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

I thank the Acting Chairman and apologise to him and to the other Members for being late. I was replying to parliamentary questions to the Department of Public Expenditure and Reform, which ran over time.

I am very pleased to be here with Senators and to bring the Finance Bill to the Upper House. In many ways this Bill reflects the progress we have made as a country and an economy but it also points to the further progress we must make and issues we need to address. It contains measures to improve living standards and to put in place policies that would have looked very unlikely a few short years ago. In this respect, the Finance Bill 2018 builds on progress that has been made. However, as Finance Bills must, it also contains a range of measures to raise revenue. As such, it reflects the careful consideration I as Minister have given to the competing demands posed by our budgetary requirements. It is always the case that any Minister for Finance must balance the need for care and caution on one hand with ambition on the other. I understand that all Senators have received a briefing document so I do not intend to go through the Bill section by section but I do wish to draw their attention to what I consider to be some of the key measures in the Bill.

I wish to look first at some measures that focus on the individual. In particular, I point to the income tax package contained in sections 2 to 5, inclusive, that gives effect to measures announced in the budget. These include: raising the entry point to the higher rate of income tax for all earners by €750; reducing the third rate of the universal social charge, USC, to 4.5%; and increasing the ceiling of the band at which the 2% rate of the universal social charge will be payable to €19,874. The home carer credit is being increased by €300 to €1,500, and the earned income credit is being increased by €200.

I now turn to some measures that are relevant to both economic activity and our wider society. I wish to highlight sections that relate to climate change policy and those that aim to enhance our corporate tax regime and our reputation. In support of climate change policy, section 9 of the Bill extends the benefit-in-kind exemption for electric vehicles until 31 December 2021. Section 39 extends the vehicle registration tax, VRT, relief for hybrid electric vehicles until 31 December of next year. In recognition of increasing concerns about air pollution and specific concerns about pollutants being emitted in high amounts by diesel vehicles, section 37 of the Bill provides for a VRT surcharge of 1% on diesel cars.

Senators will all be aware that my focus is also on having a corporate tax regime that is stable, legitimate and transparent to support continuing investment in jobs and the creation of jobs in our State. As part of Ireland's commitment to implementing the anti-tax avoidance directive, ATAD, I announced in budget 2019 the introduction of two new anti-avoidance measures, namely, an ATAD-compliant tax regime and new controlled foreign company, CFC, rules. These are designed to prevent the artificial diversion of profits to offshore entities in low-tax or no-tax jurisdictions. They operate by attributing certain income of a CFC to the controlling parent company for immediate taxation. They are primarily associated with territorial tax systems and therefore have not to date been a feature of our worldwide tax code.

The new ATAD-compliant exit tax regime will impose a charge to tax at 12.5% on unrealised gains where companies migrate or transfer assets offshore such that they leave the scope of the Irish tax system. It replaces a pre-existing, focused anti-avoidance exit charge with a new broad-based exit tax and was therefore introduced via financial resolution on budget night. The introduction of both these measures, in addition to the commitments to further action set out in the corporate tax roadmap published in September, clearly demonstrates Ireland's ongoing commitment to playing a significant role in international tax reform. These measures are set out in sections 27 and 32 of the Bill.

Next I wish to look at measures designed to support specific sectors. Income tax-based incentives have a significant part to play where market failures mean that additional support measures are necessary to deliver financing and reduce costs to businesses. This has been especially true in recent years, and a range of measures have evolved since the financial crisis to fill the gap. The changes in the Bill to the employment and investment incentive and the key employee engagement programme, KEEP, and the introduction of the startup capital initiatives demonstrate that we are responsive and can develop innovative solutions to emerging challenges.

Regarding section 26, I hope Senators will agree that film tax credits act as a stimulus to the development of an indigenous audiovisual sector. The section provides for a four-year extension to the credit. I am also introducing, subject to state-aid approval, a new short-term regional uplift for certain productions. The regional uplift will commence at 5% and will be phased out over four years.

Turning now to section 48, in order to promote lifetime transfers of land and encourage more young people to pursue farming, a full relief from stamp duty on the conveyance of farmland to young trained farmers is currently available, subject to conditions. This relief is due to lapse at the end of the year but the Bill provides for its extension for a further three years. In addition, section 21 extends stock relief for farmers for a further three years. I refer also to section 23 which sets out, as announced in the budget, the amount of interest that may be deducted by landlords in respect of loans used to purchase, improve or repair a residential property to be increased to 100% from 1 January 2019. This is a slight acceleration of the rate of restoration of the full value of the relief, which was due to increase incrementally to 100% by 2021.

Finally, I wish to turn to two measures that I know have provoked much debate. I refer first to section 43, which changes our 9% VAT rate to 13.5%, with the exception of newspapers and sports facilities. I reviewed this rate and published a paper on it in the summer of 2018. This review found that the objectives of the 9% rate had been met and that it is no longer needed in the current economic climate. This single change alone will result in additional revenue of €560 million in the first full year of operation, rising to well over €600 million across a full year. Section 35 of the Bill increases the rate of betting duty from 1% to 2% for bookmakers, while the rate of betting intermediary duty has been increased from 15% to 25%.Betting duty contributes less than 1% of all excise duties and it is time the betting sector increased the contribution it makes to pay for public services. I look forward to hearing the views of Seanad Éireann. We will also have an opportunity on Committee and Report Stages to debate these matters in greater depth. I commend the Bill to the Seanad.