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Seanad Éireann debate -
Wednesday, 16 Dec 2020

Vol. 273 No. 10

Finance Bill 2020: Report and Final Stages

Before we commence, I remind Senators that a Senator may speak only once on Report Stage, except the proposer of a recommendation who may reply to the discussion on the recommendation. Also on Report Stage, each non-Government recommendation must be seconded.

Recommendation No. 1 in the names of Senators Sherlock, Bacik, Hoey, Moynihan and Wall arises out of committee proceedings.

I move recommendation No. 1:

In page 1. In page 9, to delete lines 9 to 24 and substitute the following:

“ “(iib) Covid-19 pandemic unemployment payment (within the meaning of the Act of 2005),”,


(b) by inserting the following after subsection (6B):

“(6C) The payments, commonly known as the pandemic unemployment payments, made under section 202 of the Act of 2005 on and after 13 March 2020 to the relevant date (within the meaning of section 7 of that Act), shall be exempt from income tax and shall not be reckoned in computing income for the purposes of the Income Tax Acts.”.

(2) Paragraph (b) of subsection (1) shall be deemed to have come into operation on and from 13 March 2020.

(3) Paragraph (a)(i) of subsection (1) shall be deemed to have come into operation on and from 5 August 2020.”.

I second the recommendation.

On Committee Stage, I made very clear on behalf of my colleagues in the Labour Party our deep unease - this is shared by other colleagues on this side of the Chamber - regarding what we believe is the retrospective application of income tax to the pandemic unemployment payment, PUP, between 13 March and 5 August. I listened very carefully to the comments the Minister of State made, especially with regard to the income tax classification of PUP income received in the context of Case IV of Schedule D and also the need to reclassify this as Schedule E in order to be able to offset personal and PAYE tax credits. We accepted that point and asked the Government to table a recommendation in this regard. However, as this was not forthcoming, we have brought forward a recommendation in conjunction with the Free Legal Advice Centres. The latter has written on a number of occasions to the Minister for Finance, Deputy Donohoe, expressing its alarm about section 3 of the Finance Bill.

Our recommendation is that for the period before which PUP had statutory basis as a payment, namely, 13 March and 5 August, it would not be considered reckonable income for income tax purposes. We accept that the payment has been subject to income tax since 5 August. However, we believe that the principle of retrospection in the context of income tax is wrong. Last week, I also mentioned that there is a great reluctance and resistance on the part of the Government to enter into a conversation about the retrospective application of tax changes to any other part of our tax code. As a result, we are not convinced why it is acceptable in the context of income tax.

I ask the Minister of State to accept our recommendation, which we believe is very reasonable and which solely deals with the period between 13 March and 5 August when the payment was classed as an emergency payment. We hope that he will accept the recommendation.

I thank the Senator. The recommendation differs from that put forward on Committee Stage in that it proposes to exempt the PUP from taxation for the period prior to 5 August, rather than maintaining that the payment is not currently taxable.

The Senator has accepted that the payments have been taxable since August and is now proposing that payments from March, when they were introduced, until that date in August be non-taxable. I repeat that the PUP is and always was taxable. There is no question here about retrospection of taxation.

As I advised on Committee Stage, it bears reiterating that the main purpose of section 3 is to confer on PUP recipients, both employees and self-employed, an entitlement to the employee tax credit, thus allowing those concerned to offset the credit against their tax liability arising from receipt of the PUP. That is what section 3 is about, as discussed on Committee Stage. It is about making sure that those on the PUP can offset their employee tax credit or PAYE allowance against that payment. If we do not do so, it would result in more tax being paid on the PUP. In the absence of such an approach, the PUP would fall to be treated for income tax purposes as case IV, schedule D income, that is, miscellaneous income not falling under any other heading. In such circumstances, recipients of the payment, that is, employees or self-employed persons who have lost employment due to Covid-19, would be liable for the gross amount of income tax arising on the PUP payments that they receive. They could use neither the employee tax credit in the case of employees, also known as the PAYE credit, nor earned income credit in the case of self-employed persons to abate the gross tax liability. That is what section 3 is about, as discussed on Committee Stage.

Of its nature, the PUP is a taxable payment and, having regard to considerations of equity, grounds to move away from that position are not strong. The Government and the Minister for Finance, Deputy Donohoe, have been consistent on that point, essentially from the outset. Several parliamentary questions have been tabled on this exact issue since the payment came in. Questions were tabled on it right through May, June and July, long before the August date was even mentioned. Is it fair and equitable that recipients of the PUP are subject to tax on that income, just as those who continued in employment or those in receipt of the temporary wage subsidy payment are subject to tax on their emoluments?

Furthermore, the PUP is an income support and shares the characteristics of jobseeker's benefit and jobseeker's benefit for the self-employed, both of which are taxable. It would be inequitable if the PUP was not to be taxable while jobseeker's benefit is subject to tax. Indeed, as a general rule, all social welfare payments are subject to taxation unless specifically exempted. It is for these reasons that I do not see the logic in exempting the PUP from taxation as proposed, but taxing it after 5 August. What the Senator is actually saying is that she accepts it is taxable. I am saying it is taxable from when it was introduced in March. The recommendation accepts that it is taxable from August but the Senator wants it to be not taxable prior to August. How can people in receipt of the PUP after that date in August be liable for tax while those who got it before August would not be liable for tax? There is zero equity in that approach, in my view. A person on the PUP at the end of July and a person on the PUP at the beginning of August are entitled to be treated the same way under the tax code. It is the same payment and there should not be a differential in that regard. It would be most unfair to tax people in receipt of PUP in one month, while those who were on the payment in the previous month are not taxable.

I refer to the Social Welfare (Covid-19) (Amendment) Act 2020 that was debated in the Seanad on 29 July. The then Minister for Employment Affairs and Social Protection, Deputy Humphreys, made it clear during that debate that the payment was always taxable. That legislation was passed in the Seanad on 29 July and came into effect on 5 August following signature by the President. Section 6 of the Act provides:

Benefit to be paid or provided for out of the Social Insurance Fund shall include such sums as the Minister may estimate on the basis that may be agreed between the Minister and the Minister for Public Expenditure and Reform in respect of the payments, commonly known as the pandemic unemployment payments, made under section 202 on and after 13 March 2020 to the relevant date ...

That legislation, which was passed through the Dáil and the Seanad at the end of July and then came into effect, clearly states in section 6 that the relevant date in terms of income received is 13 March. Claims for the payment may have been submitted some days before that date but, in terms of payments received, 13 March is the relevant date as set out in legislation. I cannot see how we can go back and untangle that Act which was passed through the House, signed by the President and came into legal effect on 5 August in order to change the relevant date for receipt of the PUP. That legislation states the relevant date is 13 March 2020. That date did not come from nowhere. It is specified in legislation passed by the Houses. In the context of the PUP, the relevant date is 13 March as set out in the legislation passed in the House at the end of July. I cannot see how there could be any equity in amending that legislation, which sets out that the effective date is 13 March, by providing that those who got the payment in the first three or four months should pay no tax but those who got it in months 4, 5 or 6 should pay tax. I just cannot accept that approach. I cannot accept the proposal in the recommendation that some people who received a payment, the relevant date for which as specified in legislation is 13 March, in one month should be exempt from tax, while those who got it in a later month would be subject to tax. The Senator accepts the payment would be subject to tax from 5 August. The recommendation would mean that a person getting the payment in a particular month would not have to pay tax on it while a person getting the same payment the next month would have to pay tax on it in circumstances where there is no relevant basis for that date. The relevant date in the legislation as passed here several months ago is 13 March.

On that basis, not only do I not wish to go there in terms of the recommendation, it would be utterly unfair for people who began receiving the PUP later in the year as they were not laid off in the early stages of the pandemic to be taxed whereas those who came in the first wave of PUP would get it tax free. In many cases, it could be the same person. I could not accept such a situation. I know the recommendation is designed to assist, but I cannot see how there is any equity in what is proposed in terms of treating people differently in respect of the same payment depending on the month in which they received the payment. On that basis, I am unable to accept the recommendation.

I thank the Minister of State for his reply but I am disappointed by it. I believe the goalposts have been shifted since Committee Stage, when Senators were told that people would be horrified to discover that they would not be able to offset some of their tax liability for the PUP against their personal and PAYE tax credits. The recommendation clearly attempts to deal with that by separating the period before 5 August from the period after 5 August. The Minister of State has made his point. Obviously, I have not won the argument. However, I will take a positive from this because, to my mind, this is breaking new ground. It acknowledges that it is possible to introduce a payment or tax change and then retrospectively change its status several months later. I look forward to the Government being open to the concept of retrospective application of changes when we are debating issues relating to other parts of the tax code. Up to now, it has not been open to that. I will take it from section 3 that the Government is willing to countenance retrospective application into the future. Even if it is not welcome in the context of income tax, it will certainly be very welcome in other areas of the tax code.

As set out in the legislation to which I have referred, that is, the Social Welfare (Covid-19) (Amendment) Act 2020, the period of applicability in the context of the payment is from 13 March onwards. That legislation was passed by this House on 29 July and then brought into effect on 5 August. I wish to confirm that those are the dates in question.

I do not agree with the Senator's interpretation: it was always taxable from day one. I never had a different view. Most people do not have a different view. I accept that some people have a different view, but I do not share the interpretation that we are doing anything retrospective. It was always taxable from 13 March under the schedule we mentioned under the legislation. The Senator has tried to say I am establishing a precedent, but that is not the case. As far as I am concerned, it was taxable from day one, as we have always said. I am consistent in that regard. I accept the Senator might disagree with that point of view, in the same way that I disagree with her view that we are making retrospective changes.

Recommendation put and declared lost.

Recommendation No. 2 has been ruled out of order as it involves a charge on the people.

Recommendation No. 2 not moved.

I move recommendation No. 3:

In page 10, between lines 10 and 11, to insert the following:

5. Within six months of the enactment of this Act, the Minister shall lay before both Houses of the Oireachtas a report on the operation of section 195 of the Principal Act, which shall include an analysis of the amount of revenue foregone as a result of the authorisation of exemptions under that section to serving or former public office holders (within the meaning of the Social Welfare Consolidation Act 2005), and to individuals who received income in excess of €100,000 which was chargeable to tax in the year of assessment immediately preceding the year of assessment in which they duly made a claim to the Revenue Commissioners under that section.”

I second the recommendation.

The proposed recommendation No. 3 relates to the recommendation I sought to introduce on Committee Stage and is similar to recommendation No. 2, which has been ruled out of order. I note your ruling, a Chathaoirligh, and the explanation which I received from you on the grounds that it could involve a charge upon the people or upon the Revenue, as per Standing Order 41.

I note that you stated that it has long been held by successive cathaoirligh, and in the other House, that the reference to a charge on the people refers to the imposition or the increase of a public taxation measure and that a charge on the Revenue is a reference to public expense. I believe there is a significant ambiguity in the wording of Standing Order 41 because of the phrase "the people" as opposed to "people". Bunreacht na hÉireann is quite clear that references to the people are generally references to the people as a collective and it seems to me that a more obvious interpretation of Standing Order 41 would be that the imposition of a charge on the people refers to the imposition of some kind of public expense and that the imposition of a charge on the Revenue would basically amount to a tax cut. Having regard to the fact that the Constitution already significantly curtails the extent to which the Seanad can make recommendations in respect of a money Bill, the broadest possible interpretation should be given to the meaning of Standing Order 41, so as to facilitate Seanadóirí in their work. In the event of any claimed ambiguity, as I believe there is here, then the benefit of the doubt should be given to the legislator seeking to do his or her work in that regard. Having said all of that, I respect your decision. I suppose it is a matter now to see whether there would be support for a clarification of the standing order, to allow a situation that I and many others here would regard as much more sensible, which is that given the restrictions on the Seanad on money Bills, that there would be a broader latitude when it comes to proposing measures that would increase taxation, as in this case, by narrowing the scope of an exemption.

All that said, recommendation No. 3 seeks at the very least to provide that we would now begin to establish how much revenue is being lost to the State by what I believe is the overly broad application of the artists' exemption, indeed I would say, the abuse of the artists' exemption. This recommendation would provide that within six months of the enactment of the legislation the Minister would lay before the Houses a report on the operation of section 195 and to include an analysis of the amount of revenue forgone as a result of authorising exemptions to serving or former public office holders, as applies at present. In the case of former public office holders, those who are in receipt of a pension of €20,000 or more, and to individuals who received income in excess of €100,000. The recommendation does not refer to the amount of pension being received by the former public office holders that would be among the subjects of this report. The report would also indicate the tax lost to the State where individuals who have received income in excess of €100,000 in the previous year of assessment are availing of the artists' exemption.

I note in passing that the wording is slightly different from what was in the recommendation on Committee Stage. That was to try to address the point made by Senator Higgins on that occasion. I am not sure whether I have done so in a manner that is satisfactory to her, but it improves the recommendation somewhat by providing that it would be in the year immediately prior to the year of assessment that the €100,000 threshold was exceeded. The point here, as I stated previously - I will not labour it again because I set it out at length on Committee Stage and it is on the record of this House - is that this exemption was always only intended for artists and writers who were low paid and impecunious. I mentioned the cultural memory of the artist starving in the garret for the sake of his or her art and that it was as a gesture to the importance of the creative community in society that this artists' exemption was introduced, providing that a person could earn up to €50,000 before he or she would be liable for tax, or that they could earn €50,000 tax-free. I said that was a potential value of €20,000 lost to the taxpayer, or shall we say sacrificed by the taxpayer, for the sake of the merit of the work being done by these artists and writers. I do not believe that it was ever intended to be within the scope of the relevant section of the tax code that a highly paid broadcaster writing his or her political memoirs or a sports star's memoirs would come within the scope of the artists' exemption.

I brought to the attention of the House the fact that the Arts Council had commented on the overly broad application of the artists' exemption by the Revenue in the past. I also drew to the House's attention the fact that a very high percentage of appeals was successful where the artists' exemption was refused. I strongly urge the Minister to consider even at this stage that this is not the way things should be, that this is not the proper use of the artists' exemption. In fact, where biographies or autobiographies are concerned, for example, a biography of an artist or writer, the view of the Arts Council is that this might qualify for the artists' exemption only in circumstances where it sheds new light upon the person's work. It is not just the story of the person's life that is required. In order to meet the threshold of eligibility for the artists' exemption, if it is not a directly creative work but it is a book about an artist or a writer it should in some way shed new light on the interpretation of the artist or writer concerned. We are clearly a long way from any of that in the way this section is operating.

While I regret that the recommendation cannot be put to the House because of the operation of Standing Order 41, we can at least begin the process of reform by providing that there will be a report done on the operation of the section and the money being lost to Revenue as a result of the excessively broad application of this tax exemption that is being availed of by people who are in no way low paid or impecunious.

I listened very carefully to the lengthy debate last week on this recommendation and Senator Mullen has a point. It was a real pity that the Minister of State rejected every request last week for a report on how we might better align our financial plans for the future. Just like the request we made last week, this request has merit. I think, or at least I hope, no Member would be comfortable with wealthy people availing of the artists' exemption. There is something fundamentally unfair about that. Senator Mullen seems to be suggesting that a report be completed on the degree to which this is an issue. I do not imagine the completion of such a report would cause too much difficulty or time on the part of the Minister of State's colleagues in the Department. It is a sensible suggestion to make. I have no doubt but that the Minister of State will reject the suggestion, which is disappointing but there is a fundamental point here. There are very wealthy people, albeit perhaps a small number, who are availing of this artists' exemption when it was never designed for them. The point is that it is fundamentally unfair. The Minister of State should take this point on board and seek to have a report written on this issue.

I wish to make two points. First, I concur that the Seanad Committee on Procedure and Privileges must examine the issue of the interpretation of "the people". If one interpretation has 4.5 million people behind it and the other has a few individuals, we really need to think about that and examine it. Given that these are only recommendations and that the powers are already constrained, it would be appropriate that we do not unnecessarily further constrain ourselves, particularly on the issue of tax. I have always sought to look to some the tax reliefs, because they should be subject to scrutiny on how they are applied. This exemption is one such case.

In respect of the arts, it is good that we support the artists and we need to support the arts in Ireland. I acknowledge that artists in Ireland have had one of the most extraordinarily difficult and challenging years. Absolutely and unequivocally, we need to support artists. Indeed, the artists' exemption is there because in the balancing of cost and benefits, it was felt that it is something that is very important. I welcome it being acknowledged. It is a foregoing of revenue when there is any tax relief but I believe we get a lot more as a State in general from the tax relief that we afford to artists than from some of the other tax reliefs that are in place. For example, the still marginal rate of private pension tax relief is fundamentally inequitable. However, while there is an important role for instruments such as this in supporting the artists, it is appropriate for it to be examined and considered in order that we can ensure that it is performing as it should.

I recognise that the Senator has tried to take on board one of my points. I believe that in examining it, the focus should be beyond just one previous tax year, because for many artists, particularly writers, there may be five or six years in which there is no income and one year in which there is a high income. Therefore, the focus of the examination should be income over a five- or ten-year period. I have spoken about wealth taxes before and I strongly favour the introduction of a wealth tax. In cases where people are earning extremely high amounts, sometimes millions, in the absence of a wealth tax and where tax on capital assets is not being captured in that way, it is appropriate to consider whether this tax relief is needed in such cases. It is always useful to re-examine those issues.

It may be outside the Minister of State's remit but other than looking at the tax reliefs for artists, there are a number of ancillary measures that could be taken, including looking at how grants are provided, how we address social protection, and how we recognise the realities of the lives of artists. There is a suite of measures that should be looked at.

In respect of the Minister of State's remit, the recommendation that has been made is a reasonable one. I am sure Senator Mullen would be happy for the Minister of State to expand its terms and engage in other issues, as might be related. It is worth an examination and maybe we would see some interesting proposals and revisions in respect of this. For example, tax credits could be looked at in respect of artists who are on very low incomes and are not even in a position to benefit from tax exemptions. There is scope for examination and it is a useful discussion to have.

We discussed the issue, the principle, the background and the information that led Senator Mullen to put this recommendation forward on previous Stages. We had quite a detailed discussion and the Senator provided a lot of information on the matter.

Section 195 of the Taxes Consolidation Act 1997 provides for the exemption of certain earnings of writers, composers and artists and allows the Revenue Commissioners to make determinations in respect of artistic works in the following categories only: a book or other writing; a play; a musical composition; a painting or other like picture; and a sculpture. Guidelines were drawn up by the Arts Council and the then Minister for Arts, Heritage and the Gaeltacht, for determining whether a work which falls within the scope of the activities listed in the section is an original and creative work and whether it has, or is generally recognised as having, cultural or artistic merit and consequentially can qualify for the exemption. For most categories of work, once a determination is made by the Revenue, the exemption will apply not just to the works submitted with the application but also to any future works in the same category. In these instances, an individual need only make a fresh application if the category of their work changes, for example, from books to music. The exception to this process is where the works in question are non-fiction books. Due to the restrictions imposed by the guidelines governing the scheme on non-fiction books, it is necessary to submit a new application in respect of each new non-fiction work to ensure it comes within the eligibility criteria set out in the guidelines.

There have been three legislative changes to section 195 of the Taxes Consolidation Act included in two Finance Bills in the past 15 years. Two of these changes concerned the maximum amount of exempt income allowed under the scheme and the third change was made on the foot of infringement proceedings being threatened by the EU Commission. This change expanded the eligibility for the scheme to residents of all EU and EEA countries, where previously it was only open to residents of this State. As stated by the Minister for Finance at the time, the policy basis of the artists’ exemption is to provide "further encouragement to the creative artists in our midst and to help create a sympathetic environment here in which the arts can flourish".

On the issue of excluding certain public representatives and public servants from the scheme, I do not see how it is relevant to the objective of the measure to exclude a person solely on the basis of their former employment. As a general principle of tax equity, the source of other income should not determine the tax treatment of the income from an artistic endeavour. As I am sure the Senator will agree, artistic inspiration and talent can be found in all sorts of unexpected places - even among retired public servants and public representatives, as I mentioned previously.


We are not excluded from making an artistic contribution to the country.

More honoured in the breach.

Regarding otherwise high-earning individuals, in addition to the €50,000 cap, those claiming the exemption that also avail of other specified reliefs, continue to be subject to the high earners' restriction, which limits the amount of tax relief that can be utilised in any one year to €80,000 before the restriction begins to apply. It is now a more limited scheme targeted at supporting artists on low incomes and individuals who, without the exemption, may have to earn their income elsewhere to continue in their artistic field. The point is that there is a high earners' restriction in respect of the amount of specified reliefs that can be claimed by an individual. People cannot combine different levels of exemptions and have each one treated separately. To that extent, there is a cap on the total amount that can be claimed because of the high earners' restriction.

On that basis, it is not necessary to further limit the relief to those who had a particular income outside the scheme in any of the three previous years and, accordingly, I cannot agree to the suggestion that a report is required as proposed in the recommendation before the House.

I will provide one or two further pieces of information and elaborate on why I believe this is a fair and reasonable approach to take. There was a written question which Senator Mullen mentioned the last day. He asked if the Arts Council complained to Revenue about exemptions for ghost written biographies and political memoirs. One might say it is a small point. There was no issue between the Arts Council and the Revenue Commissioners at any stage. Revenue operated the scheme in accordance with the advice given to it by the Arts Council in respect of biographies rather than autobiographies. The wording of this guidance was, however, ambiguous and the Tax Appeals Commission, which is independent of Revenue, took a different view in its interpretation of the guidelines. This resulted in the determination at the appeal stage that the exemption should be granted, despite having previously been refused by Revenue. Revenue did not make this determination. It went with the scheme guidelines from the Arts Council but, on appeal, the commission granted the exemption, independently of the Revenue Commissioners, in that particular case.

My other point relates to the criteria for autobiographies or biographies. The conditions are that the work must be a biography or an autobiography that, in the opinion of the Revenue Commissioners, incorporates the author’s unique insight into the subject matter and is regarded as a pioneering work and also makes a significant contribution to the subject matter by casting new light on the person or by changing the generally accepted understanding of the person. That is the rule.

The real reason I believe it is not necessary to accept this recommendation - and I was of this view previously but have had it confirmed - relates to the number of claimants who had an income of more than €100,000. This could apply to any year but I will give the Senator the details for the year for which I have figures. With regard to the specific information requested in the recommendation, while it is not possible to identify the public officeholders and public servants specified in the first part of the recommendation or to pick out those groups, I am advised by the Revenue Commissioners that, in 2018, there were 266 taxpayers who claimed the exemption and who received income in excess of €100,000 which was chargeable for tax in the 2017 tax year. The figures are from 2018, based on the 2017 tax year. Some 266 people in that category had received income in excess of €100,000 but that cannot be broken down into groups such as retired public servants and retired politicians. That is the overall figure. The associated tax costs of the artists' exemption for these 266 cases in 2018 was approximately €1.7 million, which represents an average of €6,390 per person.

I have been in the Houses a while and, in my view, the information the Deputy seeks is available through the normal parliamentary process. A recommendation on the Finance Bill 2020 is not required. As I have said, I am here a while and I know that this can be examined through parliamentary questions or through questioning the Revenue Commissioners when its representatives appear before a committee of the House, including the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. Even the Arts Council would be able to obtain this information. All I am saying is that obtaining the information I have just provided did not require a report. It is available from Revenue.

If people look at the income tax returns people make, there is a special line under which the artists' exemption is claimed. I do not know the line number off the top of my head, but there is a specific line. The Revenue can immediately provide figures as to how many people claimed an exemption under that heading. In 2018, there were at least 266, but probably a whole lot more as this only includes those with an income of more than €100,000. This figure popped right out of the computer. A report is not needed. The Senator does not need to wait six months, he could follow up on this next week if he chose to do so. It is not necessary. That information can be obtained from Revenue.

With regard to any issue arising in a detailed assessment of its annual report, Revenue has excellent computers which will allow this issue to be followed up. How else could it handle all of the employment wage subsidy scheme or the temporary wage subsidy scheme? It has really up-to-date computers and can produce that information to Members of the national Parliament, whether Deputies or Senators, if they choose to pursue the matter. There are also several avenues within the Houses through which this can be followed up on by individual Members without the need to provide for a report under the Finance Bill.

Perhaps an official could someday interpret the provision as allowing him or her to refuse to provide such information to Members of the Dáil because he or she is required to provide it in the six-monthly report under the Finance Act and that Members must wait until that report is ready. In a strange way, this recommendation could slow the flow of information currently available to Senators and Deputies. For that reason, it is better not to proceed with this.

I thank the Minister of State for his extensive response. He covered a lot of ground at great speed. It did him no harm. I will certainly read up and reflect on everything he has said. I am very grateful to him for establishing the number of taxpayers with incomes in excess of €100,000 who availed of this exemption and for providing that figure of €1.7 million, which is a significant sum of money which could do a significant amount of good and which does not need to be in the pockets of people who have earned more than €100,000. The Minister of State makes the point that it is not possible to distinguish who among that number are public servants. I have said this on the previous occasion but I will reiterate it; the tax code frequently distinguishes between categories of people. The reason it is appropriate to exclude public officeholders and public servants more generally from availing of the exemption is because of the particular situation of income security that comes with their role. In no way am I suggesting they are not capable of producing works of cultural and artistic merit, but the point of the artists' exemption is not to reward everybody who produces works of cultural and artistic merit but to assist those among them who are impecunious or who may otherwise be in severe financial straits. That is the point of the distinction, which is reasonable and not excessively punitive.

I take on board what the Minister of State has said with regard to the Arts Council and Revenue. I will again have to look closely at this issue but it is my understanding that, in 2013, the Arts Council complained to Revenue that its role was being undermined by the tendency to grant exemptions to ghost written sports biographies and political memoirs. As far as I know, that is true. It is also the case that the ministerial guidelines say that for non-fiction books to be considered they should be works with a cultural theme, such as a biography or autobiography of a writer or painter. In other words, the book must relate to art and creativity in a direct way. Even then, these guidelines say the work should only qualify if it is a pioneering work casting new light on the subject matter or changing the generally accepted understanding of the subject matter. I will read back carefully on what the Minister of State has said but I do not believe any of it displaces that concern.

I thank the Minister of State for his response. I knew that he would not accept the recommendation. As to the question of whether the requirement to produce such a report would, in some way, clog up the flow of information to the Houses, as I believe the Minister of State is suggesting, I find that difficult to believe. I do, however, take his point that information is available. I hope, that information being available, that the Government will now act. Why would €1.7 million be wasted in this way?

It is at least €1.7 million because the figure does not include those who may be on very significant salaries just under €100,000 who are availing of this tax exemption and who may be public officeholders and so on. I ask the Minister of State and the Government to look at this issue. There is currently a significant drain on the public purse, to say the very least. People are making enormous sacrifices, many people are up against it and we are borrowing shedloads of money, which will have big consequences in the future, particularly if interest rates increase. Even in respect of relatively small sums of money like this €1.7 million, there is an issue of attitude.

If it can be demonstrated that very well-off people are getting that money, when it should be going to the Revenue and into the Exchequer to pay for much-needed services for vulnerable and disadvantaged people, etc., would it not send out a healthier and better message of prudence, responsibility and solicitude for the common good to take the attitude that now this loophole has been drawn to our attention we should clean it up and tie it up? That is not what we are hearing from the Government today, however, which I regret. However, the point having been brought up now, I hope that perhaps this aspect will be looked at again at an early occasion by the Government and that a future Finance Bill, or another Bill, will tie up this loophole. I hope that will happen and that the Minister of State will take that message back to the Government.

Recommendation put:
The Seanad divided: Tá, 8; Níl, 24.

  • Bacik, Ivana.
  • Boylan, Lynn.
  • Gavan, Paul.
  • Higgins, Alice-Mary.
  • Hoey, Annie.
  • Mullen, Rónán.
  • Sherlock, Marie.
  • Warfield, Fintan.


  • Ahearn, Garret.
  • Ardagh, Catherine.
  • Byrne, Malcolm.
  • Carrigy, Micheál.
  • Casey, Pat.
  • Cassells, Shane.
  • Clifford-Lee, Lorraine.
  • Conway, Martin.
  • Crowe, Ollie.
  • Cummins, John.
  • Currie, Emer.
  • Daly, Paul.
  • Doherty, Regina.
  • Dolan, Aisling.
  • Fitzpatrick, Mary.
  • Gallagher, Robbie.
  • Garvey, Róisín.
  • Kyne, Seán.
  • McGahon, John.
  • Murphy, Eugene.
  • O'Loughlin, Fiona.
  • O'Reilly, Pauline.
  • Seery Kearney, Mary.
  • Ward, Barry.
Tellers: Tá, Senators Paul Gavan and Rónán Mullen; Níl, Senators Robbie Gallagher and Seán Kyne.
Recommendation declared lost.

Recommendation No. 4 has been ruled out of order.

Recommendation No. 4 not moved.

I move recommendation No. 5:

In page 80, between lines 33 and 34, to insert the following:



57. The Minister shall, within 6 months of the passing of this Act, lay a report before both Houses of the Oireachtas in relation to carbon pricing and carbon levies outlining—

(a) how the Government intends to apply the principle of common but differentiated responsibility between individuals and corporations, and

(b) the potential implications of such pricing and levies as regards costs associated with EU emission reduction commitments and future liabilities under investment protection systems.”.

I second the recommendation.

This report which I am suggesting in this recommendation would look at the intersection of three issues of great significance to the public and to our collective future. These issues concern how we collectively take responsibility for and engage with the costs relating to climate action. I refer to taking action in the face of the existential threat posed by climate change. Globally, it is estimated that the chances of staying in any kind of safe zone regarding climate change are 33% or less. We are increasingly looking at a catastrophic crisis globally. The countries which have contributed the least to the crisis, namely, those which have not contributed the greatest amount of carbon emissions, are already bearing some of the most devastating impacts.

One of the aspects associated with the principle of climate justice within the United Nations Framework Convention on Climate Change is the question of common but differentiated responsibilities. It recognises that while all of us face a collective challenge, there are those who bear a greater responsibility for causing these issues and who should also bear a greater responsibility to act in respect of them. My recommendation seeks to take a similar approach regarding how we should look at this issue on a national level.

On an international level, I am passionate about climate justice. I know we have just transition but that is a different thing. It is more about how we do the policies and how we reflect things; it is about the way. Climate justice is about how much must be done and just transition is concerned with the detail of how it is done.

It might be worth considering a similar kind of process in relation to the responsibilities of corporations and citizens. Unlike others in this House, I support the changes in carbon pricing. I am not supporting them because I believe in the concept of lifestyle nudges or anything like that; it is more serious than that. I support the increase in carbon pricing because the price of fossil fuels has been subsidised for too long. The social and environmental costs have been held and carried by states. The Pigovian principle is the justification, even though there is no behavioural proof or evidence behind it. The principle holds that when a cost has been externalised and the public and the state have been required to carry it, that should be reflected within the price of carbon. That is why our priority must be to address issues like energy poverty so that those who are most vulnerable are not impacted disproportionately by the inevitable and necessary changes in the price of carbon to reflect the fact that it already has a cost that was being carried by the global south.

When we take the Pigovian principle a little further, we can see that addressing this issue at the point of purchase is missing an enormous part of the picture. We have moved ahead in relation to changing carbon pricing and increasing fuel costs at the point of purchase but we have not done very much to address the huge carbon costs and the fact that most of the benefits over decades that have led to the crisis we are in now have been reaped by corporations but they are not paying their part. When the National Oil Reserves Agency (Amendment) and Provision of Central Treasury Services Act went through the Houses earlier this year I pointed out that there should be a levy on the capital assets of the major fossil fuel companies so that we do not see what we have seen elsewhere in the world, whereby the cost of cleaning up such companies is also borne by the public.

When I talk about that principle of common and differentiated responsibilities, I am asking the Minister of State to consider how we might ensure that corporations pay their share. Globally, 20 companies are responsible for one third of the world's carbon emissions. Last year, 100 companies were responsible for 71% of the world's emissions. This is not simply a matter of everybody turning off the lights when they leave a room, as everyone who grew up in Ireland in the 1970s and 1980s has already been trained to do. There are some very large players who have made money for the last ten to 20 years and who have caused a lot of the damage. They should be asked to pay their share as well. That is why, alongside accurate carbon pricing that reflects the real and devastating cost of carbon, we also need to have levies on corporations.

There are two other elements to the report I am seeking. There is the question of the common but differentiated responsibilities but there is also the fact that the public is carrying a disproportionate amount of the cost of dealing with climate change and reducing emissions. The people of Ireland are carrying a larger burden than corporations in terms of energy costs and payments for energy. The people are also carrying a much larger burden in terms of paying the penalties. Today the people of Ireland are paying a €50 million penalty because Ireland has not taken the kind of substantial action needed to reach its renewable energy targets. Again, the public pays at the point of purchase but companies are not captured at the point of production. The public pays the fines for the State's failure to deliver on its targets. I am glad to say that today the Joint Committee on Climate Action had its final meeting of the year. It will produce a report and recommendations on how the climate Bill can be strengthened in that regard but the public is paying those fines.

Now we are also facing the prospect of the public carrying a whole set of other costs if the State wants to open us up to further arbitration through the investor courts provided for under CETA. We are already vulnerable in respect of the energy charter. Ireland has been extraordinarily lucky to avoid investor and corporate courts so far. There are many countries around the world which would argue that we are lucky to be in that position, including Australia which has just passed legislation to ensure the country will never again sign up to such investor courts because of the damage they have done in areas such as public health policy. Ireland is vulnerable under the energy charter, as is all of the EU.

There are many cases going through investment protection systems at the moment involving the corporations which created the costs and the damage we have talked about and have put countries in the position of having to pay fines. In terms of climate law, France diluted its climate protection laws which were meant to restrict natural gas and oil production because of the threat of legal action by the Canadian company, Vermillion Energy Inc. The energy company Uniper is preparing a lawsuit against the Netherlands over its planned withdrawal from coal. Since 2012, the Vattenfall company has been suing Germany for its nuclear phase-out, with compensation and legal costs potentially amounting to more than €6 billion. There are 117 countries which have had to answer claims through investor-state dispute settlement, ISDS, courts. Some countries are facing huge legal fee bills. This is the chill effect of regulation because when a company takes a case, it can cost €2,000 to €3,000 per day. Some cases last for ten years, resulting in legal fees of tens of millions of euro, leaving aside the final ruling. Corporations are being facilitated to take cases against us when we introduce environmental regulations, if they believe the cost of compliance with such regulations will diminish their future profits. They can seek compensation from us but if we do not introduce environmental regulations, we will be paying fines, and rightly so. In the meantime, the people continue to be told that it is up them to stop climate change.

There is a huge imbalance in how we are approaching these issues, some of which falls into the area of finance in the context of investment protection mechanisms. Let us be clear about CETA - the trade part is already happening. A full 98% of tariff reductions have already happened. The trade part, because CETA is a mixed agreement, is an EU competency and is already under way. However, the investment protection component and the investor courts, which create the aforementioned kinds of liabilities for states, are a separate vote. They are a separate vote because the European Court of Justice ruled that the decision to open a state up to financial and legal liabilities is so significant that it cannot be decided at EU level and that the investment protection mechanism must be ratified nationally. An attempt was made to slip the vote through these Houses this week. That vote relates to the investment protection part of CETA. It has no relationship to the trade part of the agreement, which has been happening since 2017 but it has huge implications for how we deal with the kind of environmental crises that we are facing in the next ten years. What are the implications if we choose to sign up to this and to vote for it? Bear in mind that no one is asking us to do this and that ten countries have not ratified the agreement yet. Nobody is making us schedule this vote and there is no deadline from Europe on it. When we vote on it, the decision is irreversible.

It will take us 20 years if we try to get out of it and those 20 years are the 20 years in which we can avoid irreversible climate change. They are a very important 20 years.

We talked about some of the energy cases earlier, which really relate to the fossil fuel companies. Many European countries are trying to get out of the ISDS and the investment court elements of the energy charter. There is talk of withdrawing entirely from the energy charter or amending the energy charter because European countries recognise that we will not be able to address climate change as we need to if we leave ourselves open to compensatory cases from the fossil fuel companies which have driven this crisis.

We are at a very significant point of decision. I urge the Minister of State in whatever role he might have to urge that Ireland would not rush this decision, as it certainly seemed willing to do this week, and give it serious consideration. Has there been full risk-proofing of what this means? Is there a reserve fund - I do not see it in the Finance Bill - to allow us to meet the legal costs that may come? Is all our legislation proofed? Are we confident? Has there been a modelling of cases which investors, including some of the investors facilitated under the Minister of State' remit, might take against Ireland? Have there been case models? Has there been a full risk assessment? If it is available, it would be very useful to have it and share it with us in the House.

Ultimately the responsibility and the burden of proof is on those proposing such measures to show that they are safe, of benefit and necessary. It is the precautionary principle writ large. The precautionary principle is that when risking great harm, as we are doing with climate change, the burden of proof sits with those who are proposing the action which could cause the harm to show that it is safe. I feel that burden of proof has not been met.

Recommendation No. 5 calls for a report on carbon pricing and carbon levies, outlining how the Government intends to apply the aforementioned principle between individuals and corporations, and the potential implications of such pricing and levies as regards costs associated with EU emission reduction commitments and future liabilities under investment protection schemes.

The United Nations Framework Convention on Climate Change, UNFCCC, principle of common but differentiated responsibility acknowledges that the global nature of climate change calls for the widest possible co-operation of all countries in an effective and appropriate international response, in accordance with the common but differentiated responsibilities and capabilities of individual nations.

Climate change is a global issue and the need to act collaboratively to face this challenge is recognised on an international scale. Reflecting our commitment to addressing this global challenge, Ireland is a party to the United Nations Framework Convention on Climate Change and the Paris Agreement, which together provide the international legal framework for addressing climate change. As a member of the EU, Ireland also participates in the EU emissions trading system, an essential tool for reducing greenhouse gas emissions. Ireland also committed to reaching national targets for reducing our greenhouse gas emissions under the EU effort sharing decision and EU effort sharing regulation.

The Minister for Finance is also a member of the global coalition of finance ministers for climate action. Additionally, the Central Bank of Ireland has joined more than 30 other central banks as a member of the network for greening the financial system.

In November 2020, the Government welcomed the adoption of the task force on climate-related financial disclosures by those corporate entities which are already engaged with the task force. We are further actively encouraging greater uptake as more Irish firms look to accelerate and scale their own climate transition plans.

Addressing the threat of climate change is a priority for this Government as is reflected in the programme for Government. As one of the most significant challenges facing the country, it is a whole-of-government and societal issue that requires a joined-up effort.

Getting carbon pricing right encourages businesses and people to do what is right for the environment while leaving the choice of how they do so to them. It makes each of us responsible for our share of the problem and rewards those who pollute the least. It is not, nor will it ever be, the primary Government response to fighting climate change but it is a vital part of a package of policies and measures, each of which will make some contribution towards our climate targets.

The current carbon tax policy of incremental annual increases has cross-party support and has been advocated for by the Climate Change Advisory Council, the Citizens' Assembly on climate change and the Oireachtas Joint Committee on Climate Action, among others. As recommended in the programme for Government, this policy has been informed by evidence-based research completed by the Economic and Social Research Institute. The Government will continue to be informed by up-to-date research in this field and is fully committed to this policy, which forms a core part of our efforts to combat climate change.

Accordingly, I cannot accept the Senator's recommendation. I have outlined all the international bodies involved in this. Much of the Senator's contribution related to asking why we cannot tax the companies responsible for fossil fuel production and sale. In Ireland we can only pass finance legislation that is relevant to Ireland. A number of the cases the Senator mentioned relate to companies that are not in Ireland taking other jurisdictions to court on various issues. Regarding what is relevant to Ireland, Ireland is almost entirely dependent on imported fossil fuels. This leaves us with very little ability to tax the production of the majority of fossil fuels we consume. We are in an unusual situation in that we are not independent in respect of our fuel sources. In the main, Ireland is dependent on imported fossil fuels. The idea of taxing production of fossil fuels does not arise to a great extent in Ireland.

Companies involved in the oil and gas production sector in Ireland already face a double rate of corporation tax at 25%. I know everybody is familiar with the 12.5% rate but some corporations do not qualify for the 12.5% rate. They already pay corporation tax at 25% in addition to the petroleum production tax for which a minimum rate of 5% applies. Therefore, those in the oil and gas production sector pay corporation tax of 30% or more. This means they are contributing if they produce it. I believe that is substantially dealt with by that high rate of tax relative to the main rate of corporation tax at 12.5%.

The only other domestically produced fossil fuel is peat. It was either produced by individuals for private consumption or by Bord na Móna, which is already committed to cease peat production by 2028. Along with Bord na Móna, some private individuals may harvest from bogs for their own domestic purposes, which is not extensive but there is an element of it.

If the new tax is applied to the companies involved in the sale of fossil fuels in Ireland, the cost of such taxes would simply be passed on to consumers at the pump. As we are importing the fossil fuels and because it is not being produced here in most cases, if the companies which sell it on to Irish people are to be taxed, there is only one way that goes: it will be passed on to the customer.

Certain sectors, which do not pay carbon tax, such as those involved in electricity generation, aviation and certain energy-intensive industries, such as steelworks, cement etc., come under the scope of the EU emissions trading system and therefore carbon pricing is incorporated into these industries separately from the carbon tax. The current price of the EU carbon allowance permit is approximately €25 per tonne of CO2 produced. We have the situation the Senator is referring to. Very few of the companies that produce the fossil fuels are in Ireland to start with so I do not know who will be taxed by the tax. Some involved in the gas production sector would be taxed. Those in that sector are already taxed at 30%, which by a long way is the highest rate of corporation tax payable by any business sector in the Irish economy.

That is compared with those on a maximum rate of 12.5% and against which some people have allowances that can be offset. The only other producer of fossil fuel in Ireland is Bord na Móna, which is to cease production.

There are other "large polluters", although they are not producers of fossil fuel. They create substantial CO2 emissions. As Members know well, there is a separate mechanism at the EU level to deal with all these major companies. I might have mentioned it here the last day or some previous day but it takes in approximately 100 of these large companies in Ireland. It is a publicly available list and the Environmental Protection Agency is involved. They have licences for CO2 emissions and if they need to exceed the limit, which they should not, they can get more of an allowance through the emissions trading system and will be paying a rate of €25 per tonne of CO2 in order to continue operating plants. There has not been much emissions trading in that system recently and there is a high tax on it, albeit separate from the carbon tax. That happens if companies exceed permitted limits for CO2 emissions and there are not many cases of that. There might be some but the overwhelming majority, if not almost all, of those 100 or so companies come within those limits.

Applying carbon taxes to aviation and shipping can only be done at EU level due to carbon leakage. Put simply, if Ireland imposed a tax on shipping or aviation fuel, the providers of these services would simply choose not to refuel in Ireland. That is a simple fact of life. The aviation industry in particular is gradually being brought under the remit of the EU emissions trading system and companies will be caught at an EU level, with the price of the CO2 emissions to be determined. That price of carbon emissions from the sector will be applied at an EU level and this will not just be an Irish matter, although Ireland will be involved.

In a nutshell, there are very few producers of fossil fuels in the country. This is an international debate and because of our circumstances, there is not as much of a heavy concentration in Ireland in any event. Producers in the oil and gas industry here are paying a very high level of tax, like the Senator is seeking. It is already happening. Those not in the system pay for their emissions through the emissions trading system at EU level as well. The only other company that is in the production of fossil fuels currently is Bord na Móna and it is getting out of the activity.

All in all, the Senator's comments are interesting but this does not have as much application in Ireland as one might have thought. On that basis, it is not necessary to have this report. If a very large part of the Irish economy was involved in this area of production of fossil fuels, it is something we would address in general and not just through this Finance Bill. The various committees of the House and the Departments would deal with it in any event. It is not an issue of the same scale as it is in other countries. I am not in a position to accept the proposal.

There are a few different issues. The United Nations Framework Convention on Climate Change, UNFCCC, does not fall under the scope of the Minister of State's Department but I was speaking to the same kind of justice principles being applied.

The Minister of State spoke about the companies that could be affected. There is a quote from 2017 from Vermilion when it took a larger share of the Corrib gas project, indicating that "as a result of our tax pools in Ireland, we do not expect to incur current income taxes in the Ireland business unit for the foreseeable future". That is Vermilion and the Minister of State remembers the Canadian company we mentioned that is threatening legal action against France for its climate laws and which has succeeded in diluting those climate laws in France with the threat of legal action. I mention this as the company took over much of Shell's area in the Corrib gas fields and it does not imagine it will pay income tax for the foreseeable future. That is not next year or in this quarter. On the books there may be a tax but it is not really being applied. I note Shell E&P Ireland had received €186 million in tax credits. Much like we know some of the wealthiest people do not tend to pay their 40% or 41% in tax, we also know that many of these companies are not paying significant tax.

I would prefer for us to move as a State to saying we do not want any more offshore drilling and exploration, even to these companies paying tax on what they produce. Maybe we do not want offshore extraction from the Corrib gas fields. If we ratify the investor court system, will we be more vulnerable to potential cases from Vermilion? Will it just take cases under the energy charter or might it take cases against us through the other mechanism that we are looking to hand to it?

It is interesting to compare what is on the books with what is happening. We have scope and we can look to other ways to make companies pay their share. There is the question, for example, of levies on capital assets relating to the clean-up cost of exit from fossil fuels. That can be a specific and ring-fenced project. There is also the question of levies on imports. We can bear in mind that Ireland is not a little country floating on its own but rather it is part of the European Union. Maybe we need to say we have an opinion on the distribution of the cost of carbon carried by those purchasing energy versus the levies placed at a European level and cost in the emissions trading scheme. Perhaps the costs should be much higher for companies not meeting their targets.

The Minister of State was not able to address the bind in which the people have been placed. If we do not act on climate change, not only will we see a devastating impact but we will also pay fees like we did today, with €50 million having to be paid because we did not meet our targets. If we act on climate change - and we need to - there is a shadow threat being introduced with the potential for investor courts. Let us not put the public in a bind and let us try to ensure that we can work in imaginative ways to ensure companies contribute. We must support and stand beside the public, which is paying an increased cost of carbon, by ensuring the State makes ambitious policies and changes.

As I stated, today we finished pre-legislative scrutiny of the climate Bill and, as a committee, we put forward some very strong recommendations to improve the legislation. These are not all the recommendations I might have wished for but they are very strong recommendations nonetheless. I want to see us implementing those climate policies fully and in an ambitious way so they are matched in every Department, including the Minister of State's, with imaginative ways to ensure that those businesses, industries and companies that have driven this the most would pay their share. At this fragile moment in history, we should not give another hostage to fortune in the form of a liability attached to our progress on climate action.

Recommendation put and declared lost.
Question put: "That the Bill be received for final consideration."
The Seanad divided: Tá, 30; Níl, 4.

  • Ahearn, Garret.
  • Ardagh, Catherine.
  • Blaney, Niall.
  • Boyhan, Victor.
  • Byrne, Malcolm.
  • Carrigy, Micheál.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Lisa.
  • Conway, Martin.
  • Crowe, Ollie.
  • Cummins, John.
  • Currie, Emer.
  • Daly, Paul.
  • Davitt, Aidan.
  • Doherty, Regina.
  • Dolan, Aisling.
  • Fitzpatrick, Mary.
  • Gallagher, Robbie.
  • Garvey, Róisín.
  • Kyne, Seán.
  • Lombard, Tim.
  • Martin, Vincent P.
  • McGahon, John.
  • McGreehan, Erin.
  • Murphy, Eugene.
  • O'Reilly, Joe.
  • O'Reilly, Pauline.
  • Seery Kearney, Mary.
  • Ward, Barry.


  • Boylan, Lynn.
  • Gavan, Paul.
  • Ó Donnghaile, Niall.
  • Warfield, Fintan.
Tellers: Tá, Senators Robbie Gallagher and Seán Kyne; Níl, Senators Lynn Boylan and Paul Gavan.
Question declared carried.

When is it proposed to take Fifth Stage?

Is that agreed? Agreed.

Question, "That the Bill be returned to the Dáil", put and declared carried.