Brendan Griffin (Kerry, Fine Gael)
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144. To ask the Minister for Finance if he will reduce the rate of VAT on residential construction to incentivise the building of new homes; if he will consider further measures to reduce the tax burden on the development of new living units; and if he will make a statement on the matter. [3046/23]

Michael McGrath (Cork South Central, Fianna Fail)
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The VAT rating of goods and services is subject to the requirements of EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate (currently 23% in Ireland), unless they fall within the categories of goods and services specified in Annex III of the VAT Directive, in respect of which Member States may apply a lower rate of VAT.

Following amendments to Annex III of the VAT Directive, agreed in April 2022, a limited number of categories within Annex III of the VAT Directive now permit a zero rate. However, it is not possible to apply a zero rate to construction of any kind.

Ireland already applies a reduced rate of 13.5% to all construction, including new builds. It is not possible under the VAT Directive to provide separate VAT treatment for new builds in comparison to other forms of residential construction. In addition, there is no obligation for any VAT reduction to be passed to the final consumer.

In addition, the Deputy should note that while, it is possible for Ireland to apply the 9% reduced VAT rate to the supply and construction of housing, as part of a social policy and to the repair and renovation of residential housing, it is not possible to apply the 9% rate to non-residential construction.

Thus, if a 9% VAT rate was applied to the construction of new residential properties, this would require the application of two separate VAT rates to different construction services. Revenue has indicated that this would be very difficult to administer and could lead to accidental or fraudulent underpayments of VAT, where an underpayment of VAT may arise in the construction of an apartment block. The apartment block may for instance be classed as purely residential in order to avail of a reduced rate of 9% and then subsequently become a mixed-use block with a commercial/retail element on the ground floor. Revenue believe that policing the measure would be difficult and could result in fraudulent behaviour.

Neasa Hourigan (Dublin Central, Green Party)
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146. To ask the Minister for Finance if he will outline the international tax guidelines for large-scale private investment funds that seek to invest in Ireland’s natural resources; and if he will make a statement on the matter. [2982/23]

Michael McGrath (Cork South Central, Fianna Fail)
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I understand, following clarification from the Deputy’s office, that the Deputy is looking for further information on processes where a State body engages with investment from large-scale international private investors in our national strategic resources or infrastructure, with reference to recent reports of investments in Irish forestry.

Policy responsibility for the development of forestry in Ireland is within the remit of the Minister for Agriculture, Food and the Marine and of course Coillte.

I understand that the issue referred by the Deputy arises in the context of the plan to expand forest cover in Ireland to meet climate change targets.

In the context of this issue, I can outline the role of the Ireland Strategic Investment Fund (ISIF). ISIF's statutory mandate is what it refers to as a “double bottom line” mandate of investing for a commercial return and investing to support economic activity and employment in Ireland. ISIF has disclosed that it is investing €25m in the referenced project. It is anticipated that this will form part of a wider €200m fund, which will acquire land from farmers and private landowners who wish to sell to the fund at market rates.

ISIF has also informed me that its investment is part of both its Food & Agriculture and wider €1bn climate action investment programme, complementing its existing investments in forestry, renewable energy, energy efficiency and energy storage, and generating further progress in Ireland’s transition to a Net Zero economy.

ISIF complies with all applicable laws including tax law. The tax treatment of the Fund is set out at note 6 on page 189 of the NTMA’s 2021 Annual Report, which is published on www.ntma.ie.