Vol. 1029 No. 2
94. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to remain satisfied that adequate measures have been taken to confront inflation here, and control any incoming inflation to the greatest extent possible; and if he will make a statement on the matter. [55812/22]
To what extent does the Minister continue to monitor the efficacy of measures taken to tackle inflation, both locally generated and imported?
I thank the Deputy for raising the critical economic challenge we are now confronting. As he will be aware, consumer price inflation picked up sharply over the past year and in October stood at 9.6%. Almost every advanced country in the world is in the same position with, for example, inflation throughout our neighbours within the EU, and in particular among those countries that share the euro with us, reaching a record 10.7% in October. That our rate of inflation is slightly below the EU area average is going to be of precious comfort to the businesses and households the Deputy is concerned about.
As he will know, the key driver of these pressures is the sharp rise in energy, food and other commodity prices as a result of the war in Ukraine. Spillover effects from higher energy prices are also being felt in other sectors, such as food and consumer goods and services. We are acutely aware of this, however, and the Deputy has been good enough to recognise the value of the measures we have brought forward. In addition to our day-to-day budget, which was at the high level of €6.9 billion, we are also bringing forward a set of one-off measures amounting to more than €4 billion. I will not list what they are, given the Deputy knows what they are, but they are all designed in different ways to help households and businesses with the rising costs and inflation and the impact that is having on living standards, our ability to live and the viability of businesses.
Many citizens, who have come through the wearying tunnel of Covid and have finally got to a better point in that regard, have now been hit by the surge in prices, with all that that means for their lives, and we understand that very well. With the measures we are bringing forward, we are doing our best to offer help without creating new risks in the future.
I thank the Minister for his comprehensive reply. To what extent are efforts being made across Europe and in this country to identify specific issues that might have a disproportionate impact on inflation throughout the EU and in this country, and has anything been identified? For example, various issues are suggested from time to time as being the cause of the rising inflation. In some cases, investigations carried out by individuals have indicated the figures are not accurate. One of them relates to a builder who was importing steelworks for his construction company. He travelled to Europe and Turkey with a flat-body truck and brought the stuff home at a fraction of the cost. Something is going wrong somewhere.
Indeed. The focus at European level is on trying to reduce the cost of energy, which, as the House will know, is an exceptionally complex and sensitive matter at a time the supply of energy in the first instance is so constrained and so low. That is the focus of considerable collective efforts within the EU because any change in the price of energy will have a significant impact on the rate of inflation we face. In Ireland, of course, the Departments of Finance and Enterprise, Trade and Employment will monitor what is happening throughout our economy to be confident that the change in prices that is happening will not give the opportunity for unwarranted price increases. For now, the level of challenge so many businesses face due to the rising cost of their inputs indicates that the rising prices are driven by the global forces I referred to.
I welcome the emphasis on monitoring what is happening as a means of identifying generated sources of inflation, which we cannot afford at this time, whether here or elsewhere in Europe. I thank the Minister for the information he gave. Will this approach continue for the foreseeable future?
Yes, it will. In the various economic forecasts we conduct, which we will again revise in April, we will continue to monitor clearly where we are with inflation and what that means for our economy overall. While we expect a decrease in inflation rates in the economy for next year, it will be a decrease to only 6%, which, unfortunately, will have an impact on the living standards of our country and the ability of businesses to remain viable and to continue to employ citizens. It will be carefully monitored as the year goes on. For now, that which will have the greatest impact on trying to reduce inflation will be the collective efforts of the EU with regard to the price of energy, and I hope more progress can be made on that in the time ahead.
I welcome Tony and Eileen Manning to the Gallery. They are here with Deputy Devlin.
95. Deputy Ged Nash asked the Minister for Finance his views on the Economic and Social Research Institute, ESRI, post-budget analysis that suggests that permanent tax changes made in budget 2023 will disproportionately benefit higher earners; if he is concerned that full-time workers who are on the minimum wage will not see the full benefit of the planned 80 cent an hour increase in the national minimum wage due to the failure to entirely adjust all relevant PRSI and tax bands to account for this increase; his plans, if any, to address this issue on Committee or Report Stage of the Finance Bill; and if he will make a statement on the matter. [55838/22]
For full-time workers on the national minimum wage, a significant portion of the 80 cent an hour increase they will receive in July will be swallowed up. In the budget, the Government failed to adjust the relevant PRSI bands to account for the increase and to ensure the full increase would go into the pockets of those who benefit from the national minimum wage increase. There are no Committee Stage amendments to the Finance Bill to rectify this problem, although it may be addressed in, for example, the social welfare Bill. I have tabled an amendment to the Finance Bill on the matter. The Minister might first respond to the question and we can take it from there.
Our taxation system is among the most progressive in the OECD in that those on lower incomes pay less income tax as a share of their income than those on higher incomes. Budget 2023 included a significant personal income tax package, estimated to cost €1.13 billion. Overall, in all the measures contained in that tax package, it is expected 2.1 million taxpayers will benefit in different ways.
It is important to bear in mind, however, that tax measures form only one component of the budget. The Department’s analysis shows that the gain in the top five income deciles is mainly from direct and indirect tax measures, while welfare measures and the energy credit are responsible for most of the gains in disposable income for households in the bottom five deciles.
With the increase in the national minimum wage from €10.50 to €11.30 per hour from 1 January, those on the national minimum wage will be better off in overall net terms.
In addition, the ceiling of the band for the 2% rate of USC is increasing by €1,625 to €22,920. Similar to previous years, this policy measure is to ensure that a full-time worker on the minimum wage, who will benefit from the increase in the hourly minimum wage rate, will remain outside the top rates of USC. As the Deputy acknowledged, policy matters regarding adjustments to PRSI are dealt with in the social welfare legislation and are a matter for the Minister for Social Protection. However, I will pass this on to her.
That would be appreciated. It is something we intend to raise in the context of the Finance Bill and probably more appropriately, the social welfare Bill. Our own analysis, which has been confirmed by the Parliamentary Budget Office, shows that in terms of the national minimum wage, a worst-case scenario could see many full-time workers on the minimum wage lose more than 30% of the 80 cent per hour increase because no adaptation is being made with regard to the PRSI threshold. That diverges from what policy has been over the years.
In 2015, for example, significant moneys were made available to address the USC issue, which is being addressed this year as well. Money was also used to address the PRSI cliff-edge problem. This can, therefore, be rectified. I hope the Minister will use his good offices with the Minister for Social Protection to seek to do that. There is an issue here that needs to be addressed. The principle that as much as possible of the increase that goes to a full-time national minimum wage worker should be taken home is something everybody should accept.
I appreciate the point raised by the Deputy. I have made great efforts in changes I made to the USC to deal with the issue he identified. As he will know, changes in PRSI have other consequences of which the Minister of Social Protection will be aware. I have no doubt at all that she will give a clear and justified account of what is happening from a PRSI perspective. However, the reason we did make the changes in USC is to ensure that somebody sees his or her wages go up due to a change in the minimum wage and is not worse off as a result of an unchanged level of USC.
I will put on record, and various respective think tanks have said it as well, that PRSI parameters will remain unchanged, and that will increase the PRSI burden on a full-time minimum wage worker. The threshold for those earning below €424 is not changing. There will, therefore, be an impact. More than 30% of the increase will be swallowed up because the kinds of PRSI adjustments that ought to be made are not being made. We will continue to argue for that. That is frankly an injustice given that we know the bottom two deciles will be worst affected by the impact of inflation, notwithstanding the measures that have been introduced by Government. It is important, however. When we look at budget 2023, there is a bit of sleight of hand going on. There is an effort by Government to include the one-off measures and the measures of budget 2023. It describes the budget as being ethical and progressive but when we strip away the one-off measures, that is not necessarily the case for low-paid workers.
As the Deputy knows, many of the institutes he is quoting regarding the progressive nature of our budget are the same institutions that are saying the measures we brought in should be temporary. The one-off measures should indeed be temporary in the hope that the cost-of-living pressures about which we are all concerned begin to change and moderate, and offer an opportunity then to change the level of support we have in place if things begin to improve and prices begin to moderate. I would, therefore, make the case to Deputy Nash that it is appropriate that in evaluating the progressivity of the budget, we include the one-off measures. As I told the Deputy in my opening answer, many other measures are contained in budget day that aim to make a difference to low-income citizens who need additional supports. They should be identified as well and we should not just focus on tax in isolation.
96. Deputy Pearse Doherty asked the Minister for Finance the estimated annual revenue forgone as a result of stamp duty not being applied to share buybacks not effected by means of a stock transfer form; and if he will make a statement on the matter. [55908/22]
A stamp duty tax of 1% normally applies to the purchase of shares. Under certain circumstances, however, when a company buys its own shares, this charge does not apply. In fact, the stamp duty only applies when a share buyback takes place by means of a stock transfer form. In the other two cases, when they are purchased through a direct contract or through security settlement systems, no charge applies. Will the Minister close the gap to ensure that a charge applies to all forms of share buyback?
A stamp duty charge of 1% normally applies to the purchase of shares. However, I am advised by Revenue that the stamp duty treatment of share buybacks depends on the form in which the shares are held and the method by which the buybacks are affected.
Share buyback refers to the practice whereby a company purchases or buys back its own shares. For shares held in certificated or paper form, the shares may be bought back in two ways. The first is by means of a standard stock transfer form. The second is where the shareholder and company enter into a contract or share purchase agreement for the sale of the shares, following which the shareholder hands over the share certificates to the company. For shares held in uncertificated or electronic form, the shares may be bought back via an electronic settlement system.
Shares bought back by means of a stock transfer form are chargeable to stamp duty. Where a company enters into a contract or share purchase agreement, Revenue accepts that there is no stamp duty chargeable on the transaction by virtue of section 31(1)(b) of the Stamp Duties Consolidation Act 1999. For shares bought back via an electronic settlement system, it has been a long-standing Revenue practice to confirm that stamp duty does not apply to such transactions. Revenue estimates that based on prior year transactions, the revenue forgone on share buybacks is between €5 million and €20 million in each calendar year. However, Revenue is unable to gather comprehensive data on share buybacks that occur and are not subject to stamp duty as companies have no obligation to report this information. The wide variation in the estimated annual yield forgone is because share buyback programmes are implemented on an irregular basis by a limited number of companies.
Revenue just applies the laws we set this House. Share buybacks have become a popular way for companies to drive up their share prices and enrich corporate executives and shareholders. Irish publicly-listed companies are on course to spend more than €1.9 billion buying back their own shares each year, including retail banks and large developers. However, share buybacks can often be at the expense of the company or, indeed, the broader economy. Money spent on share buybacks to benefit corporate executives and shareholders is money not spent to reduce prices for consumers, increase employee wages or invest in the company itself. If we look across the Atlantic, that is the reason the Biden Administration is introducing legislation to apply an excise tax on share buybacks. In practice, few and only small private companies perform share buybacks through stock transfer forms where the stamp duty applies and, therefore, this gap should be closed in legislation. I ask the Minister to consider closing this gap with an amendment at Report Stage of the Finance Bill.
I would love to be able to point out whether this is a matter Sinn Féin considered in its alternative budget but I cannot because it is not available. I did evaluate it, however. In evaluating and consulting with my officials on it, the view I have reached is that a change to it at this point could limit the ability of our capital markets to operate. Those capital markets are important for providing funding and investment to companies based in Ireland. I did give consideration to it. I have decided that at this point, more risks could be associated with this change than benefits. I will not be bringing forward a Committee Stage amendment in that regard. The Department of Finance will continue to monitor this matter, however.
We have been calling for this, which the Minister will know because he has our alternative budget. It is online. We have asked the Department to make a clear signal to him as to where he can access it. However, let us deal with the issue here. The Minister talked about how we need to pay for stuff. Up to €20 million in foregone tax is lost here. The loss is difficult to justify, especially when the transactions in question are of limited value to a company and the practice can lead to corporate executives and shareholder enrichment at the expense of the company, investment in employee compensation or lower price for consumers. It is clear that share buyback regulation deserves attention. The opportunity cost of share buyback is considerable. As I said, resources could be used to lower prices and, indeed, increase productivity or workers' pay.
The Minister's own officials make it clear, stating that as there is a transfer of the beneficial ownership to the shares from one person to another in exchange for valuable consideration, there is clearly a conveyance of transfer on sale of the shares and therefore a charge of stamp duty at 1%. That is not being applied because the law has a gap. There is no rationale for allowing such a large volume of share buybacks to slip through the net without the 1% stamp duty being paid. The Minister can deflect all he wants. This is a sensible proposal that could benefit the State by up to €20 million. That is what we are talking about. Why will the Minister not introduce this measure? Why will he not close the gap that his own officials have identified and believe there is justification for?
I have no doubt that Sinn Féin's pre-budget statement is going to be available later today.
It always was. Stop deflecting. I think I even posted it to the Minister.
Not at all. Actually, the Deputy did post it to me - I have a copy of it - but it was not available today. It has not been available over the last number of days and the Deputy knows why. The figures do not add up, the proposals are a source of risk and any new issue, any bus that goes by, Sinn Féin wants to hop on it.
Answer the question. Why is the Minister allowing these rich executives to keep €20 million?
Sinn Féin does not want the country to know what its track record is and what its proposals are.
Answer the question. Why is the Minister going against his officials' advice, allowing these executives-----
I am going to answer. I am only too happy to answer the Deputy's question. We did indeed consider this matter following the publication of the tax strategy group paper. As I said to the Dáil, we are going to continue to monitor this matter. It was the view of my Department, and I assessed the matter myself, that any change in the current regime could cause unintended consequences, including conflicting with European and domestic capital markets, and might raise potential issues for Irish companies that are accessing US markets. That is the reason.
The next question is in my name but it is being taken by Deputy Aindrias Moynihan.
97. Deputy Pádraig O'Sullivan asked the Minister for Finance if he will reconsider the benefit-in-kind, BIK, changes introduced in budget 2023; and if he will make a statement on the matter. [55675/22]
146. Deputy Neale Richmond asked the Minister for Finance if he has considered providing a differentiation in benefit-in-kind rules for company cars for someone who receives a car as a work benefit versus someone who uses the car as a part of their job; and if he will make a statement on the matter. [55873/22]
159. Deputy Aindrias Moynihan asked the Minister for Finance if he will reconsider the BIK changes introduced in budget 2023 given that the changes will have a serious financial impact on workers in the current economic climate; and if he will make a statement on the matter. [55800/22]
This relates to the benefit in kind for company cars, the fleet that people have out there, day in, day out, just to keep them doing their job and earning their income. There is a financial hit on people with this proposed change. The question is whether there is an opportunity to improve that for people.
I propose to take Questions Nos. 97, 146 and 159 together.
This new charging mechanism was legislated for in 2019. It is not a result of anything that was contained in this budget or the current Finance Bill. We indicated in 2019 that these changes were to come in. I appreciate why the Deputy is raising this matter and the impact it may have on some of his constituents. I recognise that. However, this is a change that has been very clearly flagged over a number of years now, recognising that it could well create a cost, in particular to company car users who are using their cars as a very important part of their daily business, for example, sales representatives or people who need to use their cars to visit customers. This measure has been indicated now for a number of years and is not due to any changes that are contained in this budget.
Government policy has focused on strengthening the environmental rationale behind company car taxation. Until the changes I brought in as part of the Finance Act 2019, Ireland’s vehicle benefit-in-kind, BIK, regime was unusual in that there was no overall CO2 rationale in the regime. This is despite the fact that a CO2-based vehicle BIK regime was legislated for as far back as 2008.
In the Finance Act 2019, I legislated for a CO2-based regime for company cars from 1 January 2023. From that date, the amount taxable as BIK remains determined by the car’s original market value and the annual business kilometres driven, while new CO2 emissions-based bands will determine whether a standard, discounted or surcharged rate is taxable. The number of mileage bands has been reduced from five to four.
The rationale behind the mileage bands is that the greater the business mileage, the more the car is a benefit to the company rather than its employee, and the more the car depreciates in value, the less of a benefit it is to the employee as the asset from which the benefit is derived is depreciating faster. Mileage bands also ensure that cars more integral to the conduct of business receive preferential tax treatment.
Reforming the BIK system to include emissions bands provides for a more sustainable environmental rationale than the continuation of the current system with exemptions for electric vehicles, EVs. This will bring the taxation system around company cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other member states.
In addition to what I have outlined and in light of Government commitments on climate change, budget 2022 extended the preferential BIK treatment for electric vehicles to the end of 2025 with a tapering mechanism on the vehicle value threshold. This BIK exemption forms part of a broader series of very generous measures to support the uptake of EVs, including a reduced rate of 7% vehicle registration tax, VRT, a VRT relief of up to €5,000, low motor tax of €120 per annum, Sustainable Energy Authority of Ireland grants, discounted toll fees, and 0% BIK on electric charging.
I appreciate the importance of the point the Deputy is making but I ask him to consider that this measure has been flagged over a number of years. My concern, given the importance of this measure in changing the carbon emissions from our private car fleet, is that if we were to indicate at this point that it is not going to happen, I am not sure whether or when it would happen. I believe many other companies have now made investment decisions in anticipation of these changes coming in.
I thank the Minister for the overview and very detailed response. It is a financial hit on people now more than ever due to the pressure from the cost of living and fuel prices. The electric car charging network has not been rolled out as we would have liked. Someone travelling around the Cork and Kerry region, or anywhere in the country, will be under pressure to find public charging points. I appreciate the Minister's point about the measure being flagged. Is there an opportunity at this point to delay it and give people some further time to change over? Cathal, for example, is down €44 a week. He drove throughout the pandemic servicing supermarkets as an essential provider. The cost now hitting people is very challenging. Is there an opportunity to delay this?
I appreciate that the costs the Deputy refers to are very significant. I have no doubt that constituents are contacting him about the matter and are concerned about it. I respectfully make the case to him again that we have been flagging this change for a number of years. My concern is that if we were to change or defer a significant change in BIK that has been very well flagged at this point, there could well be other car users who have already made decisions in anticipation of this coming in. I have to be conscious of them as well. We will certainly monitor this matter and keep it under review. As I have tried to indicate to the House throughout this Question Time, I am very much aware of the impact of the rising cost of living on our constituents. We are doing what we can to lessen the blow that many are facing at the moment.
98. Deputy Holly Cairns asked the Minister for Finance the steps that he is taking to fulfil the commitment in the programme for Government for credit unions to become a key provider of community banking. [55634/22]
Credit unions are more important than ever. As households and family businesses are experiencing the cost-of-living crisis, credit unions are providing vital services to help people get through. However, they are still constrained by an outdated policy framework that is limiting their capacity rather than helping them serve their communities.
I appreciate the work the Minister has been doing in this area but when will the necessary reforms be brought forward?
I want to recognise the huge work the Minister of State, Deputy Fleming, has done on this. He has put incredible energy into assessing where we are from a policy perspective with a part of our economy he understands well, namely our credit union movement. He regrets that he cannot be here to take the Deputy’s question but he is representing us on Government business in Brussels.
The Government recognises the importance of credit unions as a provider of community banking services. The programme for Government contains clear commitments to review the policy framework, enable and support the credit union movement to grow, support credit unions in the expansion of services and enable the credit union movement to grow as a key provider of community banking services. The review of the policy framework has been completed and in July the Government approved the drafting of legislation to implement the proposals. The legislation has received priority status for publication in the Dáil’s autumn session.
The policy proposals contained in the review address a number of different and important objectives. Cumulatively, the desired outcome of these objectives is to strengthen the role of credit unions as a provider of community banking and to enable them further to focus on priorities that will better position the sector to face the challenges and opportunities of the future. In developing this important work, the Minister of State, Deputy Fleming, has met the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers Association, the National Supervisors Forum, the Registrar of Credit Unions, the Credit Union Advisory Committee, the Credit Union CEO Forum and collaborative ventures. As I do my work across the country I find that virtually every credit union I meet has met the Minister of State, Deputy Fleming. He has done huge work on this and the proposals he has brought forward are very meaningful. I know they do not deliver all that the credit union sector wants but they are capable of making a difference. The Government will do its best to legislate speedily for them.
Many households and businesses are in crisis and credit unions are ready to provide vital assistance. Are the Minister or the Minister of State, Deputy Fleming, looking into what measures they can bring in immediately to allow them to take advantage of the place of credit unions in the community and their balance sheets? I realise the Minister and the Minister of State, Deputy Fleming, are pursuing larger policy reforms, which is so welcome, but are there any aspects of that which could be accelerated now to help the sector and communities in the more immediate future? Some 77 credit unions offer current accounts, including Access Credit Union and First South Credit Union in Cork South-West. With the closure of bank branches and entire banks that service will be increasingly important, especially in rural areas. What steps is the Minister taking to help more credit unions offer those current accounts? The Strategic Banking Corporation of Ireland has 19 credit unions engaged as SME lending partners. That is a welcome development to support and enhance the sector. Could the Minister clarify how he is helping other interested credit unions to enter that arrangement?
The Deputy is dead right. For example, in the early part of 2021 some 19 credit unions participated in the Covid-19 credit guarantee scheme. It was great to have those individual credit unions participate in that scheme. Beyond that, five credit unions were announced as participants in the Brexit impact loan scheme. If I look at the participation of the credit union sector within our lending landscape, the SME lending they are engaged in has grown by just over 15% year-on-year at the end of June. I am seeing positive signs taking place in that and overall some 77 credit unions are approved to provide current accounts.
On the measures we are bringing in, the Deputy asked if there are any that will make a quick and immediate difference. What we are bringing forward are measures that will be of help in the medium term. I continue to encourage credit unions to engage with their regulators so they can broaden the range of services they want to provide. I am encouraged that so many of the credit unions I meet have an increasing desire to do so. So many of them at local level represent the opportunities that are open to people as we see other regrettable changes take place in the supply of banking services in our country.
I encourage the Minister to look at the reforms that could be brought in quickly. The Minister will be aware that the credit unions have again topped the customer experience ranking for the eighth year in a row and they have even improved on their scores in the process. They are also continuing to innovate and adapt to changing circumstances. For example, the Cultivate programme offers loans for things that farmers need, such as machinery, improving farm buildings or helping with cash flow. In west Cork the Bantry Credit Union recently bought the former Bank of Ireland building, which is symbolic of the changing retail and financial landscape, especially in rural areas. Those are just some of the positive and dynamic things associated with credit unions. I ask the Minister to imagine all they will be able to do when the financial regulations allow them to provide increased services and competitive loans to families, farms and SMEs.
It is very positive to hear the example the Deputy has of the acquisition of the Bank of Ireland building in Bantry. I know the building the Deputy is referring to and I can only imagine that will have a positive impact on the presence of credit union services to her constituents. We will continue to work within Government with the sector to try to support it, in an appropriate way, in the development of its services to our economy. There is a rare opportunity ahead for this movement, which many of its members appreciate, in the changes they are making. This is in two different ways. First, as the cost of living becomes more intense for many communities the services our credit unions offer members will become even more needed and appreciated. Second, as the Deputy has shown in her example from Bantry, as other changes happen in the provision of banks, credit unions are taking their places.
99. Deputy Ciarán Cannon asked the Minister for Finance the way that farmers are to be included in the temporary business energy support scheme, TBESS. [53235/22]
The Minister earlier mentioned the dreary tunnel of Covid and the significant challenges the business sector faced as it navigated its way through that tunnel. The Minister and his colleagues in the Department were exceptionally supportive of those businesses during that time, ensuring that they remained viable, and in doing so they protected thousands of Irish jobs. As we emerge from that tunnel we are seeing businesses again faced with additional challenges. One of those sectors is agriculture and our farmers. How does the TBESS as it is currently designed intend to support the farming sector in particular?
Details of the new TBESS are set out in Finance Bill 2022. Farmers will be eligible for payments under the TBESS in the same way as any other business that is carrying out a trade which is taxable under case I of Schedule D where they meet all eligibility criteria. A person engaged in a trade of farming who has suffered an increase of at least 50% in the average unit price of electricity or natural gas for the relevant billing period in 2022, as compared with the average unit price for electricity and gas, or both, for the corresponding reference period in 2021, will be eligible under the scheme.
In line with the temporary crisis framework, there is also an overall cap on the amount that an undertaking can claim. The cap that currently applies in relation to farmers is €250,000. If any amount charged on an energy bill for a claim period is not expended wholly or exclusively for the purpose of the farming trade, then this amount must be deducted from the relevant energy bill amount for the claim period for the purpose of calculating the eligible cost. We have done this in recognition of an issue we felt could develop. That issue is where, for example, you could have a single electricity connection and that is supporting the farm activity and also domestic life. In an effort to get ahead of that developing as an issue, we will include the provision for the deduction of energy for domestic purposes.
The short answer to the Deputy's question is that by using the approach of case I trading income I am confident that many of the farmers the Deputy is referring to will be able to participate in a scheme that I know they need.
I thank the Minister, particularly for that clarification on the splitting of the bill between the business aspect of the energy consumption on the farm holding and the domestic aspect of it.
That is causing significant concern for many farmers. On the categorisation of eligible farmers, we have heard of many instances in the last few days of small retailers, butchers in particular, who have unusually large energy consumption. I assume that most of them are registered as sole traders. Indeed, any of our farmers who are registered either as tax-compliant businesses or sole traders will be eligible to access this scheme. Will the Minister clarify what exactly are the categories within which farmers can gain access to the scheme?
I am virtually positive that is the case but I will come back to the Deputy to confirm that. I will provide that full clarification when we are debating the Finance Bill. As I have said, if businesses have a trading relationship with the Revenue Commissioners under case I, they are included in the scheme. There are some positive signals on the design of the scheme. The feedback is that the number of businesses that are not participating in it at the moment is less than it was when we were bringing forward other similar schemes during the Covid era when, as the Deputy will recall, our time was consumed as much by the businesses and sectors of the economy that were not in the scheme as it was by those that were in it. Clarity in relation to trading income should allow the inclusion of many of the businesses and retailers to which the Deputy has referred. I expect the vast majority of them will have the opportunity to enter this scheme.
100. Deputy Alan Dillon asked the Minister for Finance if he will provide an update on the publication of the draft residential zoned land tax maps by local authorities; the scope of the tax; and if he will make a statement on the matter. [55890/22]
117. Deputy Paul McAuliffe asked the Minister for Finance his plans for the implementation of the residential zoned land tax; and if he will make a statement on the matter. [55892/22]
Following the recent publication of the draft residential zoned land tax, RZLT, maps by local authorities, I ask the Minister to provide an update on the scope of the tax and its intended use.
I propose to take Questions Nos. 100 and 117 together.
The Department of Housing, Local Government and Heritage has informed me that the draft maps indicating the land that falls within the scope of the RZLT were published by all 31 local authorities in respect of land within their administrative areas on 1 November 2022. These maps are available on the websites of each local authority concerned and in their public offices. They are also centrally available at www.gov.ie/rzlt. Landowners may now make submissions or observations to the relevant local authority by 1 January 2023 where they consider that their land does not meet the criteria for inclusion set out in the legislation. In addition, other interested parties may make submissions regarding the inclusion of land which they consider falls into scope but was not included on the draft maps. Landowners may also, until 1 January 2023, make a submission requesting that the zoning of their land is amended to remove it from the scope of the tax.
I appreciate the Deputy raising the question because it will be very important in the time ahead that landowners check the status of their land on these maps. We will launch an advertising campaign shortly to draw attention to these maps and give ample time to landowners to make their case for either a change in zoning and to find out the liability they could face for the use of the land if it is not changed. The Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, and I have agreed some advertising supports with our officials to draw the public's attention to these changes, so that there is a higher level of awareness of them. Given the scope of what is now proposed and will take place and given the number of maps that are being published, it is important to make landowners more aware of the tax liabilities they may have in the future.
I thank the Minister for his response. It is very positive to hear of the advertising campaign because this tax will have implications for farmers and landowners in rural areas throughout the country. Hundreds of farmers could be hit with an annual tax of 3% of the market value of their zoned farm land. Looking at the interactive draft maps, which I have analysed for County Mayo, the volume of land zoned as liable under the tax in certain market towns and small to medium-sized towns is significant. In other areas there is little land zoned. We need to come up with an approach. What I would like to hear is that there will be a mechanism for farmers to appeal these types of decisions. What engagements has the Minister had with the Minister for Agriculture, Food and the Marine on the issue?
I engaged with the Minister for Agriculture, Food and the Marine when we were bringing in the changes. In fairness to the Minister, he raised the same issues the Deputy has just raised a year ago when we were designing this new tax. He raised the issue of land in smaller towns that could be owned by farmers and is zoned for residential use. Our judgment - the Deputy will know this better from a local point of view - is that the overall amount of land is a low share of the total amount of land that will be taxed under this new measure. That will be of little comfort or perhaps relevance to the owners of this land. The tax that is being introduced provides for a process to change the zoning of the land through which landowners can ask for it to have non-residential status. That is really what needs to happen. Given the housing needs that we have, where land is zoned for new housing, we want to build on it.
I thank the Minister for his engagement and proactive approach to the issue. I encourage the local authorities and county councils that have published these maps to engage with the landowners and ensure they do not go down a route where appeals will have to be made to An Bord Pleanála. That would be the last resort. I welcome the tax measure. It is an important component of the pathway towards increasing our housing supply. Activating zoned land is hugely important. Only one sixth of land zoned residential is activated. This will be an important mechanism going forward.
I hope the last recourse in this regard will be the involvement of An Bord Pleanála, which is having enough demands placed on it. Like the Minister for Housing, Local Government and Heritage, I want and expect any questions or concerns regarding the status of land to be dealt with by local authorities. It should not involve having to use An Bord Pleanála in any way. The Minister for Housing, Local Government and Heritage and his officials have been working to prepare to put the resources in place to allow these decisions to be made. I reiterate that I do not anticipate, nor do I want, An Bord Pleanála to have to become involved in this process. It has other matters that we want it to decide, rather than this. We will go ahead with the measures to draw attention to and raise the profile of these maps to avoid any moments of great difficulty in early 2024. I thank the Deputy for raising the matter.
As we are almost out of time, Deputy Costello will have only one opportunity to contribute on the next question.
101. Deputy Neasa Hourigan asked the Minister for Finance if he will provide an update on the work of his Department to bring VAT rules into line with common EU priorities such as fighting climate change; and if he will make a statement on the matter. [55913/22]
I ask the Minister to provide an update on the work his Department is doing to bring VAT rules into line with common EU priorities, such as fighting climate change.
The VAT rating of goods and services is subject to the requirements of EU VAT law, with which our law must comply. As the Deputy is aware, significant changes have now occurred with regard to that. The tax strategy group, TSG, published a paper earlier this year outlining some of the options now available for Ireland and other member states to consider. I suspect the one the Deputy is most aware of is that concerning solar panels and the potential for a lower rate or zero rate of VAT for them. I did not believe it was appropriate to introduce the measure in this budget, but we will continue to look at this as part of the future TSG process. I will share with the Deputy the rationale for our decision that this change could not be made in the budget. There is flexibility in this regard and I have used it elsewhere, for example, in applying the zero rate of VAT to defibrillators, which was needed.
I thank the Minister for his reply. Taxation, VAT in particular, is one of the levers we can use to drive environmentally friendly business. That is not only for things such as solar panels. It can be a tool for businesses that will facilitate, reduce and reuse, even before we get to recycle, in terms of preventing waste and emissions.
In February of last year, the Minister spoke to the Committee on Budgetary Oversight and said he was engaging with the OECD and European Commission to ensure a best practice approach. Can the Minister give any information about progress that has been made in that regard and in supporting green business that, as I say, will help to reduce and reuse waste instead of creating it?
I thank the Deputy. We have been engaging with the European Commission, particularly in respect of the VAT directive that was introduced earlier in the year. The engagement we have had with the OECD has concentrated on other areas of taxation rather than the area to which the Deputy has referred. As I said, this is a new area of flexibility that has been granted to us. We are going to ensure in the work we do in preparing for next year's budget, which may seem far away but will be upon us quickly, that we think through these matters and evaluate them clearly. We have made other tax changes that have been recognised as playing a valuable role in supporting our efforts to achieve a lower carbon future.
