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

When the Minister for Finance, Deputy Donohoe, introduced the budget in the Dáil last month, he outlined the progress made in the economy. He referred to broad-based economic growth, low levels of unemployment, a large increase in public capital expenditure, tax revenues in line with the target of €58.6 billion and a projected surplus of 0.2% of national income. At that time, he stated that Brexit is the main immediate threat to the economy. Although there have been developments since budget day, 8 October, Brexit remains the main immediate threat. The Brexit deadline of 31 October has passed, with a further extension agreed until 31 January 2020. We are still unclear, however, as to what will be the outcome of Brexit. Even with an agreement, it is still the case that the UK is leaving the EU and that this will bring change. It is important that Ireland is ready for that change, for both its citizens and its businesses. In that context, we will continue our preparations for all scenarios. On budget day, the Minister stated that we were faced with an uncertain scenario over which we had relatively little influence and that this was all the more reason to take care with the policies that we could control and influence.I think it is fair to say that developments since budget day have proven Deputy Donohoe's prudence to be well-founded. I understand that a section-by-section brief of the Bill has been circulated to Senators so I do not propose to go into that level of detail now but shall focus on the main themes of the Bill.

Climate change is another significant threat. It was described by the Minister, Deputy Donohoe, in presenting the budget as "the defining challenge of our generation". Therefore, climate-related measures are among the most important aspects of the Bill. While it is by no means unanimous, there is broad support for a move towards a target of €80 carbon tax per tonne by 2030. Deputy Donohoe proposed a gradual approach to that target with annual increments of €6 each year to get to the target. Furthermore, while the €6 increase applied from budget night to auto fuels, the Minister delayed its application to other fuels until May 2020 after the heating season. The fuel allowance payment has been increased from €22.50 to €24.50 per week or an additional €56 in the full season. This mitigates the effect of the increase in carbon tax on the most vulnerable people in society.

The carbon tax increases will raise an estimated annual revenue of €90 million in 2020 and €130 million in a full year. The additional revenue raised will be ring-fenced to protect those most exposed to higher energy costs, build a just transition and support a new investment in climate action. On budget day, Deputy Donohoe also outlined how we will invest a portion of the carbon tax in the midlands to ensure that the transition that takes place in the communities within that region will be fair to all stakeholders.

In addition, we are replacing the 1% diesel surcharge that was introduced last year with a nitrogen oxide, NOx, emissions-based structure that will apply from 1 January 2020. This measure was introduced in recognition of the health and environmental risks posed by non-CO2 emissions, which are harmful to the environment and public health, including an estimated 1,100 premature deaths a year in Ireland directly attributed to NOx emissions.

Another important feature of the Finance Bill are the measures included to tackle aggressive tax avoidance. Ireland offers a stable competitive tax regime to international investors which is consistent and transparent. Potential investors know how the Irish system works and that it does not change dramatically from year to year. However, this should not be taken as a licence to avoid paying the just amounts of tax due by designing complex plans that exploit mismatches or gaps in the legislation. We are making changes to the tax regime for Irish real estate funds, IREFs, to address aggressive tax planning activities identified by Revenue on examination of IREF accounts filed this year.

We are also making amendments to the real estate investment trust, REIT, regime to ensure appropriate taxation is collected, and to the taxation of securitisation vehicles to strengthen anti-abuse measures introduced in previous Finance Acts. We are also updating existing transfer pricing rules, extending their scope and application, and introducing new anti-avoidance measures this year in the form of anti-hybrid rules to fully adhere to the EU anti-tax avoidance directive.

Stamp duty on non-residential property has been increased from 6% to 7.5%. This is primarily a revenue raising measure that adds a further 1.5% to the increase from 2% to 6%, which was applied two years ago. It is considered an appropriate level of increase that takes account of the previous low level and the buoyant state of the non-residential property market.

The Government supports enterprise through a variety of means, including the taxation system. This Bill provides for a number of significant enterprise taxation supports by way of broadening access to the key employee engagement programme, KEEP, scheme, the employment investment incentive, EII, and the research and development tax credit. The Bill also extends the special assignee relief programme, SARP, and foreign earnings deduction, FED, to the end of 2022. Importantly, the Bill provides for income tax measures announced on budget day, applying increases to the home carer's credit and the earned income tax credit. It also provides for the extension of the help-to-buy scheme to the end of 2021. Finally, I draw the attention of Senators to two provisions, specifically VAT on food supplements and the sea-going naval personnel tax credit. The Bill provides that food supplements will be subject to VAT at the reduced rate of 13.5% from 1 January 2020. This provision is being made to clarify the position regarding the VAT rating of food supplements under the VAT Consolidation Act 2010. For naval personnel, there is a new section in the Bill that provides a tax credit for permanent members of the Irish Naval Service. Where a permanent member of the Naval Service spent at least 80 days at sea on board a naval vessel in 2019, he or she will be entitled to a tax credit of €1,270 in 2020. This is a once-off measure that will apply for 2020 only. It is intended to operate as a temporary scheme and one that underlines the Government's bona fides in recognising the particular circumstances in which members of the Naval Service operate.

In summary, the Bill gives legislative effect to the budget and I look forward to hearing the views of Seanad Éireann on it. We will also have the opportunity to consider it in more detail during the later Stages of its progress through the House. I commend the Bill to the House.