Vol. 856 No. 2
6. Deputy Paul Murphy asked the Minister for Finance the cost to the Exchequer of the proposal in the Finance Bill 2014 to exempt green fees and membership fees in member-owned and non-profit making golf clubs from VAT; and if he will make a statement on the matter. [41763/14]
What will be the cost to the Exchequer of the proposal to put on a legislative basis the decision to exempt green fees and membership fees in member-owned and non-profit making golf clubs from VAT? Regardless of the decision of the European Court of Justice in the past year, does the Minister really think it is justified, in the context of a fourth regressive budget in a row, people being hammered with further austerity and unable to afford to pay water charges, to give a VAT exemption which will benefit disproportionately the better-off in society?
The proposal in the Finance Bill 2014 to exempt green fees in member-owned clubs from 1 January 2015 is necessary to ensure Irish VAT law complies with the recent decision of the European Court of Justice in the Bridport & West Dorset Golf Club Limited case, reference number C-495/12. Membership fees received from members of member-owned golf clubs had already been exempt from VAT and the ECJ judgment which has direct effect in the State found that green fees received from non-members should also benefit from a VAT exemption. Prior to the ECJ judgment, green fees charged by non-profit making organisations such as member-owned clubs to visitors had been liable to VAT at the 9% reduced rate of VAT.
Where a person or body supplies VAT exempt goods or services, this means that they do not charge VAT on these supplies and they are not entitled to claim input VAT on costs associated with such supplies. Until now member-owned golf clubs would have made exempt supplies on membership fees and taxable supplies on green fees charged to non-members and, as a result, would have been entitled to partial VAT input deductibility on their business costs, including on capital development projects.
From 1 January 2015, however, member-owned golf clubs will be exempt from VAT on green fees and membership fees, and they will no longer have an entitlement to a credit for VAT incurred on their inputs in regard to green fees. This means the changes may have an Exchequer impact in the future and retrospectively. It is difficult to cost the impact to the Exchequer of the changes to the VAT treatment of golf fees because Ireland's simplified VAT return system means that the necessary detailed information to determine the cost of specific changes is not captured on VAT returns. However, as many golf clubs will have substantial overheads relating to capital developments, where up to now a proportion of the VAT on these costs was deductible, it is likely that the judgment will have a favourable impact on only a small number of clubs, retrospectively and in the future, and, as such, it is likely that any impact on the Exchequer will be negligible.
In addition, where VAT refunds arise, the Revenue Commissioners must consider whether the refund would unjustly enrich the club. The Revenue Commissioners have met with the Golfing Union of Ireland and have consulted with individual member-owned clubs to discuss concerns surrounding the issue of unjust enrichment. They will issue guidance on their position regarding unjust enrichment once the discussions are concluded.
I am aware of the relevant case law from the European Court of Justice. However, it remains a political decision of the Government to put that into legislative effect by including it in the Finance Bill. The measure was not mentioned by the Minister in his Budget Statement. He cannot tell me the exact amount of money involved. I presume it is not a significant amount. For example, the 20% cut to the respite care grant saved the Government €25 million. Would it not be a better use of Exchequer funds to immediately reverse that cut, as people have demanded, rather than giving a VAT exemption for clubs which are, to a large degree, privileged and elitist institutions? Plenty of ordinary people play golf and I do not have a problem with that, but the entrance and annual fees of some clubs are substantial. Newlands Golf Club has an annual fee of almost €1,500, with an entrance fee of €5,000, Clontarf Golf Club has fees of over €1,000 and a joining fee of €5,000, and Dún Laoghaire Golf Club has a joining fee of €16,000. Is giving such clubs a VAT exemption or refund justified?
VAT is largely driven by EU VAT directives. When the European Court of Justice makes a ruling, it applies to Ireland whether we legislate domestically or not. We have to legislate domestically to incorporate it in the body of our VAT law. This is a very minor change and the reason it was not mentioned in the Budget Statement was that it was so minor. It was in the supporting documents for the budget.
Before any announcement was made, VAT was not paid on membership. Members of golf clubs were not liable for VAT on their membership fees. Visitors to golf clubs were charged VAT on green fees and the ruling of the European Court of Justice is that they should also be exempt. That is a disadvantage to many golf clubs because, while there was a small return on VAT from visitors paying green fees, member-owned golf clubs had the capacity to reclaim VAT for inputs. If a member-owned golf club spent €500,000 on upgrading a golf club, it was able to claim back the VAT, which was charged at 9%. Now, as a quid pro quo, golf clubs will no longer be able to do that.
It is difficult to get statistics on this, but I have received advice from my Department and the Revenue Commissioners that the influence on the Exchequer will be negligible and one balances the other. It is a very minor issue and there is no big gift to golfers coming from the change. The measure is simply to comply with a ruling of the European Court of Justice. We try to be compliant and operate in accordance with the law.
I understand the Revenue Commissioners made a decision at the start of this year to begin to apply the European Court of Justice ruling. What has it decided to do about refunds? It stated at that stage that it was in discussions and if there was to be a windfall for clubs it would not be given. Has it made a decision yet? If not, why not? This is important because it speaks to the nature of the budget and the taxation system. The Government likes to proclaim that we have one of the most progressive taxation systems in the world, but in doing so it speaks only about income tax and not about VAT, which is, overwhelmingly, a regressive tax. It is not a tax on luxury goods, with the result that those in the bottom 10% in our society in terms of income pay almost the same as a percentage of their total income in tax. This illustrates the regressive nature of our tax system.
Ireland is an effective, respectable and fair country and we try to keep our tax laws in line with international law. As VAT is driven by EU directives, if the European Court of Justice makes a ruling, we try to amend our laws to comply with that.
On the precise question on the current position of the Revenue Commissioners, as I said in my reply, where VAT refunds arise the Revenue Commissioners must consider whether the refund would unjustly enrich the club. The Revenue Commissioners have met the Golfing Union of Ireland and have consulted with individual member-owned clubs to discuss concerns surrounding the issue of unjust enrichment. The Revenue Commissioners will issue guidance on their position regarding unjust enrichment once the discussions are concluded and that will be available publicly. We can revisit the matter at that stage.
7. Deputy Dara Calleary asked the Minister for Finance his views on the tax treatment of crowdfunding initiatives; and if he will make a statement on the matter. [41758/14]
The National Policy Statement on Entrepreneurship in Ireland indicated that more diverse sources of finance are needed for start-up companies. It indicated there is considerable potential in crowdfunding. I want to ascertain from the Minister what work is under way in his Department to support and mine that potential.
Crowdfunding is still in its early stages of development. This type of funding has the potential to increase entrepreneurship as it bridges a financing gap for many micro-enterprises and fosters a more engaged investor community whose expertise can help micro-enterprises. Delivering on action No. 217 of the Action Plan for Jobs 2014, officials in my Department are working with stakeholders involved in SME finance on a number of non-bank financing initiatives, of which crowdfunding is one, so that the optimum mix of SME finance products can be established as soon as possible. The SME State bodies group, which is chaired by my Department, hosted an SME policy day and identified crowd funding as an area that is likely to help Irish SMEs in the coming years. My officials recently facilitated meetings between the European Investment Bank and two crowdfunding organisations.
In terms of supporting such alternative financing mechanisms as crowdfunding through tax incentives, it must be borne in mind that value for money and a strong justification for State intervention are key considerations. As crowdfunding is relatively new and is only currently establishing a presence in Ireland, I am inclined to consider the various available options prior to intervening with taxpayers' money in an effort to boost take-up. Private sector initiatives have their place and do not necessarily require tax reliefs in order to foster participation. The Deputy will be aware that the employment and investment incentive already provides tax relief for investments of medium-term risk capital in qualifying SMEs.
I acknowledge the progress made. The justification for State intervention is job creation. Some private companies can point to just under 1,000 new jobs created in the past two years. I acknowledge the significant progress made by Microfinance Ireland over the past four months in terms of reforming and sharpening up its role. What timeframe has the Minister given to his own Department to conclude these negotiations and come forward with a proposal which might hit the marketplace? Might we see some sort of Government-endorsed package around crowd financing to assist the growth of potential projects?
As the Deputy knows, crowdfunding is the practice of funding a project or venue by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding campaigns are generally funded by the general public rather than by traditional investors.
Section 6.2 of the 2014 report of the entrepreneurship forum discusses crowdfunding and recommends that no action be taken by the Government until the industry establishes itself in Ireland and has had time to grow and develop. Action No. 217 of the Action Plan for Jobs 2014 commits to developing proposals to support the development of alternatives to bank financing within Ireland. My officials are working with stakeholders involved in SME finance on a number of non-bank financing initiatives, of which crowdfunding is one. Our policy position so far is that it is at a very early stage and I am not disposed to encourage it at this time by providing it with a tax break. However, it is an issue we will keep under review. We have tax breaks to encourage investment in other areas.
The tax breaks from the employment and investment incentive scheme, EIIS, and the other schemes are for people with larger incomes, who have spare capacity to invest in such schemes. As the Minister said, crowdfunding tends to attract smaller investors and people with smaller savings. They are entitled to a fair share of any tax incentives on offer. I welcome the progress made but I encourage the Minister to move forward as quickly as possible on this rapidly growing market. There is no reason this country should not be at the forefront.
We might learn from the practice in the United Kingdom. In 2013, the UK Government commenced lending to small businesses through a peer-to-peer lending platform called Funding Circle. An initial amount of £20 million was provided through its British business bank and this has subsequently been increased to £40 million. These funds will be used to provide the final 10% of any loan to a borrower. The remaining 90% of funds must be raised through private investors.
While I will not cite peer-to-peer lending specifically, the Government has a range of mechanisms in place to provide alternative sources of finance to SMEs in Ireland, such as those mentioned by the Deputy - the microfinance loan scheme, the employment and investment incentive scheme, the start-up refunds for entrepreneurs, SURE, programme, and the Strategic Banking Corporation of Ireland. Crowdfunding is something that is gaining traction in other jurisdictions, and it is worth looking at what is happening in the United Kingdom. However, while we are keeping up with what is happening, I do not have an initiative to propose yet. The Deputy may be correct in his analysis, but this is something I will keep under review.
8. Deputy Joe Higgins asked the Minister for Finance the number of persons that will benefit from the changes to the special assignee relief programme, including the scrapping of the ceiling of €500,000, the reduction in the amount of time for which a person must have been employed by a company, and the withdrawal of the requirement not to be tax-resident in another country; and the cost to the Exchequer of these changes. [41749/14]
My question relates to the special assignee relief programme, SARP. What effect, in terms of massive benefits, will the further generous concessions the Minister provides in the Finance Bill have for highly paid individuals?
As the Deputy will appreciate, predicting the cost and take-up of any new tax measure is difficult. When SARP was introduced in 2012, it was estimated that for every 100 individuals that availed of the scheme, the cost to the Exchequer would be approximately €5 million. The recent review of SARP has shown that just 12 individuals availed of the scheme in 2012 and provisional figures show that 31 individuals availed of it in 2013.
As the Deputy will be aware, my officials conducted a review of the special assignee relief programme in advance of this year's budget. The review analysed aspects of the scheme such as the background and rationale for the programme and data available from the Revenue Commissioners, including the cost and take-up of the programme. In addition, a public consultation was held. A report was written on the review and this has been published on the budget website.
Taking into account the review, on budget day I announced the amendments the Deputy has mentioned. Based on discussions with stakeholders, I believe that these measures are a positive step forward as part of a range of measures, forming a roadmap for securing Ireland's place as a destination for the best and most successful companies in the world. It is not, however, possible to predict what the take-up will be. I have provided an estimated additional cost of €1 million in 2015 for the scheme. My Department and the Revenue Commissioners will keep the levels of take-up of the programme under review.
The SARP was a massive tax break provided by the Government to the highest-paid executives who qualified for it. A qualifying chief executive on €500,000 a year would increase his or her take-home pay by a breathtaking €52,275 per year. The Minister had instituted a cap of €500,000, but now he is removing that cap, so that somebody on €750,000 will get not just the €52,275 I mentioned but an extra €30,750, giving an extra take-home amount of €83,000. This is an incredible inequality in our society at a time when the Minister is hammering the poorest people and middle- and low-income workers with water charges and other austerity burdens. It speaks volumes about the ethos of the Government.
Countries all around the world compete for foreign direct investment, and in recent years schemes such as this have become the norm, especially in western Europe. Countries with a high marginal rate of income tax, such as Ireland, face a competitive disadvantage in attracting key personnel. Holland has a scheme which is even more generous than anything I am putting on the table, and the Dutch are direct competitors with us for foreign direct investment.
The scheme intends to provide for start-up businesses in bringing to Ireland key people without whom the business would not take off or development of the industry would not take place. That is being done based on the advice I got. The scheme has applied to few people. In the year of introduction only 12 people took it up, and in the last year for which we have figures the initial estimate is that up to 31 people took it up. As the whole debate on international tax avoidance develops, the OECD's policy position is that the test of validity is that real economic endeavour takes place - in other words, no brass plates. If we can get key individuals in - some of the key people in multinational companies - we can prove easily that real activity is taking place in our jurisdiction.
This is just further proof and an illustration of the huge anomalies created by weak Irish capitalism over the past 30 or 40 years, which has completely made itself over-dependent on multinational investment instead of developing indigenous industries and more organic investment locally. SARP is a typical result of this. Who lobbied the Minister for this? Who are the stakeholders who wanted it? I agree that only a small number of individuals benefit, but the scheme is highly symbolic of the massive chasm between the richest in this country - people with huge take-home pay, chief executives, etc. - and those ordinary people who under austerity are getting hammered on a daily basis. Where is the break for those people, given that the Minister is attempting to wipe out with a water tax whatever minuscule concessions were given in the budget?
The people who make submissions on these matters are those who are familiar with foreign direct investment and its benefits for the country and with the platforms that are necessary to attract foreign direct investment to Ireland against competition from other countries. Many people made submissions when we opened the consultative process, but principal among them were the IDA, the American Chamber of Commerce, IBEC, and the tax practitioners and big firms that represent foreign direct investment here. These made their submissions and we made a judgment. We also get submissions from people who do not have expertise in the area but who have strong opinions on these matters, and we take these into account.
The objective is to have more foreign direct investment in the country so that more jobs are created. I do not disagree with the Deputy that the model in Ireland has been lopsided. Not enough attention has been given to growing indigenous industry into multinational industry.
However, the Deputy will notice that is not true of this Administration and that in every Finance Bill we have concentrated on agriculture and food and tourism which we are growing into major industries, even bigger than they historically were. I will continue to do this. While foreign direct investment is very important, the growth of indigenous industry with deep roots in Irish society is equally important.
A total of 150,000 people made a submission to the Government on Saturday. Will it listen to them?
There is evidence that the Government is listening.
I am afraid that the time for parliamentary questions has expired. We will now move on to the Finance Bill.
We started ten minutes late.
The Deputy should read Standing Orders. The time for parliamentary questions runs from 9.30 a.m. to 10.45 a.m. It is now almost 10.55 a.m. and I have to-----
You can extend the time allowed. We started ten minutes late.
That is not my fault. I was standing outside the door, waiting for a quorum to be provided.
It is very rare that we get a chance to question the Minister.
I am sorry, but it is up to others to make certain that Members are present to form a quorum. I cannot do anything about it; I only apply the rules of the House.
On a point of order, I had to come in to ensure there was a quorum. The Government is supposed to provide a quorum.
That is not my problem and there is no point in blaming me for it.
The Ceann Comhairle said at the outset that while, on the one hand, Question Time would run to 10.45 a.m., on the other, 75 minutes were to be allocated.
I have checked with the official who advises me that the new Standing Order states Question Time will run from 9.30 a.m. to 10.45 a.m.
It is extremely unfair on a Deputy who has to make special child care arrangements to be here to ask the question.
I know it is unfair and it is not just Deputy Ruth Coppinger who is affected. Deputy Michael McGrath was next in line.
I know that, but is this a ruse by the Government not to show up?
We are not going to waste more time. The Deputy can take up the matter through the Committee on Procedure and Privileges. If it wants to change the rules, I will apply them. I am sorry, but it is up to the Dáil to have a quorum at 9.30 a.m. I have been here since 8.45 a.m.
It is outrageous.
The problem with the rules is that the Government can reduce the time in which we can hold the Minister to account.
No, it is up to the Dáil to provide a quorum.
I was here at 9.25 a.m.
I know that, but that is not the point.
