Finance Bill 2018: Report Stage (Resumed)

Amendment No. 18 is in the names of Deputies Paul Murphy, Barry and Coppinger. As none of them is present to move it, we will have to proceed.

Amendment No. 18 not moved.

Amendment No. 19 has been ruled out of order.

Amendment No. 19 not moved.

Amendments Nos. 20 and 21 are related and will be discussed together.

I move amendment No. 20:

In page 124, to delete lines 12 to 17.

We discussed this issue at length on Committee Stage. It is one I raised for a number of years with the Minister's predecessors. It concerns the need for bookies, those placing bets and the industry as a whole to pay more tax. That there is a need for a larger contribution is accepted across the industry. Currently, the rate is 1% rate. A 2% rate is proposed in the Bill. During the years I have examined the accounts of many independent retailers. The increase would have a dramatic and, possibly, drastic effect in that it could move them from profitability to loss making and, therefore, lead to the closure of some independent retailers, with the associated loss of jobs which are mostly in rural Ireland. That would only be to the advantage of some of the larger operators and possibly move more people to bet online. For a long time we have been arguing for a 3% rate to be placed on the punter, not the industry which would face a challenge in absorbing the increase, given its profitability. The Minister has not agreed to that proposal. We debated the issue on Committee Stage, which is why we, in Sinn Féin, have tabled an amendment to delete the lines that increase betting duty. I am doing so reluctantly, as I believe the industry should pay more tax, but at this stage in our discussions on the Finance Bill, it is clear that there is no other option but to seek to delete the lines. Otherwise, the Bill will have a drastic effect.

I am conscious of the damage a gambling addiction can inflict in our society and have long argued for an increase in betting duty, but it is being done in a way that will hit the smaller, independent bookies far more. There is a proposal from the industry on methodology. I understand that, although there was not universal acceptance of a gross profits model in the past, there is now. It is similar to the model operated in Britain. The industry has argued in favour of rates of 10% and 20% on different sectors. This model is worth considering. Despite our position on the imposition of a 3% tax on the punter, we are open to considering the proposed model. I, therefore, urge the Minister not to proceed with the measure proposed in the Bill at this time. On Committee Stage he acknowledged that every tax increase could have an impact, but this one could have a very clear impact. Sometimes, it is up to us to weigh the impacts and benefits. We are also conscious that the costings are just a multiplier of the increase from 1% to 2% without any real extrapolation of the effects on independent retailers. For that reason, I will oppose this section of the Bill.

We had a good discussion on this issue on Committee Stage. It is widely acknowledged that the change will have a significant and detrimental impact on independent bookmakers, in particular. I support Deputy Pearse Doherty's point about the wider context, which is why we have been calling consistently for progress on the Gambling Control Bill 2018 to deal with problem gambling. The industry needs to play a full part in dealing with such issues because problem gambling can destroy lives. However, that is not the subject of this discussion.

Whenever the Minister proposes a tax increase, I imagine vested interests, including those directly affected, make arguments to him on its likely impact. He has to assess whether they are crying wolf or whether what they are saying is borne out by the evidence. That is a judgment we have to make, too. We must assess the information and feedback we are getting. It is my judgment that the change will have serious consequences for the independent bookmaker sector. Bookmakers have opened their books to many of us and we have examined financial statements.

By its nature, a turnover tax is crude, but that is the model that has been in place for some time. The sector has proposed a gross profits tax. From the bookmakers' perspective, the proposal has been fully costed and is supported generally across the industry. They submit the view that such a tax would be likely to bring in more money than the projected yield from the Minister's change under the Bill, which is in the region of €40 million in 2019 and just over €50 million in a full year.

These claims need to be evaluated thoroughly. The sector contests many of the claims the Minister has made, including on Committee Stage, about its engagement in the period during which this issue has been discussed. However, all of that is academic at this point. We are at the eleventh hour and there is a proposal contained in the Finance Bill. We have an amendment, No. 21, which seeks the making of an economic impact assessment of the change on the independent bookmaker sector. Given that the first stream of payments of betting duty in 2019 will be in April, is there any window of opportunity to conduct the assessment while progressing a comprehensive evaluation of the proposal that has been made for a gross profits tax?

The entire profits of the retail betting sector are in the region of €35 million per year. Doubling the tax from 1% to 2% constitutes a 100% increase which will wipe out all of the sector's profits. In the past ten years there have been 515 closures. If the 2% rate had remained in place, there would have been more. Currently, there are approximately 850 betting shops throughout the country.

Bookmakers are only starting to see a slight increase in business. If this increase goes ahead, it is estimated that it will lead to between 350 and 400 more closures, resulting in job losses of approximately 2,500. This will cost the Exchequer approximately €35 million, with a further €1 million in commercial rates lost. If these shops close it will have a serious effect on families and on subcontractors, window cleaners, local newsagents, plumbers, electricians, shopfitters, computer and IT services, printers and so on. It is estimated that another 900 indirect jobs will be lost. The total number of jobs lost could reach 3,400.

In my town of Dundalk Boyle Sports employs more than 400 people. It is making profits and paying its taxes. It makes no sense to tax turnover and makes far more sense to tax profits. All over the world, bookmakers are taxed on their profits and I do not see why Ireland should be any different. The Minister cannot ask bookmakers that are not making profits to pay tax. He must go after the bigger bookmakers that are making bigger profits and get them to pay more tax. It is important to ensure that small bookmakers survive. This provision has been described as an anti-gambling measure but if we lose 2,500 direct jobs and another 900 indirect jobs, I do not know what will happen. Years ago there was a black market in gambling and the last thing we want is to see that returning. It does not make sense to tax turnover. We should do what every other country does and tax the profits. We must think of the jobs that will be lost and the families that will be affected by that.

Táim chun díriú i dtosach ar leasú Uimh. 21 maidir leis an tuairisc mar tá buairt i measc geallghlacadóirí ar fud na tíre, go háirithe na comhlachtaí beaga áitiúla. Tá brú orthu agus braitheann siad go mbeidh an leasú seo ag teacht isteach go trom orthu agus go gcuirfidh sé fostaíocht i mbaol. Ní theastódh uainn go dtarlódh a leithéid, go háirithe i measc bailte beaga i mo cheantar, ach caithfear rud éigin a dhéanamh. Aithníonn muid go bhfuil fadhb ag go leor daoine, go bhfuil siad ag leagadh síos geallta arís agus arís eile agus go bhfuil sé sin ag cur isteach ar chúrsaí sa bhaile agus go bhfuil fadhbanna ann. Ba chóir go mbeadh srian curtha ar sin agus tacaíocht tugtha dóibh ach b'fhéidir gur chóir an t-ualach a leagadh ar an duine atá ag leagadh an geall in ionad an comhlacht beag agus a bheith ag cur fostaíocht i mbaol. Caithfear athbhreithniú a dhéanamh le féachaint an bhfuil slí níos fearr ann.

Slí amháin nó slí eile, caithfear dul i ngleic leis an bhfadhb. Mar atá leagtha síos i leasú Uimh. 21, ba chóir tuairisc a dhéanamh ar an moladh seo de 2% agus d'fhéadfaí teacht ar ais arís agus féachaint ar cén saghas feabhas a bheadh ann. Cuidim leis an leasú chun fanacht trí mhí agus tuairisc a thabhairt ar ais.

I wholeheartedly endorse the amendment tabled by my party colleague, Deputy Michael McGrath, although ideally I would like to see no increase coming into effect. We must acknowledge the role played by bookmakers in our communities. They provide much-needed employment. In the early years, bookmakers were mainly associated with horse racing but they have now expanded into all types of sport and many provide direct sponsorship. Some of the funds from the increase in the betting tax will go directly into the pocket of Horse Racing Ireland, HRI, but if one goes racing these days one will see that the crowds are small except when the bookmakers provide sponsorship. That is how the tracks attract customers. I have noticed that at certain festival meetings but also in my own backyard in Cork. Paddy Power recently sponsored a race and gave out free tickets. If the HRI got the money for that race meeting, there would not have been any additional people at it. Sponsorship entices people to go to meetings and is an invaluable resource. This in turn generates other indirect revenue through spending at the courses on hospitality and so on which also benefits the Exchequer. We recently got rid of one source of sponsorship for sport by way of the Public Health (Alcohol) Bill and the sources of funding for such sponsorship are drying up. This tax will further reduce sponsorship options for communities and sporting organisations, large and small.

I ask the Minister to consider, as part of this review, the proposal made on gross profits. I also urge him to accept the amendment and come back to the House in three months' time so that we can see what damage has been done.

I understand the challenges faced by those with a gambling addiction and the ongoing issues that it raises for families. I am fully aware of the negative effect it can have on individuals and on children in particular. Gambling addiction is a very serious issue and some people find it very hard to cope with gambling. However, in the context of the proposed tax increase from 1% to 2%, we must ask how we can minimise the damage done to employment in the domestic economy. This will be a major blow to the many men and women who work in the sector. There is a genuine fear that hundreds of betting shops, including many in my constituency, will close as a result of this tax increase. I fully endorse my party colleague's very constructive amendment which calls for a review of the increase in three months' time to assess the damage it has done.

I would like the Minister to make a move on the online betting market, which has exploded in recent years. It is now possible to pick up a smartphone, download an application, get an upfront allowance and bet away to one's heart's content. I believe we should be targeting the online market. There are lots of local bookmakers that do not operate on a big scale and which play an important role in the context of social isolation in rural areas. Some people go along to the local betting shop in a small town or village and they have a chat, a cup of tea or coffee and have a small flutter on a horse or on the lottery. There is a degree of social engagement attached to it. While I certainly understand all of the issues around gambling addiction and welcome that some of the money raised will be spent on that problem area, we must look at the effect this tax increase will have on small independent bookmakers who are finding it hard to stay in business.

The point is well laboured. It has been laboured in this Chamber and also at committee. As I understand it, it has also been laboured at Fine Gael Parliamentary Party meetings. I am very conscious that what I say here is restricted in the sense that Fianna Fáil Deputies are constrained in what we can do and what amendments we can table under the confidence and supply arrangement. We cannot ask the Minister to stop and refrain from doing this. We can, however, ask him to press the pause button and reconsider. My understanding of the responsibility of Government is to pursue policies that will assist in job creation. Fine Gael had its annual Ard-Fheis last week at which it claimed it is the party of jobs but what the Minister is doing with this tax increase is far from pursuing a policy that will support job creation. This policy will cost jobs, not in multinational companies but in small indigenous family bookmakers.

The Minister has admitted the Department did not conduct a proper analysis of this proposal.

The Minister has admitted that the only reason he cannot press the pause button and change his mind on this is because he is afraid that it will unwind the whole budgetary process. That is not a good enough reason to pursue a policy that will cost jobs. What the Minister is doing is wrong. To be fair to this industry, it is not asking that it does not pay its fair share. In fact, the industry has come forward with costed proposals that will deliver more for the Exchequer than what the Minister is proposing.

Gambling is a serious issue and people think that, because it is a serious issue and causes such hardship in certain families, it is fair to attack the industry. The serious gambling issues occur online which the Minister is not addressing. The areas where there is an element of supervision and control is in the small family-owned bookies where they know their customers, and that is where the Minister is focusing his attention. It is wrong. The Minister has the opportunity to be a bigger man and admit he got it wrong on budget day and say he will review it within three months, as my colleague has suggested. He will see at that stage that it was the wrong decision and he will have the opportunity, within three months, to implement the proposals that have been put forward by the industry and signed up to by the multinationals and, indeed, by the small, family-owned businesses.

I outlined the rationale as to why I am making this move on Committee Stage. I thank Deputies Fitzpatrick, O'Keeffe, Aindrias Moynihan, Troy and Butler for the points they have brought in at this point.

There a couple of points I would make. Every decision that I make, particularly in taxation, has consequences, and I have no doubt at all that if I had followed any of the other suggestions that have been put to me, and Deputy Pearse Doherty outlined a number of them, each of those would also have had consequences that would have been raised in the Chamber. There is no taxation decision I can make that does not have consequences in some part of our economy.

This betting duty is at 1%. It is at the lowest level it has been since 2006 and I ask colleagues to reflect as to whether we have any other levies or taxes that have not changed since that point given the kind of change that has happened since, where all parts of our economy and all forms of enterprise were asked to contribute more in response to the significant difficulty that we were in. Given the situation we are in now and the objective that I understand is shared by all Deputies who have spoken, or at least by their parties, of trying to broaden our tax base and find ways to make tax revenue more sustainable, surely we should be looking at the appropriate level of tax contribution that different businesses can make. I repeat that this is a levy that is nearly unique, out of all forms of contributions that different areas of our economy have made, in not changing at all for more than 12 years.

The Deputies are right. Some of them have made the point that I have acknowledged that there are consequences for this decision, as I have acknowledged for every other tax change I have stood over. The challenge I face, which is shared by some of the Deputies but is unique to me, is that I have to try to make decisions on the basis of information that is available to me, conscious that every decision I make can have negative consequences in certain parts of our economy. I have to try to calibrate that level of consequence. I stand fully over the decision I have made to date and I am standing over it in this Finance Bill. We need to be asking different areas of our economy to make contributions to the funding of public services. All parties here, at this point, have advocated the need for this sector to make more of a contribution, and I assure them that, for any of the different options they would put forward, they would face similar considerations to those I face today.

On the particular issue Deputy Michael McGrath has put to me, I have indicated on Committee Stage that I will keep this measure under review to see what impact it has in the sector across 2019. The challenge I face in considering the Deputy's amendment is that the deadline he places on it is to lay a report within the first 12 weeks of this measure being implemented. The specific challenge for that proposal is that the betting liability itself, the duty liability, does not fall to be paid until on or before 15 April. It is paid after the quarter. What I am happy to do, as I would do with any measure, is to look at the implementation across next year, especially when we get information from tax about it, and I will engage constructively with the sector on the proposals that are put forward.

When measures such as the proposals that are now being put to me, whether relating to a levy to be paid by the punter, the person pressing the wager, or relating to the gross profits tax, were looked at before, many different voices also had issues about them. I am happy to look at the implementation of this measure or the effect of this measure, particularly when we have information as we move through next year, but I am not in a position to accept the amendments that have been tabled.

I have rehearsed on many occasions that I can remember going into the bookies with my father when the betting duty was 20%. It was then reduced to 10%, 5%, 2% and 1%. We have to weigh up if there is a better way to ensure we get the same amount of tax, if not more, without an impact on jobs and especially in rural communities. There is a proposal before us that has merit. There was not universal support for it. There is now universal support within the industry.

Given those facts, we need to not proceed with this measure now. On that basis, I will be pushing my amendment. While I understand the difficulties in terms of confidence and supply, jobs will be lost in rural communities, so I appeal to everybody in the House to support this amendment, thereby ensuring this increase does not take place. Instead, we can ensure an efficient levy is imposed on the industry so that it pays the same amount of tax, if not more, and we protect jobs and services in rural communities.

Can I come in on this?

No. Sorry, the Deputy cannot because Deputy Doherty, having moved the amendment, had the right to speak a second time. Nobody else can contribute because he has moved and wrapped up.

The amendments are grouped, so do I not get a second chance?

There is only one mover. I am sorry. Go on, Deputy McGrath.

I will be brief. In effect, the Minister is asking me not to press the amendment, so I have to ask what exactly he is committing to. We have asked for a report on the economic impact assessment of this measure. The context is clear. The trend is accelerating. The move to online gambling is very evident for all of us to see, and the concern is that we will quickly see closures, people will be put on protective notice, and there will be redundancies. We are all aware of the level of costs that the retail bookmakers, with a physical store, have to carry, so they are at a significant disadvantage. An alternative proposal has been put forward by them. I fully accept that has to be examined and probed rigorously by the Department and Revenue.

The Minister makes the point that the first returns under the betting duty are in April 2019. I acknowledge that, but my overarching concern is that it will be too late and we need to know if this alternative proposal that has been made stands up. We need to know if it will deliver a yield equal to or greater than the yield the Minister has projected from the increase in betting duty, which the industry would strongly assert will not be delivered because of the impact on jobs and so forth.

I hope the Ceann Comhairle will allow the Minister in briefly - I am sure we will make progress very quickly after this - because I need to ask what exactly the Minister is committing to. Is he committing to a report? When can we see that report?

It seems if I give an inch, people want to take a mile. I will let the Minister give a brief response but first I want to bring in Deputy Joe Carey.

And then I will get a chance to sum up?

No, the Deputy will not.

There has been a lot of debate about this issue and there has been engagement with the industry. A substantial proposal has been put forward and there is general agreement within the industry on it. The proposal obviously needs to be fully scrutinised. I make the point that this measure was not costed and that there will be unintended consequences as a result. It will hit small independent bookmakers in provincial towns in particular and will make them unviable. The Minister should consider initiating a review of this measure. He and his officials should engage directly with the parties concerned to come up with an alternative that would raise the same amount of money that the Minister wishes to raise through this measure. There is no doubt that the industry has done well over the years and that an increase in betting tax is merited to get more revenue from the industry, but it should be done in a different way. This alternative proposal should be robustly considered and, if it is found that it raises the amount of money the Minister has outlined, it should be taken on board. The only way to do that is to have a review, a report and engagement with the industry. I appeal to the Minister to give that his consideration.

Three points have been put to me for a response. Deputy Michael McGrath asked me what I have said I will do. First, I will evaluate the proposal that has been put to my Department in respect of a gross profit tax model. This proposal was shared with me very recently. I will make the point that when we engaged with the sector on this model the last time, there was not complete support for it. That support was not there. We would not be in the situation of trying to figure out how to broaden our tax base if we were not debating the levy now being introduced in the absence of agreement on how else this could be done. That is the reality of where we stand. Engagement happened and efforts were made. There was engagement on a betting charge which would only be paid by the punter. Let us be clear, a 3% change in that area would also have an effect on jobs and employment. That would be raised with the sector. Deputy Doherty has put forward that proposal in the past. That change would also have an effect on employment. We will evaluate this proposal. I am happy to report back to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the proposal in the early part of next year as we evaluate it.

On the second point, as I have reiterated, there was not unanimous support in the industry in respect of how any other option put forward could be implemented. On the third, the timeline Deputy Michael McGrath's amendment asks me to meet simply cannot be met because we will not have the relevant information.

When can we do it?

As I have said, I am happy to engage with the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on the proposal next year. In answer to the Deputy's question regarding when we can do it, I want to engage robustly on the proposal that has been put forward by the industry. We have only recently received a proposal of this breadth. I would be happy to report back to and engage with the committee in this regard across the first quarter of next year.

Amendment put:
The Dáil divided: Tá, 24; Níl, 39; Staon, 31.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Buckley, Pat.
  • Connolly, Catherine.
  • Crowe, Seán.
  • Cullinane, David.
  • Doherty, Pearse.
  • Ferris, Martin.
  • Fitzmaurice, Michael.
  • Fitzpatrick, Peter.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kelly, Alan.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • Munster, Imelda.
  • O'Reilly, Louise.
  • O'Sullivan, Jan.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Ryan, Brendan.

Níl

  • Barrett, Seán.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Carey, Joe.
  • Creed, Michael.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Harris, Simon.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • Madigan, Josepha.
  • McLoughlin, Tony.
  • Moran, Kevin Boxer.
  • Murphy, Eoghan.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Ryan, Eamon.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Breathnach, Declan.
  • Browne, James.
  • Butler, Mary.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Curran, John.
  • Fleming, Sean.
  • Gallagher, Pat The Cope.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Murphy O'Mahony, Margaret.
  • Murphy, Eugene.
  • O'Brien, Darragh.
  • O'Callaghan, Jim.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Sullivan, Maureen.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Pearse Doherty and Louise O'Reilly; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.
Amendments Nos. 21 and 22 not moved.

I move amendment No. 23:

In page 133, between lines 15 and 16, to insert the following:

“Report on economic impact of VAT rebate on car rental sector

41. The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report assessing the economic impact of ending the VAT rebate on VRT on the car rental sector in section 37.".

This amendment relates to the issue of the VAT rebate in the car rental and leasing sectors. I will deal initially with the issues in the car rental sector. During the Committee Stage debate the Minister made an estimate of the impact of the measure as being between €1.50 and €2 per vehicle per day. That estimate has been examined. The estimate presumes a pass-through spread across 12 months. The nature of the car rental market and the movement of the fleet mean that typically the measure should be spread across a period of three to five months.

The estimates I have seen, which were prepared by professionals, put the impact at a figure of between €5 and €8 per day for an average vehicle. For a typical tourist or customer who rents a car for seven days the impact is estimated to be between €36 and €55, which is not insignificant. North American tourists typically rent automatic vehicles or larger people carriers. The impact will be far greater, perhaps between €14 and €23 per day. The impact on the end consumer of this measure will be considerably greater than the estimate made by the Minister, which was based on certain assumptions.

At a time when VAT is going up in the tourism and hospitality sectors, this is further blow in cost competitiveness and to the offering we make. The nature of the car rental market has changed dramatically in the past 40 years. It is rather seasonal but we now have five large operators within the market. This is an extra significant cost.

The car leasing aspect got less attention on Committee Stage. The issue is that the change to VAT will impact on car leasing but will not impact on the other form of competition within that area, including hire purchase or people acquiring vehicles through loans. The potential is that this would have a significant impact on corporate and small and medium-sized car leasing businesses by resulting in rather hefty increase of perhaps €700 for an average vehicle in the sector. The issue did not get a great deal of attention on Committee Stage but the impact is not insignificant.

Again, I have looked at the background to this, which dates back to 1992. The Minister has presented this as being a concession, a tax expenditure. There is a strong argument that it was in fact a tax equalisation measure at the time, one not intended to be temporary in nature. I call on the Minister to re-examine the matter and consider the amendment we have brought forward.

We are well aware that this was a temporary measure that has lasted in our tax code for a period of 25 years. Anyone from the industry would be forgiven for thinking that it was always renewed, always in place and permanent.

One of the main issues I see is the sudden shock to the industry and the way the industry operates. I was rather impressed to see the size and scale of the sector and the number of cars leased when we were provided with documentation on the matter.

Several important factors are relevant. There was no consultation whatsoever with the industry. There was no economic impact study carried out before the change took place. Arguments have been put forward to the effect that there is a lack of understanding of the consequences that this could have given the sudden introduction of the measure. It is important that there should be consultation, that this should be delayed, and that we look at the impact of it.

Deputy McGrath referred to the range of time in which this cost could be absorbed. The details have been presented to me as well. Reference was made to a period of three to four months. Arguments have been put forward by the Minister that mitigation is provided by section 39, but that does not really apply in the case of Ireland given that we have right-hand steering wheel vehicles. Only two other European jurisdictions have the same type of vehicles and one of them is about to leave the European Union. Thus the question of mitigation does not really arise. I would encourage the Minister to rethink the timing of the proposal to carry out consultation with the industry. I am not suggesting the Minister must accept the view of those in the industry, but it is important to consult and look at the economic impact. Like many other Deputies I have been written to and contacted on this issue, including from representatives of the airport in Carrickfinn, which is an important economic enabler in our area. They have outlined the potential harm this could cause given the abruptness, short notice, how this is being brought in and how it impacts on plans already afoot.

On Committee Stage I covered the rationale and why I am making the change. The question I am posing to Deputies McGrath and Doherty is a simple one. Do we think this is worth €20 million per year of taxpayers' resources? To my mind, the answer to that question is no.

This measure has been in place since 1993. It has been there so long that it appears many were not even aware of its existence. We have to get to a point of asking ourselves about this. If we go to the effort of raising taxes elsewhere for sums of money not far away from €20 million, is it not legitimate to ask whether taxpayers' money is being well-used by putting it against an exemption or a change such as this? To my mind, the answer is no. I believe there are better ways of using the €20 million. We can use it to invest in public services or to fund changes we are making in taxes elsewhere.

We have covered the arguments in every debate. For every tax change we make, those looking at the debate and those looking at what I say on budget day come forward with claims that a given measure has not been analysed, that the figures are not costed, that we will not bring in the revenue and that we are not aware of the consequences. These arguments are sometimes a recipe for changing course, but if they were to be used to pause everything I am doing, then we would end up not having a budget. My core contention to the House is that there are better ways of using €20 million of Exchequer resources. We have covered the rationale and need for this on Committee Stage. For that reason I am not in a position to accept the amendment.

Several points need to be made. First, this was not a budget day measure. It was not announced on budget day. It was not contained in the budget day booklet or within the summary of taxation measures. Certain measures that brought in as little as €2 million were singled out in the budget day booklet summary of tax measures. The Minister says this measure will bring in €20 million but it did not warrant a mention. Presumably it was not in play at the time, but between budget day and the publication of the Finance Bill the issue emerged and was put forward in the Bill, as published. There was no consultation and the out-of-the-blue nature of this is what has caused so much concern.

The Minister needs to accept some facts and realities. This will make our tourism offering less competitive. It will increase costs in the car rental sector. This affects not only tourists but also other consumers. There will be an implication and a cost. There is a potential impact when Ireland is being compared with other jurisdictions and no one knows what that is, but it will be taken in addition to the impact of the increase in the lower VAT rate.

When it comes to the car leasing sector, which is an important area for small and medium-sized businesses and corporate bodies throughout the country, car leasing will now be placed at a relative disadvantage to hire purchase arrangements, which is another manner of providing vehicles, as well as personal contract plan arrangements or indeed the provision of vehicles through debt loans.

Car leasing will be placed at a relative disadvantage to hire purchase arrangements, another manner of providing vehicles, personal contract plan, PCP, arrangements, or the provision of vehicles through debt loans. There is a change within that stream of activity. Car leasing will become more expensive, with an average car costing around €700 more. The Minister of State has mentioned the figure of €20 million, but there is another side to the argument and it remains to be seen whether the €20 million will actually be collected. People deserve an explanation. From where did this measure come, given that it did not warrant a mention anywhere in the detail of the publications on budget day?

Is the Deputy pressing the amendment?

Will the Minister of State respond?

No; he cannot do so. The order was made earlier today.

I did not personally make it.

The Deputy participated in the making of it. Is he pressing the amendment?

No; I will take up the matter with the Minister of State separately.

Amendment, by leave, withdrawn.
Amendment No. 24 not moved.

I move amendment No. 25

In page 134, between lines 1 and 2, to insert the following:

“VAT treatment in respect of children’s footwear and clothes

45. The Minister shall, within three months of the passing of this Act, prepare and lay before the Oireachtas a report on efforts by the Department of Finance to secure flexibility at EU level in relation to VAT on children’s clothes and footwear.”.

I will not labour this point, but I want to raise it in the context of the moves at European level to change EU VAT law which may open a window during which this issue may be revisited. In summary, I am raising the issue of the application of VAT to children's footwear and clothes. The current legal position is that children's footwear and clothes are exempt up to a certain age, beyond which VAT at the standard rate of 23% is applied. The exemption applies to average footwear and clothes sizes for a typical ten year old. We discussed this matter on Committee Stage. The average measurements for clothes are given as up to a chest size of 32 inches and a waste size of 26 inches and, for footwear, up to and including size 5.5 or 38 in European measurements.

There are two problems. Not every child is of average size and children are aged 11, 12, 13, 14 and 15 years when they are also teenagers. In retail outlets there is a completely different pricing mechanism for sizes that attract the VAT exemption. This is most obvious in the case of footwear. A pair of football boots or trainers up to size 5.5 might cost €40, but above that size they might cost €70 or €80. The application of VAT does not explain the difference in full, but it is being exploited by the introduction of a completely different pricing regime.

I am aware of the rules and we do not need to rehash them, but, as things stand, I believe the Minister of State's hands are tied because he cannot introduce any new VAT exemption beyond what was designated when Article 110 of the VAT directive took effect on 1 January 1991. I acknowledge that Revenue has done some work in looking at average clothes and footwear sizes for a typical ten year old. It has not found any evidence that the current measurements are out of line, but there is not much evidence to back them up either. There does not seem to be a lot of information available, which I can understand.

We are aware of European Commission proposals to give member states more flexibility when it comes to VAT. The press release states the European Union's common VAT rules which were agreed to by all member states in 1992 are out of date and too restrictive. I could not agree more. I am asking the Minister of State to give a commitment that the Government will raise this issue in the context of the changes at European level, with a view to achieving greater flexibility in order that we can bring about some changes.

I add my support on this issue which we discussed at length on Committee Stage last year. In fairness, Deputy Michael McGrath has brought it up on numerous occasions. There are obviously anomalies. I am the father of four children. My eldest child is now 12 years old, but he wears a size 10 shoe and has done so for quite a while. As has been said, not every person is of average size. Some are taller than others. There is an issue, but there is also a unique opportunity, given the forthcoming changes to VAT rules. It is important, therefore, that we consider commissioning a report, not just on children's clothes and footwear but also on all VAT rates. We are sick to the teeth of having to respond to those involved in emergency services who are out collecting money to provide vital equipment, be it defibrillators, mountain rescue equipment or adult bike helmets. These items are all subject to VAT, but as they are important, it should not be the case. The new list system will allow for the notification of certain items which will be limited to firearms and gambling, etc. We will have huge scope to move VAT rates if we so wish.

There are huge anomalies in the current system. I have spoken about mountain rescue equipment. In the discussions it emerged that sea rescue equipment was exempt but mountain rescue equipment was not. I come from a mountainous area and live beside the sea. It just does not make sense. It should not matter whether one's life is in jeopardy at the top of a peak or in the water. What is important that the equipment be treated in the same way. I also examined the issue with the Minister of State and sought a VAT exemption for mountain rescue vehicles. Will he update us on whether any progress has been made on the matter.

The amendment is timely, given the changes happening at EU level. If offers us an opportunity to look at the entire VAT regime. The tax strategy papers could specifically look at the issue of VAT and consider how we could deal with some of the serious anomalies raised by me and others in this Chamber in different areas.

If I recall correctly, we had much the same discussion this time last year. I will not go into the details, but I will mention the action plan for the future of VAT in the European Union. In January the European Commission published a proposal for the reform of VAT. The outcome of any discussion on the VAT rating proposal and the eventual adoption of the proposed legislation will clarify and establish the full scope available to Ministers and member states to alter the VAT rating of goods and services. However, other than an initial discussion at Council working party level in March, the VAT rating proposal has not been tabled for discussion by the last two Presidents. No reform of VAT rates can be based on the proposal until it is agreed to by Finance Ministers within the European Union. We all know that there are anomalies and peculiarities within VAT rates and structures. VRT on rescue vehicles falls into the same category. Until the discussions are concluded at European level we will not be able to consider the matter. It will also depend on the outcome of the discussions.

Deputy Michael McGrath was correct to say the analysis was carried out by Revenue of the average size of children. It seems there has been very little change in average size since the last time such an investigation was carried out in the 1980s. There has been a very little push from any part of the clothing and footwear sector on the issue, although I accept that there are anomalies. I have heard Deputy Pearse Doherty talk about how his son wears a size 10 shoe. When I was 20 years old I wore a size 8 shoe and my feet have not grown since. There are peculiarities. Sometimes people end up going to appalling expense if their children are larger than average.

Whatever way we dress it up or discuss the detail, the simple reality is that while notionally there is an exemption from VAT for children's shoes and clothes, for a significant minority of children, it does not apply.

That is the issue I am looking to have addressed. While I accept that the Government's hands are more or less tied by EU law on value added tax, VAT, from what the Minister of State indicated, there is a window of opportunity. It will not go anywhere quickly. I know the wheels do not move quickly in Europe when it comes to changing something of this significance. However, I want it to be on the radar of the Minister of State, the Minister and officials in the Department of Finance and Revenue that this issue will need to be examined in more detail when the opportunity presents. I accept that applying the exemption to larger sizes would potentially give rise to a significant cost. However, that is detail that can be worked through. If the principle is that these products should be exempt from VAT, that is an objective we should work towards.

Amendment, by leave, withdrawn.

I move amendment No. 26:

In page 134, between lines 1 and 2, to insert the following:

“VAT on food supplements

45. The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report on the different rates of VAT charged on food supplements and on whether certain categories of food supplements should be retained in the zero rate VAT category.”.

This relates to the issue of VAT on food supplements. There was a detailed discussion of this issue on Committee Stage but some points need to be clarified and teased out in the Chamber. The comments made by the Taoiseach in the House when he was asked about this issue on Tuesday, 13 November were ill-advised, insulting and very disparaging to an important sector of the economy. He stated:

Food supplements very rarely do anything for our health. They are mostly snake oil and just cost people money.

The snakes are over there.

People dedicate their lives to providing these products with the objective of making a commercial return but also of helping people in their lives. I do not know if those are comments that the Minister of State supports, but they were made by the leader of his Government.

They are outrageous.

On the substantive issue, we seem to be in a grey area. The current system of VAT on food supplements is riven with disputes. There is a distinct lack of clarity. I would go as far as to say it is dysfunctional. Some people may be regarded by Revenue as compliant, while others may be regarded as not compliant. People often do not know whether they are compliant with the application of VAT law in this area.

On Committee Stage, the Minister stated that a Revenue concession allowing the zero VAT rate to be applied to certain types of food supplements such as vitamins, minerals and fish oils was no longer tenable. He explained that Revenue is carrying out a review and may issue some guidance in the coming period. It is clear that the Minister was considering legislative change in the Finance Bill to provide clarity to the sector but opted not to do so based on consultation with the Department of Health. I am not sure in which direction he intended to move the legislation, but there is now no legislative provision in place, which means we must rely on Revenue's guidance and interpretation. I accept that the food supplements and nutrition sectors are evolving and changing rapidly and it is not easy for Revenue to keep pace with them and apply law consistently because many of the products are composites of different components. However there is a distinct lack of clarity. The Minister says that vitamins, minerals and fish oils have a zero VAT rate. I have seen Revenue declarations confirming that other food supplements are also zero rated but they were not named by the Minister. There is a distinct lack of clarity and an inconsistency. People could be building up liabilities in the system of which they are not even aware.

This is all about clarity. This issue has been dragging on for some time and the industry is entitled to the clarity it is seeking. In reply to a parliamentary question the Minister informed me that an expert report was received by Revenue more than a year ago and that he had looked at options prior to this budget and decided not to do anything legislatively. The industry tells us it is taking a pragmatic view, supporting the proposal by Revenue and the Department of Finance to introduce a reduced rate of VAT across the board. On the other hand, there are those who say the Department and Revenue are muddled and spinning and a zero rate of VAT is the only fair conclusion.

The industry is saying that any VAT rate needs to be lower than the first reduced rate of 13.5%. This would help secure the industry 's support and avoid a consumer backlash. However, the clear message I have received from the industry is that the introduction of VAT would be more beneficial than the status quo and the ongoing disputes. It is also concerned that Revenue could move to a VAT rate of 23% on all products, which would meet with strong opposition from consumers and industry alike.

There is a need for clarity. I do not understand why this is taking so long. We have the expert report, which has not been published. As part of the deliberative process, the report is exempt from freedom of information requests. We need to hear from the Minister when a decision will be made on this issue. When will there be clarity? Surely to God it cannot take much longer to come up with a proposal.

We need clarity on what we are discussing, namely, food supplements. These are legally designated as foods in the European Union, with their own directive, Directive No. 2002/46/EC. They are concentrated foodstuffs. They must be produced, presented and supplied in accordance with food law and are subject to the specific labelling requirements of foodstuffs. I say this because people can mix them up with sports supplements or cosmetic supports. Food supplements are a narrow and important category of foodstuffs.

I agree very strongly with the points made by Deputy McGrath. The Taoiseach's remark that all these products are snake oil was probably not thought out and probably made off the cuff. We are talking about fundamental vitamins, including folic acid which we encourage pregnant women to take. It is very unhelpful of the Taoiseach, who happens to be a medical doctor, to describe essential vitamins that are important in preventing disease in children as snake oil.

I would not like to be his patient.

That aside, clarity is now required in this regard. This cannot be a hit-and-miss exercise. I regret that there is not a clear legislative proposal to apply the zero rate to these designated foodstuffs so that the industry can have clarity. I ask the Minister of State to provide clarity today insofar as he can. This is a burgeoning industry. People are now looking to supplements to make healthy but affordable lifestyle choices. We should encourage that, rather than put up barriers to it.

I support the amendment. I have family members who play sport. Health foods and supplements are used all the time. As Deputy Howlin says, we encourage this and give these supplements to pregnant women. The Taoiseach is often accused of being sneaky but to call these products snake oil is an outrageous comment from a so-called medical doctor. Thank God neither I nor my family are his patients if that is what he calls health supplements. I know that medical people protect their own livelihoods and many do not like health foods, but these products are part and parcel of our lives now. In my constituency, this industry provides valuable employment, pays rates and health food shops are part of our high street. Goodness knows, the high street is under enough attack without imposing a punitive VAT rate on these products.

As Deputy Howlin said, these products are part of the food chain. They are food ingredients and the industry has to adhere to the relevant standards on labelling, packaging and everything else. I do not know whether it was a slip of the tongue or a sneaky move. I do not like the snake either. I support the amendment.

Revenue's position is that food supplements are not food and, as such, they are not entitled under VAT law to the zero rate of VAT.

Regardless of Brexit.

Therefore, the standard rate of VAT applies. The concession in relation to vitamins and the like is proving unworkable as the industry seeks to use the concession to achieve a zero rating for much of the product range in the sector.

I accept there is confusion. What the Minister conceded on Committee Stage was that the tax strategy group, when it reports, will bring clarity to the entire food supplement sector. With more information available to us, we may then be able to deal with the matter more fully in budget 2019.

Live horse and get supplements.

While the Minister gave the commitment described, in further conversation it became clear that the Revenue intends to issue guidance on the application of VAT in this area. We do not know whether the Revenue guidance or the review in the tax strategy papers will come first? I asked the Minister to give a commitment not to implement any change in respect of interpretation until we have the wider review in the tax strategy papers. That commitment was not given and we are now in limbo. More to the point, those directly involved in the sector are in limbo.

There is a clear lack of consistency here. Many of those affected do not know whether they are compliant. That is a concern because they could be building up liabilities which would ultimately result in businesses closing. Will the Minister of State provide clarity? Will Revenue guidance issue shortly for this area? If so, when is it likely to issue? What exactly will the review in the tax strategy group papers address?

The Minister of State cannot respond now. I assume he will communicate to the Deputies on the matters raised.

Amendment, by leave, withdrawn.

Amendment No. 27 in the name of Deputy Wallace is to be moved by Deputy Mattie McGrath.

I move amendment No. 27:

In page 134, between lines 1 and 2, to insert the following:

"Impact of VAT increase on hospitality sector

45. The Minister shall, within 6 months of the passing of this Act, prepare and lay before the Oireachtas a report analysing the impact that the increase of VAT to 13.5 per cent has had on the hospitality sector, with particular regard to small businesses.".

The Government's decision to increase VAT on the hospital sector will have a devastating negative impact, especially on small businesses, throughout the country, including, strangely enough, the capital city where we all pay high prices for hotel rooms. Smaller businesses, both here and at remove from the city centre, will be significantly impacted by this measure. The reduced VAT rate was a welcome and necessary move at the time and it is still necessary.

I compliment Deputy Wallace, who apologises for his absence, on tabling this reasonable amendment. It requests that an impact assessment of the VAT increase on the hospitality sector be carried out after six months. This is seldom done in legislation.

This is a major issue, certainly outside the Pale. The reduced rate was bringing people back into hospitality businesses for food, drinks, etc., and generating business. It has proved successful. While we may have accepted a 1% increase in the VAT rate for the sector, reinstating the 13.5% rate is ridiculous. It was not expected by the industry as it had lobbied hard on the issue.

The Minister of State, Deputy D'Arcy, must know that restaurants and other parts of the hospitality sector are on their knees and struggling. The reduced rate was a big help to the sector because people started going out again in towns and villages, as well as the islands and other tourist areas, many of which had become economically depressed.

We want an impact assessment conducted on this measure. The adage, live horse and get grass, comes to mind. In the earlier discussion, it was live horse and get food supplements or snake oil. I do not think we will get grass, however, because we never do.

This was a foul and foolish move. As I said, the Minister could have decided to incrementally increase the lower VAT rate or made clear that he definitely intended to raise it to its previous level. However, to make this change in one fell swoop on budget day with immediate effect is regressive. The current rate benefitted everybody, including small enterprises and their employees, the self-employed and Revenue through the increase in the tax take generated by different businesses. It was a foolish move to go backwards in one fell swoop.

The Minister should at least give a commitment to conduct an impact assessment. I accept that will be difficult because it is a case of Dublin versus the rest of the country. As I said, there are small enterprises such as restaurants outside Dublin city which are also struggling. It is having a serious negative impact on the whole hospitality industry. Some self-employed people will go out of business, which will have knock-on effects such as job losses and a loss of revenue from PRSI and other taxes. I appeal to the Minister of State to look at this amendment sensitively.

I speak in support of the amendment. The hospitality sector in Ireland has two parts. While I am not saying it is has not picked up everywhere and it is doing well in the major cities, unfortunately, especially during the week, there is a problem filling beds and in the food sector in many parts of the country. The increase in the VAT rate for the sector will have an adverse effect and the amendment makes a reasonable request to assess the impact of the measure. Such an assessment would give us a good guide, although the level of revenue from the sector will also give us a guide.

We need to be mindful that many areas of the country are only starting to recover. The recovery in Dublin has been much faster and many parts of the country are not experiencing the recovery that Dublin has experienced.

Different ideas, such as bed taxes, were floated. I understand that the large cities and other areas have done well, but there may also be small businesses that are struggling. It is imperative that we undertake this assessment to ensure we do not leave anybody behind or close doors. At the end of the day, the hospitality sector pays rates, VAT and taxes and, most important, employs people. We do not want to put pressure on the sector again.

Deputy Noonan and I were the Ministers who introduced the reduced VAT rate and we did so for a purpose. It was not related to taxation but to what we could do to stimulate job creation at a time of mass unemployment, with unemployment approaching 500,000 at the time. It was felt that the most beneficial thing we could do was to reduce the VAT rate on the hospitality sector. The reduction worked spectacularly well. However, it was due for review as it was not meant to be a permanent decision.

Nobody in this House would argue against increasing the rate for the large hotel chains which are coining money. The decision we made in 2011, in the first 100 days of that Government, was a job creation measure. We included vulnerable sectors such as hairdressers and barbers at the time but these are not being exempted from the increase. As a once-off increase of 4%, this measure will have a very significant impact on sole-trader barbers and hairdressers whose margins are tight already. The least we can do, since we on this side cannot table amendments to change the VAT rate, is to have the impact of this measure reviewed, hopefully before people are driven out of business, in order that we can see if the 13.5% rate is a viable rate for this very vulnerable sector.

I take Deputy Howlin's point that it was a measure to assist the sector, and in that regard it worked. To withdraw it in one go is not how business works. The Department should have conducted an impact analysis of the increase before the Minister announced it. Not every business is coining it. Some businesses, particularly in rural areas, are in serious difficulty and the Minister is adding significantly to their costs. Businesses work on the basis of projections for one, two or five years.

I come from a city and county that rely heavily on tourism and have seen hotels struggle during those years. They received some relief in terms of that tax rate but they had ten years of hardship, of trying to keep the doors open, of investing whatever surplus moneys they might have had into their business and of not being able to get loans for expansion and so on. In one fell swoop and without any analysis, the Minister turns it back to the previous rate. Jobs must be sustained and money is committed in the context of the business to sustain those jobs. What the Minister has done is take away that money that might have been relied upon to ensure jobs were not just created but sustained. It is the one single issue that clearly demonstrates the difference between the big urban centres like Dublin and the rest of the country because the rest of the country is struggling desperately to keep jobs in their regions and to ensure that they are there to play a part in the economic upturn whenever that happens in rural Ireland.

I ask the Minister to take a fresh look at this. Obviously, we cannot participate in a vote on it but I would certainly support ensuring that while the Government is carrying out the analysis, it ensures that these businesses are able to pay their bills and that support is there for them. If there is one thing the Government could do to illustrate that, it would be to assist businesses rather than put obstacles in their way.

I support this recommendation, although I think a report in six months might be too late for certain areas. I have made the point very forcefully on Committee Stage that while there is merit in increasing the VAT rate to 13.5% for the hotel industry, there is no merit in that type of jump with regard to other areas of the hospitality and tourism sector. The Government is getting wrapped up in its own propaganda. We heard figures about jobs recently, which are to be welcomed in respect of the number of people in employment. This is a tribute to those entrepreneurs and workers who made such a success of it.

The Minister for Employment Affairs and Social Protection tweeted "a job for everybody who wants one", which was a huge insult to many people in my constituency. More than 10,600 people in my constituency are on the live register. It goes to the fact that the Government does not understand the regions and does not understand that not every place is booming and thriving to the same degree as other parts of the country. The Minister owes an apology to the people who are busting their gut trying to seek employment, travelling long distances for interviews and sending in CVs. For the Minister for Employment Affairs and Social Protection to make such a derogatory comment and suggest that in some way they are lazy and do not want a job goes to the heart of it.

In many rural communities such as those in Donegal, services such as hairdressers, barbers or the local pubs that provide a bit of food on the side are now seeing a sudden jump from the 9% rate to 13.5%. This is not justified. As I said to the Minister, a more appropriate way to bring this in would be to introduce it in increments and allow for it to be absorbed by the industry as opposed to overnight. Deputy Jonathan O'Brien has told me about what is being played out in Cork in an area I would not have considered so much, namely, the effects on those planning to marry next year. These people have booked their accommodation and have their bills and budget for their wedding, which is the most important day of their life, and are now getting calls from hotels saying they have to put another €500 on the bill thanks to the Minister, Deputy Donohoe. The hairdressers that are booked are also saying that they have to increase the cost, along with the make-up and all the rest.

The flowers and all of that. The Government has wrecked a happy day for many couples so I can level that one at the Government. Perhaps I cannot blame it for the performance of the Irish team earlier on. That is the genuine seriousness of this and this is how it plays out. This part of the measure was not appropriate. I know the hotel sector is a separate argument. I have long argued that the rate should increase for this sector. We need to bring in specific support for the regions in terms of the hotel sector in my area where another hotel closed during the winter period. This is not good. It is not good for tourism and our community. This increase should not go ahead for the other part of the hospitality and tourism sector.

For a number of weeks I have said that this is a bad move for particular parts of the country. The argument has been outlined by a number of my colleagues. Where an establishment does not have the footfall, it will certainly suffer. There is no doubt that when the VAT rate was reduced to 9%, it had the effect of increasing employment, particularly in the restaurant sector. We found restaurants that otherwise would have not survived were setting up in small towns and villages and were able to survive. The message that is clearly coming back to me from those people is that some of them will close and some small hotels will reduce the number of staff.

We can talk about the hotel sector all day, but a lady running a family hotel told me that this VAT increase was the equivalent of two well-paid workers. While they may not be working full time, this measure will cost the owner almost €50,000 extra, so her intention is to reduce the number of staff. It is remarkable, because if any shop or business was surviving in rural Ireland, it was the hairdresser and the restaurant when many others had closed. The pity of this is that at the very time when we are talking about rural regeneration and putting money back into towns and villages, which I acknowledge, some of these businesses will definitely close. I said at an early stage that it was a retrograde step. I think it is wrong. I accept that we cannot have one tax in Dublin and a different tax in other parts of the country. I do not know whether something could have been done with regard to turnover but we need to do something about this because it will cost jobs, especially in rural areas.

This matter is causing concern to many small businesses. I know this because I still get representations about it weekly asking me whether anything can be done. I know there was talk about investing €35 million in the tourism industry. I do not know where that is and whether anything has been done to ease the sting of this measure. I do not know whether the Minister of State can tell us anything about this. We should remember that those businesses were hit hard in the rates review in recent years. Many of them had to pay extra rates on their small premises, so they have been hit pretty hard. I think it was Deputy Howlin who said earlier that many of them had to survive through hard years and had to make many sacrifices during that period. I would certainly support the comments of all my colleagues here. This must be kept under review. I would like to see something done with that €35 million to help those businesses that will struggle because of this.

The 9% VAT rate was introduced as a temporary measure in the Finance Act 2011 to cease at the end of 2013. This period was extended subsequently, but during last year's Finance Bill a commitment was given to undertake a review of the 9% VAT rate. Everybody knows that it was said here in this Chamber that the 9% VAT rate in budget 2018 would be considered at that stage.

Reviewed. The review was published in July 2018 and the budget decision to increase the VAT rate was made following that analysis, which indicated that the majority of activity at the 9% rate is driven by income growth more than price and that the retention of the rate provides little additional benefit relative to its cost. The review of the 9% rate found that tourism expenditure is more sensitive to income growth and economic cycle than to price changes.

The economy is performing well, with high levels of employment and strong demand in the tourism sector and growth expected to continue in the medium term. This positive economic outlook means that the income channel of demand is likely to ensure that the economic activity within the sector to which the 9% VAT rate applies remains strong. In this context, it is believed that the VAT rate applied to the tourism sector should not greatly impact demand or employment therein. In this circumstance, there does not appear to be a case for a review of the impact of an increase in the VAT rate on the hospitality sector within the next ten months.

A number of the issues raised are relevant issues but they are not relevant in terms of the VAT rate within the hospitality sector. There are areas that are struggling and areas that are performing well. There are pockets of rural Ireland that are performing well and other areas that are not doing as well but this is not due the VAT rate because the same rate of VAT applies in both instances. It is the product available that brings people to particular areas.

There are 2.27 million in employment in this State. We have never had more people working. When people are working, they are able to spend more and to pay a little extra VAT. Taking the example of a coffee and a scone that costs €5, the increase in VAT is 22.5 cent. I do not believe a 22.5 cent increase would cause anybody to not buy a coffee and a scone. There is a legitimate question about the regionality of the tourism sector but it is a different question than the VAT rate.

The Minister of State mentioned that a review was carried out last year. Will he elaborate on what was reviewed and who carried out the review? He also mentioned that pockets of rural Ireland are doing very well. They are very scarce pockets because I do not know many areas that are doing well. In my constituency, there are many cottage industries providing bed and breakfast services and catering services, such as the Carraig Hotel in Carrick-on-Suir, Hotel Minella and Leisure Centre in Clonmel, Cahir House Hotel in Cahir and Great National Ballykisteen Golf Hotel in Tipperary, and hairdressers, that will be impacted by this increase. I hope it does not affect the beauticians or they will have to charge extra for the snake oil.

In regard to the review, there are pockets of Dublin where the hospitality is not doing well, with many establishments forced to sell a two-course meal for €10 to try to encourage customers in. That is a fact. I was in one such place recently. I could not believe the prices being charged. However, rural Ireland is most impacted. The reduced VAT rate was introduced by former Minister for Finance, Deputy Noonan, and former Minister for Public Expenditure and Reform, Deputy Howlin, for good reason. I accept it was to be a short-term measure but it proved to be successful. It was the spark that started new businesses and helped others to remain open.

The Minister of State said there had been a review of the reduced VAT rate. Was consideration given to an incremental increase to assist the people mentioned by Deputy McGuinness who have made five-year plans, who have taken out loans from banks to generate their businesses, and who need to service their debt? It is fine for the Minister of State to say that the cost of a coffee and a scone will increase by only 22.5 cent, but the increase on functions such as weddings, birthday parties and bed nights will be greater. We are supposed to be the Ireland of a thousand welcomes. This is the basis on which many in the hospitality sector operate. The reduced rate helped them and it also helped new businesses to get up and running. It helped to regenerate villages and towns. The increase is a slap in the face for all of those people and businesses. It is a huge increase, amounting to almost 40% of the cost. It is too much too quick. The tourism sector and our fledgling cottage industries will not be able to sustain this increase. We need a review mechanism.

Amendment put:
The Dáil divided: Tá, 23; Níl, 38; Staon, 23.

  • Brady, John.
  • Buckley, Pat.
  • Collins, Michael.
  • Crowe, Seán.
  • Cullinane, David.
  • Doherty, Pearse.
  • Fitzmaurice, Michael.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kelly, Alan.
  • Kenny, Martin.
  • McGrath, Mattie.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Jan.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Pringle, Thomas.
  • Ryan, Brendan.
  • Ryan, Eamon.
  • Shortall, Róisín.
  • Tóibín, Peadar.

Níl

  • Barrett, Seán.
  • Boyd Barrett, Richard.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • D'Arcy, Michael.
  • Deasy, John.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • Madigan, Josepha.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • Mitchell O'Connor, Mary.
  • Moran, Kevin Boxer.
  • Murphy, Eoghan.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Breathnach, Declan.
  • Broughan, Thomas P.
  • Browne, James.
  • Casey, Pat.
  • Cassells, Shane.
  • Curran, John.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy, Eugene.
  • O'Brien, Darragh.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • O'Sullivan, Maureen.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Mattie McGrath and Michael Collins; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 28:

In page 145, between lines 32 and 33, to insert the following:

“Amendment of section 44 of Forestry Act 1988

62. Section 44 of the Forestry Act 1988 is amended, in subsection (11) (amended by section 67(e) of the Ministers and Secretaries (Amendment) Act 2011), by substituting “paid by the Minister for Finance” for “paid by the Minister for Public Expenditure and Reform”.”.

Amendment agreed to.

I move amendment No. 29:

In page 145, between lines 32 and 33, to insert the following:

“Report on proposals for digital tax

62. The Minister shall within one month from the passing of this Act prepare and lay before Dáil Éireann a report on the merits of a digital tax regime as proposed by a number of European Union Member States, indicating how such a tax might operate, the likely tax rate and whether the tax paid would be set off against other tax liabilities.”.

This amendment calls on the Minister to prepare and lay before the Dáil within one month of the passing of the Act a report on the merits of a digital tax regime as proposed by a number of European Union member states. There is an inevitability to a digital tax and we should at least prepare for it. I know the Minister has set his face against such a tax, but the analysis that would be required if this amendment is carried would be a good thing.

It would be a good thing to see if we could offset tax from a sector making significant profits. I think there is universal acceptance that it is not paying its fair share of tax globally. There will be a regime of some description. What is emerging from European countries is analogous to a levy on turnover, as opposed to what some countries are proposing which is a sales tax within each jurisdiction. I am opposed to that. We should be prepared for this, we should acknowledge it is coming downstream and that this sort of analysis should be done. This amendment will not impact on the Minister's budgetary arithmetic. I ask him to look favourably on this amendment and accept it so that work can be underway and we can have an informed discussion on the issue of digital tax in this House in the future.

I support this amendment. The biggest source of tax avoidance by corporations globally centres on this digital area. We know these companies can, essentially, write their own tax bills. In Ireland, that is because of loopholes that I believe we have helped them create. We have worked with them on a nod and a wink basis to create a situation to allow them to write down their taxable profits. That is done by having loopholes which allow the corporations to write-off the costs of payments for intellectual property or royalties on intellectual property. They make payments to themselves for the use of their own intellectual property.

Consequently, things that would be profits become costs and then become tax deductible. It is just a joke. It is assisting in accelerating inequality in the distribution of wealth to extraordinary proportions. These sorts of companies are leading the charge on this. A digital tax is a reasonable response to try to get a bit of tax back from these firms which specialise in avoiding tax.

If the Government has concerns that this might have a disproportionate effect on Ireland, then we should get out ahead of it. We should acknowledge there is a serious problem with tax injustice and tax avoidance and state we have a better solution to it. The starting point for that solution has to be acknowledgement of this serious problem. It should also be stated that what these companies are doing is immoral and we need mechanisms to deal with it. Then we go out and argue, in a positive way, for a way of dealing with that. On the other side of this debate, the bigger countries may be playing for their own advantage. I accept that. We should not, however, be just as bad as they are by stating we care only about our little bit of advantage.

There is a bigger picture here and that is of the big multinationals being parasitical in not wanting to pay their fair share of tax. We should look to address that problem. It is reasonable to have a report on this issue and also to have a serious discussion in this House about how we address it.

I will set out the Fianna Fáil position. We regard the digital tax proposals as the first step towards tax harmonisation through the back door. It is the thin end of the wedge and it does represent a transfer of taxing rights. It will also represent a transfer of actual tax revenue from smaller member states, such as Ireland, to larger member states. There is a need, undoubtedly, for further reform and changes to the way multinationals, particularly in the technology sector, are taxed. It should be done on a truly multilateral basis, however, at the level of the Organisation for Economic Co-operation and Development, OECD. There should be no mistake about this. Ireland would be a significant loser if this came to pass.

The Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach heard from the Revenue Commissioners on this issue when we met with it earlier this year. It was evident that there were many unanswered questions at that point as to how this would work. I believe they remain unanswered. It would, however, represent a transfer of taxing rights in the sense that where the service users are based is where most tax is going to be paid. Given the size of our population and economy relative to the European Union, it would not take a genius to work out we will be a major loser in that context.

The next step will be the common consolidated corporate tax base, CCCTB. The European Commission keeps resurrecting these proposals which would represent a firm step towards tax harmonisation. Taxation is a national competence. We should protect and safeguard it. If we were to move towards CCCTB, there would be a system where profits to be taxed would be apportioned on the basis of where employees and assets are based and where turnover occurs. Ireland would again be a major loser, perhaps the single biggest loser in the European Union. We do have to be open to change and continue to co-operate with the OECD moves in this direction. In my view, however, this proposal on digital taxation is an attempt by larger countries within the European Union to secure taxing rights from smaller countries like Ireland.

There are two reasons why I am not in a position to accept this amendment. The first is the amount of work I and my Department have already done to try to meet the need to which this amendment refers. Officials from my Department and the Revenue Commissioners have appeared before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. On foot of those appearances we have already submitted a report to the committee laying out the different issues Ireland would face if this measure was implemented. I contend we have already done the report for which this amendment calls.

The second reason is that the taxation of the digital economy sector will change in the future. It is going to change in the same way as we have seen how other forms of corporate activity are taxed. The key point is how that change can happen in the safest way for Ireland. A change in tax policy that creates a trade risk is a big challenge for a small open trading economy such as Ireland. To avoid that happening, it is safer for our country and economy that agreement on this issue be reached with key trading partners, such as the United States of American and Japan, so that they have an opportunity to reach agreement with Europe on new ways to tax this sector.

Absent that, my great concern is that we could see Europe and Ireland going in one direction and then our trading partners deciding to respond in turn. That is quite a vista for us to have to face into. My view on this is clear. Taxation of the digital economy will change. The proposal from the European Commission, however, does not deal with issues such as how it would interact with national taxation measures. It does not deal with how exporting countries could be given comfort in respect of shifting the tax incidence into markets of consumption as opposed to where the value is created. For those reasons, I believe it is a safer venue and avenue for these matters to be dealt with by the OECD. On this amendment, as I discussed with Deputy Burton on Committee Stage, I have already supplied the key information for which this amendment calls. I am not, therefore, in a position to accept this amendment.

I am well aware of the base erosion and profit sharing, BEPS, process. I dealt with it myself in Cabinet and at the OECD in Paris. The amendment suggests we should move away from blanket resistance to something we should, at least, be exploring. I refer to how this digital economy and the digital sector, which is making incredible profits - it is the most profitable industry on the planet - can pay its fair share of taxes. The amendment suggests we start that process in this jurisdiction.

We must participate fully in the OECD process. The base erosion and profit shifting process was something we very much engaged with and we were certainly leaders in that field during Labour's time in government. I presume that is continuing. In the domestic economy we must still be prepared to look at issues as our own citizens and people in any forum I attend anywhere on the planet have a view that Ireland facilitates tax avoidance. Whether we like it or not, that is the perception. It is not helpful to our international reputation.

I listened to Deputy Michael McGrath and in truth, past Governments facilitated the double Irish tax scheme and procedures we wound down because they were not acceptable. In a world where people are impoverished, there is the notion that enormous corporations make enormous profits that are not taxed. We cannot wash our hands of that. I understand the Minister is of the view that this work is already done but I have not seen it. Sending officials to speak to a committee of the House is not the sort of analysis I am talking about here. Maybe the timeframe involved is too narrow but it is something we should engage with so we can be prepared to deal with the reputational issues we have already endured and robustly argue, perhaps not for the model that the Minister finds objectionable but another model of taxing the digital economy. Let us be the proponents of such a model rather than be perceived as the defenders of the indefensible.

I have a different view and I agree with the Minister.

I thought I was wrapping up the amendment.

If we are to abide by the order, it would normally be-----

The order was changed this morning.

I am in the Leas-Cheann Comhairle's hands.

I will let you in the next time.

The topic does not matter.

You will be in the Chair later and can control the debate then.

Amendment put and declared lost.
Amendment No. 30 not moved.

I move amendment No. 31:

In page 145, between lines 32 and 33, to insert the following:

“Report on tax revenue foregone

62. Within 6 months of the passing of this act, the Minister shall produce a report on the actual or estimated tax revenue foregone, specifically in the area of property investment, as a result of section 110 tax relief on such investments, dating back to investments made since 2012 up to the present and in any future years where the benefit of this tax relief might still accrue.".

I will be brief on this as we have discussed the topic quite a few times. The dog in the street knows extortionate profits are being made in the property sector currently. Much of this profit is being made by investors, asset management companies, vulture funds or however we might want to describe the likes of the real estate investment trusts. They were invited here, it is fair to say, to buy property-related debt from NAMA and some of the banks we bailed out. They bought vast amounts of property and building land at discount prices and they have now gained a major foothold in the Irish property sector, playing a very significant role in generating the current housing and homelessness emergency. They are engaged in wholesale property speculation, land hoarding and efforts to evict and de-tenant properties bought off NAMA. I have had to fight quite a few cases in my own area where Cerberus and Apollo Global Management have tried to evict people or get around rent caps. All they are doing is trying to ratchet up the values of those properties and rents to extortionate levels.

Most of these people, particularly the outside investors, will benefit from this section 110 tax loophole if they hold their investments for a specified period of seven years. As well as making profits from rents and capital gains, they will then pay no tax on it. We could not make up that stuff. It is absolutely shocking. The public needs to know about this. There are many losers in the housing and homelessness emergency but there is a small cohort of winners who are being facilitated by these kinds of tax loopholes and Government policy in general. It is wrong and utterly shocking that when asked how much tax is forgone on this, the Government cannot or will not tell us. It must be to the tune of billions of euro, without a shadow of doubt, if we consider what is happening in the rental and property sectors.

Section 110 of the Taxes Consolidation Act 1997 sets out the regime for the taxation of special purpose vehicles set up to securitise assets. Securitisation is both useful for banks in freeing capital to allow them to continue to lend to all taxpayers and for the productive economy as it can underpin the supply of capital market financing to industries and companies in Ireland, Europe and further afield. Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through the work on the capital markets union, a main objective of which is to build a sustainable securitisation regime across the EU.

Section 110 companies can hold certain qualifying assets. Real property is not an asset that a qualifying company can hold but they can hold loans and other financial assets that derive their value from them. Following concerns raised by the Revenue Commissioners and subsequently by Deputies on the finance committee as to the use of section 110 companies to hold debt secured on Irish property, the Finance Act 2016 made changes to the taxation of section 110 companies to ensure profits derived from Irish land and buildings would be subject to tax in Ireland. Those changes took effect from 6 September 2016.

With regard to the specifics of the report proposed by the Deputies I am advised the Revenue Commissioners do not and could not collect the type of information required to calculate the tax that would have been paid had the section 110 process not existed. In the first instance, some of the business carried on through section 110 companies simply would not be carried on here, or it would have been carried on here differently. There is no method to take account of how behaviour would have changed had the regime not existed. Second, in the case of activity which would have taken place in Ireland in the absence of section 110, the hypothetical alternative tax would depend on exactly what the underlying business was and how it might otherwise have been structured, as a company, a partnership or an investment fund, for example. Any such estimate would therefore be highly subjective and could not be presented as an accurate assessment of the tax impact of section 110. I therefore cannot accept the Deputies’ amendment.

I will correct the Deputy's statement. The top 20 largest landlords in Ireland account for 3.8% of the total tenancies. The Deputy alluded to a large number of companies claiming use of section 110 but that is not the case.

I am mystified by the Minister of State's response. That percentage has definitely dramatically increased if we consider how these types of entities have come in. In the overall landlord sector, the number might be relatively small.

That IRES REIT is the largest landlord in the country and is still buying up property loans and properties gives an indication of where the situation is heading. It was a deliberate policy.

This is analogous to the double Irish and the intangible assets debate in that windows were opened. The Minister of State mentioned that the Government changed the law in 2016, and it was around that time that the intangible assets measure reverted to 80%. A specific window was deliberately opened up for these people in terms of intangible assets and property. It is in that window that we have this enormous scandal of a large amount of tax and of NAMA and the banks unloading vast amounts of property, building land and loans related to those. I do not buy the argument that it cannot be quantified because behavioural changes might have occurred had we done things differently. That could be said about any tax. At the same time, the Government is well able to give figures on revenue forgone under other tax heads. The Government does not want to give us this figure because it is a staggeringly high one. If it came out, people would be scandalised by it. The idea that the Government cannot even give us an estimate of how much tax would be forgone if these entities paid normal levels of tax on this kind of activity stretches credibility.

Amendment put and declared lost.

Amendment No. 32 is out of order because it is not relevant to the provisions of the-----

It is very relevant.

It may well be, but I will tell the Deputy my reading of it. He can introduce report-style amendments, but they must be relevant to the provisions of the Bill. I understand that this one is about job creation and investment in universities and institutes of technology, which are not relevant to the Finance Bill.

It is about the relief.

I am sorry, but those matters are not relevant to this Bill. The amendment has to be solely about taxation. I ask the Deputy to accept my advice.

Seeing as how it is you, a Leas-Cheann Comhairle.

And it is Thursday evening.

Amendment No. 32 not moved.

I move amendment No. 33:

In page 145, between lines 32 and 33, to insert the following:

“Corporate tax rate

62. Within 6 months of the passing of this act, the Minister shall produce a report on establishing a minimum effective corporate tax rate of 12.5 per cent and the tax loopholes that are used to avoid paying this rate.”.

Amendment put and declared lost.

Amendments Nos. 34 and 35 may be discussed together, as they are related.

I move amendment No. 34:

In page 145, between lines 32 and 33, to insert the following:

“Bogus self-employment

62. Within 6 months of the passing of this act the Minister shall prepare a report on the scale of bogus self-employment and measures that can be taken to prevent same.”.

This relates to some of our discussions on the section 481 tax relief and, more generally, the problem of bogus self-employment. In the short time available to me, I will put it to the Minister this way. It is an incredible fact that there are workers, such as pilots, construction workers and film workers, who are fighting to pay tax but are being prevented from doing so. When we discuss tax reliefs, we usually refer to people who do not want to pay tax, avoid it and make lots of profit, but there is a cohort of working people who are fighting for the right to pay tax and are being frustrated in their ability to secure employment where they pay tax. If they secured employment and, instead of being falsely classified as contractors or freelancers, were classified as PAYE workers, as they want to be, then everyone would gain. They would get some sort of security and continuity of employment and Revenue would gain additional tax income.

It would be a win-win situation except for certain classes of company, employer and so on who would rather not have to take responsibility for their employees, pay PRSI or pension contributions, pay sick pay and holiday pay and so forth and are instead deliberately playing the system. It gets even worse. Many of these companies that are trying to force bogus self-employment on people are in receipt of large sums of public money. We have discussed the film industry at length. There are protests under way on Gardiner Street in the Minister's constituency - I have not been able to attend it this week because I have been so busy in here - where building workers at St. Mary's Mansions are fighting for direct employment on an approved housing body, AHB, site where social housing is being constructed. Subbies are bringing people down who are working as bricklayers and classified as contractors despite in reality being employees. There are workers outside the gate who are fighting for direct employment as PAYE workers. That situation is wrong.

In all of these situations, be it in Ryanair, the film industry, the construction sector or other sectors, we need clear definitions of an employee. They are not difficult to devise. Does someone set people's working hours, tell them when to go on lunch and pay them certain moneys for certain hours? If so, then they are employees. They are not contractors or businesses. Revenue needs to go into these places, be they in the film industry or construction industry, and say that someone will be classified and taxed as a PAYE worker.

There is something that has not been addressed yet, namely, the new tax rules for self-employed people. More people will be pushed into being subbies. As I have mentioned, doing the paperwork under the new rules will cost employers €450 per employee from next January. That will put a small business in trouble.

I will tell the previous speaker something about the building sector. I have worked on construction sites and various road projects. Often, a main contractor gets the job. If I am from Galway, I price the blocklaying as a contractor. I will probably supply the cement, ready mix, trowels and the whole shebang. I take that job on price and I then employ people. That is the way it operates. Some people get confused and believe that the main contractor should be taking on everyone. The main contractor will not. A job may be for three or six months, after which people will be gone again. In the construction sector, someone will not work on a site for 20 years and get a pension out of it. That person is almost like a bird, flying from place to place. In particular, people from rural areas come to the likes of Dublin and do the ground work, which is taken on price. They employ others - I want to be clear on that front - and must do so under Construction Industry Federation, CIF, regulations. The person who subs the work from the main contractor is not big enough to take on the full contract. That is how we get subcontractors. There will always be subcontractors because there has to be. In every job around the country, there are subbies who do not have the turnover to take on the main contract. They could be in Dublin building or laying foundations and then be building 50 houses in Galway two months later. That is the nature of the business. I need to make that clear.

I thank Deputy Boyd Barrett for raising this issue and Deputy Fitzmaurice for contributing to it. We discussed it extensively on Committee Stage. At that time, I outlined to Deputy Boyd Barrett the work that was done when my Department and that of the Minister for Employment Affairs and Social Protection, Deputy Regina Doherty, published a report on intermediary-type structures, self-employment arrangements and the implications of same for social insurance and tax policy. We have also outlined a number of times the kind of work that the Revenue Commissioners are doing on dealing with the risk of tax evasion. In 2017, for example, Revenue participated in 1,800 construction site visits and conducted more than 10,000 interviews. Given the amount of work that the Revenue Commissioners are doing, the report that has just been published by two Departments on this issue and the recent campaign that was run by the Department of Employment Affairs and Social Protection encouraging people who felt they were being exploited to come forward, this issue is recognised by the Government and a great deal of effort is being made.

This is an issue that is recognised by the Government and much effort is going into tackling it. Deputy Fitzmaurice has described the reality of workplaces today and the many reasons for smaller companies and subcontractors getting involved in the delivery of larger projects.

This is a matter that the Government takes seriously but given the report that has already been done on it, the work of the Oireachtas Joint Committee on Employment Affairs and Social Protection as well as the work being done by the Revenue Commissioners on it, I am not in a position to accept the amendment.

I accept that here has been some movement on this. It has been a long time coming and building workers have been fighting on this for many years but I accept that there has been movement from the Government and Revenue recently. However, more is needed. There is a protest in the Minister's constituency as we speak involving an approved housing body that is building houses with public money. The Minister should pop down and talk to those involved in that protest.

Deputy Fitzmaurice is correct in saying there may be legitimate reasons for subcontractors to be involved in projects. However, we must ask whether the people who are working for the contractor or subcontractor are getting payslips, are being properly taxed and properly classified. Is the subcontractor hiring lots of people who are all being classified as self-employed entrepreneurs? Often these workers are not self-employed and are getting paid less than they would be paid if they were directly employed. That is the main issue. Similarly, I have spoken to people working in the film industry who have told me that a lot of problems in that industry could be sorted quite easily. They suggest that officials from Revenue's joint investigations unit, JIU, or from the Department of Employment Affairs and Social Protection or the Department of Culture, Heritage and the Gaeltacht visit film production sites before filming starts and obtain a list of all of the people who will be working on the project, including their names and grades and whether they are working on contract or are self-employed. In that way, everyone will be properly classified and abuse cannot happen. This would require additional resources for Revenue, or whatever body is responsible, in order to be effective. Resources are needed, as is a willingness to do this properly. We also need legislation which is why a report on this, as per my amendment, would be good. We need legislation to tighten up things like the definition of an employee and an employer in order to make it easier to deal with the grey areas and the areas of dispute and abuse.

I hope everyone understands that once the proposer winds up the discussion, there is no opportunity for others to contribute. How stands the amendment?

I am pressing my amendment.

Amendment put:
The Dáil divided: Tá, 20; Níl, 37; Staon, 21.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Buckley, Pat.
  • Collins, Michael.
  • Crowe, Seán.
  • Cullinane, David.
  • Doherty, Pearse.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kelly, Alan.
  • Kenny, Martin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Maureen.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Tóibín, Peadar.

Níl

  • Barrett, Seán.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzmaurice, Michael.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • Madigan, Josepha.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • Mitchell O'Connor, Mary.
  • Moran, Kevin Boxer.
  • Murphy, Eoghan.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Breathnach, Declan.
  • Butler, Mary.
  • Casey, Pat.
  • Cassells, Shane.
  • Curran, John.
  • Dooley, Timmy.
  • Fleming, Sean.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Michael.
  • Murphy, Eugene.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
Tellers: Tá, Deputies Richard Boyd Barrett and Thomas P. Broughan; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.

I know Deputy Boyd Barrett will accept the ruling that amendment No. 35 is out of order because it is not relevant.

Amendment No. 35 not moved.

I move amendment No. 36:

In page 145, between lines 32 and 33, to insert the following:

“Report on rate of exit tax

62. Within one month of the passing of this Act the Minister shall lay a report before Dáil Éireann on the implications of increasing to 33 per cent the rate at which the exit tax in section 31 is set at.”.

I welcome the introduction of a new exit tax because clearly the existing one was not fit for purpose. We know it is necessary under base erosion and profit shifting, BEPS, rather than a great initiative by this Government but, as usual, there is Irish exceptionalism when it comes to this exit tax. This tax applies to gains made on assets onshored and then moved offshore, so it seems like a straightforward case where capital gains tax should apply at the normal rate of 33%. If it is to be taxed as profit, then surely at least it would be on non-trading profit which, in our State, is a corporation tax rate of 25%. Either way, the 12.5% rate in this Finance Bill does not make sense.

We know from the tax strategy group papers that: "Responses to the Coffey/ATAD consultation focussed primarily on the rate to be applied in calculating the exit tax, with the majority favouring a 12.5% rate for assets in use for the purposes of a trade." On a quick scan through those submissions that came in, only KPMG suggested a 12.5% rate.

One could take that to the extreme and say that as KPMG was the only one it is the majority, but that is not a fair analysis or presentation of the facts. The exit tax needs to be tightened up. I welcome the fact that it is there; the issue we have is with the rate. The Minister has failed to convince me or my party as to why the 12.5% rate should apply. We have a capital gains tax rate of 33%. That relates to gains and this is about gains. It is likely that there will be depreciation in respect of these assets but any profits or gains should be taxed at the level at which we tax gains in this State. As I said, if it is to match the corporation tax rate it should at least be based on the rate for non-trading income, which is 25%, as opposed to the rate for trading income, which is 12.5%.

The introduction of the exit tax regime is an important development in ensuring that our corporate tax policy continues to meet the evolving international standards in respect of corporation tax policy. I explained on Committee Stage that the reason I was making this change at 12.5% was to bring it into line with the main trading rate of corporate tax. I also made the point that, though many more countries have yet to bring in the regime, the norm in many of the other EU member states that have brought it in has been to anchor the exit tax rate to the existing corporate tax, which is what I have done. They are the reasons I have made that change. If they do not convince the Deputy, that does not take away from the fact that this is the argument why I have done this and why I believe it is the correct rate to use.

It would not be appropriate to tax an unrealised gain at a higher rate as is suggested by the Deputy's amendment for a number of reasons. The first is that the companies subject to the charge may have no intention of disposing of the asset and may, therefore, not actually realise any gain. The second reason is that the asset that is migrating might fall in value following migration, in which case a high rate of tax could well have been paid on a temporary value fluctuation. I acknowledge that the Deputy welcomes the fact that we are bringing in a regime. He clearly disagrees with the rate but I believe anchoring it to our existing corporation tax rate is appropriate.

Amendment put and declared lost.

I move amendment No. 37:

In page 145, between lines 32 and 33, to insert the following:

“Report on income tax relief for individuals in rental accommodation

62. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on an income tax relief equivalent in value to one month’s rent of an individual available to all renters not already in receipt of any State subsidy examining the social and economic impact of this measure in the context of historically high levels of rent for Irish citizens.”

In this Finance Bill landlords have been given accelerated tax breaks with no conditionality at all attached. My amendment to oppose that measure has been ruled out of order. There are serious questions around that and I would look for more detailed explanations of how some of these amendments have been ruled out of order. I could go into that but my time is limited.

What I propose in this amendment is a tax relief equivalent to one month's rent for all renters in the State who are not already supported by the State. This would therefore exclude those receiving a subsidy such as the housing assistance payment, HAP, for example. As I outlined to the Minister in our alternative budget and on Committee Stage, this one month's rent back each year for three years would be accompanied by a rent cap or a rent freeze during that period. The third leg of this stool would be an increase in supply. We argued and advocated for a larger, much-increased capital programme which would see thousands more social, affordable and cost rental houses being built with direct funding from the State.

The great solution to the housing crisis the Minister came up with in budget 2019 was to increase landlord's tax relief on mortgage interest to 100%. Sinn Féin's alternative, as I said, has been rent relief for the renters who are facing the great crisis out there. The problem with the Government's proposal is that it is completely unconditional. There needs to be large amounts of conditionality. It should be ensured that landlords getting this very large tax break are providing affordable rents and security of tenure. This relief provides no incentive to reduce rents in an environment in which supply is still restricted.

Many people out there are put to the pin of their collars and many young people can never aspire to what their parents had before them, which is the simple ability to own one's own family home. That is particularly acute in the more urban areas of Dublin, Cork, Galway and elsewhere but it is also being felt more and more right across rural Ireland. That is a clear example of how we are failing on the issue of housing. The Minister likes to say that we are never returning to boom and bust but that is exactly what is happening here. We went from boom to bust and now we are going to boom again. There is a lack of ability to manage the issue of housing in this State. Government has never got a handle on it.

Rents have risen for the 25th consecutive quarter. Rents have reached an all-time high in each of the last ten quarters. Every single one of those quarters broke new records. Year on year we are seeing inflation of more than 10% and the Government is discussing accelerating tax relief for landlords. We want to see tax relief for renters. We want to see one month back for every person renting in the State for a period of three years. That is what this report calls for. It is about giving real relief to people and introducing a cap so that landlords cannot increase these rents any further. It is about giving breathing space at a time when the Government needs to ramp up the amount of money it is putting into social, affordable and cost rental houses to deal genuinely with the supply issue rather than tinkering around the edges.

I support this amendment, particularly given the very generous tax reliefs we discussed earlier which are to be given to those who are making extraordinary amounts of money out of property, rents and, frankly, profiteering off the back of the current housing and homelessness emergency. It has got to shocking levels. A new record was struck in the docklands area, which is in the Minister's constituency as it happens. Rents of €3,300 are proposed for apartments in a new block which has just been completed. That is just wrong. At this point surely the Government recognises that we have to do something in terms of real rent control. I do not refer just to rent caps: we need rents to be set at affordable levels.

This is done in other jurisdictions. People from local authorities or some other Government or State body go in, look at places and at their size, take into account any reasonable factors and say that more than a given figure cannot be charged. We have to have that now, otherwise this will be a disaster on many levels. Even from the point of view of economic competitiveness, which may be more of a focus for the Government than the social and humanitarian side, we are not going to be able to get the people we need into this country to address labour and skills shortages or to keep our own young people from leaving the country if we cannot set affordable levels of rent. In the absence of that, the little bit of relief proposed in this amendment is a good idea, but the Minister really has to look at rent controls or we are in serious trouble. Many people are in serious trouble, as is our wider society and economy.

I will be brief. As the Minister is aware, this is touching on a problematic area. We are all familiar with the staggering sight of dozens of people queueing to view a property that becomes available on the rental market. The inability to save is very real for people who are renting in the private market who want to purchase their own home. Even if they could service a mortgage, they cannot save a deposit to buy a home given that they are paying rent of between €1,500 and €2,000 or more, as Deputy Boyd Barrett said.

As Deputy Pearse Doherty acknowledged, this measure will only have a benefit if a rent cap is imposed. I ask the Minister to address that point, whether the Government has stretched the constitutional advice as to what can be done. We have rent control limits at the moment and the advice of the Attorney General and other legal advice was cited on a number of occasions when that measure was introduced.

The landlord tax relief is €10 million next year. From my perspective, it is a very modest measure to try to bring some stability to a market which is losing approximately 3,000 landlords every year. That is the reality. It is not a game changer. It is a very small measure and it might help to stem the exit of domestic landlords from the market. We have an inflow of very large institutional investor landlords but we need to have a rental stock spread throughout the country and within urban areas we need to have rental properties available in ones and twos spread across individual housing developments and along different streets. The large institutional investors will not provide that model of rental stock. They will buy large blocks within Dublin and perhaps other cities as well.

I support the amendment. I agree with Deputies Pearse Doherty, Michael McGrath and Boyd Barrett.

In recent days I heard Mr. Tom Parlon had been in Lithuania where we are supposed to be getting workers. People from the west to whom I have spoken go to England to work rather than Dublin because they can jump on an aeroplane in Knock and get accommodation in England. That is the reality. If we do not provide some rent relief we are codding ourselves. To be blunt, going to Lithuania or other countries will not solve the problem given language barriers and other issues. Plenty of skilled people are leaving Knock Airport and Dublin Airport every Sunday night and Monday morning. The reason they are not going to the cities is because the rent is unaffordable. Unless we do something people will continue to go abroad.

I have friends in Canada where they can have a good lifestyle. They have houses and they are on pretty good money. We must incentivise them to stay here. Thousands of hugely skilled workers have left this country, and if the situation continues for much longer, they will settle in those countries and they will not come back. It is sad to say that, especially given the many villages in rural areas that need people to live in them.

I urge the Minister to try to resolve the problem in the rental sector because to put it bluntly, people cannot afford it. If we bring in people from other countries, some of them do not have the skill base and it can take a while to get certified. They will not be able to afford the deposit that is required to rent a house. We are codding ourselves at the moment by going on trips.

The previous tax relief in respect of rent paid was abolished in budget 2011, and it is no longer available to those who commenced renting for the first time from 8 December 2010. That followed a recommendation in the 2009 report by the Commission on Taxation that rent relief should be discontinued. The view of this independent commission was that, in the same manner in which mortgage interest relief increases the cost of housing, rent relief increases the cost of private rented accommodation. Accordingly, the result of reintroducing this relief could be seen as a transfer of Exchequer funding directly to landlords, which would not have the intended effect of reducing the pressure on tenants.

In the normal course of events, a tax credit of this nature would be of little benefit to lower income workers, the unemployed and students who may have little or no income tax liability. However, I understand from the discussion on Committee Stage that Deputy Pearse Doherty is proposing that the relief be in the form of a refundable tax credit. An approach on the lines the Deputy suggests would represent a significant shift which could have major policy implications far beyond the question of financial support for rent costs. It would take us into the area of income and welfare supports, which is currently the primary responsibility of the Minister for Employment Affairs and Social Protection.

In addition, this proposal, if it was accepted as outlined by the Deputy, would entail a very significant investment by Revenue to provide for it. Likewise, it would involve substantial investment by employers and payroll systems providers to develop new systems and procedures to handle refundable tax credits.

For those reasons, this is not a development that I am willing to consider at this time. The actions that the Government proposes to take to address concerns about the cost of rental accommodation are set out in Rebuilding Ireland - Action Plan for Housing and Homelessness.

At the time of its abolition, the rental tax relief cost the Exchequer up to €97 million per annum, and it is likely that there would be an even higher cost were a similar scheme to be introduced. It would be higher again if it were on the basis of a refundable tax credit.

Deputy Michael McGrath asked about the extent to which the constitutional grounds may be breached. We are satisfied that we are at the limit of the constitutionality to which we can go in terms of rent caps and other measures.

I completely disagree with Deputy Pearse Doherty's view on the amount of money that was provided in budget 2019 for housing solutions. It is €2.6 billion. That is not tinkering around the edges. That is the most money that has been made available in any budget ever before for housing solutions.

We have listened to the Minister, Deputy Donohoe, and to the previous Minister, Deputy Noonan, for a number of years. They continued to tell us that everything would be okay. We have heard all the different measures they introduced such as the help-to-buy scheme and now giving tax breaks to landlords. The latter measure is not just supported by Fianna Fáil. It demanded that it would happen and it ensured it was written into the Finance Bill.

We have a major crisis. I have made this point time and again. The homelessness crisis lies completely at the Government's feet. Here and now in this Chamber and on Committee Stage we decide how to divvy up the resources of the State and year after year the Government has failed to invest the necessary funding for social and affordable housing. The automatic consequence of that is we have a housing crisis. As we speak here at 5 o'clock, families are walking the street. Children have been picked up from school a couple of hours ago and they have nowhere to go. They will go to their hotels tonight and in the morning they will be told to leave their rooms. A total of 4,000 children are in that situation and 10,000 people in all.

That is at the most acute end of the situation but, in addition, we have seen rents increase for 25 consecutive quarters. The Minister told us the rent caps were supposed to solve this but landlords are breaching the rent caps. The reality is that we have seen record levels of rent in this State for the past ten quarters. Each quarter set a new record in the State. We are saying the Minister must do something more imaginative. We have offered a solution in terms of rent relief, which used to exist, which was abolished by Fianna Fáil and only rolled its way out of the system last year because people were still able to avail of it up to then. We need such a solution when we have the highest level of rent in the history of the State. Rent should be refundable to all, including students. People are being charged through the nose to share a bed. That is the kind of crap that goes on. It is unbelievable what is happening to students and other renters.

Now we are in a situation where because of mismanagement we need others to come into the country to build the houses that should have been built in a proper and managed way. That will put more pressure on the housing sector which, in turn, will fuel house prices further. Somehow, those in the Government think the people are going to manage, but they are not. Therefore, we need measures such as this to be introduced, but I do not expect the Minister to introduce them because he does not believe in them. He believes the market will solve it all, but it has not done so.

Amendment put:
The Dáil divided: Tá, 20; Níl, 36; Staon, 21.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Buckley, Pat.
  • Collins, Michael.
  • Crowe, Seán.
  • Doherty, Pearse.
  • Fitzmaurice, Michael.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kelly, Alan.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Tóibín, Peadar.

Níl

  • Barrett, Seán.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • Mitchell O'Connor, Mary.
  • Moran, Kevin Boxer.
  • Murphy, Eoghan.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Breathnach, Declan.
  • Browne, James.
  • Butler, Mary.
  • Casey, Pat.
  • Cassells, Shane.
  • Curran, John.
  • Dooley, Timmy.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Michael.
  • Murphy, Eugene.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
Tellers: Tá, Deputies Pearse Doherty and Jonathan O'Brien; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 38:

In page 145, between lines 32 and 33, to insert the following:

“Report on mortgage interest relief

62. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on maintaining the current Mortgage Interest Rate Relief until such time as mortgage interest rates are equivalent to the European average.”.

This is an issue I have discussed with the Minister previously. In last year's Finance Bill he decided to taper mortgage interest relief. The relief benefits almost 50% of persons with a mortgage, amounting to over 400,000 households. It is being reduced from 75% to 50%, something my party and I oppose. Many of the people concerned are in negative equity and still struggling. Many of them are in mortgage arrears, but many others are just struggling to get by because of the high cost of living. Therefore, we ask the Minister to consider accepting the amendment on Report Stage. The point of it is to register our opposition to the reduction in mortgage interest relief, one of the few reliefs in place to support those with a mortgage, particularly at a time when mortgage holders in this state are paying twice the European average in the rates being demanded from them.

This provision relates directly to the confidence and supply agreement which I was involved in negotiating back in 2016. Without such a provision in the agreement, mortgage interest relief would have been removed totally for everyone at the end of 2017 and there would have been a cliff-edge effect. All of the benefit people had been enjoying would have been lost. On average, it was worth approximately €600 per annum. In the 2016 general election Fianna Fáil was the only party of which I am aware that campaigned on the basis that mortgage interest relief would be retained and provided for in the budgetary and fiscal projections made at the time. I would have loved to have seen it retained at a rate of 100%, but the best we could negotiate two and a half years ago was that it would be retained at a reduced rate and tapered over a three year period. That was better than allowing it to disappear overnight, which was the legal position as programmed in the Finance Acts up to that point. The tapering represented an improvement. We would have loved to have kept the relief at the rate of 100%, but that was not possible.

We dealt with this issue on Committee Stage. I will reiterate the two points I made at the time.

In principle Deputy Pearse Doherty is against any measure that might add to the price of homes or that might drive the demand for them. However, when I seek to make a policy decision to alleviate the pressure on pricing, acknowledging the fact that the ESRI carried out a report in which it argued that demand side tax incentives such as this could add to the pressure on pricing in the market, the Deputy is also against it. We are removing mortgage interest relief because increasingly it is being baked into the pricing of homes. The Deputy acknowledges that Governments can do things that drive up the price of homes, but when we seek to remove a measure such as this, he also opposes it. For clear reasons, we will not extend the relief. This is a measure that currently is only available to a certain number of people within the State based on when they bought their homes. We made an agreement with Fianna Fáil that we would abolish it, but that it would be abolished at a slower rate in order to be fair to the people who benefited from it and acknowledge the affect it had on persons who did not have it. Some contend there are measures the Government could take to force up prices. If it was to remain in the tax code, this measure would have the potential to do so. That is why we have sought to unwind it over time in a way that is fair to all.

There is absolutely no basis on which the Minister can say this measure pushes up house prices. It is in place for persons who are being absolutely ripped off by banks, in which the Minister is the majority shareholder. They are charging twice the interest rates being charged by our European competitors and the Minister sits there and does absolutely nothing about it. That is nonsense. The very same Minister brought forward and supported the help-to-buy scheme and in this Finance Bill is seeking to bring forward tax reliefs for landlords which will do exactly what we have argued against and push up house prices.

How did the Minister deliver that with a straight face? It blows my mind that he can stand there and say this support is not needed, or that it would actually increase house prices or cause difficulties when from 1 January the cost of a mortgage for more than 400,000 people is going to increase. It is nonsense.

To Deputy Michael McGrath I say this is the time when you call a spade a spade. If he is opposed to this measure, he should not have supported it in the Finance Act 2017 and should not have abstained. The position-----

Sinn Féin did not campaign against it.

Of course, we have campaigned against it.

Sinn Féin did not.

We have tabled motions and called Fianna Fáil out time and again.

The Deputy should look back at the manifesto.

We have called the Deputy's colleagues in Fianna Fáil out.

The Deputy should look back at his party's general election manifesto.

The Deputy can hide under the skirt of the confidence and supply agreement, but what he is doing is pushing up the price of a mortgage for 400,000 householders.

Sinn Féin did not even raise this issue in the general election.

The truth hurts.

Sinn Féin did not raise it in its manifesto.

The Deputy should stand up, be a man and get out from under the skirt of the confidence and supply agreement.

The Deputy should read his party's manifesto.

The Deputy should stand with those who are being penalised by rip-off mortgages by supporting the amendment.

The Deputy should read his party's manifesto.

I am pressing the amendment.

The Deputy should read his party's manifesto to see how much Sinn Féin stated about it. Zilch.

The Deputy should put his money where his mouth is.

There was not one word about it.

Fianna Fáil negotiated an increase in the price of a mortgage for hundreds of thousands of families. That is a fact. Hundreds of thousands of families will be penalised because of it.

Sinn Féin did not state one word about it. The Deputy should read his party's manifesto.

Amendment put:
The Dáil divided: Tá, 19; Níl, 34; Staon, 20.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Buckley, Pat.
  • Collins, Michael.
  • Crowe, Seán.
  • Cullinane, David.
  • Doherty, Pearse.
  • Fitzmaurice, Michael.
  • Healy, Seamus.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Tóibín, Peadar.

Níl

  • Barrett, Seán.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Kyne, Seán.
  • Lowry, Michael.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • Mitchell O'Connor, Mary.
  • Murphy, Eoghan.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Breathnach, Declan.
  • Butler, Mary.
  • Casey, Pat.
  • Cassells, Shane.
  • Curran, John.
  • Dooley, Timmy.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • McGrath, Michael.
  • Moynihan, Michael.
  • Murphy, Eugene.
  • O'Brien, Darragh.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
Tellers: Tá, Deputies Pearse Doherty and Jonathan O'Brien; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 39:

In page 145, between lines 32 and 33, to insert the following:

"Report on trade union tax relief

62. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the re-introduction of Trade Union Tax Relief.".

The amendment call for a report on the reintroduction of trade union tax relief to be prepared and laid before the House within six months of the passing of the Finance Bill. As the Minister will be aware, this relief was abolished in 2011 by the then Fianna Fáil-led Government. The new trade union, Fórsa, which is an amalgamation of a number of trade unions, has made presentations to a number of Oireachtas committees on the reintroduction of this tax relief. It has stated that its abolition discriminated against its members given that members of professional bodies get tax relief on membership fees. It has also stated that it acts as a barrier to some workers joining a trade union. I note from the Minister's comments in committee and in reply to parliamentary questions that he disagrees with that view. He argues that its reintroduction would make no beneficial difference to people. I beg to differ. We could settle the matter if the Minister agreed to this amendment providing for the publication of a report on the benefits of reintroducing the tax relief on trade union membership fees.

I support the amendment. The key point is I do not see how the Minister can possibly justify that such relief exists for those paying subscriptions to professional bodies and not allow the same for trade union members. It is a clear case of discrimination. Workers need the protection of trade unions every bit as much as professional bodies may feel the need to exist and that people may wish to be members of them to protect their interests or to carry on their particular trade. The discrimination and inequity of this must be addressed. The trade union relief should be brought back in. I am interested in hearing the Minister's response because the position is not fair.

An issue that often arises when debating this issue is tax relief for professional subscriptions. However, the divide seems to be between the self-employed and PAYE taxpayers. If a PAYE worker pays a professional subscription, unless it is a requirement of the job that he or she be a member of the professional body in question, the employee will not get tax relief on the subscription. Unless it is wholly, exclusively and necessarily required in the performance of a person's duties, a PAYE worker paying his or her own subscription does not get any tax relief. The issue being raised by way of contrast in respect of trade union subscriptions is that in the case of the self-employed such a subscription is, in effect, tax deductible. There is an issue of consistency here. Employees who pay their own subscription cannot avail of a tax relief on it, unless it is a requirement of their job. Generally, where it is a requirement of the job, the subscription will be paid by the employer and a benefit-in-kind issue may arise.

We have debated this matter on a number of occasions. My point remains that there is a difference between the tax relief that is available to professional bodies and tax reliefs that are available to a trade union. For this reason, I am not in a position to support the amendment.

This is a relief that was available to members of the trade union movement and subsequently abolished. We are not asking the Minister to reintroduce it today but to publish a report on the benefits that could accrue if it were reintroduced. We seek only a report, which would not cost the Minister anything. Nobody should be afraid of what would be in that report. It may uphold the Minister's view, which he has put forward in committee, or it may uphold the unions' position. We will not know unless the Minister agrees to the amendment to produce a report.

Amendment put:
The Dáil divided: Tá, 18; Níl, 35; Staon, 21.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Buckley, Pat.
  • Collins, Michael.
  • Crowe, Seán.
  • Cullinane, David.
  • Fitzmaurice, Michael.
  • Healy, Seamus.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Pringle, Thomas.
  • Ryan, Eamon.
  • Tóibín, Peadar.

Níl

  • Barrett, Seán.
  • Brophy, Colm.
  • Bruton, Richard.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • D'Arcy, Michael.
  • Deasy, John.
  • Donohoe, Paschal.
  • Durkan, Bernard J.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Flanagan, Charles.
  • Grealish, Noel.
  • Griffin, Brendan.
  • Harris, Simon.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kyne, Seán.
  • Lowry, Michael.
  • McEntee, Helen.
  • McLoughlin, Tony.
  • Mitchell O'Connor, Mary.
  • Murphy, Eoghan.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Breathnach, Declan.
  • Butler, Mary.
  • Casey, Pat.
  • Cassells, Shane.
  • Curran, John.
  • Dooley, Timmy.
  • Kelleher, Billy.
  • Lahart, John.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Michael.
  • Murphy, Eugene.
  • O'Brien, Darragh.
  • O'Callaghan, Jim.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
Tellers: Tá, Deputies Jonathan O'Brien and Louise O'Reilly; Níl, Deputies Seán Kyne and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 40:

In page 145, between lines 32 and 33, to insert the following:

"Withholding Tax on peer to peer lending

62. The Minister shall within three months of the passing of this Act, prepare and lay before the Oireachtas a report on the requirement for companies availing of peer to peer loan finance to withhold tax at 20 per cent of interest paid as required under section 246(2) of the Taxes Consolidation Act 1997 and on the appropriateness of section 246(2) of the Taxes Consolidation Act 1997 to the peer-to-peer lending and other crowd funding mechanisms.".

This amendment relates to the peer-to-peer lending sector. While we did discuss the issue on Committee Stage, I want to tease it out further. There is general acceptance that we need to reduce the level of dependence on lending from the banking sector and so the more non-bank sources of finance there are available to small and medium enterprises, in particular, the better. Peer-to-peer lending is an evolving sector, but it is growing. Earlier this year, the Revenue Commissioners paid attention to it and I understand that in May last they issued an e-brief requiring borrowers to deduct a 20% withholding tax from their repayments. This measure is to ensure tax compliance. I would like to know from the Minister if this measure arises out a concern on the part of the Revenue Commissioners in regard to non-compliance. Obviously, everybody involved in this sector, and every other sector, should be tax compliant. The Minister is moving with the Central Bank towards regulation of crowd funding generally but, in particular, peer-to-peer lending. My concern is that given the nature of how peer-to-peer lending works the imposition of a withholding tax will render it unworkable because each person contributing to the lending will be required to complete the R185 form and each loan in this sector can have over 200 different lenders involved in a transaction. If this requirement is to remain, it will stop in its tracks the further development of peer-to-peer lending.

On the e-brief issued by the Revenue Commissioners, it was not in regard to a new policy. Rather, Revenue were confirming existing policy in the area. I imagine they did so in recognition of the growth of the sector. On the requirement for a withholding tax, the Deputy will be aware that the purpose of the withholding tax is to facilitate tax compliance, which as we both know has to occur across all parts of our economy. As I said on Committee Stage, I am willing to examine what would be an appropriate tax regime for this sector but only after we have concluded our work with the sector in regard to how we can better regulate it. Currently, this sector is not regulated. The European Parliament is commencing work in this area, which when completed we can use to get a better idea of what our domestic regulatory regime might look like.

In terms of sequence, we will make progress on the direction of regulation first and, as we are doing that work, we will engage with the sector on what might be a more appropriate taxation regime for it.

The issue is that given the nature of how peer-to-peer lending works the administration of withholding tax makes it virtually impossible for the sector to function. I ask the Minister to afford a degree of urgency to the work that his officials and the Central Bank are doing on this issue. I agree that we need a proper system of regulation. The Minister wants that issue to be dealt with before putting in place an appropriate system of taxation. I ask him to continue to engage with the sector. This is an important area. We need to diversify further the sources of funding that are available to SMEs throughout the country. The more competition we have in the area of credit the better value SMEs, as consumers, get and end consumers will get a better deal as well. I ask the Minister to step up the engagement and deal with this issue. In the short term, my concern is that the application of this regime will impede the further development and growth of the sector.

Amendment, by leave, withdrawn.

I move amendment No. 41:

In page 145, between lines 32 and 33, to insert the following:

“The linking of DIRT rate and exit tax rate on life assurance policies

62. The Minister shall, by the end of 2018, prepare and lay before the Oireachtas a report on the breaking of the link between the rate of DIRT and the rate of exit tax from life assurance policies, including the impact of this on life assurance savers.”.

The purpose of my tabling this amendment on Report Stage is to try to firm up the answer to the question as to when the Minister expects to deliver the report to which he has committed. To recap very briefly on this issue, it relates to the exit tax on certain life assurance products, in particular long-term investment products. Until recent years the exit tax rate was aligned with the rate of DIRT. The Minister's predecessor announced a four-year cycle of 2% reductions in DIRT. When the most recent reduction comes into effect in January, DIRT will therefore be down to 35% but the exit tax will remain at 41%. In 2020, DIRT will be down to 33%, so the gap will get bigger because exit tax will remain at 41%.

There is a policy issue here which we have discussed a number of times in that the differential in the tax treatment of the return from both these products will essentially encourage consumers to put their money into bank-type savings products, on which the return at present is as close to zero as makes no difference. We therefore need to examine the policy implications of this because we want to encourage longer-term saving, longer-term commitment to investment products and so on. The Minister has committed to a report to try to tease out the policy implications. Obviously, there are fiscal implications of doing anything, and I think this is why he has not done anything by way of trying to realign the rates. I believe, however, that we need to give some attention to this in a policy context and then in future budgets to revisit the decisions that have been made.

The report will be made available before the end of this year. It is in draft form at present. The Minister, Deputy Donohoe, just has to read it and then it will be published.

This year as in 2018?

Amendment, by leave, withdrawn.

I move amendment No. 42:

In page 145, between lines 32 and 33, to insert the following:

“Increasing public awareness of certain income tax reliefs

62. The Minister shall, within three months of the passing of this Act, prepare and lay before the Oireachtas a report setting out steps the Revenue intend to take to increase public awareness of certain tax reliefs that may be claimed including tax relief on third level fees, the home carer tax credit and the income exemption limit for persons aged 65 and over, and to increase public awareness of the four year time limit for claiming reliefs retrospectively.”.

This amendment essentially seeks confirmation of the steps that Revenue in particular intends to take and that the Minister's Department can take to raise public awareness of certain tax reliefs available to citizens. My tabling of this amendment is very much borne out of my personal experience as a Deputy dealing with queries from constituents. When I raise and promote certain tax reliefs in newsletters and circulars that I send out, I get feedback, and it has become very apparent to me that there is a lot of underclaiming going on in that many people are simply not aware of some of the available credits.

For example, one of three I have cited in the amendment is the tax relief on third level fees. It is widely misunderstood. People think that if they are only paying the €3,000, there is no tax relief. This is true if they are only paying it in respect of one child. If they are paying the €3,000 in respect of more than one child going to college, they can claim tax relief because a single disregard of €3,000 applies. This is not widely known. I have personally helped a number of people to work their way through this and they have benefited by way of a claim.

The home carer tax credit, which we discussed in the lead-up to the budget, is a similar issue. We welcome the increase to €1,500 to this credit. Again, it is my experience that there is underclaiming of this simply because people are not aware of it. We went through the numbers on Committee Stage as to why this may be.

The third example I have given in the amendment is the taxation options open to older people on the income tax side. They can be taxed in three ways. First, they can be taxed under the conventional system that applies to everyone else, with the application of bands and tax credits. The second way is the income tax exemption limit - €18,000 for a single person and €36,000 for a couple - that applies to people aged 65 and under. The third way is the marginal rate relief if their income is modestly above these thresholds. Again, my experience is that people are not aware of this and it is very hard for people to try to assess for themselves which option is best for them.

The system should pick up these things automatically, and I think in many cases it does, but not in all. It is my experience that these three reliefs in particular - there are other examples - are not being claimed or not being claimed properly because people are simply not aware of them or of the full eligibility criteria. We all need to make a greater effort. We have a role as Deputies, but Government and Revenue in particular need to play the lead role in increasing public awareness of the availability of these reliefs and how they can be claimed.

I understand that Revenue contacts PAYE taxpayers to remind them that there is a four-year time limit for claiming additional tax credits and reliefs. In late 2017, Revenue issued 135,188 letters to all PAYE taxpayers who had not claimed additional credits or reliefs from 2013 to 2017, reminding them that they may be entitled to make claims on or before 31 December 2017. An additional 291 claims were made for the home carer tax credit, 570 for the age tax credit and 746 for tuition fees. On 1 November of this year 125,000 letters concerning this matter were issued. The Revenue Commissioners pre-populate the annual tax returns of self-assessed taxpayers with the home carer tax credit where it was claimed in the previous year. Revenue automatically grants the home carer tax credit and the age tax credit where it can identify eligible people whose circumstances would indicate that they would benefit from the credit or, more particularly, are eligible for it. The Revenue Commissioners put in a lot of effort to ensure that taxpayers are aware of the reliefs and support they would be able to access. I will encourage the Revenue Commissioners to continue this work, and for this reason I ask the Deputy to withdraw the amendment.

I will be very brief. I accept that where information is available to Revenue that leads it to conclude that a taxpayer is entitled to a credit or relief and not claiming it, it is provided automatically. Sometimes, however, the relevant information is not available to Revenue. It could be that there has been a change in circumstances, as is very often the case with the home carer credit, for example. Circumstances in a home may change. Similarly, regarding third level fees, a person may go from having one child going to college to two and people may not be aware of the change in that regard. I do not think the Revenue systems would or could be expected to pick up on this automatically. All these debates help to promote awareness of the availability of these tax reliefs and encourage the Revenue Commissioners and the Minister's Department to use every opportunity to highlight the availability of reliefs which may well be underclaimed - in my view, they are - and to promote them. It is important that people are given the right and accurate information relating to themselves.

The Minister has touched on the four-year rule. I accept that Revenue is writing to certain taxpayers to remind them that the ability to claim for reliefs dating back more than four years will fall off if they do not submit returns by the end of the year. This needs to continue because, again, people's awareness of this is quite limited. I will not press the amendment; I will withdraw it.

Amendment, by leave, withdrawn.

Amendment No. 43 is not in order as it is not relevant to the provisions of the Bill.

Amendment No. 43 not moved.

Amendment No. 44 is in the names of Deputies Paul Murphy, Barry and Coppinger. As none of the Deputies is present, the amendment cannot be moved.

Amendment No. 44 not moved.

Amendment No. 45 is in the names of Deputies Paul Murphy, Barry and Coppinger. The same rule applies.

Amendment No. 45 not moved.

Amendment No. 46 is out order as it is not relevant to the provisions of the Bill.

Amendment No. 46 not moved.

As none of Deputies Barry, Paul Murphy or Coppinger is in the House, amendment No. 47 cannot be moved.

Amendment No. 47 not moved.

As Deputy Wallace is not in the House, amendment No. 48 cannot be moved.

Amendment No. 48 not moved.

Amendment No. 49 is out of order.

Amendment No. 49 not moved.

Amendment No. 50 is out of order.

Amendment No. 50 not moved.

As Deputy Wallace is not in the House, amendment No. 51 cannot be moved.

Amendment No. 51 not moved.

That concludes the amendments. Before moving to Fifth Stage, the Minister wishes to ask for a formal Clerk’s correction to the Bill.

In accordance with Standing Order 163, I ask the House to agree that the Ceann Comhairle instruct the clerk of the Dáil to make a formal correction in the Bill. On page 52, line 42, the phrase "of any company other than—" and the following clauses (I) and (II) on top of page 53 should be aligned to paragraph level as the text is a continuation of paragraph (b) and not subparagraph (iii) as currently displayed.

Debate adjourned.