Seán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank the Acting Chairman.

I am pleased to have the opportunity to introduce Financial Provisions (Covid-19) No. 2 Bill 2020 to the House this afternoon. The Bill provides the legislative basis to introduce the tax measures the Government announced as part of the €7.2 billion July jobs stimulus last week.

The plan is the next stage in our response to the Covid-19 crisis and will help businesses get back on their feet, ensuring as many people as possible can return to work in accordance with public health and Government advice. The plan contains a suite of tax, loan and expenditure measures designed to directly support business at all levels of the economy that have been negatively impacted by Covid-19. The plan is the first step in this Government's mission to reignite and renew the economy following the impact of Covid-19. It aims to build on the recovery to date and the measures previously announced with a further €4.3 billion of spending on supports that will have an immediate impact on businesses, employment and economic activity. The overall value of the package, including tax changes and the opening of the €2 billion Covid-19 credit guarantee scheme is €7.2 billion.

Today's debate is focused on the tax measures of the plan that will have a net cost approaching €1 billion.The total value of the tax package is €1.4 billion, but the amendments to corporate tax losses will be cost-neutral to the Exchequer as they are an acceleration of the ability of companies to avail of a relief that exists in the corporation tax code.

Importantly though, this measure will release up to €450 million of liquidity in the current year to companies currently facing significant cash flow difficulties at a point when they most need it. In addition, the employment wage subsidy scheme, EWSS, will cost an estimated €2.25 billion, guaranteeing substantial State support for employee wages through to March 2021.

The Bill only runs to 13 sections so I will briefly go through them individually. Section 1 is the standard definitions section common to Bills of this nature.

Section 2 makes changes to the temporary wage subsidy scheme, TWSS to include individuals who return to work after maternity and other types of leave, those on apprentice and training courses as well as changes to the subsidy amounts payable that the Minister announced on 15 April last. All of these, and other necessary adjustments to the TWSS, were previously announced and have been administered to date by Revenue on the basis of their care and management provisions.

The section also provides for the EWSS, which will replace the TWSS. It is being introduced as an enterprise support that gives a subsidy to qualifying employers on the basis of the numbers of paid employees on the employer's payroll. The scheme is an economy-wide support and is open to all sectors. The primary qualifying criteria is that the employer must be able to demonstrate that in the majority of cases he or she is operating at no more than 70% in either the turnover of the employer's business or the customer orders received by the employer by reference to the period from July to December 2020 compared with the same period in 2019.

In this regard, given the importance of childcare to the reopening of the economy and also recognising the unique circumstances where the turnover of such businesses would be greater than 70% but the cost base considerably higher, the Government has decided that the key eligibility criteria would be waived for this important sector. The level of subsidy the employer will receive is per paid employee. For every employee paid more than €203 gross per week, the level of subsidy is €203. For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50. A nil subsidy is payable for employees paid less than €151.50 or more than €1,462 gross per week – the latter amount consistent with the eligibility ceiling which exists in the current TWSS. The scheme will be in place until 31 March next year. It is estimated that it will cost €2.25 billion, €1.35 billion in 2020 inclusive of seasonal workers and €0.9 billion in 2021 up to the end of March.

Sections 3 to 5 together, inclusive, a legislative basis for the tax "debt warehousing” scheme announced by the previous Government on 2 May 2020, which is currently being operated by the Revenue Commissioners on an administrative basis. No interest will be charged on the tax debts for the initial Covid-19 restricted trading period or 12 months thereafter. Interest will be charged at the reduced rate of 3% per annum after that. Businesses will also be required to comply with requirements in relation to tax returns for the duration and pay other liabilities such as VAT in full and on time. Otherwise, the normal 10% per annum interest will apply.

Section 6 will add a new interest provision in chapter 5 of Part 47 of the Taxes Consolidation Act 1997, to reduce the interest rate applying to agreed repayments of all tax debt to 3% per annum rather than 8%, 10% or 11.75%, depending on the tax head, where agreement has been reached between the taxpayer and Revenue prior to 30 September 2020. The measure will assist taxpayers in difficulty with their tax returns. I advise them all to check with their accounts and tax advisers in that regard. The purpose of this section is to provide support to taxpayers experiencing difficulty with tax liabilities by reducing the interest rate applying to agreed repayments of all tax debt where agreement has been reached prior to 30 September 2020.

Section 7 provides for the stay and spend incentive, which will incentivise taxpayers to support registered or accredited providers of accommodation or food during the off sseason, thus providing support to a particularly vulnerable sector that will continue to be constrained by public health limitations. The incentive will provide for a refund through income tax of 20% of the vouched cost subject to a minimum spend of €25, that is, a maximum tax credit of €125 per person or €250 for a jointly assessed couple. This innovative measure will be a valuable off season form of support for the hospitality sector. I look forward to hearing the inputs from Senators on this issue and to a healthy debate through the various Stages of the Bill's passage through the House. The incentive provides relief on accommodation and food, including soft drinks, but not including alcohol. Businesses must be registered or accredited as appropriate and have tax clearance if registered for VAT. Businesses will register with Revenue to participate. This scheme will cost up to an estimated €270 million in total. It will run from 1 October 2020 to 30 April 2021, including over the Christmas period and the St. Patrick's Day period next year also. It is designed to unlock money people may have saved over recent months and encourage spending in the sector and local economy. I expect the sector to use its creativity and talent to market and ensure the best use of this opportunity for their businesses and customers. In doing so, I believe there will be wider benefits for the economy that go beyond the hospitality sector.

It is important to recall that the stay and spend incentive should not be viewed in isolation from the other, very significant measures announced as part of the plan. The extension of the wage subsidy scheme until the end of March next year and its extension to new or seasonal staff with effect from 1 July this year, the VAT change; the rates' waiver; the reopening grants and the range of other supports will buffer businesses and the economy as we move through the remainder of 2020 and into next year.

Section 8 amends the help-to-buy scheme to stimulate demand from first-time buyers for new houses in the housing market, to encourage house completions and to assist first-time buyers to accumulate a deposit for a new home. The support available to first-time buyers will be increased to the lesser of €30,000, an increase from the current level of €20,000; 10%, which is an increase from the current 5%, of the purchase price of a new home or self-build property; or the amount of income tax and DIRT paid in the four years before the purchase or self-build. The additional relief will be effective immediately and will apply to applicants who sign a contract for the purchase of a new house or make the first drawdown of the mortgage in the case of a self-build in the period 23 July to December 2020. This scheme is in operation as we speak, but we want to put it on a legislative basis. Receipt of the additional relief is not dependent on the completion being before 31 December. It will expire on 31 December 2020. All other parameters of the scheme will remain the same.

Section 9 provides for increases in the allowable expenditure under the cycle-to-work scheme in respect of e-bikes and bicycles. The allowable expenditure will be increased from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of regular bicycles. The scheme currently allows the purchase of a new bicycle every five years and this will be amended to every four years.

Section 10 provides for a new once-off income tax relief measure that will benefit self-employed individuals who were profitable in 2019 but, as a result of the Covid-19 pandemic, are loss-making in 2020, providing a much needed cash flow boost in the current year. An additional option for farmers in this context to step out of income averaging for the 2020 tax year is also being introduced, and should be welcomed. The estimated cost of this once-off proposal is €150 million in 2020. Section 11 provides provide cash flow support to previously profitable companies that are experiencing losses as a result of public health measures. It allows companies to estimate their current year losses and to make an early claim to carry back 50% of that loss for offset against taxable profits of the prior year. This will generate an immediate tax refund of some or all of the corporation tax paid in the previous year. Under normal rules, this carry back would not take place until up to nine months after the end of the loss-making year, when tax returns are normally due for filing. As it is based on projections of the expected losses for the full accounting year, the carry back is limited to 50% of the estimated loss. The balance of the loss will be available for carry back in due course under normal rules, when accounts have been prepared by the companies at their year-end. The measure has no net cost in the medium term as it is an acceleration of a relief that exists in the corporation tax code. However, it will release €450 million of valuable liquidity in the current year to companies currently facing significant cash flow difficulties at a time when they need it most in the weeks and months ahead.

Section 12 provides that the standard rate of VAT will be decreased on a temporary basis from 23% to 21% for the period 1 September 2020 to 28 February 2021. It is estimated that this decrease will cost some €440 million in total - €160 million this year and €280 million next year.

The reduction is part of a number of stimulus measures to aid economic recovery in the short term and help ensure sustainable growth for the future. It cuts across a wide range of economic activity from the retail sector, the motor industry, as well as the hospitality sector and, as such, there is a broad range of types of businesses and traders who will benefit from this VAT reduction. A decrease in the 13.5% VAT rate, such as that provided for in the Jobs Initiative 2011, would have been more limited in its impact. This is a more broadly based measure. In the context of the prevailing public health advice and the restrictions necessitated by the social distancing rules and the shortage of overseas visitors, a reduction in the standard rate is the appropriate policy response on this occasion.

Section 13 is the final section and is another standard section relating the Short Title. There is no commencement provision and the Bill will become effective on enactment and signature by the President.

This is a relatively short Bill but it is a crucial element of the next phase of the Government's response to the Covid-19 crisis. It sets out the fiscal measures that will enable the economy to recover and emerge from the period when the economy was shut down.

The people have shown remarkable resilience throughout the crisis and now businesses are reopening and taking employees back onto their books but those businesses continue to need our support. The measures in this Bill will assist in that process and supplement the other measures the Government has taken to support businesses. It introduces new support measures and adapts existing ones to meet the needs of our people and our economy as we continue to make progress in restricting the impact of the disease, reopen our country and help businesses recover and begin to prosper again. They are far-reaching measures involving Exchequer support but necessary for the crisis we are addressing. I commend the Bill to the House.