Maria Byrne (Fine Gael)
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I move recommendation No. 1:

In page 12, between lines 17 and 18, to insert the following: "Report on Help-to-Buy Scheme

7.The Minister shall within 6 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the operation of the Help-to-Buy Scheme and its uptake, both in its original form and its enhanced form. ".

I welcome the Minister, Deputy Donohoe, to the House. The Finance Bill is a really important document. There has been a great deal of work done on the help-to-buy scheme to date and many people have been able to avail of it and benefit from it. We are proposing that there be a review of the takeup of the scheme with a view to enhancing it. It would be useful to look at the figures now and in a couple of months time. The recommendation proposes that the Minister would report back to the Houses in six months time on how many additional people have availed of the scheme. It has been a very worthwhile scheme. I have worked with a number of families in my area in Limerick who have found it very beneficial.

Seán Kyne (Fine Gael)
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I welcome the Minister. We all agree that the help-to-buy scheme is a tremendous programme, supported by the Minister and the Government and pushed through in recent years with the support of the Houses. It has been a great initiative to help people to set up in their first home. In Galway, some 1,784 people have benefited from the scheme. Up to November of this year, approximately 37,330 have benefited from it nationally. Has the Minister examined the success of the initiative in terms of how it has worked and what future plans he might have? Does he intend to examine it further with a view to enhancing it over the coming years?

Jerry Buttimer (Fine Gael)
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I support my colleagues in putting forward this recommendation. I commend the Minister and the Government on the help-to-buy scheme at a time when criticism is being levelled at the Government regarding its housing policy. We accept we have a road to go on this issue and there are challenges to meet. Up to the end of November, 37,300 help-to-buy claims had been made, of which 36, 500 were approved. That is an extraordinary figure. As Senators Kyne and Byrne said, these are people being helped to get on the ladder and to buy their own home.

It is important to look at the totality of Government housing policy and what is being done in the context of expenditure. A total of €723.2 million has been spent on the help-to-buy scheme and the value of applications approved and pending is of the order of €706.4 million. By any measure, that is an extraordinary amount of money being given by the Government to assist people under the scheme. It is to be commended. Like the previous speakers, I will be a little parochial by referencing the figures for Cork, where 4,789 applications have been made and €99.3 million claimed. If we look at housing policy in its totality, the help-to-buy scheme is an initiative that is helping people. It is central to helping applicants to buy their first home. The scheme is about ensuring we can assist people in that way.

I have a question for the Minster on dereliction and on the living city initiative. I will come back to the latter, which is an initiative I am passionate about in the context of Cork city and particular parts of it. At this time, we have a market that is moving. In my area of Bishopstown, in the estate in which my father lived, there are three houses for sale. These are old houses that need to have their building energy rating, BER, improved and may need to be modernised. It is an old area that would benefit from people moving in and from regeneration. In the past two decades, people have moved out of Bishopstown, which has seen its population base decline. Its demographic is now an older, more mature one. Given its proximity to University College Cork, UCC, Munster Technological University and Cork University Hospital, professional people are looking to purchase properties in the area and there are also people looking to buy properties there to rent out. In that type of settlement area, there is wonderful footfall and access points to the city in terms of road infrastructure and proximity to colleges, schools and healthcare services. It is a great place in which to live and raise a family. However, substantial renovation work would be required on many of the houses in the area. Ballinlough is another example of a similarly mature area but I refer primarily to Bishopstown. I hope the Government will look in time not just at new builds but at the whole issue of the refurbishment of old houses.

The help-to-buy scheme has been a phenomenal success. The number of applicants and the amount of money given is extraordinary. Sometimes, we do not highlight enough the accessibility of the scheme in helping people.

Fintan Warfield (Sinn Fein)
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I had intended to oppose section 6. However, I will make a few points about the help-to-buy scheme, which we are discussing in this recommendation. The extension of the scheme will have a full-year cost in 2023 of €175 million. In its current guise, the scheme has certain requirements of applicants.One must take out a mortgage of at least 70% of the cost to buy a newly built home or of the valuation approved by the mortgage provider if one is building a home. Among the findings of a report undertaken by Mazars and commissioned by the Department of Finance in July 2022 was that, "The scheme promotes demand for new housing in a market where the problems that exist are unequivocally supply constraints", which leads to a risk of price inflation in an already unaffordable market. It goes on to state:

Expenditure on the scheme has far surpassed projected values and is rising rapidly. This trend appears likely to continue and may accelerate ... The scheme is poorly targeted with respect to incomes, location, house prices and other socioeconomic factors. As a result, it has socially regressive impacts, there is considerable deadweight associated with the expenditure, and it is poorly aligned with spatial policies.

We have spoken against this inflationary help-to-buy scheme. It is no substitute for an affordable housing plan.

I put on record Sinn Féin's opposition to section 6 of the Bill. I have missed the opportunity to speak to that section because of the speed with which we have gone through the Bill. I am not blaming the Acting Chairperson for that. It is as much my fault.

John McGahon (Fine Gael)
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That is my fault and I apologise. I call on the Minister to respond.

Fintan Warfield (Sinn Fein)
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The Minister said that a minority of property transactions in the State involve people availing of the help-to-buy scheme. Since its introduction in 2016, the scheme has cost €603 million. That is more than half a billion euro and represents a significant cost to the State. While it involves a small number of transactions, I know that in previous years some 40% of those who benefited from the scheme already had the required deposit for a mortgage. Does the Minister have to hand any up-to-date numbers in that regard? In 2020, 40% of those who benefited from the scheme already had the required deposit. Has the Minister any data on that from more recent years?

Maria Byrne (Fine Gael)
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I thank the Minister for his well put together response. I thank him for pointing out that the information is available. I compliment the scheme overall and look forward to it going from strength to strength.

Seán Kyne (Fine Gael)
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I thank the Minister for the response. We will not push the recommendation. It is regrettable that Sinn Féin does not want to help people to buy a home and would deny assistance to those who have benefited from the scheme. More than 1,784 people in Galway and some 37,000 nationally have to date been assisted to get their feet on the property ladder via the tax rebate under the help-to-buy scheme. It is important to acknowledge that.

Paddy Burke (Fine Gael)
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I welcome the Minister. How does the Government know whether the scheme is going to be a success? Does the Department compile figures weekly, monthly or every six months? The recommendation would provide for a six-monthly report to be laid before the Houses, so I am sure the Department will want to know how successful the scheme will be. Moreover, for future planning, that type of information will be needed. Does the Department have some sort of a scheme that collates all this information? If so, it would not be difficult to compile it in a report to be laid before the Houses, as the recommendation seeks to provide.

Maria Byrne (Fine Gael)
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I move recommendation No. 2:

In page 13, between lines 4 and 5, to insert the following: “Report on Small Benefit Exemption

8. The Minister shall within 3 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the potential broadening of the Small Benefit Exemption in such cases where the assistance provided is for energy and transport costs associated with employment. ”.

I welcome the doubling of the support, whereby a company will be able to give its employees up to €1,000 as opposed to €500. Some countries have broadened this provision further and looked at assistance on issues such as energy or transport costs for people travelling to work. In a couple of months, when we see how successful the small business benefit exemption has been working, perhaps it could be looked at further with a view to expanding it.

Seán Kyne (Fine Gael)
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I agree with Senator Maria Byrne. The changes that were made to the small business exemption scheme, from a limit of €500 to one of €1,000, are very welcome. I understand that a company will be able to give two vouchers to employees under the scheme. Does the Minister have any plans to broaden the scheme? Obviously, people are facing additional costs from transport and energy, among other issues, and such a change would be well received.

Paddy Burke (Fine Gael)
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Will the Minister clarify something in regard to the cargo bicycle provision in section 8? Some bicycles used by post office workers have a cargo space at the front of the bike or in between the two wheels, while many other cyclists pull an additional frame, which may be used for their kids and so on. Will that qualify? These frames are not an integral part of the bike but they can be fully attached. Will the part being pulled to transport somebody, whether a child or whatever the case may be, be eligible for the proposed grant?

Jerry Buttimer (Fine Gael)
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I commend the Minister and the Minister for Defence on their extension of the seagoing credit for Naval Service personnel, which is covered in sections 10 and 11. As somebody who comes from the constituency Cork South-Central, which includes Ringaskiddy, the Naval Service base and Haulbowline at the core of its operations, I commend the extending of this tax credit and congratulate the Minister in that regard. It is important that we have in these Houses an honest conversation about our Defence Forces, including the Naval Service, and the Minister for Defence has been very proactive in that matter. Notwithstanding the publication of the strategy, this is an important recognition of, and reward for, those able seamen who go out to sea. We are extending the commitment and it is important we continue to support our Defence Forces, including our Naval Service.

Last week, the Representative Association of Commissioned Officers, RACO, AGM was held. Worrying remarks have come from the Naval Service about its strength. Having spoken to the likes of Mark Keane, I know that the Permanent Defence Force Other Ranks Representative Association, PDFORRA, does great work advocating on behalf of the men and women of the Defence Forces. There are issues relating to the complicated nature of the payments, which was referenced in the strategy, but this provision is a positive development in the ongoing extension of the credit. I thank the Minister for that.

John McGahon (Fine Gael)
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Recommendations Nos. 3 to 5, inclusive, are related and may be discussed together by agreement. Is that agreed? Agreed.

Maria Byrne (Fine Gael)
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I move recommendation No. 3:

In page 15, between lines 24 and 25, to insert the following: “Report on Income Tax

11.The Minister shall within 4 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on increasing the standard rate cut-off point with respect to income tax to €50,000.”.

The report on income tax was published recently. The Minister is looking at broadening the tax bands, and we will all be better off for that and have more money in our pockets. The standard rate cut-off point is to be increased to €40,000. Are there any plans to extend that to €50,000? I know that there was a debate about it recently. Does the Minister have any thoughts on that? The increase to €40,000 is welcome, but perhaps the Minister might consider extending it.

Seán Kyne (Fine Gael)
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I concur with Senator Byrne. In government, Fine Gael has shown that we want to allow people to keep more of their money and to put more money back in their pockets. The Minister and the Government have increased the threshold at which people will start paying the higher rate of tax. We have kept pace with the increases in the minimum wage with adjustments to the USC as well. Those measures are important.

With regard to recommendations Nos. 3, 4 and 5, a number of suggestions have been made, including the introduction of a 30% tax rate which the Minister mentioned in his budget speech. Perhaps he can update us on what initiatives he is looking at with regard to that. Recommendation No. 5 concerns the laying before the Houses of a report on the introduction of a 30% tax rate before budget 2024. The other recommendations seek to ensure that the Minister prepares and lays before the Houses reports on the impact of increasing tax credits and on increasing the standard cut-off point to €50,000. We have seen, over successive budgets, the increase in the standard rate band up to €40,000. I ask the Minister to outline his plans to increase that further in the coming years to allow people to keep more of their money. Ireland has a very progressive tax system which compares very favourably in terms of ensuring that those at higher levels pay more. However, at the same time, there are people in the squeezed middle, who work and pay a lot of their income in tax. It is important that we try to alleviate the burden on them. I ask the Minister to outline his plans in respect of the measures mentioned in recommendations Nos. 3, 4 and 5.

Maria Byrne (Fine Gael)
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I thank the Minister for his clear statement and explanation.

John McGahon (Fine Gael)
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Before we move on, I welcome Senator Gallagher and his guests to the Gallery.

Maria Byrne (Fine Gael)
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I move recommendation No. 4:

In page 15, between lines 24 and 25, to insert the following: “Report on Tax Credit

11.The Minister shall within 4 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the impact of increasing both the employee tax credit and the earned income tax credit to €2,000 by 2025.”.

Maria Byrne (Fine Gael)
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I move recommendation No. 5:

In page 15, between lines 24 and 25, to insert the following: “Report on Tax Rates

11.The Minister shall within 4 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the introduction of a new 30 per cent tax rate in Budget 2024.”.

Fintan Warfield (Sinn Fein)
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Section 18 provides for an extension to the measure, the special assignee relief programme, for a further three years until 2025. In addition, in the interests of improving the economic efficiency of the scheme, the Bill provides that for new entrants there will be an increase from €75,000 to €100,000 in the income threshold to avail of the scheme. Existing claimants will not be impacted by the change but Sinn Féin has consistently pointed out, time and again, that there are significant equity issues inherent in the special assignee relief programme, notwithstanding that no cost was provided for the extension of this measure in budget 2023.

The relief provides significant tax benefits to high-income individuals which are not afforded to other workers. The cost of the relief has increased significantly since its introduction. More than €38 million in 2019 in the relief was claimed in respect of 50 individuals earning in excess of €1 million with combined costs of €5.5 million in 2019. Significant issues have been raised with respect to the relief, not least by the Commission on Taxation and Welfare, including the fact that many multinationals tend to use tax equalisation, where an employee pays no more or no less tax while on international assignment than they would have paid had they remained in their home country, such that the benefit in these cases is actually passed on to the corporate employers.

Some 24% of the special assignee relief programme claimants in 2019 reported that they operated through the relevant employees payroll on a tax equalisation basis. The Commission on Taxation and Welfare recommended a number of changes with respect to the special assignee relief programme, including the application of a higher effective tax rate with respect to employees, a further reduction in the upper threshold, and restricting allowable expenses, including private school fees. None of these recommendations was implemented in the Fnance Bill 2022 and I call on the Minister to implement those recommendations. Sinn Féin will be opposing this section on the special assignee relief programme.

Alice-Mary Higgins (Independent)
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I move recommendation No. 6:

In page 66, between lines 8 and 9, to insert the following:

“Report on wealth tax

25.The Minister shall, within six months of the passing of this Act, lay before both Houses of the Oireachtas a report on the potential revenue raised from, and

distributional impact of, a wealth tax of 1 per cent on all households with assets of over 10 million euro.”.

We have been hearing many warnings about the precariousness of the sustainability of the bumper corporate tax intakes we have had for the past number of fiscal years and the need to widen the tax base. I am concerned that much of the narrative in the media has been around increasing the targeting of lower income households in respect of tax increases. One of the topics which is coming up again and again, but is never properly examined or surveyed, and is something which must be considered, is exploring again the question of wealth taxes.

The amount of wealth inequality in Ireland is extraordinarily high. Statistics from the Central Bank show stark differences between the wealth of the lowest income deciles compared to the highest income deciles and, before tax and transfers, we have one of the highest levels of income inequality in the OECD.

This amendment focuses on wealth inequality. From recent figures, and I am being cautious, I am talking about wealth of more than €10 million. I will be honest and say that I considered having this figure at €1 million, which should be considered, but I was bearing in mind issues such as the family home, and so forth, in that context.

We are fifth in the world in respect of billionaires per capita, of which we have 17. We have those who have extreme wealth, and we know from research by Oxfam and others that wealth inequality globally is shifting enormously. We are seeing a trickle-up effect, which is a pooling of wealth at the top. Even going into the middle category, if we are talking about those with wealth of more than €10 million, even a 1% wealth tax could make a significant difference.

It is difficult to get figures on wealth. If there is a small number of people with a great deal of wealth, they do not necessarily rush to answer surveys in respect of their wealth, so we have put the figures together in this way. One of the figures we have from last year is that the wealthiest 10% of the population were estimated to have a net wealth in excess of €788,000 after-tax, whereas the bottom 10% of the population were estimated to have net wealth of less than €600. There is, therefore, a huge portion of people in Ireland who have no safety net and no wealth.

Again, the figures are very stark in respect of those who own a home and have a certain level of wealth, but for renters the level of wealth they have in Ireland - many people in Ireland are renters - is minimal. Even at times when we were not measuring wealth properly here, one way in which we have been measuring it is through measuring the absence of wealth through the deprivation index. It is very notable, for example, that the deprivation index has constantly shown that lone parent families are the most at risk of homelessness and of poverty. That is, lone parent families without wealth. We have a situation in Ireland, therefore, where we have a very significant portion of the population who do not have a safety net of wealth and having wealth and assets is worth something.

My amendment is modest. I know there have been proposals in the past for a wealth tax on all those with wealth and assets of more than €1 million and there is a very strong case for that. I tried, however, in an almost incremental approach, to suggest that we would begin by examining at least a 1% wealth tax on those with wealth and assets of more than €10 million. That is a very reasonable place to begin and it would show a gesture against a quite dangerous international tide of wealth inequality.

I know the Minister is familiar with Thomas Picketty, and all of the rest, and the move into capital and away from solely looking at income taxation measures. We need to examine measures in respect of wealth tax in that regard. The Minister will be also aware that I have supported other forms of wealth tax in that regard.However, in addressing assets and doing so in the wider sense, what I propose is important if we are to ensure we do not slide towards further inequality. I am simply calling for a report examining the impact and the potential revenue raised. The revenue that might be raised could, I hope, be used redistributively to raise the bottom 10%, as well as to ensure that those who can contribute, contribute more.

Alice-Mary Higgins (Independent)
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I thank the Minister for his response. I will continue to pursue the issue because it is significant. I am glad we are getting more data. That is progress. I am aware that our transfer system does redistributive work regarding our extraordinary high levels of income inequality. In this regard, there is a discussion to be had on the Social Welfare Bill, which is touched upon. I would be concerned if proposals for the social protection system reduced its redistributive focus, leading to a cementing of wealth in certain cases. Some of the proposals in this area are quite worrying. Given that our social protection and transfer system is doing much work to repair wealth inequality and income inequality, it is important that we do not undermine it. There has been a trickle-up effect in respect of our economy more broadly and it is important that our social protection system continues to ameliorate that.

I understand there are certain forms of taxation in place but a lot is not getting captured. The Minister will be aware that, in the past, I made proposals on financial transaction taxes, for example. These would be another way of capturing some of the issues in relation to stocks and shares. I have concerns about the way stocks and shares are treated as part of remuneration packages. This, in particular, points to an area of wealth that we need to examine more. I do not believe our current system properly captures or takes an appropriate share where stocks and shares and the assets in respect of them come into play. However, I understand the Minister is not able to accept the recommendation at this time. I will return to the issue again.

The bottom 10% and those with absolutely no wealth reserve comprise a crucial alarm bell for the State. Those with absolutely no wealth reserve, with €600 as wealth, do not even have the makings of one month's rent. We need to bear this in mind as a priority when dealing with our next finance Bill.

IMF research of which the Minister is aware found over 30 years that when you increase the income and wealth of the bottom 10%, it has a huge net benefit for society, whereas increasing the benefits for the top 10% has a net negative effect on economic growth.

Alice-Mary Higgins (Independent)
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I move recommendation No. 7:

In page 66, between lines 8 and 9, to insert the following: “Report on private pension tax reliefs

25.The Minister shall, within six months of the passing of this Act, lay before both Houses of the Oireachtas a report on private pension tax relief including:

(a) an assessment of the cost to the exchequer;

(b) a comparative gender analysis of tax reliefs;

(c) the distributional impact; and

(d) the potential impacts or benefits of a shift from a marginal rate to a 30% standard rate approach for private pension tax relief in respect of cost to the exchequer and gender impact.”.

Recommendation No. 7 relates to private pension tax relief. There has been a reluctance to examine this issue fully. It was an extraordinary oversight that when the Pensions Commission was examining State pension policies, our current private pension tax relief was taken off the table and not subject to proper scrutiny and the same kind of rigorous analysis, auditing and modelling, including econometric modelling, as everything else being considered. The relief is at a marginal rate and has been shown to benefit those on higher incomes and men predominantly.

We are aware that over 70% of the tax relief for private pensions accrues to the top 20% of earners. It is a big elephant in the room, one that people do not like to talk about. Even many civil society actors and others do not like to discuss it; however, if we are discussing pensions policy, and particularly if we have proposals that could significantly negatively affect the pensions of everybody in this State – dangerous proposals on a potential move not just to a 30-year contributory requirement, as was anticipated, but to a 40-year one – we need to be able to talk about everything.

We have been told about a universal pension at the same level for everybody in the State, including all women and men. It was estimated by the Commission on Taxation and others that it would cost approximately €3 billion per year, but the last figure I got on private pension tax relief, which was a few years ago from a former Minister, was €2.9 billion. Therefore, we are spending an extraordinary amount on a tax relief at a marginal rate, so it gives a much higher benefit to higher earners. I realise there is an argument that it is captured later but the tax somebody pays on a pension is not the same as that which might be paid on income.It is the most egregious example of a trickle-up effect in terms of our pensions. On the contributory pension side, when we moved from ten to 20 years, women in particular found themselves on a reduced rate pension. If we move to 30 years, we are likely to see even more women on a reduced rate pension. If we go to 40 years, you can be guaranteed that an extraordinary number of workers in this State will not have 40 years of contributions, bearing in mind that only 20 years can be from a combination of PRSI credits while on social protection payments or caring credits. We know that many people are not going to meet that requirement for 20 years of solid contributions. We will have a parallel pension system moving along on one side and on the other side, we will have this other private pension system. Bear in mind that one of the few items in the IMF's memorandum of understanding with Ireland was the call for the standard rating to move to 30% rather than 40% versus 20%. If our actual goal is to try to ensure financial security for as many people as possible and even if you believe in private pensions as the way to that - we have auto enrolment being introduced now - you would not have a scheme that has been found to be ineffectively targeted at the top 20% of income earners and predominantly at men. One of the policy priorities the State should address in the context of pensions is the huge gender pension gap.

My recommendation calls for a report to be prepared that provides a proper assessment of the costs to the Exchequer of our current private pension tax relief system, a comparative gender analysis of those tax reliefs and their distributional impact on each income decile in the State, as well as details of the potential impacts or benefits of a shift from the current marginal rate system to a 30% system. I have supported for years the calls from the National Women's Council of Ireland and others for a universal pension system but I am attempting to be reasonable here by referring to doing, at a minimum, what we were asked to do back in 2009, which is moving to a standard rate approach of 30% and asking what the impact of that would be in terms of the costs to the Exchequer and the potential improvement in the context of gender and distribution.

The recommendations of the Commission on Pensions, which were largely based on the affordability of pension proposals, are not solidly credible in the end when affordability is calculated with €2.9 billion taken off the table and moved into the background every year. That is not credible if we are looking at modelling what is necessary and what are the hard choices. There are hard choices to be made around pensions, even though we have a younger population than most other EU countries, and those hard choices need to consider very high-income earners who have been getting lots and lots of money for years, which they will not lose if we make changes. Maybe that is not something we can afford to prioritise in the context of our pension policy as we move forward.

Alice-Mary Higgins (Independent)
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Yes but some 70% of the benefits go to the top 20%-----

Alice-Mary Higgins (Independent)
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The key point is the cash, which the Minister himself mentioned. The fact is that 70% of the money - an extremely large amount of money - is going to the top 20%. The fact that smaller amounts are going to the majority of people in that scheme should not be used as a shield for what is effectively a trickle-up effect. The cap is clearly not adequate if 70% of the benefit is going to top 20% of earners. There are lots of workers in this State who are on the standard rate and who pay 20% of tax and they will only get tax relief at 20%. That is why so few of such workers are in these schemes and it is also why the pension companies predominantly advertise to those on higher incomes. They advertise entirely to those who earn above the marginal rate, at 40%. That is who these schemes are designed for but, to be clear, every worker in the State pays for them. Everybody pays for them. This is public money. The money does not just go to these individuals; it also goes to the private pension industry to a large degree. In many cases, much of the profit model is based on the tax relief that is available. If we have a scheme which effectively requires all of the workers of the State to pay for the top 20% of income earners to get billions of euro in benefits, then we have a problem. It goes against the spirit of progressivity and the redistributive principle. I appreciate that these issues were examined by the Commission on Taxation and Welfare to an extent but they were not examined by the Commission on Pensions and that disjoin is a concern. The following is an issue that came up during our hearings in the Committee on Gender Equality and I expect it will come up further in that regard. A major concern the Minister might not have been able to address at this point but that we might come back to on Report Stage is the gender-proofing issue. We talk a lot about the demographic issue in age, although Ireland is not in as bad a situation as other parts of Europe in that regard. However, the gender pension gap is very significant and it has been a significant concern that the auto-enrolment scheme has not been properly gender-proofed. This private pension tax relief is also not properly gender-proofed. One thing that has been missing from the analysis of the tax relief schemes and the auto-enrolment scheme has been a proper gender analysis and gender-proofing because every pension policy change we make and every existing pension policy we have should be bringing us closer to gender equality and not embedding an inequality that is there already or moving us further apart. I intend to come back on Report Stage and examine the issue of gender-proofing further. While the Minister addressed many of the issues, that is not one we have addressed just now.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 8:

In page 66, between lines 8 and 9, to insert the following: “Report on the Foreign Earnings Deduction

25. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the Foreign Earnings Deduction, the extent to which the relief has achieved its policy objectives and to review its qualifying criteria to ensure it achieves its policy objectives.”.

This is about the foreign earnings deduction, FED, which provides relief from income tax on up to €35,000 of a salary for employees who are tax resident in Ireland to travel outside the State temporarily to carry out duties for their office or employment in certain qualifying countries. The relief does not specify the type of work to be carried out and there is no legislative requirement that the employee be engaged in any export-related activity whatsoever. We are calling on the Minister to lay before the Houses of the Oireachtas a report on the FED and the extent to which it has achieved its policy objectives.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 9:

In page 66, between lines 8 and 9, to insert the following: “Report on income tax relief

25.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on an income tax relief equivalent in value to 8.3 per cent of annual rent to all private rental tenants not already in receipt of any State subsidy, examining the social and economic impact of this measure in the context of high levels of rent and other policy levers such as a ban on rent increases.”.

Nowhere is the housing crisis more pronounced than in the rental sector. In the past year rents have increased by a record 14%, with the average rent now standing at in excess of €1,600 and more than €2,000 in Dublin. There were only 495 rental units on the market in some of the months during the summer, compared with an average of 1,500 at any given time between 2014 and 2019. That is the extent of the collapse in the rental supply. People my own age and others can find cheaper rents in many European cities, such as Berlin, Brussels and elsewhere. These units are more spacious and secure. The Government spent some years opposing and arguing against our call for a rent relief for renters in the form of a refundable tax credit equivalent to one month's rent. Crucially, we also called for a ban on further rent increases. This recommendation calls on the Government to produce a report on the introduction of a rent relief equivalent to one month's rent being put back in renters' pocket and, crucially, to introduce it together with a ban on rent increases. Struggling tenants should not have to endure further hikes in their rental payments.

John Cummins (Fine Gael)
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Senator Warfield referenced a rent freeze, which Sinn Féin often does, but as I have said before, we do not have to look too far away from here to Berlin, where a left-wing government introduced a rent freeze. What did that result in? It resulted in a 50% reduction in the private rental stock available on the market. Not only that but it was struck down by the Federal Constitutional Court not long after that. What is contained in this Finance Bill is a tax credit for renters. It is €500 for this calendar year of 2022 and €500 for the calendar year of 2023. A couple in rented accommodation will have from January a tax credit of €2,000. That is more than equivalent to the one month's rent back in renters' pockets that Sinn Féin often touts. However, what it does not say is that with the other hand it will take €32,000 off you in the context of the help-to-buy scheme, which is also, rightly, included in this Finance Bill.

Fintan Warfield (Sinn Fein)
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It is a strong response that is being proposed by the Government and we welcome it. I do not doubt that if I went back to the record that I could find Senator Cummins speaking against a tax relief that is being proposed by Sinn Féin.

Mark Daly (Fianna Fail)
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Through the Chair, please.

Fintan Warfield (Sinn Fein)
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If we can bring it back to this recommendation particularly, I do not think it is a lot to ask that a report be laid before the Dáil so I will press it.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 10:

In page 66, between lines 8 and 9, to insert the following:

“Report on mortgage interest relief

25.The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of targeted, tailored and time-bound mortgage interest relief in respect of primary dwelling homes, considering options for its design, in the context of sudden and significant increases in interest payable on mortgage loans.”.

On 14 September the European Central Bank increased its interest rate by 0.75% bringing up to 2%. That was the third hike since July and further increases will happen. That has an immediate impact on households with tracker mortgages and could impact those with variable rate mortgages in coming months, thereby heaping further financial pressure on struggling households. What we are calling for here is that within one month of the passing of the Act, the Minister would prepare and lay before the Dáil a report on the introduction of targeted, tailored and time-bound mortgage interest relief in respect of primary dwelling homes, considering options for its design in the context of sudden and significant increases and interest payable on mortgage loans.

Maria Byrne (Fine Gael)
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I move recommendation No. 11:

In page 67, between lines 17 and 18, to insert the following:

“Report on Living Cities Initiative

26.The Minister shall within 6 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the expansion of the Living Cities Initiative to towns to encourage the refurbishment or conversion of suitable properties for city or town-centre living.”.

I compliment the Minister and his team on all their work to date on the expansion of the living city initiative and the most recent changes proposed in the Bill. As the Minister is aware, I live in the centre of Limerick city and unfortunately, many buildings are not in use, especially in the Georgian quarter. The scheme has helped to bring a number of those properties back into use. Thinking back to its beginning, people found it very restrictive and while we have come a long way, I believe we will have to go further. I would love to see a report in six or 12 months on how many properties in town centres and cities have availed of the scheme. When I walk down our main streets, we have many buildings where nobody is living over the premises. Many city centre streets have no one living there and we need to bring people back living in the city centres. I am thinking of our Georgian buildings, on which this is very much focused, and how so many were left to go into dereliction. It is great to see them coming back into use now but there are still many buildings where developers find it a bit too restrictive, while some have found the cost of renovating prohibitive. I welcome what has happened to date but we will have to look further and I would love to revisit this in six months or that the Minister could bring back a report down the line to see how successful it had been and to look at stronger options to expand it.

Jerry Buttimer (Fine Gael)
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I welcome Michael Coghlan to the Gallery. He is the son of our friend, former Senator Paul Coghlan. I wish them all well and particularly Paul.

This is a very important issue for me. I have spoken about it at parliamentary party level and I have spoken to the Minister on it. The living city initiative has been successful but it can be improved. I know we have made changes to it, as Senator Maria Byrne noted. My overarching aim is that the scheme is accessible, that it is not complicated or burdensome and that it enables places to become a living city. That is the ultimate aim. Last Friday, we had a meeting with the city manager and staff in Cork City Council on the whole issue of the city. I come from a Cork perspective in the context of the island. To those who are not from Cork, what I mean by "the island" is St. Patrick's Street, Washington Street and Barrack Street, to just name three, as well as Oliver Plunkett Street. We have this wonderful plan, aided, abetted and facilitated by the Government and the urban regeneration development fund where the docklands got €353.4 million. That is fantastic. It is absolutely wonderful money that is necessary for the Grand Parade quarter to do the needed works in the docklands. As the city manager said rightly last Friday, the docklands extension will add to the number of people in the city. But as an example, you could start at the beginning of St. Patrick's Bridge, come over through Patrick's Street to the Grand Parade - I will not take the Minister all through Cork, now - then go up through Barrack Street over to North Main Street and then go down through Douglas Street.We have so much potential. The living over the shop scheme is not new but as for the uptake, the challenges and barriers are enormous. We have debates ad nauseam about building up for apartment living but if you wall through Cork city or any town where the scheme is applicable, in many cases there is nothing beyond the second floor and there is no imagination to try to change that. In fairness, we living in challenging times for retail and retail is changing. That presents an opportunity. If we were to take what we did with Covid and transpose it to our urban living quarters then we would have an opportunity to be imaginative. I spoke earlier about the regeneration of Bishopstown. There are parts of Cork city that are now commercial properties but which, with some collaboration between the Government, city council, developers and property owners, could be made habitable for first-time buyers, couples or single people coming to live there in the heart of our city.Prior to Covid, the living city initiative was targeting the owner-occupier. In Cork, we had a very good uptake - 92 homes refurbished and a potential 260 out of 400 at present so it is changing.

Senator Maria Byrne spoke about Limerick in her contribution about the Georgian quarter. We have an opportunity in Cork. We have put everything, on one level, on the urban regeneration development fund to go to the docklands and the Grand Parade quarter. That is absolutely wonderful and necessary. However, we have an opportunity in tandem to develop the island. If we lose the island in Cork, forget it. We will create the retail park beyond and we will have nothing in the island. In 40 years’ time, when we are all dead and gone, people will be having the same debate we are having today about regeneration of the island in terms of urban living. I would hope that in the context of a continuing look at this particularly area, we would not be closed in our outlook about Cork, for example. Others will speak about it more eloquently than I will and probably will give a better description.

We can make our city breathable and liveable. There is nothing worse than walking down Cork streets at the moment and seeing quay sites idle. I appreciate there is work going on behind the scenes to attract investment to ensure that the Debenhams site or the Savoy site, to name but two, will, in time, be developed in a variety of different ways. I just hope that the living city initiative, which has been a success, has attracted a certain coterie of people to come in and look at the area. I also think of Elizabeth Fort in Cork and that quarter, down South Main Street and Barrack Street, and the potential of the convention centre. To be fair to the Minister, Deputy Coveney, he has been a strong supporter of the convention centre. To be fair to him, it is not his fault or the want of effort by him that it has not been completed.

We have a once-in-a-generation opportunity now in Cork to reimagine and breathe new life into the city. That is why I put my name to this recommendation. It is something we should pursue with vigour. I love my city and it pains me to see part of it lying idle for a variety of reasons. A city without people is nothing.

We have the wonderful Crawford gallery. We have a wonderful city library week, which is happening this week. David O’Brien, the librarian, is doing great work in making that library the people’s library. I fully support and embrace that Grand Parade regeneration and centralising the library. If we do not have people in our city shopping, working or involved in cultural, sporting or recreational pursuits, then we have nothing. That is why this is an important part of this Finance Bill. If we could do what Senator Byrne is asking to drive this living city initiative further, then it would be a good day's work.

John Cummins (Fine Gael)
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I thank the Minister in particular for the measures introduced as part of the Finance Bill on the living city initiative. It is one of the areas that I would have engaged with him on. The fact that it has been extended from the end of this calendar year to the end of 2027 is hugely welcome. I looked at some of the statistics earlier this year for Waterford and 76 properties had availed of the living city initiative – 24 owner-occupiers and 52 rental properties. We can of course, as Senator Buttimer said, go further than that.

The change the Minister introduced to shorten the relief period from ten years to seven years is also welcome. The commitment to live in the property is one of the provisions. The seven-year period is certainly a more attractive prospect in terms of recouping the tax relief. Tackling vacancy and dereliction is one of the most important issues. I have done much work on this in my own area in Waterford. I see the living city initiative as one of a suite of measures that we now have in place as a Government. We have the repair and lease scheme, the buy and renew scheme, the Croí Cónaithe scheme and the living city. Many of them interchange with each other, particularly the repair and lease and the living city initiative, to make it more attractive to bring those vacant and derelict properties back into use.

The maps for the special regeneration area that were designated back in 2015 as part of the process need to be updated now, six or seven years after the introduction of the scheme. There were a number of anomalies in those areas; for example, one side of the street was not included in one area. I am not saying they should be massively expanded, although I know many people would love to see it expanded to whole swathes of areas, but there is a tidying up exercise to be done. I would ask whether that piece of work could be undertaken by the Department in consultation with the local authorities.

Paddy Burke (Fine Gael)
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I welcome this initiative and the Minister's commitment. I am a long-time advocate of this measure as well. There is nothing better than to see people living in the centre of towns and cities, and villages for that matter. When people start to move out, everybody moves out. Nobody wants to live in the centre of a town on their own. I can well see when people move in now, more and more people will move in. These initiatives will bring much life to the centre of towns and cities, particularly now when we are trying to move cars off streets and from cities and towns. I notice that many older people want to move back into towns and cities. They want to be near the shop, the church, the pub or have coffee in the mornings or whatever and do not want to have to take out their car to move.

This is a great scheme that will have many benefits for the years to come.

John Cummins (Fine Gael)
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What about the map?

Maria Byrne (Fine Gael)
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I thank the Minister for his comprehensive response and his commitment to assessing this as we go along. I will withdraw the recommendation and work with the Minister's suggestion.

Paddy Burke (Fine Gael)
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I wish to ask the Minister about a problem with solar panel farms or solar photovoltaic farms. As a country, we want to get people into all forms of electricity or energy generation, whether offshore or onshore, wind or photovoltaic. However, where farmers give over their farms, whether or not they rent them long-term to companies, for solar farms - not turbine farms but solar photovoltaic farms - they lose their basic payments. That is a disincentive to farmers going down that route. I ask that the Minister, before he comes back on Report Stage, consider where we can go forward on this to incentivise farmers from a taxation point of view or to deal with farm payments on a different basis in order that the farmers do not lose them. They will lose their farm payments, which is very significant, and the farm carries those payments on into the future. Now a farm payment is as valuable as a part of the land if the land is sold. This is a big obstacle to farmers going down that route, so I ask the Minister to look at that aspect of it.

John Cummins (Fine Gael)
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I re-emphasise Senator Burke's point. It is an issue a number of farmers in my area, Waterford, have brought to my attention. They are interested in making their landholdings available for solar farms, but there is the fact that their payments are lost in that context. It is a big leap for them, obviously, to commit to leases of 25 or 30 years on their lands, given the fact that once their farming payments are gone they are gone for ever. If the land were ever to revert to its former use, they would be at a loss. The fact that there is not relief in place in respect of solar energy as there is for the provision of other forms of energy means they are at a loss. Perhaps the Minister could consider the matter before Report Stage.

Paddy Burke (Fine Gael)
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I thank the Minister for clarifying part of that. I did not see anywhere else in the Bill to raise the matter. I wish to bring it to the attention of the Government because it will be a Government issue, I presume.

Maria Byrne (Fine Gael)
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I move recommendation No. 12:

In page 91, between lines 7 and 8, to insert the following: “Report on Energy Efficiency

33.The Minister shall by 31st July 2023 prepare and lay before both Houses of the Oireachtas a report on the uptake of this new incentive to make rental homes more energy efficient.”.

Jerry Buttimer (Fine Gael)
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I second the recommendation.

Maria Byrne (Fine Gael)
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I know this is to do with rental properties but it involves greater use of more heat efficiencies and greater insulation to make rental homes more energy-efficient. I welcome what the Minister has planned in respect of the Finance Bill. In my time on the council and in the Oireachtas, I have been in some rental properties that are substandard. I believe that this change will go a long way but I would love to see, maybe in six months, if it is not working, that we would revisit it. While some landlords will be very good and will avail of the relief available, others will not. We need to bring properties up to a standard that is habitable for people. If the Minister could commit to the measure in the recommendation, it would be great.

Jerry Buttimer (Fine Gael)
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I support what Senator Maria Byrne said and welcome the changes made thus far. Given the new weather advisory for tomorrow, in the short term this will not help us, I know.We will not get the Bill through by tomorrow. Given that climate change has become part of our world and we must take it seriously, there is an urgency about making houses more energy-efficient and improving their energy rating. In this recommendation, we are seeking information on efforts to incentivise retrofitting to make the schemes more inclusive by including different types of works using grants that can be written off against tax. This goes back to my earlier point. I am repeating myself only because I am familiar with my own area. Many people are putting off doing works for a variety of reasons. As we know, landlords are leaving the rental sector. There are issues around the energy retrofitting and efficiency programmes. As Senator Maria Byrne said, we need a roadmap for the future. It is important that we encourage people and bring them with us. We must incentivise rather than taking any other approach.

Seán Kyne (Fine Gael)
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I concur with the recommendation. All initiatives to improve energy efficiency should be improved and made more easily available, whether for the rental sector or for individual homeowners who, for example, want to replace the front and back doors of their house. If people are not in receipt of the fuel allowance and the household benefits package, they are not able to draw down a grant for that type of work. People who are working are unable to draw down any grants to improve the heating efficiency and heat retention of their homes. They hear all the talk of climate change and energy efficiency but they are not able to avail of any supports for those small measures. For people who are eligible for the household benefits package and can claim the larger grants and for those who can afford to pay for a full retrofit, it is fine. However, for those who are caught in the space between, there are no supports available.

Maria Byrne (Fine Gael)
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I thank the Minister. It is great that he is willing to accept the main thrust of the recommendation and has assured us the information will be put out there when it is available. On that basis, I withdraw the recommendation.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 13:

In page 95, between lines 4 and 5, to insert the following: "Report on the tax treatment and economic impact of institutional investment in the housing market

38.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax treatment and economic impact of institutional investors and corporate landlords in the housing market, including their impact on tenure, affordability, property price and rental price dynamics.".

This recommendation calls for a report into the tax treatment and broader economic impact of institutional investment in the housing market. Real estate investment trusts, REITs, and Irish real estate funds, IREFs, pay no corporation tax on their rental profit and no capital gains tax on the disposal of their assets. These tax advantages are not available to domestic landlords or any other company in the State.

In a reply to a parliamentary question on this issue, it was stated that institutional property investors and real estate funds paid an effective tax rate of 17.9% in 2020 based on taxable events in 2019. That figure of 17.9% was relative to the taxable event, meaning distributions to shareholders, not to rental profits. There has been a downward trend in tax paid through dividend withholding tax in recent years, with the amount collected falling from €65.8 million in 2020 to €36.8 million in 2021. That reduction has been attributed to the growth in forward-funding agreements and the decline in forward-purchase agreements that have been reported. It has also allowed for a circumvention of the 10% stamp duty surcharge that was introduced on bulk purchases.

Fintan Warfield (Sinn Fein)
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All housing markets are different but the tax treatment of investment vehicles in our housing market must be scrutinised. We welcome the review and I suggest that it be followed by action. We have already seen Department of Finance reports from 2019 stating there is a risk that at sufficient scale, an institutional investor group could, over time, develop monopolistic or oligopolistic pricing power. We ask that the Minister ensure this welcome review is followed by urgent action. I expect this is the first and last time I use the word "oligopolistic" on the record of the House.

Seán Kyne (Fine Gael)
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I move recommendation No. 14:

In page 102, between lines 6 and 7, to insert the following:

“Report on Tax Credit for Regional Film Development

42.The Minister shall within 3 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the impact of retaining the enhanced tax credit for regional film development at its original level until 31st December 2028.”.

Section 481, as the Minister is aware, is a very important measure within the finance legislation, with the rate of tax credit being worth up to 32% of eligible Irish expenditure. In addition, there is the regional uplift which is particularly beneficial to those areas outside of Dublin, Wicklow, and Cork city and county. Having had some part to play in the launch of the western regional audiovisual production. WRAP, fund a number of years ago, which is a collaboration of the Western Development Commission and Ardán, with the support of the local authorities in Galway city and county, Clare, Donegal, Leitrim, Mayo, Roscommon and Sligo, as well as Údarás na Gaeltachta. This allows for strategic investment on commercial terms and encourages regional production in films, television, drama, animation and gaming. It is an area that has great potential but also has a very significant footfall across the city and county of Galway and across the regions, so it is of great importance. We ask in the amendment we tabled on the retention of the enhanced tax credits for film development, which we plan until the end of December 2028, whether the Minister will lay a report in respect of the impact of the retention of this very important tax measure.

Maria Byrne (Fine Gael)
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I second this amendment. I also wish to address the regional uplift from film production and section 481. In my own area of Limerick, we have Troy Studios, and this has been a great success to date. I refer to the reduction in the credit. It was at 5% for a number of years. While it was at 5%, Troy film studios was full. This credit is currently down to 3%, it will be 2% next year, and nil after that. I support Senator Kyne and ask that the Minister might review this measure because I know it has created almost 5,000 jobs in the regions over recent years. Since the Minister introduced section 481, it has been a major success in bringing people with skills. The education and training boards have had many people who have been upskilled and trained through working in the film studios. As a result of the proposed reduction, this area of activity has not been as successful. If the Minister could review this measure in respect of its impact, that would be appreciated.

Jerry Buttimer (Fine Gael)
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Very briefly, on a related digression, if I may, I commend the Minister on the changes in the digital gaming tax credit. In Cork, we are very proud of our gaming industry and sector. I know he is committed to making Ireland a digital gaming hub of world renown and I commend him on that.

Maria Byrne (Fine Gael)
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I appreciate that the Minister has outlined the circumstances of this. Before he finally phases out this credit, perhaps he might consider doing a review at that time to ensure nobody is left behind. That is the only commitment I ask the Minister to make.

Maria Byrne (Fine Gael)
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In light of the Minister's response, I will withdraw the recommendation.

Joe O'Reilly (Fine Gael)
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Amendments Nos. 15 and 16 are related and may be discussed together.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 15:

In page 103, between lines 30 and 31, to insert the following: “Report on Deferred Tax Assets

44.The Minister shall, within six months of the passing of this Act, lay before both Houses of the Oireachtas a report on the potential for restricting banks from utilising the deferred tax assets scheme.”

My colleague, Senator Higgins, is at the final meeting of the Oireachtas Joint Committee on Gender Equality into which both she and I have put many months of work, on the back of a very important Citizens' Assembly on Gender Equality report. I hope that Senator Higgins will be able to revisit this recommendation on Report Stage.

Many times in recent years Senator Higgins has raised the fact that Irish banks shaved €400 million from their tax bills in 2017 by offsetting financial crisis losses against taxable profits. What is most shocking to the average person is that these losses can be carried forward indefinitely to shield banks' future profits from tax. I hope the Senator will be able to resubmit this recommendation on Report Stage if I withdraw it now.

Fintan Warfield (Sinn Fein)
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I move recommendation No. 16:

In page 103, between lines 30 and 31, to insert the following: “Report on Deferred Tax Assets

44.The Minister shall, within 12 months of the passing of this Act, lay a report before both Houses of the Oireachtas outlining the potential for removing the qualification to utilise deferred tax assets from any bank which seeks to act on a removal of restrictions on pay or bonuses.”.

Joe O'Reilly (Fine Gael)
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Recommendations Nos. 17 to 21, inclusive, are related and may be discussed together. Is that agreed? Agreed.

Lynn Boylan (Sinn Fein)
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I move recommendation No. 17:

In page 104, to delete lines 16 and 17 and substitute the following:

“

”.

As the Leas Cathaoirleach has just said, recommendations Nos. 17 to 21, inclusive, are all related. Recommendation No.17 reduces the excise duty applicable to petrol, diesel and home heating oil to the minimum permissible under the energy tax directive, which is €359 for petrol, €330 for diesel and €0 for home heating oil per 1,000 l. Recommendation Nos. 18 to 20, inclusive, deal with the issue of the carbon tax, which is applied to home heating oil and which is due to take effect in 2023. Our recommendations seek to ensure that this measure does not come into effect, together with the reduced rate of excise applied to agri-diesel being extended to October 2023, in light of the increased fuel costs that are impacting the agricultural sector. The Finance Bill provides for the extension of the existing mineral oil tax reductions on petrol, diesel and marked gas oil. The reductions in mineral oil provided for VAT-inclusive per litre reductions of 21%, 16% and 5 cent on petrol, diesel and mineral gas oil, respectively. These reductions were introduced in March 2022 and were due to end on 12 October. Our recommendation will extend the reduced rates for a further 20 weeks until 28 February.

Given the cost-of-living crisis, we are seeking to reduce the burden on households in terms of their home heating oil and also the carbon tax. I note that even Deputy Hourigan, now a member of the Green Party, has openly said that consumption-based taxes are not effective and that the Government should reassess its approach to them.

Lynn Boylan (Sinn Fein)
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I move recommendation No. 18:

In page 104, to delete lines 18 and 19 and substitute the following:

“

”.

Recommendation put and declared lost.

Lynn Boylan (Sinn Fein)
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I move recommendation No. 19:

In page 104, to delete line 20 and substitute the following:
“

”.

Recommendation put and declared lost.

Lynn Boylan (Sinn Fein)
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I move recommendation No. 20:

In page 104, to delete lines 21 and 22 and substitute the following:
“

”.

Recommendation put and declared lost.

Maria Byrne (Fine Gael)
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I move recommendation No. 21:

In page 104, between lines 42 and 43, to insert the following: “Report on Mineral Oil Tax rates

45.The Minister shall within 3 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the retention of the reduction in Mineral Oil Tax rates until 30th April 2023.”.

Maria Byrne (Fine Gael)
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I raised this matter with the Minister of State on the previous occasion. It has to do with setting the price of a packet of cigarettes. I wrote to the Department in the meantime. I want to put on record the fact that some packets of cigarettes are on special offer and are being sold at a lower price. We are trying to encourage people to stop smoking. My understanding is that the price is set by the manufacturers. I am not sure that is healthy. Maybe the Department could reconsider this down the line. As I said on Second Stage, if you go into a premises with a vending machine, there is often 10 cent or 15 cent extra on the price. I ask the Minister of State to commit to looking at this, maybe not today but down the line, because it is of real importance to small retailers and especially to members of the Convenience Stores and Newsagents Association.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I understand the sentiments behind the statement by Senator Maria Byrne. As she is aware, we discussed this a little while ago. There is an EU directive under which the price is set. The price is set by the manufacturer and importer and the retailer has the flexibility to increase the price. However, the day the Senator said it I thought it was a good idea and that there should be scope for those retailers that want to do this. However, I would see this is a health issue, as tobacco is primarily a health issue. The commitment I will give is that I will raise this matter directly with the Minister for Health in order to build this up from a health perspective first.

Joe O'Reilly (Fine Gael)
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I thank the Minister of State for that. I am sure the Senator is happy with that positive response. Well done to her on the proposal.

Joe O'Reilly (Fine Gael)
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Recommendation No. 22 has been ruled out of order as it is not relevant to the subject matter of the Bill.

Joe O'Reilly (Fine Gael)
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Recommendations Nos. 24 and 25 are related and may be discussed together by agreement. Is that agreed? Agreed.

Maria Byrne (Fine Gael)
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I move recommendation No. 24:

In page 115, between lines 18 and 19, to insert the following: “Report on VAT rates for e-books and audio-books

65.The Minister shall within 3 months of the passing of this Act prepare and lay before both Houses of the Oireachtas a report on the application of the zero rate of VAT to—

(a) e-books, and

(b) audio-books.”.

E-books and audio books were discussed on a previous occasion, as well as journals and newsworthy magazines such as The Economist, Business and Financeand the Phoenix. I ask that the Minister of State give consideration to a 0% VAT rate for them. We propose that there be a report on the VAT rate.

Joe O'Reilly (Fine Gael)
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The Minister of State can respond to the recommendations.

Seán Fleming (Laois-Offaly, Fianna Fail)
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Recommendation No. 24 relates to VAT rates applied to e-books and audio books. The current position is that the second reduced rate of VAT applies to e-books and audio books supplied in an electronic format, that is, 9%. Where an audio book is provided electronically, it is considered an electronic publication and, therefore, liable at the reduced rate, assuming it meets the criteria laid out in Irish legislation.

The supply of an audio book in physical form, such as on a CD, is liable for the standard rate of VAT. As Senators will be aware, Ireland has always applied a zero rate of VAT to printed books. However, until the amendment to annex 3 of the VAT directive earlier this year, it was not possible to reduce the rate of VAT applying to e-books or audio books to zero. It is also important to note that digital information services are not always a direct equivalent to traditional printed books, including actual books. Even where the content is similar, the additional functionality such as search facilities, hyperlinks, archives etc. associated with electronic content produces a fundamentally different product. However, while I cannot accept the recommendations from the Senator, I will ask that my officials consider the issue in next year's tax strategy group paper.

Joe O'Reilly (Fine Gael)
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Does the Minister of State want to respond to recommendation No. 25?

Seán Fleming (Laois-Offaly, Fianna Fail)
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No, only to recommendation No. 24.

Maria Byrne (Fine Gael)
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I accept the response from the Minister of State. I thank him for his commitment that the matter be considered in future budgets.

Paddy Burke (Fine Gael)
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I refer to the vacant homes tax, VHT. It was supposed to be introduced on 7 November 2022, a date which has come and gone, with a filing date of the end of January 2023, I presume. Will this tax now not come into being until 7 November 2023 or are we legislating retrospectively?

The penalty a person has to pay is three times the local property tax, LPT. Someone may have a vacant house in Dublin with an LPT of €1,500 or €2,000 per year, which would mean €6,000 in VHT per year. In another part of the country, or even another part of Dublin, a vacant home may be valued in such a manner that a person is paying less than €1,000 in tax. It seems a very uneven fine. In some cases there may be disputes or other reasons as to why a house has to remain vacant.

I wonder about people who are working. I do not see in the memorandum or the Bill information on people who may be seconded to Europe or are working over the world. We know people can work from various parts of the world or may have to seek employment outside of Ireland. They may not return to Ireland for a year or two or be in a position to rent their house. They will be unfairly hit. There is no exemption in this section of the Bill. I ask the Minister of State to address those issues.

The could be a problem with parochial houses. In some parishes there are two or three such houses, but only one priest.What will happen to parochial houses throughout the country?

Seán Fleming (Laois-Offaly, Fianna Fail)
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Section 96 provides for the new vacant homes tax through the insertion of the new section into the Taxes Consolidation Act 1997. The objective is to increase the supply of homes for rent or purchase by encouraging the owners of vacant habitable residential properties to bring those properties back into use. The tax will apply to residential properties that are within the scope of the local property tax, LPT, only. It will not apply to properties that are derelict or uninhabitable. The vacant homes tax charge, as the Senator is aware, applies to properties that were occupied for less than 30 days in the 12-month period. The rate will be equal to three times the property’s existing local property tax rate. The tax will be operated on a self-assessment basis, which means property owners will be required to determine whether they have a liability to pay the vacant homes tax, to satisfy any related payment and file their obligation, again, on a self-assessment basis. That applies to valuation, which will be covered by the LPT, and the issue of the 30 days will be based on self-assessment.

Each chargeable period will run for 12 months – from 1 November to 31 October each year. The first chargeable period for the vacant homes tax will commence on 1 November 2022, ending on 31 October 2023. Owners of the vacant properties will be required to self-assess the tax and file a return by 7 November 2023. Payment in respect of the chargeable period will fall in January 2024.

There will be a number of exemptions: where the property owner-occupier has recently died and while their estate is in probate, ending once administration of the estate has been completed; where their property was actively marketed for sale or for rent - that is a very important element; where the occupation or sale of their property was restricted by court order; where the property is undergoing significant structural repair or refurbishment; where the property was vacant as a result of the former occupant’s illness or long-term care; and where the property is owned by a North-South implementation body within the meaning of the British-Irish Agreement.

I gave the dates related to the assessment period. In addition, the legislation will permit the Revenue Commissioners to require property owners to provide records demonstrating that their property was occupied for these 30 days. A surcharge will apply where a vacant home tax return is filed late. The Bill provides for Revenue to establish a register of vacant homes and their associated chargeable person, which allows for exchange of information between the Revenue and other public bodies, such as local authorities, for the purpose of administering this tax.

I understand what the Senator said on the different valuations in the different parts of the country and the difficulties it can cause. Essentially, this is a new tax that is being introduced for the first time. The clear commitment in any new tax is to monitor it closely over a period of its implementation to see how it is working out in practical terms on the ground and any issues that immediately come to light. If there is an unfairness in the way it is designed, that can be examined. However, the first thing we want to do is get the tax up and running on the self-assessment basis, like the LPT is as well. After a short time, we can review any anomalies that arise. That is as much as I can say.

Paddy Burke (Fine Gael)
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On the dates, from what the Minister said, I understand the first payment for people who fall under these criteria year will be January 2024. Is that correct?

Seán Fleming (Laois-Offaly, Fianna Fail)
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Correct. Owners of vacant properties will be required to self-assess liability to the tax and file a return on 7 November 2023. Payment in respect of this chargeable period will fall due on 1 January 2024.

Paddy Burke (Fine Gael)
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The residential zoned land tax will have some difficulties, I presume, in its implementation, particularly in rural villages and rural towns. As I understand from what the Minister of State proposes, the landowner can apply not to have his land zoned. Would that be the case? If it is not zoned, he does not fall under the criteria even though the land may have all the services. Would it be fair to say that would be the case? We know in some cases where land is zoned by local authorities that the landowner may not know it has been zoned. All of a sudden, such a person who is perhaps farming full time would be hit with a huge bill and he or she would not be able to pay it because the farming enterprise would not be able to pay for the new tax arising from the land being rezoned. How does the Government expect that to work out on the ground?

Seán Fleming (Laois-Offaly, Fianna Fail)
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The measure specifically relates to zoned land, so it is not an issue of the provision of services, whether they be water, electricity or wastewater services. That is not the relevant issue. It is an issue of zoning. No doubt there can be zoned land that does not have the services either, so that is another issue. I apologise; I just want make a correction. Land has to be zoned and serviced. I want to correct the record on that. It is not just zoned; it must be zoned and serviced. We are clear on that.

The issue the Senator has raised relates specifically to farmers who might not be aware their land on the edge of a town or village has been zoned and they could be liable for this tax. Sometimes, without their knowledge, the land of farmers who are actively farming at the edge of a town or village will be zoned. Sometimes, the first the farmers might hear about it is long after a development plan has passed. I know some may find that unusual, but I am aware of local authorities that have not communicated with landowners about the zoning of their land and which landowners have only become aware of it after the fact. That is perhaps a matter for the local authorities to deal with.

Zoned land is a matter for the local authority. Any farmer who feels he could be liable for this tax, even though he is currently farming the land, should seek, through the local authority, to have it dezoned if he does not want it to be included in zoned land, even if it is already zoned. That is essentially it. One cannot keep the zoning and not pay the tax. The farmer has a choice. The zoning issue is a matter for the local authority; it is not matter for the Department of Finance. Landowners are free to commence the process through the local authority outside the normal course of a normal development plan, but they only come up every few years. Where the town has been developed during the course of a development plan to where a farmer is actively farming land he has no intention of ever selling, that farmer should, if he is concerned about the tax, talk to his local authority and ask for the formal process to be put in place to have the land dezoned if he does not want it to be zoned. Then he is not included in this tax net. That is the practical advice we give. That would be a matter to be dealt with through the local authority, rather than through the Department of Finance or the Revenue Commissioners. I hope that clarifies that issue to some extent.

Paddy Burke (Fine Gael)
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Will the Minister of State clarify what the services are? I refer to all of the services needed, whether they be water, sewerage, public lighting and footpaths. When will they be laid down in law? I presume they will be. What is entailed? The Minister of State said it has to be zoned and serviced land. What does serviced land mean in the law that would require payment of the serviced land tax?

Seán Fleming (Laois-Offaly, Fianna Fail)
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The zoning is the straightforward bit. It is the vote of the local authority in relation to zoned land. On services, I am having the matter clarified. I assume it is based on the definition in the Finance Act 2021. I will give the Senator a commitment to make that information available. It is actually services already covered in legislation. I assume that covers water services as one of the possibilities.The roads and public lighting only get done in some of these situations in the course of a development taking place on those lands. I am giving a commitment to clarify the issue for the Senator. We will get the note on precisely what service means, which is specified in the 2021 Act, and I will send it on. I do not have that Act in front of me but I will forward it to the Senator.

Lynn Boylan (Sinn Fein)
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I move recommendation No. 26:

In page 198, between lines 12 and 13, to insert the following:

“Report on the Vacant Homes Tax 97.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the vacant homes tax, including an assessment of options to include derelict properties within its scope, to apply a minimum amount of tax greater than three times the lowest rate of Local Property Tax and to increase the amount of vacant homes tax to be charged in respect of a residential property in proportion to the length of time during which that property remains vacant.” I think we are all in agreement that we need to address the issue of vacant properties, particularly given the disastrous housing situation in this country which Fine Gael has presided over for the last ten years. Vacant properties persist and the overall figure is very significant. The estimates range from a high of 166,752 vacant properties, if you go by the Central Statistics Office, CSO, figure - the census preliminary results - or a to low of 57,206 vacant properties per the local property tax November 2021 returns, or an intermediate figure of 90,158, according to a 2021 report from the GeoDirectory. Our recommendation calls for a report to be carried out into the vacant homes tax within six months of the passing of this Act, including an assessment of the options to include derelict properties within its scope; to apply a minimum amount of tax greater than three times the lowest rate of local property tax; and to increase the amount of vacant homes tax to be charged in respect of the length of time that the property is vacant. As we said, the exclusion of derelict properties is a problem and although its exclusion is due to the ongoing review of the derelict sites levy, it should be noted that in 2021 alone, 19 local authorities did not collect a single cent in derelict site levies. Some of these councils are owed well in excess of €100,000. Overall, local authorities collected on average 32% of the amount that was levied and there is still an outstanding debt of more than €12 million.

There are also several specific exemptions from the new vacant homes tax which may be claimed by the chargeable person where the applicable conditions are met and with specific regard to properties which are exempt for the period in which they are actively marketed for rent or for sale. There are real risks of abuse of these exemptions and the length of time that these properties may be marketed for rent or sale without charge to the tax.

We also have concerns around the rate that is being applied which is to be, I think, three times the local property tax, whereas other jurisdictions have applied a rate of at least 1% of the market value of the property. The vacant homes tax is to be charged at three times the local property tax which for the majority of properties, if you work out the calculations, is based on a rate of 0.1% resulting in a levy of 0.3% of the market value or €270 annually. As I said, other jurisdictions are looking at 1% of the property value and we are only looking at an average of 0.3%. Is this punitive enough to disincentivise people sitting on vacant properties?

As we said, consideration should also be given to increasing the charge periodically in line with the length of time that the property is vacant so that in the third or fourth year of a property being vacant, the rate or levy will go up with that. All this recommendation is asking is that there would be report looking at all of these issues so that we are actually having a vacant house levy that will do what we want it to do which is obviously to bring those vacant homes back into the housing stock.

Seán Fleming (Laois-Offaly, Fianna Fail)
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I thank the Senator and I have listened carefully to what she said. As was indicated, addressing vacancy and maximising the use of the existing housing stock is a priority objective for this Government and for everybody with an interest in the housing situation. In Housing for All, the Government has set out a suite of incentives available to encourage the reuse of properties and increase the supply of housing. In addition, the Government is committed to exploring options around sanctions for non-use of residential properties so that there is some penalty for leaving a home vacant for a prolonged period of time without a genuine reason. This is why the Minister announced the introduction of the vacant homes tax in budget 2023.

The case has been well-made in the recommendations for reports on various aspects of the tax, including the duration of vacancy; the rate at which it is charged; options to include derelict properties; and a definition of market trends. As with all new tax measures introduced, my Department will monitor the tax and if it is not considered to be effective in bringing more properties into use, the Minister will have no hesitation in reviewing the measures and how it actually operates.

The rate of tax has been the main issue discussed here, even though we have touched already on the duration of the vacancy. That has been well discussed. The issue of derelict properties has been raised. On the rate of tax, in developing the new tax, an important consideration was simplicity. That is extremely important. Taxes which are simple and easy for people to understand and make the required payment and administered easily by Revenue are normally the best sort of taxes, rather than a very convoluted tax where people might have to engage professional advisers to assist them make the return. We want to avoid all that because if it is simple and straightforward, people can understand it and file the returns themselves. It is important to ensure the tax is easy to understand and administer. This is why the Minister has set the rate of the vacant home tax as a multiple of the property tax base for the local property tax, LPT, charge as the LPT system is simple and well understood.

While Senators recommend that the Department considers a variable rate of vacant homes tax, I note the price growth and rent increases do not take place evenly nationwide. While one county might see a significant rise in prices and another may remain at more or less stable prices, vacant home tax will apply nationally without variation or the rate in the region. As a result, the tax is easily understood which in turn supports compliance. A variable rate would also be more costly to administer. This is a national tax. It is not like rates where the local authority in one county has a rate which is different from the adjoining county.

The important issue here is that this is a national issue and one rate is set nationally by the Oireachtas and implemented by the Revenue Commissioners on a self-assessment basis. That is the reason that having variations, depending on how properties go up in value at different rates in different counties, would make this more difficult to administer.

While a higher rate would mean a greater yield, the policy intent of the vacant homes tax is to raise revenue. In setting the appropriate rate of tax, care must be taken to get the balance right between achieving the objective of encouraging the use of available housing without excessively penalising a limited group of property owners. However, as I said previously, the Department will monitor the operation of the tax, including the effectiveness of the rate in bringing more property into active use. As I outlined, the tax is a new measure. It is important to see how it operates after coming into effect and then make an assessment as to whether or not it is working. However, this will occur as part of the ordinary policy monitoring process conducted by the Department and the Revenue Commissioners. The Department will monitor the tax and if problems arise over it or if it proves ineffective, the Minister will be happy to review any of the matters outlined and I am satisfied the matters raised by the Senators will be sufficiently considered through appropriate channels in due course once the tax comes into operation. For these reasons, I do not propose to accept the recommendation proposed by the Senator.

Lynn Boylan (Sinn Fein)
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This is about the defective concrete products levy. The levy will apply to specific concrete blocks and boring concrete. Precast has now been excluded. The measure was expected to raise €80 million in a full year when announced in budget 2023. However it is likely to yield less than this as the proposed 10% levy will now be implemented at a rate of 5%. It is about the impact of the concrete levy on the cost of housing. This is why we oppose the section.

Seán Fleming (Laois-Offaly, Fianna Fail)
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As well as opposing section 99, the Senator and her colleagues in this House are, in recommendation No. 27, calling for a report to be prepared on the impact of the levy within six months of the passing of the Act. The Minister has previously stated it is intended that the revenue from this new levy will contribute towards offsetting the significant costs arising from the comprehensive redress scheme for those homeowners who have been affected by the issue of defective concrete blocks, as agreed by the Government in November 2021.

The Minister has stated it is essential that the entire cost of the redress scheme, which after all arises from the use of defective concrete blocks and other concrete products, is not borne in full by the Exchequer and through it every Irish taxpayer. The cost of the scheme, or at least the portion of it represented by the revenue that is expected to arise from this levy, must be borne by the construction sector.

I am aware of the potential impacts of the introduction of such a levy on the construction industry. These are recognised. However, there is a wide range of factors that influence the viability of development projects. These include the dynamics of the planning system, infrastructure requirements and land costs, as well as hard and soft costs. While housing policy and remediation for homeowners affected by defective blocks are matters for my colleague, the Minister for Housing, Local Government and Heritage, I remind the House that measures are being rolled out by the Government and by that Department in particular. As part of the work undertaken on the impact that the levy would have on the construction sector, the Department of Housing, Local Government and Heritage commissioned a bottom-up scientific analysis. This was carried out by an independent construction economics cost consultant to help identify the likely impact of the levy on construction costs. This report was carried out in September 2022 and took account of the prevailing relevant costs in the construction sector as they applied at the time they were prepared. The costs set out in the report are for the third quarter of 2022 and account for inflation up to that point in time. Revised figures have not been prepared since, given that it has only been a very short time since the report was prepared and published.

The report was undertaken on the impact of the levy as was announced in budget 2023 and so is a cost assessment based on a 10% levy on concrete products for typical dwellings. As the rate of the levy as published in the Finance Bill 2022 has subsequently been reduced to 5%, the Minister's consideration of feedback received from industry participants and others was taken into consideration. The costings in the analysis can be reduced by approximately 50% to determine the impact of the new design of the defective concrete products levy on costs.

As has already stated, the levy will be essential in providing funding to help, at least partially, offset the cost of the redress scheme for those home owners who have been affected by the issue of defective concrete blocks, and, therefore, the removal of section 99, which provides the legislative basis for the defective concrete products levy, is not an option to which the Minister would give even the smallest consideration. The Minister and the Government are quite clear that the vast bulk of the cost will be paid by the Irish taxpayer through the Exchequer but there must be some contribution by the construction industry as it was directly involved in the supply of the concrete blocks to the particular houses in question. Therefore, the Minister cannot accept recommendation No. 27. Speaking on behalf of the Minister, I reiterate that we are not in a position to accept the deletion of the section.

Mark Daly (Fianna Fail)
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As it is now 6 p.m., I am required to put the following question in accordance with the order of the Seanad of this day: "That in respect of each of the sections undisposed of, the section is hereby agreed to in Committee, the Schedule is hereby agreed to in Committee, and the Title is hereby agreed to in Committee."

Mark Daly (Fianna Fail)
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When is it proposed to take Report Stage?

Lisa Chambers (Fianna Fail)
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Next Tuesday.