Neale Richmond (Dublin Rathdown, Fine Gael) | Oireachtas source

-----be that in county council format, the Seanad, the Dáil or the Government.

A number of Senators mentioned income tax and welcomed the change in the threshold for the second time in a year and advocated for greater change. I will say that Ireland's progressive personal income tax system plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. The Government is of the view that a broad-based progressive income tax system where the majority of income earners make some contribution according to means is the most fair and sustainable income tax system in the long term. Crucially, at a time of economic plenty people who are hard-pressed deserve to get a little of their money back. This is recognised particularly when other costs are increasing.

Capital acquisition tax and capital gains tax were raised by Senators Gavan, Boyhan and McDowell. I take Senator Gavan's point in the spirit it was offered, recognising the ideological differences between us. They are sincerely held and we will not fall out over them. His differences with Senators Boyhan and McDowell on the issue are well noted. I will take on board Senator Boyhan's point on the treatment of single persons in capital acquisitions tax. I agree with him. This is why the increase in the threshold this year for capital acquisitions tax to €400,000 was significant. It is the first change we have had in five years and many of us would argue it is very welcome. Proportionately the changes to the other thresholds have been far greater. It is still a big difference, and I acknowledge that. I underline there is a lot more to do.

Senator McDowell's point on the taxation rate was well made. It is one I have heard him make at various forums many a time. I understand the decision was made to focus on the threshold point exactly because it is easier to reflect it on rising property prices and what it actually impacts. Senator McDowell's point was well made. The reduction from 40% to 20% and then the increase to 33% after the financial crash are well documented and everyone knows this. I fundamentally believe that more changes need to be made to the thresholds and I am very proud to be in a party and a Government that has made these changes.

With regard to Senator Gavan's comments on mortgage interest tax relief, it is the Government's continued view that taxpayers with mortgage balances of less than €80,000 on 31 December 2022 are, in general, more likely to be in a relatively stronger financial position in comparison to those with larger mortgage balances. In addition, such individuals are likely to have significant amounts of equity built up and have relatively low loan-to-value ratios. This means such individuals should have better opportunities to switch their mortgages and obtain more favourable interest rates, which would ultimately reduce their interest liability without the need for Government intervention. As Senators will appreciate, it is not possible or desirable for the Government to alleviate the full impact of higher interest rates for all mortgage holders.

A number of Senators raised the issue of the VAT rate in the hospitality sector, in particular Senator Casey of Fianna Fáil, with great informed knowledge and eloquence, and others such as Senator Byrne who are practitioners in this area and have been for many years as well as being public representatives. This received a lot of attention in advance of the budget. It was subject to a Private Members' motion in the Dáil in advance of the budget, which was tabled by the Rural Independent Group. Following the budget statement, there was another Private Members' motion tabled by the Independent Group. The points were made quite sincerely. I must say they are acknowledged by the Government. I have said previously that when I was in the Department of enterprise we commissioned the research that went into the detail of the impact of changes, not only in terms of interest rates and energy rates but policy changes that I hope we would all support, in terms of increasing the minimum wage, sick pay and various workers' rights. We stand by the fact they are the right thing to do but they do have a cost and they do need to be paid for. It is not the Government that pays for them as it is generally the employers. The sectors most acutely impacted by this are, of course, the retail and hospitality sectors, particularly the food-based hospitality sector which has made its point very clearly. This is why we introduced the €4,000 Power Up grant. This is why we increased the level of the VAT threshold and why we have consistently made sure the cost-of-living payments may give people the opportunity to patronise these businesses more than they intended to, particularly in the busy Christmas months. I see the argument for changing the VAT rate. I made that argument myself when I was in the Department of enterprise and when I first moved to the Department of Finance.If we were to make the changes to the VAT rate, and I see the argument - I made it myself when I was in the Department of enterprise and now in the Department of Finance - we all have to accept that it comes with a massive cost of up to €740 million to make the change to the VAT 9, as it was known before. That comes out of a tax package of €1.6 billion. That is close to 45% of the tax package gone with one measure for one year. Even if it was just to be about the food-based aspects of hospitality, it would still be in the region of €400 million. This is a substantial amount of money that is taken from other sectors of the economy and does not necessarily allow for a balanced one. That is not to say they are not without their merits, but it is not necessarily a decision the Government was prepared to take at this time based on the overall needs of the economy more widely,

I want to conclude on two or three additional points before the Minister, Deputy Chambers, comes back in to discuss the Committee Stage recommendations. In terms of gender analysis, as per the points with regard to pensions raised by Senator Higgins, the Department is incorporating equality budgeting into the budgetary process. In terms of pensions specifically, the interdepartmental pensions reform and taxation group report published in November 2020 considered the issue of gender. The report noted the key drivers of pension coverage and adequacy for women relate to labour market factors. The combination of reduced working hours and breaks in employment due to caring duties can have significant implications for the duration of women's working lives and lifetime earnings. Therefore, this limits the capacity to maximise the size of the final pension fund for women who contribute to a supplementary pension. The Commission on Taxation and Welfare also noted that it took equality impacts, including gender, into account in its considerations and recommendations, which are being considered by the Department of Finance. I am cognisant of gender pensions equality and it forms part of the consideration of new pensions measures. I note that recent standard fund threshold, SFT, examinations, while also recommending an increased SFT, also recommend revision into interaction with the pension adjustment orders under family law.

In respect of auto-enrolment, as Senator Higgins, is aware, this is primarily a provision for the Minister for Social Protection. I can, however, give some brief information in response to the points. It needs to be emphasised that auto-enrolment funds will be personal property of participants of the scheme, rather than a new national fund. Therefore, we need to treat auto-enrolment participants' money on a par with those invested in occupational schemes.

Briefly, as to the points on electric vehicles, as raised primarily by Senator O'Reilly but also by others, from 1 January of next year, a benefit-in-kind exemption would apply to the installation of a battery electric vehicle home charger by an employer at a director's or an employee's private residence. This means that a director or employee will not pay BIK on the installation of a home charger which is required for work purposes and aims to support the roll-out of EVs in the commercial feet. The Bill also amends the weight ratio required for commercial electric vehicles, from 130% to 125%, to qualify for the €200 VRT rate.

I appreciate I have not covered all the points, particularly those I was not in the Chamber for, but there are 47 recommendations to be discussed on Committee Stage which cover a lot of the points raised where we will be able to get in. I thank all the Senators for their contributions, which varied in scale and in area. I fundamentally believe we will have a good ability to discuss these further during the final Stages of the Bill's legislative journey. I repeat the gratitude expressed by Senator Boyhan and others to the officials in the Department of Finance who have put a Trojan amount of work into preparing what is first and foremost a good budget but also a really good Finance Bill. Hours and hours of preparation throughout the working week and into the weekend have been put into this to get it through the Dáil and the Seanad, and their contribution should not be underestimated in this process. I look forward to the next stage of the Bill.