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Dáil Éireann debate -
Tuesday, 22 Feb 2022

Vol. 1018 No. 4

Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Tax Code

Pearse Doherty


7. Deputy Pearse Doherty asked the Minister for Finance if the advantageous tax provisions applying to real estate investment trusts and Irish real estate funds apply for the purchase of both new and existing housing stock; the number of new and existing housing units purchased by Irish real estate funds in each of the years 2017 to 2021; and if he will make a statement on the matter. [10106/22]

We just discussed how the Minister for Finance is going to continue to push up tax on ordinary families in the form of carbon tax, despite them being pushed to the pins of the collars because of the cost-of-living crisis. I ask him to explain to the House why he is not going to allow the vulture and cuckoo funds to pay any tax on their incomes from rent or any capital gains tax, CGT. Are these tax advantages available to Irish real estate funds, IREFs, and real estate investment trusts, REITs, for the purchase of existing property stock or are they just applicable for new stock? I ask because the Minister has justified these advantages as in some way stimulating housing supply.

It is important that we have this discussion in the context of overall Government housing policy, which is providing record levels of State investment for all forms of housing. However, Government expenditure alone cannot meet all the housing needs of our State. Modelling undertaken by my Department estimates that approximately €12 billion of development funding will be required annually to meet the targets set out in Housing for All, of which €10 billion will be required from private capital sources. That is what is at stake here: the role of private capital in leading to the supply of new homes. Much of the residential investment committed to by institutional investors is observed by the level of forward commit transactions, that is, the provision of capital to fund the construction of new dwellings, or the agreement to purchase contracts to de-risk a project sufficiently to enable the sourcing of low-cost financing. It is likely that such construction would not occur in the absence of this investment.

While it is important to facilitate collective investment through appropriate regimes, it is equally important to ensure that, where such investment brings a profit, a fair share of tax is paid. As the Deputy will be aware, and as is common for investment funds generally, tax occurs primarily at the level of the investor rather than within the fund. Additionally, in the cases of IREFs and REITs, withholding taxes apply on distributions to investors to ensure collection of tax revenues. In 2019, I made several significant amendments to both regimes to ensure appropriate levels of tax are paid by investors in Irish property. Due to the small number of market participants within the REIT regime, and to protect taxpayer confidentiality, Revenue cannot provide data with respect to the residential holdings of REITs. As REITs are publicly listed companies, however, information, such as annual reports, is publicly available. Regarding the proportion of new units, Coldwell Banker Richard Ellis, CBRE, estimated the level of forward commit investment by institutional investors in the past year totalled just over €2 billion.

The Minister did not answer my question concerning whether these tax provisions will apply to the purchase of new and existing housing stock. The housing crisis, as I have said on many occasions, is not an accident. It is a direct consequence of the policies of the Minister's party, and of the decisions made by that party and by its partners in government, Fianna Fáil. It is an outcome of a decade of underinvestment and has resulted in a chronic shortage of affordable housing.

This fact is undermining our economic competitiveness and damaging living standards. We have seen house prices increase by 14% in the past year, while rents have gone up by 10%. The average rent is now €1,500. Institutional investors are forward-purchasing, and not forward-funding, entire developments to rent at extortionate prices. Those institutional investors are paying no tax on the rent they get - nothing, zero, zilch and not a bean. The latest financial stability review published by the Central Bank of Ireland last year found that most units purchased by these funds in 2020 were existing rather than new stock. How can the Minister justify these funds enjoying this tax advantage for a purchase that does not stimulate new supply?

Let me be clear that where tax is paid: it is paid by those who invest in these regimes. Those in REITs are subject and liable to a 25% withholding tax, while those in, or investing in, an IREF, are subjected to a 20% dividend withholding tax. That is where the tax is paid. It is paid when the person or the company investing in one of these funds gets the money back. It is taxed in exactly the same way in which a pension fund is taxed. The tax is incurred, therefore, when the income is redistributed to the person or company investing in the fund. The reason I believe these private capital funds have a role to play in our country is this is about ensuring that new homes are built. These funds play a role in the building of new homes, and particularly in the case of the building of new apartments.

The Minister has again refused to answer the question because the facts are terrible for him. These funds, which he ensures pay no corporation tax, and which in some cases have rental income of €61 million, pay no CGT when they dispose of their assets. No other Irish company can enjoy that advantage. No other individual who rents out properties can enjoy it. The Minister, though, has created a nice wee sweetheart deal for these IREFs and REITs. Other landlords will have to pay corporation tax at 25% and there will also be a need to pay CGT. Shareholders in those companies will also have to pay tax on the dividends they get. For these funds, however, no tax is charged on the rental income or on capital gains. They are being allowed to snap up the majority of second-hand properties. That is why GillenMarkets told international investors that current housing policy has benefited institutions and developers at the expense of individual buyers. This is the housing policy of the Government. GillenMarkets continued by stating that "the aim of institutions is to maximise rental income from their properties and developers are designing apartment blocks to maximise this income for the institutions rather than aiming to meet the needs of society". That is the Minister's policy and his legacy.

I reiterate this is a Government that is investing €4 billion annually in responding to the intense housing needs we know exist. In the aftermath of a pandemic, this is a Government that has seen its policies lead to more than 20,000 homes being built last year, more than 30,000 homes now being commenced and more than 35,000 homes having received planning permission. That is what the effect of our policies have delivered, in the aftermath of a pandemic during which the construction sector was closed. I accept that for many people we are not making enough progress fast enough. I accept as well that many people want to see rents coming down quickly-----

They want to see the funds paying.

-----and the price of homes change so they will be able to afford to buy their first home.

I accept that, but that is why we have the help to buy scheme, which the Deputy is against-----

It is a sweetheart deal.

-----and why we also have the Land Development Agency in place, which the Deputy is against-----

The Minister is changing the subject. On the floor of the Dáil he cannot defend his own policy of a sweetheart tax deal.

-----and why we have the shared equity scheme. I am well used to this from the Deputy. I said earlier, and he knows this is the case, that where the tax is paid, that is when the income is distributed from the fund. That is where the tax is liable. It is liable at 20%. It is liable at 25%. That is where the tax is paid. This was the case with the debate we had earlier on climate. The Deputy is peddling a dangerous idea: the concept, with regard to climate, that there can be progress without difficult decisions.

The Minister thinks it is dangerous to ask who pays tax, and not fleece people in this market and push up house prices.

Again, the Deputy will not acknowledge the reality that where the tax is paid is where the income is distributed.

Tax Code

Richard Boyd Barrett


8. Deputy Richard Boyd Barrett asked the Minister for Finance if he is considering further tax measures to alleviate the severe burden of heating and energy price increases; and if he will make a statement on the matter. [10105/22]

The Minister knows, and it has been discussed at length in this Chamber in recent weeks, that people are being crucified by the rising cost of energy and heat for their homes. Another report was published today, on a survey by Amárach, which shows that people are cutting back on food, meals and essentials because of the rising cost of heating and energy, a basic necessity to keep themselves warm. What tax measures are the Minister willing to consider to address the cost-of-living crisis that people are facing?

I appreciate the challenges many people are facing and I know the issues the Deputy raises are ones that too many are confronting. As I said in the debate earlier on carbon taxation, to be emerging from the very dark and difficult pandemic, with all that it meant for employment and income, for many to have to confront rising prices on top of this is a bridge that is hard for many to cross. I accept that, but it is not about the measures I am considering; it is about the measures that have been put in place by the Government. It is about the measures that were introduced in last year's budget. I accept that, with regard to many of the measures we brought in, the Deputy will be of the view that more can, and should, be done.

The changes we made last October that took effect in January included a €5 increase in the weekly payments that are vital to our social welfare code. Changes were made to the living alone allowance, the qualified child allowance and the fuel allowance. We made changes to personal taxation thereby trying to get to a point where more people pay the standard rate of tax on more of their income. This is the reason we increased the personal tax credits. In addition to the measures we put in place, it is about the measures that the Government announced last week. We made changes in the energy credit. There was a lump sum payment of €125 for those in receipt of the fuel allowance. In addition to what we have done on public transport, changes were made to the drugs payment scheme and other important schemes that affect the cost of healthcare. We have brought forward a package of measures that aims to respond to the challenge we know many are facing at present. These are measures that have either been implemented from 1 January or will be implemented in the coming weeks. We know many people need help and the Government is determined to do what it can to provide that help.

I am afraid it is just not enough. Heating and energy bills are set to increase by approximately €800. For many people, it will be more than that if their homes are badly insulated. In most cases, they have little control over that if they are tenants, public or private, or do not have the money to retrofit their homes. Who will make up the gap between the very small measures, such as social welfare increases, including an increase to the fuel allowance for those who get it, or the €200 energy credit and the cost-of-living increase? When it is added up, it is still well short of the increase of just in the price of heating and energy, never mind how the cost of rent is rocketing and food prices and so on are going up. It is not enough. Does the Minister consider the fact - because he should - that the same people who are being crucified by these costs are paying €494 million in carbon tax, which the Government plans to increase, €481 million in VAT and €263 million in public service obligation levies? They are being crucified by taxes that he has the power to reduce. Does he not think that, given the unprecedented crisis we are facing, he needs to do a hell of a lot more?

I am increasingly being struck by the tone, particularly from some Members of the Rural Independent Group, and the venom with which the word "tax" is used. It is extraordinary for a Deputy of the far left, such as Deputy Boyd Barrett, who I would have thought understands the role taxes play in providing public services on which our country depends, to do so. These are taxes that I know are difficult for many people to pay, but they are also taxes that pay for our schools, hospitals, and the public services that are essential to our society. They are public services that many people, whom the Deputy represents through this question, depend on and want to work well. They also know that the funding of these services plays a part in the services working well or better in the future.

In regard to the measures brought forward, I know they will never be enough for the Deputy. I know any measure that I bring forward, short of the collapse of capitalism, is a measure that he will be unhappy with and make a case against. However, these are measures that will help those who are experiencing real challenges, which we accept and understand. They will be implemented in the coming weeks, in addition to the measures that were implemented on 1 January.

Between the wars, climate destruction and inequality that capitalism generates, it will not need me to help it collapse. It will be more likely to do it itself. I do want taxes put on those who are doing well from the current inflation crisis. As I pointed out to the Minister, why will he not consider taxes on the excessive profits of energy companies? Energia's profits were up by 46% last year and 45% the year before that. What about the profits of the oil companies or the ESB? Does the Minister think it is okay that poor people on low and middle incomes will be considerably worse off, some of whom are making the decision not to have meals, pay rent or medical bills, while the companies that are hiking up the prices are making obscene profits? Does he think he should possibly address that injustice? Does he think that he should possibly use the power he has, as the Minister for Finance, to tax their profits as against imposing crippling taxes on people who cannot afford it?

We are just bringing in measures that will increase the corporate tax rate for the largest companies - I am not sure of the turnover of these companies - by 15%. Corporate tax rates will go up. The Deputy will appreciate the challenge involved in doing this. I know he would want them to go up more. One of the reasons corporate tax rates are increasing is it is a challenge to look at how we can find ways in which very large, very complex and, at times, very profitable companies can be taxed more effectively and differently.

I refer to the point the Deputy made about the ESB. The ESB is a semi-State company and, therefore, the profits it makes are returned to the State via dividends. The dividends are used by the State to help fund public services that the Deputy wants to see improved. If a decision is made to reduce that level of profitability in any way, it would have a knock-on effect on other services the Government uses those dividends to pay for. That is the reality of it. As I said earlier, we appreciate the significant pressure that so many people face at present. We know the measures we are bringing forward, for many, will only help, but we are bringing them forward in recognition of the challenges they are facing. They can and, I believe, will help.

Disability Services

Pearse Doherty


9. Deputy Pearse Doherty asked the Minister for Finance the number of engagements he has had with the Ombudsman and Disabled Drivers Medical Board of Appeal regarding the eligibility criteria under the disabled drivers and disabled passengers scheme since 2017; the actions he has taken following and in response to such engagements; and if he will make a statement on the matter. [10107/22]

For years, citizens with severe and permanent disabilities have been denied access to personal transport through the disabled drivers and disabled passengers scheme, a scheme the Minister has been responsible for since 2017. In October, the entire board of appeal resigned due to his inaction. This board assessed appeals from citizens who were rejected under the scheme. They resigned en masse. Will the Minister outline the engagements he had with the board, including the first engagement, and the actions he took to respond to each engagement and concern the board raised?

The disabled drivers and disabled passengers scheme provides relief from VRT and VAT on the purchase and use of an adapted car, as well as an exemption from motor tax and an annual fuel grant.

There has been ongoing engagement between officials in my Department and both the Ombudsman and the Disabled Drivers Medical Board of Appeal since 2017 and I met with members of the board in March of last year. The ongoing engagement has reflected past and current issues surrounding the administration and oversight of the scheme such as the decision and implications of the recent Supreme Court case in June 2020; increases in the administrative burden and demand on the scheme arising from closures of other mobility schemes in the past decade; and concerns regarding eligibility criteria and the impact of the Covid-19 pandemic on the assessment and appeals elements of the scheme.

The members of the Disabled Drivers Medical Board of Appeal wrote to me recently tendering their resignation from the board. My officials engaged with the Department of Health and the Public Appointments Service to seek expressions of interest from medical practitioners to participate in the board. I am informed that the notice seeking expressions of interest has been issued. It is hoped to move this process along as quickly as possible so that appeals can recommence as soon as possible.

I recently gave a commitment to the House that a comprehensive review of the scheme, to include a broader review of mobility supports, would be undertaken. I have been agreed with my colleague, the Minister for Children, Equality, Disability, Integration and Youth, Deputy O'Gorman, that the review should be brought within a wider review under the auspices of the national disability inclusion strategy, to examine transport supports encompassing all Government-funded transport and mobility schemes for people with disabilities.

The Minister has been responsible for this scheme since 2017. I asked him when the engagements happened. He said there were ongoing engagements in 2020. Was that the first time the board of appeal raised concerns with him? Can he indicate to the House the first time he was made aware that they would not continue to operate this scheme because of its discriminatory nature or the concerns they had with it? What action did he take following his being alerted to that?

There have been severe consequences of inaction for many years in respect of this scheme. One of the last actions taken by the Ombudsman, Peter Tyndall, was to publish a report called Grounded which itemised how people with severe disabilities could not leave their homes and were unable to take up normal activities that the Minister and I take for granted because of the flaws in the scheme. We have had the new Ombudsman call it out and call on Opposition and Government Deputies to put on pressure to get this rectified. When was the Minister first alerted to the matter? When did the board members first raise concerns that they would not be able to operate the scheme any longer? What actions did the Minister take immediately following that?

As I said, my officials who have been in contact with the board regularly alerted me to the concerns the board had about the operation of the scheme. When I met members of the board last year, which I did via a video conference, they informed me that they had very significant concerns regarding the operation of the scheme. They emphasised what other bodies have already done, the need for action to be taken to deal with issues regarding the eligibility criteria of the scheme and the administration involved in the scheme. I gave commitments to them that I would act on that and aim to make progress. However, I clearly did not meet their expectations for progress. I very much regret that they have resigned from the board in the way that they have. I accept responsibility for it. I am well aware of the consequences of appeals not being processed speedily. I am going to do my best to try to get a board appointed and then to deal with the fundamental issues that have led to this point.

It is still not clear when the board first raised concerns about this. It appears the Minister has only met the board once in the five years he has held responsibility. Maybe he can clarify that. Forget about the board of appeals. Has the Ombudsman not been raising this directly with the Minister? The Ombudsman made clear that he wrote to the Minister for Finance and the Minister with responsibility for disability matters in 2017 repeating concerns about the eligibility criteria having a particularly narrow focus and being overly prescriptive. In January 2020, there was supposed to be a special Cabinet meeting on disability issues. There was correspondence to the Secretary General but no action. People with severe disabilities were found to be grounded and unable to get out of their homes. There was no action. The board of appeals, all medical professionals, resigned en masse because there was no action and the Minister, as he has said, did not meet their expectations. That is a terrible situation. As we speak, there are people out there whose appeals cannot be heard. These are children and adults with disabilities.

I am very much aware that there are adults and children, citizens of our State, who are already grappling with such need in their lives and are expecting there to be a speedy appeal process in place. Of course I am aware of the assessments that have been offered of this scheme for so long. As I said to the House a few moments ago, I very much regret that the board members who were operating the scheme that I was responsible for felt they had no option but to resign in the way they did. Through the Public Appointments Service, I aim to get a new board in place as soon as possible. In respect of the key issues that we need to make progress on, I will work closely with the Minister, Deputy O'Gorman, to look at how we can resolve these matters as soon as we can. They are difficult issues. As I said twice already, I very much regret where we are now. I accept that we need to make faster progress on this matter given the views of those who were on the board and I will do my best to do that.

Economic Policy

Michael Lowry


10. Deputy Michael Lowry asked the Minister for Finance his plans to introduce measures to support businesses impacted by increased energy, fuel and insurance costs (details supplied); and if he will make a statement on the matter. [9668/22]

Question No. 10 was to be grouped with Question No. 8 but if the Deputy wants to make a brief contribution on the matter, maybe the Minister would give a brief reply.

I was not aware the question had been grouped. The last two years have been a very challenging time for businesses due to the Covid-19 restrictions. While larger grocery, pharmacy, hardware and retail outlets maintained or increased trade during the pandemic, smaller retailers faced periods of closure and significantly reduced footfall. On top of that, the cost of energy, fuel and insurance have all risen significantly over the last 18 months. These increases are greatly impacting on the ability of many to continue to trade. They urgently require assistance from the Government.

I thank the Deputy for raising this issue. Many of these businesses still have a number of months of Covid support available to them in the form of the employment wage subsidy scheme. I acknowledge that the Deputy has made a number of constructive suggestions over the last two years to change the operation of the employment wage subsidy scheme and the Covid restrictions support scheme, which I have taken on board. Those schemes are still in place for many businesses affected by the pressures to which the Deputy refers. Do I at this point have any plans in place to bring forward a further set of business supports? The candid truth at the moment is that I do not. I accept that many businesses are facing new challenges in the rising cost of energy and in retention of staff. We are not yet out of two years of an exceptionally high level of support for our economy, which was needed, and a very high level of support to many businesses. That is going to be in place for many of them for a number of months. To be clear, that was for Covid, for a different reason. Even in the current environment of a lower Covid impact on businesses, those supports are still in place, albeit at a reduced level.

Housing Schemes

Catherine Connolly


11. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 92 of 16 December 2021, the status of the promised review of the help to buy scheme; the terms of reference for the review; the person or body carrying out the review; the timeline for the review; and if he will make a statement on the matter. [9688/22]

My question pertains to the status of the promised review of the help to buy scheme, the terms of reference for the review, the person or body charged with carrying out the review, the timeline and if the Minister will make a statement on the matter.

I thank the Deputy, who raised this issue with me just in the week before Christmas. Where it stands at the moment is that I will soon sign off the terms of reference for this report. We will procure an independent consultant to the Department to carry out this work. I expect that will all be done in the next few weeks.

I thank the Minister. Will the terms of reference be published prior to the review going ahead? No. The Minister is going to go outside the Department for an external group to run it. When does he expect that to be completed? What exactly will it be looking at?

I realise our opinions on this differ. From anecdotal evidence on the ground and the figures, I do not believe the scheme has been successful at what it is supposed to be doing. In the Minister's previous answer, he referred to 60% of people needing help with the deposit. Therefore, 40% did not need help with the deposit. I welcomed his comment in his reply, which I had the privilege of seeing earlier, that the review will be extensive. He did not read out the whole reply so I am focusing on the positive aspect, namely that the review will be quite extensive. I would like to see a breakdown of those who benefit from the scheme, by locality, income and savings, to determine whether it is actually achieving what it is supposed to do.

I have no issue at all with making the terms of reference of the review publicly available. I will be happy to publish them. I do not want to do it at the expense of slowing down this process but there is no reason we cannot publish the terms of reference and make them available to the Deputy.

The organisation will be external to the Department of Finance, as is frequently the case with assessments like this. The review will consider whether we are now making the most effective use of State money in helping those who are looking to buy their first home. The Deputy and I have differing views on this. She will focus on the 40% who did not need the full support of the scheme to assemble their first deposit. I would retort that, with any tax measure, there will always be some who might not benefit as much as others. For a large majority of people, however, the scheme plays a role in helping them. We will consider the level of deadweight within the scheme and the degree to which it is helping those seeking to buy their first home, which must be newly built.

It is not "any tax measure"; it is a tax measure to assist people with the deposit when buying a house in a most serious housing crisis that is getting worse every day. I watched these developments as a councillor locally. I recall exactly when the construction started because we used to get quarterly reports telling us how many houses would be constructed and where. It stopped in 2009. The final column stated: "Construction suspended". From 2009 until a year or two ago, not one single social house was constructed in Galway. There are many reasons for a housing crisis but one of the major ones is the failure of government to be in the middle of the market, balance the market and build social housing - I prefer the phrase "public housing" - on public land. I cannot remember the figure pertaining to the increase under the scheme. A certain price was predicted and it jumped astronomically. The original estimate was €40 million per annum. By January 2021, the cost was €167 million. Then it went up to nearly €500 million, which is the last figure I saw, and higher than that.

The cost for 2021 was €191 million. It is the case that the total cost since the scheme was introduced in 2017 was €568 million. I agree with the Deputy regarding the essential role that public or social housing needs to play in ensuring that we have an overall housing policy capable of working more effectively. That is why more than 6,000 social or public homes will be built this year. Time and again, including earlier this evening, some Members of the Opposition, although I am not suggesting the Deputy, pick a particular aspect of our housing policy and suggest it is the only way in which the Government is seeking to respond to housing needs, including the need to build more homes. In conjunction with the scheme in question, we have a public housing programme that is gathering momentum week by week, with more homes being built across our country.