I move: "That the Bill be now read a Second Time."
I am pleased to have the opportunity to introduce the Financial Provisions (Covid-19) (No. 2) Bill 2020 to the House this morning. This Bill provides the legislative basis to introduce the tax measures that the Government announced as part of the €7.2 billion July jobs plan last week. This plan is the next stage in our response to the Covid-19 crisis and aims to get businesses back on their feet, ensuring as many people as possible can return to work in accordance with public health and Government advice.
This plan contains a range of tax, loan and expenditure measures designed to directly support business at all levels of the economy that have been negatively impacted by this disease. The plan is the first step in this Government's mission to reignite and renew the economy following the impact of Covid-19. It aims to build on the recovery to date and the measures previously announced with a further €4.3 billion of spending on supports that will have an immediate impact on businesses, employment and economic activity. The overall value of the package, including tax changes and the opening of the €2 billion Covid-19 credit guarantee scheme, is approximately €7.2 billion.
Today's debate is focused on the tax measures that will have a net cost of approximately €1 billion. The total value of the tax package is €1.4 billion but the amendments relating to corporate tax losses will be cost-neutral to the Exchequer as they are an acceleration of the ability of companies to avail of a relief that already exists in the tax code. Importantly, however, this measure will release up to €450 million of liquidity in the current year to companies currently facing significant cash flow difficulties at a point when they most need it. In addition to this, the employment wage subsidy scheme will cost an estimated €2.25 billion, guaranteeing substantial State support for worker wages through to March 2021.
The Bill before the House today only runs to only 13 sections so I will briefly go through them individually. Section 1 is the standard definitions section common to Bills of this nature.
Section 2 makes changes to the existing temporary wage subsidy scheme, TWSS, to include individuals who return to work after maternity and other types of leave, those on apprentice and training courses, as well as changes to the subsidy amounts payable that I announced on 15 April. All of these and other necessary adjustments to the TWSS were previously announced and have been administered to date by the Revenue Commissioners on the basis of their care and management provisions.
The section also provides for the employment wage subsidy scheme, which will replace the temporary wage subsidy scheme. It is being introduced as an enterprise support that gives a subsidy to qualifying employers on the basis of the numbers of paid employees on the employer's payroll. This is an economy-wide support and open to all sectors. The primary qualifying criteria is that the employer must be able to demonstrate that in the majority of cases they are operating at no more than 70% in either the turnover of the employer's business or the customer orders received by the employer by reference to the period from July to December 2020, compared with the same period in 2019.
In this regard, given the importance of childcare to the reopening of the economy and also recognising the unique circumstances where the turnover of such businesses would be greater than 70% but the cost base would be considerably higher, the Government has decided that the key eligibility criteria would be waived for this particular sector.
The level of subsidy the employer will receive is per paid employee. For every employee paid more than €203 gross per week, the level of subsidy is €203. For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50. A nil subsidy is payable for employees paid less than €151.50 or more than €1,462 gross per week; this latter amount is consistent with the eligibility ceiling which exists in our current plan. The scheme will be in place until the end of March next year. It is estimated that it will cost €2.25 billion, comprising €1.35 billion in 2020, inclusive of seasonal workers, and €900 million next year.
Sections 3 to 5, inclusive, together provide a legislative basis for the tax "debt warehousing" scheme announced by the previous Government on 2 May. No interest will be charged on the tax debts for the initial Covid-19 restricted trading period or 12 months thereafter. Interest will be charged at the reduced rate of 3% per annum after that and businesses will also be required to comply with requirements relating to tax returns for the duration and pay other liabilities in full and on time. Otherwise, the normal 10% per annum interest will apply.
Section 6 will add a new interest provision in Chapter 5 of Part 47 of the Taxes Consolidation Act to reduce the interest rate applying to agreed repayments of all tax debt to approximately 3% per annum rather than 8%, 10% or 11.75% per annum depending on tax head where agreement has been reached between the taxpayer and the Revenue Commissioners prior to 30 September 2020.
The measure will assist taxpayers who are in difficulty with tax payments. The purpose of this section is to provide support to taxpayers experiencing difficulty with their liabilities by reducing the interest rate applied to agreed repayments of all tax debt where agreement has been reached prior to 30 September 2020.
Section 7 relates to the stay-and-spend incentive. This will incentivise taxpayers to support registered or accredited providers of accommodation, food or both during the off-season, thus providing support to a particularly vulnerable sector that continues to be constrained by public health limitations. The incentive will allow for a refund through income tax of 20% of the vouched cost, subject to a minimum spend of €25. In other words, it offers a maximum tax credit of €125 per person or €250 for a jointly-assessed couple. This innovative measure will be a valuable form of off-season support for the Irish hospitality sector. It provides relief on accommodation and food, including soft drinks but not alcohol. Businesses must be registered or accredited as appropriate and must have tax clearance if registered for VAT. Businesses will be obliged to register with Revenue to participate. It is estimated that this scheme will cost up to €270 million in total. It will run from 1 October 2020 to 30 April 2021, including over the Christmas period. It is designed to unlock the money people may have saved in recent months and encourage spending in the sector and in local economies. I hope and expect that this really important part of our economy will use its creativity and talent to market this opportunity and ensure its best use for businesses and customers. However, this should not be seen in isolation. The extension of the temporary Covid-19 wage subsidy scheme until the end of March 2021, and its extension to new or seasonal staff with effect from 1 July this year, the VAT change, the rates waiver, the reopening grants and a range of other supports will buffer and support businesses and the economy as we move through the remainder of 2020 and into next year.
Section 8 amends the help-to-buy scheme to stimulate demand from first-time buyers for new homes in the housing market, to encourage house completions and to assist first-time buyers in accumulating a deposit for a new home. The level of support will be increased to the lesser amount of €30,000 from €20,000, to 10% from 5% of the purchase price of a new home or self-build property or to the amount of income tax and deposit interest retention tax, DIRT, paid in the four years before the purchase or self-build. The additional relief will be available immediately and will apply to applicants who sign a contract for the purchase of a new house or make the first drawdown of the mortgage in the case of a self-build in the period from 23 July to December 2020. Receipt of the additional relief is not dependent on completion before 31 December. It will expire at the end of this year. All other parameters of the scheme will remain the same.
Section 9 provides for increases in the allowable expenditure under the cycle-to-work scheme. The allowable expenditure will be increased from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of bicycles. The scheme currently allows the purchase of a new bicycle every five years. This will be amended to four years.
Section 10 provides for a new once-off income tax relief measure that will benefit self-employed individuals who were profitable in 2019 but who, as a result of the Covid-19 pandemic, are loss-making in 2020. This will provide a much-needed cash flow boost in the current year. The estimated cost of this once-off proposal is €150 million in 2020.
Section 11 provides cash flow supports to previously profitable companies that are now experiencing losses as a result of public health measures. It allows companies to estimate their current-year losses and to make an early claim to carry back 50% of that loss to offset against taxable profits of the prior year. This will generate an immediate refund of some or all of the corporation tax paid for that year. Under normal rules, this would not take place until up to nine months after the end of the loss-making year when tax returns are due for filing. As it is based on projections of the expected losses for the full accounting year, the carry-back is limited to 50% of the estimated loss. The balance of the loss will be available for carry-back in due course under normal rules, when accounts have been prepared after the company's year end. The measure has no net cost in the medium term as it is an acceleration of a relief that already exists in the corporation tax code. However, it will release up to €450 million of valuable liquidity in the current year to companies currently facing significant cash flow difficulties at a time when they most need it.
Section 12 provides for the standard rate of VAT to be reduced on a temporary basis from 23% to 21% for the period from 1 September 2020 to 28 February 2021. It is estimated that this reduction will cost some €440 million in total, €160 million in 2020 and €280 million in 2021. This is one of several measures to aid economic recovery in the short term and to help ensure growth in the future. It cuts across a wide range of economic activity, including the retail sector, the motor industry and the hospitality sector, and, as such, a broad range of businesses and traders will benefit. A reduction in the 13.5% VAT rate would have been more limited in its impact. In the context of the prevailing public health advice, other restrictions necessitated by the social distancing rules and the shortage of overseas visitors, a reduction in the standard rate is the appropriate policy response.
Section 13 is another standard section. It relates to the Short Title of the Bill. There is no commencement provision and the Bill will become effective on enactment and signature by the President.
This is a short Bill but it is a crucial element of the next phase of the Government's response to the Covid-19 crisis. It sets out the budgetary measures that will support jobs and our economy and help our country emerge from the period when the economy was shut down. The Irish people have shown remarkable resilience throughout this crisis and now businesses are reopening and taking workers back onto their books. However, those businesses need our help and support. The measures in this Bill will assist in this process and supplement the other measures the Government has taken to support businesses. The Bill introduces new support measures and adapts existing ones to meet the needs of our people and our economy as we continue to make progress in restricting the impact of this disease, reopen our country, help business recover and allow workers to go back to work. These are far-reaching measures involving truly massive support but they are absolutely necessary. I commend the Bill to the House.