Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I am pleased to be back in the Seanad. Before I comment on the Finance (No. 2) Bill 2013, it might be appropriate to examine the economic context in which it is proposed to be enacted. Considering the economic backdrop against which the budget was set, and although we experienced a difficult first quarter, the Irish economy returned to growth in the second quarter. The most recent figures provide room for optimism for the remainder of this year. The Government has been particularly encouraged by the positive developments in the labour market of late. Employment increased by 3.2% during the year to quarter three, marking a fourth successive increase in employment on a year-on-year basis. In line with such developments, the economy returned to growth in the second quarter, and more recent figures provide grounds for continued optimism. Next year, a more supportive external environment and a continuation of positive domestic developments should allow for more robust growth. Economic output is expected to increase by 2% in 2014.

On the fiscal side, the recently published Exchequer returns show that tax revenues increased by almost 10% year-on-year to November. Strong income tax receipts from both PAYE workers and the self-employed are encouraging and are consistent with recent data on the recovering labour market. In addition, expenditure remains below profile across most Departments. These returns give confidence that, once again, Ireland will meet and, indeed, better its fiscal targets in 2013. Building on this, budget 2014 targets a deficit of 4.8% of GDP. This represents an over-achievement in respect of the deficit target and will deliver a small primary surplus.

As we move to examine the Finance (No. 2) Bill, there are a number of key points I wish to make. Sometimes the finance Bills are simply seen as the means by which the taxation aspects of the budget are formalised and given legal status and effect. However, legislation of this nature also provides the Government with an important opportunity to introduce significant new measures which help to stimulate economic growth and underpin fiscal policy. For example, on Second Stage in the Dáil, the Minister, Deputy Noonan, made the point that the Bill before the House introduces provisions relating to corporation tax and our policy based on the three Rs, namely, rate, reputation and regime. I echo the comments made by the Minister in his budget speech to the effect that while the Government has over the past two and a half years focused on implementing and ultimately exiting the EU-IMF programme, we have also been following a parallel programme - the programme to support businesses, create jobs and get people back to work. This is why measures that assist us in achieving these objectives are an important feature of the Bill before the House.

The Finance (No. 2) Bill 2013, as passed by Dáil Eireann, comprises 83 sections and runs to 103 pages. As I said here when I introduced what became the Finance Act 2013 in this House last March, this legislation is not only the product of work done by legislators and officials. We in Merrion Street do not just devise measures. The measures in the current Bill are the product of much discussion and dialogue across all Departments and consultation and interaction with representative organisations, Members of both Houses and individual citizens.

I will now take Senators through the main points relating to the Bill. I will not cover every section but I will highlight some of the more relevant ones. Section 3 relates to tax relief for acquiring an interest in a partnership. This relief will be withdrawn on a phased basis over four years. Relief will not be allowed for new loans taken out after 15 October 2013. The relief will be reduced by 25% per annum until its eventual total abolition in 2017. Existing claimants will retain the relief on a reducing-rate basis until 1 January 2017. The provision was amended on Committee Stage in order to permit replacement loans where the loan being replaced would have qualified. This will enable borrowers to refinance loans at a lower cost if they have the opportunity to do so. The latter will reduce the cost to the Exchequer because the interest payments on the restructured loan will be lower and, as a result, the tax relief provided will be reduced.

Section 4 provides for the budget day announcement of the abolition of top slicing relief for ex gratiaor discretionary lump sums paid on or after 1 January 2014. There has been some confusion about the measure since it was announced and I would like to make it clear to Senators that the measure will have no impact on lump sums payable from occupational pension schemes. The existing exemptions for discretionary lump sums are also being retained. It is only the concessionary rate of tax that may apply to any taxable element of such lump sums that is being abolished.

Section 5 introduces a scheme of tax relief for home renovation work, the home renovation incentive, which has been warmly welcomed by the construction sector. This is intended as a much needed boost for the construction sector and to assist homeowners who wish to wish to carry out works on their homes. Relief will be granted at a rate of 13.5% on qualifying expenditure up to a maximum of €30,000, excluding VAT. The minimum expenditure must be €5,000 inclusive of VAT. Relief will be granted by way of a tax credit split over two years following the year in which the works are carried out. The scheme will run from 25 October 2013 until 31 December 2015. Works carried out in 2013 will be deemed to have taken place in 2014 and the credit will be awarded in 2015 and 2016.

Section 6 proposes an employment activation measure, the start-your-own business incentive. This will provide an exemption from income tax, up to a maximum of €40,000 per annum for a period of two years, for qualifying individuals who have been continuously unemployed for a minimum of 12 months and set up a qualifying, unincorporated business.

Section 7 abolishes the one parent family tax credit and replaces it with a new single parent child carer credit. Following the many representations made by Deputies and Senators, the Minister amended the provisions in this section on Committee Stage in the Dáil to allow the new credit to be claimed by a non-primary carer where it is relinquished by a primary carer. This may apply to a grandparent.

Section 8 provides for the budget day announcement of the new ceilings of €1,000 per adult and €500 per child on the amount of medical insurance premiums that qualifies for tax relief. These provisions were also amended on Committee Stage in the Dáil to provide that where a student is being charged a full adult premium, the adult ceiling for relief will apply. In addition, the Minister also removed the existing requirement for a defined relationship between the policyholder and the individual insured in order for the tax relief to apply to premiums paid on behalf of others.

Section 16 provides that the employment and investment incentive will be removed from the high earners restriction for a period of three years in the hope it will stimulate investment in SMEs. It also provides that capital allowances for plant and machinery used in manufacturing trades claimed by passive investors in a leasing trade will be included as a specified relief for the purposes of the high earners restriction.

Section 18 contains a technical amendment to ensure the incentivised scheme of early retirement operates as intended. The section also relates to section 782A of the Taxes Consolidation Act 1997 and strengthens the override provision introduced to enable access to additional voluntary contributions without the need for changes to be made to pension scheme rules or trust deeds.

Section 19 relates to employee share ownership trusts. The legislation is being amended to allow ex-employees to remain in employee share ownership trusts for a period of 20 years, as is available to existing employees.

Section 21 will increase the amount of expenditure eligible for the research and development tax credit without reference to the 2003 base year from €200,000 to €300,000. The section will also increase the limit on the amount of expenditure on research and development outsourced to third parties from 10% to 15% of the total amount of expenditure on research and development qualifying for the credit in a given year. It also amends the key employee element of the research and development tax credit, in conjunction with section 13.

Section 23 makes a number of changes to deposit interest retention tax, DIRT. The main change is the increase in the rate to 41%, with effect from 1 January 2014. The section brings dividends paid or credited to regular share accounts of credit unions within the DIRT regime from 1 January 2014. The previous exemption from DIRT for certain interest paid on special term accounts offered by banks and building societies and special term share accounts offered by credit unions has been discontinued from budget night, 15 October 2013.

Section 25 provides for the withholding tax that will apply to payments made by companies qualifying for film relief under section 481 of the Taxes Consolidation Act 1997 to performing artists resident outside EU and EEA member states.

Section 30 introduces a single rate of exit tax of 41%. This applies to payments and deemed payments from life assurance policies and investment funds, in place of the existing rates of 33% and 36%. The higher rates applying to investments in personal portfolio life policies and personal portfolio investment undertakings have also been increased. The rate changes are to be introduced with effect from 1 January 2014.

Section 31 extends the scope of the Living City initiative to include residential properties in certain designated areas constructed up to and including 1914. There are also a number of technical amendments. The initiative is subject to EU state aid approval and a commencement order. The Minister announced in budget 2014 that the initiative would be extended to certain designated areas in the cities of Cork, Galway, Kilkenny and Dublin. The areas to be designated have not yet been decided. This will be done in conjunction with the relevant local authorities and other Government agencies.

Section 33 provides for the removal of the 50% restriction on the amount of prior year trading losses a NAMA participating institution can set off against trading profits. This should protect the value of deferred tax assets at the banks, improving capital ratios under the new Basel III rules and enhancing the valuation of the State's equity holdings in AIB and Bank of Ireland. This restriction served only to extend the period of time over which relief for losses could be claimed by the banks but did not restrict the total amount of relief to be claimed.

In the light of recent rulings from the Court of Justice of the European Union, section 35 provides for an option to defer payment of exit tax in cases where a liability arises following migration of a company's residence to another EU or EEA member state. Section 34 makes the necessary amendment to the company tax residence rules contained in section 23A of the Taxes Consolidation Act to ensure an Irish-registered company cannot be stateless in terms of its place of tax residency.

Section 40 makes an amendment to rules relating to additional credit relief for foreign tax paid on foreign dividends in order to bring provisions relating to relief for foreign tax on dividends paid to Irish companies into line with rulings of the Court of Justice of the European Union.

Section 43 restricts the extent of losses that may be claimed for capital gains tax purposes in situations where a loan or part of a loan relating to the purchase of the disposed asset has been forgiven or written off by the lender.

Section 42 extends capital gains tax retirement relief to disposals of leased farmland in circumstances where, among other conditions, the land is leased over the long term, the minimum lease being five years, and the subsequent disposal is to a person other than a child of the individual disposing of the farmland.

Section 45 provides for a capital gains tax incentive to encourage entrepreneurs, in particular serial entrepreneurs, to invest in assets used in new productive trading activities as announced in the budget. Commencement of this measure is subject to receipt of EU state aid approval.

In Part 2 of the Bill section 48 introduces a new section in general excise law to provide that alcohol products held for sale on unlicensed premises are liable to forfeiture where that premises remains unlicensed because the person who should hold the licence does not qualify for a tax clearance certificate.

Section 49 amends section 138 of the Finance Act 2001 which provides that a person suspected of an offence of dealing in, or with, unstamped tobacco products must provide information for a Revenue officer or a member of the Garda Síochána.

It also provides that a Revenue officer or garda may search any bag or receptacle that he or she reasonably believes to contain tobacco products that are concerned in the offence.

Section 50 amends the provisions of general excise law to clarify that a Revenue officer may, while assigned to the Criminal Assets Bureau, continue to exercise the Revenue powers, functions and duties that have been delegated to that officer. This section also provides that appeals against excise decisions may be made directly to the appeals commissioners with the exception of VRT matters, which will still be made to the Revenue Commissioners in the first instance.

Section 51 provides for the introduction of a relief from solid fuel carbon tax on solid fuels with high biomass content. The relief will be limited to the biomass element of the finished solid fuel.

Section 52 gives effect to the increase in the rates of tobacco products tax which came into effect on budget night and which are estimated to raise €15.4 million in 2014.

Section 53 gives effect to the increase in the excise rates of alcohol products tax, which came into effect on budget night and which are estimated to yield €148 million next year.

Section 58 in Part 3 provides for the retention of the 9% VAT rate on tourism-related services.

Sections 59 to 61, inclusive, and 65 contain VAT anti-avoidance measures. Section 62 extends a Finance Act 2013 provision relating to receivers and the capital goods scheme.

Section 63 increases the VAT cash receipts threshold from €1.25 million to €2 million with effect from 1 May 2014. This was an extension of a provision we included in last year's budget to help SMEs.

Section 64 increases the farmer's flat rate addition from 4.8% to 5% with effect from 1 January 2014, as announced in the budget.

Section 66 provides that the VAT rate applying to the supply of horses and greyhounds, and to the hire of horses, will increase from 4.8% to 9% in compliance with a judgment of the European Court of Justice. However, the 4.8% rate will continue to apply to livestock in general and to horses that are intended for use as foodstuffs or for use in agricultural production. I just want to put Members off their Christmas dinners.

Section 67 extends the existing VAT exemption on water supplied by local authorities to the supply of water made by Irish Water.

Part 4 deals with stamp duties. Section 69 adds three courses to the list of qualifications, any one of which must be held to be eligible for the relief from stamp duty on transfers of agricultural land to young trained farmers.

Section 70 provides for an exemption from stamp duty on the transfer of stocks and marketable securities of companies listed on the enterprise securities market of the Irish Stock Exchange. The exemption is subject to a commencement order.

Section 71 provides for an additional 0.15% stamp duty levy on pension fund assets for 2014 and 2015. The existing 0.6% levy will cease at the end of 2014. This pays for the 9% tourism-related VAT rate. If Members want this rate, they must find us the money to do it. If they do not support this levy, they must support other provisions.