Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The previous tax relief in respect of rent paid was abolished in budget 2011, and it is no longer available to those who commenced renting for the first time from 8 December 2010. That followed a recommendation in the 2009 report by the Commission on Taxation that rent relief should be discontinued. The view of this independent commission was that, in the same manner in which mortgage interest relief increases the cost of housing, rent relief increases the cost of private rented accommodation, which is exactly what Senator O'Donnell has said. Accordingly, the result of reintroducing this relief could be seen as a transfer of Exchequer funding directly to landlords, which would not have the intended effect of reducing the pressure on tenants.

In the normal course of events, a tax credit of this nature would be of little benefit to lower income workers, the unemployed and students who may have little or no income tax liability.

However, I understand from previous discussions on Committee Stage in the Dáil that what may be envisaged here is that the relief would be in the form of a refundable tax credit. An approach based on refundable tax credits would represent a significant shift which could have major policy implications far beyond the question of financial support for rent costs. It would take us into the area of income and welfare supports, which is currently the primary responsibility of the Minister for Employment Affairs and Social Protection.

In addition, going the route of refundable tax credits would entail a very significant investment by Revenue to provide for it. Likewise, it would involve substantial investment by employers and payroll systems providers to develop new systems and procedures to handle refundable tax credits.

For these reasons, this is not a development I am willing to consider. The actions the Government proposes to take in order to address concerns about the cost of rental accommodation are set out in Rebuilding Ireland: Action Plan for Housing and Homelessness.

At the time of its abolition, the rental tax relief cost the Exchequer up to €97 million per annum, and it is likely that there would be an even higher cost were a similar scheme to be introduced. It would be higher again if it were on the basis of a refundable tax credit.