Pearse Doherty (Donegal, Sinn Fein)
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107. To ask the Minister for Finance if he will commit to postponing scheduled increases in the carbon tax in light of the cost-of-living pressures that households continue to face; and if he will make a statement on the matter. [28567/24]

Jack Chambers (Dublin West, Fianna Fail)
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The Government is conscious of the implications of fuel costs for all sectors of society. This is reflected in the fact that in 2022, in light of the acute impact rising prices were having on households and businesses, the Government provided for temporary cuts in excise rates which, inclusive of VAT amounted to 21 cents, 16 cents and 5.4 cents per litre on petrol, auto-diesel and marked gas oil, respectively.

These temporary cuts to excise rates were initially due to end on 31 August 2022, but following review and monitoring of fuel prices, were extended until February 2023, with a phased restoration of rates occurring in June and September 2023. A final restoration of excise rates was due to take place on 31 October 2023, but Budget 2024 provided for further extension until 31 March 2024, with phased restoration occurring in April and August 2024. The first of these restorations took place on 1 April 2024 adding 4 cent per litre to petrol, 3 cent to auto diesel and 1.7 cent to MGO.

Carbon tax rate increases on petrol and auto-diesel are legislated to occur on 9 October 2024 when the rate of carbon tax will increase from €56 to €63.50 per tonne of carbon dioxide emitted. This will add 2.1 cent per litre of petrol and 2.5 cent per litre of auto diesel, VAT inclusive. Carbon tax increases are implemented annually under the 10-year carbon tax trajectory that was introduced in Finance Act 2020. The 2020 Programme for Government committed to increasing the amount that is charged per tonne of carbon dioxide emissions from fuels to €100 by 2030, and the 10-year trajectory of carbon tax increases delivers on that commitment. The commitment also features as one of the nine reform measures in Ireland’s National Recovery and Resilience Plan.

It is important to note that a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society but also in the long term, will mitigate fuel price impacts by reducing our reliance on fossil fuels.

In the long run the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them. We will achieve this through the progressive decarbonisation of Irish society and through the steps that will be taken to meet the Government’s commitment to reach net zero greenhouse gas emissions by 2050. The carbon tax has an important role to play in this area, therefore the Government has no plans to postpone scheduled increases.

Brendan Smith (Cavan-Monaghan, Fianna Fail)
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109. To ask the Minister for Finance if the Revenue Commissioners have been engaging with farmers and farming organisations in relation to VAT requirements; and if he will make a statement on the matter. [28622/24]

Michael Moynihan (Cork North West, Fianna Fail)
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121. To ask the Minister for Finance his plans to review the VAT treatment of farmers; and if he will make a statement on the matter. [28505/24]

Jack Chambers (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 109 and 121 together.

The Deputy should note at the outset that the VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT Directive, farmers can elect whether or not to register for VAT in respect of their farming business, and each farmer’s decision on this matter affects how VAT incurred on their inputs is treated.

Under VAT law, farmers can avail of the Flat-rate Farmers Scheme and remain unregistered for VAT. The scheme allows unregistered farmers to add and retain a percentage charge (known as the “flat-rate addition”) onto the amount they invoice VAT-registered businesses whom they supply with agricultural goods and services in the course of their farming business.

However, in addition to the compensation for flat-rate farmers provided by the Flat-rate Scheme, Irish VAT law also permits flat-rate farmers to reclaim VAT they incur on some particular business expenditure, as set out in the 2012 Refund Order. The Refund Order is permitted under EU law, subject to certain conditions, including that its scope is not extended. This means that the order may not be altered to permit refunds of VAT incurred on farming business costs that are not currently provided for in the order.

I am advised by Revenue that they can only administer the refund order according to the legislation as enacted. Revenue will continue to monitor refund claims for new and innovative products as they are received but can only refund expenditure that is within the scope of the legislation.

Revenue has engaged with the farming sector on the VAT Refund Order (ICMSA and IFA). Revenue officials also attended the Joint Oireachtas Committee on Agriculture, Food and Marine on 8 May.

Following a review of submissions from the representative groups, Revenue published a Tax and Duty Manual on 4 June 2024 to provide guidance on the Refund Order. The manual outlines how VAT can be reclaimed under the Order, the conditions under which VAT may be reclaimed, the types of expenditure on which VAT can be reclaimed, and the information required to make a claim.

Finally, it should be noted that it is always open to a farmer to elect to register for VAT in respect of their farming business and claim a full deduction for the VAT they incur on their business costs, subject to rules on deducibility.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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110. To ask the Minister for Finance whether in the forthcoming budget he will consider introducing a millionaires' tax on the wealthiest 5% of households, whose average wealth is in excess €4 million each, excluding family homes as progressive replacement for the local property tax; and if he will make a statement on the matter. [28564/24]

Jack Chambers (Dublin West, Fianna Fail)
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The Local Property Tax (LPT) was introduced in 2013 to provide a stable and sustainable funding base for local authorities and is a significant base-broadening measure. LPT has yielded over €5 billion since its introduction, with a yield of over €550 million for 2023.

LPT broadens the tax base and reduces the level of central funding required by local government, freeing up resources for expenditure in other areas. LPT is an essential source of funding for local authorities, accounting for approximately 7% of current income.

All property owners benefit from the essential local services LPT helps to fund. The proper functioning of these services benefit every community and household. Therefore, it is equitable that the cost of providing the services should be shared as broadly across property owners as possible.

In relation to replacing LPT with a tax on high-wealth households, the taxation of property through a recurring annual tax is less economically distortionary than tax imposed on either income or capital. The LPT provides a stable source of funding which is fair and progressive with the owners of the most valuable properties paying most. The tax is equitable, has reference to ability to pay, conforms to international norms and significantly broadens the domestic tax base.

For the reasons outlined, I do not plan to replace the LPT with a tax along the lines suggested by the Deputy.

It should also be noted that there are already a number of wealth taxes in place in Ireland, including the aforementioned Local Property Tax, Capital Gains Tax (CGT), and Capital Acquisitions Tax (CAT). Certain forms of Stamp Duty also act as taxes on wealth charged in a number of ways, including on the acquisition of shares, stocks and marketable securities of Irish registered companies, and on the acquisition of property both residential and non-residential.

In total, the net receipts from these forms of tax came to just under €4.2 billion in 2023.

A 2022 report from Commission on Taxation & Welfare identified challenges that would impede the implementation of a specific wealth tax. They found that a new tax on net wealth should not be introduced without in the first instance attempting to substantially amend Ireland’s existing taxes on capital and wealth. Rather than introducing a specific tax on wealth, the Commission maintains that it would be more effective to re-examine the primary existing forms of wealth tax, CGT and CAT. These are taxes on wealth that have well-established, but distinct, bases and are well-understood in their operation.

The Government has also taken action against inequality through our tax and welfare system. The strong redistributive role of the Irish tax and welfare system is evident in the range of supports that were introduced to help mitigate the impact of the Covid-19 pandemic and in the series of measures designed to limit the impact of the current cost of living pressures. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI.

Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country. The current structure of the income tax system operates as an effective means of income redistribution, helping to reduce the comparatively high levels of market income inequality to around the EU average.

It is projected that the top one per cent of taxpayer units, who are those with annual income in excess of €290,000, will pay just over 24 per cent of total Income Tax and USC in 2024. This is a very large proportion of the total Income Tax and USC take from such a small cohort of taxpayers. In comparison, 80 per cent of taxpayer units, which is the cohort of income earners with annual income of less than €69,500 and account for about 2.74 million taxpayer units, will pay 21 per cent of total Income Tax and USC.

Therefore, I do not have immediate plans to introduce another wealth tax in addition to those set out above. However, as with all areas of tax policy, the taxation of wealth, will be kept under review throughout the annual budgetary process.

Joe Flaherty (Longford-Westmeath, Fianna Fail)
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112. To ask the Minister for Finance if he will be introducing new tax measures to help hospitality businesses; and if he will make a statement on the matter. [28481/24]

Jack Chambers (Dublin West, Fianna Fail)
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As the Deputy will be aware, the 9 per cent VAT rate was applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5 per cent rate. The 9 per cent rate was introduced on 1 November 2020 in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic.

The economic rationale for a VAT rate reduction at that time, as it was in 2011 when it was also reduced to 9 per cent, was to lower consumer prices, encouraging higher demand, more output and an increase in employment.

Despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases, the real disposable income of households should recover and support consumer spending. As a result, households are on a stronger financial footing and this will support demand for contact-intensive services including the tourism and hospitality sectors.

In relation to employment, between the end of 2020 when the 9 per cent rate was re-introduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record high of 2.71 million, an increase of over 17 per cent. The Q4 2023 Labour Force Survey indicated that employment in the accommodation and food service sector stood at 183,000.

It is noteworthy that 14 EU countries have a VAT rate of 12 per cent or higher on food services. Our nearest neighbour Great Britain and Northern Ireland has a VAT rate of 20 per cent on food services.

It is important to remember that VAT reductions, even temporary VAT reductions, have a cost to the Exchequer. The estimated cost of the 9 per cent VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a very substantial support by the Government to the hospitality and tourism related sectors.

The cost of a further temporary VAT reduction to 9 per cent for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million.

The Government wants to maintain a healthy and profitable environment for these sectors going forward. However, in making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.

The Deputy will also be aware that, on 5 February, my predecessor, Minister McGrath announced changes to the tax debt warehousing scheme including a reduction in the interest rate on warehoused debt to 0 per cent which, amongst other sectors, will assist businesses in the tourism and hospitality sectors.

The Government has provided significant support to business throughout the period of increasing costs and Budget 2024 contained a number of measures which will support businesses facing increased costs, including the Increased Cost of Business (ICOB) grant, which aims to provide financial support to small and medium sized businesses who operate from a rateable premises, at a cost of €257 million. The grant will be at a rate of half an enterprise’s commercial rates bill, for 2023, for firms paying up to €10,000 in rates. A flat €5,000 grant will be available to firms who pay between €10,000 and €30,000 in rates.

Broader supports for SMEs which were announced in Budget 2024 include the extension of the 9% VAT rate on gas and electricity from end-October 2023 to end-October 2024.

In addition, the Deputy may have noted the wide range of measures brought forward by my colleague, the Minister for Enterprise, Trade and Employment, announced on 15 May. Details of these measures can be found at the following link:

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Finally, the Deputy should note that any decisions about tax measures to help the hospitality sector is a matter for consideration as part of the Budget 2025 process.