Wednesday, 6 December 2017
Finance Bill 2017: Committee Stage (Resumed)
I appreciate the extra time to finish discussing the recommendation. I am aware of the problems of rural as opposed to Dublin-based hotels, which are heavily over-subscribed. However, many other cities have a local hotel tax which is something I urge the Minister of State to look at. It is a possible way to distinguish between cities and rural Ireland. I accept the point around tax bands, but this is something we could consider. There is a particular tax for London hotels. I cannot reconcile the fact that I pay huge rates when I stay in hotels in Dublin where we have children in uniforms going down to eat their breakfast, having been piled into hotel rooms. I cannot accept that we have this tax break for hotels in Dublin. There must be a way around it. The contrast between those children in their uniforms and the huge rates hotels charge cannot be right on any level. I record also my concern about labour standards in this sector. We are subsidising some very bad employers, which is certainly something that needs to be addressed as well.
I support the recommendation. We did not have an opportunity to debate it due to time constraints, but I was very supportive of the recommendation on banks and their losses. I reserve the right to raise on Report Stage the issue of banks and their losses which was discussed previously by Sinn Féin.
In reviewing the 9% VAT rate as the year goes on, will the Minister of State consider hotels' compliance and engagement with joint labour committees? If we want to see real economic benefits from these measures and the hospitality industry, we must ensure that those working in it, who often have homes locally and who are there when the tourist season is over, have sufficient incomes. That is how one ensures there is a benefit all year round. It is by ensuring that those who work in the industry have an adequate wage which they bring back to the local community. The Government's Low Pay Commission has highlighted many serious concerns around wages in the hospitality sector. I ask the Minister of State to comment on that also.
The reduced 9% VAT rate is reviewed annually in the context of the budget, including the economic costs and benefits and the additional revenue that could be raised by bringing the rate back to 13.5%. Revenue's most recent estimate is that reverting to the 13.5% rate would bring in an additional €491 million. A 1% increase would yield €109 million. The estimated cost to the Exchequer of the reduced 9% VAT rate since its introduction in 2011 to the end of 2016 is of the order of €2.2 billion.
As to the economic benefit, employment in the accommodation and food service sector has grown significantly since the introduction of the 9% VAT rate.Employment in these sectors has increased gradually each year since 2011, with an increase of over 35%, or 40,500 jobs, in the period from quarter 2, 2011 to quarter 1, 2017. The rate of increase in employment in the sector was significantly greater than the overall level of employment increase. The number of overseas trips to Ireland by non-residents increased from 6.5 million in 2011 to 9.6 million in 2016, an increase of almost 50%. However, those benefits could be attributed to other factors such as the general and very strong recovery in the economy and better economic performance in the target markets.
The Minister, Deputy Donohoe, decided not to make any change to the 9% VAT rate in budget 2018 as it continues to benefit the tourism sector throughout the country and any change in the rate could impact greatly on the tourism sector outside the capital. The Minister was also conscious of the impact the decline in the value of sterling is having on UK visitor numbers and how any increase in the VAT rate might exacerbate this.
While it is noted that hotel prices in Dublin continue to rise, that is partly a function of supply, which is being addressed. Furthermore, due to EU fiscal neutrality constraints, different VAT rates cannot apply to different geographical areas in the country. VAT policy must be decided in the context of the national interest.
However, we accept the position of the Senators that the 9% VAT rate must be subject to ongoing analysis and it is. In that context, the Minister asked the Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of next year’s budget. The review should be completed by mid-2018 and will better inform any future decision on the reduced rate.
However, it is not certain that the analysis will be finalised within the timeframe suggested in the recommendation and, therefore, the Senators’ recommendation cannot be accepted. However, I assure them that their concerns will be included in the study to be undertaken by the Department.
Senator Conway-Walsh is confused today. On some issues she has called for votes and has opposed votes on other sections she brings forward. She is in favour of rural Ireland being supported. The 9% VAT rate is the biggest and most costly example of how the Government favours rural Ireland but the Senator is against it. Her continued confusion is consistent.
The joint labour committees, JLCs, can deal with such issues. If people do not pay the correct rates, there is a structure in place to ensure they are made to do so. I have no time for anybody who does not pay the correct rate.
I welcome the retention of the 9% VAT rate in the Finance Bill. Many of those present come from the regions of Ireland, such as the Minister of State, who comes from Wexford, while I am from Waterford and other colleagues come from other areas of the country. For such Members, this has been one of the measures that most assisted the hospitality trade during the economic crisis. That is evidenced by the vast increase in the number of tourists visiting Ireland.
People to whom I have spoken who are involved in restaurants and hostelries told me that the 9% VAT rate was one of the measures that kept them in business during that difficult time. However, I acknowledge that there is an issue, particularly in Dublin, regarding the cost of hotel rooms. The message should go out from the Seanad Chamber to hoteliers in Dublin that it is not a given that the 9% VAT rate will remain forever. I have lobbied for its retention and I will continue to do so because it is good for business and makes it cheaper for people to visit Ireland, which has a knock-on impact in terms of further expenditure in our local economies. However, the message should go out from Seanad Éireann that hoteliers should not take the 9% VAT rate for granted and should consider the competitive price of bed nights in Dublin in particular. It is an important matter that they should take into account. The Minister will take account of it, as will his officials. I welcome that a further analysis is to be conducted of the VAT rate, its impacts and how it benefits the economy.
It is also welcome for regional newspapers, a sector that has struggled considerably over many years and particularly so during the economic crisis when advertisements, a strong source of income for newspapers, decreased. They too depend on the lower VAT rate to help them become and remain sustainable businesses. Regional newspapers carry out a public service by reporting upon affairs of State and also reporting on news items in communities, towns and villages across the country. As the Minister of State said, and I support him on this point, the 9% VAT rate supports rural Ireland in many ways, such as tourism. Its benefits can be seen in the huge increase in visitors to the Waterford greenway and that it is attractive for those from outside the country to come here and visit and spend money in local economies. Local newspapers keep our communities connected and inform them of happenings, Oireachtas events and local events and it is critical for that to continue. I want to put on record that the 9% VAT rate is not just a financial measure but has helped rural Ireland and various sectors of the country on many levels. However, the Dublin hotel trade should not take the measure for granted because the prices of hotel rooms in Dublin are going through the roof and becoming uncompetitive and a problem.
I agree with the points made by Senator Coffey. A very clear message needs to go out in regard to hotels in Dublin. However, I lobbied for the retention of the 9% VAT rate in the past and on this occasion, and it sends a very positive message in terms of job creation, as the Minister of State said.
Another benefit I have seen in the regions is the amount of investment people are beginning to put into their businesses in the hospitality industry. The 9% VAT rate has encouraged people in that trade because they have to constantly reinvent themselves and invest in their businesses to give good offers to their customers. However, without the retention of the 9% rate we would not have increased employment or investment. I agree with its retention. It is to be welcomed that the Minister, Deputy Donohoe, listened to proponents of the rate and kept it because there were rumours that it would be changed and there was lobbying by the Opposition in that regard. It has been a positive measure but it is important that the message be clear that it will not always be available and that hotels in Dublin need to sit up and take cognisance of that.
In regard to the discussion on labour rights and employment pay rates, while all Members know good and bad employers, there are facts and figures provided by the Low Pay Commission with which to work. There are also very clear targets relating to this area, such as those under the sustainable development goals and gender equality. The figures and information we have, such as the Low Pay Commission examination of women in the hospitality industry and the sustainable development goals targets for where we need to be in terms of the 40% lowest incomes, are factual matters that could usefully feed into the examination by the Department and which I may be examining on Report Stage in terms of further amendments.
I move recommendation No. 10:
In page 71, between lines 4 and 5, to insert the following:“64. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report which would include a risk assessment of the sustainability of stamp duty receipts from commercial property.”.
I move recommendation No. 12:
In page 88, between lines 6 and 7, to insert the following:
“86. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the likely changes in the amount of Local Property Tax payable by households based on the most recent house price data and forecasts for the next valuation period.”.
I have moved the recommendation, albeit with provision to-----
I move recommendation No. 13:
In page 88, between lines 6 and 7, to insert the following:“86. The Minister for Finance shall—(a) within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas an equality statement to examine how the measures contained in the Finance Act 2017impact upon equality in Ireland, andI would like to bring this recommendation back in on Report Stage because I would like to examine it further. I acknowledge that the Department of Public Expenditure and Reform has done very positive work in respect of equality budgeting and in respect of the staff paper on equality budgeting. I will bring it back on Report Stage when we might have a chance to discuss it. I acknowledge the very positive paper from the Department in this regard. Recommendation No. 13 is a very specific recommendation on the role of the equality statement within that. I would prefer to discuss it on Report Stage.
(b) ensure that Budget 2019 is accompanied by an equality statement.”.
I move recommendation No. 14:
In page 88, between lines 6 and 7, to insert the following:“86. The Minister for Finance shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report assessing the impact of Finance Act 2017on Ireland’s progressive implementation of the Sustainable Development Goals, including the target under Goal 10 that by 2030, progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate higher than the national average.”.
We may discuss this recommendation again and I may bring it back on Report Stage because I believe a discussion is needed on Ireland's implementation of the sustainable development goals. Ireland will prepare a report next year on the sustainable development goals and I believe it is important that the measures in the Finance Act and the measures in the budgetary processes are properly considered in light of the sustainable development goals and whether they bring us closer to or further away from the implementation of those goals. With regard to the Finance Bill I specifically have in mind goal No. 10, which says that states should progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average. Perhaps the Minister will afford us the opportunity on Report Stage to discuss it, and he may have a response now. This is a test we need to start applying to the tax and distributive measures in our budget.
If one goes back several years, since the real damage impacted upon the finances of the State, we have been doing that. Some 400,000 people out of 2 million people pay a zero rate of universal social charge. A total of 36 % of the workforce pays no income tax. These figures are rarely quoted. I absolutely agree that within those figures there are part-time workers for whom the system works very well. This is 400,000 people who pay nil in respect of the universal social charge. This is 36% who pay nil in respect of income tax because they are underneath the threshold. The reason they are underneath the threshold is because we have raised the thresholds. I absolutely support these measures.
The sustainable development goals were adopted in 2015 by 193 UN members, including Ireland and consist of 17 high-level goals and 196 targets. While not legally binding, developed and developing countries are expected to take ownership and establish national frameworks for achieving the goals by 2030. Senior officials have formed a group, led by the Department of Communications, Climate Action and Environment, that has been set up to oversee Ireland's implementation of these goals. A progress report, published by EUROSTAT in November notes that the EU as a whole made moderate progress in the goal to achieving sustained income growth of the bottom 40% of the population at a rate higher than the national income over the last five years. In an Irish context, and from the perspective of income tax changes introduced in the last four budgets, incremental progress has been made in reducing the income tax burden, thereby increasing net after-tax income with an emphasis on low and middle-income earners.
It is the Government's intention to continue this progress in future budgets as fiscal resources allow. It is also important to look at the broader effects of budgetary measures over time such as the contribution of budgetary policy to employment growth over the past number of years. It is necessary to consider other non-budgetary Government measures to support those on lower incomes. For example, the Government has adopted the recommendation of the Low Pay Commission to provide for an increase in the national minimum wage from January. This is the third consecutive year in which this has increased.
I also note that budget 2018 has provided for an increase in social protection payments, including a €5 per week increase in all social welfare payments to be introduced through the Social Welfare Bill. An analysis of the Finance Act alone would not be representative of the range of measures undertaken by the Government to support those who are on lower incomes.
The Senator will also be aware, on foot of the discussions on a previous recommendation in respect of equality assessment, that a significant volume of work is already being undertaken by the Departments of Finance, Public Expenditure and Reform and Employment Affairs and Social Protection to assess the impact of the budget, tax and expenditure measures on income equality.
Taking these factors into account, and in view of the oversight role held by the Department of Communications, Climate Action and Environment, I do not accept the Senator's recommendation.
I move recommendation No. 15:
In page 88, between lines 6 and 7, to insert the following:“86. The Minister for Finance shall, within six months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on—(a) how Part 30 of the Principal Act might be amended to allow for replacement of the current marginal rate tax relief in respect of private pensions with a standard rate tax relief, and
(b) how Part 30 of the Principal Act might be amended to allow for replacement of the current marginal rate tax relief in respect of private pensions with a single rate tax relief of 30 per cent.”.
I wish to speak on recommendation No. 15. Can I check that this is the last amendment, as I do not want to eat in to colleagues' time?
I believe that this recommendation is one of the most important in the Bill. It asks the Minister to consider creating a report for the Oireachtas looking at how an amendment within Part 30 of the principal Act might be made for the replacement of the current marginal rate tax relief for private pensions with a standard rate tax relief. The recommendation also proposes an alternative to allow for a replacement of the current marginal rate tax relief with a single rate tax relief of 30%. The inequity around private pension tax relief is an issue. Greater relief goes to those on the highest incomes and less relief goes to those on lower incomes, even though the stated objectives of the pension policy are to encourage a wider take-up of pensions and to encourage a greater gender equality in more women taking up pensions. Both of these measures are counteracted by the marginal rate tax relief in which the benefits go very heavily to higher earners. In the memorandum of understanding with the troika, one of the key measures it had sought at that time was the standardisation of Ireland's private pension tax relief. This was one of the only measures that was not implemented or touched, even though it had been a key recommendation. It was recommended as an inequity. I have the Minister of State's figures here. We have an inequitable tax relief system with varying costs. Dr. Micheál Collins, assistant professor of social policy in UCD has looked at figures overall for tax relief for private pensions being estimated at €2 billion. We are aware that the figure for certain schemes alone is €210 million. We are talking about a huge figure - hundreds of millions of euro - being spent on private pension tax relief in Ireland.At the same time, we have been hearing that addressing the inequalities in our State contributory pension system is simply unaffordable. We have a recognised inequality in tax relief being maintained instead of addressing a recognised inequality in our contributory pension system.
The Senator is focusing on people on higher pay who take the opportunity to provide a good pension for their retirement. However, they represent a small percentage of people in the scheme of things. In this State, 50% of people have no pension, which is the biggest issue. They have nothing coming.
I thank the Minister of State and the Members for their co-operation over the past two to three hours. The Minister of State is very familiar with the Seanad, thankfully, which has probably helped with his deliberations in the Chamber.
I thank everybody. This is my fourth time dealing with the Bill so I ask Senators not to repeat contributions on Report Stage. We have left out quite a few areas, which I am happy to go through on Report Stage. If it is otherwise, we will have the same conversation we have already had. That is what happened in the Dáil. I do not see the purpose of going through some of these matters a fifth time. Some things were not discussed in the other Chamber and I ask the Senators to focus on those.