Patrick Costello (Dublin South Central, Green Party)
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187.To ask the Minister for Finance for an update on the implementation of each of the recommendations outlined in the 2022 Commission on Taxation and Welfare Report: Foundations for the Future; and if he will make a statement on the matter. [25166/24]

Michael McGrath (Cork South Central, Fianna Fail)
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The Commission on Taxation and Welfare (the Commission) was established in April 2021 as a result of a commitment in the Programme for Government. The Commission was asked to independently consider how best the taxation and welfare systems can support economic activity, and promote increased employment and prosperity while ensuring that there are sufficient resources available to meet the costs of the public services and supports in the medium and longer term.

‘Foundations for the Future’, the Report of the Commission on Taxation and Welfare, was published in September 2022. It is a wide ranging report that contains 116 recommendations relating to the future of our taxation and welfare systems.

The Commission’s recommendations are significant and wide ranging. It is clearly set out in the Commission’s report that the recommendations are not intended to be implemented all at once, but rather provide a clear direction of travel for this and future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner.

Notwithstanding this express medium to long term view, since the publication of the report my Department has examined the Commission’s recommendations in detail, in particular those relating to taxation, and has taken a number of actions.

For example, my Department conducted a review of Ireland’s personal tax system which was published with Budget 2024. In addition, as recommended by the Commission, my Department is conducting a wide-ranging review of the funds sector under the broad and interlinked themes of “Open Markets, Resilient Markets and Developing Markets”. A public consultation has been completed and a wide range of research, analysis and stakeholder engagement has been undertaken.

My Department is also currently undertaking a review of share-based remuneration which will include further consideration of recommendations made by the Commission on this topic.

Outside of these reviews, a number of legislative amendments have been made which incorporate some of the recommendations of the Commission. For instance, with regard to taxes on capital and wealth, Finance (No. 2) Act 2023 implemented a recommendation from the Commission to introduce a limit on retirement relief on the disposal of businesses and farms to children up to the age of 66. That Act also amended legislation to ensure foster children can avail of the group B capital acquisitions tax threshold based on their relationship to their foster parents. The Act also.

In relation to supporting enterprise and in particular small and medium enterprises (SMEs), the Finance (No. 2) Act 2023 implemented a number of enhancements to the Employment Investment Incentive (EII). A review of this incentive is currently underway. That Act also provided for a new capital gains tax relief for angel investors.

In line with a recommendation of the Commission, Finance (No. 2) Act 2023 also saw an amendment was made to the taxation of rights to acquire shares options or other assets. This amendment moved the obligation to account for the tax due on these rights from the self-assessment system to the Pay as You Earn (PAYE) system.

The Commission recommended that a Local Property Tax (LPT) surcharge should be introduced for vacant properties. Finance Act 2022 introduced a new Vacant Homes Tax (VHT), charged at a multiple of a property’s base LPT charge. Last year, in Budget 2024, I announced an increase in the rate of VHT from three to five times a property’s base LPT charge. VHT is payable in addition to LPT on properties which are occupied for less than 30 days in a 12-month period.Finance Act 2022 also saw the implementation of changes to the Key Employee Engagement Programme (KEEP).

The annual increases in the carbon tax have been implemented to date as legislated for in Finance Act 2020. The most recent increase occurred for motor fuels in October 2023 and for all other fuels from 1 May 2024. The rate is now €56 per tonne of carbon dioxide. The Government is committed to increasing the amount that is charged per tonne of carbon dioxide emissions from fuels to €100 by the end of this decade as recommended by the Commission. A phased removal of the diesel excise gap as well as other fossil fuel subsidies in the road transport sector was examined in the 2023 Tax Strategy Group Paper on Climate Action and Tax.

The introduction of an emissions-based tax regime for light goods vehicles (VRT Category B) will be explored in greater detail in the 2024 Tax Strategy Group Paper as part of the policy objective to redesign vehicle taxes in the medium to long term to support environmental objectives and ensure the maintenance of tax revenues.

In relation to the use of taxation in promoting public health, excise duty on tobacco products has increased consistently over the past decade and Budget 2024 provided the highest increase in excise, at a rate of €0.75 on 20 pack cigarettes in the Most Popular Price Category (MPPC). Additionally, I announced in Budget 2024 my intention to introduce a domestic tax on e-cigarette liquids in Budget 2025.

The Department is focused on and committed to improving how tax expenditures are reported. My officials have been working closely with Revenue to implement recommendations from the Commission on Taxation and Welfare Report in this area.

The Department now holds a master list of tax expenditures which is used by the Department for budgetary planning and by Revenue for statistical reporting and transparency purposes.

In addition, the Department has been working on updating their Guidelines for Tax Evaluation, which will include a strategic plan for future tax reviews to cover all tax expenditures. The updated Guidelines on Tax Expenditures will be published over the coming months and will address many of the recommendations of stakeholders.

In Budget 2024 I announced two major new funds to help protect living standards and public services into the future as these funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund are in line with the Commission’s recommendation to utilise excess corporation tax receipts.

With regard to roadmaps and feedback statements, a Roadmap for the Introduction of a Participation Exemption to the Irish Corporate Tax System was published in September 2023, and a feedback statement on the development of a participation exemption for foreign dividends was published in April 2024.