Vol. 1043 No. 4
83. Deputy Colm Burke asked the Minister for Finance to confirm that consideration would be given to increasing the small gift exemption for capital acquisitions tax from €3,000 to €5,000 from each person per year, due to the increase in the cost of living; and if he will make a statement on the matter. [43079/23]
Will the Department consider increasing the small gift exemption for capital acquisitions tax, CAT, from €3,000 to €5,000 from each person per year? This was introduced in 2003 and it has not changed since. Will consideration be given to this? It is about the redistribution of wealth. If people find that when they give money to someone, there is going to be a liability for tax, their immediate attitude is not to give that gift. It is something to consider.
As the Deputy will be aware, the small gift exemption is an annual CAT relief available to all recipients of gifts. This means a person can receive a gift to the value of €3,000 free of CAT. For example, a parent may give a gift up to the value of €3,000 to a child or anyone else each calendar year without any CAT arising. Two parents can make gifts of €3,000 each to a child, resulting in a gift to the value of €6,000 in any year free of CAT. It should be noted that there is no limit on the number of small gifts a person can receive in a year from different donors. The Finance Act 2003 increased the small gift exemption threshold from £1,270 to the current threshold of €3,000. This was the most recent increase to the small gift exemption threshold.
A wide variety of further exemptions and reliefs from CAT and capital taxes more generally are also available. In particular, for a gift from a parent to a child, CAT is only paid on the value of cumulative gifts above a lifetime tax-free threshold of €335,000. In other circumstances, including where gifts or inheritances are given by a grandparent to a grandchild, or gifts between siblings, CAT is only paid on the value of the gifts or inheritances above a lifetime threshold of €32,500. A tax-free threshold of €16,250 applies for instances of gifts or inheritances between individuals with relationships not covered by the other thresholds. Details on these thresholds are available on the Revenue website.
“Lifetime” in this context means any gifts or inheritances received after 5 December 1991.
Additionally, numerous other generous capital tax reliefs are available if a person meets the qualifying criteria. These include agricultural and business relief, which, subject to certain conditions, reduce the taxable value of the farm or business assets being passed on to a child on by 90% and dwelling house exemption, which provides an exemption from CAT on the inheritance of certain dwelling houses subject to the beneficiary meeting the qualifying criteria.
I fully accept what the Minister said about the exemptions that are available but it was 2003 when this was last changed. It is 20 years on and it is the time to look at this again, particularly in respect of CAT. Generally, the exemptions that were there prior to 2008 were greater than what they are now. As the Minister will appreciate, the value of property has gone up substantially and the cost of living has gone up in the meantime. Therefore, should the increases in CAT relief not be applied in the same way? I fully accept that there is a responsibility on people to pay tax on gifts but there needs to be some equalisation as well when the cost of living and the cost of housing have increased. Therefore, there should be an increase in the reliefs that are available.
Any changes to the small gift exemption must be considered in the context of competing demands. Increasing the small gift exemption threshold would incur a cost to the Exchequer, which may potentially inhibit the Government’s ability to introduce further cost-of-living supports for households and businesses. The relief, in its current guise, is fair, and providing an increase to the small gift exemption must be balanced against competing demands and as part of the annual budget and finance Bill process.
As the Deputy will be aware, a person may receive a gift up to the value of €3,000 from any person in a calendar year, without having to pay CAT. Significantly, gifts within this limit are not taken into account in computing tax and are not included for aggregation purposes. There is no limit to the number of such gifts a person can get every year, if someone was fortunate enough to be in a position to receive them. There are tax planning opportunities here and I have no doubt that this tax planning is being given effect in many instances. It can be €3,000 each year, indefinitely, and there is no limit to the number of such contributions or amounts to be given by grandparents, other parents and so on. We have to look at it in the round but in general it is a generous exemption.
The Minister will accept, though, that there is a need for some change in CAT in view of the fact that the value of property has increased substantially. The exemptions were higher going back 15 or 18 years ago than what they are now. There have been changes in a whole lot of areas in the meantime. I am asking that consideration would be given to this.
As always when it comes to individual areas of taxation, they are considered in the lead-up to a budget. We are in a scenario where we have limited resources overall. We have a net tax package of €1.15 billion, as set out in the summer economic statement, and there are lots of different things we would like to do with that envelope. Principal in that would be an income tax package to support workers and pensioners, who pay tax as well, through changes to income tax and USC to ensure there is a fair distribution of the benefit of those reductions for low- and middle-income earners as well as for everybody else on the income scale. There are lots of different priorities but all taxes are considered as we lead up to a budget and before we make any final decisions.
84. Deputy Pearse Doherty asked the Minister for Finance his views, and the Department's analysis, of the capacity and number of borrowers eligible to switch from lenders to the mainstream mortgage market under the recently published eligibility criteria published by the Banking and Payments Federation Ireland and retail banking sector; and if he will make a statement on the matter. [43138/23]
On 4 August, I called on the Minister to convene a meeting of the Central Bank and the banking sector to chart a pathway for households whose mortgages were sold to vulture funds to return to the mainstream mortgage market. That meeting took place on the last day of that month but the pathway was not outlined. Instead we had an announcement after that. Can the Minister outline the measures that were agreed, and comment on their effectiveness, given the financial pressure they are facing as interest rates soar? Can he also reflect on the fact that the vast majority of loans in the grips of vulture funds will not be able to avail of the measures that were outlined?
As the Deputy said, I met the mortgage industry on 31 August 2023. Attendees included the Banking and Payments Federation Ireland, BPFI, CEOs and senior representatives of all the main mortgage lenders and servicers, including: AIB; Bank of Ireland; Permanent TSB; Pepper; Mars Capital; Avant Money; Dilosk; and other mortgage entities. The Central Bank of Ireland also attended. The Insolvency Service of Ireland, the Citizens Information Board and the Money Advice and Budgeting Service, MABS, indicated at the meeting that, from the inquiries coming to them, there is an increasing number of borrowers who are encountering difficulty in meeting their mortgage repayments.
The Government is acutely aware that the increase in the level of interest rates, in addition to the general increase in the cost of living, is causing difficulties for many mortgage holders. I made it clear that banks and all other mortgage entities should be fully aware of the significant challenges that some of their customers are facing and, therefore, lenders and servicers should respond by assisting their customers who are experiencing difficulty. I also highlighted that greater clarity should be provided to customers on the possibility of switching provider and that this option should be fully supported by all mortgage entities, including the existing mortgage creditor, as the level of switching between firms is low. Further, I supported the steps taken by the Central Bank to ensure that firms proactively deal with emerging difficulties for their customers since the increase in interest rates. The Central Bank requires firms to enhance the range of supports available to borrowers in or facing arrears and to have sufficient operational capacity to manage applications by borrowers to switch their mortgage or mortgage provider.
Arising from that meeting, on 6 September, BPFI announced a number of further initiatives by the mortgage industry. These included a second phase of a dealing with debt campaign; mortgage servicing firms and MABS to collaborate on an expansion of streamlined customer engagement framework and the provision of initial eligibility criteria by the main lenders to provide clear guidelines for home mortgage customers of credit servicing firms who are seeking to switch their mortgage. This means that, for the first time, there is an agreed industry-wide set of eligibility criteria to facilitate people switching their mortgage from a non-bank to a bank. All the banks and some other lenders, like Avant Money, ICS Mortgages and Finance Ireland, have signed on to that set of criteria, which is a significant change and brings clarity to mortgage holders. These new measures are additional to those provided for in the existing regulatory framework. Separately, Pepper has introduced a new discounted two-year fixed rate alternative repayment arrangement, ARA, option for borrowers in arrears, which increases the range of options for Pepper customers entering into an ARA.
I would always encourage people to switch, whether they are in the hands of vulture funds or with the mainstream banks and lenders. They should always look at the option of switching if better value is available to them. I have serious reservations on the effectiveness of the measures that were announced. We know that 80,000 households have mortgage loans held by vulture funds and they have little option to switch. They have received letter after letter in the post confirming other interest rate hikes, adding hundreds if not thousands of euro to their mortgage repayments, and some of them are paying as much as 10% in interest rates.
The eligibility criteria are published by the BPFI and the banks are extremely restrictive. They require households to pay capital and interest, in full, on the outstanding mortgage, with no split or warehoused element on the mortgage. They expect your household's credit history to show a clean repayment track record, without arrears, for at least the past two years. In the Minister's analysis, how many of the 80,000 mortgage prisoners will be able to switch under these criteria?
As the Deputy knows, in total we have more than 110,000 principal dwelling home mortgages that are in the non-bank sector, and the agreement on the eligibility criteria for switching is a significant step forward. It is the first time we have such agreement in place and we have the agreement of all of the different lenders that they will operate and support those mortgage switching and eligibility criteria. That is important.
I have been engaged with the Central Bank on the question of how many customers it believes will be able to switch under the initial eligibility criteria. I know the Central Bank wrote to the Deputy directly on that question as well and confirmed that in its view, at this point in time, approximately 27,000 such mortgages could meet the criteria.
Many more can meet them in the future. When we look at the very low level of switching that is taking place and the fact that, as of today, 27,000 mortgages in the non-bank sector may well be eligible, and are eligible in the view of the Central Bank based on its initial assessment, that should be the trigger for an awful lot more switching activity than is currently taking place. I envisage that in the coming months, now that everyone knows what the criteria are, many more mortgages will become eligible and fall within the scope of the criteria that have been agreed.
I have been raising this now for a long time as households were thrown to the wolves, including by the Minister's party and Fine Gael. We now have mortgage prisoners who are facing interest rate hikes that simply do not exist in the other retail mortgage market. The Ministers were told this. My legislation, which would have prevented the sale of these loans to vulture funds, was blocked. I made it clear on Committee Stage that vulture funds would hike up interest rates. Let us look at the data that the Central Bank has given me. Only 2% of mortgage holders in mainstream banks are paying 5.5% or more. In vulture funds, on the other hand, a quarter of all loans are paying more than 5.5% and some of them are paying up to 10%. When I asked the Central Bank how many could switch before the BPFI came out with its criteria, the bank said the figure was possibly 54,000. After the BPFI came out with its criteria, the Central Bank is now saying the upper limit is 27,000 and that would be subject to other credit checks. For example, those who missed a direct debit payment in the last while would be excluded.
What was agreed after the meeting simply does not cut the mustard. There is a responsibility on those banks, and indeed on Fianna Fáil and Fine Gael which facilitated these loans being sold and people being thrown to the wolves, to facilitate a pathway back to main street lending. That would mean these loans could get out of the grips of the vulture funds and back into main street lending. We see from all of the data that even though interest rates have been increasing, they are significantly lower than what is happening with vulture funds. Does the Minister not agree that action has to be taken to right this wrong? What is the Minister for Finance going to do about this?
Before the eligibility criteria were agreed, we had very low levels of switching from the non-bank sector to the bank sector. This is in part because the eligibility criteria were not in place. The appetite to receive such customers was limited. That has been challenged. We now have agreed criteria and we have the Central Bank confirming that around one quarter of non-bank mortgage accounts come within scope of the switching criteria. That is a very significant start. We need to see activity levels in respect of switching from non-bank to bank increase significantly. I make it clear that I will be very closely monitoring implementation of this set of eligibility criteria. I will also be monitoring the implementation of the key player in the non-bank sector, namely, Pepper. It has come forward with an alternative repayment arrangement that involves a 3% temporary fixed rate for customers. We will be watching very carefully how many customers who are in distress are actually in a position to access that rate and benefit from it. I hope I have the support of the Deputy in that regard.
86. Deputy Aindrias Moynihan asked the Minister for Finance what his engagement to date has been with the Central Bank of Ireland and the Irish banking sector to increase the availability of long-term, fixed-rate mortgages; and if he will make a statement on the matter. [43146/23]
I want to get an outline of any engagements the Minister has had with the Central Bank and the banking sector regarding increasing the opportunities and availability of long-term, fixed-rate mortgages of ten, 15 or 20 years, and the availability and certainty that would provide for homeowners.
The retail banking review last year highlighted the change in the Irish mortgage market, with the increased level of fixed-rate mortgages. A significant portion of new mortgages, some 85% in July of this year, are now fixed-rate mortgages. This will protect borrowers in the event of a rise in official and market interest rates, at least for the period that the interest rate is fixed. The review noted that there have been innovations in recent years in the mortgage market, from the introduction of long-term fixed rates, mainly by non-bank players. The review also included the recommendation targeted at the retail banking sector to review its existing mortgage product suite to identify opportunities to enhance and expand it for the benefit of bank customers. However, neither the Central Bank nor I have a statutory role in determining the products that lenders provide to their customers as these are commercial decisions for the firms themselves. This also extends to lenders in which the State has a shareholding as these entities must also be run on a commercial and independent basis. Their independence in this context is protected by the relationship framework agreements in place.
The weighted average interest rate on new fixed-rate mortgages was 4.04% in July, which is the most recent available data. This represents an increase of two basis points from June and is 154 basis points higher on an annual basis. The Government is acutely aware of the impact that increases in interest rates and the cost of living more generally are having for many mortgage holders. In that context, I recently met the banks and the other mortgage creditors and made it clear to them that they need to be aware and conscious of these difficulties for their customers and be prepared to respond in a meaningful way. I also indicated that all credit providers should be open to considering applications for new mortgages from all creditworthy borrowers. This includes any borrower whose mortgage is currently serviced by a credit servicing firm or other regulated entity that does not provide new credit. In addition, the Central Bank's regulatory framework requires that lenders are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle, whether borrowing, switching or facing arrears.
I will focus on the long-term fixed-rate mortgages of ten, 15 or 20 years. Has the Minister had an opportunity to discuss such mortgages with the Central Bank and the lenders? I understand he is not able to compel lenders to make different products available but I want to get an understanding of the possibilities of having such mortgages and the demand for them. With the ECB rate continuing to rise, many homeowners are under increasing pressure and are looking for solutions and a level of certainty for future repayments. Such mortgages could offer such an opportunity. Has the Minister discussed these types of mortgages with the lenders? Has he determined what level of demand for them there was when the lenders started to consider these products some years ago and whether they will make more of them available in the years ahead?
I would welcome the introduction of more long-term fixed rate mortgages in Ireland in terms of the offering by the lenders. It de-risks a mortgage for a borrower if they can know with certainty what their repayments are going to be for the next five, ten or 15 years. It offers them certainty and there is real value in that. It is also important to highlight the role the credit unions are increasingly playing in the mortgage market. A number of them are already providing mortgage products. Through the work of the Minister of State, Deputy Carroll MacNeill, I envisage that the number of credit unions offering mortgages will increase significantly over the period ahead. There is a significant initiative under way to improve collaboration across the credit union movement to ensure there is a revised offering available for customers. Credit unions also offer badly needed competition for the main banks in Ireland.
I also want to focus attention of homeowners who are stuck with vulture funds. These funds charge much higher variable rates than many of the other lenders and people are heaped with expensive monthly repayments. This is a huge struggle for many homeowners. More than 100,000 homeowners have found that their mortgages have been sold on. Through no fault of their own, they found themselves part of a loan book of performing and non-performing loans. They are now stuck and unable to switch their mortgage. Has the Minister met the Central Bank and the various lenders to discuss making it possible or more realistic for people to switch from these expensive lenders in order to have more manageable repayments that would allow them to hold onto their homes?
This is an area where I have been very active. I have met the banks and the non-banks and also MABS, the Insolvency Service of Ireland and the Central Bank at a round-table meeting at the end of August.
One of the outcomes of that was that for the first time we now have an agreed set of eligibility criteria for people whose mortgage is in the non-bank sector to enable them to switch their mortgage to a bank. All of the banks have signed up to that and have committed to implementing those criteria. The Central Bank's initial estimate is that about a quarter, around 27,000, of the mortgages in the non-bank sector currently fall within the scope of the eligibility criteria. Up to now we have seen very low levels of switching from the non-bank sector to banks and that needs to change. There needs to be a genuine welcome and an appetite among banks to receive customers who are within the eligibility criteria and who are currently in the non-bank sector. I will be watching that very closely over the weeks and the months ahead.
88. Deputy Colm Burke asked the Minister for Finance the amount the State has taken in for tax receipts for income tax, corporation tax and VAT to date in 2023; and if he will make a statement on the matter. [43078/23]
92. Deputy Cathal Crowe asked the Minister for Finance if he will report on corporation tax receipts to for the first three quarters of 2023; and if he will make a statement on the matter. [42878/23]
125. Deputy John Lahart asked the Minister for Finance if he will provide an overview of the trends in corporation tax receipts in the recent past. [42890/23]
126. Deputy Cathal Crowe asked the Minister for Finance his assessment of Exchequer returns for the first three quarters of 2023; and if he will make a statement on the matter. [42879/23]
134. Deputy Richard Boyd Barrett asked the Minister for Finance if he will provide an update on his Department's latest projections for windfall corporation tax revenues; the possible uses for these revenues that he is considering in budget 2024; and if he will make a statement on the matter. [43152/23]
I ask the Minister to outline the tax receipts for income tax, corporation tax and VAT to date in 2023 and to make a statement on the matter.
I propose to take Questions Nos. 88, 92, 125, 126 and 134 together.
The Exchequer returns to the end of September this year showed an overall surplus of €1.1 billion. This compares with a surplus of €7.9 billion at end of September 2022. The bulk of the deterioration was driven by the transfer of €4 billion to the National Reserve Fund earlier this year.
Overall, tax revenues to the end of September stood at €61.4 billion, €3.5 billion or over 6% ahead of the same period last year. This has been driven by income tax, VAT and corporation tax.
On income tax, receipts of €23.1 billion were up by €1.8 billion, or over 8%, remaining ahead of target and reflecting the strength of a labour market that is at full employment.
VAT receipts to the end of September are up by €1.5 billion, or over 9.5% on 2022, reflecting continuing resilience in consumption.
Corporation tax receipts of €14.4 billion to the end of September are ahead of the same period last year by €600 million or 4.4%, but are significantly behind target. Since 2015, corporation tax receipts have increased substantially. Last year, corporation tax receipts stood at €22.6 billion. This represented a more than doubling of 2019 receipts and a more than fivefold increase on the position a decade ago, with corporation tax surpassing VAT for the first time to become the second largest source of taxation revenue.
Certainly, these receipts are welcome. They reflect positively on Ireland as a leading destination for highly profitable multinational firms. However, as the Deputy will recall, I have frequently warned of the risks around corporation tax. These revenues are built on an extremely narrow tax base, with just ten firms accounting for well over half of all receipts. This means that this tax head is vulnerable to the business decisions of a small number of multinational companies and is subject to exceptional potential volatility. The exceptional volatility of this tax head has been particularly evident over the last two months, with sharp declines in corporation tax receipts recorded. Corporation tax is now €700 million behind profile for the year. This is a clear demonstration of the dangers of relying on volatile tax revenues to fund permanent spending.
A significant proportion of the current corporation tax yield is estimated to be windfall in nature, in other words, it is not linked to the domestic economy and could prove transient. At the time of the stability programme update in April, windfall receipts this year were estimated at around half of the entire corporation tax yield for the year. My officials will be revising this estimate, taking into account the latest available information, as part of the fiscal projections published next week in the budget.
The Government has regularly warned that corporation tax is not a suitable base for permanent expenditure commitments and is mitigating the exposure of our public finances to this revenue stream. This is why we set up the National Reserve Fund and put €6 billion of windfall receipts away. In addition, €2.25 billion in windfall receipts will also be made available over the period 2024 to 2026 to fund capital projects. This will allow us to take advantage of these temporary receipts to build long-lasting improvements to our society and economy. Work is also under way on proposals for a long-term savings fund which will invest these receipts to help fund part of the future costs of structural change, particularly the costs associated with an ageing population, and the climate and digital transitions.
Ultimately, however, the best way to mitigate the risk of an over-reliance on corporation tax is by continuing to pursue a sensible budgetary strategy that keeps expenditure growth at sustainable levels. We must also continue to run budgetary surpluses. I believe that the fiscal parameters we have set out in the budget strike the appropriate balance, giving Government the scope that we need to address the challenges of today, including providing support to address the cost-of-living challenges, supporting the vulnerable, assisting and encouraging enterprise, and continuing to invest in our public services while also ensuring that our public finances remain on a positive trajectory over the medium term.
Is the increase in income tax receipts a reflection of the increased number of people in employment? I understand that approximately 80,000 more people are in employment compared with this time last year. Alternatively, is it a reflection of increases in wages and salaries?
VAT receipts have increased by 9.5%. Is that a reflection not necessarily of an increase in the volume of sales of goods and services delivered but an increase in the prices being charged because VAT automatically goes up if the cost of goods has increased? Has any analysis been done on that?
The year-to-date receipts of income tax are at €23.1 billion compared with a performance last year of €21.4 billion, meaning it is up by over 8% year on year. However, when compared with the profile or the estimate of what we thought we would collect to the end of quarter 3, it is only ahead of it by about €145 million, or 0.6%.
As the Deputy said, VAT receipts are up by almost 10% year on year. However, again it is actually below profile by just over €100 million, or 0.6%.
The Deputy is precisely right on what is driving those receipts on the income tax size. It is a function of the number of people in work and also a function of rising incomes. When it comes to VAT, of course, it is a function of the volume of activity across the economy. There is certainly also a value consequence as prices increase and we have seen significant inflation. Of course, that is the final part of any bill layered on top. As a consumer tax, it reflects and takes account of the inflation that our economy has experienced recently.
I am not sure if the Minister saw the student protests yesterday but the slogan they had was "It's raining now" - I think it is raining right now. In other words, there is no excuse for the Government not acting to protect people from the cost-of-living crisis and the housing crisis at a time when there is a very significant surplus. There is no excuse whatsoever and that is the message that will be heard loud and clear from the Cost of Living Coalition protest at 1 o'clock this Saturday on Parnell Square.
We were the ones pointing out that relying on Ireland's model as a corporate tax haven and big corporation tax receipts is not a sustainable model; I agree entirely. However, the question is whether to use those windfalls now to invest in capital expenditure by building a State construction company and investing in climate adaptation, such as retrofitting, solar panels, renewable power and so on. We should make capital investment but, in doing so, shift our economy onto a different track.
The Deputy is very quick to advise us how to spend the surpluses, but he pays very little heed to why we have surpluses. It is due to the enterprise model that Ireland has successfully developed over many decades, our commitment to European Union membership and the euro, political stability, and successive governments running pro-enterprise business policies and implementing such policies.
The debate does not start with "What do we do with the surpluses?" It is "Why are we in the position that we are in today?" as an outlier in European Union terms, on the positive side, because we have such surpluses. Of course it gives us policy choices but as we said in the summer economic statement, there was 6.1% expenditure growth on core expenditure and an additional non-core expenditure of €4 billion. We have committed an extra €250 million to the public capital programme next year which will already be in excess of €13 billion. That is high in European terms, and rightly so, because we have to build the homes that our country needs and invest in education, transport infrastructure, healthcare infrastructure and energy infrastructure. We will set out on budget day what our plans are for the surpluses that, thankfully, we are enjoying because it gives us policy choices into the future which include spending more on capital infrastructure. However, it also has to involve providing for the future. Otherwise we would be consigning the students who are protesting now to much higher taxes in a decade or 15 or 20 years' time when the demographic changes really begin to bite.
I agree about providing for the future. However, providing for the future means getting off the current tax haven model. It is not a sustainable model because we can be undercut by anybody else. Onshoring could happen in the US. At a certain point in time the corporate tax revenue will collapse. The question is now, to use the revenues that we have to invest, to have public investment in the key challenges we face in terms of the housing crisis and the climate crisis. The Minister wants to have a debate about why we are in the position we are in today. Absolutely, I want to debate how it is that we are one of the richest countries in the world in GDP per capita terms and yet one in ten families is reliant on food banks to feed their children. How do we have almost 4,000 children homeless in this State? How are we missing all of our inadequate climate targets? How is that? The answer is because the Government is run in the interests of very few, those at the top, those who pay very little tax in percentage terms.
I will let Deputy Burke in and then the Minister can answer both.
The Minister outlined the issue in regard to the concerns about the corporate tax not returning as much as was originally planned. In regard to planning for the next 12 months, do we need to make sure that we plan carefully for that? Is there an expectation that all the larger companies in Ireland, and indeed all the companies here, are continuing to grow? They are continuing to employ more people therefore their turnover will increase. Should we presume that this will now stabilise rather than reduce?
I thank the Deputy. We will lay out next Tuesday what our forecasts are for corporation tax receipts and indeed receipts under every other tax head for the next number of years. That will be the considered view of my Department as to what we expect to receive over the coming years. Deputy Burke is right that these companies that contribute the vast bulk of our corporation tax receipts have substantial operations in Ireland. Industrial Development Authority, IDA, clients now directly employ in excess of 300,000 people at this point in time and many more people indirectly. Earlier this week we had a succession of very positive jobs announcements for Ireland because we are a country that is pro-business, because we welcome capital and investment and job creation in our country.
In reply to Deputy Murphy, we are investing more in public capital. It will be more than €13 billion next year. There are capacity constraints. If we were to add many billions more in a short period of time you would not get value for money first of all, and there are constraints in planning, in housing and in labour and we have to address all of those through reforms and in some instances through investment as well. Ireland is not a tax haven. Ireland is part of a global initiative to reform the operation of corporate tax and we are implementing pillar 2 of the OECD agreement in the Finance Bill later this year. I look forward to the Deputy's engagement and participation in that. Ireland is at the table now, directly negotiating, influencing and shaping pillar 1, which deals with the potential reallocation of taxing rights in respect of the profits of global multinational corporations. We are very much part of a global effort to address the issue of how we tax corporate profits into the future. We have, up to now, introduced and implemented a whole range of reforms across corporate tax.
89. Deputy James Lawless asked the Minister for Finance for an update on the progress being made on the funds review; and if he will make a statement on the matter. [43169/23]
My question is on the funds review being produced imminently. In particular, in his answer the Minister might focus on the risks and opportunities posed by technological innovation and digital innovation, the markets in crypto, assets regulation and indeed the digital operational resilience Act, DORA. I raised the question of crypto five years ago in this House with the then Taoiseach in terms of its regulation and it was not in progress at the time. Five years on we are getting there but how does that fit into the funds review in which the Department is currently engaged?
I thank Deputy Lawless for raising this issue. On 6 April this year I published the terms of reference for a review of Ireland’s funds sector. The objective of the review is to ensure that Ireland’s funds sector framework is up to date and fit for purpose in the years ahead, that we can maintain our globally competitive position by supporting long-term growth and a sustainable and resilient market and that the sector continues to support national and regional economic growth, as well as job creation. In addition to the funds sector, the review will also examine three specific areas of taxation which were highlighted in the recommendations of the Commission on Taxation and Welfare. These issues are the taxation regime for funds; life assurance policies and other related investment products; the real estate investment trusts, REITs; the Irish real estate funds, IREFs regimes and their role in the property sector; and the use and scope of the section 110 regime as well. A team has been established within my Department to conduct a review of the funds sector. As Deputies will be aware, a public consultation was launched during the summer and closed on 15 September. I am very pleased with the volume of submissions received in response to the consultation. There were more than 190 responses. I thank all those who made the effort to contribute. The responses came from a wide array of stakeholders, highlighting the significant interest in the review from both industry and from individual retail investors. In tandem with the public consultation, the review team has been engaging extensively with the funds sector and other relevant public sector and private sector stakeholders. The team is currently analysing the responses to the consultation and this work will inform further targeted engagement with stakeholders over the coming months. The review team will report to me in summer 2024 and I look forward to considering its findings at that point. It would not be appropriate to speculate on the outcome of the review in advance of its completion. However, I can come back to the Deputy further in a moment, when he responds.
The time is short and the next session is about to begin. However, I stress to the Minister that I mentioned in particular the digital assets, in regard to the opportunities and the risks that flow from those. There are huge opportunities. The digital markets have become the markets. That includes crypto but not only crypto. The Minister will give a written response and he might focus in on those areas that provide great opportunity. However, they need to be subsumed into the wider framework as well.
I thank the Deputy. As I have indicated, the review is now well under way. The consultation period has closed. Submissions were received and are being examined. I have no doubt that the question of digitalisation and questions around crypto feature as part of those submissions. Once the budget is over I intend to sit down at an early date with the review team to engage to get a sense of the direction of travel and an early assessment from the team on the range of issues that have been raised in the consultation period, to be reassured about the timeline in respect of the outcome of the review because I will be anxious to consider as soon as possible once the review has been completed next year any policy issues that arise including taxation issues. I will pay particular attention to the digitalisation questions and the role of crypto that the Deputy raised. This is an area to which the Central Bank of Ireland is giving ongoing attention. I will be happy to engage further with the Deputy in that regard.
