Finance Bill 2019: Committee Stage

Sections 1 to 8, inclusive, agreed to.
SECTION 9
Question proposed: "That section 9 stand part of the Bill."

Section 9 deals with the special assignee relief programme, SARP, an income tax relief for some of the highest earners in the State. It is a relief on salaries between €75,000 and €1 million. We know for a fact that some of those who benefit from the scheme have salaries of over €3 million. I recognise that they only get the special tax relief on that part of their salary between €75,000 and €1 million. However, we have to look to the conversation which many people across the world are having around the pooling of extremely high levels of income equality at the very top. We are not talking about people who have two families or who are on €100,000. We are talking about people on salaries of between €1 million and €3 million. When 50% of people in the country earn incomes well under €30,000, how can we justify massive amounts of tax relief for those at the top?

There has been a conversation globally as to whether we need a higher level of tax or a third band. The conversation from the Government is always that we are focusing too much on these higher earners and we cannot look at a wealth or a higher band of tax. People are not aware that it is not simply that we are not putting an extra level of tax on the very highest earners in the State but we are actually giving them tax relief. This means that somebody earning between €40,000 and €60,000 will pay a higher portion of their wages in tax than somebody on €600,000. This is simply not acceptable.

The defence given is that this is basically to attract jobs to Ireland. The fact is that those who are in a position to create jobs and are high earners are provisionally already benefiting from our corporate tax rate, which has continued support across the field. We have corporate tax rates to attract corporations. Tax reliefs like the knowledge box need to be reviewed to ensure they are more efficient and effective. For example, if we are giving major international corporations tax reliefs, surely, we should not also be giving tax reliefs to every one of their executives. The public would be shocked and appalled if they realised how this was going.

I have an example of one individual who would pay €111,000 less in tax next year than a PAYE worker who was earning the same salary. That is some PAYE worker. However, there is a real issue of equity involved.

IMF research over 30 years in over 100 countries has consistently shown that when one increases the incomes of the top 10%, national GDP falls. When one increases the incomes of the bottom 10% in society, however, then the economy does better. That same IMF report states the trickle-down effect does not work.

I hope the Minister of State will reconsider section 9. If not, will he clarify what evidence there is for a job dividend from each person who is benefiting from the scheme and how we can be sure that?

Sinn Féin opposes this measure because of its cost. In 2010, SARP cost the taxpayer €28.1 million.

If its cost continues to increase at the same rate of 55% between 2017 and 2020, it could be as much as €105 million next year. Under the scheme, an employee earning a salary of €1.1 million will be able to write off 30% of his or her income in excess of €75,000, which would reduce income tax liability by €123,000. There is an innate unfairness in a system, which results in such employees paying a rate of 28% on income above the standard rate band while most other workers pay 40%. The Government has provided only €5 million for lone parents supports and €18 million to increase medical card thresholds and alleviate the waiting lists for home help, for which we costed an allocation of €59 million into our alternative budget, yet it is likely to give away €105 million under this scheme, of which 1,084 employees availed in 2017. This is a transfer of wealth from people who can least afford it to people who can afford it. On that basis, we are strongly opposed to the section.

Will the Minister of State clarify whether an Irish citizen who has been resident abroad and is posted back to Ireland by his or her employer is entitled to this relief?

Yes, such an employee is eligible for the scheme. It is important to understand that the development agencies working on behalf of Ireland are operating in a competitive sector. It is easy for the Senator to offer a figure of €105 million but there no structure on which that figure is based.

Will the Minister of State clarify the figure?

I am doing so. In 2017, which is the last year for which we have a final figure, the cost of the SARP scheme was €28.1 million. The Senator's extrapolating of numbers upwards is a concoction.

What does the Minister of State estimate the total to be in 2020?

I am not sure how the Senator's figure of €105 million was constructed. I know she does not like dealing with actual numbers.

I do, which is why I want to know the number for 2020.

We do not have the figures for 2018 or this year. I am giving the Senator the figures I have.

The Minister of State is not giving us the figures.

We do not have the figures for last year or this year.

How can the Minister of State ridicule the figure I gave when he does not have the data himself?

I said that the Senator concocted a figure for 2020.

I did not. I indicated the basis on which I calculated the figure for next year.

The Senator is plucking a number from the sky so that she can pretend that this scheme is a terrible thing. She referred to specific allocations for healthcare and social protection but she did not mention the overall healthcare allocation of €19 billion for 2020, which is the highest amount ever. She did not refer to the €20 billion budget for social protection. The Senator gave a concocted figure of €105 million for SARP without saying where it came from. The figures I am giving come from the Indecon report. It showed that the companies that availed of SARP for their employees in 2017 paid €2.5 billion in corporation tax. If we want to pay our bills, fund the health service and retain the social protection budget, we have to bring in the moneys that enable us to do so. These companies employed more than 155,000 people directly and, for every employee, another is employed indirectly as part of the supply chain. They also paid €1.9 billion in PAYE taxes. The cost to the State of the SARP scheme of which they availed was €28 million in 2017, set against the €4.4 billion paid directly by those companies to the Exchequer, which makes up some of our public service expenditure budget. I would love to say that we do not need this programme but the reality is that the countries with which we are in competition for foreign direct investment have their own SARP schemes. The Senator will not want to hear that and she may not agree with what I am saying, but this is how it works in the real world in which we have to get money in if we are to pay our bills.

It worries me that the Minister of State does not know the figures after 2017 and cannot give a projected figure for 2020. A payment of €2.5 billion in corporation tax suggests that these are wealthy companies. The question is why they do not pay their employees sufficiently to incentivise them to come to Ireland. Why should the taxpayers of this country pay them to do so? I do not see why this transfer of wealth should be facilitated.

It is concerning that we do not have the 2018 figure when we are considering the budget for 2020. When it comes to smaller-ticket measures that come under the social protection budget, for example, we have to look at their exact impact and prove their benefit up, down and sideways if we want to see them extended or improved slightly. It is a cause for concern that a scheme that cost €28 million in 2017 - a not insignificant sum - is being continued into next year without there being any information on what it cost in 2018 and 2019. Any measure that is costing taxpayers almost €30 million should be reviewed and we need to know what is happening with it.

The figure Senator Conway-Walsh gave is an extrapolation of a percentile increase and was offered in the absence of actual numbers being given, which they should be in respect of any such decision. The Minister of State makes the case for our corporation tax regime and the measures we have in place to attract corporations, referring to the €2.5 billion in corporation tax paid by the companies in question. However, it is a broad brushstroke to point to the taxes raised and the numbers employed and then make a causal link between that contribution and what amounts to a sweet set of deals for executives. Let us bear in mind that tax relief is tax expenditure. Is it the Minister of State's view that if the State did not give executives a massive subsidy from general taxation to encourage them to come to Ireland, then all of these companies would leave? Is that how fragile our relationship with them is? Surely the focus should be on investing in ecosystem supports and structures for foreign direct investment, which is not just about corporation tax but all the other aspects, as well. These are important questions.

I have two final questions for the Minister of State. Does he agree that this scheme is inconsistent with the principle of progressive taxation and the sustainable development goals? It is difficult to justify a measure that, instead of benefiting the bottom 40% of taxpayers, clearly benefits the top 10%, as shown by the international research to which I referred. It is not enough to say that we want to encourage corporations to invest in Ireland. Where tax relief deals are available, people will avail of them. The Minister of State needs a much stronger evidence base for claiming a link between these measures and encouraging foreign direct investment. Can he give three or four examples to illustrate his claim?

This is a healthy debate, but the context is that we are operating globally and we must compete at international level. It is all about intellectual property and people coming back here and bringing experience with them. In many of the multinational companies that have thrived here, and continue to thrive, the top management is now Irish. One of the reasons they have stayed here and expanded is because they are Irish. I would like more of such people to come back here if they will create extra jobs. The continuing issue is that we must compete on the global stage and are trying to strike a balance. In the case of the lower-paid, we are continuously examining the minimum wage and the tax rates. It is not a perfect world-----

Apparently, we could not afford an increase in the minimum wage this year.

As I have seen on many occasions, we have kept multinational companies in Ireland because the top managers are based here and many of them are Irish. An expansion has taken place. There must be an element of looking at the overall market in which we are competing and assessing whether having this range of measures ensures that we retain jobs and create more of them in a specific area. On balance, I believe it does.

To put it in context, approximately 270,000 people are employed by foreign direct investment companies. For each one of those jobs there is another job that is linked to those companies. These are extremely valuable companies for Irish employment. The conversations in political chambers can be very pure and the Senators are having a very pure discussion about tax. I would love everybody to be on the same level, but if we are trying to attract a company to this country that will employ hundreds or thousands of people, the chief executive could say: "There is no problem getting paid by my company but your levels of income tax are penal for high earners so I will go somewhere else. However, it was good talking to you.". That is what the Senators are saying.

What we must do is ensure that we get jobs into this country and keep people employed. For executives coming here with a company from another jurisdiction the issue is not how much they are paid, but how much they are taxed at the highest level. They can choose not to come because they can go somewhere else where they can have a much lower tax rate than the rate in Ireland. These company executives come here and bring their managerial skills and abilities, and they are here for a number of years. Some of them leave and some of them stay, but those skills are passed on to Irish people who do not have the opportunity to avail of the SARP. The benefit of the SARP is that knowledge, skill sets and abilities are brought in from abroad and are retained in Ireland. There is a very successful structure here in Ireland and this is part of it. Have the Senators who disagree with this read the Indecon report?

The Senators will have an opportunity to speak again.

Have they read it?

The report says that this is good value. It is money well spent.

The Minister of State is editorialising.

I agree with it. We will not be changing our view on this at all. The issue here is the amount of tax to be paid. One of the figures I have is very important. The top 1.5% of income earners in the State pay 25% of all income tax and USC. Other figures can show the Senators the position as well. These are the same Senators who disagree with the Taoiseach's wish to increase the threshold at which the higher tax rate is paid for the average earner. We were criticised for bringing that proposal forward. Unfortunately, nothing is right for the Senators. This is a good programme with huge value for the State. We will not change it.

Before calling Senators Conway-Walsh and Higgins I wish to point out that at least four sections of the Bill are opposed and there are 22 amendments, but we have not yet reached amendment No. 1. It is a very useful debate that has lasted 25 minutes, but if we do this on all the amendments we will be here until 1 a.m. tomorrow.

You are theorising that this will not help.

I will let you back in, Senator. Members should try not to be repetitive. I am not saying anybody was, just that they should try not to be repetitive.

I will not be repetitive. It is clear that the Minister of State will not turn on this. We are here to represent people. In fact, the answer the Government got in the by-elections should have made it re-examine things like this and tax fairness. People have nothing left in their pockets because of the tax they are paying and we should not be protecting the 31 people who had incomes of more than €1 million in 2017.

With respect, I ask the Minister of State not to editorialise in sweeping generalisations on what he thinks we think and what he believes our beliefs are. We have many specific amendments-----

I am just responding to the Senators.

I am saying the debate will move better if we do not have to go back and forth on those matters. I do not believe any of us is interested in talking about what Sinn Féin and Fine Gael like. Let us focus on the proposals at hand.

If I was a shareholder in a company in which the CEO was making decisions on where to locate the company based on his or her salary and income tax, I would question the value of that company. It is extraordinarily poor practice for a CEO or senior executive to decide to move the company to the Netherlands, Ireland or Lithuania based a cushier cash deal for the CEO and his or her top five or six executives. If that is the decision making, there are big questions. It is shaky ground. On Irish people who are returning, one must question the patriotism of people earning €3 million who will not locate or contribute to the country to which they are supposed to be so attached unless they get a hefty tax relief. They pay less tax than somebody on €40,000 for the section of their income between €75,000 and €1 million. It is an important issue and there are key questions.

With regard to the level of the tax, the Minister of State should not try to suggest that the Government is in wonderful solidarity with those on €40,000 when the tax relief we are discussing relates to income between €75,000 and €1 million. The public must be clear that it is €75,000 to €1 million. We probably should be able to lower the threshold if there was a higher rate of tax, but that is not what this is about. There are later amendments which refer to that.

There will be a point of review on this. The extraordinary hollowing out of our income tax base that is going to the very wealthy in Ireland is galling. It is not a gesture of solidarity with those on €40,000 because it is the people on €40,000 who are paying 40% on all of their income above the threshold who are paying for this. It is not a zero-sum game; it is tax expenditure. People on €40,000, €50,000 and €60,000 are paying for those on €1 million under this provision. The case for it is poorly made. Perhaps there will be something further in the future as I am sure we will discuss it again later.

I am not sure that the Senator understands the concept of hollowing out the tax base because we have done the opposite. We have broadened the tax base since entering Government in 2011. I am not editorialising under any circumstances.

The Government is hollowing out the income taken from higher earners.

I am saying that we will lose these jobs. This is part of the armoury that is required, although not all of it. The Senator questioned somebody's patriotism if they have left and returned. That is not all of it.

Again, the Minister of State-----

The Senator did question it.

I did not question somebody's patriotism if they went away and came back. I must call on the Acting Chairman.

That is not what I said. I referred to where somebody needs a tax relief in order to return.

It is exactly what the Senator said.

It is actually what the Senator said.

It is actually not what I said.

It is what you said. You may not have meant it but I will let you come back in to clarify what you said.

I do not want to keep going on this. I would just like it to be clarified.

Let the Minister of State respond.

Everything we are doing is to expand the tax base we have. We have brought the corporate tax yield from €4.5 billion to €10 billion. We have brought the income tax take from €11 billion to €22 billion, and that is why we are able to spend more on health, social protection, education and other such services. This is part of our successful armoury to get companies from outside Ireland to come here. It is so we can have the jobs with a salary of €40,000. When we get them in, success involves moving them up the value chain. One keeps moving them up the value chain so a salary of €40,000 becomes a salary of €45,000, and then €50,000. That is why we have 2.32 million people at work in this State.

I accept that when people are at work, Sinn Féin becomes irrelevant. It may have had success in a by-election.

I would have said Fine Gael was pretty irrelevant in the recent by-election.

Let us stick to section 9, if we can, on every side.

Well done to Sinn Féin. If the Senator wants to bring in the politics of elections, that is fine.

The Minister of State did.

The Senator started it, if she remembers. The Senator brought in the politics of elections.

Nyah nyah nyah nyah nyah.

We are not in pantomime season yet.

We will not bring up the Acting Chairman's local elections. Half his county council seats-----

The Minister is goading his audience as much as it is goading him now.

I guess I am doing a bit of goading. I apologise.

We have a long night ahead of us.

To clarify, I did not question people who leave and come back. I am delighted that people who leave come back. I questioned the narrative that they would come back only if offered a tax relief.

The Senator has made that point and clarified it. I thank her.

Let us be very clear on it.

A good and long-standing family friend of mine, Mr. Garret FitzGerald, was once alleged to have asked, "That is all right in practice but does it work out in theory?" It is not true that he was the first to have said it. If one googles the phrase, one will find out it was said about 30 years before Mr. FitzGerald was alleged to have said it. It reminds me, however, of one proposition. I agree with Senator Kieran O'Donnell that when it comes to taxation, one cannot be a slave to theory; one must be a slave to what is practicable. It is not a matter of patriotism. Senator Higgins may talk about patriotism and whether people who stay outside the country are patriotic.

That topic was introduced by the Minister of State.

I know but I am just referring to the view that people who stay outside the country might not return because of an absence of patriotism. It does not really matter to me very much what the internal thought processes of those people are; it is about the practical effect on the Exchequer in the long run. That is the crucial question. When I say that, I am not being cynical at all. For instance, we had a very close shave very recently with the proposal to change the 183-day residency qualification to allow very rich people to fling a few euro at this, that or the other by way of philanthropy and get a further exemption in terms of the number of days for which they could stay. That was very nearly enacted. The then Minister for Finance seemed to be favourably disposed towards it in an Oireachtas committee considering a Finance Bill.

Like Senator Higgins, I strongly believe we should have a fairer tax system. I believe equally strongly that we should not have a system that distinguishes between Irish citizens radically depending on their financial circumstances or what they have done in the past while. My theory is that an Irish citizen should be liable to some basic tax in Ireland, no matter where he or she lives in the world, if he or she has qualifying assets in Ireland or qualifying interests in assets in Ireland. Thus, one could not just emigrate to a tax haven and pay nothing in tax to the Irish Exchequer. That is my strong view.

We are on section 9. I am indulging the Senator for now.

We are talking about residency.

I ask Senator Higgins to take on board the point that Mr. Charlie McCreevy, when Minister for Finance, cut the rate of capital gains tax from 40% to 20%. By doing so, even at that stage, when tax rates were not as high as they were after the economic crisis, he quintupled the yield from the tax. One could say, if one wanted to be theoretical or ideological about it, that those making a very large capital gain should pay just as much as their secretaries or personal assistants on relatively modest salaries, or at least as much as they do in terms of marginal earnings since they are better off in that financial year on that basis. The bottom line, however, is that the Exchequer yield went up by 500%. All of the additional money was available to be spent by way of redistribution. Having said what I said about citizens and not escaping completely the obligations of citizenship by becoming non-resident for tax purposes, I believe the yardstick we should apply to questions such as this is not an ideological one but a pragmatic one. Forgetting about patriotism, if it is the judgment of those who study these things minutely and interact with foreign investors in Ireland that the total yield to the Irish Exchequer will increase by offering the kind of relief in question. Anybody who suggests it is immoral or unprincipled should ask what might be done to get the money from the particular company in a way that would finance extra hours for home helps and the like at the end of the year. That is the bottom line.

This is not a discussion on ideology, wishful thinking and so forth. There is ideology at play across the House, and there is also pragmatism at play on both sides. They entail very different perspectives and we simply disagree but the fact is that it is still the view that a trickle-down effect from investing in the highest earners, for example, will somehow lead to a general effect. That still seems to be the principle behind this logic and these measures.

There is evidence backing up my point. It is not theory or what I would like to be the case. I have not heard a rebuttal of the evidence, which I have mentioned when considering every Finance Bill for three or four years. I am referring to the evidence of the IMF, which studies this in great detail. Its 30-year study, which came out in 2017, found that, of over 100 countries-----

It is not true to-----

No, leave that aside. What I am speaking to-----

Senator Higgins has made that point two or three times already.

Excuse me, but I was told I was talking about theory and that others were speaking about pragmatism. I would like to point out-----

But the Senator made that point already.

On Report Stage, we may hear an answer from the Minister of State in respect of the IMF analysis of real play-out in real economies in 100 countries over 30 years. It suggests that when the income share of the top 10% is increased, it damages GDP. When the income of the bottom 10% is increased, the effect on the economy is greater.

The Senator made that point. She has made it very well but does not need to make it again.

I need to make it in the sense of indicating I am not talking theory while others talk pragmatism. I am talking evidence and I would like to hear answers in terms of evidence. We can move on but perhaps we can come back to this point on Report Stage.

This is probably what we should be doing. We probably do not have enough time to have a debate at this level.

I am just making a general point. The Senator's point is out of context. This is not about creating a rate within Ireland; it is about creating something that will bring extra jobs into the Irish economy.

It is about creating something that would bring additional jobs into the economy. It is a particular measure. It may not even be a long-term measure. I disagree with Senator Higgins's general point about the trickle-down effect in the context of what we are looking at here. It is not an ideological issue; it is about looking at the world landscape and the fact that we have a large multinational sector and asking what we can do to ensure that we retain what we have, encourage people to come back or encourage others to come who have a relevant area of expertise. Over time, I would like us to develop in two areas. The first is our own multinational sector that goes abroad. That is evident with some companies in Limerick. I do not want to mention the names, but many of them are now becoming the modern multinationals. Second, I want entrepreneurs to come to Ireland. We are seeing it in the university sector. The key point is that it is about finding practical measures that will benefit Ireland Inc, provide extra jobs and bring in additional taxes. The issue Senator Higgins is talking about should be seen in the round, not specifically in terms of the impact in one area.

I apologise for goading Senators. Sometimes it is not difficult.

What did the Minister of State say?

I said sometimes it is not difficult to goad Senators.

Would the Minister of State stop? He is doing it again.

On whether it relates to ideology or practicality, it is due to practicality. We need €62 billion to run the State every year. That is the level of expenditure we have. We have never spent more under current expenditure and we have to get the money in. If ideology prevents us getting money in, then we have to move beyond the ideology. SARP is a practical relief. It is what gives IDA executives and Enterprise Ireland companies the opportunity to bring executives here and participate in the economy by working and passing on their skill sets to Irish people. The relief is restricted. I am not sure that every Senator who has raised SARP has read the Indecon report, because the report is clear.

Question put:
The Committee divided: Tá, 16; Níl, 7.

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Conway, Martin.
  • Lawlor, Anthony.
  • Lombard, Tim.
  • Marshall, Ian.
  • McDowell, Michael.
  • McFadden, Gabrielle.
  • Ó Céidigh, Pádraig.
  • O'Donnell, Kieran.
  • O'Donnell, Marie-Louise.
  • O'Mahony, John.
  • Reilly, James.

Níl

  • Conway-Walsh, Rose.
  • Devine, Máire.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Humphreys, Kevin.
  • Mac Lochlainn, Pádraig.
  • Warfield, Fintan.
Tellers: Tá, Senators Gabrielle McFadden and John O'Mahony; Níl, Senators Rose Conway-Walsh and Máire Devine.
Question declared carried.
NEW SECTION

I move recommendation No. 1:

In page 11, between lines 19 and 20, to insert the following:

Report on special assignee relief programme

10. Within 6 months of the passing of this Act, the Minister shall produce a report on special assignee relief programme to include a quantification of revenue foregone.”.

The recommendation simply asks that within six months of the passing of the Act, the Minister might produce a report on the special assignee relief programme, to include a quantification of revenue forgone. The Minister of State mentioned in his general response on the section that we have figures for 2017 but we do not have any figures for 2018 in terms of the cost of the scheme. Given that the cost of the scheme was more than €28 million in 2017, which is substantial expenditure from the revenue base of the State, it is costly. It behoves us, as we move the scheme forward into 2020, that we would know how much it cost us in 2018. We should also establish quite quickly how much the scheme cost us in 2019. We should not operate with three year old figures regarding a scheme of this cost.

There is an exemption from income tax on any gain realised on the exercise of a qualifying share option under the key employee engagement programme, KEEP, scheme.

I note we are on recommendation No. 1.

This is recommendation No. 1. We are still on SARP. We have not got to the KEEP programme yet.

I have discussed SARP earlier.

So the Minister of State does not agree with Senator Higgins's recommendation.

When does the Minister of State anticipate that we might get the 2018 figures?

The figures tend to be two years behind. We will the figures for 2018 next year in 2020. That is the way it works with Revenue. We do not do the figures. Revenue allocates the figures to us.

Recommendation put and declared lost.
Section 10 agreed to.
SECTION 11
Question proposed: "That section 11 stand part of the Bill."

I oppose the section and I have also tabled recommendations to the section. Section 11 concerns the KEEP scheme. It is the one the Minister of State was preparing to discuss earlier. Section 11 is an extension of the KEEP scheme. My core issue is not with the measures concerning the extension, which relate to part-time, flexible working arrangements, although there is also a question mark over the movement between qualifying companies within the group. My concern is that the KEEP scheme effectively allows for employees to take a large portion of the emoluments they receive for their work in a company in the form of shares and thereby reduce the taxation they pay on the income derived. It is a really key concern as it benefits only those in private companies because it relates to companies that have shareholdings and where shares are an issue. It does not benefit those working in the public service. Persons may choose to have up to 50% of their wages paid in the form of stocks or share options.

For example, they could get up to €100,000 a year in stock and share options and up to 50% of the total emoluments could be treated and take the form of shares. This is a real concern because it is another measure that means people will potentially be paying less tax to the Exchequer relative to their income because they are paying the rates for shares and stocks which, while they might be caught elsewhere, are not caught at the same rate, rather than as income. I am concerned that we are creating a perverse incentive whereby we are encouraging people to move from a model of payment as income to a model whereby they will be getting portions of their income as shares.

I know the Minister of State may welcome co-operative schemes, employee dividend schemes and so forth. If that was the case there would certainly be some merit in this but it is quite wide and can be used by a wide range of companies. There is concern over the specific new measure inserted in section 11 - perhaps the Minister of State can clarify it - regarding people moving between companies within a group. A group may have companies, one of which is profitable and one of which it chooses to make unprofitable for various reasons and tax reliefs. We have had considerable concern over that kind of issue.

Could somebody be working for one company and be taking shares of another company owned by the same network of companies as part of his or her emoluments under the scheme? That seems to be part of the new scheme allowing movement between qualifying companies within the group. I ask the Minister of State to clarify that. Could a person be working for one company while receiving shares of another company within that group? I can see numerous concerns that might arise from that measure aside from my general concern about the KEEP scheme.

The KEEP scheme is not for the wealthy elite. The KEEP scheme was designed for people working in a particular sector. The challenge for smaller companies in that sector is that they are not able to hold on to their staff. Staff retention is a major issue in many sectors. The objective here is to give an employee the opportunity to take shares as part payment of their salary in effect. It is not that they are avoiding tax on that. The Senator seems to be hinting that people are avoiding paying tax or that the scheme is hollowing out the tax base. They pay tax on the shares when they exit and move off the shares, like many other investors. This was designed to help those working with smaller companies have an incentive to stay with that corporate group, rather than be challenged by the larger entities that are household names and that gobble up the staff.

In the circumstances the Senator outlined, somebody can receive shares in a company or holding company within a group. The measure reflects what has emerged from the comprehensive stakeholder consultation held this year. This was an SME event hosted by officials in June which allowed representatives of the sector to put forward their views on the changes required in KEEP and the incentives. The KEEP scheme was not working as we wanted it to work, which was to make it easier for small and medium-sized enterprises hold on to their staff.

As I understand it, people can have up to €100,000 in stocks and shares, and up to 50% of their income come in the form of stocks and shares. This would mean people covered by this could be getting up to €200,000, which is quite a large amount. I would question the small-scale employee. The scheme is designed to be of benefit for those on €200,000, €150,000 or €100,000. I remind the Minister of State that the median income is less than €30,000. Therefore, we are talking about people in the top 10% of incomes who can benefit from this scheme.

It is interesting that the Minister of State indicated it is not working as he wishes for SMEs. It would be interesting to get a breakdown of the extent to which the KEEP scheme has been used by higher earners and larger companies versus how much it has been used by or is useful to SMEs, which are largely used as the logic for having it.

The Minister of State referred to a stakeholder consultation. While SMEs are stakeholders in this, PAYE workers are also stakeholders because they help to pay for it.

In terms of avoiding tax, let us be clear that this reduces the portion of incomes-----

The Minister of State may come back in again later.

While I agree that people get taxed on their stocks and shares, these people would have been taxed at 40% and are being taxed at a lower rate because it is on stocks and shares at point of exit. That is an overall reduction in our tax and revenue. The aspect of pay later and pay less has been the feature of a number of tax relief measures introduced by the Government over a series of Finance Bills. The aspect of pay later and pay less also underpins our private pension tax relief scheme in terms of the benefits for higher marginal rate earners. There is an issue with paying later and paying less. That is not really addressing the predictability of incomes.

Do we have a breakdown of high earners versus low earners who are benefiting from the scheme? To what extent is it larger companies versus SMEs? Has the Department engaged with stakeholders other than SMEs asking what they would like to give their employees?

With respect, you are taking an ideological viewpoint.

The Senator should speak through the Chair.

Skip the ideological-----

Hold on. Senator Higgins will have another opportunity to come back in.

I wish to finish my point. The Senator is making the point that this is a tax-avoidance measure and that it should come in the form of income and be subject to income tax at the higher rate. I see this as a practical measure that allows companies operating in a very competitive environment to retain key staff members who may move to another company abroad or at home. This particular measure may ensure that companies will survive and prosper, and provide a large number of jobs to employees who will pay income tax. If they are exporting, as many are, they do not pay VAT. I see it in the round. The Senator's key point is an ideological point, whereas she should look at things in a practical way.

I call the Minister of State and Senator Higgins may come back in after that.

Since I have been accused of an ideological-----

The Senator may come back in after the Minister of State.

I have a single question to move it on.

I am letting the Minister of State in next. That is the order and the Senator may come back in to conclude.

I have a single sentence.

I have no more to add.

As the Minister of State has no more to add, I call Senator Higgins.

In an earlier contribution I asked the Minister of State a direct question and did not get an answer. It might be useful on this. Does he believe in progressive taxation? Does he believe that the SARP scheme and the KEEP scheme satisfy the principles of progressive taxation?

Before I call the Minister of State, I note-----

Since I have been accused of having an ideological position, let us go there.

-----the Minister of State made the point that 1.5% of the population are paying 25% of the tax. Therefore, the Minister of State has addressed that point to my mind.

Unfortunately, the Senator's ideology is clouding her practicality. If we go down the road of her ideology we would not have enough money to spend the-----

What is the ideological point on which the Minister of State disagrees with me?

She is trying to portray the Irish income tax as not being progressive. It is the most progressive income tax system in the OECD countries. The more people earn in Ireland, the more they pay. We have a number of targeted schemes designed to increase the overall pot. The Senator's ideology would prevent the pot being increased. She would bang the drum but it would result in only having €40 billion to spend instead of €60 billion. That is ideology-----

Are the KEEP and SARP schemes progressive?

That is the Senator's ideology.

It is not ideology; it is a direct question.

I am simply asking whether the KEEP scheme and the SARP scheme are progressive taxation measures. That is not ideological. The Minister of State has spoken about progressive taxation.

I will allow the Minister of State in to reply.

It is not an outlier notion.

I ask the Minister of State to go ahead.

I will give the Senator actual numbers. A total of 87 people benefited from KEEP in 2018, its first year of operation.

It is not a case of tens of thousands of people scamming the system and the income tax structures. It involves a very small number of people, so it has not had the take-up we wanted. We wanted thousands of people who are working within the SME sector to be able to take share options and have them as a savings opportunity and whenever they may require that savings opportunity, they would-----

What was the cost of the scheme?

We do not have it because the shares must be retained for a period of time.

So we do not know how much it cost for the 87 individuals who benefited.

We do not have the cost because the shares must be retained for a period of years.

While the Senator can come back in, this is not a to-and-fro session.

The Senator's ideology prevents her from allowing those 87 people to benefit. We want that figure of 87 to increase to hundreds, perhaps even thousands of people who are taking up these share options because then they have buy-in with regard to their company and are far less likely to move off to another company, perhaps one of the big players or the big fish.

To what element of ideology is the Minister of State referring?

The Senator's ideology is that none of this should happen. It is very clear. Most schemes to prevent-----

Is my ideology one of progressive taxation? Is that the tension?

The Senator ignores the fact that the Irish income tax system is the most progressive in the OECD. She chose to ignore that.

Can we refrain from-----

I will let the Senator back in but-----

I do not want to come back in.

The rules do not permit me to allow people to throw in heckles, digs, questions or whatever one wants to call them. This applies to the Minister of State as much as to the Senator. The Senator says her piece, the Minister of State responds and the Senator can come back in. That is the way it works. The Senator cannot keep chipping in in the middle of the Minister of State's contributions.

I see that. I am just asking whether we could stop getting the exact same answer, which is that I have ideology, so that we can move forward. Can we stop throwing that in?

I have asked the Minister of State-----

If the Minister of State has a view on the scheme and I have a view on it-----

The Senator keeps saying the same thing. It is the same answer regarding the same silly question.

That is not helpful either.

With respect to the Chair, can we just focus on-----

I am going to put the question.

Question put and declared carried.
NEW SECTION

I move recommendation No. 2:

In page 16, between lines 6 and 7, to insert the following:

"Report on key employee engagement programme

12. Within 3 months of the passing of this Act, the Minister shall produce a report on the implementation of the key employee engagement programme, to include a breakdown of the cost of the scheme and revenue forgone in 2018 and 2019.".

Recommendation No. 2 relates to the cost of the key employee engagement programme. We know 87 persons benefited. This recommendation involves how much the scheme costs. We knew that it cost €10 million to set up. We have spent €10 million on it for starters and as 87 people have benefited, that is quite a substantial benefit for a very small number of people so far. The Minister of State says shares may be held and the tax may be taken at a later stage so I might withdraw the recommendation and bring it back on Report Stage to revise and specifically address the income tax foregone. While the Minister of State will rightly make the point that some taxation may be taken from the scheme at a later stage in respect of taxation on shares - we do not know if that will be later - I will believe it will also be less. The clarity we need concerns the scheme in 2018 and 2019. What portion of income tax revenue was foregone in those years? Given that my wording is wider, I will withdraw the recommendation and re-introduce it on Report Stage focusing on income tax foregone and tax expenditure in 2018 and 2019.

Recommendation, by leave, withdrawn.
Question, "That section 12 stand part of the Bill", put and declared carried.
Sections 13 and 14 agreed to.

I want to check. I might have the original. Section 18-----

Section 18 concerns the living city initiative.

No, section 18 deals with flat rate expenses.

Which section deals with the living city initiative? Recommendation No, 3, which concerns a report on the review by the Revenue Commissioners on flat rate expenses does not appear to be in any way in sync with section 18.

Is the Senator referring to the Bill, Committee Stage recommendations or the Bill as passed?

I want to speak on that recommendation but I do not want it passed.

I think it is section 17 but I am not sure. Is it the living city initiative? It is section 17.

Is it definitely section 17?

The version I have here is-----

-----is section 18 but what I am saying is that with regard to section 18, recommendation No. 3 states that on page 20-----

My apologies, I might have the Bill, as amended on Committee Stage, rather than the Bill, as amended on Report Stage.

It is a bit out of sync. Is the Senator moving recommendation No. 3, which deals with a report on flat rate expenses, under section 18 because it has nothing to do with the living city initiative?

That is not my recommendation. We are only on section 15.

We are dealing with section 15. We will then take sections 16 and 17 and when we get to section 18, we can deal with Senator Kieran O'Donnell's point.

I am just concerned about the recommendation.

Section 15 agreed to.
SECTION 16
Question proposed: "That section 16 stand part of the Bill."

Section 16 concerns the help to buy scheme. We disagree with this scheme. The original costing suggested that the scheme would cost €130 million in total, however, we know that by August 2019, the cost was €206.4 million. The aim of the scheme is to help first-time buyers raise the 10% deposit to purchase a property but we know that the average help to buy purchase was above the average price of residential properties in 2018. There is no need for this scheme and it is using money that could be used to solve the housing crisis. The report produced on it shows that the scheme has failed to benefit all of the regions of the country as well, with 60% of claims being made in Dublin. More worryingly, the report shows that the scheme has been disproportionately availed of by higher-income earners so it is out of reach of the vast majority of earners. Only 13% of sales through the scheme involved properties costing less than €225,000 and more than a fifth of the houses were bought for more than €375,000. This is not an affordable housing scheme. Basically, 40% of people who used this scheme already had the 10% deposit and did not need it so it failed to help the majority of people to get on the property ladder. It has not done anything to reduce housing prices. It is simply being priced in. The cost of the scheme has been €206.4 million but it has failed to benefit those who need help the most and has done nothing to reduce the cost of housing. On that basis, we will be opposing section 16.

Senators will be aware that the help to buy scheme was announced in budget 2017 and back dated to apply to 19 July 2016. It is an income tax incentive measure designed to assist first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home and to support the growth in supply of new homes. The relief is only available in respect of new builds. The Senator quoted figures regarding properties costing less than €225,000 and more than €375,000. I would not like to try to buy anything in County Dublin for €225,000. I note Senator Horkan is nodding his head.

That is why I am out of one chair and into another. I want to speak on this issue.

I would not like to try to buy something for €225,000 in the area in which Senator Boyhan lives. Senator Conway-Walsh quoted a figure of €375,000. A person might buy something very small in Dún Laoghaire for that amount but then again, he or she might not. I accept that the figures quoted by the Senator are above the average but 15,000 people have benefited from this. I support first-time buyers, which is why we are extending the scheme. I disagree with the Senator's logic. Again, it goes back to an ideology.

Senator Conway-Walsh's ideology is incorrect. Somebody who is in County Dublin should be entitled to this as well as somebody living a long way from the city centre, from the capital or from the county who has the benefit of buying a house for a much lower price. One could buy a house in my constituency for much less than €375,000 but one will not buy a new build there for much less than €275,000.

With the greatest respect, I acknowledge that property values where Senator Conway-Walsh is living are not the same as those in the general local authority area I represented.

The help-to-buy scheme was very much a Fianna Fáil initiative in the confidence and supply agreement with the Government. All one needs to do is go on daft.ie and look at the price of any three-bedroom semi-detached house in Stillorgan, Dundrum, Kilmacud, Leopardstown or Clonskeagh. Just because one happens to live in Dublin and one ends up having an expensive house does not mean one is wealthy. It just means one has a higher mortgage and one spends a higher percentage of one's take-home income on housing. I made this point earlier at a meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach where we were discussing the fact that teachers in south County Dublin are being paid the same as teachers in rural Mayo or Longford but they are paying €2,500 a month in rent whereas one might rent a house for €400 or €500, and certainly less than €1,000, in other parts of Ireland outside the main cities in smaller towns and villages.

This is not about making people wealthy. Senator Boyhan will be as familiar with the property market in Dún Laoghaire-Rathdown as I am. I ask all Senators to consider the cost of a three-bedroom semi-detached house in south Dublin, particularly in the Dún Laoghaire-Rathdown area, and he or she will realise that this is not a scheme designed for the super rich. It is designed to give people who were from an area, who may have grown up in an area and who are working in that area, some small relief towards the purchase of an incredibly expensive property. That is all it is.

This scheme does not do anything for housing. It benefits people who do not need it. There is an issue of deadweight here. I made clear, both here and on Second Stage, my party's objections to this. I oppose section the section.

Question put:
The Committee divided: Tá, 13; Níl, 7.

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Conway, Martin.
  • Feighan, Frank.
  • Lawlor, Anthony.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • O'Donnell, Kieran.
  • O'Mahony, John.
  • Reilly, James.

Níl

  • Conway-Walsh, Rose.
  • Devine, Máire.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Mac Lochlainn, Pádraig.
  • Ó Donnghaile, Niall.
  • Warfield, Fintan.
Tellers: Tá, Senators Gabrielle McFadden and John O'Mahony; Níl, Senators Rose Conway-Walsh and Máire Devine.
Question declared carried.
Section 17 agreed to.
NEW SECTIONS

I move recommendation No. 3:

In page 20, after line 33, to insert the following:

"Report on flat rate expenses

18. The Minister shall, within 3 months of the passing of this Act, prepare and lay before the Oireachtas a report on the review by the Revenue Commissioners on flat rate expenses and ways in which low and medium income earners can be protected from any change that may arise.".

This recommends that the Minister shall, within three months of the passing of this Act, prepare a report and lay it before the Oireachtas. Many other Senators for some reason seem to want to provide for many reports to be reported to Dáil Éireann. I do not know why somebody in this House would want all these reports going to the other House and not to the House of which he or she is a Member, but that is what many Senators seem to have done. My three recommendations are about preparing and laying before the Oireachtas a report-----

It is good to see Senator Horkan is inclusive.

I am inclusive always.

My three recommendations are about preparing and laying before the Oireachtas a report on the review by the Revenue Commissioners on flat-rate expenses and ways in which low and medium income earners can be protected from any change that may arise.

The point, as no doubt the Minister of State will be aware, is that this is a competence of the Revenue Commissioners. A significant number of people, currently totalling 606,570 employees, avail of various expenses. These are deducted from their income and reduce their taxable pay. If they are on the standard rate, it will benefit them at the standard rate. If they are on the higher rate, it will benefit them on the higher rate. There are 53 employment categories and 134 individual flat-rate expense allowances. I will not go through them all but they are detailed, from carpentry to cardiac technicians, clergymen in the Church of Ireland, dentists in employment, dockers, draftsmen, occupational therapists and many other categories.

The gross claims were €163 million. The cost to the Exchequer was €48 million. The Minister of State may end up saving that €48 million, but who will be affected? All I am asking for in this recommendation in that, within three months of the passing of this Act, we would have a report on the review by the Revenue Commissioners on flat-rate expenses and ways in which low and medium income earners can be protected from any change that may arise.

We need to examine the impact on low and medium earners before that is changed.

The flat-rate expense allowance regime is an administratively-based practice operated by the Revenue Commissioners where specific commonality of expenditure exists across an employment category and the statutory requirement for a tax deduction for expenses, as set out in section 114 of the Taxes Consolidation Act 1997, is satisfied, namely, that the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the relevant employment.

Over the past 18 months, Revenue has been conducting a comprehensive review of the regime. No decision have been made but I understand that the review is nearing conclusion and its expected completion date is before the end of the year. Any potential changes to the regime will not be implemented before 1 January 2020.

Revenue is independent in its performance of its functions under the tax Acts and any changes in practice to the flat-rate expenses regime are, therefore, solely a matter for Revenue. I, therefore, caution against any actions that might be perceived as seeking to undermine the independence of Revenue.

I understand that any withdrawal of the practice can only take place if Revenue is satisfied that there is no longer a legally valid basis to give the concession after engagement with the relevant representative body acting on behalf of the various categories of workers. I expect that Revenue, as it has demonstrated on many occasions, will implement the outcome of its review in its customary proportionate and fair manner, cognisant of the impact on the individuals concerned.

As Senators may be aware, the Minister for Finance has engaged with Revenue on the matter. Once this process of engagement has been completed, he will be in a position to comment further and, conscious of the timeline involved, he anticipates that he will be able to do so shortly. It would not be appropriate, therefore, for the reasons outlined, to take the recommendation proposed by the Senators.

Until all that is done, can the flat-rate expense allowance regime not just be extended for another year until the impact has been properly assessed? The Minister of State said it will be introduced in January 2020.

I accept the point that the Minister of State made but there needs to be a genuine understanding by the Revenue and the Government of the effect of this change. I will not press the recommendation and I am happy to withdraw it, although I do not know what Senator Conway-Walsh wants to do. I will withdraw, having listened to the Minister of State's analysis, but it is important that we keep this measure under review, regardless of whether we want to do a report on it under the Bill. The Government needs to be cognisant that almost one third of the workforce are affected by these expenses and workers are going to start seeing changes in their pay cheques and remittances. Depending on whether workers are paid weekly or monthly, they could notice the change as soon as the first week of January and wonder why it has happened. Workers may be affected by this change so it is important that the Government and the Department keep it under review.

I cannot accept this. I am worried about the impact that this will have on low and middle income workers and this cannot be left up to Revenue. I will press the recommendation.

Many flat-rate expenses have been there for years and many workers are not claiming flat-rate expenses to which they would be entitled. I appreciate the cautious approach that the Government has taken. The relevant term was always that the relevant expenses were wholly, exclusively and necessarily incurred in the performance of one's duties. Jobs have changed significantly over many years and I expect many new categories to come in. It is important that this is handled with great caution.

How soon does the Minister of State mean when he says that the measures will be announced "soon"?

Soon is very soon - a matter of days rather than weeks.

Recommendation put:
The Committee divided: Tá, 6; Níl, 14.

  • Conway-Walsh, Rose.
  • Devine, Máire.
  • Gavan, Paul.
  • Hackett, Pippa.
  • Higgins, Alice-Mary.
  • Warfield, Fintan.

Níl

  • Boyhan, Victor.
  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Conway, Martin.
  • Feighan, Frank.
  • Lawlor, Anthony.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • O'Donnell, Kieran.
  • O'Mahony, John.
  • Reilly, James.
Tellers: Tá, Senators Rose Conway-Walsh and Paul Gavan; Níl, Senators Gabrielle McFadden and John O'Mahony.
Recommendation declared lost.

I move recommendation No. 4:

In page 20, after line 33, to insert the following:

“Report on re-introduction of trade union tax relief

18. The Minister shall, within 7 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the re-introduction of the trade union tax relief.”.

This recommendation refers to the restoration of tax relief on trade union subscriptions. The rationale at the time of its abolition was that it was a measure related to austerity and difficult choices that needed to be made. The initial proposal was that tax relief on both trade union subscriptions and subscriptions to professional bodies would be abolished. In fact, when the 2011 Finance Bill was published, the tax relief on trade union subscriptions was abolished but the tax relief on subscriptions to professional bodies was not.

An inequitable situation continues whereby tax relief is still granted to the self-employed and on professional fees paid by employers for employees' memberships of professional bodies and subscriptions to, for example, bodies such as IBEC and the Irish Small and Medium Enterprises Association, ISME, yet tax relief is not granted on trade union subscriptions. It is an anomaly that was introduced into the tax system in 2011. We were told it was part of a necessary austerity measure at the time.

The concern is that we have heard a lot of comment in many debates in this House about partnership and balance between all parties but it is inequitable if tax relief is only applied to professional body membership. I do not oppose that but it needs to be matched by addressing the issue of tax relief for trade union membership. If we wish to have a society that engages in negotiation by partnership, ensuring that we can have collective discussions at the highest level and industrial relations machinery that works, trade union membership has a significant public benefit. I would like the Minister to consider producing a report on the best ways to further restore balance in that regard and restore the trade union membership tax relief.

I understood that Sinn Féin had sorted out this section in the Dáil. Can the Minister of State clarify that?

The Minister for Finance has committed to preparing a report on the tax treatment of union subscriptions. I was not going to take the recommendation.

I am fantastically delighted because I automatically put it forward three years in a row. I congratulate those who put it forward.

It is my pleasure to have fantastically delighted the Senator.

Recommendation, by leave, withdrawn.
SECTION 18
Question proposed: "That section 18 stand part of the Bill."

Section 18 covers the living city initiative. It has been in place for a few years. It is a big issue for us in Limerick city where we have a Georgian quarter. I have spoken to the Minister of State and his officials in the past about the take-up of this scheme, how it has worked and whether he has had an opportunity to review it. The scheme's purpose is beneficial but the practical importance is whether it is working. If the Minister of State has not had an opportunity to review it, I would like something constructive to be done by the Department on this initiative. It applies nationally but I am specifically concerned with the heart of Limerick city where uniquely in Ireland our footprint is Georgian. It is critical for us that the scheme is taken up. Are there impediments to taking it up? Does the Minister of State have an indication of the take-up of the scheme generally and specifically in Limerick city?

I know the Senator has been asking about this for several years. A total of 228 applications have been received since the start of the scheme: 92 in Dublin, 71 in Cork, 19 in Limerick, 32 in Waterford, 11 in Kilkenny, and a low number for Galway. A total of 20 individuals have made claims in respect of €400,000 in 2017 at a cost to the Exchequer of €100,000. It is much lower than we had hoped or anticipated. The numbers are not at the level we expected when the scheme was originally envisaged under this section of the Finance Act 2013, which commenced in May 2015.

Senators will be aware that, as a result of the review, changes to the scheme were introduced in budget 2017 to enhance the uptake and effectiveness of the scheme. The principal changes were the extension of the residential element of the scheme to lessors; the removal of the requirement for the residential element of the scheme that the building must have been originally constructed for use as a dwelling; the removal of the floor area restrictions for the residential element of the scheme and the reduction of the minimum amount of capital expenditure required for eligibility to €5,000. The Minister has decided to extend the scheme for a further two and a half years providing for a sunset clause on 31 December 2022.

Those figures are disappointing. The Minister of State mentioned 228 applications nationally but only 19 came from Limerick. That is low and disappointing. I welcome the extension of the scheme for a further two and a half years. I would like him to commit to reviewing the scheme in some depth to see why there is such a low take-up in Limerick city where there is a much higher concentration of Georgian buildings in the city centre than in the other cities. Perhaps I could follow up on that with him and his officials.

I will be glad to follow it up with the Senator.

Question put and agreed to.
Sections 19 to 26, inclusive, agreed to.
NEW SECTIONS

I move recommendation No. 5:

In page 33, between lines 2 and 3, to insert the following:

Report on income tax relief

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

This is an important recommendation and relates to our alternative budget. It provides for tax break equal to one month's rent during that period worth €279 million. We are asking for a report on that. This relief existed in the past and we want it reintroduced. We talk about tax reliefs but if tenants who are being crucified by ever-increasing rents cannot have a tax relief, there is something seriously wrong.

The previous tax relief for rent paid was abolished in budget 2011 and is no longer available to those who commenced renting for the first time from 8 December 2010. This followed a recommendation in the 2009 report by the Commission on Taxation that rent relief should be discontinued. The view of this independent commission was that in the same manner that mortgage interest relief increased the cost of housing, rent relief increased the cost of private rental accommodation. Accordingly, the result of reintroducing this relief would be a transfer of Exchequer funding directly to landlords, which would not have the intended effect of reducing the pressure on tenants. In addition, a tax credit of this nature would be of little benefit to lower income workers, the unemployed and students, who may not receive the benefit of the relief because they may not be paying sufficient income tax. The actions the Government proposes to take to address concerns about the cost of rental accommodation are set out in Rebuilding Ireland, the action plan for housing and homelessness. Finally, at the time of its abolition, the rental tax relief was costing the Exchequer up to €97 million per annum. Under certain assumptions it is likely that the annual cost of the proposal, if introduced, would be even higher. I do not propose to accept this recommendation.

That is why within our alternative budget we cited an emergency freeze on rents for three years to address the question of the transfer to landlords.

Recommendation put:
The Committee divided: Tá, 6; Níl, 13.

  • Boyhan, Victor.
  • Conway-Walsh, Rose.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Mac Lochlainn, Pádraig.
  • Ó Donnghaile, Niall.

Níl

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Conway, Martin.
  • Feighan, Frank.
  • Lawlor, Anthony.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • Ó Céidigh, Pádraig.
  • O'Donnell, Kieran.
  • O'Mahony, John.
Tellers: Tá, Senators Rose Conway-Walsh and Paul Gavan; Níl, Senators Gabrielle McFadden and John O'Mahony.
Recommendation declared lost.

I move recommendation No. 6:

In page 33, between lines 2 and 3, to insert the following:

“Report on introduction of a progressive wealth tax

27. The Minister shall, within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive and progressive wealth tax. The report shall include options for; the collection and collation of data necessary for the assessment of such a tax, categories of wealth to be included in such a tax, rates applied to certain categories of wealth under such a tax, proposals for the assessment and collection of such a tax, and estimated revenue raised under those options.”.

This is for the introduction of a wealth tax. The reason I wish to move the recommendation is because in our alternative budget, we wanted to introduce a wealth tax for the wealthiest 0.25% in this State at a rate of 1% on the portion of wealth held over €1 million. That would bring in €89 million, which would pay for a great many things that are necessary.

I will not be accepting the amendment.

I note that we have wealth taxes. We tax wealth in a variety of ways, including capital gains tax and capital acquisitions tax. These taxes are levied on individuals or companies on disposal of an asset in the case of capital gains or the acquisition of an asset through gift or inheritance in the case of capital acquisitions tax. We also have a wealth tax on the highest form of wealth in the State. This is a property tax. Of course Sinn Féin is against the property tax because it is populist. The local property tax was introduced in 2013. It brings in approximately €500 million.

It is important to understand where Ireland stands in respect of the distribution of wealth. Our officials examine all aspects, including taxation and wealth taxation, on an ongoing basis. During 2016 and 2018 the Department jointly with the ESRI conducted two research projects into the distribution of wealth in Ireland and the potential implications of a wealth tax using the CSO household finance and consumption survey. The resulting research papers are available on the ESRI website. Both papers presented results on the composition of net wealth - assets less liabilities - across the wealth and income distribution sectors in Ireland. A number of wealth tax scenarios, including regimes from other jurisdictions and other scenarios, were applied to the Irish data. In each case the associated tax bases and revenue yields, the number of liable households across the income distribution and the characterisations of the households affected were outlined. The composition of households under different tax scenarios was examined and the studies found that even with a narrow base and high threshold, some households in low-income deciles were affected. This is because of the imperfect correlation between income and wealth. Furthermore, the distribution implications of a wealth tax across different types of households should be taken into account. A larger proportion of the wealth tax burden would fall on certain households than their share of net wealth might indicate.

If a wealth tax were to be applied in addition to the related forms of wealth taxation, it could have the disincentivising effect of causing large changes in the level or types of assets held by Irish households. Households could be expected to respond to high effective rates of tax on capital income, for example by reducing their holdings of assets in Ireland or reallocating their wealth holdings to asset types facing a lower wealth tax charge.

Reference was made to increasing taxes on high-income earners. In 2020 it is projected that the top 1.5% of those who have an annual income of over €200,000 will pay 26.5% of all income tax and universal social charge payments. This is a large proportion of the total of income tax take and USC take for such a small number of taxpayers. In comparison, 72% of taxpayer units, which is the cohort of those with an annual income of less than €50,000, will pay 15% of all the income tax and USC.

To further demonstrate the high amount of tax being paid by high earners under the current income tax system and USC system I note that in 2020 it is expected that there will be approximately 2.78 million taxpayer units, including married couples under joint assessment. The total yield from income tax and USC will be over €24 billion. The remaining yield of over €17 billion will be paid by less than 440,000 people earning over €70,000. Of that yield, approximately €7.2 billion will be paid in total by 2.34 million taxpayer units with incomes of under €70,000 per annum.

It is my view that a broad-base progressive income tax system where the majority of income tax earners make some contribution, according to their means, is the most fair and sustainable income tax system in the long term. The Department will continue to monitor and consider any additional information and data that come to its attention. The Department will continue to examine existing alternative potential taxation sources. The Minister has no plans to introduce tax measures along the lines suggested and therefore the recommendation will not be accepted. There is another aspect to this. I do not have the actual figure but approximately 30% of the people who earn income in the State pay zero income tax. That is an important figure to note as well.

I point out that we are talking about 0.25% of the wealthiest people in the State and we are talking about a 1% tax on amounts over €1 million. That would bring in €89 million. I really think this needs to be reviewed.

I will take up that last point on the percentage of people that do not pay income tax, because it is trotted out by conservative politicians all the time. I respectfully remind the Minister of State that those people pay plenty of VAT. As the Minister of State knows, VAT is not correlated to income, so it is disingenuous to talk about people who do not pay tax. Everyone pays tax in this country, but the wealthiest pay the least in comparison to their income.

The Minister of State noted that he was referring to income tax.

It is important to note I was discussing income tax. Of course everyone pays VAT, but about 30% of the 2.3 million people who work in Ireland do not pay any income tax. I support that wholeheartedly, because as I said to Senator Higgins earlier, we have a very progressive income tax system. It is the most progressive system within the OECD, though that is too often ignored by people with a different point of view than mine. The Senator described me as a conservative politician, but I consider myself a centrist. Tags such as conservative or liberal are irrelevant to me. We have a very fair income tax system, as I have said to the Senator on previous occasions. It is an appropriate system. The OECD considers our income tax system to be most progressive, as people who earn more pay more. In 2020, 1.5% of people will pay 26.5% of all income tax and USC. The highest form of wealth in this State is property, but the Senator's party disagrees with taxing that because it is populist. It is practically the only leftist party in Europe that does not support a wealth tax, which is mainly a tax on property.

We support a second home tax. That is another distortion of the truth.

The Minister of State forgot to mention that we also have the third-highest rate of low-wage earners in Europe. That is why they do not pay tax. Their wages are so bad that the State subsidises low-wage employers, to the tune of €300 million a year. We should be ensuring those employers pay a living wage. That is Sinn Féin's policy.

In case the Senator was unaware, when Fine Gael came back into government the first thing we did was to reverse Fianna Fáil's decision to reduce the minimum wage by €1.

The Government has now frozen it.

It is now €9.85, which is the second-highest minimum wage in Europe. The Senator has chosen to ignore that fact. We also have a social protection payment which used to be called the family income supplement, though I am not sure what it is called now.

That is the one.

It is a superb payment.

It is, for bad employers.

Many people benefit from getting a payment into a household on top of their net pay. It is a superb payment because it benefits so many families. It is a family income supplement. Many people find that they have to earn a huge amount more money in gross to get beyond the net effect of the family income supplement plus their net pay. The Senator should not decry that payment, as it is one of the best payments we have in the social protection budget.

It would not be necessary if workers were paid a living wage. That is the point I am making.

Hear, hear. That is the point.

In many cases it is a subsidy to low-wage employers. As it stands, the minimum wage law has an appeals mechanism in place whereby an employer who cannot afford to pay the minimum wage can appeal that and go through a process to agree it. The same practice would be possible with the living wage, and we have included that in our policies. What Fine Gael is doing at the moment is subsidising too many bad employers. Workers who work for a living deserve to earn a living. That is what a living wage means.

The Senator made a point about bad employers. I am not here to defend bad employers. Some sectors pay above the minimum wage because there are sectoral agreements in place for €10 an hour. The Senator should not say that the people paying those amounts-----

The rents in Dublin-----

If the Senator will allow me to finish-----

The Minister of State, without interruption.

The Senator should not say that those people are bad employers. I know both good employers and bad employers. Most employers do their best to continue employing people and the people doing the employing are often the last to be paid. That is how things are for many businesses, both big and small, the length and breadth of this country. The Senator should not decry employers because without employers, there would be no employees. Sinn Féin's model would vanish pretty quickly.

The conversation has strayed quite widely. The Minister of State referred to the family income supplement, which is now called the working family payment. People are very aware of that payment because they are all struggling to make ends meet and people rely on it. It is an indictment if people are not earning enough for their families to live on. That is an issue. I support the payment because I realise that people need it. It is not a wonderful add-on, but is something people need.

The Minister of State mentioned sectoral agreements. I would be delighted if all sectors had sectoral agreements but, unfortunately, that is not the case. Measures to push forward a sectoral agreement in the hospitality sector, which employs a high number of people, many of whom rely on the working family payment, were opposed only a week ago. Sectoral agreements would be an ideal way to move this forward, but a number of employers and employment representative organisations have opposed them. That is just a point of information, on which I do not need to elaborate.

I will reiterate the Senator's last point. The Minister of State mentioned good and bad employers. Let us be very specific here. The hospitality industry has refused point-blank to engage with trade unions or the industrial relations machinery of the State, specifically the Workplace Relations Commission, in order to work through a joint labour committee, JLC, process. The Government maintained that veto last week here in the Seanad. That is the bottom line. It is clear to me that employers that refuse to engage with trade unions are bad employers. The Minister of State should think that too.

It is very easy to stand up and decry a whole sector as bad employers but it is wrong to do so. I know huge numbers of people who work in the hospitality sector. They work in that sector to provide excellent employment. The Senator may not agree with it-----

-----but the hospitality sector employs tens of thousands of people and it is wrong for someone to stand up in a Chamber where he or she has privilege and call all those people bad employers. I am from a county with a huge amount of hospitality sector employers and employees.

Why will they not engage with trade unions?

Senator Gavan should allow the Minister of State to speak.

The Senator should not do that, because it is wrong. If he thinks certain companies are bad employers, he should go out onto the plinth and name them and see where he finds himself.

What the Minister of State has said is quite outrageous. The Irish Hotels Federation has point-blank refused and has stated with pride that it will not engage with trade unions or the industrial relations machinery of the State. I have cited that example several times in this Chamber. Will the Minister of State not condemn that? Has he nothing to say about it? I am very clear-----

He says he is not a conservative.

I would suggest that he is somewhere to the right of the Tories.

Senator Feighan does not have the floor just yet. We are currently dealing with an amendment proposing a wealth tax, from which we have strayed a fair bit. One could say that everything is linked to a wealth tax, but we must deal with the amendment. I ask the Minister of State to conclude his remarks.

Sinn Féin is always hypocritical when it comes to a wealth tax. The highest form of wealth in this State is property but Sinn Féin will not tax it because it is populist. That is purely what Sinn Féin is about.

The Minister of State spoke about hoteliers and the hospitality sector. In Donegal and rural areas throughout the west of Ireland, the sector the Minister of State would claim to champion and laud is outraged that the Government has increased its rate of VAT from 9.5% to 13.5%. The Government is treating a hotel in the top of Donegal or the west of Mayo the same as a hotel in Dublin. It treats a hairdresser on Grafton Street exactly the same as a hairdresser on the main street of Milford or Ballina. Why has it done that?

The Government is using the hospitality sector to impose a tax that is not progressive, VAT being applicable to everybody in the same way. Everywhere it turns, the Government does not have friends. It is a foolish policy and the Government needs to address it.

In regard to this recommendation, our position is that the very wealthiest section of our society - we are talking about people earning more than €140,000 per year - can afford to pay a bit more to alleviate the crisis in the health system, in housing, the evidence of which we see in this city tonight, in childcare and so on.

I support the property tax and I also support Sinn Féin's proposal to introduce a progressive wealth tax.

The point about VAT is that we brought the numbers back up to where they were. I am not sure whether Senator Mac Lochlainn knows how we paid for that in the first place. We did so by putting a levy on people's pension pots, which generated hundreds of millions and eventually billions of euro to provide the hospitality sector with a much needed boost. The industry was appreciative of the measure at the time and knew and understood that the standard rate would eventually be restored. Many different aspects of the provision were considered at the time, including the argument that only businesses in Dublin should be returned to the higher rate. However, the simple fact is that, according to the VAT law of this State, we cannot apply a regional rate. If Sinn Féin is being honest in its intentions in proposing a wealth tax, it should acknowledge that property is the largest form of wealth in this State by a country mile.

Apple is fairly wealthy.

Recommendation put:
The Committee divided: Tá, 8; Níl, 12.

  • Black, Frances.
  • Conway-Walsh, Rose.
  • Devine, Máire.
  • Gavan, Paul.
  • Hackett, Pippa.
  • Higgins, Alice-Mary.
  • Mac Lochlainn, Pádraig.
  • Ó Donnghaile, Niall.

Níl

  • Burke, Colm.
  • Burke, Paddy.
  • Buttimer, Jerry.
  • Byrne, Maria.
  • Coffey, Paudie.
  • Conway, Martin.
  • Feighan, Frank.
  • Lawlor, Anthony.
  • Lombard, Tim.
  • McFadden, Gabrielle.
  • O'Donnell, Kieran.
  • O'Mahony, John.
Tellers: Tá, Senators Rose Conway-Walsh and Paul Gavan; Níl, Senators Gabrielle McFadden and John O'Mahony.
Recommendation declared lost.

I move recommendation No. 7:

In page 33, between lines 2 and 3, to insert the following:

"Report on revised threshold for High Wealth Individuals

27. The Minister shall, within 3 months of the passing of this Act, prepare and lay before both Houses of the Oireachtas a report on the introduction of a new threshold for High Wealth Individuals defined as persons in possession of net assets of the value of €10 million and above.".

This recommendation proposes that the Minister produce a report on the introduction of a new threshold for the definition of high wealth individuals as being persons in possession of net assets of €10 million or more. That is an extremely high level of wealth but lower than the current threshold. As we know, people earning €40,000 pay the same income tax rate as those earning €60,000. Those earning from €75,000 to €1 million may be able to avail of the SARP scheme, as we have already discussed, and pay a reduced rate. My recommendation is about examining the introduction of some form of wealth tax for high wealth individuals.

To give some perspective, in the five-year period between 2013 and 2018, during which time many people throughout the country were experiencing straitened circumstances and many parents were relying on the working family payment, there was a 32% increase in the number of millionaires in Ireland. We got 3,000 new millionaires last year alone. There are more than 1,000 of what are called ultra high net worth individuals, that is, people who have net assets of €30 million or more, living in the State. In addition, the number of billionaires went from eight to nine in 2018. During a period when the minimum wage was frozen, before starting to crawl back up, we had an extremely high increase in the numbers of people with immense wealth.

I have not gone for millionaires in my proposal, nor have I solely targeted our nine billionaires. Instead, I have gone for a level in between, a little below that of the 1,000 people with assets of €30 million or more. I am asking that the Minister consider a threshold for the introduction of a wealth tax which would include persons with assets worth €10 million or more. It is absolutely fair enough that they should be eligible for such a tax. They are not people who happen to own a family home that is valued highly because of where it is located. They are not people with two family homes and a small number of shares in the company in which they work. We are not going after people with property of any reasonable or normal level. When we talk about a net worth of €10 million or more, we are talking about people who can afford to contribute a little more to the State. I reserve the right to introduce on Report Stage a further proposal in respect of ultra high net worth individuals if the Minister of State is of the view that €10 million is too low a threshold in terms of people making an additional contribution.

Following a review, Revenue recently revised the threshold for high net worth individuals downwards from €50 million to €20 million. The review was conducted in the first quarter of 2019 and the report was published in June. The rationale for setting the threshold at €20 million included facilitating the close alignment of Revenue's resources with risk, the engagement between Revenue and the Comptroller and Auditor General on chapter 18 of the 2018 report on the management of high net wealth individuals' tax liabilities, and the discussion that took place during the Revenue chairman's attendance at a meeting of the Committee of Public Accounts in November 2018. The adjustment of Revenue's organisational structure is an ongoing process influenced by a wide range of factors both internal and external. Revenue is proactively and continually evolving its structure to ensure it can optimally manage the alignment of its resources with risk and deliver a high-quality service to support taxpayer compliance.

Revenue is independent in its administration of the tax and duty system, and the threshold within which cases are managed by the different divisions is an operational matter for Revenue.

As part of its ongoing management of the case, I understand Revenue will continue to prepare reports and evolve its case base. In these circumstances, a review is not appropriate at this time. It would not be a productive use of resources coming so soon after the previous review. It does not have relevance to the Finance Bill and I cannot accept the recommendation.

Just to clarify, was €10 million considered or lower? Was €15 million considered?

It was €50 million.

Yes, I know, and it was reduced. In terms of the risk issues that were identified, was there a specific consideration of risks in reducing the threshold to €10 million?

No, €20 million was deemed appropriate.

I think €10 million might be worth considering and reviewing because if there is a substantial-----

The Revenue Commissioners have just concluded a review. They are the people who deal with people of high net worth. They have made a judgment call based on their knowledge, experience and abilities in terms of the risk to be applied and how those high net worth people are configured with that figure. I am not going to tell the Revenue Commissioners what the figure should be. They are independent of Parliament. It is a matter for Revenue to put its figure upon it.

With due respect, the decisions in respect of policy around revenue and the direction of it, they actually are political decisions. Lots of decisions have been made around tax reliefs and measures and how we set the bands. I do not think we can abdicate that issue entirely to Revenue in that regard. These are not highly important people, they are high net value people who happen to have a lot of assets. We should bear in mind that all the people are important. The Minister of State is talking about people with an extraordinarily high level of assets. It is quite a legitimate question and a political question to decide if the Minister of State or the Minister, Deputy Donohoe, would wish to ask Revenue to consider a risk analysis in respect of the possible costs or benefits of defining the threshold down to €10 million. I accept that the Minister of State does not accept my recommendation at this point.

The point I am making is that Revenue has just concluded a review and says that the appropriate figure is €20 million, not €10 million.

Recommendation put and declared lost.
Section 27 agreed to.