Aengus Ó Snodaigh (Dublin South Central, Sinn Fein)
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70. To ask the Minister for Finance his views on the introduction of an 80% windfall tax on land rezoned from industrial to residential use; the estimated impact of such a tax on land value capture, land hoarding, land development and residential house prices; his further views on the best way to capture the increased land values from such rezoning from both land sales and from property sales; and if measures such as windfall taxes can be geographically specific, that is, parcels of land rezoned from industrial to residential as proposed by Dublin City Council and South Dublin County Council. [4451/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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As the Deputy is probably aware, the National Asset Management Agency Act 2009 amended the Taxes Consolidation Act 1997 by providing for an 80% windfall tax on profits or gains arising from disposals of development land, to the extent that those gains were attributable to a relevant planning decision. Profits or gains from these activities that were not attributable to a relevant planning decision were taxed in the normal way. Section 31 of Finance Act 2014 repealed the 80% tax rate on these profits or gains with effect from 1 January 2015.

I have signalled in the past my concerns regarding the re-introduction of a windfall tax. These were on the basis that the re-introduction of a windfall tax on a similar basis is likely to act as a disincentive to landowners to dispose of such property. In addition, the existence of the levy may discourage landowners from seeking planning permission for specific sites. Currently most sales of land or property are subject to CGT at 33 per cent.

1) The extent to which any windfall tax may affect land hoarding, land development or indeed residential house prices is likely to be determined by its design, its scale, scope and the rate applied. In the absence of such detail it would be difficult to comment on its potential impact. Indeed if such a tax was introduced it would be some time before it would be possible to consider its effectiveness or impact.

(1) As regards capturing any increased land value from rezoning, it is understood that such measures can be a combination of either specific taxes or fees, levies or charges which could be used for specific development purposes. There are also forms of development based land value capture, which aims to capture revenues from the development of the land and return the benefit to state or local authorities. As with any consideration of windfall levies if such or indeed other measures were to be implemented to capture increased land value from rezoning they would need careful analysis in their development, design and implementation.

It is not clear as to the policy basis a windfall tax would be introduced only for industrial sites identified in Dublin City Council and South Dublin City Counsel. The advice of the Attorney General on the constitutionality of a windfall tax based on geographic location would be necessary.

(1) The introduction of any tax changes by themselves such as a windfall tax would not be the solution to resolving issues with the housing market and the supply of new homes. There is significant past experience, which suggests that tax changes by themselves have the potential to create distortions, create perverse incentives and may not lead to a desired outcome of increasing the supply of residential property.

Finally I would point to the operation of the Land Development Agency (LDA). One of the key aims of the agency is to drive strategic land assembly for the long-term by introducing new mechanisms for working with both public and private sector land owners, by stabilizing land values, flattening extreme peaks and troughs and driving increased affordability through better land availability. The LDA will, in effect, be the State’s tool for actively managing development land.

Michael Healy-Rae (Kerry, Independent)
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71. To ask the Minister for Finance if he will address a matter regarding the taxes levied on the pension of a person (details supplied); and if he will make a statement on the matter. [4470/20]

Paschal Donohoe (Dublin Central, Fine Gael)
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I am advised by Revenue that it was informed by the Department of Employment Affairs and Social Protection (DEASP) that the person’s State Contributory Pension payment increased by €5 per week with effect from 6 January 2020.

In situations where a person has both a private pension and a State Contributory Pension from DEASP, the tax due on the latter (DEASP payment) is achieved by reducing the annual tax credits on the former (private pension) by the value of the DEASP payment.

For example, an increase of €5 per week in a DEASP payment means that tax on an additional €260 is to be collected over the course of the year by reducing a person’s tax credits. €260 extra income at the standard rate of tax of 20% gives rise to a reduction in tax credits of €52 for the year or €4.34 per month.

The person’s private pension provider applied the revised tax credits and rate band to the private pension payment of 1 March 2020 and, consequently, additional income tax was deducted on a cumulative basis back to the beginning of 2020.

While reviewing the person’s overall tax position, it was noted by Revenue, based on available information, that the person had not received his full credit entitlements. Revenue has adjusted his tax record to take account of additional tax credit and rate band entitlements and this has been reflected in his subsequent private pension payments. Revenue is satisfied that the correct tax is now being deducted from the person’s private pension.