Paul Gavan (Sinn Fein)
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I move recommendation No. 1:

In page 10, between lines 10 and 11, to insert the following: “Report on Universal Social Charge

3. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on removing the Universal Social Charge from the first €45,000 a person earns.”.

I will move through these as quickly as I can because many of them are common sense and self-explanatory. This amendment calls for a report on the universal social charge, specifically that the Minister would, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on removing the universal social charge from the first €45,000 a person earns. It is to establish what the actual cost of that proposal would be and speaks very much to the points I and Senator Boyhan made, that the proposals from the Government are fundamentally unfair and this is the way we should go. A report on this topic would bear out the points we are trying to make.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I thank Senators Gavan and Warfield for this recommendation that, ultimately, we will disagree with, but we will disagree with it agreeably, if that is okay. It must be noted that Ireland has one of the most progressive personal income tax systems, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. In respect of the particulars of this point, I am advised by Revenue that the proposal by the Senators is estimated to cost €1.56 billion in the first year and €1.8 billion on a full-year basis. For context, our entire tax package this year cost €1.6 billion.

Michael McDowell (Independent)
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I accept the removal of USC from the earnings range as mentioned by Senator Gavan in his recommendation would have serious Exchequer consequences, but let us remember that USC was brought in as a temporary measure, as was income tax, by the way, to pay for the Napoleonic wars. I fully take the point that USC is a very wide-ranging levy on incomes and if we go back to the 20% and 40% rates that are referred to in the table to the section to which this recommendation is being made, we should remember it was the aim of Government to reduce the fundamental tax structure in this country from one where the marginal rates of taxes were very high to a simple 40%-20% tax structure that everybody could understand. In the course of the recent referendum on the family, I had the opportunity to look at the Murphy tax decision about the treatment of married people, which goes back to the 1970s. I invite any member of this House who is not standing for election and has half an hour to spare to go back over that decision. The Supreme Court recites that in the 1970s the top rate of income tax was 80%. Those kinds of tax rates are simply counterproductive.

Even when they were 48% and 60%, I remember as a member of Fine Gael having differences with Garrett FitzGerald and Alan Dukes in Dublin South-East when I was chairman of their constituency party and saying the rates of tax were confiscatory. Garrett Fitzgerald's response was to say they were not high enough, and he was backed up on that by Alan Dukes.

Low rates of tax do work if they are applied across the board. That is the point I am making. I will reiterate this point as I had only five minutes before on Second Stage. We have to have a system that really affects people and that you cannot opt out of in its entirety just because you are very wealthy. The time has come to take a look at non-domiciled persons, non-DOMs, in Ireland, a serious look at the people who leave this these shores to live elsewhere in Europe in more tax-friendly climates because they want to avoid the taxation consequences of income, capital asset acquisitions and capital gains they have made in Ireland. It does seem to me that if you want to be an Irish citizen, a philanthropist and to contribute as little as you possibly can to the Irish Exchequer, it makes sense to do what the British Labour Party is proposing, which is to take a look at non-DOMs and tell them they cannot have their cake and eat it.You cannot have assets producing substantial wealth for you in Ireland and own substantial amounts of land in Ireland, and do a lot of things which only the very wealthy in Ireland can aspire to do and, at the same time move yourself offshore and live a tax-free existence when your secretary, gardener, caretakers or whoever you employ in Ireland, to look after your business empire, are taxed to the hilt, especially by the USC. I really do think that the Government should act on this. The structure that I would suggest for doing it would be one which at the very least would say to the super wealthy, who have been Irish citizens and remain qualified by virtue of owning assets in this country beneficially, that they must pay a basic rate of tax on their income across the world, regardless of where they live be it Malta, Portugal or wherever they go. I suggest that we say to them that if they want to be Irish citizens and own business assets and land assets in Ireland that they should pay a significant contribution just in the same way as all of the employees they have left behind in Ireland must pay while earning much more modest incomes to keep these wealthy people in the happy situation that they can live tax free while owning very substantial wealth in this State.

Neale Richmond (Dublin Rathdown, Fine Gael)
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In response to Senator McDowell's comments, I watched as Senator Gavan disagreed fundamentally and then disagreed warmly, which was quite an interesting concept that one gets from luxury. I can reassure the Senator that such debates in Fine Gael in Dublin South-East are still common at times, even though we now call the constituency Dublin Bay South.

I take both of these very different points very seriously. I disagree with little about the first point but I think we understand that it is about how one does things in stages and in a measured balanced way based on compromise. The second point merits investigation but I think we can all agree at this stage that it will be for the next Government to do that work.

Michael McDowell (Independent)
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Put it on the agenda now.

Mark Daly (Fianna Fail)
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Recommendations Nos. 2 to 4, inclusive, and 32 are related. The recommendations may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move amendment No. 2:

In page 12, between lines 4 and 5, to insert the following:

“Report on Rent Tax Credit 6. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the Rent Tax Credit operating in the absence of a cap on rents, making a direct comparison between the amount of the credit and rent increases across the State for each year that the credit has been in operation.”.

To be frank, I will briefly discuss these recommendations because they are very straightforward.

Recommendation No. 2 calls for a report on rent tax credit. Due to the huge increase in rents a report on rent tax credit would be very valuable. Recommendation No. 3 seeks a report on mortgage interest relief, which I have already sort of explained. Recommendation No. 4 seeks a report on the affordability of housing under the local authority affordable purchase scheme. Sinn Féin calls for these reports and I hope that the Minister will accept these very reasonable measures.

Mark Daly (Fianna Fail)
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I welcome the Minister.

Jack Chambers (Dublin West, Fianna Fail)
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I thank Senator Gavan for raising this matter.

As Senators will be aware, the credit was first introduced in the Finance Act 2022 at a value of €500 for single people and €1,000 for jointly assessed married couples. It has played a valuable role in providing financial support to renters right across the country. The credit was subsequently increased in 2023 by €250 to €750 for a single person or by €500 to €1,500 for a jointly assessed couple.

As announced in budget 2025, the rent tax credit is now being increased again to €1,000 per person or €2,000 in the case of a jointly assessed couple for 2025. In addition, in recognition of the cost-of-living pressures facing many renters right now, I have also increased the credit again for 2024 to €1,000 and €2,000 for a jointly assessed couple.

On the specific recommendation that broadly relates to rent caps, as Senators will be aware, we have introduced rent pressure zones which cannot exceed general inflation, as recorded by the Harmonised Index of the Consumer Price. We have seen research published research on rent pressure zones across the economy. We are committed, as a Government, to focussing on the Housing for All strategy, driving additional supply in the economy, and to moderate the housing costs in both the purchase and rental sectors. In that regard, more than 2,100 new cost-rental homes have been delivered through various different channels, including local authority delivery, approved housing body delivery, the LDA and through the cost rental tenant in situ scheme.

Next year, approved housing bodies will deliver over 1,000 cost-rental schemes. These homes will be delivered with the support of €300 million provided under the cost rental equity loan mechanism and via funding from the Housing Finance Agency.

Recommendation No. 3 seeks a report on mortgage interest relief. Senators Gavan and Warfield, in their recommendation, propose that those with a mortgage balance on their principal private residence of under €80,000 should qualify for the relief. It is also proposed that the relief would be applied at source.

The Government is acutely conscious of the continued impact of high interest rates and mortgage costs on taxpayers. It is for this reason that as part of budget 2025, I announced a one-year extension of the mortgage interest tax relief.

For 2024, the relief at the standard rate of income tax will apply in respect of the increase in interest paid in 2024 over interest paid in 2022. All other conditions pertaining to the relief remain unchanged.

The relief will be capped at €1,250 per property. It will be available to taxpayers in respect of their principal private residence in the State, where the outstanding mortgage balance was between €80,000 and €500,000 as of 31 December 2022. Furthermore, the taxpayer must be compliant with LPT requirements and must have an income tax liability for 2024. The relief will operate by way of a credit offset against a taxpayer’s income tax liability for 2024. Finally, we have set out our wider policy on mortgage interest relief.

Recommendation No. 4 concerns the interaction of the help-to-buy scheme and the local authority affordable purchase scheme. I am pleased to advise Senators that the help-to-buy scheme can operate in tandem with both the local authority affordable purchase scheme and the first home scheme. This scheme makes local authority-provided homes available at a reduced price for first-time buyers and fresh start applicants, whose combined mortgage and deposit will not cover the market price of the newly built home. Under the scheme, the local authority facilitates the sale of a new home to an eligible purchaser for a price that is less than the full market price of a home, in exchange for an equity stake of between 5% and 40%.

The Finance Act 2023 amended the help-to-buy scheme to treat the equity stake as a qualifying loan for the purposes of the help-to-buy scheme. This means that local authority affordable purchase claimants can also avail of help-to-buy scheme as if they were purchasing a home without this assistance.

Under the first home scheme, a special purpose vehicle jointly funded by the State and participating mortgage lenders, offers equity finance to first-time purchasers, including fresh start applicants, of new builds. The first home scheme already has a built-in mechanism that allows it to work in tandem with the help-to-buy scheme by reducing the equity stake available to purchasers to 20% in cases where help-to-buy is claimed. The maximum equity stake available under this scheme is 30%. Where the purchaser is availing of help-to-buy then the maximum equity stake terms of the scheme is 20%.

By way of clarification, section 7 amends the help-to-buy scheme by changing the definition of “qualifying residence” to ensure that a newly constructed property purchased by a local authority, for onward sale to an affordable purchaser under this scheme, is eligible for help-to-buy. This is a technical amendment requested by the Department of Housing, Local Government and Heritage, which may only be relevant in a small minority of LAAP purchases, if at all. It is intended to address circumstances where there may be a delay in completing the purchase directly from the developer.

Finally, recommendation No. 32 seeks a report on the removal of stamp duty on the purchase of residential property for first-time buyers on properties up to a value of €450,000, to be provided within three months of the passing of this Bill. Generally speaking, stamp duty on individual residential property applies at rates of 1% on the first €1 million and 2% on the excess over €1 million, with a further rate now introduced by financial resolution on budget night applying at 6% where the consideration exceeds €1.5 million.

Up to November 2007, when stamp duty of up to 9% applied at staggered rates dependent on the value of the acquired property, first-time buyers were exempted from stamp duty. However, a decision was taken at that time, as part of a restructuring and simplification of stamp duty, whereby the number of rates applying on property acquisitions were significantly reduced. The exemption for first-time buyers was ended at that time. The same stamp duty rates have since applied to both first-time buyers and those acquiring their second or subsequent residential property.A further simplification of the stamp duty system was introduced in December 2010, resulting in the current streamlined structure I have just outlined. While there is no longer a stamp duty exemption for first-time buyers, a range of schemes have been introduced by successive governments designed to assist in the acquisition of a first home, including the help-to-buy and first home schemes and other additional supports. Given the continued success of these measures and that stamp duty on residential property is set progressively according to the consideration involved, I have no plans to provide an exemption at this time. For the reasons outlined, I cannot accept recommendations Nos. 2, 3, 4 and 32.

Paul Gavan (Sinn Fein)
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I move recommendation No. 3:

In page 15, between lines 3 and 4, to insert the following: “Report on Mortgage Interest Relief

7. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of temporary mortgage interest relief, available in respect of mortgages on principal private residences, applied at source on a monthly basis where mortgages under €80,000 are not excluded.”.

Paul Gavan (Sinn Fein)
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I move recommendation No. 4:

In page 15, between lines 18 and 19, to insert the following: “Report on affordability of housing under Local Authority Affordable Purchase Scheme

8. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the need to extend the Help-to-Buy to “affordable purchase” making specific reference to the unaffordability of housing under the Local Authority Affordable Purchase Scheme.”.

Mark Daly (Fianna Fail)
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Recommendation No. 5 has been ruled out of order.

Mark Daly (Fianna Fail)
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Recommendations Nos. 6, 8, 10, 15 and 36 are related and may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move recommendation No. 6:

In page 19, between lines 15 and 16, to insert the following: “Report on cost of Employer contributions to PRSAs and PEPPs since 2022

13. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the cost to the Exchequer from aggressive tax planning using the employer contributions to PRSAs and PEPPs since 2022.”.

This recommendation is just a common-sense suggestion to ensure the taxpayer is, or is not, frankly, getting value for money.

I will move on briefly to the others. Recommendation No. 8 is a report on costs of increasing the standard fund threshold to €2.8 million. It states, "The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the costs of increasing the standard fund threshold to €2.8 million, clearly outlining the cost to the Exchequer as well as providing a cost per beneficiary." Again, this is because we just do not believe there is value for money in this area.

The next recommendation to which I can speak is recommendation No. 10. This relates to a report on the effectiveness of the planned auto-enrolment scheme. It states, "The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the comparative state supports received by workers in the auto-enrolment compared to workers earning above the standard rate band in an occupational pension as a result of income tax relief against earnings from employment for pension contributions, as well as clearly outlining how it will deliver its stated aim of taking pressure of[f] public finances in the future." Again, that would be a very worthwhile report.

The next recommendation, No. 15, relates to a report on pension tax reliefs and subsidies, and my colleague Senator Higgins referenced concerns about this as well. In the circumstances, it is a very reasonable request. It states, "The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax reliefs and subsidies applicable to pensions, including contributions, and at drawdown to assess their cost to the Exchequer and distributional impact."

The last recommendation in this grouping is No. 36.

Pat Casey (Fianna Fail)
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That is not the Senator's recommendation.

Paul Gavan (Sinn Fein)
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It is not mine. Senator Casey is right.

Jack Chambers (Dublin West, Fianna Fail)
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I thank Senator Gavan for submitting these recommendations and I will respond to them.

Recommendation No. 6 relates to the changes to PRSAs introduced in section 12. The section amends the Taxes Consolidation Act 1997 to introduce limits on the tax relief available for employer contributions to personal retirement savings accounts and pan-European pension products. Prior to 31 December 2022, where the combined contributions by an employer and an employee to a PRSA did not exceed the employee’s annual percentage limit, the contributions were relieved from tax. Where the combined contributions exceeded the relevant employee’s annual percentage limit, however, the amount above the limit was treated as a taxable benefit-in-kind in the hands of the employee. The employer was entitled to a tax deduction for this contribution. As Senators will be aware, section 22 of the Finance Act 2022 changed the treatment of employer contributions to PRSAs with effect from 1 January 2023. Following the change, an employer contribution to a PRSA is not treated as a BIK for the employee, and therefore there is no tax liability for the employee arising from an employer contribution to a PRSA. The change was introduced in order to implement a recommendation from the 2020 report of the interdepartmental pension reform and taxation group. Unlike occupational pension schemes, PRSAs are personal pension products and employer contributions are not required. Also, an individual’s PRSA is not subject to the two thirds final salary funding limit that is imposed on employee benefits from occupational pension schemes. It was clear that the removal of BIK for employer contributions would result in PRSAs having less restrictions on employer contributions, albeit still subject to the overall tax relieved limit of the standard fund threshold.

Some alternative options to the changes made in Finance Act 2022 were explored at the time, but they proved too complex and difficult to implement in practice. Revenue has actively monitored developments in this area and identified a number of cases that gave rise to concerns where the employer contributions to PRSAs are significantly higher than the salary associated with the employment and, in most of these cases, the employee for whom the contribution was made had a connection to the employer. It would appear these cases show signs of behaviour that is not in keeping with the policy intent of the Finance Act 2022. The change introduced in this year’s Bill aims to address these concerns by imposing a limit on the size of the employer contributions to a PRSA that are not considered a BIK. For the purpose of simplicity, a single limit of 100% of the relevant employee’s salary will apply to employer contributions to a PRSA. Any contributions above the limit will be considered a BIK for the employee and be subject to tax. The tax treatment of pan-European personal pension products, introduced in 2022, mirrors that of a PRSA. Therefore, the changes outlined will also apply to PEPPs. I am advised there are currently no PEPP providers and hence no PEPPs available in Ireland.

Recommendation No. 8 relates to the standard fund threshold. It sets the maximum amount available for a tax-relieved pension at retirement. Where a pension exceeds the standard fund threshold, it is subject to an upfront, ring-fenced income tax charge, known as a chargeable excess tax, at 40%. This forms part of the taxation framework for pensions that applies to all pensions in the public and private sector. This was reviewed by Dr. Donal de Buitléir at the end of 2023 and we received a report during the summer. The report makes a number of recommendations to modernise and update the SFT giving rise to changes in the pensions landscape and the impact of wage growth since 2014. The report considers the level of the SFT, the rate of tax payable and the method of valuing benefits for the application of the SFT regime, and makes a significant number of recommendations for change in these areas. The Bill amends three specific aspects of the scheme and we have set out the context on that in September around the scale changes to the scheme out over the next number of years. This is not for 2025 but from 2026 onwards. I have previously set out the detail on that.

The final recommendation relates to the report on the comparative State supports received in the auto-enrolment savings scheme compared with individuals making contributions to an occupational pension scheme who benefit from tax relief for those pension contributions at the higher rate. The design and operation of the auto-enrolment scheme is a matter in the first instance for the Minister for Social Protection, who designed this scheme with co-operation across Government. The provisions relating to auto-enrolment in this Finance Bill are simply putting in place the taxation provisions that will apply to all stages of the auto-enrolment system, in line with the design developed by the Minister for Social Protection and introduced through the Automatic Enrolment Retirement Savings System Act 2024.As I said, all of the detail on that has been published previously.

Recommendations Nos. 15 and 36 propose the publication of a report on pension tax reliefs. On the tax treatment of supplementary pensions, as Senators are aware, Ireland operates an exempt-exempt taxed, EET, system. This means that contributions to pensions are exempted from income tax, and pension fund gains are exempted from tax, but income from pension drawdown is then liable for tax. I am very cognisant of the importance of retirement savings. Overall, the policy objective for pensions is to encourage individuals to save for retirement to meet a target level of supplementary pension coverage and an income replacement target, and to assist in preventing an over-reliance on State support for people in later life. The policy lever of tax relief is important in supporting this objective.

The interdepartmental pensions reform and taxation group was tasked with a number of actions relating to the pensions roadmap. Its report was published in November 2020. The Commission on Taxation and Welfare also made recommendations on the pension landscape more generally, some of which relate to the standard fund threshold. A number of the changes proposed in the report would result in more tax being levied at retirement, while others would increase the relief available for pension contributions. There is potential for increased costs to the Exchequer from some of the recommendations. We have recommendations from both these reports. Again, there is ongoing review of those recommendations in the context of decisions for the future. I have set out the detail of the standard fund threshold.

The Department of Finance's Report on Tax Expenditures and Revenue's Cost of Tax Expenditures publication contain information on the cost to the Exchequer of tax expenditures, including tax relief for pension contributions. In 2020, the most recent year for which this figure is available, the cost of tax relief for employee pension contributions was €1.154 billion. In 2022, the cost of tax relief for employers’ contributions to approved superannuation schemes was €323 million, while the cost of the exemption employers’ contributions from employee BIK was €956 million. These are significant costs but they are important in encouraging savings for retirement. In addition, consideration of this cost in isolation does not give a full picture of the overall cost of pensions tax expenditures.

The publication of the income tax insights 2023 report, published by Revenue in April 2024, provided some analysis of the pension contributions made in 2023 by income level and gender. It notes that 1.08 million employees made pension contributions at some point in 2023. This represented 33% of all employees. Pension contributions by employees and employers totalled €4 billion and €3.8 billion respectively in 2023. These include occupational pension-retirement benefit schemes, additional voluntary contributions, PRSAs and retirement annuity contracts. Those with higher incomes make greater contributions to their pension, while the average share of income set aside as pension contribution across the income ranges varies between 3% and almost 7%, which is below the maximum age-related percentage thresholds that apply to pension contributions.

When considering this information, the reality is that when we discuss the cost of pensions the holistic picture of the overall costs of all three prongs of the EET approach are not considered. Chapter 6 of the recent independent examination of the standard fund threshold considered this in detail, noting that the current EET pension regime provides for a deferral, rather than an exemption, of tax on pensions. While pension contributions and pension fund gains are exempt from tax, the income from pensions is liable to income tax when it is drawn down. In effect, this system acts as a means to average lifetime income before paying tax on pension income in retirement. Where data is available, we report the cost of tax relief provided for pension contributions. However, in many cases, due to data constraints, we do not have the data on the cost of some exemptions from tax, such as the growth of pension funds.

The examination recommends further work in this area to be able to give a more accurate picture of the cost of pension tax expenditures, as I mentioned. We have asked officials to establish an implementation group to consider how this can be achieved, as well as other recommendations referenced in the SFT examination. Given the information already published in relation to pensions, the consideration of the issue of the cost of pension tax expenditures in the recent examination of the SFT, and the intention for further work on improving the information available, I do not believe a further report is necessary at this time.

Alice-Mary Higgins (Independent)
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I will speak a little further to recommendation No. 36, which is in this group. The purpose of this recommendation is to seek a report. The Minister mentioned the issue for report and the many reports that have been compiled, but the issues I am asking to be properly reported on and examined are those in respect of which there is a real lacuna. My proposed report would look to an assessment of the cost to the Exchequer of the various changes in policy on private pension tax relief, including the proposed changes that will come through under this shift in the threshold upward from €2 million towards €2.8 million, for example. It would also look for a gender analysis and a distributional impact assessment of pension tax reliefs. These are key pieces that are missing.

It was interesting that the Minister mentioned that we cannot look to these private pension tax reliefs without looking to the other areas of pension policy. In fact, that is exactly what has happened. We have had a disjoin. The conversation on private pension tax relief has been happening in one space, whereas the conversation relating to other areas of pension policy is happening completely separately. For example, the Commission on Pensions was, unfortunately, intrinsically flawed in its mandate and brief because it was specifically excluded from considering private pension tax relief. We have had this discussion, including in the context of the Commission on Pensions, which is looking at revenue. It is only the fact that the moneys being spent on private pension tax relief were explicitly not allowed to be discussed by that commission, that it came up with a quite - I would say ludicrous but for the danger it will be implemented - dangerous recommendation to increase the number of years that people need to have consistent contributions to 40 from the current 20 in order to qualify for the public State pension. We were told at the time that the cost of a universal State pension that every person would be entitled to, which was called for by the National Women's Council and many other groups, would be €3 billion and would be prohibitive within the economic constraints of pension policy. At the same time, however, the amount being spent on private pension tax relief is €2.9 billion. We are spending on private pension tax relief an amount equivalent to what it would cost to give every single person in the State the guarantee of a universal full State pension.

There has been a lot of talk as we approach the general election about the rates being raised by €5 here or €10 there and what might happen. When we talk about the full State pension, however, we need to be honest with people about living on a reduced rate pension. In my previous roles, I worked with the National Women's Council of Ireland and the Older and Bolder alliance, which is an alliance of all the age organisations in Ireland. We did round tables throughout the country and what we found was that women, in particular, were likely to be on reduced rate pensions because they did not have enough contributions to qualify for a full pension. Even during the recession when the full pension rate was not cut, many women experienced a practical cut in their pensions because they were on a reduced rate and the bands shifted. The contributory requirements increased. That was when the contributory requirements increased to 20 years. Now there are proposals to increase the contributory requirements to 40 years to get a State pension. That will affect women and part-time workers. When he spoke, the Minister's colleague the Minister of State, Deputy Richmond, acknowledged that the research shows us women are more likely to have gaps. While some care credits are accessible, they are limited because the goalposts have moved. Even if more care credits are allowed, people will have to have achieved an overall larger number of contributions.

We have a situation where the gender inequality that was in our pension system is likely to get deeply cemented by the shift to 40 years.

Garret Ahearn (Fine Gael)
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Before I ask the Minister to respond, I welcome the students of CBC Cork Preparatory School. I hope they are having a very good day visiting Leinster House. I hope they are enjoying it and learning a lot. I hope some of them become politicians in the future. If their teachers are there, I can tell them they have no homework this evening if there is any coming. Or rather it is two days, that is Wednesday and Thursday.

Jack Chambers (Dublin West, Fianna Fail)
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I thank Senator Higgins for her contribution. I also welcome all the students who are here from Cork. I am familiar with their school. I played sport against their school some years ago. I think we won down in Cork, they will be glad to know. They are very welcome.

Senator Higgins referred to the cost of the changes and the SFT in the context of the decision points we have taken. We published those costs in parliamentary questions and set out the trajectory of the costs as part of wider public information that we published. Some of what she raised relates to broader pensions policy with the Department of Social Protection and what the State is trying to do to bridge some of the issues. This Government has sought to address some of those wider points around the interaction between decisions I take in the Finance Bill and wider pensions policy which is co-ordinated by the Minister for Social Protection and the need for both to work together.

On the marginal rate, the interdepartmental pension reform and taxation group reviewed the cost of funded supplementary pensions to the Exchequer. Its report published in November 2020 noted:

In common with most developed countries, fiscal support for private pension saving exists in Ireland. This support is provided by way of tax relief and its inclusion in the tax code predates the foundation of the State. In providing incentives, states are motivated by the policy objective of increasing aggregate savings or encouraging citizens to provide for their retirement, by deferring a sufficient amount of income and consumption today to provide for their later years. This is based on an assumption that individuals require an incentive to lock-up savings until they retire given that alternative saving vehicles allow on-going access.

The Commission on Taxation and Welfare considered inter alia the area of pensions and in particular tax relief on pensions. Its report, published in September 2022, included a number of recommendations in the area of pension tax relief. It examined the issue of marginal relief to which the Senator referred. It considered potential changes to the existing marginal relief approach, including through potentially allowing all contributors to access the same level of relief at the higher, lower or standard mid-point rate. The commission concluded that on balance, the existing approach of marginal relief was appropriate on the basis that such contributions represent a deferral of income. If the marginal-rate tax relief on pension contributions was to be reduced to the standard rate while maintaining the current total earnings limit, that is, the maximum amount of earnings that can be taken into account for the purpose of calculating the relief of €115,000 per year, the yield would be €684 million.

The Senator raised some points about overall tax expenditure and the evaluation undertaken by the Department.As part of my budget day announcements, I have set out the current iteration that is going to progress in future. We have guidance from 2014 published with several enhancements. The updated guidelines seek to ensure that Ireland’s approach to tax expenditure evaluation, including the evaluation of tax expenditure on pensions, remains in line with international best practice, while accounting for effective evaluation and the necessary allocation of resources in the Department. In particular, these guidelines now incorporate equality and green budgeting objectives into their criteria, from what I set out on budget day, with the aim of promoting a much more comprehensive assessment across a range of evaluation criteria. That will be happening in the context of the tax expenditure relating to pensions policy, which is important. This is something the Department is advancing and that I set out in the updated guidance we published on budget day.

Alice-Mary Higgins (Independent)
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I welcome that those factors will be considered. It is in line with what we saw in terms of equality budgeting in Scotland, where there was a move from original expenditure to looking to tax expenditures in terms of tax reliefs and so forth. Will there be an explicit gender disaggregation in the context of that equality analysis?

Jack Chambers (Dublin West, Fianna Fail)
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I will send further information to the Senator. The Department is still working through the specific detail on how equality budgeting will operate. I will, though, reflect what the Senator said and further information will be published in that regard.

Alice-Mary Higgins (Independent)
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I would appreciate any correspondence in that regard.

Jack Chambers (Dublin West, Fianna Fail)
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I am happy to provide it.

Alice-Mary Higgins (Independent)
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I thank the Minister.

Garret Ahearn (Fine Gael)
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Recommendation No. 7 has been ruled out of order due to a potential charge on the people.

Garret Ahearn (Fine Gael)
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I welcome Deputy Michael Ring's guests, who I suspect are from Mayo: Ita Plunkett, Patricia Walsh, Margaret O'Donnell and Sheila English. They are all very welcome to the Chamber. I hope they have had a fruitful and enjoyable day with Deputy Ring. They are in very good company, so should enjoy it.

Jack Chambers (Dublin West, Fianna Fail)
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Up Mayo.

Paul Gavan (Sinn Fein)
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I move Recommendation No. 8:

In page 21, between lines 4 and 5, to insert the following: “Report on costs of increasing Standard Fund Threshold to €2.8 million

14. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the costs of increasing the Standard Fund Threshold to €2.8 million, clearly outlining the cost to the Exchequer, as well as providing a cost per beneficiary.”.

Alice-Mary Higgins (Independent)
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I will not go over these aspects in detail again. I had some discussion in this regard with the Minister of State, Deputy Richmond, when he was in. I just wish to signal this issue again in response to his response. I refer to the auto-enrolment retirement savings system. I am significantly concerned regarding what I believe is a lacuna concerning ethical oversight in respect of those funds. I know that the position, as the Minister of State described it and the Minister, Deputy Humphreys, indicated, is that these are private funds and, therefore, none of the usual standards that may be applied to, for example, the Future Ireland fund or any other funds will be applied. These include those I mentioned in respect of being in compliance with our cluster munitions legislation, the Fossil Fuel Divestment Act 2018 and the important principles under the International Court of Justice ruling that, effectively, said these moneys should not be treated as the investment of State money. Effectively, however, it is the investment of State money.

It is a large amount of State money that we are choosing to direct into a new system of auto-enrolment pension schemes. There is an oversight mechanism that is not the same as that in respect of PRSI. There is an oversight mechanism in terms of the scheme established for and paid for by the State. Even within that oversight mechanism, there is an investment committee. Surely that investment committee, established by the body responsible for overseeing the auto-enrolment investments, which, given many of the other things it is meant to be watching out for, should also be looking to questions concerning these key ethical principles. I refer to aspects such as the State having signed up in respect of fossil fuel divestment, cluster munitions and explicitly in terms of the ruling of the International Court of Justice, which the Government has now accepted requires it on behalf of the State to ensure there is no investment of public moneys in illegally occupied territories.

This is a new scheme. It needs to be looked at and re-examined. I do not believe that simply saying it is other people's money and nothing to do with us is enough when the State is responsible for administering the scheme and is pouring large amounts of public moneys into it. It is not enough to say we will wash our hands regarding where those moneys are invested. I do not think that will stand up. I note that, right across the world, pension schemes, including public pension schemes, are doing their best to divest from unethical investments, while we are in danger of establishing a brand-new repository that will expose a great number of Irish citizens though the auto-enrolment scheme to potentially having their money, and the State's money that is going to them, invested in ways that do not have the ethical safeguards we would apply to other areas of public investment like the Future Ireland Fund or the Climate and Nature Fund. Again, I emphasise that this is an area that might need re-examination as we have an opportunity to try to get this process right from the beginning. I am worried that we are going to walk ourselves into a mistake that will be difficult to walk ourselves out of.

Jack Chambers (Dublin West, Fianna Fail)
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I thank the Senator. The Senator has tabled a recommendation seeking a report to be published which I understand would outline the comparative State supports received by workers in the auto-enrolment retirement savings scheme compared with individuals making contributions to an occupational pension scheme. Is this what she was referring to?

Alice-Mary Higgins (Independent)
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No. I was speaking to the section. I think the Minister was remarking on Senator Gavan's recommendation.

Jack Chambers (Dublin West, Fianna Fail)
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On the design and operation of auto-enrolment more generally, this was discussed at length by the Minister, Deputy Humphreys, when she was bringing this legislation through the Houses. In this Bill, we are simply putting in place the taxation provisions relating to the auto-enrolment system in line with the design set out by the Minister, Deputy Humphreys, and introduced in the legislation. It must be emphasised that the auto-enrolment funds will be the personal property of participants in the scheme rather than a new national fund. As stated previously, the auto-enrolment participants' moneys are on a par with those invested in occupational or supplementary private pension schemes. It is not a direct fund. That was the context of what was set out by the Minister, Deputy Humphreys, at the time.

Alice-Mary Higgins (Independent)
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I believe a mistake has been made and I have signalled this very clearly to the Minister, Deputy Humphreys. I am now signalling it to the Minister and his Department. This scheme is not the same as a private or occupational pension scheme in that the State is determining, in effect, the eligible vehicles in this regard. The State is contributing a great deal of the money in this context too. I believe the Department of Finance does have a responsibility in this regard. As the Minister said, it is, ultimately, responsible for the mechanisms relating to the funds. There is a need for this to be examined in terms of the use of public moneys in ways that may, in fact, be inconsistent with national laws or international laws.

There is an opportunity to get this right. I disagree with the perspective that the State can abdicate responsibility for any ethical issues relating to how this money is invested. It would be worth reconsidering. I am not at all opposing the auto-enrolment scheme. I am, however, trying to ensure we set it up in a way that will prevent us having a scandal in two or three years because of how the money is invested and what it is going into. I am trying to prevent people saying in future that they were automatically enrolled in a scheme where the money was invested in a way that was unethical because no safeguards were put in place. This is about trying to avoid unnecessary difficulties down the line by getting things right at the beginning. I am going to leave this matter here. I know it is not entirely within the Minister's remit. It is, however, an issue for the Government to consider further, with both Ministers perhaps examining this issue together. I thank the Minister.

Garret Ahearn (Fine Gael)
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I welcome the guests of Deputy John Paul Phelan, who I suspect are from County Kilkenny. I hope they are having a very enjoyable day. It is tough for a Tipperary man to welcome Kilkenny people, but they are very welcome and I hope they have a good day. They are in very good hands with Deputy Phelan.

Unless the Minister has anything further to add, we will move on.

Garret Ahearn (Fine Gael)
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Recommendation No. 9 has been ruled out of order as it is not relevant to the subject matter of the Bill.

Paul Gavan (Sinn Fein)
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I move recommendation No. 10:

In page 26, between lines 22 and 23, to insert the following: “Report on effectiveness of planned auto-enrolment scheme

16. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the comparative state supports received by workers in the auto-enrolment compared to workers earning above the standard rate band in an occupational pension as a result of income tax relief against earnings from employment for pension contributions, as well as clearly outlining how it will deliver its stated aim of taking pressure of public finances in the future.”.

Paul Gavan (Sinn Fein)
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I move recommendation No. 11:

In page 42, between lines 23 and 24, to insert the following: “Report on tax deduction related to donation to approved sporting bodies by individuals and companies

22. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax deduction related to donation to approved sporting bodies to assess effectiveness of this reform, including the frequency of tax deduction being gifted to approved sporting body.”.

We are simply calling for a report on tax deductions related to donations to approved sporting bodies by individuals and companies. I do not need to say any more on it.

Paul Gavan (Sinn Fein)
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I move recommendation No. 12:

In page 42, between lines 34 and 35, to insert the following: “Report on expansion of Professional Services Withholding Tax (PSWT) to private sector

23. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the expansion of Professional Services Withholding Tax (PSWT) to the private sector to assess the potential of designating large contractors of professional services as accountable persons.”

I will speak briefly on this recommendation. We are calling for a report on the expansion of professional services withholding tax to the private sector. The recommendation calls on the Minister to, within three months of the passing of this Act, "prepare and lay before Dáil Éireann a report on the expansion of Professional Services Withholding Tax (PSWT) to the private sector to assess the potential of designating large contractors of professional services as accountable persons."

Paul Gavan (Sinn Fein)
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I move recommendation No. 13:

In page 42, between lines 34 and 35, to insert the following: “Report on withholding tax on short-term rental income

23. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on potential benefits of introducing an obligation for intermediaries to apply a withholding tax on short-term rental income.”.

We are calling for a report on withholding tax on short-term rental income. This recommendation calls on the Minister to, within one month of the passing of this Act, "prepare and lay before Dáil Éireann a report on potential benefits of introducing an obligation for intermediaries to apply a withholding tax on short-term rental income."

Neale Richmond (Dublin Rathdown, Fine Gael)
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I thank the Senators for the recommendation. There is already work under way across the Government with regard to short-term rental. The proposed short-term letting and tourism Bill that is being developed by the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media will provide the statutory basis for the establishment of a register for short-term lets in Ireland and for the implementation of the new EU short-term rental regulation, which was adopted by the EU on 11 April 2024 and will come into effect from May 2026.

Paul Gavan (Sinn Fein)
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I move recommendation No. 14:

In page 45, after line 35, to insert the following: “Report on backlog of appeals to Disabled Drivers Medical Board of Appeal

30. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the backlog of appeals to the Disabled Drivers Medical Board of Appeal, making specific reference to the effectiveness of these measures.”.

As the Minister of State will probably be aware, there is a huge issue with the backlog of appeals to the Disabled Drivers Medical Board of Appeal. We are asking for a report on this important issue. It is a reasonable request. I hope the Minister of State will accept this recommendation.

Alice-Mary Higgins (Independent)
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I will speak briefly in support of this recommendation. As a member of the finance committee, I know it is an issue we have examined. This backlog has caused considerable distress both for those who work for the Disabled Drivers Medical Board of Appeal and, crucially, for the disabled drivers who have found themselves in limbo waiting for their appeals to be addressed. I endorse this recommendation.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will speak on this extremely important and well-meaning recommendation because it is important to provide clarification. To lay out for the purposes of the House, the purpose of the Disabled Drivers Medical Board of Appeal is to provide a review mechanism for those who have been assessed as not meeting one of the six disabled driver and disabled passenger scheme eligibility criteria by a HSE medical officer. While there were considerable issues with the board between 2021 and 2023, which a number of Senators who have an interest in this area will be familiar with, those issues have been resolved. For the information of the House, as of 31 October 2024, there are 482 appellants on the waiting list from an opening total of 1,007 appellants in December 2023. The Minister, Deputy Chambers, and I believe the current board, therefore, is operating effectively and this is reflected in the significant reduction of the waiting list. It is important to be aware that the Minister, Deputy Chambers, and the wider Department of Finance share concerns that the disabled drivers scheme is no longer fit for purpose and should be replaced with a needs-based, grant-led approach for necessary vehicle adaptions that could serve to improve the functional mobility of the individual. This is very much a matter for the Government. While the Department of Finance has oversight over the disabled drivers scheme, it does not have direct responsibility for disability policy.

Paul Gavan (Sinn Fein)
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I move recommendation No. 15:

In page 45, after line 35, to insert the following: “Report on pension tax reliefs and subsidies

30. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax reliefs and subsidies applicable to pensions, including contributions and at drawdown, to assess their cost to the Exchequer and distributional impact.”.

I will speak briefly to this recommendation.

Garret Ahearn (Fine Gael)
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It has already been discussed.

Paul Gavan (Sinn Fein)
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Okay. I will not speak to it then.

Garret Ahearn (Fine Gael)
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Recommendation No. 16, in the names of Senators Gavan and Warfield, has been ruled out of order due to a potential charge on the people.

Garret Ahearn (Fine Gael)
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Recommendation No. 17 is in the names of Senators Gavan and Warfield. Recommendations Nos. 17 and 18 are related and may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move recommendation No. 17:

In page 61, between lines 6 and 7, to insert the following: “Report on providing R&D Tax Credits payable to small and micro companies within 12 months

42. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on providing R&D Tax Credits payable to small and micro companies within 12 months.”.

I will speak briefly to recommendations Nos. 17 and 18. Recommendation No. 17 calls for "a report on providing R&D Tax Credits payable to small and micro companies within 12 months." It makes sense to look into this to see what the potential is. It is a reasonable request.

Recommendation No. 18 calls for "a report on the prevalence of research and development activity subsidised by the State through the research and development tax credit being conducted outside of Ireland." We are looking to establish what value for money we are actually getting. It is a very reasonable request.

Alice-Mary Higgins (Independent)
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These recommendations are very much related to my own recommendation No. 42, which I thought might be grouped with these recommendations, although it is fine that it is not. We know that a huge amount of expenditure goes into the research and development tax relief but we do not have the information on how that is being done. I support the recommendations.

While my own recommendation, which we may come to later, explicitly talks about the knowledge development box scheme, Senator Gavan's wider piece is important. There is significant expenditure on tax relief in respect of research and development but we do not have information on the extent to which that research and development, such as research and development in areas of research priority for the State, is linked to increases in manufacturing, production or employment within the State, or indeed the extent to which any of that research and development involves - this is what my own recommendation addresses - links and partnerships with research activity in higher education institutions within the State. We have a situation where we are putting a huge amount of money into the research and development tax relief while the research sector in our higher education institutions is squeezed to the edge. Many issues have been highlighted, such as the poor conditions for those working in research and the question of adequate terms and conditions for those who are working as researchers.We also have a situation where we have higher education institutions talking about their extreme lack of funding, the fact Ireland is way below the EU average in respect of our funding for third-level and higher education institutions, both as teaching institutions and with regard to research, and yet we have a very significant tax relief. I am just looking for the joining of the dots. If we are putting money into tax reliefs for research and development, it would be useful for us to be getting information apt to that tax relief with regard to how it is panning out in the context of the research and development leading to innovation, production and manufacture within Ireland. Besides being something that big companies want and that makes Ireland an attractive place tax relief-wise to do research and development, what actually comes with that research? What are the outputs of that research and development? How is it contributing, for example, to Ireland's reputation as a place for quality research and development as opposed to being just a place where the tax reliefs are good for that line in your budget that says research and development? How is it contributing in terms of actual outputs and links with outcomes, employment, education and our higher education institutions?

Neale Richmond (Dublin Rathdown, Fine Gael)
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I do not want to add too much on the general research and development tax credit pieces as I would have spoken about that on Second Stage of the Bill and on my owned lived experience as a Minister of State in the Department of enterprise. I am sure Senator Higgins will join the whole House in welcoming the €80 million in additional funding for Ireland's higher level research sector that was announced just this morning by the Minister, Deputy O'Donovan, and this Government. It goes to the point that the research is good-quality research that is leading to very serious technological and medical advancements as well as creating a really high standard of jobs and conditions that are improving. I would have had a lot of opportunities, when I looked after space policy, to visit NovaUCD in UCD, where we see this cluster and the research being put into the development of really amazing start-ups that are working on everything from accessibility software to hydration software and everything else therein.

More pertinently, I will speak to the two recommendations made by Senators Gavan and Warfield. On the first one, regarding claims by micro and small companies, the Senators will be aware that the Finance Act 2022 introduced changes to the manner in which the research and development tax credit is claimed, including a new provision allowing for claims of up to €25,000 of research and development tax credit to be payable in full in year one instead of being spread over three annual payments. This provision, referred to as the first-year payment threshold, was increased to €50,000 in the Finance (No. 2) Act 2023, and I am now providing in this Bill for a further increase to €75,000. These increases provide a cash flow benefit for smaller research and development projects and are aimed at encouraging more companies to engage with the research and development corporation tax credit regime. As a result of these changes, claims in respect of qualifying research and development expenditure in a year of up to €250,000 will be payable in full in the first year. It is therefore expected that the majority of research and development claims by small and micro companies will be payable in full in the first year, going forward.

On the Senators’ second proposed recommendation, I note that foreign spending is most likely to be incurred through the outsourcing provisions, which allow for limited amounts of outsourced costs to qualify for the tax credit. There are two separate provisions, one for work subcontracted to third-level institutions located in the European Economic Area or the United Kingdom, and one for work subcontracted to other unconnected persons which is not limited by geographic scope. In both categories, the company is allowed to claim the research and development tax credit on qualifying expenditure of up to the greater of 15% of the eligible research and development expenditure incurred by the company itself or €100,000, subject to the company having incurred at least the same level of expenditure. We are all aware that, in various sectors, particularly the life sciences sector, this is very pertinent to making sure that research and development is actually fit for purpose in genuinely developing the research into a product that can be used in many areas. In this regard, I hope this information will be of some use but we will, obviously, be opposing the recommendation.

Paul Gavan (Sinn Fein)
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I move recommendation No. 18:

In page 61, between lines 6 and 7, to insert the following: “Report on percentage of research and development activity subsidised by State through research and development tax credit conducted outside of Ireland

42. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the prevalence of research and development activity subsidised by the State through the research and development tax credit being conducted outside of Ireland.”.

Garret Ahearn (Fine Gael)
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Recommendations Nos. 19 and 37 are related and may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move recommendation No. 19:

In page 74, between lines 3 and 4, to insert the following: “Report on establishment of Wealth Tax Commission

47. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the establishment of a Wealth Tax Commission to independently consider, having regard to the current taxation of wealth relative to labour, the merits, design and implementation of a net wealth tax.”.

I will speak very briefly to the recommendation. Here, we are calling for a report on the establishment of a wealth tax commission. We are back to ideological differences, I suspect. I am always intrigued by the fact that while both Fine Gael and its sister party, Fianna Fáil, always resolutely oppose a wealth tax, they never actually agree to even having it investigated to see whether it is justified or worthwhile. We in Sinn Féin believe passionately that a wealth tax is not only justified but very necessary. There is a small segment of people in this society paying little or no tax and they are among the wealthiest people in our society. The Minister of State can feel free to disagree with us but our point is, why not establish this report, look into it and see what the level of wealth is. There has been a consistent ideological refusal by the Department of Finance for many years. It would take a fundamental change in Government for this to happen. Sinn Féin firmly believes that, in the context of tax justice, there should be a wealth tax.

Neale Richmond (Dublin Rathdown, Fine Gael)
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This is not just a matter of ideological difference, it is about a practical difference. First and foremost, we should recognise that there are taxes on wealth already in our economy, and indeed Sinn Féin and its sister party, People Before Profit, regularly vote against the local property tax at local authority level. That is important, for the record, if we are going to be making assumptions, as such.

I am opposed to a wealth tax in the manner Senator Gavan described. I am also opposed to the report because we do not need the report. We saw what happened when France tried to do this. It just leads to a flight of capital. This is something that absolutely - particularly from the political ideology of the left - makes sense on paper but it does not make sense in practice. They will bring in this tax and yet all it will do is create a flight of capital, and they will actually end up taking less tax in. That is not necessarily what we are trying to achieve. While I appreciate the ideological emphasis by Senator Gavan, this is not something to be lost on ideology. It is to be lost on practicality.

Paul Gavan (Sinn Fein)
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I move recommendation No. 20:

In page 79, between lines 23 and 24, to insert the following: “Report on working conditions in film industry in Ireland and performance of related tax measures

49. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the effect of supportive tax measures on increased economic activity in the sector, and analysing the working conditions in the sector.”.

I will speak very briefly again. I am trying to get through it as quickly as I can. We are calling for a report on working conditions in the film industry in Ireland and the performance of related tax measures. We really do support the development of the film industry in Ireland but I have to tell the Minister of State, wearing my old trade union hat, that I have concerns with regard to how some of the workers are being treated in some circumstances. There are certainly examples of exploitation, which I know have been brought to various committees in this Oireachtas before. It would be both useful and helpful to have a report looking into this particular topic.

Neale Richmond (Dublin Rathdown, Fine Gael)
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A new enhanced credit for small- to medium-sized feature film productions is being introduced. The enhanced credit, which will form part of the long-standing section 481 film tax credit, will provide an additional 8% credit for film productions with a maximum qualifying expenditure of €20 million. This will provide for a total support of 40% for in-scope productions.

I have been lucky to go through what I think is my eighth Finance Bill and my first as a Minister of State in the Department, having sat on the finance committee and been part of these debates in both Houses. This point should be made that this is an issue that routinely comes up. We all say we support the film industry, the many jobs that are created by it and the reputational benefit it brings to the State, but how we show our support is actually backing it by these credits and listening to the workers in the sector, the vast majority of whom have a positive experience. As Senator Gavan will know from his own professional experience as well as my previous ministerial experience, for any issues that are counter to that, there are mechanisms to deal with them already.

Paul Gavan (Sinn Fein)
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I move recommendation No. 21:

In page 105, between lines 9 and 10, to insert the following: “Report on Israel tax compliance with EU's Code of Conduct and OECD's Forum on Harmful Tax Practices

53. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on Israel tax compliance with EU's Code of Conduct or OECD's Forum on Harmful Tax Practices to assess the potential need for Ireland the request that Israel be added to the non-cooperative jurisdictions for tax purposes.".

The recommendation calls for a report on Israel's tax compliance with the EU's code of conduct and the OECD's forum on harmful tax practices. We propose that the Minister shall, within one month of the passing of the Act, prepare and lay before Dáil Éireann a report on Israel's tax compliance with the EU's code of conduct and the OECD's forum on harmful tax practices to assess the potential need for Ireland to request that Israel be added to the list of non-co-operative jurisdictions for tax purposes. It is self-explanatory. We firmly believe Israel should be added to this list.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I appreciate the sentiment, and I mean this in all seriousness, of the recommendation. I have no major opposition to it but this is an issue of what is practical. There is no mechanism under which Ireland may request another jurisdiction to be added to the EU list. The listing process is an objective process based on agreed tax standards applied consistently to all jurisdictions within the scope of the listing process. Any jurisdiction, including Israel, could be added to the EU list or have a tax practice deemed as harmful should it fall foul of its compliance with the relevant international tax standards. For the reasons I have outlined, I am unable to accept the Senator's recommendation. While I appreciate the sentiment and do not necessarily disagree with it, it is not in our gift to do this.

Paul Gavan (Sinn Fein)
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I move recommendation No. 22:

In page 129, after line 38, to insert the following: “Report on application of stamp duty on the buy-back of shares

57. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the application of stamp duty on all purchases by companies of their own shares, and requiring companies to provide data pertaining to all purchases of their own shares to Revenue.".

We are calling for a report on the application of stamp duty on the buyback of shares. The recommendation proposes that the Minister shall, within six months of the passing of the Act, prepare and lay before Dáil Éireann a report on the application of stamp duty on all purchases by companies of their own shares and require companies to provide data pertaining to all purchases of their own shares to Revenue. This would be a very worthwhile report. It is a practice about which we have particular concerns.

Alice-Mary Higgins (Independent)
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I am disappointed there was no engagement on the recommendation relating to shares. I was looking forward and interested to hear what the response would have been.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I am not going to engage on every point.

Paul Gavan (Sinn Fein)
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I move recommendation No. 23:

In page 141, between lines 6 and 7, to insert the following: “Report on Gambling Bill and Betting Duty

76. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the Gambling Bill and Betting Duty to assess any unintended consequences of the Bill and the potential benefits of increasing the betting duty.".

This calls for a report on the gambling Bill and betting duty. It proposes that the Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the gambling Bill and betting duty to assess any unintended consequences of the Bill and the potential benefits of increasing the betting duty. The gambling legislation is significant and we had very good debates in the Seanad on it. I pay tribute to my colleague Senator Joe O'Reilly who was particularly passionate about getting the legislation passed. We had some particular concerns about the Bill in terms of tidying it up. It would be useful to have this report. Why not assess unintended consequences and the potential benefits of increasing betting duty? There could well be a case for doing so.

Neale Richmond (Dublin Rathdown, Fine Gael)
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As Senator Gavan is aware, the Gambling Regulation Act is under the remit of the Minister for Justice. Therefore, I am not in a position to discuss the legislation in a Finance Bill context. However, any potential change to betting duties is kept under review as part of the tax strategy group and budgetary cycle. This is in line with how the Department of Finance develops and monitors tax policy.

Paul Gavan (Sinn Fein)
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I move recommendation No. 24:

In page 142, after line 38, to insert the following: “Report on Mineral Oil Tax

77. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the legislated increase to rates of Mineral Oil Tax, including an analysis of the distributional impact.".

The recommendation calls for a report on the mineral oil tax. It proposes that the Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the legislated increase to rates of mineral oil tax, including an analysis of the distributional impact.

Neale Richmond (Dublin Rathdown, Fine Gael)
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A number of factors affect the final retail price of fuels, including energy market dynamics, wholesale pricing, individual retail pricing policy, transport costs, exchange rate fluctuations and taxation. It is important to note that despite the restoration of excise rates which occurred in April and August this year, as well as the carbon tax increase on 9 October, national average retail prices have generally declined over the past six months or so. While national average prices as of 6 May 2024 were approximately €1.84 and €1.78 per litre for petrol and diesel respectively, average prices as of a number of days ago were approximately €1.73 for petrol and €1.66 for diesel. It is important to note that at the time of the initial Government intervention in March 2022, prices were approximately €1.92 and €1.86 for petrol and auto diesel respectively.

Garret Ahearn (Fine Gael)
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Recommendations Nos. 25 and 41 are related and may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move recommendation No. 25:

In page 142, after line 38, to insert the following:

“Report on introduction of a tax on private jet departures

77. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential introduction of a tax on private jet departures from the State assessing both the potential revenue and emission reductions from behavioural changes.".

The recommendation calls for a report on the introduction of a tax on private jet departures. The recommendation proposes that the Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential introduction of a tax on private jet departures from the State, assessing the potential revenue and emission reductions from behavioural changes. I find it remarkable that nothing is being done on this issue.We all say we are concerned about the environment, and yet there is no action by the State with regard to these private jet departures. This is a major omission on the part of the Department.

Neale Richmond (Dublin Rathdown, Fine Gael)
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There are two substantive recommendations here. This was raised in detail on Second Stage, particularly by Senator Higgins. I will try to be brief because the clock is against us, but both recommendations merit debate.

Senators will be aware that the Government is genuinely committed to tackling climate change and decarbonising the economy by 2050 and is aware of the challenge that these subsidies pose to our collective effort to disincentivise the use of fossil fuels. The programme for Government, the climate action plan and the Climate Action and Low Carbon Development Act form a broad policy and legislative framework for moving away from fossil fuels to renewables and alternative fuels. However, it is recognised that this must be a gradual transition and that there is a balance to be struck between phasing out subsidies and incentivising alternatives, as well as introducing measures such as the carbon tax, which we support.

On the recommendation tabled by Senators Gavan and Warfield, before consideration could be given to any proposal of the type outlined, it would be necessary to appropriately define what a private jet actually is. This is because the term "private jet" is broad in nature and does not have a specific definition that can capture many different types of flights, such as privately owned jet aircraft, business aviation and fractional ownership by multiple owners to name but a few. Once an appropriate definition is established it would be necessary to gather information about the number of private jets departing from Irish airports on a yearly basis to establish the feasibility of such a measure.

Related to the proposed tax on private jet departures is the issue of taxation of aviation fuel, as raised by Senator Higgins. The current position on this matter is that the scope for a country to take a unilateral approach to taxation is currently limited by international law and a range of bilateral and multilateral agreements that operate under the 1944 Convention on International Civil Aviation, known as the Chicago Convention. Furthermore, and in the context of both recommendations, Ireland is subject to the energy taxation rules set out in the EU energy taxation directive on aviation kerosene. Under the current directive, member states are obliged to exempt certain fuels used for commercial aviation purposes from excise duty. A member state may waive this exemption where it has entered into a bilateral agreement with another member state to tax fuel for intra-Community flights. Ireland has not entered into such agreements to date. In July 2021, as part of the Fit for 55 package, the EU Commission published a proposal to revise the energy tax directive. The taxation of intra-Community flights forms part of this proposal and to date has proved to be one of the more contentious of the file because of the wish of certain member states to maintain the exemption on the taxation of excise fuel. I will leave it there, but I know there is a lot more to it.

Alice-Mary Higgins (Independent)
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I thank the Minister of State for addressing the issue. He detailed a number of points of information, details of which it would be useful to have, in respect of private jets and Senator Gavan's recommendation. That is exactly what points to why a report is needed in this area. We need to be honest about the fact that Ireland is one of the major hubs for aircraft leasing. Ireland has a significant aviation sector, including private aviation, and it needs examination. The Minister of State has made the case for the report suggested in Senator Gavan's recommendation by pointing to the number of things that need to be examined in terms of what constitutes a private jet and what levels of activity are taking place. This is an area in respect of which we need to start gathering information, even in advance of whatever policy we may choose to bring in on the back of that. However, the information gathering is certainly needed.

The Minister of State mentioned that the potential changes to aviation kerosene tax relief at EU level under Fit for 55 are contentious. What position is Ireland taking in the discussions on that matter?

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will ask the Minister for energy to follow up on that directly.

Paul Gavan (Sinn Fein)
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I move recommendation No. 26:

In page 142, after line 38, to insert the following:

“Report on impact of Defective Concrete Products Levy on cost, viability and affordability of construction and housing projects

77. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the Defective Concrete Products Levy and its impact on construction costs, the viability and affordability of housing projects, and the cost of remediation for homeowners affected by defective concrete products.”.

As the recommendation indicates, we are calling for a report on the impact of the defective concrete products levy on cost, viability and affordability of construction and housing projects. I do not think I need to go into any more detail about the impacts of this levy or the ongoing crisis for homeowners.

Paul Gavan (Sinn Fein)
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I move recommendation No. 27:

In page 143, between lines 16 and 17, to insert the following:

“Report on impact of extension of 9 per cent rate of VAT for supply of gas and electricity until 30 April 2025 on level of arrears on electricity and gas bills in State

80. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the impact of the extension of the 9 per cent rate of VAT for the supply of gas and electricity until 30 April 2025 on the level of arrears on electricity and gas bills in the State, making reference to the level of revenue collected through the temporary solidarity contribution applied to fossil fuel production and refining companies, and making reference to the level of windfall profits of electricity generation companies as no windfall tax was applied.”.

This recommendation calls for a report on impact of the extension of the 9% rate of VAT for supplies of gas and electricity until 30 April 2025 on the level of arrears relating to electricity and gas bills in the State. The Minister of State will be aware that Sinn Féin called for the 9% reduced VAT rate to be extended in our alternative budget until 1 May, which is what the Government is doing. However, households continue to struggle under the weight of high energy bills. In July, electricity prices were 47% higher than they were in July 2021, while gas prices were 84% higher. Irish electricity prices remain among the highest in the European Union. Government refused to apply a windfall tax on electricity companies, allowing them to keep record profits at the expense of workers and families. The Government opted for protecting corporate profits over public finances. Figures released to Sinn Féin show that more than 230,000 households were in arrears on electricity bills at the end of April, an increase of more than 20,000 on the same period in 2023. Sinn Féin would support households with a €450 electricity credit this autumn and winter. This measure would cost approximately €900 million. There is a very good case for the suggested report at the least.

Neale Richmond (Dublin Rathdown, Fine Gael)
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When we discuss comparisons between 2024 and 2021, it is important that we acknowledge what happened in that period and what caused major increases in energy prices. We have subsequently seen those increases decline. It is easy to choose a period before Russia invaded Ukraine and we saw massive inflation in the has sector, and then talk about what has happened since when those prices came back down, and the interventions by the Government through energy credits including the two that will be paid out in the coming months. Many have received the first one this week.

Paul Gavan (Sinn Fein)
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That is kind of missing the point, which is that we have a crisis in arrears which is getting worse and not better. The Government has not addressed that issue sufficiently.

Paul Gavan (Sinn Fein)
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I move recommendation No. 28:

In page 145, between lines 25 and 26, to insert the following:

“Report on potential economic benefits of a temporary reduction to the hospitality VAT rate to 9 per cent

89. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential economic benefits of a temporary reduction to the hospitality VAT rate to 9 per cent excluding hotel accommodation making specific reference to the viability of SMEs in the sector and employment.”.

We call for a report on the potential economic benefits of a temporary reduction of the hospitality VAT rate to 9%. I am particularly interested in the Minister of State's response to this recommendation because I have heard a number of people from his side of the House call for what is suggested to be considered. I do not know what the potential economic benefits of this reduction would be, but where I live in Limerick, I can see that small hospitality, restaurants and cafes are struggling. There is no question. They are really struggling. I do not think it right to include those types of businesses with the large hotels, and with the big hotel groups in particular, which are making huge amounts of money.The recommendation states:

The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the potential economic benefits of a temporary reduction to the hospitality VAT rate to 9 per cent excluding hotel accommodation making specific reference to the viability of SMEs in the sector and employment.

It has been acknowledged, particularly on the Government side of the House, that there is a real crisis for the small business sector. There is a case now to be made to look into this issue. That is all we are asking for. I hope the Minister of State will support this particular request.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will refer to the Second Stage debate in this regard.

Paul Gavan (Sinn Fein)
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I will press the recommendation.

Jerry Buttimer (Fine Gael)
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Recommendation No. 29 has been ruled out of order as it involves a potential charge on the people.

Jerry Buttimer (Fine Gael)
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Recommendation No. 30 has been ruled out of order as it involves a potential charge on the people.

Paul Gavan (Sinn Fein)
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I move recommendation No. 31:

In page 154, between lines 11 and 12, to insert the following:

“Report on Banking Levy

96. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the banking levy and, in particular, the effective rate of the levy relative to the net interest income and operating profits of in-scope credit institutions in each of the years since its introduction, and the effective rate of equivalent levies in EU Member States relative to the same base, additionally make reference to the government's decision to ignore senior legal advice on ensuring banks contributed to the defective concrete block scheme.”.

This recommendation calls for a report on the banking levy. I made a reference to it in my initial speech. The recommendation states that:

The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the banking levy and, in particular, the effective rate of the levy relative to the net interest income and operating profits of in-scope credit institutions in each of the years since its introduction, and the effective rate of equivalent levies in EU Member States relative to the same base, additionally make reference to the government's decision to ignore senior legal advice on ensuring banks contributed to the defective concrete block scheme.

The recommendation speaks for itself. Sinn Féin is clear on this particular issue. We believe the levy should be increased substantially. The banks are making out like bandits at this point and yet this Government does not want to increase the levy. It is not the right stance for the Government to be taking.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will respond briefly. The banking levy was retained and the Senators are seeking a report on the rate of the levy relative to the net interest income and operating profit for all in-scope institutions since the levy was introduced. It is, therefore, important to point out that it would not be possible to produce a report as requested within that timeline. Credit institutions licensed by the Central Bank do not necessarily have to publish net interest income on a sub-consolidated basis. Prior to the amendments made in the Finance (No. 2) Act 2023, the levy had a wider application and some in-scope banks only reported net interest income on a consolidated basis, with no breakdown available for their Irish subsidies. Therefore, any such historical analysis, as suggested by the Senators, would be incomplete.

With regard to the defective concrete blocks grant scheme, that measure is under the remit of the Minister for Housing, Local Government and Heritage. However, the Minister, Deputy Chambers, and I note that the revenue raised by the bank levy is not hypothecated and the annual yield contributes to the general Exchequer. Therefore, I do not intend to accept this recommendation.

Paul Gavan (Sinn Fein)
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I move recommendation No. 32:

In page 154, between lines 11 and 12, to insert the following:

“Report on removing stamp duty on first time buyers

96. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the removal of stamp duty on the purchase of residential property for first time buyers on properties up to a value of €450,000.”.

Jerry Buttimer (Fine Gael)
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Recommendation No. 33 has been ruled out of order as it involves a potential charge on the people.

Jerry Buttimer (Fine Gael)
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Recommendation No. 34 has been ruled out of order as it involves a potential charge on the people.

Paul Gavan (Sinn Fein)
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I move recommendation No. 35:

In page 161, between lines 12 and 13, to insert the following:

“Report on use of agricultural land by wealthy individuals for tax planning purposes

101. The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the use of agricultural land by wealthy individuals for tax planning purposes and the effect this has on the price of agricultural land and the variability of family farms, including an assessment of the effectiveness of both the current asset and farmer test, paying particular attention to the issue of leasing in the case of the latter.”.

This recommendation calls for a report on the use of agricultural land by wealthy individuals for tax planning purposes. It states:

The Minister shall, within 3 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the use of agricultural land by wealthy individuals for tax planning purposes and the effect this has on the price of agricultural land and the variability of family farms, including an assessment of the effectiveness of both the current asset and farmer test, paying particular attention to the issue of leasing in the case of the latter.

I find myself in agreement with Senator McDowell, which does not happen often. He made reference to this point and when you have left and right coming together, there must be some common ground. I hope the Minister of State will acknowledge that, as things stand, agricultural relief can be used by wealthy individuals to reduce inheritance tax. This can drive up the price of agricultural land as it is being acquired for tax purposes rather than genuine agricultural reasons. It is hard enough for smaller farmers to compete with wealthier farmers and farm enterprises without having to compete against anyone else. We would review the farmer test for agricultural relief to ensure that the relief is protected for farmers only. Wealthy individuals should not be incentivised to purchase farmland for tax reasons as this can drive up the price for farmers. The Government reform of the capital acquisitions tax, CAT, agricultural relief is a step in the right direction but a further review is needed.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I am worried because that is the second time that Senator Gavan has agreed with senator McDowell in this session.

Paul Gavan (Sinn Fein)
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I am as worried as he is.

Neale Richmond (Dublin Rathdown, Fine Gael)
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If it happens a third time, I do not know what will happen. Perhaps Beetlejuice will appear. This Bill introduces a new section 89A to the Capital Acquisitions Tax Consolidation Act 2003 to provide for a revised form of relief from capital acquisitions tax for gifts and inheritances of agricultural property. The primary policy rationale for the relief is, of course, to promote the intergenerational transfer of family farms. The relief will operate in a similar way to the existing relief by reducing for CAT purposes the market value of agricultural land by 90%. In order to qualify for the relief, the assets comprising the gift or inheritance must be agricultural property and a number of conditions must be met by the beneficiary, primarily that he or she qualifies as a farmer. The farmer test has two elements. It is still the case that the beneficiary must meet the assets test, which requires that at least 80% of the beneficiary's assets after taking the gift or inheritance consists of agricultural property. However, the Bill also provides for an extension to the active farmer test to the disposer of a gift or inheritance such that the disposer would now also be required to farm the agricultural property or lease it to an individual who farms the agricultural property for at least six years prior to the date of the gift or inheritance. The beneficiary will continue to be required to meet the six-year active farmer test. The purpose of this is to ensure that family farms continue to be actively farmed and to address concerns that have been raised that the relief is currently being used as a wealth transfer mechanism.

To provide a smooth transition from the old to the new rules, and to ensure taxpayers will not be unfairly excluded from the relief, the traditional arrangements will apply during the first six years of the operation of the relief. Under this transitional arrangement, the disposer will be required to have met the active farmer test only for the period following the introduction of the revised relief. The Department of Finance and Revenue will continue to monitor the operation of the existing relief under the new section once commenced. Therefore, the Minister and I do not see the benefit of the proposed report and I cannot accept the recommendation.

Alice-Mary Higgins (Independent)
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I move recommendation No. 36:

In page 163, between lines 23 and 24, to insert the following:

“Report on private pension tax reliefs

103. 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 the following: (a) an assessment of the cost to the Exchequer, including the cost to the Exchequer of changes to policy in this respect over the past 10 years;

(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 per cent standard rate approach for private pension tax relief in respect of cost to the Exchequer and gender impact.”.

Alice-Mary Higgins (Independent)
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I move recommendation No. 37:

In page 163, between lines 23 and 24, to insert the following: “Report on wealth tax

103. 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, and include in their consideration relevant analysis, including publications of the Parliamentary Budget Office.”.

Jerry Buttimer (Fine Gael)
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Recommendations Nos. 38 and 39 are out of order as they are not relevant to the subject matter of the Bill.

Alice-Mary Higgins (Independent)
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I move recommendation No. 40:

In page 163, between lines 23 and 24, to insert the following: “Report on re-introduction of trade union tax relief

103. The Minister shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on the re-introduction of the trade union tax relief.”.

Recommendation No. 40 relates to a key requirement that Ireland has to meet imminently. It is not solely related to this; it is a recommendation I put forward every budget around the reintroduction of a tax relief for trade union membership. I believe it is a public good to have trade union membership. I commend, in particular, the Irish Nurses and Midwives Organisation, which in its pre-budget submission explicitly named the reintroduction of trade union tax relief as something it was calling for. The removal of this tax relief happened at the time of a number of cuts during the early years of the recession but it has never been reintroduced, even though we have the anomaly whereby people can get tax relief on membership of a professional organisation or business association. Membership of a trade union is still not entitled to a tax relief even though this was a standard practice for a number of years.

This has a new urgency now because Ireland is required in two weeks’ time, by mid-November 2024, to complete transposition of the EU adequate minimum wage directive. Within that directive, there are a number of measures, some of which I spoke about in a Commencement matter earlier today, in terms of Article 5 and the question of what constitutes an adequate minimum wage and, crucially, Article 4 and the importance of promoting and protecting trade union membership and collective bargaining. There are explicit requirements under this directive for all countries that have a trade union membership level of less than 80%. Ireland has a trade union membership level of only 22%, despite research showing that a majority of workers and, particularly, a majority of young workers would like trade union membership and would like to have access to collective bargaining.

However, they face obstacles in respect of such membership. One of those obstacles has been addressed in the Respect at Work campaign, highlighted by a number of unions working together, including SIPTU, Mandate, the Communication Workers Union and the Financial Services Union. It is a powerful campaign. They have put forward legislative proposals. Another obstacle in respect of membership, particularly for younger workers, is partly the cost of trade union membership.

This is another opportunity for the State, which will have to develop an action plan to show the European Union that the Government is serious about raising the level of trade union participation. When we raise the level of trade union participation, it is a benefit for all of society. It has been shown to lead to better outcomes, better employment standards and better wage levels. When we have better wage levels, that of course has a knock-on effect of benefiting the economy and, for example, having fewer people dependent on the benefits designed to address in-work poverty. There are huge numbers of benefits for society as well as the cultural positivity and shift when we have workplaces in which people feel empowered and respected, and can be collectively represented in engagement with their employer. There are numerous benefits to collective bargaining and trade union membership. That is why the directive is explicitly calling on states to develop action plans to encourage it.

It seems to me that one of the lowest hanging fruit, and one of the simplest and first gestures that the State could make in respect of signalling that the State understands trade union benefit and membership to be a public good and something we should promote, would be restoring the trade union tax relief. Again, it was in place for a large number of years but was cut, ostensibly as an austerity measure, despite it being raised year after year not just by me but by others and by unions. I again commend the Irish Nurses and Midwives Organisation on being one of the unions that keeps raising this issue.

Why have we not restored the trade union tax relief? It is surely one of the smallest, most obvious steps that Ireland could take if we are going to try to climb from 22% towards rates of 60% or 70%, or 80% as might be expected under the EU directive.

Paul Gavan (Sinn Fein)
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I support Senator Higgins on this. I am hugely disappointed by this. I am not particularly surprised, but I am hugely disappointed that the EU minimum wage directive, which commits this country to achieving a collective bargaining rate of 80%, will not be implemented on time by this Government. What worries me is that the Government is not proposing any changes in legislation to help that happen. That is because it then will not happen. I see this as an ideological objection on the part of the Fine Gael Party in particular. You either accept that trade unions are a force for good or you do not. I believe passionately as a trade union member that they are a force for good. I have seen them work well. I have had the honour of working for one of them, namely, SIPTU. This is the most reasonable request that has been made year after year, and every year the Department of Finance has rejected it. I firmly believe that is because the Department of Finance and, unfortunately, the Fine Gael Party do not believe that trade unions are a force for good. If they did, they would give them the same recognition as other professional bodies and give tax relief to encourage union membership, which I believe is something we should all be in support of. It is hugely disappointing but it tells us an awful lot about the politics of the Fine Gael Party.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I think it is incumbent to state that quite a number of us in the Chamber are active members of trade unions and would personally benefit from that financially, and I am one of those. Senator Gavan and I have debated the benefits of trade union membership many times previously. I do not think I was ever found wanting on that, which is why I was quite taken by some of these comments. I could talk about the transposition of European directives at length, but I know that Senator Higgins raised that with the current Minister, as is appropriate, this morning.

I wish to speak specifically to this recommendation in two points. First, I do not think the comparison with professional bodies is fair, particularly because the tax reduction for fees paid to professional bodies is available in restricted circumstances only, where those fees are incurred wholly, exclusive and necessarily by an individual in the performance of the duties of his or her employment. This occurs, for example, where there is a statutory requirement for membership of a professional body or where there is a requirement for a practising certificate or licence. Therefore, let us not make that comparison. We can have this debate without having that comparison, which is unfair and out of place.

The tax relief for trade union subscriptions, which was previously provided for under section 472C of the Taxes Consolidation Act, was introduced in 2001 and abolished from 2011 onward. It was in place for just ten years. It was abolished in line with the national recovery plan with a view to widening the tax base. Prior to 2011, the level of tax relief available equated to a tax credit of €70 per annum per trade union member. Do not get me wrong: I would love another €70 per annum if this was to come through and I would benefit from that, as would others.

A number of reviews have examined this tax relief, and all have found that there is no policy rationale for either its continuation or reintroduction. The 2009 Commission on Taxation recommended that the relief be discontinued as membership of a union is not influenced by the value of the tax credit, and there was a significant element of deadweight associated with the relief. A further review carried out by the Department of Finance in 2016 and published on budget day that year found that the reinstatement of tax relief for trade union subscriptions would consist largely of deadweight as it would have little incentive effect on the numbers choosing to join trade unions. It also found that there was no specific market failure that needed to be addressed by such a scheme. The introduction of such a relief was examined again in the 2020 tax strategy group papers.The Department of Finance carried out a further analysis which took stock of matters in relation to the issue of tax relief for trade union subscriptions and set out a number of policy options for consideration. This exercise suggested that, based on certain assumptions about numbers of beneficiaries, the measure could cost at least €36.9 million if reintroduced with the same level of support that existed in 2010. The review found that the findings of previous reviews remained valid in regard to the potentially significant deadweight element that would accompany the measure.

As outlined, consecutive reviews of the measure have found there is not a strong policy rationale for the reintroduction of the relief. The Minister, Deputy Chambers, believes the findings of the reviews remain valid and, accordingly, does not believe a report along the lines requested by the Senator is necessary or warranted.

It is important to allow the facts to speak. Let us not get pulled into the emotion and the wider argument but instead determine what actually matters: the cost and the cost benefit. Unfortunately, the benefit does not exist in this case. After the past four and a half years of engagement, I am really disappointed that Senator Gavan has made a party-political point. I do not believe-----

Paul Gavan (Sinn Fein)
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We are in a political Chamber.

Neale Richmond (Dublin Rathdown, Fine Gael)
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We are in a political Chamber but not necessarily in a party-political Chamber.

Paul Gavan (Sinn Fein)
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I am going to make political points.

Neale Richmond (Dublin Rathdown, Fine Gael)
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That is why I am saying we should remove the emotion in the politics concerning what was a very serious suggestion by Senators Gavan and Warfield. What was referred to was done before. The rationale outlined very clearly by Senator Higgins has merit in the context of the overall rationale for what is being aimed at, but what she desires is not going to be achieved by this measure. That is why it is important to make my point in this debate.

Alice-Mary Higgins (Independent)
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Questions remain concerning the assumptions behind the rationale the Minister of State outlined. He implied there is no policy case although we have a direct public policy imperative to move from 22%. The analyses he referred to are previous to the transposition of the directive. Obviously, it was not regarded as the case that there was a public policy imperative to increase union membership. On what basis was it determined that there would not be an increase? What assumptions underpin that? It is not a fact but an assumption. The suggestion, which was made once and that was lent on to the next report and the next after that, is that we are continuing to assume a change regarding the tax relief will not have a meaningful impact on trade union membership. Such assumptions need to be examined. It is not simply about the amount of money, although the €70 can have a significant role, but it is also about the signal the State would send by valuing and incentivising trade union membership. There are a number of activities, such as cycling, for which there are tax reliefs because they are regarded as public goods. We give grants and so on because they incentivise behaviour we believe to be positive and that sends a very positive signal. There is a push factor, not a pull factor, when the State introduces a tax relief measure in this regard. Now in a new context – that is why the report is relevant now – the directive to be transposed or required to be transposed imminently literally states the State needs to have an action plan to get from 22% to a higher level. An average level of 70% was talked about. Any country below 80% is regarded as having a problem it needs to address and that requires an action plan. Ireland will be in a space where it needs an action plan to get us from 22% right up to 80%, at which point the EU directive will no longer regard us as having a problem with a lack of trade union membership that needs to be addressed. This is a very strong policy incentive and case, and every measure that can be taken should be taken.

With regard to the assumptions being made to the effect that there will be no benefit, there are a few things that happen when the State sends signals that it does not value trade union membership. One example, which we heard from the Respect at Work campaign, concerns multinational companies that came to Ireland in the 1980s and 1990s to set up. These were unionised but the same companies now own other facilities in the State that do not recognise unions. This is attributable to the shift from a mindset in which the State was seen not just by employees but also by employers as actively promoting and expecting the recognition of collective bargaining and support for union membership to a mindset that involves a very active culture of pulling away from these. There are companies that recognised trade unions 15 years ago that have new branches that no longer recognise them. Part of this comes from a culture and signal sent by the Government. Therefore, an important message needs to be sent through this legislation. There is an extremely strong public policy incentive to do what I suggest.

I am confused as to the kinds of measures the Government is planning to come up with. This matter seems to be one of the easiest to address. I am wondering what will populate the action plan the Government will have to come up with and that it states it will publish if something as simple as a tax relief is not to be included. What kinds of measures, including fiscal measures, will be put in place to try to drive trade union membership from 22% to 80%?

A few other legislative ideas have been floated to tackle union busting, which is important, but I respectfully suggest that if the public policy case for what I am suggesting is not recognised, all the factors have not been fully examined in respect of it. I do not know. The assumptions may need to be re-examined, particularly in the context of the changed public policy context entailed by the EU directive.

Neale Richmond (Dublin Rathdown, Fine Gael)
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It is important to come back in on this. There will be wider debates on the directive, and the House had one this morning. Such a debate is important but we are here to speak about the actualities of the Finance Bill and the costs as opposed to wider signals and motives. We are bringing into a debate an emotive aspect that is out of place here. We have had the discussion-----

Alice-Mary Higgins (Independent)
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I have been very clear. I just want to object-----

Jerry Buttimer (Fine Gael)
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The Senator cannot object. She knows well she cannot.

Alice-Mary Higgins (Independent)
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I object to points being characterised as emotive considering that I have been raising them very clearly on a public policy basis.

Jerry Buttimer (Fine Gael)
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I will allow the Senator back in again if she wishes.

Neale Richmond (Dublin Rathdown, Fine Gael)
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If the language is not acceptable to the Senator, I will correct it. This is a very serious debate but we are bringing in a secondary debate on the specifics of the request for a report and a recommendation that I know is made by the trade union movement every year. I have met the movement’s representatives, read the proposal and have said I would happily benefit personally to the tune of €1.20 per week, but the Senator is talking about public policy when I am talking about the rationale for why it is deemed that the proposal would not have an impact. The Senator is taking the answer I gave and raising it in a separate context. I felt it was important to make the point that we are talking about actualities and the importance of actual measures in the relevant context as opposed to signals. I will repeat my point and the information can be sent to the Senator if she wishes. I stated the original Commission on Taxation recommended that the relief available at the time be discontinued as membership of a union is not influenced by the value of the tax credit and there was a significant element of deadweight associated with the relief. I take the Senator’s point on the public policy rationale but I do not believe it is valid in this arena. I stand over that and I will use whatever language I need to use to get that across. I am aware the measure proposed has great support and that there are reasons for proposing it but the reality is that the measure alone, in the form of a tax relief, cannot be justified on the basis of cost and because of the lack of the push it would give toward meeting the Senator’s objective.

Alice-Mary Higgins (Independent)
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I would like to take the Minister of State up on his offer of correspondence on all the relevant reports.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will send all three reports to the Senator.

Alice-Mary Higgins (Independent)
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I move recommendation No. 41:

In page 163, between lines 23 and 24, to insert the following: "Report on aviation fuel tax relief

103. The Minister shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on the phasing out of tax relief for aviation fuel.".

Alice-Mary Higgins (Independent)
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I move recommendation No. 42:

In page 163, between lines 23 and 24, to insert the following: "Report on Knowledge Development Box

103. The Minister shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on the links between the research and development activities supported by tax relief arising from the Knowledge Development Box scheme and research activity in higher education institutions in Ireland.".

Alice-Mary Higgins (Independent)
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I move recommendation No. 43:

In page 163, between lines 23 and 24, to insert the following:

“Report on tax relief policy

103. The Minister shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on measures to improve the

gender and equality impact of policies in respect of tax relief, including comparative analysis on the use of standard or single rate benefits versus marginal rate tax relief and a consideration of the wider use of refundable tax credits.”.

I have touched on some of these other issues and I want to acknowledge the Minister, Deputy Chambers, having addressed certain matters of fact. I may not agree with him but he did address the questions of consideration of gender inequality policies in respect of tax reliefs and expenditures in particular. One issue he did not address was the consideration of the wider use of refundable tax credits and wider use of a review of the comparative benefits of having a single rate versus marginal rate tax reliefs in general. He addressed it in the context of pensions but in general it was a question of looking to a single rating on different tax reliefs. That does not necessarily mean the lower rate. It could mean, for example, a 30% rate which could be applied. The recommendation relates to the single rating on tax reliefs and the issue of refundable tax credits for those on low incomes and asks that those be examined.

As I said, the Minister seems to have indicated that there is a report under way at the moment that is re-examining tax relief expenditure. He indicated that the terms are currently being developed and that it is his intention that this new report on tax relief expenditure, this new research, would look at issues of equality. I ask that those two matters - I have already mentioned gender - of the potential on standard rating and the potential role for refundable tax credits might be considered as part of this research. In this recommendation, I am looking for a separate report, but if those factors could be taken on board within the research that the Minister, Deputy Chambers, has indicated he plans to undertake, that would also be acceptable.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will speak to the two specific points as I know the Senator has had a good discussion with the Minister, Deputy Chambers, already. On the issue of the introduction of refundable tax credits, they could potentially prove to be very costly and provide relatively little benefit to the majority of individuals, including those working full-time and earning at least the national minimum wage, because such workers generally fully utilise their tax credits. Furthermore, refundable tax credits could also have potential behavioural impacts on labour supply and reduce the incentive to work or to take on additional work. Finally, implementing a system of refundable tax credits would result in operational and administrative complexities as well as potentially reducing eligibility for some existing supports for low income thresholds.

On tax reliefs more generally, there are very few tax reliefs at the marginal rate, such as pensions, as were discussed earlier by the Minister, Deputy Chambers. If there is any additional information missing, the Department will undertake to send it to the Senator.

Alice-Mary Higgins (Independent)
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I move recommendation No. 44:

In page 163, between lines 23 and 24, to insert the following:

“Report on weight-based taxation of motor vehicles

103. The Minister shall, within six months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on measures to introduce differential motor vehicle taxation rates based on the vehicle’s weight.”.

This proposes a report to examine differential motor vehicle taxation rates based on weight. This is an approach which has been taken in France, for example. Different approaches are taken on the climate aspects of motor vehicles. Some of it is class-based and emission-type-based taxation. Perhaps one of the more constructive approaches is that which has been taken in France, where they have changed the taxation rate based on the weight of the vehicle. That aims to address the problem of the proliferation of petrol, hybrid, and even in some cases electric, SUVs. The majority of new cars purchased in Ireland are SUVs. That is a crazy situation when we look to the climate impacts. Even if that vehicle may be technically in a different emission class, it nonetheless is a vehicle which, in both its production and its consumption, is worsening our environmental crisis. That is, of course, leaving aside the other costs and damages which SUVs cause on our roads and many other issues. We have a problem whereby the majority of new vehicles are standard SUVs and I suggest this is an approach that may assist in addressing that. It is certainly the approach which has been taken in France.

Neale Richmond (Dublin Rathdown, Fine Gael)
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I will briefly mention two things in a potentially less negative response than usual but couched in the fact that, ultimately, we will not be accepting this recommendation. Obviously, those of with young children know that Isofix is often an influence in getting a larger car, unfortunately, for many of us.

A weight-based tax was discussed as part of this year’s tax strategy group paper on energy and vehicle taxation. The example of France, as cited by the Senator, as well as Norway, were looked at in this context. We know that heavier petrol and diesel vehicles generally pay more because they pollute more but the vast majority moving to hybrids and EVs going forward equate that. That is why it is estimated that an alternative means of taxation will be required to replace the revenue stream going forward and in this and other contexts, a vehicle weight tax is not an unreasonable future tax model. However, the Department believes that this is a matter for the next government and, possibly, the people of Ireland to consider.

Jerry Buttimer (Fine Gael)
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Recommendation No. 45 is out of order as it involves a potential charge on the people.

Jerry Buttimer (Fine Gael)
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Recommendations Nos. 46 and 47 are related and may be discussed together.

Paul Gavan (Sinn Fein)
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I move recommendation No. 46:

In page 178, between lines 6 and 7, to insert the following: “Report on Vacant Homes Tax

114. 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, and to increase the amount of vacant homes tax to be charged by 50 per cent for each year that the property remains vacant.”.

I will speak very briefly to the recommendations. I addressed both of these issues in my Second Stage speech. I hope the Minister of State will acknowledge the fact at the very least that the current policies to tackle derelict homes and vacant properties are simply not working. Senator Maria Byrne and I are both from Limerick and where we live is littered with vacant properties. It is the same throughout the State. Again, there seems to be an ideological reluctance, perhaps on the part of the Fine Gael Party and certainly on the part of the Department of Finance, to tackle this issue. Everyone knows we need further measures. I kind of understand the reluctance, given that conservative parties do not like taxing vacant sites. They need to get over that. We need to see much greater levels of action because the current provisions in respect of residential zoned land tax and vacant home taxes are not working.

Neale Richmond (Dublin Rathdown, Fine Gael)
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It should be noted that the Bill provides for an increase to the rate of the vacant home tax from five times to seven times the property's existing base local property tax rate. This is not exactly a move which one would associate with someone who does not like taxing vacancy, but that is exactly what is being done. The residential zoned land tax is a new tax introduced in the Finance Act 2021 which seeks to increase housing supply by encouraging the activation of residential development on lands which are suitably zoned and appropriately serviced. The principal purpose of the measure is to change the behaviour of the owners of such land, rather than to raise revenue, and to encourage development in areas where the residential zoning of the land acknowledges a housing need. The Senator has proposed reports on various aspects of these two taxes. As with other taxes, Department officials and Revenue continue to monitor these and, if appropriate, the Minister, Deputy Chambers, will be happy to review any of the matters outlined.

Paul Gavan (Sinn Fein)
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The measures the Government is taking will not be enough. They will not deliver the desired effect.That is clear to us. I contrast that with the Sinn Féin proposals. For example, we would transfer responsibility for the derelict sites levy to Revenue. That is just a common sense move that has been resisted by the Government. We believe a new vacant sites tax should be set at 7% in year 1 after the transfer and increased by 50% for each year the site is left vacant. We would also increase the vacant property tax to 1% of the market value of the property and increase it annually by 50%. We need to do much more. The current measures are not working.

Neale Richmond (Dublin Rathdown, Fine Gael)
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The vacant homes tax is only one part of a much broader suite of measures. The Minister for Housing, Local Government and Heritage launched a vacant homes action plan in January 2023 and a progress update was published in April. This document outlines the progress that has been made in addressing vacancy, along with the actions being pursued to return as many vacant and derelict properties as possible to viable use. This is about using the carrot as well as the stick.

The vacant property refurbishment grant has seen more than 10,000 applications, of which 6,730 have been approved and more than 867 grants paid out as of the third quarter of this year. This scheme coupled with others such as the ready to build scheme under the Croí Cónaithe towns fund provides financial incentives. The €150 million urban regeneration development fund has been made available to local authorities to acquire vacant or derelict properties and more than 1,200 vacant or derelict properties have now been identified and approved under call 3 of the fund, with an estimated residential yield of more than 5,400 homes. Further areas include the compulsory purchase order activation programme and the local authority purchase and renovation loan.

Paul Gavan (Sinn Fein)
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The Minister of State mentioned the carrot and stick approach. He needs a much bigger stick.

Paul Gavan (Sinn Fein)
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I move recommendation No. 47:

In page 190, after line 40, to insert the following:

“Report on Residential Zoned Land Tax

115. The Minister shall, within 3 months of the passing of this Act, prepare and lay before

Dáil Éireann a report on the Residential Zoned Land Tax and the effect it has had on the

socially damaging practice of land hoarding.”.

Jerry Buttimer (Fine Gael)
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When it is proposed to take Report Stage?

Garret Ahearn (Fine Gael)
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Now.

Jerry Buttimer (Fine Gael)
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Is that agreed? Agreed.

Jerry Buttimer (Fine Gael)
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When is it proposed to take Fifth Stage?

Garret Ahearn (Fine Gael)
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Now.

Jerry Buttimer (Fine Gael)
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Is that agreed? Agreed. I welcome to the Public Gallery guests of our colleague and friend, Deputy Marc MacSharry. As Senator Joe O'Reilly says, he is an alumnus of this wonderful Chamber. We wish Deputy MacSharry every success in the next chapter of his life and welcome his guests this evening.

Jerry Buttimer (Fine Gael)
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Will the Senators claiming a division please rise?

Jerry Buttimer (Fine Gael)
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As fewer than five Members have risen I declare the question carried. In accordance with Standing Order 61 the names of the Senators dissenting will be recorded in the Journal of the Proceedings of the Seanad.

Jerry Buttimer (Fine Gael)
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When is it proposed to sit again?

Lisa Chambers (Fianna Fail)
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Tomorrow morning at 9.30.