Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I thank the Acting Chairperson and join him in extending a warm welcome to all of our guests from Oranmore Men's Shed who are with Deputy Grealish. I hope they enjoy their visit to the Oireachtas and thank them for coming.

I am pleased to be here to discuss the Finance (No. 2) Bill 2023 which will give the necessary legal basis to the decisions announced in the budget and make a number of other necessary changes to tax legislation. I understand Senators have been provided with an updated summary of the Bill which addresses the individual sections. It is a very lengthy and complex Bill this year. As such, I do not intend to go into great detail now and will focus instead on a number of key measures.

This Bill implements the measures announced in budget 2024 to provide further support to individuals, families and businesses at a time when we all know the cost of living remains high.The Bill introduces new measures and amends existing measures specifically targeted at supporting the housing market and encouraging investment in start-up enterprises. Furthermore, it contains a number of administrative changes which primarily seek to protect and enhance the integrity of our taxation code. The Bill makes a number of changes to tax legislation to reflect recent international developments, with a large portion of the Bill dedicated to the implementation of the EU minimum effective tax rate for large groups and companies.

The Finance (No. 2) Bill 2023 implements the budget 2024 income tax package, which increases a number of income tax credits, such as the personal, employee PAYE and earned income credits. It also increases the standard rate cut-off point for a single person by €2,000, with proportionate increases in the bands applying to married couples and civil partners. I believe this will help avoid a situation whereby an individual ends up paying a higher burden of tax as his or her income rises. The changes are in line with the programme for Government and will ensure that people at all income levels benefit.

The 2% rate band ceiling for the universal social charge, USC, is increased to take account of the national minimum wage increase. Moreover, the 4.5% rate of USC is reduced to 4% This is the first USC rate reduction in five years. The Bill also extends the USC concession for those who have a medical card and earn less than €60,000 per year, such that those individuals pay a reduced rate until the end of 2025.

Other elements of the Government’s cost-of-living support package include a 12-month extension of the reduced 9% VAT rate for gas and electricity. This complements the once-off social protection measures announced on budget day as well as the three additional electricity credits. The Bill also defers the final tranche of fuel excise increases so that a phased restoration will take place in two equal instalments on 1 April 2024 and 1 August 2024.

In relation to the benefit-in-kind regime for company vehicles, the Bill extends for a further year the temporary universal relief of €10,000 on the original market value, OMV, for vans and certain categories of cars. Additionally, the tapering mechanism that provides benefit-in-kind relief for battery electric vehicles is being extended for a further two years to the end of 31 December 2027. What this means is that the current deduction of €35,000 to the original market value for battery electric vehicles will remain until 31 December 2025 and will then be reduced to €20,000 in 2026 and €10,000 in 2027.

One of the budget priorities this year was to create and maintain an environment which allows businesses to thrive. The Bill, therefore, brings a number of changes to existing tax measures to support enterprise. The research and development tax credit is being increased from 25% to 30% so as to maintain the net value of the credit for businesses subject to the EU minimum effective tax rate. In addition, the first-year payment threshold is increased from €25,000 to €50,000 to provide a cash-flow benefit, particularly for smaller research and development projects, and to encourage more businesses to engage with the research and development credit regime.

The Bill introduces a new targeted relief for angel investors which applies a reduced rate of capital gains tax to gains up to the twice the value of the initial investment. This will offer additional funding support for innovative start-up SMEs. In this same vein, the employment investment incentive scheme is enhanced by standardisation of the investment period to four years and doubling the amount of relief which an investor can claim.

Subject to EU state aid approval, the Bill provides for an increase in the project cap on qualifying expenditure for film relief. The cap is increased to €125 million for films certified after 1 January 2024 or after commencement of section 41 of the Bill, whichever is later. I am also committed to examining the potential for a scheme to develop the unscripted production sector in Ireland.

The Bill augments a number of agricultural tax reliefs which support the farming sector. For example, the accelerated capital allowances regime for farm safety equipment is extended to the end of 2026, while consanguinity relief is extended to the end of 2028. Amendments have also been made to a number of other farming reliefs to account for increased maximum thresholds in line with EU regulations.As I announced on budget day, the Bill also restricts eligibility in respect of the existing tax exemption for certain income arising from the leasing of farmland. This will ensure that those who purchase land on or after 1 January 2024 must own the land for a period of at least seven years before they can avail of the relief.

Turning to housing, the Bill complements the important Government interventions to support availability of housing, whether for purchase or rent. With regard to supports for tenants, the Bill makes a number of changes to the rent tax credit. These changes include increasing the amount that can be claimed for 2024 and 2025 by 50% to €750, and extending eligibility for the credit to parents who pay for their student child’s tenancy in the case of rent-a-room accommodation or a “digs” arrangement. More than 250,000 claims have already been approved in respect of 2022 underlining the importance of this credit. The Bill also provides for a residential premises rental income tax relief. Subject to certain conditions, this relief can reduce the tax due on a landlord’s residential rental income by up to €600 in 2024, €800 in 2025, and €1,000 in each of 2026 and 2027. In light of the impact of rising interest rates and mortgage costs on many households, the Bill introduces a temporary one-year mortgage interest tax relief for qualifying homeowners capped at €1,250 of relief per property. To provide certainty to prospective homebuyers and to the market, the help-to-buy scheme is being extended to the end of 2025. The scheme is also being amended to facilitate access to help to buy to a greater number of purchasers also availing of the local authority affordable purchase scheme.

The Bill also includes a number of other provisions, which revise existing levies or administrative regimes or update our domestic tax legislation to align it with commitments made at international level. For instance, section 36 introduces new defensive measures applying to certain outbound payments towards jurisdictions on the EU list of non-co-operative, no-tax, and zero-tax jurisdictions. These measures are aimed at the prevention of double non-taxation to meet commitments contained in Ireland's national recovery and resilience plan.

I am conscious of the recent discourse in respect of issues with the taxation of certain general practitioner income, which arise from contractual arrangements within the GP community. As such, the Bill provides that where individual GPs enter into contracts with the HSE to provide certain medical professional services, and provide those services in the conduct of a partnership profession with other individual GPs, the income from those services can be treated for income tax purposes as that of the partnership. The Bill also provides that any professional services withholding tax credit may be claimed by the partnership under such instances.

Section 73 of the Bill provides for the revised bank levy announced on budget day. A technical inconsistency has been identified in the data, which means that it will be necessary to adjust the applicable rate to 0.122% to ensure that the full €200 million is collected in 2024, as set out on budget day. I will make this change at a future point.

As mentioned, I note that the Bill implements Pillar 2, the EU minimum 15% effective tax rate for large groups and companies. The Pillar 2 provisions apply to multinational and large-scale domestic businesses with global annual revenues of €750 million and above in at least two of the preceding four years.

The Finance (No. 2) Bill 2023 will give effect to the tax measures announced in the budget and in doing so offers valuable support and certainty to taxpayers throughout the country. As noted by the ESRI in its commentary on 13 October, “The total budgetary package is progressive and this research estimates that it will result in reductions in the at-risk-of-poverty ... rate of most groups, compared to a budget pegged to income growth.” That is something the Government collectively is proud to have delivered. I also welcome last week’s finding by the European Commission that budget 2024 is in line with the Council’s recommendations.

At a later stage, we will have the opportunity to discuss the measures we are putting in place to ensure the long-term stability of the public finances. In the meantime, I look forward to hearing the views of Members on these provisions over the coming weeks. I commend the Bill to the House.