Tuesday, 22 November 2016
Department of Finance
162. To ask the Minister for Finance the reason it was decided to commence the help-to-buy scheme on 19 July 2016 in view of the fact that the tax year begins on 1 January; and if he will make a statement on the matter. [35879/16]
The commencement date for the Help to Buy scheme of 19 July 2016 was chosen as it was the date of the launch of 'Rebuilding Ireland - Action Plan for Housing and Homelessness', in which the development of such a scheme for inclusion in the Budget was initially announced. The intention to backdate this tax incentive to this date was announced at that time with a view to avoiding any potential interruption in house sales, by purchasers who may otherwise have deferred purchases, pending the commencement of the incentive.
It is not unusual for legislative changes to the tax code to come into effect on dates other than the 1st of January. This can occur when for example, State Aid approval is received from the European Commission, or to commence a change with immediate effect, such as certain Budget day changes. In this case, the date of the commencement was the date when individuals first would have become aware that the Government would be bringing forward an incentive, and it could have affected purchasing decisions.
I am advised by Revenue that the 2015 Budget increases to the Income Tax standard rate band thresholds and the reduction in the higher Income Tax rate from 41% to 40% generated an estimated first and full year cost to the Exchequer of €292 million and €405 million respectively. Due to the nature of the interaction between the two Income Tax components within this package, it is not possible to identify the specific cost of the increase to the income tax thresholds. These estimated costs were published in the 2015 Budget Book.
Regarding Budget 2016, the estimated first and full year costs to the Exchequer from the changes to employers' PRSI threshold were in the order of €6 million and €7 million respectively. The estimated first and full year costs to the Exchequer from the changes in the threshold, rates and bands related to Universal Social Charge (USC) were in the order of €561 million and €772 million respectively.
In relation to the cuts to Capital Gains Tax, it is assumed the Deputy is referring to the revised Entrepreneur Relief announced in Budget 2016. I am advised by Revenue that the estimated cost of the introduction of this relief was estimated at that time at €25m and €27m on a first and full year basis respectively as published in the 2016 Budget Book.
Regarding Budget 2017, the estimated first and full year costs to the Exchequer from the changes in USC rates and bands were in the order of €335 million and €390 million respectively. The estimated first and full year cost to the Exchequer from the increase in the Earned Income Credit from €550 to €950 is in the order of €33 million and €58 million respectively. In relation to Capital Acquisition Tax inheritance tax changes, it is assumed the Deputy is referring to the increase in thresholds. The estimated cost of these changes was estimated at the time to be in the region of €22 million on a first year basis. These estimated costs were published in the 2017 Budget Book.