forward to further engagement with him and his Department on the points I raised. The scheme is designed on a loan-to-value ratio of 70%. The scheme has been a success but no scheme will ever be perfect. If it went below a loan-to-value ratio of 70%, it would raise questions in terms of the possibility of deadweight.
My proposal is straightforward. I want people to be able to purchase their own homes. There is a cohort that will not qualify for social housing even with the new income limits. The highest limit, which is band one, will go from €35,000 to €40,000. Somebody in the cohort above that income range gets a 40% discount under the local authority affordable housing scheme where the income limit is 3.5 times a person's earnings. If the person has an income of €46,000, he or she can purchase his or her own home under the help-to-buy scheme with the council retaining a 40% stake. If it goes to four times earnings on an income of €40,500, the person will qualify to purchase his or her own home with the State retaining 40% equity. In that case, with a €300,000 home, which is the example Mazars used, the person gets €18,000 under the help-to-buy scheme. Overall, this is good value for money. I am supportive of the scheme. I look forward to further engagement with the Minister and his officials and I thank him for his open engagement on the matter.
The Minister can say he is conscious of the deadweight - the €100 million that has gone to people who do not need this support to purchase their own homes - but he has done nothing about it. This is the Finance Bill and he has done nothing about it. Mazars made it clear that this is poorly designed in respect of affordability, house prices and its objectives, yet the Minister comes forward with a Bill to extend it.
He said the Government's objective is to reduce house prices. By God, it has fairly failed on that one. Can he cite one year during his tenure as Minister for Finance when prices went down? Can he cite any one year from 2016 onwards when prices went down? On his watch, prices have gone up and up. What he plans to do in this Bill is to push them up further. Is that not right? He will push them up because he is going to introduce a concrete levy, which, according to his own officials and the SEAI, will add at least €1,200 to the cost of a three-bed semi-detached house. At a time when everybody knows, or should know, that we need to drive down the cost of housing, the bright sparks in Fine Gael and Fianna Fáil have said: "You know what we'll do? We'll introduce a measure that will actually put up the price of housing." I put it to the Minister that the Bill will increase the price of housing. There is no way to hide from that one either. It is as simple as that. The figure will be at least €1,200. Others have said it will be far more because it has not factored in inflation before the end of the year and other factors.
In my earlier contribution, I said my objective was to increase supply. The record of the Dáil will show whether or not I gave a commitment here this evening to reduce prices. I do not believe I did. What I said was that the aim of Government policy is to increase supply. I believe that increasing supply over time will lead to a reduction in the price pressure that is there and is having such an effect on tenants and people looking to buy their first home. The objective of the Government is first and foremost to increase supply, which over time will lead to an improvement in affordability.
I have long considered and have in the run up to each finance Bill looked at whether alternatives to the help-to-buy scheme are possible and if they would be any better. This scheme has a number of features that are really important. The first one is that it relates the availability of this incentive directly to the fact that the home must be newly built. It is a key feature of this scheme versus many other schemes that are available.
Second, it also offers support to self-builds. Offering support to self-builds is a factor in why the loan-to-value ratio is at its current level. I believe it is very appropriate that the tax code has a scheme that offers support to people in buying their first home. This year alone, 7,600 people were able to access help-to-buy scheme and because of this, they were able to buy their first home. These are people who do not qualify for social housing, the shared equity scheme and local authority schemes. I believe that even for those taxpayers, support for buying their first home, which is newly built, is the right thing to do. This is a key point of difference between me and Deputy Doherty. I do not know what he would say to all of these people were he to cancel this scheme. He might get the opportunity to make that point.
I move amendment No. 7:
In page 15, between lines 17 and 18, to insert the following: “Renters Tax Credit
12.Within 3 months of the passing of this Act, the Minister shall lay a report before the Dáil on whether a regime of rent controls would be a more effective way to support renters than a renters tax credit.”.
To move things along, I did not intervene in the previous discussion but, in a way, we are covering similar territory here. In this amendment, we suggest that rather than introducing a renter's tax credit of €500, the Minister would look at whether it would be more effective to deal with the crisis of unaffordable rents by examining a serious system of rent controls that seek to make rents affordable. It is self-evident that a €500 tax credit, which only some renters will be able to get, is just piddling. It is a fairly pathetic drop in the ocean compared to the situation renters face.
In the past year, rents in Dublin have gone from an average of €2,000 per month to €2,200 per month. That is an increase of €200 per month or €2,400 per year. In my area of Dún Laoghaire, average rents last year were €2,200. They are now €2,400 and rising. Against that background, to offer people a €500 tax credit is worse than a joke because those rents are utterly unsustainable. On average, €24,000 in after-tax income was required last year to pay the average rent and the figure is now up to €26,000.
This is just insanity. It is not sustainable. The €500 tax credit just goes straight into the pockets of landlords and does not leave renters in any better position whatsoever.
As I did on Committee Stage, I wish to humanise this issue. I had several people in here today for Leaders' Questions from Tathony House, Rathmines Road and St. Helen's Court, all of whom are facing mass evictions from multi-unit complexes at the hands of landlords. There were also individuals facing eviction. All of them are in this dire situation. All of them are working families, people with jobs, but they just cannot afford this. They are in a hopeless situation because they are being evicted on the grounds of sale, which the Minister allows. They cannot afford these rents. I am talking here about people who have reasonable jobs.
I will give one example, that of a couple, Jacqueline and her husband. He works for the ESB. They are being evicted from the house they have lived in for 55 years by the landlord on grounds of sale. She, her husband and her two children are absolutely terrified because there is nothing for them. Their earnings are just enough to place them above the income threshold in this regard, and even the new increased income thresholds, I think. Given their age, they went to the bank and asked if there was any chance they could borrow and get a mortgage to buy their house, now it was for sale. There was no chance. Jacqueline and her husband are in their mid-to-late 50s, so the bank would only give them a mortgage for seven years. Purchasing the house, therefore, was not a runner. Equally, they could not possibly afford to pay €1,200 or €1300 a month in rent. What are they to do? Seriously. Jacqueline was crying in the Gallery today. She was crying at the protest, along with her daughters. They are terrified. What are they to do? If the Minister can give me an answer, I will be happy. I will be happy if I can give an answer to Jacqueline, and to the other families, as to what they are to do to avoid ending up - and this is the vision Jacqueline has - of sitting in a car, along with the family, on the side of the road at Christmas because there is nowhere to go. Jacqueline is not even entitled to emergency accommodation if she is made homeless because her income is above the threshold. What do we do?
One thing we could do would be to reduce rents and bring them down to affordable levels. What was the point in having, even if the supply of housing is increased, as the Minister often says, places being rented out at these prices? All the housing being built now is going to be rented out at these rents. What is the point of building stuff like this? Who can afford it? Nobody can. The only people who will be able to afford this housing, to buy it, will be the vulture and investment funds that will come in and charge these levels of rent. These are the only parties who can afford to buy the places being built, or very rich people.
I am, therefore, genuinely asking the Minister, if he does not agree with or think our solution is viable, which is to bring in rent controls and ensure nobody has to pay more than 25% of their income in rent, to please tell me what people in a situation like the one I described are supposed to do. There are no answers to this question now. There is not even the prospect of there being answers being offered by the Government to these sorts of dilemmas. If I am missing something, then I ask the Minister to let me know what it is and I will relay this information to the people terrified they are going to be on the street because they cannot afford these rents.
The inclusion of tax credits for renters in the budget was hailed by the Government and sections of the media as a big step forward for renters. At the same time as this tax credit is being introduced, though, is there any move being made to further curb rents? Is there going to be a rent freeze? No, there is not. It will not happen in every circumstance, but in a large number of cases, and the Minister and I know this, landlords will see renters coming, see the tax credit coming and see this as an opportunity to hike rent levels. The money at stake in the context of the tax credit, therefore, will not end up in the pockets of renters but in those of the landlords. This is what is going to happen in many cases. In fact, this is indicative of the general approach of the Government and the general effect of the budgetary measures, and not only in the context of renting, which is the subject we are discussing. There has been €4.1 billion in once-off spending by the Government in the context of this budget package. Where, though, are the measures that have been taken to end, cut across or even seriously challenge the profiteering that ordinary people see going on all around them? I am talking about what happens in the supermarkets, forecourts, garages, etc. Where are the anti-profiteering measures?
I believe the Government was forced to make concessions and that it went further in the budget than it had originally intended by way of concessions for several reasons. The key reason was the general mood in the country, which Government Deputies and Ministers were not unaware of. This led them to realise that they would be in trouble if they did not go further than intended. I also believe the protests that took place in Cork on 17 September and in Dublin on 24 September were a factor in the Government's thinking. It is not that the Government saw 20,000 people on the streets and was terrified by this, but it was sufficiently politically savvy enough to know that if it did not go further originally intended with budget measures, these protests would have had the potential to grow to 40,000, 60,000 and 80,000 people, and it did not want this. It remembered the experience of the water charges. These protests, and those who organised them, then can claim some degree of credit for forcing the Government to go further than it had intended.
To bring this matter back to the question of the tax credits for rent, but also the other concessions made, we can see how what was trumpeted as something that would put money into people's pockets has ended up boosting the profits of supermarkets, big energy companies and the income of landlords in this case. I am for real rent controls, but if what the Government is doing is introducing a tax credit for renters, then the least the Government can do is to introduce it for the lowest-paid workers as well. The budget excludes them because the tax credit for tenants in private rental accommodation does not apply to those whose incomes are sufficiently low that they are not subject to income tax. The Government will respond that those who do not pay income tax cannot get a tax credit. The idea of a tax credit, however, according to the Government's messaging was to give renters a break. If renters are being given a break, then it should and must also apply to the lowest-paid workers who do not pay sufficient income tax to avail of the tax credit in the context of the rules the Government has laid down. That is the gist of this amendment. I am not happy with the proposal as it stands. We are for real rent controls, and if we do not have real rent controls, then the tax credit is like a leaky bucket.
If the Minister is to do it that way, the least he can do is include the lowest paid workers in the scheme, and that is in the amendment.
I will speak to my party's amendment No. 11. It was not today or yesterday that I started to raise with the Minister the need to introduce a rent credit. Time and again, he has taken the position of telling us a rent credit would go into the pocket of landlords. Those words were echoed by his party leader and the Taoiseach. Year after year, the Minister said a rent credit would make the situation worse, there would be less housing and it would be a State subsidy to landlords. Obviously, he was only responding to one part of our suggestion, that of a tax relief for renters. That had to be accompanied, however, by a three-year rent freeze. In fairness, at least the Minister's officials have been consistent because they advise him time and again that the likely outcome of this will be higher rents for the exact reason Deputy Barry outlined, namely, that there is nothing in large swathes of the State to prevent landlords from increasing rents accordingly. That is a serious problem.
I welcome that the Minister has got halfway there and has seen the light and done a U-turn. I welcome that he has agreed with at least half of what we are saying in terms of a rent credit. It is now time to go the whole hog and introduce a rent freeze across the State. It is such a pity the Minister did not do this three years ago when we asked him to do it. Can he imagine the impact for renters if he had listened to what we were saying on our amendments to the Finance Bill three years ago? At that time, the average rent in Donegal was €658 per month. It is now €933. Renters are paying over €3,000 more as a result of the failure of the Minister to introduce a rent freeze. Rents in Donegal are among the lowest in the State. They are no longer at the levels we thought. However, the county also has a low level of disposable income. In other areas rents are far higher and this has become the straw that broke the camel's back. The Minister's refusal to act has caused rents to increase year after year at record levels. As a result of his inaction on this matter, rents have placed an additional burden of thousands of euro on renters.
It is not only that prices have gone up. Under the stewardship of the Minister and his Government, we now see that there were only 495 rental units on the market as of 1 July compared with 1,500 at any time between 2014 and 2019. That is the extent of the rental collapse under Fianna Fáil and Fine Gael. I am sure the Minister will find some imaginative way to try to spin this that it is all Sinn Féin's fault but we will wait to see what he has to say on that.
The recent comment by the Tánaiste, when referring to young people considering emigrating due to the burden and stress of renting in this State, that the grass is always greener but young people will not find lower rents if they emigrate shows how out of touch the Minister's party is. The Tánaiste was inundated with messages from people who left these shores and are in different places, for example, in European cities such as Brussels and Berlin, where rents are not only cheaper but accommodation is more spacious and secure.
The Minister has spent years opposing and arguing against Sinn Féin's calls for rent relief in the form of a refundable tax relief of one month's rent to be put back into renters' pockets. We proposed a rate of 8.3% capped at €1,500. When I read the reply to a freedom of information request I put in on the advice the officials were giving the Minister on the renter's credit he is bringing forward, I was interested in one of the comments in the papers - that it is understood the Minister for Housing, Local Government and Heritage is seeking a rental tax credit of 8.5% on annual rental costs capped at €1,500 at an estimated cost of €273 million. That is actually the Sinn Féin proposal. Then again, maybe it should not be surprising to me because this is a Minister who is completely out of ideas and who has overseen, on behalf of the Government, a crisis that is out of control.
What needs to happen is that the rent credit should be increased and should be refundable. Crucially, it should not go into the pockets of landlords, which is why the Minister needs to introduce a three-year rent freeze. I have put this question to him time and again but he will not answer it. If I asked the Minister three years ago what, in his view, would be a success in terms of rent prices, would success have been when someone could rent a house in Donegal for €650? Rents in Donegal are now nearly €1,000. Average rents have gone up by €300 right across the board. Even those who were paying €2,000 are now paying €2,300 per month. That is €3,600 extra that a family has to find every year to pay the landlord. That is before-tax income of over €6,500 that they have to find. What is the measure? How far will the Minister allow rents to go before he recognises that, as he is being advised by his officials, the likely impact of this measure he is introducing is an increase in rents? This is the issue, as it is with the help-to-buy scheme. Mazars, and the Minister is correct on this point, did not say the help-to-buy scheme pushed up house prices. What Mazars said is "it facilitated higher prices". That is what the independent report says.
People who are desperate will obviously welcome a renter's tax credit, but what will that mean when the landlord keeps on pushing up prices? In Donegal, rents went up by 19% last year.
I will finish on this. What is a level of success for the Minister? When will he say he has achieved it? If rents go up another 19% next year, will that be a failure?
The Minister stated he was trying to correct the Dáil record and he did not mention the issue of reducing prices. That is the problem.
Do Deputies see the typical approach here from Deputy Doherty? What he does is create the impression that I, as Minister, have an approach that is all about driving up rents at the expense of tenants. The Deputy asks me or suggests that I have some figures in my mind regarding how much I want rents to go up by and creates the impression that I am not sympathetic or aware of the challenges faced by so many who cannot afford their rent and are worried about the future. I understand why Deputy Doherty will make those claims in the face of the inadequacy of his own policies-----
-----and, in fact, in the face of the track record that some of the policies he is advocating have been bad for supply and bad for making more rental accommodation available. I understand why the Deputy makes that claim.
I will reassert that in many of the different debates that Deputy Doherty and I have, I do not make the case about what the Deputy's intentions are and what he is looking to do because I approach this debate on the basis of good faith that the Deputy is looking to make a difference. Time and again, what the Deputy seeks to do is create the impression of what I am about and what I am aiming to do. He is specifically doing this-----
There will be ample opportunity for Deputies to come back in. Proposers of amendments may speak three times. There is plenty of time to make points. Please allow the Minister to continue without interruption.
I thank the Acting Chairman.
What I am looking to do here, conscious of the big challenge and need that so many face at present, is to build more homes and make more rental accommodation available. I appreciate that it is taking time and it will take time for these measures to be felt and to have the effect I want to see. While I accept the evidence is not fast enough for many, we are seeing more and more new homes being built. There were 27,417 new homes commenced up to September. A total of 44,715 homes have planning permission. This is an increase of more than 11% in the number of homes in the same time a year ago. We have seen the number of apartments completed increase by 153%. We have seen more and more social housing being delivered. Of course this is enabled by the €4.5 billion that has been made available by the Government to our local authorities and the Department of Housing, Local Government and Heritage to deliver more and more homes. Until August of this year, we saw 16,123 homes purchased by first-time buyers. That is one third of all homes purchased.
I acknowledge, as I make the case about these figures and about more homes being built, that even more homes need to be delivered and that for so many the progress we are delivering is not enough. I acknowledge all of this. I am aware of the human cases Deputies Boyd Barrett and Doherty referred to. I meet these people too. Since the budget was announced, and since the measures in it became clear and have been explained in the Finance Bill, I have met people for whom the rental tax credit will have a positive effect. It will help in the payment of their rent for this year and next year. Of course they tell me they want it to be more and they want the rent tax credit to be increased further. The point I am making is that the measure we are introducing will help and will make a difference. It will help at a time when rents are increasing. The best response to rents increasing is to introduce measures such as the rent credit, which we are making available, and make available more rental accommodation as quickly as we can.
Deputy Doherty made reference to the official advice I receive which pointed to some of the risks and trade-offs with regard to introducing a rental tax credit. He did not make reference to the advice I also received and the documents made available to me that point out the rent freeze he is advocating would have a negative effect on the supply of new rental accommodation. Deputy Doherty will say that in the face of advice such as this, it is up to people to reach their own view on what they think the appropriate policy would be. As Minister, I have the same right to weigh up the various advice put to me and reach a view on what I think is the appropriate course of action. However, if we look at the impact that rent freezes have had in other jurisdictions and other large cities, it points to the fact that over time they do not lead to more rental accommodation being made available. While a rent freeze benefits those who are in properties affected by the rent freeze, the evidence from Berlin, where the measure is no longer in place, and from San Francisco is that there has been a sharp drop in the availability of rental accommodation.
Whether it is San Francisco or Berlin, or even in the debate taking place regarding the implementation of a rent freeze in Scotland, the warnings are clear. Of course it delivers a benefit to those in rental accommodation who need support but it will deter the supply of more rental accommodation in future. This is why, even though I can understand its attraction, such a measure would lead to less rental accommodation being available. By doing this, in turn it will lead to higher rents. We have measures in the rental pressure zones that cap the annual increase in rental levels at 2% per annum and 75% of rental properties throughout the State are now in rent pressure zones. For these reasons, I am not in a position to accept the amendments.
Not surprisingly, the Minister is not able to answer the question as to what I say to Jacqueline, Richard and their two children who are facing homelessness because they are being evicted by their landlord on the grounds of sale, which the Government allows. In the middle of a housing emergency, which the Minister does not want to acknowledge, he is allowing evictions. What do I say to them? Where do they go? They cannot afford average rents of €2,400 per month. They would be lucky to find somewhere at that cost in Dún Laoghaire. This amounts to €28,000 a year just for rent before paying for anything else and after tax. This is what people need to find somewhere. Where do they go?
I have cited only this case but it is true of the 35 families in Tathony House and the 25 families affected in Rathmines. It is also true of Stella who was in with us today and several thousand more people. The Government acknowledged that deferment of notice to quit, which, by the way, does not help Jacqueline because she had received the notice to quit prior to its introduction and could potentially be evicted before Christmas, means evictions will come in a flood afterwards. Families will have nowhere to go. We will then pay €200 million to accommodate them in substandard emergency accommodation. The State will pay for this anyway except the people, children and families affected will have to go through the misery, trauma, hardship and hurt of going into emergency accommodation or being on the side of the street. Eventually we will have to give them an answer but at present the Government is saying it does not have an answer. Give us an answer. Our answer is to control the rents and stop the evictions now. Even if the Minister will not do it, in the long term he should intervene to stop people being made homeless by making rents affordable and stopping people being evicted.
Whatever the Minister's motivation, whether by design on accident, I would like to know how high rents will go before the penny drops with him that his policies are contributing to the housing crisis and the rental crisis. That is the point. Whatever about whether it was an accident or motivated, and I do not suggest it was motivated, the evidence of the Minister's time in Government is that it has been an unmitigated disaster. There is no way he can hide from it. When he went into Government in 2016 rents were €1,000. They have increased by approximately 50%.
The Minister spoke about Berlin and I am glad that in the past week he has recognised that Berlin no longer has a rent freeze. He spoke about the lack of supply. Here the reduction in supply of rental properties over the past year is 63% according to Threshold and the Citizens Information Board. The point we keep making to the Minister is that the Government's targets on social and affordable housing and cost rental housing are far too low. Of course the Minister can ignore advice. That is not a problem. I am making the point, because I agree with the advice, that in areas where there is no rent freeze a rent credit will go into the pocket of landlords. This is what will happen. It will increase rents. This is why we need a rent freeze. It is why we need the Government to substantially invest in social, affordable and cost rental homes over the three-year period. I genuinely ask because the Minister has been in office for half a decade. Under his stewardship this has gone absolutely crazy. No wonder so many people are giving up hope. It is not fair and it is not right.
On the policies the Minister introduces in the Finance Bill, nobody looks at what happens here, but it is here that the damage is done. It is in budgets and finance Bills that the damage is done, the foundations are laid and the course is set for a housing crisis and a housing disaster. Despite all the indicators saying "disaster", the Minister keeps going down this road and is unwilling to change tack, and that is a serious problem.
The Government and I have shown the commitment we have to make a difference to the huge challenges many are facing by increasing the funding in our capital building programmes for local authorities all over the country to build more social and affordable houses and by our efforts to support the private sector to deliver more homes. I refer to the role and impact of the help to buy scheme, which the Opposition is against. I refer to the shared equity scheme, which the Opposition is against. I refer to the Land Development Agency, which is looking to deliver more land banks and deliver more homes, that the Opposition is against. Many different housing schemes and projects have been brought forward by local authorities the length and breadth of the country, which the Opposition voted against and opposed locally, while Members come into the Dáil and look for more homes to be built. That is what we have sought to do.
Of course, we acknowledge more progress needs to be made and that we have to deliver more homes. However, what I will not do is indicate I am prepared to bring in measures, as the Opposition is suggesting, that have the capacity to make a tough situation even harder and tougher for so many. I repeat what I said earlier in the debate. Bringing in a measure that seeks to freeze rents at their current level for a three-year period, while I can understand its appeal in the face of the huge difficultly and significant angst and worry so many people face, is a recipe for less rental accommodation being made available and higher rents. The evidence is clear from other cities and countries that have brought in such measures. As difficult as our situation is, the answer is more supply being built in the ways the Government is seeking to deliver, and we know we must deliver that.
In conclusion, I refer to the very human situation Deputy Boyd Barrett referred to earlier. He brought up this on Committee Stage and I gave him the best answer I could then, which I will make available to the Dáil. I have those conversations in my constituency and face families who are affected in the way the Deputy described. We give all the support we can to provide, in my case, Dublin City Council, and, in the Deputy's case, Dún Laoghaire-Rathdown Council, supports to families who are in those circumstances. Their plight is the reason the Government wants to make a difference to a situation we accept is difficult for so many.
On the grouping of amendments, it is my understanding that as we are discussing amendment No. 7, Deputy Boyd Barrett has the right to come back in for a third time. Other speakers have had their opportunity and the offer is to Deputy Boyd Barrett alone. That is the guidance I have received.
That is correct. It is just not good enough for the people. Believe me, we are engaging with the local authority. Sometimes that helps us get solutions, but more often than not, it does not. So many people are falling through the cracks and that number is growing all the time. It is just not good enough. I am not going to describe motives or anything else, but I do think there is politics involved. The Government is labouring under the illusion that at some point, if the supply of public and private houses reaches a certain level, rents or house prices will go down. That is not going to happen unless there is a crash. That is the only way that will happen. Does the Minister honestly believe the private sector will let prices go down? It will stop building before it does that. The private sector will not let rents or house prices go down. If the Government is labouring under that illusion, it is a mistaken illusion that will not happen.
The public sector has to ramp up, on a massive scale, the direct provision of public and social housing. By the way, I supported all those projects and never opposed one of them. What I do oppose is the wasting of human labour building properties that no one can afford. We were 100% behind the Cherrywood development, which could have solved the entire south Dublin housing problem. We tried to fight for more social and affordable housing. The problem is, even though that one development could solve the entire south Dublin housing crisis, it will not because all of it will be unaffordable. We were campaigning for 15 years for the development in Shanganagh, where we only got the sod turned this week. Meanwhile, there are fellas building co-living apartments for rent at €1,300 a month, in which you would not put a dog. They were built and that is the problem.
I move amendment No. 8:
In page 22, between lines 22 and 23, to insert the following: “Reports
13.The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on measures that can be taken to ensure that the tax credit for tenants in private rental accommodation is made available to those of low incomes that are not subject to income tax.”.
I move amendment No. 9:
In page 27, after line 38, to insert the following: “Report on Foreign Earnings Deduction
17.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the Foreign Earnings Deduction, the extent to which the relief has achieved its policy objectives and to review its qualifying criteria to ensure it achieves its policy objectives.”
We will come to amendment No. 11, which calls on the rent freeze, after we deal with amendments Nos. 9 and 10.
Let me make this point to the Minister and perhaps his colleague will come to the Chamber and assist him in his response. He made the point about people objecting to social housing. What we want is social and affordable housing built on public lands. Perhaps the Minister could comment on the Clonburris strategic development zone, SDZ. Is he familiar with that development? It had the potential to provide 8,000 to 11,000 homes, 30% social and affordable housing, in Clondalkin. Who opposed it? Fine Gael did. The Minister's colleague, Deputy Emer Higgins, was group leader at the time. Thankfully, the council voted for it, but Fine Gael did not let it rest there. What did it do? It appealed the decision, for 11,000 homes, to An Bord Pleanála. That is the reality and there are countless examples of that not just in Dublin city but across the board. There are also countless examples of sweetheart deals, as Deputy Boyd Barrett mentioned, where houses are going to be built on public land and will be unaffordable.
The amendment deals with the issue of foreign earnings deduction, FED, and their qualifying criteria. Foreign earnings deduction provides a relief from income tax, of up to €35,000, from a salary of an employee who is tax resident in Ireland and travels out of the State, temporarily, to carry out duties to support firms that endeavour to expand their exports into new markets. It is a measure I support. The employee must spend a minimum of 30 days abroad in a year, with each trip consisting of at least three consecutive days in a qualifying period. The cost of this measure has increased from €800,000 to €5.4 million. One could argue that the increase of the cost is a success because the aim is to support businesses in terms of export markets, and never has that been more important in the aftermath of Brexit.
The issue is that there is no stipulation in respect of the type of activity an employee does to avail of the deduction. For example, an employee could be abroad for 30 days a year, in a qualifying country, but he or she may be carrying out work that could be done at home. Given the cost to the Exchequer, it is important that the activities performed by the FED assignment are export-orientated activities that cannot be undertaken within the State. I say that without suggesting in any way that this is being manipulated or abused. It is our job to look at the criteria and foresee some of these issues. We have all seen how remote and online working have changed how we carry out our activities in recent years.
It is important that the qualifying criteria be reviewed to ensure the policy objective is achieved.
A deduction, as has just been described, provides relief from income tax on up to €35,000 for employees who are tax resident in Ireland but travel out of the State to temporarily carry out duties of their office or employment in certain qualifying countries. In this way, it acts as incentive to Irish businesses seeking to develop and expand into emerging markets in any of the 30 qualifying countries. In order to qualify for this deduction, an employee must spend a minimum of 30 days abroad in a continuous 12-month period and each trip must consist of at least three consecutive days substantially devoted to the performance of duties in a qualifying country.
The incentive had a cost of approximately €5 million in 2019, the most recent year for which Revenue data are available. The scheme was last examined in 2019 when an independent review recommended an extension to the end of 2024. The review stated that the policy objective of assisting firms in Ireland to diversify their exports remained valid. Given the impact of Brexit, the impact of which is still being felt and may grow in the future, the review found that this measure was even more relevant to Ireland than it had been when the scheme was first introduced.
With regard to the qualifying criteria referenced in the Deputy's amendment, it should be noted that section 823(1)(a) of the Taxes Consolidation Act 1997 for state aid reasons does not specify particular activities to be performed to avail of the relief. Sector-specific reliefs, as a general rule, are subject to more onerous state aid requirements. It should also be noted that Revenue statistics on the measure are published on its website annually.
As the extension is due to come to an end at the end of 2024, decisions on the scheme will no doubt be considered in the coming 12 to 18 months. I expect that this will lead to a further review of and inquiry into the scheme. For that reason, the amendment proposed by Deputy Doherty this evening is not needed or merited in the Bill.
Amendment No. 10, in the name of Deputies Richard Boyd Barrett, Gino Kenny, Paul Murphy, Bríd Smith and Mick Barry, arises out of committee proceedings. There is nobody here to move this amendment.
I move amendment No. 11:
In page 65, between lines 8 and 9, to insert the following: “Report on income tax relief
24.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on an income tax relief equivalent in value to 8.3 per cent of annual rent to all private rental tenants not already in receipt of any State subsidy, examining the social and economic impact of this measure in the context of high levels of rent and other policy levers such as a ban on rent increases.”.
Ivana Bacik, Mick Barry, Cathal Berry, Richard Boyd Barrett, Martin Browne, Pat Buckley, Holly Cairns, Seán Canney, Matt Carthy, Sorca Clarke, Joan Collins, Michael Collins, Catherine Connolly, Rose Conway-Walsh, Réada Cronin, Seán Crowe, David Cullinane, Pa Daly, Pearse Doherty, Paul Donnelly, Dessie Ellis, Mairead Farrell, Peter Fitzpatrick, Gary Gannon, Thomas Gould, Johnny Guirke, Danny Healy-Rae, Michael Healy-Rae, Brendan Howlin, Alan Kelly, Gino Kenny, Martin Kenny, Claire Kerrane, Pádraig Mac Lochlainn, Denise Mitchell, Catherine Murphy, Paul Murphy, Johnny Mythen, Gerald Nash, Denis Naughten, Cian O'Callaghan, Richard O'Donoghue, Darren O'Rourke, Eoin Ó Broin, Donnchadh Ó Laoghaire, Ruairi Ó Murchú, Aengus Ó Snodaigh, Thomas Pringle, Maurice Quinlivan, Patricia Ryan, Matt Shanahan, Seán Sherlock, Róisín Shortall, Brian Stanley, Peadar Tóibín, Pauline Tully, Jennifer Whitmore, Violet Wynne.
Colm Brophy, James Browne, Richard Bruton, Colm Burke, Peter Burke, Mary Butler, Jackie Cahill, Dara Calleary, Ciarán Cannon, Joe Carey, Jennifer Carroll MacNeill, Jack Chambers, Niall Collins, Patrick Costello, Simon Coveney, Cathal Crowe, Cormac Devlin, Alan Dillon, Stephen Donnelly, Paschal Donohoe, Francis Noel Duffy, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Joe Flaherty, Seán Fleming, Norma Foley, Brendan Griffin, Simon Harris, Seán Haughey, Martin Heydon, Emer Higgins, Neasa Hourigan, Heather Humphreys, Paul Kehoe, James Lawless, Brian Leddin, Michael Lowry, Josepha Madigan, Catherine Martin, Steven Matthews, Paul McAuliffe, Charlie McConalogue, Michael McGrath, John McGuinness, Joe McHugh, Aindrias Moynihan, Michael Moynihan, Jennifer Murnane O'Connor, Hildegarde Naughton, Malcolm Noonan, Darragh O'Brien, Joe O'Brien, Jim O'Callaghan, James O'Connor, Willie O'Dea, Kieran O'Donnell, Fergus O'Dowd, Christopher O'Sullivan, Pádraig O'Sullivan, Marc Ó Cathasaigh, Éamon Ó Cuív, John Paul Phelan, Anne Rabbitte, Neale Richmond, Michael Ring, Eamon Ryan, Brendan Smith, Niamh Smyth, Ossian Smyth, David Stanton, Robert Troy, Leo Varadkar.
I move amendment No. 12:
In page 65, between lines 8 and 9, to insert the following: “Report on mortgage interest relief
24.The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of targeted, tailored and time-bound mortgage interest relief in respect of primary dwelling homes, considering options for its design, in the context of sudden and significant increases in interest payable on mortgage loans.”.
This amendment calls for a report to be laid before Dáil Éireann on the introduction of targeted, tailored and time-bound mortgage interest relief in respect of primary dwelling homes, considering options for its design, in the context of sudden and significant increases in interest payable on mortgage loans.
As the Ceann Comhairle will be aware, on 14 September the ECB increased its interest rate by 75 basis points, which is three quarters of a percentage point, to bring it up to 2%. This was the third interest rate hike since July and unfortunately others are expected in the coming months. Some of this has had an immediate impact on mortgage holders, especially those with tracker mortgages. Those who have had their mortgages sold on to vulture funds and other non-retail banks have seen this passed on immediately. Others have increased the fixed rate and may still increase the variable rate. We know 54% of outstanding mortgage balances are on variable mortgages, and as the Central Bank says, they will likely see an immediate increase in mortgage interest costs when rates rise. It also notes that even for fixed-rate mortgages, fixation periods are relatively short, meaning borrowings would be refinanced at higher rates after a relatively short period of time.
I would like to consider those who have had this impact passed onto them, including all of the people on trackers and all of those who had their loans sold to vultures and so on. Even though countless Ministers for Finance have told us it does not matter who holds a person's loan, it does matter today. People have seen their loans sold from AIB to a vulture. AIB has so far absorbed the variable rate and so has Bank of Ireland. Vultures have not. They have passed on these rate increases. This means if a person has a €200,000 loan, they will see their repayments increase next year by €2,000.
Many Deputies in this Chamber and on the Government benches are landlords. I note that landlords are able to offset mortgage interest against their tax so there is 100% relief for landlords. That does not exist for somebody who has their primary dwelling, is paying a mortgage and is now seeing their interest rate increase by 2%, which is an annual increase of about €2,000. They do not have anywhere to go. They used to, as we had mortgage interest relief up until 2021. The Government should take a pragmatic and reasoned approach, which is something it has not done so far, and get the Department to consider and publish options for the design and introduction of a relief. We in Sinn Féin are working with the Parliamentary Budget Office on costing models of this but it is something the Department should do. We have been clear that the banks should be absorbing the interest rate hikes in the interests of their customers. Obviously, that is not the case with trackers as they are pinned to the ECB rate but with variable rate mortgages I encourage the banks to continue to absorb the interest rate hikes in the interests of their customers.
This is about trying to ensure people are not fully insulated because we are not talking about that. The design I have in mind is looking at the proportion of increase that has happened. It would not look at all the interest that is paid but at the proportion that has increased over the past year. I suggest that a portion of that would supported by the State, similar to the energy credit, for example, where you can have an upper limit for what can be availed of by an individual or a householder. This is a reasonable approach. I suggest to the Minister, despite the fact his Government has stood against this idea, that it is time to do something for hard-pressed homeowners who have seen a shock 2% increase in the cost of the mortgages on their homes. When the bills must be paid, it does not matter to an individual whether it is a €2,000 increase in the cost of heating their home, the cost of electricity or the cost of the mortgage. This is a shock for people. The State should look at dusting down the type of measure we used to have, refining it for the times we are in, and having a tailor-made, targeted and time-bound measure that brings back mortgage interest relief.
As the Deputy and the House will be aware, mortgage interest relief for principal private residences was phased out on a gradual basis over the period between 2009 and 2020. The decision to abolish this relief was taken in the wake of the financial crisis, with the cost of the relief being one of the influencing factors. For example, in 2008 the scheme cost in excess of €700 million per annum. In addition, it should be noted that prior to its eventual abolition, the top two income deciles accounted for close to half the tax forgone through tax relief. This was an issue highlighted in the findings of the Commission on Taxation's 2009 report.
I am aware there has been an increase in certain mortgage rates by some lenders. However, it is important to note that mortgage interest rates, and in particular fixed interest rates, have fallen over the past number of years. It is also worth noting that a significant proportion of new mortgages are now fixed-rate mortgages and this will play a role in the event that interest rates continue to go up.
The introduction or reintroduction of this relief for principal private residences is not the best course of action to assist homeowners with rising rates and would also be very costly. The latest Central Bank data indicate that there were approximately 719,500 primary dwelling mortgage accounts at the end of June, with an outstanding balance of €98.7 billion. The average interest rate at the end of September was approximately 2.7%. Using those data as a guide, if this relief were reintroduced and granted at the standard rate of income tax, it could cost in the region of €500 million per annum. Even the reintroduction of a more tailored form of this relief would involve very significant costs. For that reason, I am not in a position to accept the Deputy's amendment.
I am going to press the amendment. It does not call for the introduction for the relief, as the Minister has said, at the standard rate. It calls on the Department to put forward a model that is targeted and tailored.
The Minister and the House will be well aware that at different times during the phasing out of this relief right up to 2011, because the rates then reduced, in certain years it cost €50 million and in others it was higher and so on. On that basis, it is the right use of resources. It is the relief that is required for individuals at this point in time due to the shock they feel in their income and I will, therefore, press the amendment.
Ivana Bacik, Mick Barry, Cathal Berry, Richard Boyd Barrett, Martin Browne, Pat Buckley, Seán Canney, Matt Carthy, Sorca Clarke, Michael Collins, Catherine Connolly, Rose Conway-Walsh, Réada Cronin, Seán Crowe, David Cullinane, Pa Daly, Pearse Doherty, Paul Donnelly, Dessie Ellis, Mairead Farrell, Michael Fitzmaurice, Peter Fitzpatrick, Thomas Gould, Johnny Guirke, Danny Healy-Rae, Michael Healy-Rae, Brendan Howlin, Alan Kelly, Gino Kenny, Martin Kenny, Claire Kerrane, Pádraig Mac Lochlainn, Denise Mitchell, Paul Murphy, Johnny Mythen, Gerald Nash, Denis Naughten, Carol Nolan, Richard O'Donoghue, Darren O'Rourke, Eoin Ó Broin, Donnchadh Ó Laoghaire, Ruairi Ó Murchú, Aengus Ó Snodaigh, Thomas Pringle, Maurice Quinlivan, Patricia Ryan, Matt Shanahan, Seán Sherlock, Brian Stanley, Peadar Tóibín, Pauline Tully, Violet Wynne.
Colm Brophy, James Browne, Richard Bruton, Colm Burke, Peter Burke, Mary Butler, Jackie Cahill, Holly Cairns, Dara Calleary, Ciarán Cannon, Joe Carey, Jennifer Carroll MacNeill, Jack Chambers, Niall Collins, Patrick Costello, Simon Coveney, Cathal Crowe, Cormac Devlin, Alan Dillon, Stephen Donnelly, Paschal Donohoe, Francis Noel Duffy, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Joe Flaherty, Seán Fleming, Norma Foley, Gary Gannon, Brendan Griffin, Simon Harris, Seán Haughey, Martin Heydon, Emer Higgins, Neasa Hourigan, Heather Humphreys, Paul Kehoe, James Lawless, Brian Leddin, Michael Lowry, Josepha Madigan, Catherine Martin, Steven Matthews, Paul McAuliffe, Charlie McConalogue, Michael McGrath, John McGuinness, Joe McHugh, Aindrias Moynihan, Michael Moynihan, Jennifer Murnane O'Connor, Catherine Murphy, Hildegarde Naughton, Malcolm Noonan, Darragh O'Brien, Joe O'Brien, Jim O'Callaghan, James O'Connor, Willie O'Dea, Kieran O'Donnell, Fergus O'Dowd, Christopher O'Sullivan, Pádraig O'Sullivan, Marc Ó Cathasaigh, Éamon Ó Cuív, John Paul Phelan, Anne Rabbitte, Neale Richmond, Michael Ring, Eamon Ryan, Róisín Shortall, Brendan Smith, Niamh Smyth, Ossian Smyth, David Stanton, Robert Troy, Leo Varadkar, Jennifer Whitmore.
I move amendment No. 13:
In page 65, between lines 8 and 9, to insert the following: “Report on pension tax reliefs and subsidies
24.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax reliefs and subsidies applicable to pensions, including contributions and at drawdown, to assess their cost to the Exchequer and distributional impact.”.
This amendment is about publishing a report on the tax reliefs and subsidies applicable to pensions, including contributions and, at drawdown, to assess their cost to the Exchequer and distributional impact. It is important we support individuals in terms of planning for their retirement. However, given that pension reliefs amount to €2.7 billion per annum in revenue foregone, greater than the entire expenditure this year on the Department of Children, Equality, Disability, Integration and Youth, we must examine the value for money and equity of these reliefs.
If anybody were to see an image of the percentile that actually avails of these reliefs, they will see they are not, in the main, going to low or middle income earners. Indeed, one would argue they are not even going to the high income earners. The majority is going to the 1% at the very top. That is an issue that needs to be addressed in terms of value for money and the equity of the reliefs.
Ireland, in common with other advanced economies, taxes pensions under a regime characterised as exempt, exempt and taxed. The income is exempt from tax when it is first received and paid into the pension, exempt from tax as the revenue or returns accrue within the pension and are then taxed when the funds are withdrawn from the pension.
On average, over three quarters of a million people make contributions every month through employer payrolls, representing about 30% of employees, on average. We recognise that many of those contributions are very modest, as the distributional impact will show. The data will also show that in 2019, 4,200 individuals with incomes above €300,000, that is, the top 1% of income distribution in the State, availed of pension contributions totalling €87 million, costing the taxpayer approximately €350 million. The question we pose in this amendment is how is that fair and equitable.
The Commission on Taxation and Welfare also drew attention to the fact that there is no up-to-date data on the tax expenditure report on tax relief on pension lump sums, with the most recent estimates being €134 million in 2014. The type of figures I have mentioned are lotto territory for a lot of people.
They could only dream of this situation. The reality is that people do pension planning and the State contributes 40% of their contributions to their pension in the form of tax reliefs. For every euro that goes into their pension the State basically puts 40 cent into it through this pension tax relief. The idea is that when someone starts to draw down the pension, he or she will pay tax at 40%. Not everybody will pay tax at 40% depending on their annual income at that time. A pension may be below that threshold and the person only pays 20% tax and, therefore, the system as designed did not really work. However, many people with high net wealth plan their pensions in terms of lump sums. Despite the fact that the taxpayer contributed 40% to the income that has gone into their pension, they are able to draw down €200,000 tax free and then a further €300,000 that is only taxed at 20%. That results in effect in a €500,000 lump sum where they only pay 60% into it. If €500,000 goes into such a pension pot, approximately €200,000 is contributed by the State. That is a serious issue.
According to the distributional impact of this, the top 1% of earners, which comprises 4,200 individuals, all of whom earn above €300,000, benefit. Some earn more than €1 million. We are subsidising gold-plated pensions for these individuals. This is not about the teacher, doctor or the person working in the factory who the State is supporting to grow their pension in the future. This is actually looking at whether this is equitable. How do we stand over a situation where people are able to go to the maximum limit of what they can push into their pension knowing that 40% of that is contributed by the taxpayer and then when they draw it down, they can structure it in such a way that some of it has no tax applied to it and some has the lower rate of tax applied? As I said this involves €350 million and 4,200 individuals, all of whom are in the top 1% of earners in this State. It is not a good resource or use of public funding. The thresholds and limits need to be adjusted so that the State is not subsidising gold-plated pensions. That is what the amendment is about.
I am going to ask my officials to look at the issue of refundable tax credits in the context of the tax strategy group, TSG, process which will be done next year and will lead to reports being made available to the public before budget 2024. I listened to the issues that Deputy Doherty raised on Committee Stage. It is worth making the point that the very high income earners to whom he refers also play an important role in either the creation of employment in our country and the payment of income tax in a very progressive tax code that I acknowledged earlier. That said the issue to which this amendment refers is the concept of refundable tax credits and that matter will be looked at in the TSG process.
Excuse me. I apologise to the Dáil and to the Deputy in that regard. As he will be aware we operate a pension system where contributions and pension fund gains are exempt from income tax but income from pension drawdown is taxed. Where data is available in regard to the Exchequer cost of tax relief for pensions, it is publicly available and included in the Revenue Commissioners publication. With regard to distributional analysis I am advised by the Revenue Commissioners that prior to the introduction of real-time reporting on 1 January 2019 pension contributions were reported to the Revenue at an employer level rather than at an employee level. While there were some delays in the processing and publication of the 2019 data, it has been published. Analysis by the Revenue Commissioners of the 2019 figures indicates that pension deductions by employers and employees totalled €4.5 billion. These included contributions to occupational pensions, additional voluntary contributions, AVCs, contributions to personal retirement savings accounts, PRSAs, and contributions to retirement annuity contracts. On average, 775,000 people were making pension contributions every month through employer payrolls. This represented approximately 30% of all employees on average and more than 875,000 employees made pension contributions at some point in 2019. Those with higher incomes make greater contributions to their pensions but the average share of income set aside as pension contributions is relatively consistent across the income ranges and is typically 3% to 6%. However, more data is needed in this area. The pensions reform and taxation group, which reported in November 2020, is tasked with a number of actions related to the pensions roadmap, one of which is an assessment of the cost of State support for pension savings. That work is currently being done. The report notes that the tax treatment of pensions represents one of the largest Exchequer tax expenditures. However the exact cost of this is difficult to quantify due to the general nature of tax expenditures and specific pension-related challenges such as limited data availability and some features of the pension regime in Ireland. It is, therefore, challenging to capture the exact data needed to analyse comprehensively the varying types of pension relief. Having regard to the work that is under way as part of the task force group to consider how the data available on tax relief for pensions can be improved as well as the fact that more detailed information is now available following PAYE modernisation, I do not believe that a further report is needed. This work needs to be done and will be done but I do not believe that the amendment will play a role in it.
We use the mechanism relating to reports because that is the restriction placed on Opposition spokespersons. However, I agree with the Minister that we do not need more reports as we have the data. We have the data that indicates that the 1% in the State, the top earners who earn more than €250,000, some of whom earn far more than €1 million, are availing of massive pension tax reliefs at a cost to the Exchequer that ordinary workers cannot access because they do not have the resources to put into their pension at that level. We are funding to the tune of hundreds of millions of euro gold-plated pensions. That should stop. I have long argued with the Minister that this can be done in terms of the standard fund threshold and the earning limits. There are ways and mechanisms to ensure that the distributional impact of the large support we put in place for people in terms of pension tax reliefs are not completely skewed to the 1%. I regret that the Minister has not taken action on this either this year or any other year. For that reason I press this amendment.
I have made the key points on this. The average level of income that is set aside as per differing levels of income within our economy is reasonably consistent at 3% to 6%. Many of the individuals to whom the Deputy is referring as the 1% play an important role in the generation of income, employment and important public services in our country and who through our progressive tax code pay a large share of the tax revenue that is collected within our State.
While the Minister defends the issue of gold-plated pensions, I reiterate that 4,200 individuals, all earning more than €300,000 are benefiting from the taxpayer to the tune of €350 million in tax reliefs. Essentially the taxpayer is putting money into their pension pots.
I cannot stand over that. There are mechanisms. Yes, they have high incomes and they pay tax at the rate that is set down in law. The question here is how much we should subsidise somebody's pension. In my view, the policy objective should be to ensure that people are able to retire on a relatively comfortable income but when we are talking about the 1%, we are talking about a huge amount of pension tax relief that is skewed completely in their direction. It is wrong and inappropriate.
Within our taxation of pensions, we have upper limits which allow us to make sure it is not completely exploited by the top 1%. For example, there is a point where, when the fund gets to €2 million, people cannot avail of any other pension tax relief. There is an age limit restriction depending on the age of the individual, and the amount of income can be up to €115,000. By adjusting those, if we wanted, or if the Minister desired a policy that did not just put taxpayers’ money into the pockets of the 1% but actually had a more distributional impact in regard to this tax relief, we could alter those two issues to make sure that people on average incomes and even those on high incomes would not be impacted, but only those at the top, the 1% of income earners in the State. Let us remember that the other 99% would not be impacted, but the 1% should not be able to avail of as much pension tax relief as they currently are because they do not need it. That is the point I am making. For that reason, I will press the amendment.
I move amendment No. 14:
In page 65, between lines 8 and 9, to insert the following:
“Report on introduction of refundable tax credits to income tax system
24. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of refundable tax credits to the income tax system, options for their design, associated costs, and impact in addressing social and policy objectives such as reducing in-work poverty.”.
This amendment deals with the issue of refundable tax credits in the income tax system and is looking at options for their design, associated costs and impact in addressing social and policy objectives, such as reducing in-work poverty. Currently, introducing refundable tax credits would not be allowed in the income tax system and it cannot be accommodated under existing legislation. Whether someone is working part-time for a few hours each week or is in a very highly paid job, everybody who is in employment in Ireland has tax credits. Once an individual's tax liability has been calculated, these tax credits are applied in order to bring down their tax bill. However, if a low income worker does not earn enough to use their full allocation of tax credits, then they will not benefit from any income tax reductions introduced by the Government in the annual budget via increases to PAYE or personal tax credits.
Making tax credits refundable would be a simple solution to this problem. It would mean that the part of the tax credit that the employee did not benefit from would be refunded. Essentially, what this means is it would be paid at the end of the tax year to him or her by the Revenue Commissioners. The major advantage to making tax credits refundable lies in addressing the disincentives currently associated with low paid employment, and the main beneficiaries of refundable tax credits would be those low paid employees both in full-time and part-time work.
Most people with regular incomes and jobs would not receive any cash refund because their incomes would be too high and they would simply continue to benefit in the same way as before. However, for other people on low or irregular incomes, the refundable tax credit could be paid via a refund from the Revenue Commissioners at the end of the year and there may even be scope for more real-time delivery of the benefit, given the new real-time reporting system in place at Revenue in the past few years.
There are benefits to introducing refundable tax credits through the income tax system. They include that it would address the problem identified in a straightforward and cost-effective manner, there would not be any administrative cost to the employer and, crucially, it would incentivise employment over welfare as it would widen the gap between pay and welfare rates.
The Commission on Taxation and Welfare did look at refundable tax credits and its view was expressed a decade ago. It did not explore this proposal for reform in any great detail and, therefore, I believe it merits further consideration by the Department.
As I indicated earlier, the issue of refundable tax credits is something my Department looked at a number of years ago but I believe it now merits further consideration. On Committee Stage, I said that this would be done through the Tax Strategy Group, TSG, process. I do not believe the implementation of this will be as simple as Deputy Doherty is saying, but I accept it is a matter that needs further consideration and it will happen in that process.
Obviously, the policy decision in regard to refundable tax credits requires consideration, which is why we in Sinn Féin have been putting this forward for many years. I am glad to hear the Minister say it warrants further consideration because, again, this is a change in attitude from this Minister, his party and the Government. We have had this debate and I have put forward this type of proposal every year to the Minister and his predecessors, and it has been stood against. It makes sense and that is why it is important to have a look at this.
One point is that we have designed many complex ways of providing support for individuals as an Oireachtas. We have passed legislation that has put an onus on Revenue to provide weekly payments to employers based on the wages of their employees, and we have placed huge challenges on them. As I have said time and again through my years as finance spokesperson, and even in the aftermath of the crash, if there is one organisation that can hold its head up high, it has been the Revenue Commissioners over the last period. They have always stood up when asked to do so and have been able to give effect to the policy changes that have arisen from this House and, in some cases, they have really had to stretch themselves in the timeframe that was required of them. Nothing is ever straightforward but if there is a policy to direct funding to some of our low income employees, those who are quite vulnerable in terms of their take-home pay, I definitely think it is within the reach and wisdom of the Revenue Commissioners to be able to direct this.
What we need is the discussion. I look forward to seeing the tax strategy papers next summer and, hopefully, they will agree with my assessment that we need this and that we needed it in the past. This amendment talks about refundable tax credits. I would argue that tax credits are there to support low and middle income employees. I would also argue that when someone reaches a certain point on the income threshold, that policy objective is no longer there. As I mentioned in my opening remarks, everybody in the State gets tax credits.
As an example, I will use the figure of €300,000. I believe those in the 1%, the highest income earners in the State, do not need tax credits. At that point, the policy objective is not about supporting them or reducing their tax liability. As I said, the Labour Party in Britain introduced this many years ago and it was continued by the Tory party. This means that when a certain point in someone's income is reached, they start to lose their credits, not all at once and there is no cliff edge but they lose their credits based on the amount of income they receive above a certain threshold. I strongly argue that when someone is on €100,000, they need to start losing their credits.
I will leave it at that. I welcome the commitment from the Government to look at this in the Tax Strategy Group papers.
I move amendment No. 15:
In page 65, between lines 10 and 11, to insert the following:
24. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the revenue gained from increasing corporation tax to 25 per cent for corporations with over €800,000 in profits and in closing loopholes that exist that allow corporations to hugely reduce their rate of tax.”.
I start with a specific point regarding loopholes that exist to allow corporations to significantly reduce their rate of tax. I will ask the Minister a question that I have put to the Tánaiste and the Taoiseach but to which I have not received a fully reply. The Irish Times reported in July that it had been informed by Department of Finance officials that the European Court of Justice, ECJ, hearings on the Apple tax case were likely to be held in autumn and the court would give the State four to six weeks' notice that those hearings were about to begin in advance of a final decision on the case - the biggest tax case in corporate history - next year. I asked the Tánaiste and the Taoiseach the following questions. Do the State and the Department of Finance have any information as to the timing of those hearings? Will they take place before Christmas or in the new year? If it is the latter, when in the new year will they take place? Alternatively, does the State have no information whatsoever on this matter? I cannot imagine that there has not been contact between the Department of Finance and the relevant ECJ sources in that regard. If the Minister were to provide the House with that information, I would appreciate it.
On the substantive issue of the amendment, what is the Minister's estimate for total corporation profits for 2022? I have tried to estimate total corporate profits for previous years. For example, we are told that the de facto rate of corporation tax paid in 2020 was closer to 8% than to 12.5%. Depending on whose estimate one goes by, it seems likely that corporation tax receipts this year will be approximately €20 billion. Perhaps the Minister can give the most up-to-date estimate in that regard. If it is €20 billion at a de factorate of 8%, that would point towards total corporate profits of €250 billion. I do not know whether the rate this year will be 8%, 9%, 10% or some other percentage. I ask the Minister to give the House his best estimate as to what the total corporate profits are likely to be this year.
Irrespective of the figure the Minister provides, I know for a fact that it will relate to a vast quantity of untaxed wealth. At a time when workers on the lowest rate of income tax are paying at a rate of 20%, what will be paid by the corporations that are making fabulous profits will be not just less than that, it will be considerably less. The argument used by the Minister and the senior officials in his Department against raising corporation tax to the 20% rate for which others have advocated, or to anything above 15% is that if that is done, is that there will be a flight of capital. In other words, multinational investment will leave the country and the State may end up with a smaller tax take than if the rate was lower. However, I have yet to see convincing information and data to support that argument. Apart from anything else, that is why I would like to get the report to which the amendment refers.
Many serious commentators on the economy point to foreign direct investment in the State being based on other factors, such as access to the European Union and European markets, the State having an English-speaking workforce and population, the high level of education and so on. I would like to see a report placed before the House in order that these issues can be debated, rather than hearing arguments that are based on scaremongering and an attempt to panic people with the idea that if corporations were asked to pay a rate of tax that is not too much above the rate paid by workers on the lowest wages, who pay the lowest rate of income tax, they will leave the country. Let us have the report and be able to debate the issue on the basis of what it reveals. The key point is that there are vast amounts of untaxed profits and wealth at a time of incredible social need. I do not have to point to the 11,000 people in emergency accommodation or the 30, 40 or 50 other examples I could give. We need a realistic debate on these issues.
On Committee Stage, I asked the Minister about the projections for corporate pre-tax gross profits. I just found the note in that regard. To be honest, it is unbelievable. Deputy Barry just estimated what it might be, but it is way in excess of that. This is newsworthy. I do not know if the Minister has put this information out there, but Janey Mac. The Minister is estimating that gross pre-tax corporate profits for 2022 were €348 billion. That is astonishing. To put that in perspective, the figure for 2020, which is the most recent available and to which Deputy Barry just referred, is €193 billion. There has been a jump in profits of more than €150 billion in two years. From 2012 to 2020, there was a jump from €74 billion to €193 billion. Those are the figures on which I was working in the context of our pre-budget submission. That is a 157% increase in profits in eight years. Now it has taken another jump. I have not done the percentage calculation, but it has jumped another €150 billion in two years. That is unbelievable.
We have seen a bonanza in corporate profitability like never before and that has accelerated at an extraordinary rate in the past two years. We should bear in mind that in those two years, ordinary working people were crushed by cost-of-living increases and lost between €4,000 and €6,000 in the value of their income in real terms.
This is because of corporations, including energy and pharmaceutical corporations, all the big IT companies and so on - we could go through the list - are jacking up prices to reach these simply dizzying levels of profitability.
Deputy Barry slightly understated the degree of tax relief these corporations are getting. In 2020, on €193 billion in pre-tax profits, €11 billion was paid in tax, which is a rate of 6.1%. It is not 8%, 10% or 12.5% but 6.1%. I have not worked out the percentage for the new figures the Minister has just given us but if he is projecting that he will get €21 billion in tax, and is estimating that on the basis of pre-tax profits of €348 billion, if these corporations paid 12.5%, never mind 15%, 20% or 25%, they would pay €40.8 billion in tax. We can more or less work it out; they are paying between 5% and 6% tax on their pre-tax profits. That is what they are actually paying. That is shocking and shameful. We could almost double corporate tax revenue if we just made them pay an effective minimum rate of 12.5%. In my opinion, the rate should go right up. These companies should at least pay the level of taxation the average worker is expected to pay on his or her income, but could we not even just make them pay the 12.5%? An extra €20 billion would then be available. When we consider what that could do for the housing crisis, the resourcing and staffing of our health service, public transport, higher education, wages for workers, all the impacts of the cost-of-living crisis, and the cost of housing it is, quite frankly, staggering.
This is never really talked about and, as Deputy Barry indicated, the Government's only argument against it is that if it raised the level of taxation, these companies would all run away. The Minister may have noticed they are starting to run away anyway when it comes to jobs, which has nothing to do with the tax measures taken by the Government and everything to do with international events that have nothing to do with our tax policy. It has to do with the fact that these corporations have disproportionate wealth that could be called profit driven and egotistical. I probably should not use some of the adjectives I could use to describe people like Elon Musk and so on but what happens when that much profit and control of the global economy is given to one individual, or wealthy multibillionaires, is that we eventually see the sort of jobs massacre we are seeing anyway. Surely, the thing to do is make these companies pay their taxes now, while the going is good, in order to give us the revenues we need to invest in housing, health and key infrastructure rather than continuing to give them massive tax breaks, deductions, reliefs, tax credits and so on, where they pay a fraction of the tax ordinary workers pay.
This amendment relates to a report on corporation taxes. It states: "The Minister shall, within three months of the passing of this Act, bring forward a report on Government plans to reduce and mitigate the reliance of the public finances on windfall corporation tax receipts."
If we have learned anything from the past two years, it is that very little can be predicted and, often, the things that shake our country up most are global shocks and things over which we have no control, such as Covid, the war in Ukraine and the energy crisis we currently face. What we have seen and heard from previous contributions is that the country has received a significant input of revenue from corporation taxes. Central Statistics Office figures published today showed corporation taxes were €15 billion, which accounts for 16% of the taxes we accrue in this country. That is double what it was in 2017 and that figure is forecast to rise to €21 billion. We also hear there is a general consensus that these taxes are essentially one-offs and it is very unlikely to be the case that they will be repeated. These corporation taxes are taxes that are heavily influenced by what happens in the global economy. The Department of Finance's chief economist has raised concerns, or cautioned, that the slowdown in the global tech sectors poses a risk to corporation tax receipts next year and into 2024.
We need to take a very prudent approach to these corporation taxes, and recognise this particular downturn in the tech sector and what is happening in that sector as a wake-up call to us. We now need to be very prudent regarding corporation taxes and how we manage them but also how we plan for the future. We cannot rely on them forever. It would be prudent at this stage to develop a plan on how we will deal with any downturn in those taxes and mitigate our reliance on those finances. This amendment is simple and pretty self-explanatory. I hope the Minister will support it because essentially all we are asking for is a report, and for the Government to plan and be proactive in this instance. I would be interested to hear the Minister's opinion on this amendment. I hope he is supportive of it.
I thank the Deputies for raising this important topic. I will answer some of the questions put to me, by Deputy Barry, in particular. We do not have information or guidance at present from the ECJ regarding when the final hearing relating to the Apple case will happen. I imagine that at this point in the year it will probably be some time in 2023 but that-----
I do not have information relating to the case. As I said, I imagine that at this point it will probably be next year but that is just my judgment. We do not have guidance regarding when it will happen.
Deputy Boyd Barrett made reference to the note I shared with him regarding trying to provide a range on the impact of corporations and large employers on our economy in 2022 and 2023. At the base of the note, it states very clearly that the gross operating surplus he referred to is not a measure used in tax calculations. To be very clear, this is not the same as profitability. It is not an estimate of taxable profits. It does not take account of capital allowances or interest deductions. The figure he referred to is one we use in trying to assess the impact of larger companies on our economy but it is not a figure that is equivalent to taxable income. I wanted to be very clear on that point.
On the impact of these companies on our economy, the one word I did not hear referenced in contributions from the Opposition is that these companies we are referring to are huge employers and taxpayers.
Amid the debate on corporate tax receipts and the different structures and reliefs referred to, mainly in Deputies Barry and Boyd Barrett's amendments, all of the focus is on tax and on how we can increase tax in respect of the elimination of intragroup transfers to which I know Deputy Boyd Barrett has a principled opposition and that I have heard on many different occasions. All of these huge corporations, which are huge global presences, have a presence in Ireland that leads to the employment of many tens of thousands of people.
Deputy Barry asked about the data that are available to indicate that, if these tax rates were to change in the way we want, it would have an impact on their employment and investment in Ireland. The only data I can give him is my direct experience. Again and again, I have seen that the level of tax companies pay in Ireland and the level of tax they expect to pay in the future are very important ingredients in their presence in our country, their investment in our economy, and the number of people they employ in Ireland. In my engagement with many of these companies over many years, the level of tax they pay and the predictability of that tax in the future are very important factors in their presence in our country.
I agree with Deputies Boyd Barrett and Barry that it is not the only factor. The quality of our workforce, education levels in our country and our long-term relationship with many of these employers are also very important ingredients in why Irish companies develop their scale and presence in Ireland and why very large companies have also been present in Ireland for so many decades.
Regarding the very large increase in corporate profitability referred to by both Deputies, it is important to note there has also been a sixfold increase in the level of corporate profitability in Ireland, so as global corporate profitability has gone up, so has the amount of corporate tax paid in our country.
Regarding Deputy Whitmore's amendment, which looked at the impact of corporate tax on our total tax take, it has grown. The Deputy spoke about the need for a plan to deal with any vulnerability we may have as a result of our reliance on corporate tax receipts. We do have a plan. It is why we have the National Reserve Fund. It is why we have set aside €4 billion to go into the National Reserve Fund for next year because the predictions regarding some of this being one-off tax revenue are coming from me and my Department. This is why, for next year, we are making the decision not to spend €4 billion of those corporate tax receipts. It is why we made the decision this year not to spend €2 billion of it because I have acknowledged this risk is there. It is also the reason, as our corporate tax receipts have increased again since 2019, we have not transferred those higher levels of corporate tax receipts to ongoing permanent spending or ongoing permanent tax reduction. It is why we are running a surplus this year. It is why I want to run another surplus next year. It is why we have put €6 billion into the National Reserve Fund. The safest insurance policy in respect of those higher levels of corporate tax receipts is not to get into the habit of spending them, and we are not doing so, because we are running a surplus and setting up two different deposits into the reserve fund for this year and next year in total equal to €6 billion.
In 1958, the State took the decision to open up the economy and invite in foreign direct investment. Irish capitalism had failed miserably. The massive emigration of the 1950s at a time when the post-war boom was well under way internationally was a sure sign of that.
The State's economic policy has been based on that for more than 60 years. The cracks in it are really beginning to open up. First, the other capitalist states are saying Ireland has carved out an unfair competitive advantage by organising a tax haven. I am not the only person to say it. Joseph Stiglitz has said it. I think all ten of the top academic papers on this issue reference it. The European Parliament has said that by an overwhelming majority. We now have a tightening up, hence the 15%. Ten percent of the State's taxes is reliant on the top ten multinationals in the country. We saw with Twitter and the decisions taken by Elon Musk how precarious that can be. These are decisions made in boardrooms that the Irish State cannot control.
All of this points to the need for a new and different economic model. We will have an opportunity some other time but I will make the point that we do that by breaking with the for-profit model and system, not relying on foreign direct investment or Irish capitalism, which is still as weak as it was in the 1950s, comparatively speaking, and choosing an economy driven by State investment and run for the needs of the people rather than the profits of the few. That is a debate we will have another day.
To be clear, I am fully aware the figure is not the taxable profit. Indeed it is precisely the point I make year after year. There are gross profits and then there is a myriad of tax reliefs, deductions and allowances that write down the taxable profit. That is the problem. Workers get a few tax credits but they do not see the level of write-down in what is taxable in their income that these corporations get.
The figure for 2020 pre-tax profits was €193 billion. The taxable income after all the loopholes was €110 billion. This is a massive write-down of what was taxable. Workers do not get anything like that in terms of the deductions and allowances that are available to them. The effective rate is about 6.1%, so it is very important to look at what the gross pre-tax profits are. We can then get a sense of what these companies are earning, which is astronomical. It is now up to, and this is a newsflash, €348 billion projected. You project for next year and it will be up to €383 billion, but the Minister estimates that, this year, they will only pay €21 billion in tax when a 12.5% tax on that would give us €40 billion. Even if you allow for a few legitimate allowances, it would be very considerably higher than the €21 billion. Given how precarious these companies have now shown themselves to be, surely now is the time to get in and get what we can off them from a tax point of view to invest in developing industry and jobs that will actually be sustainable in the long term.
We asked for a report to be brought forward on those plans. We looked for analysis of the risks and mitigation - all the different measures the Minister is looking at to deal with the reliance of public finances on windfall corporation taxes.
It is important that not only is this report undertaken and brought forward, but also that a discussion is facilitated on it in this House. One of the criticisms of the rainy day fund measure last year was that only two minutes were given to each party to discuss the saving of €6 billion in that fund. It is important, therefore, that we have a discussion about this aspect of the legislation and that the Minister outlines what he is doing, why he is doing it, what risks he is considering, what analysis he is taking into account and what modelling he is doing on this issue. It is too big a matter for there to be no debate and no transparency. This is not something that only the Minister's Government is going to be dealing with. The consequences of this proposal will be something that all subsequent Governments will have to deal with for the foreseeable future, so it is important that there is a collective debate on it.
I thank the Deputies. Starting with Deputy Barry, the opening of our economy since 1958, the role of foreign direct investment, FDI, in Ireland and our relationship with the Single Market has been a huge success. It has led to an extraordinary transformation in living standards in our country. If the period up to 1958 and the early 1960s showed that an inward-looking model of investment and employment could not work for our economy and was going to lead to living standards that would not meet the needs of our society, then surely the last number of decades have shown that, despite the many challenges we have, an open economic model, being open to international investment and helping Irish companies to grow in a global economy and in the European Single Market has been a great economic success for our country and a massively positive economic development.
Turning to Deputy Boyd Barrett, some of the companies I believe he is referring to have been in Ireland for decades. Even with the risks which exist and are growing, there is every possibility they will still be here for decades to come. I always think the Deputy has a sense that they are ready to flee. I guess he would argue that I am arguing that changes in taxation may increase this risk even further. The reality, however, is that many of the companies the Deputy is referring to, and of which he is critical, have been in this State for decades and have played a role in employing so many tens of thousands of people over many years. I argue that these companies have been, and will continue to be, a strong and important pillar in our economy.
On the points made by Deputy Whitmore, we have in the annual tax report from the Department of Finance exhaustively covered off corporate tax vulnerabilities in great detail for many years. There is not a publication from my Department about the overall structure and performance of our economy that does not include a significant focus on the corporate tax issue. There have been a large number of publications from my Department, as well as a great deal of commentary, including from me, in this regard over many years. Whatever the limitations of our debate, a lack of reports on this issue is not one of them. We are acting on them in the form of the surplus and by setting up the National Reserve Fund.
I move amendment No. 16:
In page 65, between lines 10 and 11, to insert the following: “Reports
24.The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on a levy on energy supply and generation companies to offset the increased cost of heating and energy for households.”.
I will speak briefly on this amendment. The facts, figures and statistics in this regard have been quoted many times in this House. I am not going to recite them again. These large profits, and in some cases the massive profits, are being made by these energy corporations at the same time as ordinary customers are experiencing massive increases in gas and electricity prices. My basic point is that we are witnessing a transfer of wealth from ordinary people towards the big companies, their shareholders, etc. This needs to be reversed by placing a levy on these companies, which would offset the price increases. I note that in recent days the Government has stated it is going to introduce a windfall profits tax. If that is the case, then the Government should support this amendment. I am interested in hearing what the Minister has to say on this point.
Energy policy, including the increasing costs of energy supply and taxation and profit, is a matter of key concern to the Government. In April, the Government approved and published the National Energy Security Framework, which sets the overarching response to the impact of the war in Ukraine on the energy system here in Ireland. In late September, Ireland, along with our fellow member states, agreed a new EU regulation to tackle high energy pricing in a co-ordinated way. It contains two revenue-raising measures which will address the windfall profits currently being made by some energy companies. These are a temporary solidarity contribution based on excess taxable profits for the fossil-fuel production and oil-refining sector and a cap on market revenues for specific technologies in the electricity sector which have not seen significant increases in costs.
The regulation prescribes how the proceeds from both these measures are to be utilised, including providing financial support to final energy users, such as vulnerable households and businesses. Energy policy is under the remit of the Department of the Environment, Climate and Communications and officials from my Department and the Revenue Commissioners are currently supporting that Department in the implementation of the regulation. The Government has also taken several other measures to reduce the burden on consumers in respect of the cost of energy. This includes providing a total of €800 of electricity credits to every domestic electricity account holder in the country, an additional fuel allowance payment, reductions in fuel excise duty and a reduction in the VAT rate for electricity and gas.
As Deputy Barry will be aware, on Tuesday the Government agreed to be part of the EU-wide framework in respect of how the energy sector will be taxed. Our participation in this EU framework on these issues is the best way for a small, open economy like ours to tax excess profits that are, or could, be going to become available across 2023. The measures, and the way they have been designed by the Directorate of Energy, get the balance right between taxing levels of profits that could become very high for reasons that have nothing to do with the companies concerned and all to do with the impact of the war on the functioning of the electricity sector and the functioning of the price of gas and the profit available to companies involved in this sector, while still recognising the role of investment in this sector and important role it can play in the Irish economy.
What we are also going to be introducing in this legislation will be the temporary business energy support scheme, TBESS. This will support businesses whose average unit gas or electricity price has risen by more than 50% compared to the average unit gas or electricity price in 2020. This will be a significant measure. It will be one that up to the end of February 2023 we believe will involve the spending of up to €1.2 billion of the country's money to support small-and-medium businesses during what we know will be a difficult time. Taking into account the measures the Government is taking with regard to the taxation of the sector and the supports that will be available to small-and-medium-sized businesses, I cannot therefore support this amendment.
I move amendment No. 17:
In page 65, between lines 10 and 11, to insert the following:
24.Within 3 months of the passing of this Act, the Minister shall lay a report before the Dáil on the amount of revenue that would be raised if he were to establish a Wealth Tax that taxed the top 5 per cent of households 2 per cent of their accumulated wealth less 1 million for a family home.”.
We debated this on Committee Stage. I will leave it at that. I am keen to get to some amendments further down the line.
I move amendment No. 21:
In page 85, between lines 24 and 25, to insert the following:
30.Within 3 months of the passing of this Act, the Minister shall lay a report before the Dáil on intra-group transfers and whether reliefs on such transfers are being used as a means to shift profits and reduce taxable income.”.
I move amendment No. 22:
In page 94, between lines 4 and 5, to insert the following:
“Report on tax treatment and economic impact of institutional investment in housing market
37.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax treatment and economic impact of institutional investors and corporate landlords in the housing market, including their impact on tenure, affordability, property price and rental price dynamics.”.
We debated this amendment on Committee Stage at length. I will press the amendment.
I move amendment No. 23:
In page 94, between lines 4 and 5, to insert the following:
“Report on restricting banks from carrying forward losses
37.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on restricting the banks from carrying forward losses against taxable profits in a manner which could result in many institutions paying no corporation tax for the foreseeable future by introducing a 25 per cent cap on profit that can be written off by t carried forward losses in any given year and an absolute ten year limit on the use of loss for this purpose.”.
I will press the amendment. It was discussed on Committee Stage at length.
I move amendment No. 24:
In page 94, between lines 4 and 5, to insert the following: “Report on the treatment of capital gains tax with respect to worker-owned cooperatives
37.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the treatment of capital gains tax in instances where a company or shares of a company are purchased by a worker-owned cooperative, and options to amend the capital gains tax regime to promote worker-owned cooperatives and employee ownership.”.
This is in relation to capital gains treatment for worker-owned co-operatives. I press the amendment.
I move amendment No. 25:
In page 94, between lines 4 and 5, to insert the following:
“Report on extension of relief for increase in carbon tax on farm diesel to agricultural contractors
37.The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on extending the relief for increase in carbon tax on farm diesel under section 664A of the Taxes Consolidation Act 1997 to include agricultural contractors.”.
This is in relation to ensuring that the same treatment would apply in terms of carbon tax relief for farm contractors as it does for farmers. I press the amendment.
Amendment No. 27 is in the names of Deputies Boyd Barrett, Gino Kenny, Paul Murphy, Bríd Smith and Barry. We will group this with amendment No. 28, which is in the name of Deputy Doherty. Amendments Nos. 27 and 28 will be discussed together.
I move amendment No. 27:
In page 101, between lines 1 and 2, to insert the following:
40.Within 3 months of the passing of this Act, the Minister shall produce a report on amending the guidelines in relation to section 481 (Film Tax Relief), to clearly define the requirement for producer companies in receipt of the relief to be the legally responsible employer for all those working on film productions funded by the relief as against the DAC which only has a temporary existence; and further to guarantee the full vindication of workers rights under the Production of Employees (Fixed-Term Work) Act 2003; and further ensure genuinely equitable remuneration or performers and actors in relation to their intellectual property rights and full compliance with the EU copyright directive.”.
We discussed this at considerable length on Committee Stage but I would like to give it one last airing. This relates to the section 481 film tax relief. I will read the amendment into the record so that it is clear what we are trying to do here. It states that within three months of the passing of this Act, the Minister shall produce a report on amending the guidelines in relation to section 481 film tax relief, to clearly define the requirement for producer companies in receipt of the relief to be the legally responsible employer for all those working on film productions funded by the relief as against the DAC, that is, the designated activity company ,which only has a temporary existence; and further to guarantee the full vindication of workers rights under the Protection of Employees (Fixed-Term Work) Act 2003; and further ensure genuinely equitable remuneration for performers and actors in relation to their intellectual property rights and full compliance with the EU copyright directive.
Why would I want that? It is critical that if we are giving out €100 million in State aid to the arts, in this case, specifically to the film industry, it is in compliance, not only with national law but also with European directives. I say that, and always predicate everything I say, as somebody who wants to see that much money and more go into Irish film and into arts and culture. I was one of the few people who noted that the arts and culture budget was cut marginally this year and condemned that fact. We need to put more money into arts and culture because we have an absolutely fantastic pool of creative people in this country. We have a tremendous tradition and reputation in all of the arts; poetry, music, theatre, dance, acting, film etc. I want to see more but I am deeply concerned that we are not vindicating the rights of stage crew and film crew who work in the Irish film industry, particularly in the live-action area of Irish film, or the performers, the writers, the actors and the dancers, and in failing to do so, we are not complying with the requirement to ensure that their rights are upheld and that certain things are achieved when one gives State aid to the film industry.
I appreciate that the Minister has agreed, following our lengthy discussion, to have some of his officials meet some of the so-called contrarians, that is, the people who are critical of the way the current structure of section 481 relief is operating and I genuinely appreciate that.
I ask the Minister to understand that it is very serious if we are required to comply with the Protection of Employees (Fixed-Term Work) Act 2003 and for the film producers who receive section 481 relief to tell us and the Minister that such compliance is impossible. I looked back at the transcripts of both what Screen Producers Ireland, SPI, stated at the Committee on Budgetary Oversight, what has been alleged by groups such as the Irish Film Workers Association and what, in effect, was accepted by the Minister. On Committee Stage, the Minister stated that maybe we can sort these things out through discussion and negotiation. I thought maybe we could and then I thought, no actually while discussions are welcome, there is nothing to be discussed when it comes to compliance with the law. I want the Minister to consider that and make me a commitment if a serious allegation is being made that the recipients of section 481 relief are not in compliance with the Protection of Employees (Fixed-Term Work) Act 2003. They have stated they cannot be because of the DAC structure and that it is not possible for somebody to acquire a contract of indefinite duration through the operation of law under the Protection of Employees (Fixed-Term Work) Act 2003. That is what they have said because the DAC does not survive, project to project, longer than 18 months. The Minister echoed what they are telling him, that it is not possible, but it has to be possible because it is in EU law and it is in the declaration they sign. There is something very seriously problematic if one is saying the most fundamental protection for people on fixed-term contracts is not possible.
I am looking in front of me - I have not time to quote them - at two cases that have gone to the Workplace Relations Commission, WRC. One person had 57 fixed-term contracts and has never got a contract of indefinite duration even though under the fixed-term workers directive and the law, that person is required to. Another had 26 such contracts. This is because the people the Minister gives the money to go into the Labour Court and state they could have no employment relationship with these people even though they set up the DAC for the film on which they were employed, in some cases, 26 times, 57 times or whatever it might be over decades. The whole point of the Protection of Employees (Fixed-Term Work) Act 2003 is to protect workers in that situation. If it cannot apply, there is a serious problem with the form of state aid we are giving, which is specifically designed to create an industry and to create, as the directive states, a permanent pool of skills.
In 30 seconds, I have not time to mention the performers other than to say they state their intellectual property is essentially being taken off them with buy-out contracts, which the copyright directive requires to be the exception, not the rule.
This is what the copyright directive requires. Yet in Irish contracts given by the producers to whom the Minister gives section 481 tax relief, performers and actors are required to sign away their intellectual property rights, which, under the copyright directive, they are not allowed to do. I ask the Minister to respond. If there is any uncertainty about these matters, I genuinely ask that he write to the European Commission and ask for clarification.
I will begin by addressing the amendment concerning copyright and the intellectual property rights of performers and actors. Copyright law falls under the remit of the Department of Enterprise, Trade and Employment. I am, however, aware that the issue of copyright is important for Irish culture and arts and for the media sector. I am also aware that there have been issues regarding intellectual property rights and the remuneration of actors and performers. An instance of the latter was highlighted in the Committee on Budgetary Oversight's discussion of section 481 film relief. I stated on Committee Stage that the officials are seeking to engage with the stakeholders concerned, including Government stakeholders and representative bodies for actors and performers, in order to gain an understanding of the topic and the various perspectives of those concerned.
I want to refer to the amendments concerning employer rights in the Irish audiovisual sector, particularly in the context of the issue raised by Deputy Boyd Barrett on the use of DACs. The monitoring of compliance with employment rights legislation is primarily a matter for the Department of Enterprise, Trade and Employment through the Workplace Relations Commission. I know Deputy Boyd Barrett is aware, because we discussed this on Committee Stage, that the Workplace Relations Commission carried out an audit of the sector in recent years and did not make a recommendation with regard to DACs. However, as Deputies aware, I have taken note of the concerns they raised previously in respect of this matter and have made amendments to the section 481 criteria to improve the focus on quality employment and skills development.
Applicants for the relief must submit to compliance with all relevant employment legislation on the film being certified. These conditions are to be met not only by the producer company but also by the qualifying company or the DAC. This topic was also discussed recently by the Committee on Budgetary Oversight. Following this discussion, the officials have engaged with bodies representing producers and workers. It is the Department's understanding, following this engagement, that standard practice in the film and television industry globally is to operate on a project-to-project basis. However, again as advised on Committee Stage, the officials are available to meet those groups that have a different opinion on such matters.
Deputy Boyd Barrett asked me to act on the basis of allegations. I cannot give a commitment to do this. Allegations have to be investigated by the relevant State bodies, whether it is the Workplace Relations Commission or the Health and Safety Authority, in the context of the issues he referred to on Committee Stage and just now. I do not doubt the Deputy's bona fides or the legitimacy of some of the issues he has raised, but I cannot raise issues with the European Commission in the way he suggested on the basis of allegations. It is a matter that has to be investigated.
On pay and conditions in the sector, I understand that in recent years two collective bargaining agreements have been reached in the sector. These are a shooting crew agreement and a construction crew agreement. Officials have been formed by both crew and producer representative bodies that the rates of pay included in these agreements reflect the project-to-project nature of the work. I appreciate that there are contrasting opinions on employment practices in the sector ,but it is important that I consider the views of all stakeholders in order to avoid any potential unintended consequences.
I have already dealt with the matter of the DACs. They have a purpose in that they ensure that costs cannot be shifted between various productions and allow for ring-fenced vehicles to make sure that different projects are funded and in different ways. This reminds me of the point Deputy Boyd Barrett and I have debated for some time. As I understand it, this sector is structured on a project-to-project basis. It appears that this project-by-project employment is something Deputy Boyd Barrett wants to change. He wants to see this very basis of the sector shift. Issues on pay and employment contracts are best dealt with through collective agreements and industrial relations mechanisms. They are not dealt with in the Finance Bill.
We have already made important changes to section 481 in order to ensure that there is focus on issues which, I acknowledge, are important. We are tracking and listening to the hearings that are under way at the Committee on Budgetary Oversight. We note that representatives of Equity who came before the committee said that the way rights are secured in other jurisdictions is through collective bargaining and, I imagine, the use of industrial relations mechanisms. It is in this way that the issues Deputy Boyd Barrett is referring to can be tackled and progress on them can be made.
As I have said previously, we are willing and eager to meet all of the bodies involved in the sector. We have already met some of them. This type of engagement is unusual for the Department, but we are willing to do it because this sector is very important to the economy. I care about the future of the sector and I care about those working in it. I also care about those who invest in it. They have played a role in making it such an important manifestation of a creative economy that I want to see get bigger in the years to come.
Section 481 relief is state aid. Therefore, it has to comply with EU directives in this area. People cannot negotiate away their rights. They cannot do that. They are not allowed to do it. I want the Minister to understand the point I am making. People cannot negotiate away their rights. No group that claims to represent the industry can negotiate away their rights. I will send the Minister some of the correspondence from Equity, the Film Workers Association and the writer I quoted briefly who made the same point. They say that the law is not being complied with. This is not an allegation. The Minister has to investigate if there is even a possibility of it being true that either the law or the EU directive regarding state aid are not being complied with.
The point about the DAC is that everything survives the DAC except the employment relationship. This is the only thing that does not survive. This is the evidence we have from the producers. It is not an allegation; they have admitted it. They state no employment relationship can survive the DAC. The fixed-term workers' directive and the Act require that the employment relationship goes beyond the DAC.
That is the point of it. It is to protect people who are in episodic employment relationships. The other thing that survives the DAC is intellectual property, but it accrues to the producer company and not to the people who own it. That is a breach of the copyright directive. One cannot finance a structure that is being used to break the law.
The Deputy is making extraordinary allegations. He is saying structures have been put in place that are leading to the breaking of the law in relation to the claiming of state aid and the use of taxpayers' money. If he or the people who are raising this matter with him have evidence, they should report it to the Revenue Commissioners or the Health and Safety Authority or raise it directly with the relevant body.
We oversee the implementation of the section 481. We published a thorough overview of the operation of the scheme earlier in the year, in September. If the Deputy believes the law is being broken in that regard, he has a duty to present the evidence in a specific way to the agencies involved in overseeing the law as opposed to making broad allegations in the House about a sector that is, I believe, from the evidence and reports I have, making progress in dealing with issues about workers' rights, living standards and good pay.
The Deputy claimed you cannot negotiate away rights. I am not asking that anyone does this. What I am saying is collective agreements and engagement through the Workplace Relations Commission, WRC, is the way these matters can be tackled. A classic example of this is the issue referred to by the Deputy about intellectual property. If the Deputy believes the balance is right, regarding the gains from intellectual property, between the producer and those working on individual productions, the way in which progress can be made on those matters, including engagement and negotiations, is with the Department of Enterprise, Trade and Employment and, more likely, the Workplace Relations Commission on the contracts in place to oversee the allocation of profit.
This is complicated and it takes a while to get your head around it. The CEO of Screen Producers Ireland, who struck the agreement referred to by the Minister, gave evidence to the WRC in a case taken by a film crew worker that there was no possible basis, having due regard to the realities of the sector, on which a relationship of employment could be said to have existed between the parties involved. This was on the basis of what she said were the clearly established industry norms and practices governing working arrangements in the sector, including the operation of section 481 relief. Does the Minister understand what she is saying? She is saying there cannot be a relationship between the film producer company and the worker who works on the film because of the structure of section 481. That is what she said, and the Government is giving these people money. She said that her members cannot have employees because of the way the industry is structured. That is her saying it, yet at the same time, the Government continues to give them the money for quality employment and training purposes, and it takes them seriously when they say they are striking a balance between employers and employees while they say they cannot have employees. Does the Minister not understand what is being said to him?
I am saying it is the structure of the relief. I am asking the Minister to go to Europe and ask for an adjudication on this. That is a reasonable thing to ask, is it not? How is that not a reasonable thing to ask, seriously, if there is question mark? Have we not been down this road before with compliance or non-compliance with EU directives, where people had to go all the way to flipping European courts to get adjudications?
Ivana Bacik, Mick Barry, Cathal Berry, Richard Boyd Barrett, Martin Browne, Pat Buckley, Holly Cairns, Seán Canney, Matt Carthy, Sorca Clarke, Joan Collins, Michael Collins, Rose Conway-Walsh, Réada Cronin, Seán Crowe, David Cullinane, Pa Daly, Pearse Doherty, Paul Donnelly, Dessie Ellis, Mairead Farrell, Michael Fitzmaurice, Peter Fitzpatrick, Gary Gannon, Thomas Gould, Johnny Guirke, Danny Healy-Rae, Michael Healy-Rae, Brendan Howlin, Alan Kelly, Martin Kenny, Claire Kerrane, Pádraig Mac Lochlainn, Catherine Murphy, Paul Murphy, Johnny Mythen, Gerald Nash, Denis Naughten, Carol Nolan, Cian O'Callaghan, Richard O'Donoghue, Louise O'Reilly, Darren O'Rourke, Eoin Ó Broin, Donnchadh Ó Laoghaire, Ruairi Ó Murchú, Aengus Ó Snodaigh, Thomas Pringle, Maurice Quinlivan, Patricia Ryan, Seán Sherlock, Róisín Shortall, Brian Stanley, Peadar Tóibín, Pauline Tully, Jennifer Whitmore, Violet Wynne.
Colm Brophy, James Browne, Richard Bruton, Colm Burke, Peter Burke, Mary Butler, Jackie Cahill, Dara Calleary, Ciarán Cannon, Joe Carey, Jennifer Carroll MacNeill, Jack Chambers, Niall Collins, Patrick Costello, Simon Coveney, Cathal Crowe, Cormac Devlin, Alan Dillon, Stephen Donnelly, Paschal Donohoe, Francis Noel Duffy, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Joe Flaherty, Seán Fleming, Norma Foley, Brendan Griffin, Simon Harris, Seán Haughey, Martin Heydon, Emer Higgins, Neasa Hourigan, Heather Humphreys, Paul Kehoe, James Lawless, Brian Leddin, Michael Lowry, Josepha Madigan, Catherine Martin, Steven Matthews, Paul McAuliffe, Charlie McConalogue, Michael McGrath, John McGuinness, Joe McHugh, Aindrias Moynihan, Michael Moynihan, Jennifer Murnane O'Connor, Hildegarde Naughton, Malcolm Noonan, Darragh O'Brien, Joe O'Brien, Jim O'Callaghan, James O'Connor, Willie O'Dea, Kieran O'Donnell, Fergus O'Dowd, Christopher O'Sullivan, Pádraig O'Sullivan, Marc Ó Cathasaigh, Éamon Ó Cuív, John Paul Phelan, Anne Rabbitte, Neale Richmond, Michael Ring, Eamon Ryan, Matt Shanahan, Brendan Smith, Niamh Smyth, Ossian Smyth, David Stanton, Robert Troy, Leo Varadkar.
I move amendment No. 28:
In page 102, between lines 30 and 31, to insert the following:
“Report on relief for investment in films in the context of employee pay and conditions within the sector
43. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on section 481 film relief, in the context of the pay, conditions and training of employees within the sector, and options to enhance the scheme with respect to employee pay, conditions and training.”.
I move amendment No. 29:
In page 102, between lines 33 and 34, to insert the following:
“43.(1) Planned increases on carbon tax due in March 2023 shall be postponed as a result of the cost of living currently being experienced.”.
I move amendment No. 30:
This amendment follows the start of section 43, which states:
In page 103, to delete lines 12 to 31 and substitute the following:
10 March 2022 to 1 May 2030 €165.11 €165.11 €165.11 €165.11 €165.11 €20.84 €20.01 €120.55 €18.27 €54.68 €9.36
Amendment of Schedule 2 to Finance Act 1999 (rates of mineral oil tax)This amendment effectively slashes mineral oil tax, which is made up mainly of excise duties and carbon taxes. Based on section 43 of the Bill, the Government plans to revert all mineral oil taxes to the higher thresholds from March 2023. Additionally, this form of taxation will jump significantly in future years as part of the Government's climate action agenda. This will have a devastating impact on motorists and the entire transport sector. For example, the Government reduced excise on petrol to 46 cent per litre in March 2022. At the time, the Rural Independent Group proposed a total cap of 16.5 cent per litre. Now the Government is ploughing ahead with an increase in the mineral oil tax on petrol. It will be 65 cent per litre from March 2023, 67 cent per litre from May 2024, 70 cent per litre from October 2025, and 78 cent per litre from May 2030.
43.The Finance Act 1999 is amended with effect as on and from 28 September 2022 by the substitution of the following for Schedule 2 (amended by section 12 of the Finance (Covid-19 and Miscellaneous Provisions) Act 2022):“SCHEDULE 2
RATES OF MINERAL OIL TAX
The Government is out of touch with what it is doing to people in the area of transport. With the transition, the Government is delivering a blow to families who are working but have no other option but to travel with a motorised vehicle. In the transport sector, the Government is causing higher costs for the production of food and for transport across this country. It will target low-income people in the country.
I support this amendment, of course. We all know, as should the Minister, who deals with people as much as we do, that by increasing these taxes from next May, this will drive transport costs up. It will hurt people who are going to work in their cars and taking their children to schools. This will hurt people in rural Ireland more than in urban areas. People in rural areas need a car. They cannot travel without a car. The Minister for Transport and for the Environment, Climate and Communications said today that he was proud that the Government was spending so much money on footpaths and cycleways. As I said, when people are travelling long distances to work, a bicycle is no good to them. If they are supposed to walk, they will have to leave the day before if they have to be at work the next day because savage distances are involved. Many people in Kerry work in Cork city and travel the roads morning, noon and night. People may be taking sick people to hospital in Cork, Tralee and other places. It is all travel that cannot be managed without a car.
Then take the commercial transport industry. This is going to drive the whole thing through the roof again and increase the cost of living in every way, whether it is the transport of food, agricultural goods or whatever. The Government is certainly going to drive the cost of living up further. I cannot understand why it is insisting on this, especially when the base product is so expensive. We are already paying enough taxes and carbon taxes. Even when fuel was €1.20 per litre, there was no need for the carbon tax. People have to use their cars for as long as they can. They cannot manage without them. We gave the Government ideas about liquefied petroleum gas and biofuels, but it will not entertain them.
The Government is hell-bent on making people walk or maybe making them go back to using the horse and cart. There is no common sense in what it is doing by increasing the carbon tax again next May. That is totally and absolutely out of order.
This is about the carbon tax and terrible plight of the people over the past number of years. It was brought about by a rosy idea to rob the people of rural Ireland and fill the pockets of those in the cities and bigger towns in order that they can get super transport services that we do not have in rural Ireland. Carbon tax is an absolute direct attack on the people of rural Ireland, and nothing else. The Minister has succeeded in getting a nice, healthy tax take and rosy-looking figures, but this has come at a very high cost to the ordinary mother and father. They are not going to forget that when election day comes. The people in rural constituencies are fuming. They tell me regularly that they cannot afford to put fuel in their cars because of carbon tax and the other taxes the Government has. The Government is engaged in a clean-out when it comes to fuel taxes.
It is the same with agricultural diesel. Farmers are being hit so severely this year due to increased fertiliser prices and other costs. It has been a disastrous year for agriculture. I met a silage contractor from a peninsula north of my home recently. The man was so distressed he was crying. He was in serious trouble. He did not know how he was going to get the money from the farmers because they did not have the money to pay him. His fuel bill was astronomical compared with other years. It is quite frightening. The Government has lost touch with that kind of situation. It has done a greedy tax take and a greedy carbon tax take and used the phrase "climate action" as an umbrella to cover everything. However, it does not cover all. If the price of agricultural diesel and the diesel used by the man driving the truck that brings the food to the shops is skyrocketing, this means that the price of food in the shops is also skyrocketing. It is back again to the mother and father who get up and work hard every day and try their level best to pay their way and pay their bills. They are finding it almost impossible to do so. Quite a number of them cannot do that at present.
I ask the Minister to give very serious consideration to the amendments we have put forward to the effect that carbon tax should be suspended for now. It will not be long before diesel costs €3 per litre at the pump. I would not like to be the politician who supports that and is knocking on the door to pat a person on their back as they look for their vote. As I said, it is a very difficult time for people in farming. One of our amendments was mainly about agricultural diesel. It is an extremely difficult time. There is a vote later on whereby the Government might give some bit of ease to farmers via our Impaired Farm Credit Bill 2022. Surely the Government will not vote against farmers and the people of rural Ireland again on that?
Unfortunately, we do not have a public transport service. In rural Ireland, people depend utterly on the car. They are being priced out of it. As I said earlier, climate change is the reason carbon tax has been brought in. At the same time, however, it did not stop Heads of Government flying 400 jets to Egypt last week for this climate discussion. The damage they did to the climate is frightening, but there was no worry about that. The Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, took 55 officials with him. I do not know whether they were Green Party officials or people from Fine Gael or Fianna Fáil, but it was farcical that so many individuals had to go out with one Minister, never mind the Taoiseach, and however many more went with him and the other Ministers who went to Egypt. We will be pressing the amendment.
I support this amendment very much. A carbon tax increases the price of goods and services. By design, a carbon tax causes goods and services that involve higher levels of emissions to become relatively more expensive such that consumers will tend to buy less of them or substitute others that involve less carbon-intensive production. Hence, a carbon tax makes coal, oil, natural gas and the electricity they are used to generate more expensive. It also makes goods and services that are delivered by means of their use or that depend heavily on them in the context of their production more expensive.
Is a carbon tax regressive? A tax is regressive if it takes up a larger share of a lower-income household's expenditure. John Podesta, a former adviser to Barack Obama, raised concerns about the equity of carbon taxes by arguing "A real disadvantage of just a pricing scheme is you can’t directly attack the environmental injustice problem". This reflects a broad perception that a carbon tax is regressive after all. The argument is that a carbon tax is a tax on energy and energy is a good that takes up a larger share of the budgets for low-income households than it does for higher-income households. Who is going to be directly affected by this but those who are less able to pay for it?
We are an island. Everything rolls; nothing falls out of the sky. I compliment the people involved in our haulage and transport sector. The people in vans might be getting ready as we speak. They might be about to go out working for the night to drive goods across the length and breadth of this country. Who stocks the shops in the morning? Who delivers the newspapers? Who delivers the mail? It is the hauliers and the people involved in that industry. If the cost of fuel and transport is to go up again, all it will do is mean everything has a knock-on effect from that.
I am sure those in government are very smart. They must realise that we must do everything we can to reduce carbon tax instead of increasing it. It is very simplistic to say we will reduce the amount of carbon we produce by taxing it. There are plenty of other things the Government could do instead of just imposing a tax to stop people living a way of life or using goods they need to use. It is a flawed idea and a flawed ideal. It is so crazy to see at budget time. The Government is imposing a carbon tax that will increase the cost of living for low-income households in particular. What does it do then? It tries to come up with imaginative ways of putting money back into those people's pockets. It is robbing Peter to pay Paul and going around the table in a merry dance. If the Government would only think about what it was doing. If it did not tax people so much in the first instance it would not have to be looking at other ways of trying to give them back money. I cannot see the logic in it. I cannot see the sense in it. I would like to think I am very plausible and reasonable when it comes to looking at arguments put forward by others, but I cannot make sense out of this. There is one thing I will never understand even if I live forever, namely, that people will go around County Kerry canvassing and saying they are on the side of the people and then when they come up here, they completely and absolutely forget those who sent them here in the first instance.
They leave those people behind. It is as if they fell into Dáil Éireann in a parachute and nobody had to vote for them to come here at all. It is wrong and unfair. I would remind anyone listening tonight that a politician is a servant of the people. These people forget that. They are there for the betterment of the people. They are sent here to do a job and that is to be a spokesperson for their community and the area they represent. They are to be there for the good of people and to be fair and balanced. How can anybody come in here and press the buzzer to vote for additional taxes and carbon taxes? The Government would tax people for breathing if it could get away with it. How can these people can go back to the people who voted them in and say they forgot about them when they were above in Dublin? They just lined in behind the Minister and voted away and did not really care about them at all but forgot about them. People have memories. People are able to look at what goes on in debates. People are able to follow and see what way people vote. I would ask the people in County Kerry to look at the way people are voting when it comes to representing them here in Dáil Éireann because my goodness, as far as I can see, they are being let down very badly by this Government when it comes to taxation and attacking people at a time when they are vulnerable. We should be doing everything we can with the cost of electricity, insurance, fuel and home heating oil. A bag of coal is nearly €50 and it could possibly be €50 for Christmas.
The Minister for the Environment, Climate and Communications is gone on a tangent trying to stop people burning turf. If he had his way, people would perish inside in their homes. He has no consideration whatsoever for people because he seems to be insulated from feeling what the people out there on the ground are feeling. It is a cliche to say the Government has lost touch with reality but it is true when it comes to a person who talks about introducing wolves and car pooling and says we should not have a car of our own. He thinks people should walk down from the hills and the mountains, go to the village and hope there are a couple of cars there and that they might be lucky enough to jump into one and go off on their merry way for the day. He is to be taken seriously as a Minister in a Government. He went off to represent us at a conference recently. He is incapable of doing so without having 50 people to mind him and guide him and hold his hand along the way. It would have been a fine thing if he had stayed at home. We would have been better represented if he did not go at all because if we are sending the wrong man or the wrong woman out we would be better off having nobody there speaking for us.
I will be brief. Deputy Healy-Rae was quite hard on the Minister for the Environment, Climate and Communications given that this Bill gives people €3,000 for a bicycle with a basket on the front. God forbid if people have to go up the road with their car because they will be paying for it.
I have four amendments in this grouping relating to carbon tax and the price of petrol and diesel. We understand the limitations around the energy directive from the European Union but these all fit within the energy tax directive. That allows the Government additional scope to reduce the price of petrol, diesel and marked gas oil, which particularly affects the agricultural sector, and also reduce the price of home heating oil. Let me be very clear: what we want to do in these amendments is reduce petrol by a further 15 cent, diesel by 12 cent and reduce the cost of a 1,000 l fill of home heating oil by €117. What this Government has done to the 37% of families in the State that heat their homes with home heating oil is nothing less than a disgrace. It is absolutely disgraceful that that has happened. That is more pronounced in areas like my own and Deputy Healy-Rae's, rural communities where two thirds of families will be using home heating oil to keep them warm this winter. The temperatures have dropped in the last week. Yet this Government has decided that there should be no decrease whatsoever. Indeed, what it is asking us to do, and what it would vote for if it had an opportunity but unfortunately we will not get one, is to increase the cost of home heating oil again next year. That is just absolutely disgraceful. It is out of touch. All the backbenchers in Fine Gael and Fianna Fáil, when this debate is guillotined in the next few minutes, should remember what they are voting for. They are voting to put up the price of home heating oil again in this Finance Bill. It makes no sense whatsoever. It is an ideological battle that Deputy Eamon Ryan and the Green Party are fighting but it is out of touch with the reality of where people are at. People are buying home heating oil by the jar. They are not phoning up and looking for a 500 l or 1,000 l fill. They are buying it by 5 gallon drums because they cannot afford to fill their tanks. The Government is so out of touch and so under a rock when it comes to the pressures that real people are facing, particularly in the country, that they sat around the Cabinet table and decided to put up the price of home heating oil a little bit further, despite the facts. The facts are that home heating oil has increased by 145% since January of last year.
The other disgrace is that this Bill is coming to a guillotine. The Government has imposed a guillotine on this. We are at amendment No. 30. We cannot deal with so many other amendments, amendments I put down that I did not even get a chance to discuss because of the guillotine that has been imposed. We are dealing with another issue in this Bill as well. Every backbencher should hear this. When they come in in a minute to vote for this Bill, they are voting to put up the price of housing through the levy they are putting on concrete blocks and poured concrete. I would also point out to the Minister, if I had a chance to discuss this amendment, that there is a flaw in how the legislation is drafted and it will come back to haunt the Government. I do not think parts of it will stand up legally. I will leave it at that given the limitation on time and the fact that other Deputies want to come in.
As someone who has worked in the environmental sector for 20 years, I find tonight's debate quite concerning. Due to the Government's approach to many of these things, we are seeing a divide between rural and urban communities really come to the fore. The reality is that if we do not address climate change and deal with all the issues that are coming down the road, those in rural areas will be most impacted by the effects of climate change. We will see the cost of food increase. Flooding will increase and farmers will have grave difficulties dealing with the change in temperatures and environmental conditions. Where I do agree with the Deputies is that I believe this is because the Government's policy is leaving a lot of people behind. We have heard about how rural communities in particular are finding it very difficult with the cost of energy and fuel at the moment. It is within the remit of the Government to use taxation policy to assist those households and do something that is proactive.
In the majority of instances when we discuss VAT issues with the Minister, he says it is not within the Government's competency and that it is within the control of the EU. This year, the EU brought in a directive, No. 2022/542, which will enable the Government to reduce the VAT on certain products to zero because they are in line with the EU Green Deal. I am asking the Minister to support rural communities and urban communities and the million households across this country whose homes are eligible and suitable for solar panels. He can support them by bringing in a zero VAT rate for solar installation and solar panels. This is absolutely within the Government's remit and it is something it could do very quickly. It would represent a greening of the VAT and would go a long way towards assisting those households that are suffering from the global energy shocks we are seeing. It would also help our country meet its emissions targets and help with the vulnerabilities of our grid. It is a win-win-win situation. Currently, when people buy solar panels, the Government gives them quite a meagre grant of a maximum of €2,400 but that money is taken back off them in VAT. We are asking that the Government not do that any longer and assist families to install solar panels, make their homes resilient against these energy shocks and help them reduce their energy bills by 40%. I have an amendment on this issue but we are not going to get to it. I ask that the Minister look into this. This is now allowable under EU rules. I ask that the Government be proactive and help families all across the country deal with their energy bills for next winter.
We are obviously dealing with a circumstance of astronomical prices, whether we are talking about diesel, petrol or home heating oil.
I do not think it makes any sense whatsoever to add to that. As has been said by many, the Government is leaving people behind and there is no logic to that. The only logic in regard to carbon tax was from the point of view of pushing people in a particular direction. The alternatives were not always there, but that has happened naturally in a dramatic way and I do not think there is any argument regarding carbon tax.
Due to the guillotine, I am disappointed that I will not be able to deal with amendment No. 69, which seeks that the temporary business energy support scheme, TBESS, be considered as a means of providing mitigation to those people who are in gas fed communal district heating systems and are currently paying astronomical mortgage level bills. I have spoken to the Minister and others about the real solution that is needed, namely, changing how the heat is produced and moving away from gas to woodchip, geothermal or whatever. That will involve grants schemes and a huge amount of capital expenditure. There are ways to do that and communities like Carlinn Hall are considering those solutions. However, in the short term we need mitigations and TBESS payments could be given to companies in residential areas. The likes of Frontline Energy would be paid, but the money would be ring-fenced and provided as mitigation in bills to residents who are under astronomical pressure.
This issue has been spoken about by many others, and whether it is dealt with here and now or at a later stage the fact is it needs to be dealt with as soon as possible by the Government. We need a long-term solution and a short-term solution, and I believe that now is the time to address that. The TBESS could be the means of doing that. I beseech the Minister to look at that.
The Government has recognised the pressures families are under. I heard Deputy Michael Healy-Rae talk about the need for politicians in here to be servants of the people. I serve the people. It is equally important to be honest with the people and make the case for what we can afford to do and the level of challenge and risk we could face in the future.
We brought forward €4 billion worth of additional measures from the start of October until the end of February. I remember the budgets in 2016 and 2017, which were of an overall value of €3.6 billion for the year. The temporary measures we have brought forward are equivalent to the entire budgets the Deputy voted on a number of years ago. Those measures have been brought forward in recognition of the huge challenges that we appreciate families are facing.
Deputy Healy-Rae made reference to the cost of fuel. He did not make reference to the fact that we cut excise on fuel, diesel and petrol. He made reference to gas and electricity, but did not refer to the fact that we cut VAT. He made reference to carbon tax, but did not refer to the fact that the National Oil Reserves Agency, NORA, levy, has been reduced for the next number of months to offset the impact of higher carbon taxes. We appreciate and understand the impact higher energy pricing is having on families and businesses. That is why we have reduced the taxes that make the biggest impact on the price of energy. That is why we have TBESS in place, which will be open over the coming days. All of these measures are in place until next February at a cost, as I said, of more than €4 billion of the country's money.
The time permitted for this debate having expired, I am required to put the following question in accordance with an order of the Dáil of 22 November 2022: "That the amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill; Fourth Stage is hereby completed; and the Bill is hereby passed." Is that agreed?
Cathal Berry, Colm Brophy, James Browne, Richard Bruton, Colm Burke, Peter Burke, Mary Butler, Jackie Cahill, Dara Calleary, Seán Canney, Ciarán Cannon, Joe Carey, Jennifer Carroll MacNeill, Jack Chambers, Niall Collins, Patrick Costello, Simon Coveney, Cathal Crowe, Cormac Devlin, Alan Dillon, Stephen Donnelly, Paschal Donohoe, Francis Noel Duffy, Bernard Durkan, Damien English, Alan Farrell, Frank Feighan, Peter Fitzpatrick, Joe Flaherty, Seán Fleming, Norma Foley, Brendan Griffin, Simon Harris, Seán Haughey, Martin Heydon, Emer Higgins, Neasa Hourigan, Heather Humphreys, Paul Kehoe, James Lawless, Brian Leddin, Michael Lowry, Josepha Madigan, Catherine Martin, Steven Matthews, Paul McAuliffe, Charlie McConalogue, Michael McGrath, John McGuinness, Joe McHugh, Aindrias Moynihan, Michael Moynihan, Jennifer Murnane O'Connor, Denis Naughten, Hildegarde Naughton, Malcolm Noonan, Darragh O'Brien, Joe O'Brien, Jim O'Callaghan, James O'Connor, Willie O'Dea, Fergus O'Dowd, Christopher O'Sullivan, Pádraig O'Sullivan, Marc Ó Cathasaigh, Éamon Ó Cuív, John Paul Phelan, Anne Rabbitte, Neale Richmond, Michael Ring, Eamon Ryan, Matt Shanahan, Brendan Smith, Niamh Smyth, Ossian Smyth, David Stanton, Robert Troy, Leo Varadkar.
Ivana Bacik, Mick Barry, Richard Boyd Barrett, Martin Browne, Pat Buckley, Holly Cairns, Matt Carthy, Sorca Clarke, Joan Collins, Michael Collins, Rose Conway-Walsh, Réada Cronin, Seán Crowe, David Cullinane, Pa Daly, Pearse Doherty, Paul Donnelly, Dessie Ellis, Mairead Farrell, Michael Fitzmaurice, Gary Gannon, Thomas Gould, Johnny Guirke, Danny Healy-Rae, Michael Healy-Rae, Brendan Howlin, Alan Kelly, Gino Kenny, Martin Kenny, Claire Kerrane, Pádraig Mac Lochlainn, Mary Lou McDonald, Michael McNamara, Denise Mitchell, Catherine Murphy, Paul Murphy, Johnny Mythen, Gerald Nash, Carol Nolan, Cian O'Callaghan, Richard O'Donoghue, Louise O'Reilly, Darren O'Rourke, Eoin Ó Broin, Donnchadh Ó Laoghaire, Ruairi Ó Murchú, Aengus Ó Snodaigh, Thomas Pringle, Maurice Quinlivan, Patricia Ryan, Seán Sherlock, Róisín Shortall, Bríd Smith, Brian Stanley, Peadar Tóibín, Pauline Tully, Jennifer Whitmore, Violet Wynne.