James Geoghegan (Dublin Bay South, Fine Gael)
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61. To ask the Minister for Finance if he can provide an update in respect of measures proposed in the report of the Commission on Taxation and Welfare relevant to his Department; and if he will make a statement on the matter. [15838/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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‘Foundations for the Future’, the Report of the Commission on Taxation and Welfare, was published in September 2022. The report is wide-ranging and contains 116 recommendations relating to the future of Ireland’s taxation and welfare systems.

In its terms of reference 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. The Commission clearly set out in its report that the recommendations are not intended to be implemented all at once, but rather provide a clear direction of travel for future Governments around how the sustainability of the taxation and welfare systems may be improved in a fair and equitable manner.

I would also like to acknowledge the work on the Committee on Budgetary Oversight which examined the work of the COTW and that committee’s report, which was laid before the Dáil last year, provides valuable insight and a number of additional recommendations to be considered alongside the COTW report itself.

A number of legislative actions, reports and reviews have been undertaken in my Department since the publication of the COTW report. These actions include a review of Ireland’s personal tax system and a review of share-based remuneration and several legislative changes arising have also been made in recent Finance Acts including changes to Capital Gains Tax Retirement Relief and Capital Acquisitions Tax. A new capital gains tax relief for angel investors aimed at leveraging investment in innovative SMEs has been implemented.

In October 2024, my predecessor published the ‘Funds Sector 2030: A Framework for Open, Resilient & Developing Markets’, a wide-ranging review of the funds and asset management sector. The Review fulfilled two of the recommendations of the Commission on Taxation and Welfare 2022 report. The Report arising from the Review sets out a series of recommendations to ensure that, in pursuit of continued growth in the funds and asset management sector, Ireland’s funds sector framework remains resilient, future-proofed, supportive of financial stability and a continued example of international best-practice. Officials in my Department are reviewing these recommendations and related follow on actions, which I will consider in due course.

My Department is also focused on and committed to improving how Tax Expenditures are reported and evaluated. Officials have worked closely with Revenue to implement COTW recommendations in this area. The Department committed in 2022 to a formal review of the 2014 Tax Expenditure Guidelines and arising from this, the Tax Expenditure Evaluation – Updated Guidelines were published in October 2024 and set out best practice for the evaluation and reporting of tax expenditures.

In addition to the updating of the Guidelines, officials have undertaken a significant amount of work to improve the Department’s Annual Report on Tax Expenditures. Data availability, enhanced reporting and transparency are key for evaluation. Details of a forthcoming publication, the tax expenditure ‘passport’, are contained in the Guidelines. This new publication will further help improve transparency in the reporting of tax expenditures.

In relation to progress on recommendations relating to indirect taxes, 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. The annual increases in the carbon tax have been implemented to date as legislated for in Finance Act 2020. A phased removal of the diesel excise gap as well as other fossil fuel subsidies in the road transport sector was also examined in the 2024 Tax Strategy Group Paper, Energy and Vehicle Taxation. Finance Act 2024 introduced an emissions-based VRT system for category B vehicles (generally light commercial vehicles) which will apply from 1 July 2025.

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 2025 provided the highest increase in excise, at a rate of €1 on 20 pack cigarettes in the Most Popular Price Category (MPPC). Additionally, legislation for E-Liquid Products Tax (EPT) was enacted in Finance Act 2024 and is subject to commencement by Ministerial Order. I expect to commence EPT later this year.

In relation to Corporation Tax, a participation exemption for foreign dividends was introduced into the Irish Corporate Tax System in Finance Act 2024. This measure will greatly simplify cross-border double tax relief, and work will take place this year to consider expanding the geographic scope of the rules.

As announced in Budget 2025, a review of the R&D tax credit is currently being undertaken as part of the regular schedule of tax expenditure reviews.

The Commission also recommended that revenues deriving from Local Property Tax (LPT) should increase to form a substantially larger share of total revenues. On Tuesday, Government approved proposals to moderately increase LPT charges, with yield projected to increase by approximately 8% in 2026 as a result.

The Commission further recommended that an 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. The rate of VHT payable has since been increased twice, most recently in Finance Act 2024, with the tax applying at a rate of seven times a property’s base LPT charge with effect from the chargeable period that commenced on 1 November 2024. VHT is payable in addition to LPT on properties which are occupied for less than 30 days in a 12-month period.

Consistent with the Commission’s recommendations two long term funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund were commenced in August of last year. These funds aim to safeguard & protect future State investment in public services & infrastructure. These new funds enable the State to deal with future challenges and expenditure pressures, while, at the same time minimising the risk of using volatile windfall taxes to fund permanent spending.

Considerable progress has been made on many areas of the Commissions work and the Commission’s Report will continue to provide a clear direction of travel for this and future Governments.