Committee on Budgetary Oversight debate

Report of the Commission on Taxation and Welfare: Discussion (Resumed)

Chairman

All those present in the room are asked to exercise personal responsibility to protect themselves and others from the risk of contracting Covid-19. In the first session tonight, I welcome Ms Rose Mary McDonagh, Mr. Shane Whelan and Mr. Tim Cullinan from the Irish Farmers' Association; Mr. John Kennedy and Mr. Pat Davitt from the Institute of Professional Auctioneers and Valuers and Ms Mary Conway and Mr. Tom O'Brien from the Irish Property Owners Association. This is our second meeting on chapters 6, 7, 8 and 14 of the report by the Commission on Taxation and Welfare.

Before we begin, I must explain some limitations to parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected, pursuant to both the Constitution and statute, by absolute privilege. Witnesses are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in respect of an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

I remind members of the constitutional requirement that they must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I invite Mr. Cullinan, from the Irish Farmers Association, to make his opening statement.

Mr. Tim Cullinan

I thank the Chair and members for inviting the IFA to address the committee. I am joined by Ms Rose Mary McDonagh, chair of the IFA farm business committee, and Dr. Shane Whelan, IFA farm business policy executive.

As the oldest and largest indigenous industry, the agriculture sector has been the foundation stone on which economic activity and employment, both upstream and downstream, has been built in towns and villages throughout rural Ireland. Many Governments have prioritised agriculture and food as a major economic driver for the Irish economy, which explains in part the large suite of tax relief measures that are currently in place to support the sector spanning multiple facets. Given same, the IFA is disappointed not to be afforded an opportunity to have a representative on the commission despite numerous attempts on our part. We have serious concerns about many of the proposals within the commission's report. There are concepts still which we agree with, most especially adopting equity and fairness as a core principle in the design of our future taxation and welfare system, that is, taxing people according to their ability to pay.

Many of the proposals within the commission's report, for example, the progressive removal of reduced VAT rates, capital tax and or charges will, if introduced, undoubtedly have a disproportionate impact on farmers. It is, therefore, essential that the full economic impact of any proposed amendment is thoroughly understood, not just in isolation, but from its cumulative effect before being implemented. This will help to avoid the creation of an economically unviable operation, something which, regrettably, the unjust residential zoned land tax has failed to do to date.

To comment on all of the proposals that the IFA is concerned about would take some time and, we understand, that it will undoubtedly be the Government that will decide which, if any, of the commission's proposals will be implemented in the medium to long term. Today, I will touch on some of our most significant concerns now and perhaps others will materialise in our subsequent discussions.

First, the report referred a lot to increasing revenue yields from capital taxes. The report claimed that they are more economically efficient, sustainable and there is potential to increase yields from new or amended capital measures. The report does not fully acknowledge, in any material way, the huge reliance many farm families and SMEs place on the existing capital tax relief measures to support intergenerational renewal and sustain operations. To put it simply, many businesses would exit without these supports.

Let me be crystal clear. The IFA is totally opposed to any reduction in agricultural relief or any decline in the Category A capital acquisition tax threshold. The latter proposal completely contradicts the commitment made in the programme for Government to increase the Category A threshold to €500,000, which more reflects the reality of inflationary property and land price pressures that are currently endured. The 90% agricultural relief from capital acquisitions tax reflects the fundamental reality that land, as an asset, has a value far beyond what it generates in terms of income. Any reduction in the relief rate would have a disproportionate impact on the farming sector and would be very punitive on farm families trying to organise orderly succession plans for the future. It would also place a huge tax burden on the next generation at a time when they will be seeking to invest in their farm enterprise. However, the IFA shares the commission’s view that there is a need to protect the active and genuine farmer, and maintain the integrity of the agricultural relief.

In terms of some of the other proposals, given the typically low level of profitability on-farm, the IFA opposes any potential progressive increase in the PRSI rate as we believe that it would only add increased financial pressure on farm families, hinder entrepreneurial activity and innovation so, therefore, should be resisted.

Finally, there is the proposed introduction of a site value tax. While the commission recommends a differential treatment to agricultural land, the IFA strongly opposes the inclusion of agricultural land within its remit. I return to the principle of fairness. In its broadest sense, most farms may be considered asset rich but cash poor. For most farmers the correlation between wealth and income painted by the commission simply does not apply. Average farm assets in 2021 were estimated at €885,000 with 87% related to land and buildings. However, average farm income was less than €35,000 with wide variation depending on the farm size and farm system.

One of the justifications provided by the commission for introducing the site value tax is to support achieving our housing objectives so effectively forcing land sales by imposing a recurrent tax that makes retaining land ownership unsustainable. Where is the fairness in that? Let us be clear about the following. Farmers are private land owners who utilise land for food production and earn an honest living. Farmers hold land to farm, not hoard it as an investment. This an undeniable fact that must be recognised.

To conclude, Irish farmers across all sectors are facing into an increasingly uncertain future. With almost 60% of farm families earning less than €20,000 in 2021, in the interest of fairness and equity, it is incumbent on the Government, and all Department officials, to ensure that additional cost or tax liabilities are not placed on already low-income farm families now or into the future.

Chairman

I invite Mr. Pat Davitt from the Institute of Professional Auctioneers and Valuers to make his opening statement.

Mr. Patrick Davitt

I am accompanied by Mr. John Kennedy who is the vice president of the Institute of Professional Auctioneers and Valuers.

I thank the Chair and committee members for the opportunity to speak here today on behalf of the membership of the Institute of Professional Auctioneers and Valuers on the critical matter of how Ireland's taxation regime can be future proofed to address key social needs now and in the years to come.

IPAV is enormously grateful to contribute today as securing a stable and sustainable property market that delivers for the people of Ireland is an acute problem that requires examination also in the context of the design of the taxation system. The Commission on Taxation and Welfare has correctly identified that sweeping demographic change, the drive towards sustainability and broad changes to our economy will create challenges for public finances that need to be addressed in the future. However, we would stress that these changes will also affect Ireland’s property market, which needs to be taken account of in the context of designing the tax system as Ireland faces these transformations.

I will outline some of the challenges to the property market in the face of sweeping structural shifts and highlight some concerns we have with the approach proposed by the Commission on Taxation and Welfare, in its final report.

By way of background, IPAV was established in 1971 as a representative professional body for qualified, licensed auctioneers, property service providers, valuers and estate agents throughout Ireland. IPAV currently represents over 1,500 members who are all over the country. Over 50 years, IPAV has seen great change in the property market. We harness the depth and breadth of our membership’s expertise to track the latest developments in the property market and bring these insights to the attention of policymakers and the public as a whole. We further work with other representative bodies in related sectors to commission research and highlight issues of common concern. One such body is the Irish Property Owners Association, from which a delegation is present.

I will now discuss to the shifts in Irish society and the economy which will affect both the public finances, and the property market. The Commission on Taxation and Welfare has rightly highlighted the demographic changes that we will undergo in the coming decades. These changes will have a profound effect not just on the public services provided by the State but also on the scale and nature of the housing needs of the future people of Ireland. The expected population growth will further drive the need for increased housing supply. The provision of supply will need to be agile to facilitate the changing requirements for a larger population both in terms of accommodating new people who settle in Ireland and those already resident here so making decisions on where they live based on changes to their personal or professional circumstances. Furthermore, the changing age profile of the population will affect both the types of dwellings that are needed as well as the facilities that housing units will need to accommodate. This will necessitate both construction of new houses but also the adaptation of the existing stock. Taken together, these demographic shifts will require vast private and public investment as well as a nimble property market which, in turn, rely on supportive policy.

I wish to highlight the effects of adapting to a greener economy on the building stock.

The Government has correctly identified that in pursuit of its climate ambitions, concerted action is needed to make buildings more efficient and sustainable. In addition to the State’s direct involvement, the adaptation of existing buildings, including those derelict and vacant, and the construction of new stock to match the existing standards, will require significant private expenditure. The State will need to be consistent in facilitating property owners, from owner-occupiers to businesses with large commercial facilities, in making the necessary investments.

As we face global economic shifts, Ireland’s physical infrastructure, and most notably its building stock, will need to be flexible to match the changing demands for commercial property. Foreign investors and indigenous enterprises alike will need a basis for confidence in the investments they make and the State has an important role in setting the right incentives to secure Ireland’s competitiveness. A flexible property market is also needed to match evolving trends in work practices, with the rise of remote working changing the needs workers have for their homes.

In short, Ireland’s property market in the coming decades will require responsiveness to shifting demands and the facilitation of investment. As such, we are deeply concerned by the heavy reliance on property and capital taxes in the proposals of the Commission on Taxation and Welfare, which the Irish Fiscal Advisory Council pointed out last week in its assessment of the commission’s final report. While the State clearly needs to raise revenue to take on the demographic, economic and climate adaptation challenges of the coming decades, placing an excessive burden on the property sector will be counterproductive to Ireland successfully managing these changes. It is crucial we get the balance of the taxation base right and set the right incentives that will facilitate the growth and adaption needed in Ireland’s building stock. At IPAV, we look forward to being an engaged and constructive partner as the Government and the Oireachtas seek to find the right taxation mix.

Chairman

I thank Mr. Davitt. I invite Ms Conway from the IPOA to give her statement.

Ms Mary Conway

I thank the Chair and wish members a good afternoon. I thank the committee for the opportunity to speak to it about some of the challenges facing the rental sector. The IPOA is a national not-for-profit organisation representing landlords from single property owners to multiple property owners. We seek to protect and promote their interests and encourage the supply of good-quality accommodation and professional management through education and training.

The commission's report is alarming for many of our members and fails to recommend any measures that might assist in retaining stock in the sector. It speaks about broadening the tax base but ultimately seeks to place further taxes on the same easy targets.

The exodus of private landlords from the market is well documented. Landlords are leaving the market in their thousands and the rate is increasing significantly each year, to the extent that much of the new supply coming on stream is merely replacing lost stock to little net gain. While the reasons for the exit of landlords from the market are obvious to most people, there has been a very notable unwillingness from Government and Opposition to do anything to address the matter. Given the relatively simple solutions that are required, one can only deduce that populism, which is now so prevalent in public discourse, is preventing correct and sensible decisions from being taken about the rental sector. One might ask to what end. Those the Government and Opposition parties proclaim to protect are losing out through a reduction in the supply of rental accommodation, while property owners lose out through an inequitable taxation code and regulation that sees their rights compromised and makes the simple business of renting a property unworkable.

The tax code is an obvious way of alleviating the pressure on property owners with a view to achieving a key Government priority such as maintaining the availability of rental stock. Many of the proposals contained in the commission's report, especially insofar as capital taxes are concerned, will serve as a serious disincentive to investment in property. Interestingly, the commission disagrees with tax incentives as part of housing policy but fails to condemn the 0% tax regime enjoyed by institutional investors. The disparity in treatment of institutional funds versus their private counterparts is indefensible. The State cannot afford to allow funds with annual rental profits of hundreds of millions of euro to operate on a tax-free basis while their smaller private counterparts pay tax at 53%. There is no other sector of the economy that operates a discriminatory dual taxation regime. An urgent rebalancing of the tax code is required to ensure fairness and allow private property owners to remain in business and continue to supply their much-needed stock, which is worth no less to the sector than that provided by the private equity players.

Our budget submission provided solutions as to how these imbalances can be addressed on a cost-neutral basis for the Exchequer. IPAV and the IPOA worked together with the economist Jim Power to provide some information for our proposal. We felt that a new 25% tax rate on residential rental income, inclusive of USC and PRSI, should be introduced for residential rental profit to encourage small private landlords to remain in the market and to support new investment. We proposed that this be funded through the introduction of a tax rate of 25% for all investment funds operating in the residential rental market. This would bring some much-needed equilibrium to the treatment of landlords. It is entirely inequitable that two different investors that provide an identical product and service can have such a disparity in tax treatment. The private investor is taxed at a marginal rate of up to 53% with capital gains tax, CGT, at 33% while the private equity funds pay 0% tax on rental profit once they exit the market within a defined period. IPAV and the IPOA proposed the introduction of roll-over relief on CGT on the sale of all assets where the proceeds are reinvested in residential property within 12 months to encourage existing and new investors to reinvest in the market. We also called for a reduction in capital acquisitions tax, CAT, on the inheritance of residential investment properties. Families are forced to pay large CAT bills on the inheritance of residential property and this forces the sale of the property. A reduction in the tax charge by reducing the taxable value by 90%, as applies to the inheritance of agricultural property and business assets, should be introduced. This will encourage current property owners to pass assets to the next generation, allow the next generation to remain in the market and encourage other individuals to invest in the market.

The recommendations of the commission’s report are worrying from our organisation’s perspective. The commission seeks to identify where additional tax can be generated and it has concluded that capital taxes is one of the tax heads that provides an opportunity in that context. However, the Power report and the IPOA-IPAV survey have clarified beyond doubt that taxation is a key factor in the exodus of private landlords from the system. If Government accepts the recommendations of the commission, the tax cost of investing in residential property will increase dramatically and this will only add to the existing problem. Therefore, if these recommendations are to be accepted, significant breaks must be encouraged for owners of private rental residential property to recognise the very significant role they play in the provision of housing, and to ensure they are retained.

The Government and the Opposition alike must recognise that private landlords represent 90% of the existing rental stock. Allowing these people to leave the market, or accepting that, is not an option. The Government must take bold measures that will incentivise private landlords to remain in the market and the Opposition must refrain from damaging, populist arguments that are not in the national interest. The solutions required to address the problem are relatively straightforward and, with political will, can be implemented in a timely and equitable manner. We look forward to engaging with members over the course of this debate and beyond.

Chairman

I thank Ms Conway. Deputy Mairéad Farrell is first.

Deputy Mairéad Farrell

Go raibh maith agat, a Chathaoirligh. Gabhaim buíochas leis na finnéithe as teacht os comhair an choiste. I thank them for coming and for their opening statements. I always think it is very interesting to listen to those opening statements.

My first question is for each grouping. Obviously, the role of the Commission on Taxation and Welfare was specifically about how to broaden the tax base and that is what we are here to discuss. It is why we are asking people to come in and have a discussion. We can hear loudly and clearly the groupings' opposition to certain proposals of the commission. They are within their rights to express those and we all have different concerns about different proposals. It is good to debate them and that is why we are here. However, the commission's objective was literally to see how to broaden the tax base.

My first question is for each group. What proposals do they have that they feel would be equitable for themselves and the groups they represent in broadening the tax base?

Chairman

I do not know who wants to take that first.

Mr. Patrick Davitt

I will take it first. The big thing from the point of view of agents and property owners is the widening of the tax base in respect of investment funds. It is a huge problem for private landlords at the moment in the property market. They are paying 50% and 52% tax. In some cases, it is perhaps not that rate but if they are over 60, they might well pay 4% less. It is huge thing to see a landlord paying 52% of his rental income in tax when investment funds are not paying such tax at all or anywhere near it. In fact, in most cases, they pay no tax whatsoever to the Irish economy. Why would we land ourselves in a situation such as that when we can tax these funds? These funds are earning the highest rents in our marketplace at the moment.

We hear about landlords leaving the market every day of the week. Yesterday, a daft.ie report told us how much money was the minimum value of a property to rent across the country, which I think was €1,360 or something like that. Indeed, in the past three months, that may well have been the case. However, many private landlords in the rental market are not earning €500 and €600 for their property, which is a shame. They cannot increase those rents for any reason. Then there are these multiples at the top of the market that are charging, practically for the same properties, up to €3,000 and pay no tax for this whatsoever. That is one big reason and big scenario that can be addressed to increase the tax band and increase the tax income for the Government.

Deputy Mairéad Farrell

That is interesting.

Mr. Tim Cullinan

From an agriculture point of view, it is important to point out that farming, in the main, is a low-income sector. It is important as well that for every €1 currently that a farmer spends in the rural economy, it generates €4. From that point of view, we are generating a lot of funding in the rural economy already. I do not know if farmers adhere to all of the taxation that is in place currently. We need to be careful. The Deputy asked the question about widening the tax base. Our view is clear in that our proposal is that we would not agree with widening the tax base. There are a couple of areas where we have concerns. The capital acquisition tax threshold is currently €335,000. It would be important for that to be raised. Generational renewal is important as well in order that there is a way for young people to get into the sector. At the moment, the average age of farmers in this country is 57. That is why it is important that there are proper tax measures and reliefs to ensure that the next generation can get involved in farming. I am sure that it will come up later on but the recent site tax is concerning for us as well.

Deputy Mairéad Farrell

I have a question on this site tax as well. That is the purpose of these meetings and that is the reason I am asking the question. I take on board Mr. Cullinan’s point of view. It is not to argue that; it is just to get that information because that is what this committee is specifically focused on at the moment.

Mr. Tim Cullinan

If the Chair does not mind, my colleague would like to come in on the site valuation tax as well.

Dr. Shane Whelan

To add to what the president just suggested, ultimately, whatever arrives, the rate will depend on the Government, the national approach and priorities. Many of the proposals in the commission on taxation report to some extent, from a farmer and a small business perspective, adds additional costs of production in terms of the revenue generation activity. The committee might also look at whether tax incentives could be provided to increase economic activity and, as a result, increase the revenue take. Ultimately, irrespective of what is proposed, it is imperative, as the president said, that particularly in low-income sectors, as in the case of farmers, a thorough economic impact assessment is done fundamentally.

As the president and I said, from a farmer perspective, there is a significant multiplier effect and, therefore, any kind of supports that could be implemented to promote and support on-farm activity would yield dividends, particularly in the broader rural economy, as has been evident in the trajectory of agrifood exports. There has been a significant trajectory there. If we take a rolling average from 2010 to 2020, the value of agricultural exports has increased 54%, yet farmers have not realised the same benefit; it has only gone up 6%. The benefit in terms of significant investment and having the infrastructure and supports there is yielding dividend broader than purely farm income.

Mr. Tim Cullinan

We have been working with the suite of taxation measures in place. I raised earlier the issue with the capital acquisitions tax. A rise in the threshold there would be very important. The site value tax is a huge worry for us. It is only now that many farmers in towns and villages up and down rural Ireland are becoming aware of the situation here. This is very worrying. It could lead to farmers having to sell farmland if they are going to be penalised with this tax. It is totally unsustainable for farmers. From that point of view, an exemption from this site value tax would be very beneficial to our sector.

Deputy Mairéad Farrell

I will leave it at that. I will say for the clarity of all witnesses that in our committees we work very well together cross-party and do not tend to get involved in party-political rows.

Dr. Shane Whelan

I totally agree with Mr. Cullinan in that the exemption is exactly what we would seek.

To the earlier point, in respect of any proposal, a cost-benefit analysis needs to be done on the potential revenue generation capacity of the tax itself. I think, from reading the commission report, it is adopted in only a very small number of countries and that it is very administratively difficult and burdensome and the actual returns can be relatively small across many nations. While the OECD does acknowledge the tax as being important in being a recurring tax, it is essential that it is fair and affordable for the individuals concerned. As our president said, and as we have stated in our opening statement, when 60% of farmers are earning less than the minimum wage, serious analysis needs to be done on the fairness and equality of imposing a site value tax on farmers.

Chairman

Deputy Farrell may contribute again in the next session.

Deputy Michael Healy-Rae

Before I make my contribution, I will place on the record my involvement in certain aspects of what I am going to discuss, that is, farming and my provision of accommodation of many different types, be it to students or the local authority. When I speak, however, I do so on behalf of my constituents, the witnesses' organisations, members of their organisations who contact me daily regarding the issues, problems and difficulties they have and, of course, people from County Kerry. I warmly welcome the witnesses. I thank them for the excellent contributions they have made so far, which have been crystal clear. I wish to add my view on certain aspects of what is happening at the moment.

I will deal first with the site valuation tax. In the past fortnight I met with our local authority, which will implement the tax in County Kerry.

I highlighted at the meeting that we have farmers who are actively farming, and predominantly in the cases I am talking about, they are milking. Anybody who knows anything about milk and the production of milk knows that every blade of grass is vital. It is unusual, but I know people who are farming, who are in the middle of towns. People might find it unusual but in the heart of Killarney town, I recently met with a farmer whom I know very well, who is producing milk. He is terribly worried about the site valuation tax. He has no intention whatsoever of selling up to build houses, to develop or anything like that. I am acutely aware of the need for housing, but if an established farmer who did not get sucked in to the previous boom and bust that we had, who just put his head down and continued milking his cows and producing, and doing what he always did and the people before him did, how could we think it right and proper to put a tax on a person like that? It is criminal to even suggest that we should do that. If we take the budget of a person who is on the periphery of a town or a village and he or she wants to continue, how dare we interfere with that if it is their livelihood?

I hear other politicians in the Dáil speak about farmers and their land as if it is an asset. They talk about the value of the property, and think that an acre equals such an amount of money, but to a real farmer - a person who is producing beef or milk and who is working - the value of the land never comes into it because he or she does not own it. Only farmers will know what I am talking about when I say this - they are custodians. It is not a possession. It is not something that they can pick up, take away and sell if they feel like it on a whim. It is not that type of asset. They are given a tool and the use of a piece of ground. If people are useless, they will do nothing with it, and if they are workers and are motivated, they will improve it, make it better and produce more out of it. They will be trying to get it to a better place by the time they finish their time on this earth. Will they sell it before they do? They will like blazes. They will pass it on to the next generation and be very glad to do so. Anybody that is fortunate enough to inherit a farm, all they do is use it to make a living and they pass it on. The sooner the better other politicians realise that land like that is not a commodity. It is not stocks and shares, it is not that type of asset; it is something that God gave us that is there to use while we are here. That is a very important point. We must have a derogation and exemption because where a person is proven to be farming, he or she cannot be taxed on the land. It flies in the face of all fairness. It cannot be right. Of course, if we had a person who was sitting on land, and there were briars growing out over the ditches, and it was not being used, and if it was a valuable site that could be used by the local authority or a developer to build houses that are very much needed now more than ever before, of course I would say that the land should be taxed, but not if a person is using their ground for the purpose of making a living. That is the first point I want to make. Coming out of this committee, I think with all my heart and soul that there should be an exemption on the tax. The local authorities are only going to implement the rules that we give them. I could not emphasise how much we have to go back and look at that. I say directly to the people involved in it that we must look at that again.

I take a small bit of exception to one figure that was bandied about earlier. That is when I hear talk about people paying 52% tax on rental income. While I am no financial guru, I do know about tax. If we study it, it is not 52%; it is actually 56%. When other politicians talk about the people who own property and say that they are making a fortune, I would like them to really look at it and realise that the person who is making a fortune is the Minister for Finance because he is taking €560 out of every €1,000 of rent. I was very glad last night that Sinn Féin again tabled a very good motion to debate, which it does on a regular basis. I am very grateful to the party, and I always thank it for its input. We spoke last night about the high cost of rent. I accept that is the case, but people must please understand that the biggest takers out of the rent that is being charged at the moment are the Revenue Commissioners, the Minister for Finance and the Department of Finance. They are taking 56% or €560 out of every €1,000. That leaves €440 left to pay for the property, to pay the banks, to pay for the maintenance, to pay the property tax, to insure the property, to keep it in a good order, to pay all the duties that are due and to keep the show rolling.

I again thank the contributors who spoke here this evening regarding the massive exodus of people leaving the rental sector. I started out in this business when I was 19 years of age, as did many of my friends at the time. All I can say is that there are very few of us left, because they could not stick it. The reason they could not stick it is what is being done. All we need to do is listen to what is going on inside in the Dáil. People who own a property are being attacked. It is as if there is something wrong with them. What they are doing is playing a very important role. I would dearly love to see more local authority houses being built. I also want to see more single rural cottages being built. I want to see local authorities being empowered with the ability to buy land, get planning permission, build homes for people, give them to them and then in time those people being able to purchase them. So far, this Government and successive Governments have failed dismally in doing that and, therefore, we do actively need to be involved in the private sector.

It is not many years ago that it made sense and it would have been financially prudent and possible for a person with a bit of gumption and the ability to borrow money - rather than a case of having money - to make a case to buy a house and to rent it out, pay tax, run the show and have it working away. That made sense one time. Today, it does not make sense because it is hard enough for a person to buy a house for themselves, to be able to finance it and to afford it, but for anybody to think that it would make sense for a person to buy a property, pay 56% tax on it, pay for the money borrowed and for all the other costs involved and then have people tell them at the same time that they have no say whatsoever over the property. They want it to be the case that a person would have no say, what I call "rightlessness", in the house whatsoever, that he or she is only providing the accommodation and that is it. That is not fair either. There must be a balance. Every week in my clinics in Killarney, Kenmare, Killorglin, north Kerry, east Kerry, south Kerry, west Kerry there is nothing but people stuck for housing because nobody is involved in the private sector any more.

In the Taoiseach's constituency, a group of 70 people have come together and formed an unofficial club. They are selling out. Every one of them owns property, be it single properties or multiple properties. They have gone to the Taoiseach and told his family members that they are bailing out because they are under constant attack, and it just does make sense for them to be doing it any more.

Chairman

Deputy Healy-Rae's time is up.

Deputy Michael Healy-Rae

Could I have just two seconds please, Chair? When they sell their properties there is not a hope that they will go back into the rental market again. The statistics are frightening. I am fearful of a future without a balance. I want the balance to be that the local authorities would provide the vast majority of housing, if they are able to get their act together and do their job, but if they cannot, houses would have to be available on the private market. Unfortunately, the climate and the political atmosphere currently are not conducive to that. Members should not get me wrong when I say this: the politicians who are attacking the people who provide accommodation do not intend that result because they are well-meaning people who want to see more people have accommodation at affordable costs, but what they are doing is actually having the opposite effect.

When in the name of holy God are people going to wake up and see that for what it is? People are bailing out day after day. The houses that are for sale are coming from the rental market, they are being bought and they will never again go back into the private rental market. Of course, we have the situation with the vulture funds which are coming in, which are buying up massive amounts of property and which are doing what they like. They do not pay tax at the rate of 56%. God only knows if they pay much tax at all. They definitely do not pay 56% in tax anyway-----

Chairman

Other members need to come in and the Deputy is way over his time. I want to give our witnesses a chance to respond to his points.

Deputy Michael Healy-Rae

I will finish, but the last word I want to say is that I appreciate each of the witnesses who are here tonight. I looked at the line-up before they came in and each one of them brings real expertise in their positions and in their organisations. I thank them for being here and for the efforts they make on behalf of their organisations. Going on some of the contributions I heard here this evening, they were worth sending out here today.

Chairman

I will go to Mr. Davitt first because he did not get in in the last round of questions. We have to end at 7 o’clock for the next session, so I ask him to constrain his comments. There are two other members who need to get in.

Mr. Patrick Davitt

The next time I come here I will ask Deputy Michael Healy-Rae to come with me because he is a great ambassador for auctioneers. I would be delighted if he could come with me wherever we go. That would be great.

It is my understanding from looking at the document that the site tax is to replace commercial rates. That is what I understood that it was. It is not the residential property zone tax, RPZT, which we seemed to be speaking about earlier on. The residential property zone tax is supposed to replace the vacant site tax. It is there to persuade - that is how we would talk about if there was no big stick - builders to build properties. It does not take into consideration the possibility of sustainability of building those properties or anything to do with the cost of building, etc., at the moment.

As our friends in the Irish Farmers' Association say, the issue of property tax or the RPZT in farming is a different kettle of fish altogether, because farmers are farming their land. There is no way that land that is being farmed should be within the scope of this tax at all. It should not even be in it. These maps have been put into the zone and into the possibility of the RPZT by the county councils. Most people only have until 1 January 2023 to get it out of it, or not. In most cases, they have to get planning consultants to get that land out. I have heard of some cases of builders who have building land in towns, apart even from agricultural land, and those maps are incorrect. As they stand, the zoning in some of them is commercial and is not even residential.

Apart from that, it was my understanding that the site tax would replace the commercial rates on properties. If that is to be the case, I do not see how one can replace the commercial rate with the site tax. This is because the site tax is many properties that will have a commercial property even in a town. As Deputy Michael Healy-Rae alluded to, they may be farming at the moment, or they may not be farming. Maybe they are there as a hardcore site or something like that, or even be for businesses, etc. How you could decide to put a site tax on that and relate it to commercial rates is beyond. To whoever came up with the idea of the RPZT, I think it is a disastrous tax.

We, along with the Institute of Professional Auctioneers and Valuers, were among the first to propose a vacant site tax in Dublin. The reason for that was that between the two bridges in the city, north and south, there are more than 170 acres, or the equivalent of a golf course, is available to build on. We came up with that tax to encourage developers, county councils, local authorities and many other Government bodies to build on those sites. It was extended throughout the country and now we have been landed in a situation where it went from 3% to 7%. Then it went from 7% back to 3%. Now it is the RPZT and it will be collected by the Revenue Commissioners. If that money cannot be collected by the Revenue Commissioners and if they do not give people a tax clearance certificate, that will put people out of business, even though they possibly cannot build on their land. Valuers like us-----

Chairman

We have to bring in Dr. Whelan.

Mr. Patrick Davitt

I just want to make one point about valuers like us who do valuations on these lands. If one cannot build, we do what is known as a residual valuation on these lands. In fact, we were looking at a particular piece of land in this House very recently. We were talking about €5 million for it. If the residual valuation is done on that land with the cost of building at the moment, the land will be worth zero, not €5 million at all.

Dr. Shane Whelan

There has been some crossover between site value tax and the zoned residential land tax, but there are parallels between them. The wealth tax is being proposed to replace the commercial rate in tax which has been broken. The zoned residential land tax is coming in to replace the vacant site levy which was poorly enforced. I completely echo the comments made by Deputy Michael Healy-Rae on the need for farmland to be completely exempt from it and for a thorough review of taxes as currently proposed to exclude farmland. As it has been noted, farmland was exempt from the vacant site levy, so the precedent is there.

I will address the four unjust areas within the design of the existing residential land tax for the benefit of the committee and to maybe bring this forward in getting the levy removed. In the first instance, as has been noted, farmers are private landowners and are not builders. They own land to farm it, and not to hoard it as an investment. That is evidenced by the strong intergenerational transfer between farms, as well as the limited number of sales on the market. The other area is that there is a complete lack of transparency in relation to the tax-----

Chairman

I am going to ask if Ms Conway or Mr. O’Brien want to come in.

Dr. Shane Whelan

Can I just make two final points?

Chairman

We have to finish by 7 o’clock and there are two more Deputies who need to get in.

Mr. Tom O'Brien

It is refreshing to hear Deputy Michael Healy-Rae speak so sensibly about the housing market and the rental market, in particular, and highlight how Government policy and the alternative policies from the Opposition which are pushing Government very hard are damaging the people who they are designed to protect most.

Deputy Seán Canney

I welcome all the participants here, especially Ms Conway, who comes from Headford in my own constituency in Galway. I thank her for coming up here today. I declare my own vested interest. I own property and have my property is rented. I put that on the record.

Coming from a farming background, I believe there is a populist thing about land, wealth and tax, as well as how important it is to tax people who own land. People get confused about this, no more than we get confused between property owners and the investment funds. They are all put into the one pot and are all vilified for being in that market. Yet, if we did not have farmers, we would not have food, our produce or our exports. We have to level it all down and ask where we are going with all of this.

It was a mistake not to have farming representatives on the commission. When we look at the impact that farming has on the wider economy, it is important that that type of commission should have an input from people right across the board, who are doing a huge amount for our economy and who are creating so much wealth for other people in this country. It is important that we say that.

We could talk about the issue of housing all day, as well as what is right and wrong with it. We are good at bringing in laws, rules and regulations, but at the same time this creates more paperwork, and it does not get things done. For anybody who tries to buy, sell or rent a property, there is a lot of paperwork and the implications for doing all of that can be cumbersome. It slows things down and puts costs on.

We will go back to the issue we are talking about here. From the perspective of the Irish Property Owners' Association, its basic concern is that the private landlord is paying tax at 50% of what they take in, whereas the investor pays 0% or might pay 5%. Yet, there are tools by which they can recover that tax. That is something that needs to be resolved. Already in Galway there are probably 500 properties for sale by private landlords who want to get out of the market and who do not want to get back in again.

They want to get out and run away from it as fast as they can. That is something that would affect 500 families. These are 500 properties in which there are existing local authority tenants who are on the housing list but are housed in the private sector. If they were not, God knows where they would be housed. We must recognise and thank private property owners for doing that.

When we talk about the farming end of it and about property and housing, much of what the witnesses are saying is common to all of them. That is very important going forward. It is important when bringing the points across to the commission that as three organisations representing three different facets of life, there is an awful lot of commonality in what they are saying today.

Okay. I am not sure I agree that it is a double tax. I will come back to Mr. O'Brien first in the next round. I am sorry; we are getting close to the time now. I call Deputy Patricia Ryan.

Deputy Patricia Ryan

I apologise for being late. I welcome our guests. I was in another meeting. I will ask two consecutive questions because I am aware of the time constraints. My constituency is blighted with dereliction. If we look at any of the towns like Portarlington, Athy, Rathangan or Monasterevin, there are buildings that have been derelict for more than 20 years. I really want to know about schemes like the Croí Cónaithe towns fund. What do the witnesses think of the existing schemes? Is there any other way a taxation system can be used to bring the buildings back into use? The second question is simply around how Croí Cónaithe was extended to rural areas recently. Has the Irish Farmers' Association, IFA, seen much interest from its members and if so, what are their thoughts?

Chairman

I will let Mr. Davitt in first and then come to Mr. Cullinan.

Mr. Patrick Davitt

I want to mention one point that was raised by Deputies Canney and Michael Healy-Rae. Deputy Michael Healy-Rae talked about when he transferred his farm on to the next generation. Indeed, under section 7.1, when he transfers that farm or a business on to a future generation, the value of that farm will be taken at the value he got it at originally and it will be then put into his estate at the value it is today. If section 7.1 comes into being, it will actually be capital gains tax paid on that when he dies before ever such time as he passes on the property to his next of kin, especially if it is a business.

I will go back to what Deputy Patricia Ryan said. I thank her very much. The Croí Cónaithe scheme is obviously a perfect example of something that can be done with new buildings but, unfortunately, the cost of new houses has led to a situation where the €144, 000 being paid under Croí Cónaithe is not actually any good.

It is being paid too late because builders still have to make the investment and build the properties before such time as Croí Conaithe comes to pass.

As for the other properties the Deputy talked about, there are 22,000 derelict properties in Ireland at present and 9% of our property stock of 2.25 million units is either derelict or vacant. There are 28 million properties in England and the vacancy rate is 0.9%. In Portarlington, Portlaoise or any of the towns across rural Ireland from Maynooth outwards, we can see all of the vacant properties that are there. We have asked the Government to give a grant to people to use them and instead of coming out with a big stick to say we going to charge so much CGT, we should not charge it and we should allow them to sell the properties on to other people. If we do not allow them to sell on the properties, we are going to be looking at these properties closed up forever because they are not going to pay the CGT. That is the one of the most important things we need to do.

Mr. Tim Cullinan

I could not agree more with Deputy Ryan. What we need to do first is to look at all of the vacant buildings and sites that are available. It is critical that we regenerate local towns and villages. Farmers will be keen to see old farm dwellings redeveloped as well and brought back into the system. As a group, we understand there is a housing crisis and with regard to anything we can do as farmers, we want to engage in that process. I presume the Deputy will agree that this tax that is being imposed on farmers who are farming adjacent to towns and villages is wrong. I appreciate the support at the meeting for a derogation on that.

Deputy Patricia Ryan

To be fair, the housing crisis is so bad at the moment that bringing any houses that we can into use is vital. That is why I am asking whether the members of the IFA are up for doing all of that. I take on board what the witnesses are saying and thank them both, but we need to see some houses. That is the current problem.

Mr. Tim Cullinan

We are absolutely up for that. Where there are old farm dwellings, farmers will be more than willing to redevelop them, and I welcome that there is a grant in place for that now. The more funding that is available, the more work we will get done. My answer is clear, and it is that we want to be part of that process.

Deputy Patricia Ryan

I thank both witnesses.

Chairman

Would anyone else like to come in?

Mr. Tom O'Brien

I agree with Mr. Davitt regarding the Croí Conaithe initiative. The other thing we are going to have a difficulty with is investors getting debt to buy those properties. The current tax and regulatory environment means that banks are shying away from giving money for buy-to-let loans so, unfortunately, housing policy is militating against that initiative.

Deputy Bernard J. Durkan

I apologise for coming in late. I am trying to attend three meetings at the same time, which is very difficult, needless to say.

I wanted to come in to support the positions taken by a number of my colleagues on the use of farmland in the future and the impact of capital taxation. There is also the fact that for people in the business, farm, shop or whatever it may be, they are working all of their working lives there and paying tax, and at the end of it, they have another tax imposed to punish them for doing whatever they did for their lifetime. That is a dangerous route to go. That will drive people away or to do nothing, as has been said, and leave property idle.

The other thing is that when people look at empty properties in the centre of towns, there is a certain amount of fear of realising the best use of the property on the basis that inheritance tax or other taxation would follow. There is also the fact that in the middle of towns and villages, with heavy traffic nowadays, it is not always possible for families with children to live in such proximity to a heavily trafficked roadway. That needs to be borne in mind when we are talking about this, when everybody seems to have the answer in terms of availability and is asking why this is not done. Incidentally, within a couple of hundred yards of where we are sitting this evening, there are a number of properties that have been vacant for a number of years, and they could be utilised for family purposes or otherwise.

From an auctioneering point of view, I totally agree with Deputy Durkan. It is fantastic. The more people who want to buy houses, the happier auctioneers are, so if everybody wants to buy a house, that is great. However, we have to take into consideration that many people are moving and younger people are probably moving out of houses a lot earlier than they did previously, so they are renting before they buy. That scenario is perhaps an Irish thing in its own right. At the end of the day, if housing is at the right price, it is great that everybody should have a house and we have been saying this for a long time. Home ownership has fallen from more than 80% to 62% or 63% at present, as the Deputy knows. If that continues to fall, we will have a nation of people renting and only the very few will own their own property. I agree in many ways but renting is important as well.

Deputy Bernard J. Durkan

I thank Mr. Davitt.

Deputy Aindrias Moynihan

I had an opportunity to listen to the contributions earlier. There was the idea of using different taxes to encourage owners to move land on for development for housing or accommodation.

It is an issue that I am concerned about. Very often, if a plot of ground is zoned and there is no intention other than to farm it, it makes it difficult for the farmer who may want to pass it on to a son or a daughter at a later stage. I am not sure whether witnesses had an opportunity to discuss this or whether there was a debate on rates, etc.

We see several places, such as the apartments over Dunnes Stores in Macroom or the vacant house down the street that is to be seen in many different towns, rotting into the ground. There must be a tool to move people on and make the ground available for people who are looking to rent or buy. What do the witnesses think of the local property tax, LPT, or the different available options to free up such apartments and ground that may be available in order to provide accommodation to people?

Mr. Patrick Davitt

Obviously, we have a view on it, and we are all for that. However, we have come before the committee to talk about taxation measures, it seems we want to do away with all these initiatives. We are on the side of increasing those initiatives. When reading the document, it seems the only way the tax base is going to be extended is by cutting the taxes and allowances we have now. What the Deputy is talking about is well outside of that and is something we are well prepared to look at. I refer to allowances in capital gains and section 23 relief. That has worked very well in the past and will work very well in the future, but allowances and tax incentives should be given, in the form of capital gains tax, building taxes, or anything that will encourage people to sell those vacant houses and to let people buy them, live in them, make use of them, and bring them into the building stock, or develop the land to make new housing.

I refer to way the property market is and the way building costs have gone. People in many rural towns are looking for apartments to be built. Most people know they cannot build apartments in rural towns because the cost is so high. They end up with a two-bedroom apartment in Macroom, as the Deputy said, or somewhere else-----

Deputy Aindrias Moynihan

But what about in cases where apartments are already built and are sitting vacant?

Mr. Patrick Davitt

I do not know where such apartments are. I know many one-off houses are sitting vacant, but I am not sure about apartments. The cost to build a two-bedroom apartment in Macroom could be €400,000, while a second-hand two-bedroom apartment in the same town might cost between €150,000 to €200,000. It is not possible to build new properties in those areas.

Mr. Tim Cullinan

The Deputy mentioned moving a farm from one generation to the next. We discussed this earlier and it is in our submission. It is important at the moment. The threshold of capital acquisition tax is €335,000. Our proposal is that this amount needs to increase-----

Deputy Aindrias Moynihan

There is a commitment in the programme for Government.

Mr. Tim Cullinan

We all know where the value of land is. To answer the Deputy's question on properties that are vacant, the regeneration of towns and villages is very important for all of us in rural Ireland. Our concern before we joined the committee meeting, however, on which there was unanimity, was that there should be a derogation to take farmland adjacent to towns and cities out of the taxation system. This is the land farmers are using to produce food day in, day out. What we are looking at is farmers' livelihood. From that point of view, we have a very clear direction.

Another area of concern for us, which was raised earlier, is about proper consultation. It was very disappointing that we had no representation in this review on taxation. If there is one lesson to be learned here, when going through processes such as this in the future, it is very important that all key stakeholders are involved.

Chairman

I have to suspend the meeting. A vote has been called in the Chamber and therefore, members are released to cast their vote. We are at the end of the session anyway and I thank the witnesses for staying so late. I know it can be hard to do an evening session, so I do appreciate their attendance. When we resume, we will start with the next session.

Deputy Patricia Ryan

I will attend the next session online.

Chairman

That is okay.

Sitting suspended at 7.05 p.m. and resumed at 7.49 p.m.

Chairman

I welcome Ms Denyse Campbell, Mr. Paul Gallagher and Mr. Tim Fenn from the Irish Hotels Federation, IHF; Mr. Eoghan O’Mara Walsh from the Irish Tourism Industry Confederation, ITIC; and Mr. Adrian Cummins from the Restaurants Association of Ireland, RAI.

Before we begin, I will explain some limitations to parliamentary privilege and the practice of the Houses as regards reference witnesses may make to other persons in their evidence. The evidence of witnesses physically present or who give evidence from within the parliamentary precincts is protected pursuant to the Constitution and statute by absolute privilege. Witnesses are reminded of the long-standing parliamentary practice to the effect that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory with regard to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him, her or it identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House.

I invite Ms Campbell from the IHF to make her opening statement.

Mr. Tim Fenn

The IHF is grateful for this opportunity to address the committee on the recommendations set out in the commission report. On behalf of hotels and guest houses throughout the country, I would like to make a number of observations.

First, I would like to mention the VAT recommendations, specifically recommendations 6.8 to 6.11. Unlike other sectors, when setting tourism VAT, it is essential to take account of the VAT landscape across international competitors. VAT is a consumer tax and in Ireland most tourism VAT receipts arise from transactions made by individuals who are not resident within Ireland. Overseas tourism revenue is discretionary expenditure that is highly mobile and influenced by international competition. It is not a captive tax base. The 9% rate is the right one for Irish tourism in a European context. As can be seen from our submission, Ireland's 9% rate is in line with our European competitors. Should the VAT rate be increased from 9% to 13.5% at the end of February 2023, it would place Ireland's VAT rate as the third-highest in Europe and place us at a competitive disadvantage.

Far from being an exceptional measure, most European countries operate a low tourism VAT rate. Since 2011, the reduced VAT rate has been an invaluable sector-specific policy instrument, deployed in a highly effective manner to support tourism. In response to the financial crisis, the reduced VAT rate directly led to the creation of 65,000 new jobs since 2011, making the 9% rate one of the most successful job creation initiatives in modern times. During the Covid crisis, the reintroduction of the 9% rate helped enable the survival of tourism businesses at a time of collapsing revenues due to lockdowns and restrictions. This was the worst economic shock in living memory. Despite the upturn in tourism, the majority of hotels, guest houses and tourism businesses are still in recovery mode. The industry is facing worrying headwinds, with a stark economic environment and worrying uncertainty around future outlook. As such, the 9% VAT rate is a critical policy measure that supports tourism enterprises and enhances our international competitiveness. A global cost-of-living crisis is not the time to introduce cost or growth levers that will only deter consumers from considering Ireland as a travel destination.

I will turn to the proposed accommodation tax, or recommendation 6.12. There are no grounds for an accommodation tax, given the enormous contribution that tourism makes to the economy as our largest indigenous employer. Pre-Covid, tourism supported more than 270,000 jobs and generated revenues of €7.5 billion. It yields taxes equivalent to 23 cent for every €1 spent by tourists. In 2019, this equated to €2 billion in taxes. This is a substantial contribution to the cost of public goods and services consumed. Tourism businesses, including hotels, also contribute directly to the funding of local authority services through commercial rates and levies. There is also the unintended consequence that further adjustments in taxation may lead to additional hotel construction being shelved. As such, additional taxation risks deterring much-needed investment.

A bed tax, by its nature, would likely be imposed on accommodation providers only. This would be inequitable as tourism benefits a range of businesses, from tour companies, visitor attractions and retailers to restaurants and many more. To specifically target one sector would be unfair and would apply upward pressure on hotel prices. It would place Ireland down the list in the eyes of price-sensitive consumers. It sends the wrong message to those looking to visit Ireland for our famous céad míle fáilte. We look forward to discussing these issues with the committee in further detail.

Mr. Adrian Cummins

I thank the committee for the invitation to attend this meeting to discuss chapters 6, 7, 8 and 14 of the Commission on Taxation and Welfare report. The commission has produced a comprehensive report that deserves the attention of all who take an interest in public policy. The RAI broadly welcomes the board’s report but we have serious concerns regarding its proposal around the temporary VAT schemes. It is our view that Ireland should place at its economic centre a low-tax and indigenous enterprise-driven economy, with continuous full employment as its target.

Let me start by focusing on chapter 6 of the commission report, which discusses the need for tax space. I would specifically zone in on the suggestion by the commission’s recommendation of the gradual increase of the VAT rate from its current 9% to 13.5%. The sector I represent, which is the restaurant and hospitality industry in Ireland, suffered immensely during the banking crisis, through the Covid pandemic and now faces further economic disruption due to the energy crisis. When the Government reduced the VAT rate to 9% in 2013, it made an enormous difference in terms of viability for low-margin, consumer-driven and labour-intensive sectors such as restaurants and hospitality. It saved businesses and jobs, and it made Ireland competitive. The Commission on Taxation and Welfare is wrong when it advocates for scrapping the temporary VAT rate. The 9% VAT rate is the correct one for restaurants that are vulnerable, have low margins, are high energy uses and are SMEs. Increasing the VAT rate for hospitality to 13.5% will make Ireland have the second-highest rate for restaurants and hospitality within the EU, with only Denmark having a higher VAT rate for these industries.

I refer to the universal social charge, which I might remind the committee was brought in as a temporary measure. We must review our tax system in terms of making work pay. What I mean by this is in our sector we have a vast number of valuable employees who, due to the taxation system, are being penalised for working more than 20 hours in certain circumstances. From the feedback received from our industry we know the incentive to work longer is prohibited due to the taxation system. In chapter 7 of the report, the commission sets out its recommendations for significant reworking of capital acquisitions tax, CAT, and capital gains tax, CGT. The 33% rate of CGT is high comparing with international rates. A reduction in the rate would improve the environment for start-ups and new businesses, which would increase activity levels within the economy and create employment and a tax dividend for the country. A reduction in CGT should be looked at as a recommendation.

Chapter 8 refers to pension contributions and I have to point out to the committee that pension auto-enrolment will add extra costs to the employer. We must plan for the future in terms of pension contributions for citizens and this must be done to alleviate the cost for employers. I will move on to chapter 14, which focuses on land and property. The RAI supports the commission’s recommendation on the introduction of site value tax, which would replace the current commercial rates scheme over time. Commercial rates are outdated and need a severe overhaul in how they are calculated. Tax is distributed and we must have a level playing pitch when it comes to determining which business pays what level of tax. We thank the committee for its time and we look forward to having an opportunity to discuss the report in more detail and to answer any questions related to it.

Mr. Eoghan O'Mara Walsh

I thank the committee for the invitation to speak to this important matter. The ITIC is the main representative body for all tourism and hospitality stakeholders in Ireland across the public and private sectors. We represent carriers, accommodation providers, hospitality operators, visitor experiences and activity operators, among many other tourism businesses.

As committee members will be aware, tourism and hospitality is the country’s largest indigenous industry and biggest regional employer. There are 20,000 businesses in the sector, the vast majority of which are SMEs, and the latest Central Statistics Office, CSO, figures suggest that 250,000 people work in the industry, 70% of which are in regional Ireland.

Tourism was walloped during Covid as no international visitors, the mainstay of the tourism economy, came to our shores for a two-year period. We are thankful the Government recognised this and stepped in with a number of very important measures. Since Covid restrictions were lifted earlier this year, the tourism industry has rebounded strongly and we anticipate that 2022 will bring circa 75% of pre-pandemic international visitor numbers to the country, which is very encouraging. However, there is widespread concern about the months and years ahead as energy costs, softening demand and global economic challenges all point to a difficult period. The Irish Tourism Industry Confederation is estimating a dip in tourism performance next year compared with this year so the recovery will stall. The situation is further complicated by Government’s over-reliance on tourism accommodation bed stock to house Ukrainian refugees and asylum seekers. Some 22% of all tourism beds nationally are contracted to Government at this point and that figure rises to 26% if Dublin is excluded. If this situation continues into next year, there will be no tourism beds in tourism towns up and down the country and thus no tourism activity, meaning job losses and business closures. Tourism operators are prepared to play their part but they cannot be asked to be the primary accommodation provider to the detriment of a broad industry.

I am here today to talk about the commission's report, particularly the tourism and hospitality related-aspects, which are mainly found in chapter 6. Much of the report pertains to other areas but there are some specific recommendations that are relevant to the tourism sector. Some of chapter 6 relates to the tourism VAT rate of 9%. The commission argues that this should be increased to 13.5% as scheduled on 28 February. ITIC is of the view that the 9% rate is the correct VAT rate for the tourism sector and puts us on an even keel with our European competitors, the vast majority of which have tourism VAT rates at this level or, indeed, lower. To increase the VAT rate would make us one of the most expensive tourism destinations across the EU, damage our competitiveness and add further cost to the system at the very time that industry is dealing with escalating costs elsewhere.

An increase in the VAT rate would also be inflationary by its nature, with IBEC estimating that it would add 0.5% to the national inflation rate at a time when Government should be trying to curb prices, not add fuel to a raging fire. The economist, Jim Power, has recently completed a report, which I will happily share with committee members, in which he makes the conclusive economic argument for the extension of the 9% VAT rate. He estimates that an increase to 13.5% will cost 24,000 jobs. The commission’s report states that a temporary VAT reduction should not be used as a short-term stimulus. ITIC would argue that VAT at 9% should be seen as a long-term measure for the tourism industry and should certainly be kept in place until full recovery to pre-pandemic levels is secured.

ITIC does not agree with the introduction of an accommodation tax as this would further damage our value proposition. EUROSTAT figures prove that Ireland is an expensive place in which to run a tourism and hospitality business with labour and electricity costs 32% and 60%, respectively, above the EU average and Ireland having the second highest excise tax and second highest borrowing costs across the EU. To add a bed tax to this formula would only depress demand. Fáilte Ireland estimates that, for every €1 a tourist spends, 23 cent is returned to the Exchequer in direct tourism-related taxes and we think this is enough. A bed tax would be bad for business, full stop.

The commission’s report is extensive and comprehensive and, if there are other tourism-related issues that I have missed, I am happy to answer questions on them. To finish, I will emphasise again that tourism is a key economic sector that should be supported during these turbulent times. Competitiveness is key and any tax increases would retard our recovery, depress demand and affect employment and regional economic balance. I thank the committee for its time. I am happy to answer any questions.

Deputy Mairéad Farrell

Gabhaim buíochas leis na finnéithe as teacht os comhair an choiste inniu. My first question is one I also asked the previous group of witnesses. Obviously, we are here today to discuss the report of the Commission on Taxation and Welfare. The commission's role was to look at ways to broaden the tax base. I hear what the organisations are saying about particular tax proposals they do not agree with but, as the whole concept was to consider how to broaden the tax base, will they advise as to how things could be broadened in their own sectors outside of those particular proposals they disagree with?

Mr. Tim Fenn

Underlying all of this is that we, as an industry, want to be allowed to grow sustainably. When we grow, we can play an even bigger part in the economy as an important domestic export industry. When and if there are risks to corporation tax receipts or increased demand for social payments, pensions and so on in the future, our industry will be a big factor in the economy's ability to support the Exchequer in meeting those demands. What we are really saying is that taking money from businesses now will handicap them in restoring our industry and bringing it to where it should be to help increase the level of taxes. As mentioned earlier on, when tourists come to this country approximately 23 cent of every euro they spend goes to the Exchequer. Allowing the industry to grow sustainably is an important way of increasing the take for the Exchequer and the economy.

Mr. Eoghan O'Mara Walsh

Because we have had such difficult times - although we are thankful that the Government has stepped in with supports in recent years - people forget that tourism in an enormous net contributor to the Irish economy. Back in 2019, the last peak, the broad tourism and hospitality sector was worth approximately €9 billion with €2 billion going back to the Exchequer in tax receipts. To answer the Deputy's question, the best way to increase the tax the tourism and hospitality sector pays is to restore growth to the industry. There is only one way to do that in such a competitive environment. It must be remembered that every time an international visitor decides on a holiday destination, he or she can choose Scotland or multiple other destinations just as quickly as Ireland. We must remain competitive, not increase the tax burden, and instead allow the sector to grow, which will mean additional tax receipts for the country as a whole.

Deputy Mairéad Farrell

I asked that question because we are talking about broadening the tax base. It is also why I asked it in the previous discussion. That is the focus of the committee's work. I note that all of the organisations here have come out quite strongly against the hotel tax, saying that it will impact on our competitiveness. Those of us who travel know that such a tax is levied in many places. It is quite common across the US, in Italy and perhaps in Germany. Out of interest, because Mr. O'Mara Walsh specifically mentioned Scotland, is he aware if such a tax is in place there? How do Scottish hotel prices compare with those here? We all know that hotel prices have risen substantially over recent years. To look at Dublin hotel prices as an example, because many Deputies stay in hotels during the week and can compare pre-Covid prices with post-Covid prices like for like, what were the contributing factors in causing these prices to rise as significantly as they have?

Mr. Paul Gallagher

There is a perception that Irish hotels, and particularly Dublin hotels, got very expensive this year. There is no doubt that there was some sensational pricing. You could find hotel prices that would worry people immensely. I have the CSO data for October, which have just been released. Hotel prices have risen by 19%. However, hotel prices have actually only risen by 17.5% since 2019. If you take 2020 and 2021, the price of hotel rooms in Ireland collapsed because we had no overseas visitors. Hoteliers around the country were trying to attract visitors from the domestic market. To do that and to give people confidence to stay in Irish hotels, prices fell. That was seen across those two summers. The prices are now 17% higher than in 2019. The Deputy asked about Edinburgh in particular. In Edinburgh in August this year, an occupancy rate of 86% was achieved at €242. In 2019, that price was €199. The equivalent price in Dublin in August was €182.

In 2019, that price was €150 at 89.5% occupancy. The other anomaly between 2019 and 2022 is that the higher VAT rate was in place in 2019. Hotels could not pass it on because it came in very quickly to us and we had already transacted a lot of business. In fact we were charging the wrong rate of VAT in many cases and had to absorb that increase of 4.5%. I hope that addresses the Deputy's question.

Deputy Mairéad Farrell

It is just of interest because we are talking specifically about tax-related issues. Regarding Scotland, is Mr. Gallagher aware if the hotel tax, or whatever you want to call it, is in place in the likes of those directly comparable areas or does he have any figures from other countries where it has been brought in and how it has impacted on hotel prices or indeed hotel occupancy? The reason I am asking all these questions is because we are dealing specifically with the broadening of the tax base and it is interesting for us to tease out for that particular issue.

Mr. Paul Gallagher

The reluctance of the hotel industry to absorb an additional tax that would have to be passed on to consumers, places our hotels at a disadvantage when customers are weighing up where they might travel to. In Scotland, it is the complete reverse of Ireland. Some 70% of all of Scotland's customers are actually from the UK; 30% are from overseas. It is the flip for Ireland. Some 70% of all our customers are from overseas and 30% of all our revenue customers are from Ireland. It would place us at a huge disadvantage when we are looking to compete in the overseas markets in order to attract consumers. Quite honestly, the level of taxation applied or enforced on the hotel industry is already extraordinary. We have not even mentioned local authority rates. Some 800 hotels in Ireland pay 12% of the total rates bill for the whole country. It is simply unsustainable. For example, across the road I pay €87,000 for a 67-bedroomed hotel whether those beds are occupied or not. It is an extraordinary burden we already bare. Notwithstanding the Government wanting to broaden the base, I am not sure you will find us willing participants in doing so.

Deputy Mairéad Farrell

That is fair. It is literally the discussion of tonight's committee and that is why I am trying to gage Mr. Gallagher's point of view on those issues because that is what we are here to talk about. I thank Mr. Gallagher. That has been very interesting. I will continue to listen and later, depending on how fast or slow we are going, I might come in with other questions.

Chairman

Votes willing. We are doing this between votes.

Deputy Michael Healy-Rae

First, I warmly welcome the witnesses. I appreciate their time, their experience in their fields and I thank them for their representation not just now but particularly during the pandemic. I come from the tourism capital of the world, that is County Kerry, and everybody knows and acknowledges we do tourism better than anywhere else, not just in Ireland but throughout Europe and the whole world. Places like Killarney are the leading crown in the tourism industry worldwide. Being a representative from that county, I am acutely tuned into the finances of restaurants, guesthouses, hotels and people in the hospitality sector. I hold my clinics in many of those places and I hear first-hand exactly what is happening.

It is ironic that during the pandemic when the actual facilities were closed and hotels were not able to function at all, it is an awful thing to say but financially they were nearly more secure than they are at present. I do not want to exaggerate because I do not ever want to be accused of exaggerating a situation but the reason I am so fearful now is the massive hike in energy costs. I am looking at respectable people like Deputy Durkan who is here a lifetime and, as I always do, I acknowledge the work and the efforts of the Government such as the great work done during the pandemic in supporting industries, not least the hospitality sector. I also acknowledge the efforts made in the budget regarding the assistance that will be there for business regarding energy costs. To be honest, it will be like a spit in the ocean because the representatives here today or anyone who operates any type of a hotel, and restaurants owners as well, will know the massive increase in the energy costs. Running ovens, heating systems and literally keeping the lights on, costs an absolute fortune. In the hotels we are talking about, this is so important. The Government created uncertainty and anguish in the budget in not telling us it was going to continue with the 9% and in other words that we were being thrown to the wolves. It is quite simply not acceptable. Governments have done U-turns before and when they do, I do not even like using the term U-turn. I call it listening to the people and to the sectors. I hope the Government will actually listen to the representatives who are here tonight, the well-meaning, good people who have come to give their views on behalf of the people in their organisations, and will say they actually got it wrong and have to support the hospitality sector further. In fairness, it kept us alive when we were shut. Why would they want to do anything to endanger us now?

I am really fearful for some businesses. I have seen so many public houses close for instance. I do between 50 and 60 clinics every four weeks in County Kerry for the past 25 years. I started off doing clinics with my late father Jackie. I do what we call the runs at night where you might visit ten or 15 places between hotels, community centres, schools and different places such as meetings halls, but predominately public houses. How sad it is for me now to pass pubs which were once vibrant and where there were people. Now I am passing and the lights are off and there are no cars outside the door. The building in some cases is derelict and in other cases the people are living upstairs but the lights and the fire that used be on downstairs are gone. The merriment that went on inside in those places is silent and that is so sad. I do not want to see that happening to our hotels or to our restaurants.

I will start off first of all in County Kerry. In defence of the prices being charged, I do not ever want to see people being charged too much for accommodation, for staying overnight or for the meals or anything like that, but I would be the first person - I do not care whether the hotel is here in Dublin, in Wicklow or in Kerry - to defend them as what they are trying to do is keep the doors open and keep the lights on. If they are charging more than we would like them to charge, does anybody think that it might be to do with insurance, energy, wages and all the different things? My goodness when you open a door, whether you are the manager of the hotel or the person sweeping the floor, between the Irish Music Rights Organisation, IMRO, and every type of person who comes and bangs on your door saying I want, I want, I want, all they are looking for is whatever they can take out of your establishment. You have to bring in enough money every day to try to make a modest profit at the end of the year.

They talk about bigger business. Of course, predominately being a rural-based politician, it might be said I represent small business, but I also readily acknowledge that the bigger the business, the bigger the heartache, the bills, the responsibilities and the wages. Some people seem to think it is no bother to them because they are a big group. My goodness, big responsibilities follow from being part of or being a big group. It is not all sunshine and light and the grass is always greener on the other side of the ditch. What I want to say to the people who are here is that I want to see common sense prevailing. I am not a person to attack the Government or say to hell with them, they are doing no good. It is the exact opposite. I want to debate my points in a reasonable way.

Could the Government please consider this and listen to the group? That is what I see coming out of the witnesses being here this evening.

I politely remind those who are talking about spreading the tax base and trying to get more tax out of people that you can squeeze only so much out of anything and cannot get blood out of the turnip. For God's sake, you have to remember these things. It is very easy for people in offices to imagine how to get more money from people in business, but businesses can pay and give only so much. The people who really understand business are those who are at it. A small employer, like me, knows how difficult it is. When I started off, I thought it was normal for the sheriff to write to people every month. When I was starting out, I thought there was something wrong with me if I did not get a letter from the sheriff every month. I knew the sheriff personally. God be good to him, he has gone to his reward, but there were plenty of times that I used to pray for him because my heart used to be in my mouth when opening the brown letters that came. I used to imagine the authorities coming the next day to seize something. That is what it is to start out in business; that is the reality of business. That is what it really means to be starting with nothing, trying to keep the show on the road, your taxes right and bills paid, and trying to have enough to keep going until the next week.

Chairman

Deputy Healy-Rae-----

Deputy Michael Healy-Rae

I am sorry, Chairperson, but I just wanted to make my point that I am here to support the people who need support. Just because one is in an office in a big building or building that looks good from the outside does not always mean it is good trying to balance the books. Could those who are trying to squeeze more out of people think about these things? If they were at it themselves, they would know what it was like to try to survive.

Chairman

I thank Deputy Michael Healy-Rae. His time was running out and I wanted to give our witnesses a chance to respond to some of his points. I do not know who wants to go first.

Mr. Tim Fenn

I will, if I may. The Deputy has more or less put the finger on the button. In our industry, many businesses are regional and seasonal, and their profitability is marginal. They are important contributors to local employment, local communities and every other aspect of society. Any decisions taken to increase the tax base or increase taxes should be subject to strict and detailed impact assessments, not just the impact assessments on the Exchequer but also on the societies on which they will have an impact. Throughout rural areas and in many towns, we see many businesses closing because the tax take and cost of doing business are making them unviable. Any decision to increase taxes should be based on an impact assessment.

Ms Denyse Campbell

I thank the Deputy for his comments. We talk a lot about tourism but it is sometimes forgotten that tourism is highly effective at spreading employment opportunities throughout every town and county in Ireland. Before the Covid pandemic, one person in ten was employed in the tourism sector and 70%of that employment was outside Dublin. Tourism should not be taken for granted. It is essential for employment in all the regions. It is not just a question of hospitality, hotels, guest houses and restaurants; it is also a question of local producers, local suppliers and everybody else who feeds into our businesses. Therefore, we really need to continue to support and invest in these businesses and allow them to flourish.

Deputy Bernard J. Durkan

Deputy Michael Healy-Rae gave a very impressive précis of the rural economy and what keeps it going. He knows it well; there is no question about that. Impact assessments make those who make the decisions aware of what the impact might be, be it good, bad or otherwise. An extra burden will never help anybody in business, in any event. We realise, appreciate and accept that there is a need to obtain revenue through taxation but we should recall when it ceased to achieve what was intended. In other words, the burden was so great that it was an obstacle, meaning many people fell by the wayside.

I agree the tourism sector is important. Like my colleague, I encounter it weekly. I notice two things in the pub sector. Some pubs that were having difficulty before the lockdowns have recovered very well. They have changed their business slightly, including by making some changes that have attracted the public. Attracting the customer is very important, now more than ever. For others, it has been quite difficult. There are pubs closing down, which is sad to see. To see it happening all over rural Ireland is not something we are happy about. I hasten to add that the Government is still watching to see what might arise in order to ensure our economy remains strong, competitive and active. That is very important. The Minister has said this, and it will rightly continue.

Let me be so bold as to offer some information. Deputy Michael Healy-Rae will counter it by saying the costs prevent what I propose. A pub that is closed and opens only for the last hour or two, be it in a rural or urban area, does not really attract customers. I was on holiday down the country during the summer and noted several busloads of tourists arriving at a pub that was shut. There was a sign at the side stating it opened at 5.30 p.m., 6.30 p.m. or 7 p.m. but the tourists were not interested in that. They wanted to be entertained when available and ready to spend their money. Let me be so bold as to give a hint: the hospitality businesses, entertainment sector and pub sector need to be available for longer to catch the customers such that the customers will be able to have a worthwhile experience and say they want to go back.

Mr. Adrian Cummins

I thank the Deputy for his question or statement on the rural pub. Several pubs that serve food are in our association. One of the biggest challenges now facing all businesses in hospitality is the energy crisis. The information we have from the energy providers is that the crisis we face will be a two-winter phenomenon, as they keep describing it. Therefore, we are only at the start of this. We welcome the Government's support by way of grant aid for our industry. I do not believe it will be enough for the vast majority of low-margin, high-energy-using businesses, not just in hospitality but also in the retail sector. I refer to businesses that use fridges, ovens, cookers and other such devices. The Government is going to have to consider this.

In the context of the committee's remit of budgetary oversight, we would like to raise the stealth taxes that are sometimes introduced, such as the sugar tax on soft drinks and the proposed latte tax on coffee cups. While people might have good intentions when introducing such taxes, they add to inflation, including consumer inflation. There are accidental consequences when the tax base is broadened in certain areas. I support our colleague's recommendation on having an impact assessment of proposed taxes. An economic impact assessment should be made by an independent body before a tax is introduced.

Mr. Paul Gallagher

There was a positive legacy from Covid. Irish people and Irish businesses found new ways to meet the challenge. Outdoor dining, beer gardens and outdoor restaurant facilities opened. One sees much more street entertainment going on. Those are all positive aspects of Covid. The Deputy is quite right. Some businesses use Covid to strengthen their futures. Those that grasp the nettle first have done best and those that were late to it probably will not survive, which is also quite sad though, of course.

Chairman

Is Deputy Durkan happy enough with that?

Deputy Bernard J. Durkan

It is still to play a part. It is not to say that they will not survive; they could be under challenge for a while. However, the same number of people – the customers – need to be attracted back into the pubs in the same way that they felt they were beforehand. People became accustomed to living their lives a different way. As a result of that, it is open to the industry to meet the challenge and introduce new ways and means of encouraging the customer in.

From the Government’s point of view, it continues to carry out a watching brief to ensure that the measures being taken are effective and that they will work. I reiterate that the Minister said that he is watching carefully and if further action is needed, it will be taken. We need to also do a bit ourselves and change the things that need to be changed. It is not the same as it was before. The proof of that is that the pub that was not doing great business before – for a particular reason, whatever it was – and the same person made changes, took it over, made a different proposition of it and is doing quite well. It is attractive. People want to come into it and sit down and they are doing that. However, they will not do it if the pub is not available or does not open or stay open when it is convenient for them. Even the last hour of night may be attractive. The customers like to sit down of the own accord, have a couple of drinks and go home.

Deputy Seán Canney

I welcome the witnesses. Listening to the commentary both from the witnesses and the members, the first thing I want to say is in reply to Deputy Michael Healy-Rae. Galway is coming up close to Kerry now from a tourism point of view. We are clipping at Kerry's ankles at the moment and we will catch them next year in the all-Ireland final and that will do us.

On a more serious note, we are talking about something that is very important. The witnesses explained everything about the industry, whether it be hotels, restaurants or pubs, and the impact it has on the economy. One of the things that is coming clear to me is the fact that the 9% VAT rate is something that should be set and dispensed with and not to have it as a cliff edge every year when the budget comes around so businesses can plan and will know what their outlays will be. One of the messages that I am getting from the witnesses is that the 9% VAT rate should be set as a standard and become a permanent part of the tax code from now on so that at least we know where we are going.

I am not sure the accommodation tax would work, but I will concerns, similar to Mr. Gallagher, because I believe that will affect hotels only where accommodation is being offered, whereas it will not affect restaurants, pubs or whatever. Taking that into account, it would be a retrograde step to bring that in. It is something that we have to examine. Coming back to the issue of when a measure is brought in, has it been sweated properly first to see the impact and perhaps some of the consequences that were not intended that can happen and can be negative?

I come from north Galway where some tourism is based on heritage. We have some beautiful places that are part of Ireland’s hidden heartland. It is aptly named because much of it is hidden. There are some great places. For instance, Galway city, Athlone and all of these places have the big hotels, whereas we have family-run hotels. Those are the hotels that keep the economy going in the Tuams, the Gorts, the Loughreas or whatever. They are the local employers. They are the places that if we were attracting a foreign direct investor into a regional town, they would look at the facilities that are in place. One of the things they look at is accommodation, be it hotel accommodation or restaurants, and what the whole make-up of the living environment is to attract the best people. That is something that the hospitality sector plays a huge role in. Even though it might not set out to do it, it does it.

Going back to my background, over a span of 25 years I was involved in the construction of many hotels. I know the standard that they are built to, the standard they are completed to and the pride that the owners take in them. These are owner-occupiers, as I would call them. They take great pride in the fact that they have a top-class product. When one compares what we have with, say, San Francisco or New York or whatever, I think we have a better quality hotel in a beautiful location. We have to take that as being an asset rather than being something that is taxed to the hilt. It is important that we kind of calibrate how we deal with the industry.

Pubs are struggling, especially in rural towns and areas, because life has changed for many people. Socialising has changed. People might go out now for a drink early on a Sunday evening and come home again early. They might spend a shorter time in the pub or whatever. The publican has to adapt to this. Some publicans have also decided to go into the food business. However, that does not mean a person brings in a toaster and a microwave and off they go. A kitchen has to be put in and standards have to be met. All of that is an investment. The investment is such that one has to get it back in a certain period. It is great just to be doing that in an uncertain time.

With the recommendations that the tax commission has come up with, we should dispense with some of them that it had very early so that we can say that these do not apply because we will not introduce them. I was struck by what Mr. Cummins said about the latte tax, the sugar tax or the cup tax. These are things that are being brought in to improve our environment and an adaptation that has to be done by industry. Globally, we have to do this. We have to do that together. We have to look at it in a way that we actually get it right and do not make a mess of it. There are complications when bringing in something such as this, so we have test that and sweat it as well.

If we do not have a thriving hospitality and hotel sector, we will be at a loss, even from the point of view of attracting the best people that we want into this country to help us. At a time we are looking for staff, it is most important. I am posing a question about taxation and all of this. Leaving aside all of this, is staffing a big challenge? Is it a just a seasonal issue? Some hotels are finding it hard to get staff, especially chefs and so on. It is creating a demand for them and increasing the cost of hiring them. Have the witnesses any comments on that?

Ms Denyse Campbell

I can take that. To come back to a few of the Deputy’s points, he mentioned the 9% VAT rate. He is correct that it would be great if we could secure the 9% VAT rate. Like all our businesses, we secure business two to three years in advance. That is our base business that we work on. For international competitiveness, 9% is the correct VAT rate.

Regarding staffing, pre-Covid we had approximately 270,000 people employed. We are probably back up now to between 240,000 and 250,000. We have found that there is probably a skills shortage that would be a concern for us, but we are working through that. Staffing and recruitment is a challenge in our industry in the moment.

Mr. Adrian Cummins

I thank the Deputy for the questions. On the staff shortage, we lost 40,000 staff during Covid.

We are trying to build that back up. When the economy is at full employment, we either take from other sectors, which lose staff, or we look to attract people from outside Ireland. The primary location we look to is the European Union. Hospitality across countries in the European Union has seen the same impact on staffing levels due to Covid. We are all in the same boat. We are doing our best to attract new labour supply. It can be seen in other sectors. The construction industry, healthcare, retail and so on are crying out for staff. It will take us time to build the number of employees in our industry back up. We have had success with chefs through the work permit scheme. We got 800 chefs in this year. We expect the same number of chefs to come in next year. I thank the Department for its activity in trying to attract staff and the processing of work permits for our sector over the past 12 to 18 months. Out of 34,000 work permits, hospitality got 800 chefs, which gives an idea of where we are. We do not get any other work permits for other subsectors of hospitality. That should be looked at and permits should be expanded to include more front-of-house staff, for whom there is a requirement.

I know Deputy Durkan cannot.

Deputy Bernard J. Durkan

I support business and industry. We had a discussion before about extra taxes, which could be a punishment to the sector concerned. While it may sound good and the rhetoric may be great, we should remember that at the height of the Celtic tiger, I used to hear speeches in this House saying we were the richest country in the world and should be doing more for everybody, spending more in various areas and so on. We quickly found out whether we were the richest country in the world. We were not. We should be careful not to delude ourselves and to ensure we encourage foreign direct investment, because that brings local investment, tag-on industries and so on. We need to ensure we run the economy in such a way as to make it attractive for foreign direct investment, for people to come to work here, and for our own people to have a ready opportunity. Remember that we spent many decades exporting our young population, which was a huge drain on the economy. They left the country every year for decades to such an extent that the population in 1956 was about 2.5 million.

We are in a different situation now. It is a changing world and there will be greater challenges. We must recognise that these challenges are there and work to ensure that we have an equitable society that does not scare anybody off and is just, fair and honest. If we do that, we will be doing well.

Chairman

When it comes to chapter 8, there is a discussion around pension entitlements. Mr. Cummins dealt with the extra cost of that to the employer in his opening statement. Pension entitlements will be an ongoing issue that will probably be of an increasing importance, given the demographics. What do industry stakeholders think the options are, considering that we must have some supports for people? We need some answers to that ongoing and increasing demographic pressure in terms of pensions.

Mr. Paul Gallagher

I have a few views on it. If our industry is going to be an attractive industry to enter and we want people to stay in our employment for a longer duration, it will be based on whether they will accrue a standard of living in their retirement that is commensurate with demands when they do retire. Mr. Fenn referred to equitability with site tax. As employers, we need to prepare our employees and our businesses in respect of the need to contribute to the future cost of pensions and to get them to start earlier. It is entirely up to them whether they decide to opt out but I am fully in favour of having staff join a pension scheme as quickly as possible. In my hotel, 18-year-olds bounced into the hotel as young women and retired after 45 years of service. You will find that up and down the country in hotels and restaurants. People enter this business, you think they are not going to stay and yet they retire from them. They should have a pension that can support a life for them into their old age, so I am fully in favour.

Mr. Adrian Cummins

I agree with Mr. Gallagher's argument that when staff start at a young age, they need to be encouraged to get involved in a pension scheme as quickly as possible. The only sector I would equate to employees automatically getting into a pension scheme would be the construction industry. It is one we could learn from. From an employer perspective, we automatically see pension auto-enrolment as a cost to the business at this time. It is about education. The minute young people get a job, they should be encouraged in some shape or form to take on a pension and then over time-----

Chairman

It is a hard sell when you are 18 or 19. We have reached the end of our session. I thank the witnesses. We have gone quite late with it, which was the result of votes being called. I thank the witnesses for their forbearance.

The select committee adjourned at 8.54 p.m. until 5.30 p.m. on Wednesday, 30 November 2022.

Committee on Budgetary Oversight debate - Wednesday, 23 Nov 2022

Report of the Commission on Taxation and Welfare: Discussion (Resumed)

Mr. Tim Cullinan

Mr. Patrick Davitt

Ms Mary Conway

Mr. Patrick Davitt

Mr. Tim Cullinan

Mr. Tim Cullinan

Dr. Shane Whelan

Dr. Shane Whelan

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tim Cullinan

Mr. Tim Cullinan

Dr. Shane Whelan

Mr. Patrick Davitt

Mr. Patrick Davitt

Dr. Shane Whelan

Dr. Shane Whelan

Mr. Tom O'Brien

Mr. Tim Cullinan

Mr. Tim Cullinan

Mr. Tim Cullinan

Ms Rose Mary McDonagh

Mr. Tom O'Brien

Mr. Patrick Davitt

Mr. Tim Cullinan

Mr. Tim Cullinan

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Tom O'Brien

Mr. Patrick Davitt

Mr. Patrick Davitt

Mr. Patrick Davitt

Mr. Tim Cullinan

Mr. Tim Cullinan

Mr. Tim Fenn

Mr. Adrian Cummins

Mr. Eoghan O'Mara Walsh

Mr. Tim Fenn

Mr. Eoghan O'Mara Walsh

Mr. Paul Gallagher

Mr. Paul Gallagher

Mr. Tim Fenn

Ms Denyse Campbell

Mr. Adrian Cummins

Mr. Paul Gallagher

Ms Denyse Campbell

Mr. Adrian Cummins

Mr. Tim Fenn

Mr. Tim Fenn

Mr. Tim Fenn

Mr. Paul Gallagher

Mr. Adrian Cummins

Committee on Budgetary Oversight debate -
Wednesday, 23 Nov 2022