David Cullinane (Waterford, Sinn Fein)
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108. To ask the Minister for Finance the estimated full year cost of the domestic retrofit tax incentive. [38710/19]

Paschal Donohoe (Dublin Central, Fine Gael)
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There is currently no domestic retrofit tax incentive. As part of the annual Taxation Strategy Group (TSG) process undertaken by officials from my Department earlier this year, a proposal for an income tax incentive measure to encourage domestic retrofits was examined and published within the Climate Action and Tax paper. This examination was prompted by the publication of the All of Government Climate Action Plan in June 2019, where it was noted that the built environment accounted for 12.7% of Ireland’s Greenhouse Gases in 2017.

The paper sought to identify the potential cost of a domestic retrofit tax incentive and to explore the factors that might need to be taken into account in the event that such an incentive was to be considered. The design model used for this purpose was the Home Renovation Incentive (HRI) which expired on 31 December 2018 in accordance with its sunset clause.

Briefly, it was suggested in the TSG paper that the proposed incentive might operate as follows:

- The measure would be targeted at domestic properties with a BER rating of B3 or less;

- Participants in the scheme would be able to claim an income tax credit for expenditure on certain qualifying works;

- The credit would amount to a specified percentage (13.5%) of the total qualifying expenditure (excluding VAT) on the qualifying works, and would be claimed over a 2 year period subsequent to the year in which the works were paid for;

- These works would have to be carried out on a qualifying property by a qualifying contractor.

Qualifying works would include wall insulation, attic insulation, floor insulation, window/door upgrades, ventilation systems; renewable energy (heat pumps, solar panels), etc.

It was assumed that if an individual receives a grant for qualifying work, then the total ‘qualifying expenditure’ under the incentive would be reduced by an amount equal to the grant amount.

Among other things, the paper also examined the potential cost of meeting the target set out in the All of Government Climate Action Plan of completing 50,000 building retrofits per annum to achieve a B2 BER up to the year 2030. Using certain assumptions, it was estimated that the annual tax cost could be of the order of €40 million per annum.

The paper was published on my Department's website and is available at the following link:

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