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Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 17 Nov 2021

Finance Bill 2021: Committee Stage (Resumed)

Debate resumed on amendment No. 31:
In page 36, between lines 29 and 30, to insert the following:
“Report on the tax treatment and economic impact of institutional investment in the housing market
28. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax treatment and economic impact of institutional investors and corporate landlords in the housing market, including their impact on tenure, affordability, property price and rental price dynamics.”.
- (Deputy Mairéad Farrell)

Amendments Nos. 31 and 76 are related. Deputy Farrell spoke on the amendments yesterday and the Minister responded. The Deputy indicated she wished to contribute again.

I do not remember the Minister's exact words yesterday but they were along the lines that he was tired of the Opposition opposing certain types of housing. To be clear, we are talking about affordablity. I was talking about affordable housing all day yesterday. I am sure the Minister will have seen the report in this morning's edition of The Irish Times that a major Australian pension fund is investing in these types of vehicles. As a matter of interest, I checked the CSO database this morning. It notes in respect of pension coverage among renters that just 8.6% of renters in the State have a voluntary pension, with a medium value of €24,000. It seems our high rents are subsidising Australian pensioners. We are helping to build a better Australia but creating a worse Ireland. That is a deep concern. As I said yesterday, these amendments are practical and can be taken on board. The committee must be constructive when we discuss Finance Bills. I would like the Minister to reconsider his position on the amendments.

The Minister gave a comprehensive response last night. I am trying to keep the proceedings moving as fast as we can. I appreciate members' co-operation on that.

I appreciate that and I am aware of the Minister's response last night. I will pick up on some of his comments and his presentation on the tax paid in relation to these funds. The two Sinn Féin amendments deal with the need for a report on the taxation of these funds. The second amendment, No. 36, also relates to their exemption from capital gains tax. Yesterday, the Minister spoke about a difference of opinion between Sinn Féin and Fine Gael and the Government on this, and there is no doubt that there is a difference of opinion. I would definitely not be jetting off to London to tell investors at a roadshow to continue to invest in apartments here that are beyond the reach of ordinary people. I would have a different set of priorities. Maybe the Minister will clarify whether he will attend this roadshow given that his colleague, the Minister for Housing, Local Government and Heritage, has said he is not going. If not, maybe the Minister will find time to meet the families affected by mica, which was the subject of another amendment we discussed yesterday. The Minister still refuses to meet these families, despite what we believe to be the Department of Finance's opposition to a 100% redress scheme.

On some of the statistics the Minister placed on record yesterday, he indicated these funds paid 17.9% tax in relation to taxable events in the previous year. That is the crucial point. If the Government legislates to provide that certain things are not taxable events, it means no tax is paid on such events. For instance, in the case of the disposal of a multimillion euro apartment block, a company or individual would have to pay capital gains tax at 33% and, therefore, the disposal would be a taxable event. However, the Minister for Finance has decided that is not a taxable event and so they do not have to pay tax in relation to that.

In relation to funds, we also know that a taxable event does not include circumstances in which there is a rent roll in one year of in excess of €100 million. That is also not a taxable event. For a small company or a landlord with one, two or three properties, that would be a taxable event but for these funds it is not and, therefore, they do not pay any tax on that income. The only time they pay tax is when dividends are paid to shareholders. The Minister and members will be well aware that I and my party argued strongly for the need to introduce a dividend withholding tax to ensure these funds paid at least some tax. Thankfully, that has been legislated for in previous Finance Bills.

However, the reality is that because of double taxation agreements those tax amounts can be written down. We can see, even with the dividend withholding tax at 20%, that is not what the funds are paying on the disbursement of proceeds. This goes to the core of this amendment. It is the fact these funds are able to sell off billions of euro of Irish assets like properties and not pay CGT.

I will give the Minister an example. In 2019 there was €7 billion worth of property transactions in this State, mainly by these funds. Despite the fact Covid-19 impacted on sales in 2020 there was more than €3 billion worth of these type of transactions. We can see it is the large funds which are involved in many of these. I will give an example. Kennedy Wilson sold Baggot Plaza for $165 million. It avoided paying CGT of €26 million as a result of what is in these Finance Bills. Any other type of company or individual would have to pay the €26 million. What of Kennedy Wilson? The Minister would say we will capture that tax when it pays dividends to its shareholders. However, there is a game companies are at now. Kennedy Wilson said the proceeds of the deal "... will be recycled into new opportunities, including European acquisitions and developments as part of Kennedy Wilson’s investment management platforms". Therefore dividends are not going to be paid out and there will be no taxable event. What will happen is the asset pool of Kennedy Wilson will continue to increase with no tax being paid. That is what has been facilitated here by this Minister for Finance over the last number of years. Ireland is being sold off bit by bit, tax-free, under our noses. It is worse than that.

It is not just that we are not getting taxes. We know that because of the tax structure of these funds, they have the firepower to outbid other buyers on the market, be they an individual who wants to purchase a house in Dublin, Cork, Galway or elsewhere, or a housing agency. One such agency came out publicly over the summer to talk about these funds being able to outbid it to the tune of, I think, €50,000 or €60,000 per unit price. This is due simply to the taxation arrangements the Minister for Finance has facilitated time and again. He has done so to the point where last year, when we were considering the Finance Bill, I argued for a surcharge on these funds in relation to buying up domestic property and the Minister flatly refused to introduce that. This happened not just last year but in previous years, until he was embarrassed by the public and had to, overnight, rush through legislation that gave an appearance he was doing something but which in reality did not go far enough. The question is: does the Minister accept that under the finance code he stands over funds are able to dispose of multi-million euro property portfolios without paying CGT and are able to reinvest those gains into their companies through new acquisitions, thus being completely tax-free?

Deputy Boyd Barrett also wanted to come back in.

I did. As I said yesterday, notwithstanding the Minister's replies the decision to invite these vulture funds, investment vehicles and property speculators into this country, supposedly to assist the housing sector, will, when the history books are written, turn out to be the most disastrous decision ever taken. Frankly, it is the biggest heist on the Irish people and has contributed to one of the worst housing crises we have ever faced.

The Minister maintains they are necessary because the State cannot do it all. That was essentially the tenor of his response. He contends that if we do not have them, we will not have the capital. I still completely fail to see what benefit they have added. We are talking about the big investment firms, wealth asset management companies or whatever they like to call themselves. What they deliver is mostly apartments nobody can afford. These are developments where the rents or prices are absolutely astronomical and completely beyond the reach of the vast majority of people. Take Cherrywood for example. I think €15 million from the local infrastructure housing activation fund, LIHAF, went into putting in the infrastructure there. It is one of the biggest residential developments in the State, if not the biggest. Years on from that we still do not know what affordable housing we are going to get back in Cherrywood. We are getting nothing from these people. What we do get, we get at a vast cost, far in excess of anything we would have paid if we had provided this directly on lands, taking Cherrywood as an example, which we actually had in our possession. These were NAMA lands. We gave them to the funds. They built completely overpriced stuff. They lease a little bit back to us at astronomical cost. We still do not know how much affordable housing we are going to get and the stuff they are selling or renting on the open market will be completely beyond affordable for the vast majority of people. Where is the benefit from this? There is none. They control the market and charge astronomical rents.

I will give another example. It is one I have been banging on about for four years. It is a multi-unit complex across the road from me. It was originally bought out by Apollo Global Management, a wealth asset management company based in the US. Its first move was to try to increase the rent by 60%. Its next move was to try to mass-evict everybody in the place when it could not get away with that. Then it flipped the complex to another vulture fund, a domestic one, which has now succeeded in mass-evicting the tenants. That fund has left quite a lot of the property empty because it has slowly and through attrition driven out the tenants. It has sat on those empty properties, of which there are now 13, for more than two years. Other tenants, all of whom paid their rent and who have lived there for years are all being driven out, facing homelessness and so on. What is the fund doing? It is driving up the value of the asset. Then when it shifts the asset without the tenants - the only way it could finally shift the tenants and mass-evict them was by saying it was on grounds of sale - the value of that complex will have increased. The new owner will now be able to charge rents far in excess of the rent pressure zone, RPZ, increases. There will be no tax paid on the capital gain made on that flipping of a property and tax paid on the rental revenue derived from the fund being able to charge absolutely extortionate rent which has, by the way, resulted in people knocking on the door of Dún Laoghaire Rathdown County Council and saying they are homeless. These are good, decent, ordinary working people. That is what this is facilitating.

The Minister said there is no alternative to that. I can think of one example. The credit unions have been screaming at the Government for the last six or seven years saying they have €5 billion they would like to use to assist the State in delivering social and affordable housing. Credit unions are not-for-profit financial institutions, beloved of the people, which are not about making money but have instead social objectives. They are saying they would like to assist the State in the delivery of social and affordable housing. They are being completely frustrated in their efforts to do that. The Government would rather team up with vulture funds because apparently we need them.

I have one last point. I asked the Minister about it yesterday. We do not even know how much tax is being forgone. The Minister said they pay this much tax. That is a meaningless figure to trot out if we do not know how much tax is forgone. How much money would they have paid in tax if they were subject to CGT and tax on their rental roll? Until we know the answer to that, we cannot in any way assess the supposed benefit the Minister is imputing to these funds. He will not convince me under any circumstances but at the very least, surely the finance and budget scrutiny committees of these Houses are entitled to know. We do this with other tax expenditures. Certainly this is something the Committee on Budgetary Oversight, of which I am a member, has been pursuing very vigorously.

We believe a light needs to be shone on tax expenditures. They need to be discussed. This is a real cost to the Exchequer in the same way as direct public expenditure is a cost, and yet we do not know how much money is being lost from the extension of these tax breaks to these ruthless profit-hungry vulture funds.

I will let the Minister respond and then I will put the question on these amendments.

Next year, the Government will invest €4 billion in the delivery of more homes in our country. We will invest €2.6 billion directly through the Exchequer and a further €1.5 billion through the Land Development Agency. The funding we have, in current terms alone, for responding to our housing needs is €1.4 billion.

What is that leading to? This year, it is leading to the building of more than 3,600 more social homes in our country. It is leading to 8,750 social homes in the pipeline that will be delivered. In the context of more homes being delivered through the private sector for private ownership and for private rental than were delivered last year, it is a figure that is growing and one that will grow again next years. The reason those figures are relevant to the debate is they show the strong role the agencies of the Government are playing in responding to the housing needs we know are there, are growing and are the cause of anxiety and frustration for so many.

If I created at any point last night the sense that I was tired by Opposition views on this, to respond to Deputy Farrell, that was far from my intention. I am absolutely up for a debate on this, for this year and the years to come, but I was making the point that the contribution of real estate investment trusts, REITs, to our housing market has to be seen in the context of all the other things the Government is doing to respond to all of the housing needs in society. Of course, I am aware of the great challenges so many face with affordability and rising prices, but I would make the point it is not only Ireland that is confronting this. It is not only this jurisdiction and this Government. In Northern Ireland, for example, the published figures show that, up to quarter 3 of this year, prices rose by 10.7%, year on year. Prices are now up 13% since the start of the pandemic. That is happening in Northern Ireland where Deputy Doherty's party is in power, where it has responsibility for housing in the Department for Communities, and it is facing into the same kind of challenges with house price inflation that are developing here and the same pressures with affordability. That is what is happening with the price of homes - houses and apartments - there.

On the performance of REITs and Irish real estate funds, IREFs, and what they bring, I have made significant changes in recent Finance Bills to deal with concerns that existed and I acknowledge the role of Deputy Doherty in dealing with issues relating to their taxation. It is worth noting that institutional investors here in Ireland own 19,500 properties, according to the Central Statistics Office, which is less than 1% of the total housing stock of our country, and information from the CSO from 2020 shows that first-time buyers purchased more than nine times the total number of properties that were purchased by property funds, real estate firms and REITs. That is as it should be. First-time buyers purchase multiples of the houses and apartments that were either forward funded or purchased by these entities.

It goes back to a point that I made last night, which is, do we want there to be any role for private savings in other countries in the delivery of more homes here in Ireland? The contention being made by the Opposition is that it does not. The argument it is developing overall here is that more supply, more apartments and more homes being built will not help with bringing down prices and will not help with affordability. The argument being made is that the role of REITs and IREFs in adding to supply in Ireland in some way is contributing to the challenges we have in getting more homes built. This debate is heading in a direction where, at a time when we need more apartments and more homes of all kinds being built, increasingly the Opposition does not see more supply playing a role in fixing the huge challenges we have with regard to the supply of housing here in Ireland.

If I look at the charges that have been made here in this debate up to this point, on the issue of tax, it is the case that the taxable incident happens when income leaves these funds. It is where tax is calculated. As that is calculated, it means that IREFs last year paid €71.9 million of tax in Ireland, which is not the same as saying they do not pay any tax at all. They do. That is the figure for how much tax they paid last year. The tax is paid when the income is distributed from these funds. For example, with regard to REITs, they are legally required to distribute 85% of the proceeds or, if they do not do that, they have to reinvest either all of the proceeds of a sale, not only a gain, or pay down their debt or pay a dividend, which at that point would be subject to dividend withholding tax.

On the role of pensions, maybe Deputy Farrell, as the debate goes on, could clarify whether Sinn Féin is saying it is now against any pension funds, including, I assume, Irish pension funds, playing a role in the delivery of either commercial property or homes here in Ireland. Maybe the Deputy could clarify that as the debate goes on.

On the role of credit unions, I continue to be open to see what role credit unions can play in the delivery of more social housing and public housing here in Ireland. We did some work on that, in response to Deputy Boyd Barrett, to try to meet some of the needs and issues they described. It has not, as of yet, led to the delivery of the kind of housing output I was hoping would happen.

Overall I continue to believe the primary responsibility for the delivery of social housing here in our country rests with the Government. We are doing that. We have 8,700 homes now in the pipeline and we are trying to enable the private sector to build more homes for either outright purchase or rental by those who rely on the private sector to see more homes being built.

I will now put the question on amendment No. 31.

We have spent quite a lot of time on this. It is a debate worth having but I need to get through these amendments. We are only on amendment No. 31 and there are 165 to go.

I am well familiar with the number of amendments. I am the sponsor of this amendment and I have the right under Standing Orders to speak a second time.

The Deputy does. I ask him to assist me-----

Of course, without a doubt.

-----to be brief and to stick to the amendment which is a request for a report.

There are two amendments we are dealing with here and they are very important.

First of all, I will make a couple of brief points. The Minister did not inform the committee whether he will travel to London for the roadshow to the investors and whether he has a different opinion than the Minister for Housing, Local Government and Heritage, Deputy O'Brien, on that.

Has the Minister reconsidered meeting with the families of those whose homes are literally crumbling? The Government has not made a decision. They want to meet the Minister. They have appealed for the Minister to meet them online or in person.

There is no comparison between the North and the South in relation to house prices. Consider anybody who is watching this debate, if he or she is living in this city. The highest house price in the North is in Lisburn. It is £180,000. The average house price is approximately £150,000. For Deputy Donohoe, as Minister for Finance, to try to compare house prices which are out of control here with those in the North is bizarre. I am sure, as Minister, Deputy Donohoe would also know the limitations a finance minister, regardless of which party he or she is from in the Executive, has. They do not have the power to increase taxation on funds. Neither do they have the power to decrease taxation on funds. Maybe Deputy Donohoe is not aware of that but a call to the Department in the North or a call to the Minister of Finance, Mr. Conor Murphy MLA, would clarify that for him.

The Minister referred to the overall number of homes held by institutional investors. I do not dispute his figures, but we can use figures to make any argument we want and present them in a way that suits our agendas. I will give the Minister a different figure. In 2019, 57% of all new homes purchased in Dublin were private rental sales, that is, build-to-rents. These were institutional investors. There is a higher concentration in respect of apartments. This is a matter of affordability as well as availability. These apartments are costing prices that are way beyond what ordinary people are able to afford.

The other point that the Minister continues to gloss over relates to a question that has been raised by us and Deputy Boyd Barrett, that is, the role of these funds. It is an easy and simplistic presentation from the Minister to suggest that these funds are financing the development of homes. Were that the case, would it not be welcome? However, the vast majority of private rental sale agreements between funds and developers were forward purchase, not forward funding. I am sure the Minister knows the difference between forward purchase and forward funding. Forwarding funding is where the funds enter into a relationship or agreement with the developer to develop and fund a certain development and they own it or have a share in it at the end of the process. Forward purchase is where the developer secures its own finance from banks or internationally with an agreement that the fund will purchase those apartments or homes at an agreed market price at the end. That is what is happening in Ireland. One could argue that, by having this agreement, the homes will eventually be sold and it makes providing finance easier for the banks, but we must be clear - funds are not funding the developments. They are only agreeing to purchase them. In a time when there is a limited amount of supply, there is a market for these homes. It is important that the Minister for Finance makes it clear that funds are not funding these developments and are only agreeing to purchase them at the end.

This has to do with fairness. We have companies, for example, Cairn and Glenbeigh. If they dispose of assets, they have to pay capital gains tax because they are not IREFs. An IREF does not pay any capital gains tax. IREFs had €7.2 billion of transactions in 2019 and €3 billion last year, and 2021 will probably be a bumper year, given some of the transactions that went through in quarters 1 and 2, but they are not paying any capital gains tax on them. They are taking in the highest rents in the State, yet they do not pay any tax on their rental income. This is definitely ideological. The Minister believes that IREFs play a vital role, but I would argue that they do not. Even if they are playing a role, surely they should pay a fair amount of tax. These structures are about tax efficiencies and paying as little tax as possible for rental and commercial properties and should not be tolerated by the Minister for Finance or this committee.

I will make a few brief points in the same spirit as Deputy Doherty. He made his points quickly and I will do the same.

I thank the Minister.

Regarding the first set of questions that the Deputy put to me, I have no current plans to travel to meet such investors. I will put a question to the committee - if a group of businesses or a business is interested in building homes in Ireland, are we getting to a point in this debate where Sinn Féin is saying I should not meet it? If Deputy Doherty has the privilege of being Minister for Finance or a Minister for something else at some point in the future and a group of businesses are interested in building homes in Ireland, is it his intention that he will not even meet them?

I am giving the Deputy a response.

The Minister is asking me a question.

Sinn Féin's inference is that it would not even meet them.

Does the Minister want me to answer the question? They are not building homes. They are just purchasing them.

The Deputy is well able to use a bit of rhetoric himself,-----

-----so just allow me to make a few points in return. It is a little rich for the Deputy to accuse me of using simplistic arguments or figures to make a case. I will turn to his argument on REITs and IREFs, but I will first welcome his acknowledgement that these entities play a role in purchasing-----

Let me finish, please. They play a role in purchasing apartments up front. The Deputy said that. What that enables developers to do is to have confidence that they have already pre-sold a certain share of the apartments they are going to build. That gives them the confidence they need to build the overall development. This is not an ideological view. Rather, it is the reality of what is happening. If someone is building a large set of apartments, knowing that he or she will be able to sell a share of them to a single buyer, which would then use those for rental purposes, that gives the confidence for certain projects to go ahead. This is the reality of what is happening for those who are looking to fund a large number of homes in a small open economy that will in future have two banks-----

They are not funding-----

-----that are capable of providing the investment and credit that we will need to build more homes.

I will turn to the Deputy's point on mica, which I want to discuss. If I decide to meet those who have been affected by this awful plight, it will not be because of the political points that the Deputy is making at this meeting. It will not be because of the cheap juxtaposition that he is making between what I may do when I am travelling or not, whichever the case may be. Those families are facing stress, anxiety and worry. I hope that, if they are tuning in to see the Deputy make that point, they will allow me to say to them that I will not respond to those kinds of political points where the Deputy is trying to compare my meeting businesses who may be looking to build homes with the plight of those who have homes that are falling down. If I decide to meet them, and I am aware of the requests, I will do it because I recognise their anguish and anxiety.

I have been reluctant to do it to this point for a simple reason. As Minister for Finance, I am pretty much involved in every Government decision that involves the expenditure of Government money that may confer a responsibility on us in future. I always have groups that want to meet me that are affected by the decisions I make. I have to respect that those groups have other Ministers that deal with them first. If I accept an approach that means I will be meeting all who are directly affected by decisions in which I am involved, it will inevitably mean that the role of other Ministers is undermined. This is the simple reason. It is not because I am diminishing or devaluing the experience that they are going through. It is because I respect the fact that they have engaged considerably with the Minister for Housing, Local Government and Heritage, Deputy Darragh O'Brien, I respect the work that he does and I respect the fact that he is the lead Minister in this regard. I am working with him closely on it.

Regarding the Deputy's point on taxation, I reiterate that, when it comes to the role of IREFs, they paid just over €86 million in tax in our jurisdiction in 2019. Excuse me - it was €72 million. It is fair enough to get into a debate on whether that was enough tax and whether they should be paying more, but to indicate that they are not paying any tax at all belies the fact that they have been. Where the tax is paid is where the income is returned.

Deputy Doherty also made a point about the difference between forward purchase and forward funding. Of course I know the difference, but I contend that, when it comes to forward purchase, the role of pension funds, for example, in giving certainty that an apartment complex is going to go ahead through the purchasing decision it makes enables those homes to be built.

What Sinn Féin currently alleging and what it alleges day after day in accusations it makes about REITs is that building fewer homes will help in fixing our housing challenge and I reject that entirely.

On the final point the Deputy made on Northern Ireland-----

Will the Minister have a serious debate or read us this nonsense?

With regard to the final point the Deputy made on Northern Ireland, I am well aware of the responsibilities and differences between myself and the Minister of Finance, Mr. Murphy MLA. I am well aware of the starting point and the differences between housing prices in the North and here. I did not suggest the starting point was the same at any point. I simply said similar trends are on the way there as are here. That is all I said.

I thank the Minister for those responses.

Amendment put and declared lost.

I did not press amendment No. 31 to a vote and reserve the right to bring it back on Report Stage.

We discussed amendment No. 32, in the name of Deputy Doherty, yesterday, with amendment No. 28.

I move amendment No. 32:

In page 36, between lines 29 and 30, to insert the following:

“Report on capital allowances with respect to qualifying expenditure incurred on data centres

28. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax treatment and capital allowances available with respect to qualifying expenditure incurred on data centres, its broader economic impact on data centre investment and activity, and options to reform the capital allowances regime in order to promote energy security and efficiency.”.

Amendment put:
The Committee divided: Tá, 3; Níl, 5.

  • Barry, Mick.
  • Doherty, Pearse.
  • Farrell, Mairéad.


  • Donohoe, Paschal.
  • Durkan, Bernard J.
  • Matthews, Steven.
  • O'Callaghan, Jim.
  • Richmond, Neale.
Amendment declared lost.
Sections 28 and 29 agreed to.

Amendments Nos. 33 and 34 are related and may be discussed together.

I move amendment No. 33:

In page 45, line 13, after “exercise” to insert “, directly or indirectly,”.

I am introducing two amendments to section 30, which are technical amendments to correct a drafting error and to ensure the correct terminology is used in the legislation. The purpose of the amendments is to ensure the section operates as intended. They do not introduce any changes to the policy intention.

The first amendment corrects a drafting error by inserting the phrase "directly or indirectly". The second amendment corrects the language used where the reverse hybrid rule applies in the case of a common contractual fund. The amendment ensures that, where the rule applies, the tax obligations of the common contractual fund shall be fulfilled by the management company.

Amendment agreed to.

I move amendment No. 34:

In page 49, to delete lines 11 to 15 and substitute the following:

“(i)is a common contractual fund, all obligations falling on the common contractual fund pursuant to this Part shall be fulfilled on behalf of the common contractual fund by the management company who is authorised to act on behalf, or for the purposes, of the common contractual fund and habitually does so, but the management company shall not be liable in a personal capacity to any tax imposed by this Part on the common contractual fund, and”.

Amendment agreed to.
Section 30, as amended, agreed to.

Amendments Nos. 35 to 50, inclusive, are related and may be discussed together.

I move amendment No. 35:

In page 50, to delete lines 10 to 15 and substitute the following:

“ “(iii) under section 835AAE for total spare capacity (within the meaning of Part 35D) arising to the company in an accounting period beginning before the change of ownership for any accounting period after the change of ownership.”.”.

I am introducing several amendments to section 31, which introduce new ATAD-compliant interest-limitation rules to Irish legislation. The majority of the amendments I am proposing to the section are technical adjustments to ensure the correct operation of the legislation as intended. The remaining amendments correct cross-referencing and typographical errors in the Bill as initiated. I commend these amendments to the committee.

As the amendments are all technical in nature, with the agreement of committee members I will read the note giving an overview of section 31 to facilitate debate on both the amendments and the section. Because of the highly technical nature of this section, if members wish to put questions to me on the section, I may ask my officials with the consent of the Chairman to respond back to some of them and I may ask that we go into private session to do that. This is because this is exceptionally technical and I do not want to give an answer to any question from a member that may prove to be technically incorrect at a later point.

Section 31 is very lengthy and introduces highly complex new requirements to the corporation tax code. With the permission of the committee, I will speak a little longer on this than I normally would so the Oireachtas is fully informed of what I am doing and why.

Section 31 introduces a new interest-limitation rules as required by the EU anti-tax avoidance directive, ATAD, by inserting a new part 35D into the Taxes Consolidation Act 1997. Interest-limitation rules form part of the recommendations of the OECD base erosion and profit sharing, BEPS, project, with the ATAD providing the basis for co-ordinating implementation of anti-BEPS measures by EU member states. Following enactment of this Bill, Ireland will have completed transposition of the directive.

The interest-limitation rule is intended to limit base erosion through the use of excessive interest deductions. These rules are complex. Deputies will be aware that my Department held an initial public consultation on these rules and the anti-hybrid rules in November 2018. This was followed by two feedback statements that were publicly made available by my Department in December 2020 and at the start of this summer, in July.

Ireland has pre-existing rules to prevent excessive interest deductions that operate in a different manner from the ATAD rule. The current Irish approach can best be summarised as one which limits interest deductions to be available only in specific scenarios largely based on the purpose of the borrowing. This is combined with targeted anti-avoidance rules which have evolved over time to combat abusive arrangements. The new ATAD rule will impose a new additional limit which links a taxpayer's allowable net interest deductions directly to its earnings. It limits the maximum net deduction to 30% for earnings before tax and before deductions for net interest expense, depreciation and amortisation. When this threshold is breached, interest deductibility is deferred until there is sufficient interest capacity to allow deduction.

The key features of the provision are as follows. The interest limitation rules apply to all corporation taxpayers but with certain erosions and reliefs as provided for in ATAD where the risk of base erosion and profit sharing is thought to be minimal. There is a de minimis exemption for companies with interest of not more than €3 million in a year. Stand-alone companies, in other words companies with no associates, group companies or permanent establishments outside Ireland, are outside the scope of the rule. Interest on borrowings in respect of long-term public infrastructure projects and interest on legacy debt, the terms of which were agreed before 17 June 2016, are also outside the scope. A group of Irish companies may, where certain conditions are met, be treated as a single taxpayer for the purposes of the restriction. The rules also take into account the debt provision of a multinational group when assessing whether interest deductions are being taken in Ireland. Finally, disallowed interest may be carried forward to the succeeding accounting periods where it may qualify for deduction if the company has sufficient interest capacity to deduct interest on its earnings before the earnings before interest, taxes, depreciation and amortisation, EBITDA, limit. Where a company has spare capacity in a year, this may be carried forward for up to five years. The new interest-limitation legislation applies to accounting periods commencing on or after 1 January 2022.

I note that one of exceptions to the interest limitation rule as set out in section 31 is a stand-alone company, that is, a company that has no associated enterprises or permanent establishments. I would like the Minister to clarify if a company using the orphan structure would meet this exemption criterion? I am sure he was expecting that question. One of the things that professional service companies like to talk about is the orphan structure because it is considered a stand-alone company even though, effectively, it will be under the control of another company or companies. I ask the Minister to clarify if this structure would meet the definition of a stand-alone company.

Another exception to the interest limitation rule as set out in section 31 is a long-term public infrastructure project, that is, a project to provide, upgrade, operate or maintain a large-scale asset in the general public interest. Would a public private partnership engaged in such public infrastructure projects meet this criterion?

A further exception to the interest limitations rule as set out in section 31 is interest on legacy debt, that is, debt, the terms of which were agreed before the terms of the interest limitation rules were agreed on 17 June 2016. For example, would profit participating notes issued before the date of 17 June 2016 meet this criterion and how would instruments such as perpetual bonds that have no maturity date and are not redeemable, but pay a steady stream of interest forever, meet the criteria of this exemption?

It is also stated that where the Irish taxpayer is part of a consolidated worldwide group for accounting purposes, the indebtedness of the overall group at worldwide level may be considered for the purposes of providing additional relief, and that if the Irish taxpayer has debtor interest ratios lower than the worldwide group, its interest expense may not be restricted or a lower restriction may apply under the ILR. I would welcome a working example of what that would look like in practice. I am aware that these are quite technical questions. It is interesting to tease out these issues.

If the Minister would like to respond to those detailed questions from Deputy Farrell, I will be happy to contribute after him.

I will try to deal with the different questions put to me by Deputy Farrell. On the question regarding the orphan structure and the stand-alone company, as the committee will be aware, an orphan company is a company that is bankruptcy remote. This means that in the event of a bankruptcy, the assets of the securitisation company are ring-fenced against the liabilities of that company. The orphaning of securitisation companies is standard practice in large public capital market transactions. There are circumstances in which a company may be orphaned and not included in any consolidated financial statements, but may not meet the very strict criteria to qualify as a stand-alone entity. In those situations, the orphaned company may be considered to be part of a single company worldwide group. In such a scenario, the company is subject to the interest limitation rule but may be able to avail of group relief, subject to it not having any transactions with associated companies which give rise to interest expense.

To summarise, in a situation where an orphan company is considered to be part of a single company worldwide group, it is subject to these rules and the criteria I have just mentioned. Beyond that, if the stand-alone entity is not part of a worldwide group, it would not be covered by these rules. The reason is that in the development of the work that led up to this point, the view was formed that stand-alone entities pose significantly less risk, if any, to base erosion and profit sharing, BEPS, through interest deductions as they are generally financed by third party debt from unconnected entities. For that reason, a stand-alone entity in those circumstances would be exempt from the operation of the interest limitation rule. In circumstances where the standalone company is outside of a worldwide group and financed by third party debt from an entity that is unconnected to it, it will be exempt from the operation of this rule.

On public private partnerships, the answer is likely to be that they will be exempt from this, but it will have to be evaluated on a case-by-case basis, depending on the funding arrangement for the public private partnership in question.

The Deputy asked a question with regard to legacy debt. She also asked another question. My apologies; I cannot recall that other question.

It was about profit participating notes issued before 2016 and if instruments such as perpetual bonds, which have no maturity date and are not redeemable but pay a steady stream of interest forever, would meet the criteria of the exemption.

On the question regarding the financial instrument, if it was issued before that date and unchanged, it would be exempt. After that date, if the terms are changed in any way, it would then be subject to this new rule.

On perpetual bonds, they do not fall into this legacy exemption. As milestones for drawdown must be included in the terms of the bond, they do not fall into this exemption.

The Deputy asked for a working example of a worldwide group. I will ask my officials to put together an example and have it circulated to the Deputy in advance of further deliberations on Committee Stage of the Bill.

I thank the Minister.

Section 31 deals with the transposition of the anti-tax avoidance directive, Article 4. Is that the directive that was agreed in 2016 and the same directive that we were supposed to have transposed into domestic law by the end of 2018 and operational in January 2019? It may not be. I am genuinely seeking clarification on this. Is it the same directive in respect of which we were threatened with infringement proceedings for delaying its transposition? If it is, can the Minister explain why Ireland delayed for so long in regard to what is a part of the BEPS process, of which the Minister is such a fan?

Yes, it is that directive. The anti-tax avoidance directive, or ATAD, provided for a general transposition date of 1 January 2019, but it was also specified that where member states had pre-existing rules relating to interest deductibility that were equally effective at preventing BEPS risks, implementation could take place up to 1 January 2024. My view, which is supported by the analysis and case study data, is that our current interest deductibility rules are at least as effective as the interest limitation rule set out in Article 4 of ATAD in terms of preventing BEPS and allowing deduction for interest expense, where appropriate.

We engaged with the Commission in this regard. Yes, infringement proceedings were issued against us and they were commenced in 2019, but over 20 infringement proceedings have been issued to date against member states in regard to various aspects of ATAD transposition. Following discussions that my officials had with the Commission, we then gave further indications as to how we were going to transpose this, work on which is under way in this Bill. As a result, infringement proceedings were paused pending the transposition.

I understood the Deputy was a fan of BEPS 2.

I am. I just want to know why the Minister and his predecessor, Michael Noonan, decided to not implement and transpose the directive, which we were supposed to have in place at the end of 2018. The Minister and his predecessor argued that our existing rules were just as effective. If that was the case, we would not have to transpose it until 2024 but that is not the case because, as the Minister rightly acknowledged, in 2019 formal notice was served on Ireland because of our refusal to transpose this agreement into Irish domestic law.

It is not the first time we have dragged our heels as a State in regard to these issues but we are now in this position. It is unfortunate that Europe had to take that action against the State to make the Government and the Minister, who was in charge at the time, change tack and implement this legislation, which is about the profit shifting of large profitable entities that are resident in the State.

That being said, I would like to ask on which sectors, in the Minister's view, this will have the greatest impact in terms of increasing their taxation burden through the introduction of these limits. Does the Minister see any impact, for example, in regard to the aircraft leasing sector, given how this will apply to it and with Dublin being a global centre for that type of activity? Are there other sectors that the Minister is concerned about? In the transposition of this directive, given there is scope in regard to how it is transposed, has the Minister taken any decisions that have in mind particular sectors and how they would be impacted?

If the Minister can submit to us the detailed note he has on each of the amendments before Report Stage, that would be appreciated.

It is important to put our efforts on ATAD transposition into context. There were many other elements of the ATAD that were equally important and that Ireland fully delivered on time, for example, changes with regard to exit tax, control of foreign companies, hybrids and the work we have under way in this Finance Bill with regard to reverse hybrids. It is the case that while we delivered all of those other expectations on time, there was a particular issue that we had in regard to interest limitation. The stance I took was driven by my view that the existing rules we had were effective. The Commission took a different view in this regard. We were not on our own within the European Union on this particular issue and other countries were also subject to proceedings from the Commission. While I never want to be in the position where we are subject to that kind of action by the Commission of the European Union, I would still make the point to the committee that it has paused what it is doing in recognition of the action we are now taking in this Finance Bill.

In regard to the sectors that could be affected by this, they are ones that tend to have very valuable assets and very high levels of borrowing, and, therefore, the sector likely to be most affected by this here in Ireland will be the aircraft leasing sector because of the value of the aeroplanes leased and the role of borrowing in this regard. The Deputy asks whether they have looked to engage with us on this. Through the public statements we published in regard to how we are going to implement this and the public consultation we have had under way on the general implementation of this change and other changes in corporate tax, they have given us their views in regard to it. As best as we can, we have tried to deal with the different issues they have raised but, overall, this is a fundamental change that we believe is necessary to fulfil the commitments we have both to the OECD and to the EU. Any public consultation response that we have made or received is published on the Department of Finance website. I understand one of the key issues that matters to the aircraft leasing trade is the difference between operating lessors and lessees.

In regard to the more detailed note I have with me, I will of course make it available to the committee.

The Minister said he had tried to deal with the issues they have raised. Beyond that issue of operating lessors, will he outline what other issues he has tried to deal with in these amendments that the aircraft leasing sector has raised?

That is the key issue I am aware of. If any other issue has been raised that is of equal importance and which I am not aware of, I will share it with the committee. That is the key issue that was raised.

The Minister will provide that note to us.

Amendment agreed to.

I move amendment No. 36:

In page 53, to delete lines 21 to 26 and substitute the following:

“(v) such portion of the profit or loss on-

(I) a financial asset (within the meaning of section 76B), or

(II) a financial liability (within the meaning of section 76B),

the coupon or return on which principally comprises interest or one or more of the amounts referred to in this paragraph, to the extent that it would be reasonable to consider that such amount is economically equivalent to interest,”.

Amendment agreed to.

I move amendment No. 37:

In page 53, between lines 26 and 27, to insert the following:

“(c) any amounts referred to in paragraph (a) or (b) claimed by a claimant company under section 420(6),”.

Amendment agreed to.

I move amendment No. 38:

In page 53, line 27, to delete “(c)” and substitute “(d)”.

Amendment agreed to.

I move amendment No. 39:

In page 53, line 27, to delete “incurred” and substitute “arising”.

Amendment agreed to.

I move amendment No. 40:

In page 53, line 32, to delete “(d)” and substitute “(e)”.

Amendment agreed to.

I move amendment No. 41:

In page 53, line 34, to delete “(e)” and substitute “(f)”.

Amendment agreed to.

I move amendment No. 42:

In page 54, to delete lines 23 to 25 and substitute the following:

“(i) An Bord Pleanála, under section 9 of that Act, or

(ii) a local authority, under section 170 of the Planning and Development Act 2000,”.

Amendment agreed to.

I move amendment No. 43:

In page 54, line 30, to delete “resources” and substitute “sources”.

Amendment agreed to.

I move amendment No. 44:

In page 55, line 11, to delete “the portion of”.

Amendment agreed to.

I move amendment No. 45:

In page 57, to delete lines 34 to 40 and substitute the following:

“(b) any relief for losses or excesses, as the case may be, carried back from a subsequent accounting period under section 396(2), 396A(3), 396B(3), 397(1) or 399(2), or

(c) amounts set off under section 420 (other than interest treated as a charge on income that may be set off under section 420(6), but for this Part) or 420A.”.

Amendment agreed to.

I move amendment No. 46:

In page 60, to delete lines 16 to 32 and substitute the following:

“Capallow is the amount of allowances in respect of capital expenditure under Parts 9, 24 and 29 made to a relevant entity, and the amount in respect of the non-finance element of finance lease payments deducted in calculating that entity’s relevant profit or relevant loss, as the case may be, for the accounting period,

Capcharge is the amount of charges in respect of capital expenditure under Parts 9, 24 and 29 made on a relevant entity in calculating the relevant entity’s relevant profit or relevant loss, as the case may be, for the accounting period,

IEded allow is the amount of deductible interest equivalent referable to allowances in respect of capital expenditure under Parts 9, 24 and 29 made to a relevant entity in calculating the relevant entity’s relevant profit or relevant loss, as the case may be, for the accounting period,

IEded charge is the amount of deductible interest equivalent referable to charges in respect of capital expenditure under Parts 9, 24 and 29 made on a relevant entity in calculating the relevant entity’s relevant profit or relevant loss, as the case may be, for the accounting period, and”.

Amendment agreed to.

I move amendment No. 47:

In page 61, to delete lines 26 to 36 and substitute the following:

“(c) in a case in which an amount of deductible interest equivalent is deducted against chargeable gains chargeable to tax at the CGT rate, the amount of that deductible interest equivalent shall be adjusted as follows:

IEded-adj = IEded x (T rate/CGT rate)


IEded-adj is the adjusted amount of deductible interest equivalent in respect of the relevant entity for the accounting period, and

IEded is the amount of deductible interest equivalent in respect of the relevant entity for the accounting period deducted against chargeable gains chargeable to tax at the CGT rate,

(d) in a case in which an amount of deductible interest equivalent in respect of the legacy debt of the relevant entity is deducted against profits chargeable to tax at the P rate, the amount of that deductible interest equivalent shall be adjusted as follows:

IELD-ded-adj = IELD-ded x (T rate/P rate)


IELD-ded-adj is the adjusted amount of deductible interest equivalent in respect of the legacy debt of the relevant entity for the accounting period, and

IELD-ded is the amount of deductible interest equivalent in respect of the legacy debt of the relevant entity for the accounting period deducted against profits chargeable to tax at the P rate, and

(e) in a case in which an amount of deductible interest equivalent in respect of the legacy debt of the relevant entity is deducted against chargeable gains chargeable to tax at the CGT rate, the amount of that deductible interest equivalent shall be adjusted as follows:

IELD-ded-adj = IELD-ded x (T rate/CGT rate)


IELD-ded-adj is the adjusted amount of deductible interest equivalent in respect of the legacy debt of the relevant entity for the accounting period, and

IELD-ded is the amount of deductible interest equivalent in respect of the legacy debt of the relevant entity for the accounting period deducted against chargeable gains chargeable to tax at the CGT rate.”.

Amendment agreed to.

I move amendment No. 48:

In page 62, to delete lines 32 to 43, to delete page 63, and in page 64, to delete lines 1 to 39 and substitute the following:

Carry forward of disallowable amount

835AAD. (1) Where section 835AAC applies to a relevant entity for an accounting period (in this section referred to as the ‘first-mentioned accounting period’), the relevant entity may carry forward the disallowable amount to succeeding accounting periods in accordance with this section and any such amount carried forward shall be referred to in this section as a ‘deemed borrowing cost’.

(2) This subsection applies where an amount of deemed borrowing cost arises from a disallowable amount which would have, but for this Part, reduced the amount of tax payable by the relevant entity in the first-mentioned accounting period or the accounting period immediately prior to the first-mentioned accounting period.

(3) Subject to subsections (5), (6), (15) and (16), where subsection (2) applies, a relevant entity may, make a claim to deduct the amount of deemed borrowing cost referred to in subsection (2), or a portion thereof-

(a) from its total profits or chargeable gains arising in an accounting period subsequent to the first-mentioned accounting period, or

(b) where there is an insufficiency of such profits, to create a loss or excess in an accounting period subsequent to the first-mentioned accounting period and relief for that loss or excess shall be given in accordance with section 31, 396(1) or 399, as the case may be, and sections 397, 400 and 401 shall apply to that loss.

(4) Where a claim is made for a deduction under subsection (3), any such deduction shall be applied after all other claims for relief have been made.

(5) Where a deemed borrowing cost is deducted from profits chargeable to tax at the P rate, for the purpose of calculating the amount of the deemed borrowing cost applied in reducing the amount of profits chargeable to tax at that rate, the amount of deemed borrowing cost shall be multiplied by the following fraction:

P rate/T rate.

(6) Where a deemed borrowing cost is deducted from chargeable gains, for the purpose of calculating the amount of the deemed borrowing cost applied in reducing the amount of chargeable gains chargeable to tax at the CGT rate, the amount of deemed borrowing cost shall be multiplied by the following fraction:

CGT rate/T rate.

(7) This subsection applies where an amount of deemed borrowing cost arises from a disallowable amount which would have, but for this Part, resulted in the relevant entity-

(a) incurring a loss or excess,

(b) incurring a greater loss or excess than would have been incurred, or

(c) offsetting a lower amount of loss or excess against its income under section 396(1), 399(1) or 399(2) than would have been offset, in the first-mentioned accounting period.

(8) Subject to subsections (9), (10), (15) and (16), where subsection (7) applies, a relevant entity’s deemed borrowing cost shall be treated as a loss or excess incurred in the first-mentioned accounting period (to the extent such a loss or excess would have arisen but for this Part) and relief for that loss or excess shall be given in accordance with section 31, 396(1) or 399, as the case may be, and sections 397, 400 and 401 shall apply to the amount of deemed borrowing cost referred to in subsection (7) in the same manner as they apply to a loss.

(9) Where a deemed borrowing cost that is treated as a loss or excess incurred in the first-mentioned accounting period is deducted from profits chargeable to tax at the P rate, for the purpose of calculating the amount of deemed borrowing cost treated as a loss or excess applied in reducing the amount of profits chargeable to tax at that rate, the amount of deemed borrowing cost treated as a loss or excess shall be multiplied by the following fraction:

P rate/T rate.

(10) Where a deemed borrowing cost that is treated as a loss incurred in the first-mentioned accounting period is deducted from chargeable gains, for the purpose of calculating the amount of deemed borrowing cost treated as a loss applied in reducing the amount of profits chargeable to tax at the CGT rate, the amount of deemed borrowing cost treated as a loss shall be multiplied by the following fraction:

CGT rate/T rate.

(11) This subsection applies where an amount of deemed borrowing cost arises from a disallowable amount which would have, but for this Part, resulted in a relevant entity incurring-

(a) an excess of expenses of management referred to in section 83(3), or

(b) a greater excess of expenses of management than would have been incurred,

in the first-mentioned accounting period.

(12) Subject to subsections (13), (14), (15) and (16), where subsection (11) applies, the amount of deemed borrowing cost of the relevant entity shall be treated for the purposes of subsection (3) of section 83, and any further application of that subsection, as if it has been disbursed as expenses of management for the first-mentioned accounting period.

(13) Where a deemed borrowing cost that is treated as if it has been disbursed as expenses of management incurred in the first-mentioned accounting period is deducted from profits chargeable to tax at the P rate, for the purpose of calculating the amount of deemed borrowing cost treated as expenses of management applied in reducing the amount of profits chargeable to tax at that rate, the amount of deemed borrowing cost treated as an expense of management shall be multiplied by the following fraction:

P rate/T rate.

(14) Where a deemed borrowing cost that is treated as if it has been disbursed as expenses of management incurred in the first-mentioned accounting period is deducted from chargeable gains, for the purpose of calculating the amount of deemed borrowing cost treated as expenses of management applied in reducing the amount of chargeable gains chargeable to tax at the CGT rate, the amount of deemed borrowing cost treated as an expense of management shall be multiplied by the following fraction:

CGT rate/T rate.

(15) The aggregate of the deemed borrowing cost utilised in an accounting period under subsections (3), (8) and (12) shall be limited to the amount of the total spare capacity in the accounting period.

(16) Where the relief available under subsections (3), (8) and (12) would, but for subsection (15), exceed the total spare capacity of a relevant entity in an accounting period, relief under subsection (8) shall be given in priority to relief under subsection (3) or (12).

(17) For the purposes of determining, in respect of a disallowable amount carried forward in accordance with subsection (1), the amount of relief available in accordance with subsections (3), (8) and (12) in an accounting period (in this subsection referred to as the ‘relevant accounting period’) subsequent to the first-mentioned accounting period, the amount of relief given in respect of the deemed borrowing cost concerned under those subsections in the accounting periods, if any, prior to the relevant accounting period shall be deducted from the amount of the deemed borrowing cost.

(18) A deemed borrowing cost shall not be taken into account in calculating a relevant entity’s deductible interest equivalent in an accounting period subsequent to the first-mentioned accounting period.

(19) Notwithstanding anything in this section, no amount shall be deductible in respect of a deemed borrowing cost that arises from a disallowable amount which reduced an amount of interest equivalent deducted in connection with the provision of a specified intangible asset, by reference to which allowances referred to in section 291A(6)(a)(i) are made, and for the purposes of section 291A(6)(b)(ii) such amount shall, for the accounting period in which the disallowable amount arises, be treated as an amount of interest for which relief cannot be given by virtue of section 291A(6)(a).”.

Amendment agreed to.

I move amendment No. 49:

In page 68, line 10, after “enterprises” to insert “which gives rise to deductible interest equivalent”.

Amendment agreed to.

I move amendment No. 50:

In page 72, line 23, to delete “resident in the State” and substitute “members of an interest group”.

Amendment agreed to.
Section 31, as amended, agreed to.

Amendments Nos. 51 and 73 are related and may be discussed together.

I move amendment No. 51:

In page 77, between lines 22 and 23, to insert the following:

32. Within three months of the passing of this Act, the Minister shall lay a report before the Dáil, on the functioning of section 481 relief for investment in films, particularly in relation to the degree to which it is meeting the requirement to meet “quality employment and training” and to examine whether film producer companies in receipt of the relief are hiding behind short lived designated activity companies (DAC) to avoid taking responsibility for workers employed on film productions supported by the relief.”.

This is an issue we discuss pretty much every year at the Finance Bill. It relates to section 481 tax relief for investment in films and the question of whether the condition of quality employment and training, which is a condition of the granting of this relief to film producer companies, is actually being met. The Minister has been helpful in responding to our concerns on this issue over the last number of years.

He has attempted to tighten the conditionality regarding the quality employment and training provisions of the relief, most notably requiring an undertaking in respect of quality employment for the recipients of the relief, on foot of the concerns raised by film workers and by me and others over the years. However, the problem is that there is very good reason to believe that this has not been enough to deal with the practice of getting around the requirements for quality employment and training by recipients of the section 481 relief.

The Minister will be aware that when this question is raised, whether it is in this committee, in arts committees, in debates in the Dáil or between the different players in the debate about the section 481 relief, the film producers who are the recipients and their representatives in Screen Producers Ireland, in particular, will say that it is a project-to-project thing so one cannot really expect security of employment and income because that is just the nature of the industry. They say they will do their best to comply with the law and so forth, but that one cannot expect security of employment. I do not accept the case that just because something is project-to-project, the workers who work in an industry for decades are basically, due to the way the industry works, only as good as not even their last job but only as good as the producer deems them to be at the moment in which they apply for their next job, even though they may have worked in the industry for decades. That is not fair. I do not believe it is in line with the working time directive and I certainly do not believe it is in line with the requirement under section 481 to have quality employment and training. It is not quality employment and training.

A person can be a painter, stage crew or somebody who is below the line, as they are sometimes referred to patronisingly by some elements in the film industry. The "below the line" workforce is the terribly insulting term that is often trotted out in these discussions. There are the above-the-line people, the flashy people perhaps, and there are the below-the-line people.

How would Deputy Boyd Barrett describe himself? Is he above or below the line?

I stand with the workers, whether they are deemed to be above or below the line. The Minister understands my point. It is an insulting notion because they are all equally important in the production of a film - everybody from the painter, costume designer, stagehand and transport drivers to the actors, directors and so forth.

It is the case that if one is a painter who paints the stages, a very specialised thing, or somebody who works in props, again a very specialised thing, one might have worked in the industry for up to four decades and for the same group of producers. It is a group, and I have spoken to the Minister's officials about this. It is not necessarily the same producer every time, but in Ireland there is a relatively small group of producer companies. They are the overwhelming beneficiaries of section 481, and everybody knows who they are. There are smaller producer companies that may be set up on a much smaller scale, but everybody knows the big producer companies and everybody knows they are the largest recipients, year in and year out. They also have representatives and friends on Screen Ireland, which is the official State body and which is, in my opinion, just looking after their interests. I believe there is a conflict of interest in many cases in the way in which Screen Ireland, which is also dishing out grants, has such a close relationship to one particular group in the film industry, the film producers. That is an issue that must be addressed. It is not particularly in the Minister's remit, but part of the problem here is that there are a number of different Departments dealing with this, including the Department of Finance, the Department of Tourism, Culture, Arts, Gaeltacht, Sport and Media, and the Department of Enterprise, Trade and Employment.

My point is that somebody can have worked for three or four decades for the same group of producers, but when a film is being done by a producer the person has worked with previously and when the person asks to work on it the producer can just say: "No, we do not like you. You spoke up about conditions on the job and you spoke publicly in a way that was critical of us, so you are not getting a job here". There is nothing in the law to prevent that from happening. They seem to be able to get away with it. I am somewhat nonplussed as to how they are doing this, given that the Minister has made genuine efforts and I acknowledge them. When the worker who is a victim of that goes to the Workplace Relations Commission, WRC, or the Labour Court, a representative of the film producer is standing across from him or her. The worker has worked with that film producer on a section 481 production. The film producer knows it, the worker knows it and they have often done it time and again, yet the film producer can say that the worker was never his or her employee. Often the producer will send a representative to say it because he or she does not even turn up. Recently at one of these hearings the producer sent in somebody from IBEC, which is quite extraordinary. I do not understand how IBEC is able to represent somebody in such a situation. That is what is happening.

Why is that? It is because the worker is an employee of the designated activity company, DAC. The film producer company gets section 481. The film producer sets up the DAC for the specific film project, but when the worker asserts his or her rights and says those rights are being breached in terms of a collective agreement - the WRC found in favour of the workers recently for breach of a collective agreement - or in terms of unfair dismissal because the worker had previously worked for the film producer and the worker is dismissed, the film producer who is getting the relief, and I remind the Minister that it is conditional on quality employment and training, says he is not the employer, even though he self-evidently is the employer because the DAC he set up is the employer. The DAC no longer exists and, therefore, the producer has no responsibility to the worker. That is fundamentally wrong.

I also believe that if the EU Commission, and it is getting to that level, was aware that the scale of the relief that is being distributed through section 481 was being abused in this way, it would ask serious questions about state aid. Do not get me wrong, the State's aid to the arts is absolutely necessary and justified. I always have to reiterate that I want more money to go into film, arts, culture and so forth, and I have actively campaigned for that, but I want it to be conditional on decent employment conditions for the people who work in the sector. The specific state aid that is allowed in the area of arts, culture and film requires an effort to build up companies of scale and a permanent pool of skills. As I discussed with one of the Minister's officials yesterday, it cannot be the case, and nobody is asking for it, that a particular film producer company employs the workers for 52 weeks of the year on a permanent basis. Let us dispense with that red herring in case it is thrown out. Nobody is asking for that.

Everybody knows that is not possible. Personally, I think it is possible at some point in the future but I will leave that for another day. There used to be film studios that did that kind of thing and, arguably, film was better then, but I will leave that aside. Even without that argument, that production can be a bit more episodic does not absolve the film producer companies that get this money again and again, particularly at the moment when there is a lot of film production happening and there is no real shortage of work. The film producer can say they work in a precarious industry, from film to film, and claim that, therefore, they have no obligation to the worker. They can say that if the worker ever tries to assert any obligations on the producer's part to the worker, they will simply deny they have any employment relationship with him or her.

That is still not being addressed and it means people are wide open to and have been victims of straight-up blacklisting. If they rock the boat, they can become victims of blacklisting. People from the acting fraternity have even appeared before Oireachtas committees and said they are afraid. Let us think about Harvey Weinstein and all that stuff. He was doing this for years. If you did not do what he wanted you to do, sometimes awful things, he had the power to put you out of the industry and say you will never work again. That can happen above the line - it does happen there - and it can also happen to the below-the-line people.

I tabled amendment No. 73. I agree with Deputy Boyd Barrett's comments. As long as we have been members of the committee, he has raised these issues. Our amendment seeks the production of a report on film relief in the context of the pay, conditions and training of employees within the sector and options to enhance the scheme with respect to employee pay, conditions and training.

Earlier we drew comparisons, or perhaps non-comparisons, between North and South in respect of housing. One area where we could look to the North, and where the minister there does have powers, relates to the terms and conditions of contracts. The Northern Executive has just been accredited as a living wage employer, something this State has not achieved. It is wrong that those working within the public service or the Civil Service would not automatically earn the living wage. Perhaps the Minister will update on us whether there is an intention to move there. Crucially, in the North, that includes those who provide services such as catering, cleaning and others. More important, as the Minister of Finance in the North, Conor Murphy, has informed me, is that from June of next year, the Executive will use the £3 billion it spends on goods and services for a greater public good. This will ensure any contract that bids for and is granted those services, whether in construction or supplying to the Departments of Education, Health or whatever, will have to abide by the living wage. Nobody will be able to be employed at a rate under the living wage.

That is an example we should follow here, and that is the spirit of our amendment. It is not about the granting of a contract of State money to a private sector employee, which is what the Executive will commence doing from June of next year, whereby in the case of every private sector contract that is awarded, all the staff will have to be paid at least the living wage. Rather, given that the section seeks to grant a benefit on companies here through tax relief, we are saying we should insist on decent pay and conditions and opportunities for those working within the sector.

It is timely to have a review of this, not just of the section I mentioned but the wider section, to examine how the State uses the vast sums it spends on contracts and to ensure it will not only be of benefit in the case of contracts awarded for the provision of, say, healthcare or education, but also that there will be the enhanced benefit whereby employees within the sector will be paid fairly.

I strongly urge the Minister to examine this issue next year with a wider lens, bringing this sector in particular, about which concerns have been raised for many years, under that microscope.

Section 481 provides a 32% payable credit for eligible expenditure on film production in Ireland. The scheme is intended to act as a stimulus to the creation of an indigenous film industry in the State, creating quality employment opportunities and supporting the expression of Irish culture. The audiovisual sector has largely continued to function through the most challenging period of the pandemic. It has provided quality employment at a time when so many other elements of the culture sector were severely impacted. The protocols put in place by the sector have meant workers have been in high demand.

It is expected that in the provision of such opportunities there will be compliance with all applicable employment obligations, including legislative obligations and policies and procedures to ensure dignity at work. To grow the industry in Ireland, we want quality and sustained employment and training opportunities in the sector. This is reflected in the undertaking of quality employment, which is required to be signed as part of the application process for section 481. This undertaking applies not only to the producer company but also to the designated activity company. In addition to the requirement to sign an undertaking of quality employment, an applicant company is required also to submit a skills development plan as part of its section 481 application if the relevant project is worth more than €2 million.

There has been good progress over the past year in respect of negotiations between employer and worker representative bodies in the sector. For example, from January 2021, a modernised crew agreement was introduced that promotes good practice, regularises evolving work practices and provides for an industry pension scheme operating under the construction workers pension scheme. A monitoring structure to oversee the operation of the agreement is included, as is a commitment to develop the first work-life balance policy for the film and television industry. The agreement acts as a framework for the industry, covering all grades except film construction.

I understand, however, that a proposed construction crew agreement is also under negotiation, and my officials will continue to monitor progress in this regard. In respect of any specific workplace disputes, the Workplace Relations Commission, WRC, and the Labour Court are the organs of the State tasked with the resolution of disputes relating to workplace matters and employment rights, and it is appropriate that any relevant claims be referred to these bodies for adjudication. As a result, I am not able to comment on those matters.

In light of these points with regard to the undertaking of quality employment, the skills development plan and the progress with regard to employment relations within the industry, I do not believe it is necessary to undertake a report in line with what has been requested by the Deputies.

To respond specifically to Deputy Boyd Barrett on continuity of employment issues, they need to be ruled on by the WRC but this has not yet happened. My understanding is the issue at stake relates to the fact an individual has worked for a different producer between the projects for which they are claiming continuity.

That is an industrial relations matter that the WRC needs to form a view and make a ruling on, as opposed to it being a matter for tax policy.

To respond to the broad issue the Deputy raised about continuity, many parts of our economy have different employers within a particular sector and employees move between those different employers. However, that does not give the employee the ability to make the case for continuity of employment if he or she has moved from one employer to another. I have said to the Deputy in the past - and I know we disagree on it - that film is a sector of the economy, both here in Ireland and across the world, in which employment takes place project to project, film to film. The progress made by the different bodies in the sector in respect of the regulation of the industry, representation and the agreement on crew means it is in a very different place from where it was a few years ago, when the Deputy began to raise issues about the sector. Work is under way on a modernised crew agreement, there is a requirement for a skills development plan and work is under way with regard to a construction crew agreement. None of this was happening a few years ago. The Deputies, the Department and I have made an input and played a role in that. That is the way in which we can make progress on the issues Deputies Boyd Barrett and Doherty have raised.

As I have acknowledged previously, the Minister, more than any other Minister - there are a few Ministers who potentially should have been involved in this - and his officials have responded and there have been changes and improvements.

The awful irony in all of this is that the people who brought the issue to the attention of the Joint Oireachtas Committee on Culture, Heritage and the Gaeltacht in 2018 and gave evidence to the committee have not worked in the industry again. They are people who had worked in the industry for decades. There is no doubt that they have been blacklisted out of the industry and subjected to horrendous vilification. I am sure the people who vilified them will say they are awful people but normally when someone is vilified in an employment relationship, there is a process in place. If an employer has a problem with an employee, or vice versa, there is a process involving disciplinary action, cautions, hearings and so on. The problem is that these workers have never had the opportunity to have their case heard in a fair way because there is nothing currently to prevent a film producer from simply telling a worker they are not being employed again because they do not like that worker, what he or she said or the criticism he or she made. The reason there is nothing to stop that is because of the acceptance of this narrative of employees working project to project and the relationship of the DAC to the producer company.

I am nonplussed, as I said. I know the Minister stated the requirement for equality, employment and training applies to both the DAC and the producer company. The problem is the relationship between the producer company, which is the recipient, and the DAC, because the DAC is short-lived. For example, if an employee works for the DAC, while that DAC is in existence, it is required to comply. However, if it does not comply and the employee later takes a case, the producer company, the only entity that still exists - it is above the project to project work and is the continuous factor in all of this - will argue that the DAC is gone. The producer company will assert that it does not have an obligation and cannot be held responsible because the DAC, which had an obligation, no longer exists. However, the person who set up the DAC still exists and that person is the producer company, which is in receipt of the relief.

The Minister has stated that it is up to the WRC to give a direction on this matter, but I do not think that is the case. I am asking the Minister and his officials to look at the detail. An instruction should come from the Government, clearly stating that where a film producer tells a worker that they do not have an employment relationship with that worker because the DAC had the relationship with the worker, it is not an acceptable case to make and film producers should not be allowed to make such a case because, in fact, the DAC and film producer are one and the same. If that instruction went to the WRC or the legislation was tweaked as required to say that that is not an acceptable position to adopt or case to make when employees worked on productions funded under section 481 or, for that matter, by Screen Ireland, it would make a big difference. It would clarify the position.

Such a direction should apply to the pool of people who have worked in the industry for the past ten years, 15 years or 20 years. I know of a man, who had worked on the first season of "Vikings" and stood outside Ardmore Studios or Ashford Studios - I am not sure which - a few weeks ago. He has since died. He fully expected to work on the next season of the show but he was considered to be associated with the wrong people, was not re-employed and he is now longer alive. Shortly before he ended his life, he stood outside a place where he had worked for years, wondering why he was not taken back in. It is brutal stuff, and there is nothing to stop it happening. For many of the people involved, it is far too late by the time they get through the WRC process, the Labour Court and all the rest of it. The Minister knows what a rigmarole that is. The film producer companies have resources, whereas the individuals who have worked in the industry for years and are trying to make their own case do not. It is just not right.

The Minister argued that because there are sectors in which there are a number of different operators and people move between these operators, if someone moves from employer A to employer B and then back to employer A, that is just what happens and that is life. However, I put it to him that there are two big differences in this case. The first is that none of these film productions - and I mean none - would exist without public money. The State has a big responsibility here. The film industry is not like the music industry in this country, for example, because the music industry never got State money until Covid. The film industry is utterly reliant on public money. No films would be made without it and, therefore, the State has a particular responsibility in that regard. Second, if it was just a case of lots of different actors in a particular sector moving from employer A to employer B or from employer B to employer C, D, E, F, G, H, I, J and so on, perhaps that case could be made. However, as I said, we know there is actually a relatively small group who are the beneficiaries. Workers will perhaps move from employer A to employer B, and then to employer C, but they are only moving between those three employers.

The film industry is a publicly-funded sector in which the various players would not exist without public money and where, generally speaking, the workers are bouncing between the big three or four players.

That is not being addressed. Ultimately, unless it is addressed, it will operate to the detriment of the quality of film and to the sector as a whole.

Deputy Doherty referred to the North. I agree absolutely about what he said about the living wage although when one is working on a film, one is quite well paid and generally receives more than the living wage. The problem is what happens afterwards, especially if the industry decides it does not like you. It certainly seems to me that in other jurisdictions there is far greater rights for the pool of people to be seen as part of that pool and not to be arbitrarily excluded from the pool because somebody does not like them. That is what I am looking for.

To use an analogy, in the worst-case scenarios of the Strumpet City days, dockers would turn up and there were opportunities to load ships for different companies. The scenario was that a company would either take a worker or not, on a completely arbitrary basis. One of the ways that was addressed was through the establishment of a stevedore company where dockers became part of a pool. They might be loading different companies' ships but there was a sort of registered pool of people and, therefore, a bit of fairness in the allocation of work, even though different companies were operating within that pool of dockers. Something like that could and should be done so that we know who is in the pool of employees and who is in the pool of trainees. Even commitments on training mean very little if we cannot track the journey of the trainee. Is the person who was trained on film A still around for film D that is being made by the same producer or group of producers? Has that trainee qualified? Is he or she now accepted as part of a pool of people with skills in the film sector? Is he or she, at any point, excluded from that pool? That issue is not being addressed.

I appeal to the Minister and his officials to look at this again to try to tighten it up. If there is uncertainty as to precisely how the working time directive and the relationship between DACs and production companies are playing out and being represented by different groups in the Labour Court, I believe it would be entirely right and legitimate for the Minister to intervene and state what the Government wants and how it wants these things interpreted. If that requires now statutory instruments or legislative change, so be it. I am not even sure it does require those things. The situation needs to be clarified and the Government needs to crack the whip, as it were.

I thank the Deputy. We will let the Minister respond on those points.

I thank the Deputy and will deal with the different points he has made. I will make a point I think is relevant to the concern the Deputy raised about the role and operation of DACs. A DAC is required to exist for a year after the cessation of a project in order to receive that tax benefits of section 481. That may not have been relevant a few years ago because we did not have the kind of framework, from an industrial relations perspective, that now exists. I acknowledge that the Deputy has played an important role in making that happen. There is a framework in place within the sector to deal with issues relating to pensions and how people are treated. The DAC must exist for a year after the project has ceased. We now have a framework through which issues such as this can be dealt with. Surely the space is there within the WRC or the Labour Court to hear issues relevant to the agreements that have now been brokered within a year after a project has concluded.

I understand the Deputy's point that a DAC does not exist after a period of time and someone can feel like they are going from DAC to DAC even though the group of people in these DACs may well be the same. However, the difference between now and the past is that we now have agreements against which the conduct of employers needs to be evaluated. I would be surprised if the Labour Court or the WRC was unable to deal with the issues within a year. During that year, the DAC is still required to be in existence as a condition of receiving the section 481 relief. That is a big difference when compared with where we have been in the past. I do not mean that in the sense of what has happened from a tax point of view, as we debated last time, but simply from the perspective of the kind of work that has happened from a labour relations point of view within the sector.

The Deputy said that many of these films or television series would not be made without them. To be more specific, they would not be made in Ireland without it. The content would still be made because the demand for films and television series that are all over streaming channels is hotter than it ever has been. They would still be made but the question is where they would be made. We want them to be made in Ireland to benefit all who work in the sector. I do not like to refer to people who work above and below the line. I want jobs for all those who work in the sector. I have met a few such people recently and it appears the sector is extraordinarily busy at the moment and doing very well.

In response to the different issues the Deputy has raised, I will say a word about progress that has been made. The WRC, in August 2020, made four different recommendations. It recognised the importance of good industrial relations and anticipated or was looking for an agreement that would deal with issues relating to pay, terms and conditions, travel time, overtime, sick leave, pensions and all of the issues one would expect to be dealt with in any good workplace. That is now in place for those involved in shooting films or television series. That was agreed between SIPTU and Screen Producers Ireland. That includes within it an industry pension screen, an agreement about how this will be monitored and a commitment to a work-life balance policy.

The Deputy also made a point about skills and training. An agreement is now in place between Screen Ireland and Screen Skills Ireland to put a greater focus on training and upskilling. Screen Skills Ireland has in the past two years, I am informed, completely changed the operation of the upskilling requirement of section 481 relief to provide far more skill opportunities and training opportunities, regardless of whether a worker is joining the industry for the first time or has been at it for a little while. There is also more recognition of the role of guilds within the industry and on how HR can be improved within that sector. I imagine that is critical for dealing with many of the different issues the Deputy has raised.

I will continue to take an active role in what goes on here. My officials and I accept the importance of points the Deputy raised two finance bills ago. We are making progress. We could always make more, but I think we are making progress. I met representatives from SIPTU and Screen Producers Ireland to indicate my interest in this subject. The account they gave me of what was going on in the sector was pretty positive. They talked about the good change that is happening and I was encouraged by that. We will continue to keep at this.

I do not believe that the Finance Bill is the way in which reports on this issue should be provided and that is why I am not accepting these amendments. I will continue to monitor this issue and see how we can support gradual positive change within a sector that is important to Ireland but within which there are issues that need to be addressed.

I genuinely appreciate the engagement by the Minister on this matter, but more needs to be done. I will come back to this on Report Stage. I ask the Minister and his officials to further consider what I have said.

It is unfair that the people who brought this matter to my attention and to the attention of the Oireachtas have, in effect, been blacklisted. While one union may be happy and, indeed, may have benefited from the actions of others in bringing certain issues forward and putting pressure on in terms of those issues, it would be a cruel and unfair irony if the whistleblowers end up being the victims even though they are ones who helped to move the goalposts and to which the Minister has responded. I think that injustice must be addressed but questions remain beyond that particular group. I have recently talked to actors. The dancers who worked on a film called "Disenchanted" made the point that their employment conditions here were much less favourable than similar film situations in the UK. There remains a problem in that people who raise questions are vulnerable. Certain people can make agreements but other people should have the right to question those agreements, at least. They should not be punished and penalised if they question things that others say are fine with nothing to see. We must protect people, give them the right to question things and ensure they are not victimised if they ask questions.

Is the amendment being pressed?

I will table an amendment on Report Stage.

Does the Deputy wish to withdraw this amendment or press it?

I will press it on the basis that I can come back to this matter on Report Stage.

Amendment put and declared lost.

Amendment No. 52 has been ruled out of order.

Amendment No. 52 not moved.
Question proposed: "That section 32 stand part of the Bill."

I do not quite understand the section and I ask the Minister to explain it. I have read the notes and the memorandum and I have tabled a parliamentary question. I want to understand what is meant by the change in the terms and the extension of the eligibility for section 481 to cover labour-only services. I am sure the Department officials know that I am concerned about bogus self-employment. I missed the discussion yesterday but Deputy Nash mentioned bogus self-employment in a well-aimed amendment. In my opinion, bogus self-employment must be defined objectively and not left to be defined by the employer, for example in circumstances in which the employer says a job is not bogus self-employment and the particular contractor is happy with the arrangement. Others who work in the industry, or might want to work in the industry, think this is an abuse that effectively excludes them and are concerned about the lack of objective criteria for what constitutes quality employment and training and is thereby eligible for the benefits of the relief. That is my concern. I am not saying I am right to be concerned; I am saying I am concerned. Therefore, I seek an assurance and certainty from the Minister that the relief is not, potentially, going to be abused.

I will begin by briefly explaining why this does not represent a change of policy by the Government in this area. Section 32 amends the definition of "eligible expenditure" in section 481 to confirm the current practice that payments made directly by a qualifying company, in respect of the provision of labour-only services by an individual, for the purposes of the production of a qualifying film qualify as eligible expenditure. Eligible expenditure is the portion of the total cost of production of a qualifying film that is expended on the production of the film in the State.

Deputies may recall that in the Finance Act 2018, the film tax credit was moved to a self-assessment basis. This involved the introduction of a substantial body of new legislation to govern matters previously dealt with by regulation. It was subsequently discovered that the new legislation unintentionally created a discrepancy between the definition of eligible expenditure and the long-standing practice in the industry. Payments in respect of self-employed individuals providing a labour-only service had always been treated as qualifying for section 481 relief and this treatment was expressly stated in previous Revenue guidance. This amendment confirms that the meaning of "eligible expenditure" includes labour-only services as described, and in addition to expenditure incurred directly by the qualifying company in the employment of eligible individuals on the production of the film and expenditure incurred directly or indirectly by the qualifying company in the provision of certain goods, services and facilities by a person who is carrying out their business from a fixed base of business in Ireland. This recognises that self-employed services may be provided in the sector but it is not intended to create a bias either towards or for self-employment. The characterisation of a worker as employed or self-employed will continue to be governed by the code of practice on employment status having regard to the specific circumstances of each individual case.

This change does not change our policy. It is policy-neutral towards the question of self-employment. It does not change the policy with regard to that. To be clear, if it subsequently comes to light that we have done anything here that changes the balance in any direction, we will look at it again but it is not our intention to do so. We are simply putting on a statutory footing the guidance that currently exists.

Question put and agreed to.

Amendments Nos. 53 to 55, inclusive, and amendments Nos. 57 to 69, inclusive, are related and may be discussed together.

I move amendment No. 53:

In page 78, line 20, to delete “an EEA state” and substitute “a European Economic Area (EEA) state”.

Section 33 introduces a new relief for the digital gaming sector. The aim of the measure is to provide an incentive to digital games developers to produce digital games that contribute to the promotion and expression of Irish and European culture. Subsequent to the publication of the Finance Bill, the requirement for a number of technical amendments to the legislation, as published, was identified to ensure the provisions operate as intended. I, therefore, commend the amendments to the committee. What I will do, in speaking to these amendments, is give a broader perspective on the Bill and the section itself.

The relief will take the form of a corporation tax credit, the beneficiaries of which will be digital games development companies. The rate of the credit will be 32%, available on eligible expenditure of up to €25 million per game. The credit will be available on expenditure incurred in the design, production and testing stages of the development of qualifying digital games, provided certain conditions are met.

In order to be eligible, the qualifying expenditure must be not less than €100,000. Games produced solely or mainly for the purposes of gambling or advertising will not be eligible for the relief.

The relief will be a cultural one for state aid purposes and, therefore, a cultural test will also apply. In order to claim the credit, a company must first apply for cultural certification as a qualifying digital game to the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media. An interim cultural certificate may be applied for at any point before or during the development of the digital game and will only allow relief to be claimed annually in respect of qualifying expenditure. On completion of a digital game, the company must apply for a final cultural certification and claim any balance of the credit due. As part of the certification process, a digital games development company will be required to sign an undertaking of quality employment. As already stated, the relief will constitute a state aid and, accordingly, must be notified to and approved by the European Commission prior to commencement. Accordingly, it is being introduced subject to a commencement order. The scheme will run until 31 December 2025.

I have no problem with the amendments. They are technical in nature. In order to support the flow on Report Stage, it would be helpful for the Minister to email a note to members in advance. He mentioned that the relief is subject to a commencement order and will be subject to state aid rules. Ireland has fallen foul of those rules in the past, with changes in the Finance Act not having been approved or requiring changes or alterations at a later stage. Has there been any indication from or discussion with the Commission regarding the likelihood of the relief being approved? Has there been any feedback on that?

We hope to get a positive response from the Commission on this issue. As we developed the relief, we looked closely at equivalent reliefs in other EU jurisdictions and we modelled it on our own section 481, so we are hopeful of a positive response on it. Obviously, that cannot be guaranteed. We expect that the overall procedure for gaining that approval could take nine to 12 months. We have indicated to those in the sector that this process could take that duration. I am hopeful, but I cannot give a guarantee.

The sector has experienced exponential growth across Europe but employment in it in Ireland has fallen. That is really worrying because it is an area in which we want Ireland to be a leader. There is broad agreement on that. We want it to be an area of significant growth. There has been a lot of success here in the context of some of the companies in the sector. Does the Minister believe this relief is what the sector requires to increase employment and grab some of the opportunities that are evident across Europe or are there other issues he has identified that need to be considered? I assume he or his officials have met with several of these companies and had dialogue with them. Are they seeking any other supports or changes?

The Deputy is correct that this is a sector in which Ireland could be doing a lot better. If you look at the strengths we have in animation and, more broadly, in the digital sector, the ingredients are there for Ireland to do far better than it is doing. We have engaged with the sector. The measure we have brought forward has received a very positive response from the sector. We have dealt in particular with Imirt, a representative body that has a variety of different companies included within it. It has given a positive response to the measure. The key issue we are likely to face is the supply of workers and graduates the companies need. I know there are a few universities that are doing great work in this area, namely, the Technological University Dublin, what will become the technological university of Munster and the Dún Laoghaire Institute of Art, Design and Technology. I understand from people who know a lot more about this than I do that they are doing really good work in training and educating students who will be able to work in this sector. I hope that in a few years when this relief is evaluated by the Department, we will be able to point to many new gains and people employed here as a result of it.

How does the relief compare with those offered by competitors such as Britain, which is now outside the European Union but is an English-speaking nation, and France? Have the provisions in those countries been considered? Is the relief proposed by the Minister more advantageous than what is on offer there or is it similar?

It is comparable to the situation in France. France has a rate of 30%, while ours is 32%. The rates in the UK are between 19% and 25% but it does not have a maximum claim. Our 32% rate compares really well to our fellow EU member but it also has the quality of being the same rate that we charge under section 481. I thought it important that there be consistency between it and the rate for the audiovisual sector. I think it is competitive and I hope it will yield gains and employment here in Ireland.

Amendment agreed to.

I move amendment No. 54:

In page 79, line 15, to delete “European Economic Area (EEA)” and substitute “EEA”.

Amendment agreed to.

I move amendment No. 55:

In page 80, line 27, to delete “to be”.

Amendment agreed to.

Amendment No. 56 is in the names of Deputies Boyd Barrett, Barry, Gino Kenny, Paul Murphy and Bríd Smith. Is the amendment being moved? As there is no member present to move it, the amendment falls.

For clarification, the amendment is grouped with another amendment. As it was not moved, does that mean we will not have an opportunity to speak to the other amendment?

No. When we reach amendment No. 74, we will discuss it fully.

It would be better for the committee to dispose of it now instead of having to come back to amendments relating to digital issues.

Is this on amendment No. 74?

Amendment No. 74 relates to the pay, conditions and training of employees in the sector.

That is slightly different. I will proceed in the manner I have been doing it.

Amendment No. 56 not moved.

I move amendment No. 57:

In page 83, to delete lines 20 to 22 and substitute the following:

“(b) as respects claims made under subsection (19), the interim certificate has expired,”.

Amendment agreed to.

I move amendment No. 58:

In page 84, line 17, to delete “relevant”.

Amendment agreed to.

I move amendment No. 59:

In page 85, to delete lines 28 to 31 and substitute the following:

“other than where—

(A) those arrangements relate to the development of part of the interim digital game or the qualifying digital game in a territory other than a territory referred to in clause (I) or (II) of subparagraph (i),”.

Amendment agreed to.

I move amendment No. 60:

In page 85, line 36, to delete “production” and substitute “development”.

Amendment agreed to.

I move amendment No. 61:

In page 86, to delete lines 1 to 21 and substitute the following:

“(b) without prejudice to the generality of section 886, where the company fails to provide, when requested to do so by the Revenue Commissioners, for the purposes of verifying compliance with the provisions governing the relief or with any condition specified in a certificate issued by the Minister under subsection (4) or subsection (9), evidence to vouch each item of expenditure in the State or elsewhere on the development of the interim digital game and the qualifying digital game, whether expended by the digital games development company or by any other person engaged, directly or indirectly, by the digital games development company to provide goods, services or facilities in relation to such development and, in particular, such evidence shall include—

(i) records required to be kept or retained by the digital games development company by virtue of section 886, and

(ii) records, in relation to the development of the interim digital game and the qualifying digital game, required to be kept or retained by that other person by virtue of section 886, or which would be so required if that other person were subject to the provisions of that section,”.

Amendment agreed to.

I move amendment No. 62:

In page 86, line 22, before “where” to insert “in relation to a claim under subsection (20),”.

Amendment agreed to.

I move amendment No. 63:

In page 86, to delete lines 42 to 44 and substitute the following:

“(ii) where an interim certificate has been issued to the company in relation to an interim digital game, any conditions attaching to the interim certificate have been fulfilled, and”.

Amendment agreed to.

I move amendment No. 64:

In page 87, line 38, to delete “production” and substitute “development”.

Amendment agreed to.

I move amendment No. 65:

In page 90, between lines 15 and 16, to insert the following:

“(c) the number of the certificate of incorporation of the company;

(d) in respect of the principal activity carried on by the company, the NACE classification code, as determined in accordance with Regulation (EC) No. 1893/2006 of the European Parliament and of the Council of 20 December 2006 establishing the statistical classification of economic activities NACE Revision 2 and amending Council Regulation (EEC) No. 3037/90 as well as certain EC Regulations on specific statistical domains;”.

Amendment agreed to.

I move amendment No. 66:

In page 90, line 16, to delete “(c)” and substitute “(e)”.

Amendment agreed to.

I move amendment No. 67:

In page 90, line 21, to delete “(d)” and substitute “(f)”.

Amendment agreed to.

I move amendment No. 68:

In page 90, to delete lines 27 to 37, and in page 91, to delete lines 1 to 3 and substitute the following:

“(g) the territorial unit, within the meaning of the NUTS Level 2 classification specified in Annex 1 to Regulation (EC) No. 1059/2003 of the European Parliament and of the Council of 26 May 2003 amended by Regulation (EC) No. 1888/2005 of the European Parliament and of the Council of 26 October 2005, Commission Regulation (EC) No. 105/2007 of 1 February 2007, Regulation (EC) No. 176/2008 of the European Parliament and of the Council of 20 February 2008, Regulation (EC) No. 1137/2008 of the European Parliament and of the Council of 22 October 2008, Commission Regulation (EU) No. 31/2011 of 17 January 2011, Council Regulation (EU) No. 517/2013 of 13 May 2013, Commission Regulation (EU) No. 1319/2013 of 9 December 2013, Commission Regulation (EU) No. 868/2014 of 8 August 2014, Commission Regulation (EU) No. 2066/2016 of 21 November 2016, Regulation (EU) 2017/2391 of the European Parliament and of the Council of 12 December 2017, and Commission Delegated Regulation 2019/1755 of 8 August 2019, in which the company is located;”.

Amendment agreed to.

I move amendment No. 69:

In page 91, line 4, to delete “(f)” and substitute “(h)”.

Amendment agreed to.
Question proposed: "That section 33, as amended, stand part of the Bill."

Can I comment on the section?

I apologise. I was trying to bilocate again, unsuccessfully this time. We had an amendment that, unfortunately, I was not present for. It relates to the extension of the section 481-type relief to the digital gaming sector. We have a concern about this. We want to support things that will create employment in this area, which is one where there could potentially be jobs and so on. We welcome those jobs. I know the Minister sometimes thinks we do not, but we very much do. Any relief should, however, be strictly tied to ensuring quality employment conditions and avoiding bogus self-employment. We are looking for assurances that that will be case. We have expressed some concerns about section 481 as it is currently applied in other areas. We do not want to have the same concerns regarding the extension of the relief to this newly growing sector.

This section deals with digital games relief. We will debate an amendment later regarding that relief and how it applies to pay and conditions in the training of employees in the sector. We do not want to repeat the earlier conversation on film relief, but it is a similar area. As I said, this is a sector we need to support and to grow. There is major potential in it if we get this right, but we need to ensure that, as the sector is expanding, the pay and conditions of workers are fair.

Game Workers Unite Ireland, a branch of the Financial Services Union, have raised concerns about employment conditions in the industry with the Minister. He mentioned that there will be a condition of quality employment. I know Game Workers Unite Ireland sought to engage with the Minister and wrote to him and to the Minister for Enterprise, Trade and Employment regarding discussion of the definition of "quality employment" in the context of this relief. We do not have that definition. Has that meeting with Game Workers Unite Ireland taken place? Has the Minister he engaged with the group on this? Is there now an understanding of what that definition will be and when it will be in place?

As the tax credit for digital games is a cultural relief, in order to avail of the credit a digital games development company must first apply to the Minister for Tourism, Culture, Arts, Gaeltacht, Sport and Media for a cultural certificate. As part of the certification process, a digital games development company will be required to complete an undertaking in respect of quality employment in order to qualify for the relief. This is similar to the requirements in place under section 481. The undertaking commits applicants to compliance with all relevant employment legislation. It is crucial that employee rights are upheld in all industries. The inclusion of this provision reinforces the importance of adhering to employment legislation in the digital gaming sector. Should a digital games development company fail to adhere to a condition or obligation specified in the undertaking, the conditions of certification will not have been met, which means that any credit claimed pursuant to an interim or final certificate may be subject to recoupment by Revenue and an application for a final certificate may be refused.

The issue of bogus self-employment is relevant to all sectors and, as such, needs to be treated in that way. I am advised that Revenue carries out a comprehensive programme of compliance operation each year across a broad range of economic sectors, including the digital games development industry. Many of the operations are carried out on a multi-agency basis, which can include officials from the Department of Social Protection and the WRC. The primary role of these joint investigation units is to detect non-compliance with tax and duty obligations, which includes non-operation of the PAYE system on foot of bogus self-employment. This led Revenue, together with the Department of Social Protection and the WRC, to update the code of conduct for determining employment status in July 2021. The code aims to be to the benefit of employers, employees, independent contractors and those involved in the sector.

On the particular point regarding the representative union, we have corresponded with it but have not met with its representatives. My officials are very much open to meeting them.

Question put and agreed to.
Question proposed: "That section 34 stand part of the Bill."

The relief for certain start-ups outlined in this section will be extended for five years. Will the Minister speak to the purpose of the section?

We originally had this in place for a three-year period. Due to the impact of the pandemic, businesses that may have wanted to access this relief were not able to do so. I am extending it for a five-year period to give more opportunities to companies to avail of it as, I hope, we move into more normal trading conditions.

Question put and agreed to.
Question proposed: "That section 35 stand part of the Bill."

I would like to hear the Minister's views on this section, which deals with measures for controlled foreign companies and which is very welcome. These are key measures to prevent base erosion and profit shifting. I am interested in the Minister's views on the list of non-cooperative jurisdictions. Is he concerned that there could be a little flux regarding that? Given how easy it can be to set up shell companies and shift them from jurisdiction to jurisdiction, has he any concerns about that? Does he think the rules need to be strengthened further? I just want to tease that out, but section 35 is welcome.

Section 35 amends section 835 of the Taxes Consolidation Act 1997, which provides for defensive measures, including the disapplication of exemptions available to controlled foreign companies resident in jurisdictions listed in Annex 1 of the EU list of non-cooperative jurisdictions for tax purposes for an accounting period. Controlled foreign company, CFC, rules are an anti-abuse measure, designed to prevent the artificial diversion of profits from controlling companies in the State to offshore subsidiaries located in low- or no-tax jurisdictions.

The controlled foreign company, CFC, rules operate by attributing to the controlling company the undistributed income of the subsidiary which has arisen from non-genuine arrangements put in place for the essential purpose of attaining the tax advantage. A number of exemptions are provided for, including exemptions for CFCs with low accounting profits or a low profit margin in which the CFC pays a comparatively higher amount of tax in its territory than it would have paid in the State.

Section 835 applies the aforementioned exemptions where the CFC is located in the territory which is listed in the EU list of non-co-operative jurisdictions. The list is compiled by Economic and Financial Affairs Council, ECOFIN. Territories that constructively engage with the EU and which meet certain standards are removed from the list. It was anticipated the application of these exemptions for CFCs resident in a non-listed territory would have a twofold effect. First, it would encourage companies to relocate their CFCs from those territories. Second, it would encourage those listed territories to take such actions as are required to remove themselves from the list. The list is kept under review. Countries may be added or taken off the list, depending on circumstances. In that regard, I have amended the section so that the list of 12 countries, which was published on 20 October, applies to CFCs resident in non-co-operative jurisdictions, with accounting periods beginning during the period from 1 January 2021 to 31 December 2021.

The amendment also provides that the list, as updated in October and which now lists nine countries, takes effect for CFCs resident and non-co-operative jurisdictions, with accounting periods beginning on or after 1 January. I want to update the Deputy on the list of the nine countries and where that stands at the moment. Currently, the nine jurisdictions are American Samoa, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu. As of the October update, three jurisdictions were removed. These were Anguilla, Barbados and the Seychelles.

To deal with the Deputy’s point about my view on the impact of this measure, it is a powerful way of dealing with this issue. One of the ways it is having an effect is when our ECOFIN meetings are taking place. Jurisdictions that are being moving onto or fear they may be moved onto this list are vocal in describing the effect a listing will have on them. Those jurisdictions that move onto the list do their best to try to move off the list and meet the requirements that are laid down by the European Commission. On the question as to whether I think it deals with the issue of shell companies, I do, because of the procedures the European Commission is now using to deal with issues in the jurisdictions.

I understand the point that the Minister is making. I think this a good section, but that is not the point. My point is to ask if there is any concern in relation to the list. I totally understand that countries have fears of being put on this list and that they would raise the impact that would have. I wonder specifically about the Minister’s own views. He said himself the list in flux. Countries can be added and removed. Would the Minister be concerned about the fact the list can be in flux? Obviously, it needs to be in flux to certain extent. However, does the Minister have concerns whereby shell companies can be opened up in different jurisdictions and can move with the list? Does he have concerns that is happening or could happen? Does the Minister think it needs to be strengthened in that regard?

For me, the success of this procedure is demonstrated by the fact it is in flux. The way I think something like this should work is that if standards are agreed and if countries meet those standards, they should not be on this list. If they do not meet those standards, they should be on the list, but if they take action to remedy the issue the Commission raised, they should get the opportunity to come off the list. For me, the fact some countries come off the list and it is therefore not a fixed list is the way I believe it should work.

The Deputy raised the issue of shell companies. Of course, it would be a concern if things like that are put in place to engage in extremely aggressive tax planning. However, the Commission takes this very seriously. I have full confidence in it scrutinising whether countries deserve to come off the list. For the Deputy’s information, 92 jurisdictions are evaluated to see whether they should be on or off this list. To put it in rough terms, if 92 are evaluated and there are currently nine on the list, this shows the Commission is taking the work seriously in this area.

Question put and agreed to.
Question proposed: "That section 36 stand part of the Bill."

I am looking at the explanatory memorandum. It says interest tax deductions only apply to connected parties. What are the criteria for a connected party? Will the Minister expand on that, if possible?

This section is an anti-avoidance provision that denies a tax deduction for interest payable on intra-group borrowings which are used to purchase assets from the connected company. I will deal in a moment with the Deputy’s question regarding how we define “connected”. It was designed to prevent companies from selling assets, such as plant or machinery, between group companies and funding the sales with intra-group debt to create tax deductible interest expenses. Revenue has been aware of cases where the provisions of section 840A were being circumvented by the use of promissory notes and replacement borrowings. Section 840A is therefore being amended to bring promissory notes and other agreements or arrangements having similar effect within the scope of the anti-avoidance provision. The amendment will also ensure any form of refinancing of a loan, as defined in this section, is within the scope of the jurisdiction. There is, therefore, no change here in how we define whether one is connected or not. The change here is to bring promissory notes and replacement borrowings into scope. I am informed there is a definition as to what the connected company is. My officials will send that on to the Deputy on Committee Stage.

Question put and agreed to.

I move amendment No. 70:

In page 92, after line 39, to insert the following:

"Report on the Two-Pillar Solution agreed by the OECD/G20 Inclusive Framework

37. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the two-pillar solution agreed by the OECD/G20 Inclusive Framework to address the tax challenges arising from the digitalisation of the economy, its impact on Exchequer revenue, its consequences for economic competitiveness, and options for a renewed industrial strategy in the context of this changing landscape.".

Amendment put and declared lost.

I move amendment No. 71:

In page 92, after line 39, to insert the following:

"Report on the Research and Development Tax Credit Regime

37. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the research and development tax credit, its operation, its use among small and medium enterprises and options to enhance and simplify its use for indigenous enterprise and in the context of environmental research and innovation.".

This is in relation to the research and development tax credit. It calls on the Minister to produce a report within six months to lay before the Houses of the Oireachtas on the research and development tax credit, its operation, its use among small and medium enterprises and options to enhance and simplify its use for indigenous enterprises and in the context of environmental research and innovation. This is timely. The Minister knows that Sinn Féin has been calling for an enhanced research and development tax credit regime for small and micro businesses. In fairness, the Minister brought it forward in budget 2019. We wanted to see the rate increased to 30% for small and micro enterprises. It is disappointing it had not taken effect despite it being legislated for two years after it was announced. The Minister said in response to me that it had not received state aid approval and that for it to receive state aid approval would require overly burdensome changes on businesses and revenue. This is very disappointing.

I am strongly of the view that we need to ensure more small, medium and micro businesses are involved in research and development. I would like to hear from the Minister on whether he has an update on this measure, which we called for and supported. In fairness, the Minister legislated for it. Is it now a dead duck or will we go back to the Commission and look for a way to introduce it without being too burdensome so it would not be a drain on small and medium enterprises or micro businesses?

There is no doubt that we need to support research and innovation among small businesses. We need to help them to scale up. We want to see changes to the research and development tax credits regime that would provide it. One was the idea of a higher rate for these companies. The second proposal we have been putting forward, and I ask the Minister to look at it, is that under the current system companies whose research and development tax credits exceed their tax liability receive the credits in three instalments over 33 months. We believe this acts as a disincentive for take-up among small and medium enterprises. We would like to see it changed for small and micro-companies, with credits paid out in one instalment in one year. It would only be a cash flow issue because the companies would still be entitled to it over a longer period of time. The estimate we received from Revenue on the cost of the first year of operation is €25 million. As I have said, this is primarily a cash flow issue. I would like to hear the Minister's view on this type of proposal. I believe it would improve the cash flow position of indigenous businesses that would engage in research and innovation and increase the uptake of the tax credit to support companies that are crucial to our economic future and the success of our economy.

The amendment calls for a report. We will go through the motions in terms of the restrictions on the Opposition with regard to the Finance Bill. At the heart of the amendment, as with previous amendments, is the view that we need to do more to encourage research and development in small and micro-enterprises. Are we giving up on the higher rate for small and micro businesses? This is already legislated for. Is there a way around it in the Minister's view? The other proposal we are putting forward is that those companies with research and development credits that exceed their tax liability would be able to be paid in one instalment in one year instead of three instalments over 33 months.

I will quickly go back to the question Deputy Farrell asked me earlier on how to define a connected company. There are two criteria for it laid down in the Finance Act of 2019. To quickly summarise, the first is that if the same person has control of both companies, or a person has control of one company and is connected with the first-mentioned person, or the first-mentioned person and persons connected with the first-mentioned person have control of the other company. The second criteria is if a group of two or more persons has control of each company and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating a member of either group as replaced by a person with whom such a member is connected. This is the definition. I have made a dreadful mistake; I have managed to confuse the Finance Act 2019 with the Taxes Consolidation Act 1997. That is where the definition is.

With regard to the questions Deputy Doherty has put to me, I will deal with the amendment before the two other matters he put to me. The Irish corporate tax regime contains a small number of tax reliefs, including the research and development tax credit. The focus of these reliefs is on the creation of additional employment and on promoting innovation and inward investment, with a view to generating high value economic activity in the country.

I note that Revenue annually publishes a report entitled “Research & Development (“R&D”) Tax Credit Statistics”. The report contains a significant volume of data. The report also provides further statistical information regarding the number of claimants and the value of their claims across a broad range of categories such as the business sector, the size of the claimant and the size of the claimant, based on whether in Revenue’s large corporates division, which manages the tax affairs of the largest taxpayer and those claimants not dealt with by the large corporates division, which is a reasonable proxy for SME companies. The report also shows a breakdown of the research and development tax credit by value of the credit claimed as profiled against the corporation tax liability of the claimant. As the information sought by the Deputy is already available I cannot accept the proposed amendment.

The primary focus of the Government over the past 20 months has been to support businesses during the pandemic. Revenue advises that the companies using the extensive Covid-19 supports were primarily SME companies. These interventions were designed primarily to deliver immediate cash support to enable affected businesses to maintain a level of trade and retain their staff in employment. However, as Deputy Doherty has noted I gave a commitment to look at measures to continue to encourage greater take-up of the research and development tax credit by small domestic companies and to examine certain aspects, such as the pre-approval procedures and record-keeping requirements.

As I stated at the time when I introduced measures in budget 2020 for micro and small companies, they were subject to a commencement order pending state aid approval from the European Commission. Following initial engagement with the Commission it was determined it would be necessary to introduce some changes to the enhancements for micro and small companies to secure state aid approval. However, as the measures in their current form are enhancements to the existing general research and development tax credit this could pose a significant administrative challenge to taxpayers and Revenue if different criteria were to apply to two elements of a claim for the same research and development cost. Adding complexity and an administrative burden would be counter-productive to the aim of assisting small and micro companies. To answer the Deputy's question on whether this is something I will progress further, at this point it will be difficult for me to fulfil the original commitment I gave on enhancing the research and development regime for micro and small companies given the issues I have just acknowledged.

I am now looking at other ways in which we might support innovation for small, innovative companies. This is why we have moved ahead with the innovation fund, which I hope we will be able to launch over the next couple of months. We are putting in place supports through Enterprise Ireland and the Ireland Strategic Investment Fund to make new forms of funding available to smaller companies to help them with innovation. It is also why I tried to move ahead with changes regarding the employment investment incentive scheme, EIIS, to find new forms of capital to support smaller and younger companies that are looking to start up. I will have better chances trying to support those companies in those ways than I will have through changes in the research and development machine.

The Deputy made a point about the cashflow issue. The information that I have is that 69% of companies avail of it within the current accounting period and 12% look to convert it into a payable credit, with a smaller number looking for a second payable credit, and an even smaller number looking for a third payable credit. The majority of companies in 2019 used the credit within the current accounting period. I would be happy to look at this again if the Deputy thinks there is a case to look at how it could be managed in a different way so that it would be more beneficial to companies that access it.

I know the higher rate for research and development for small, medium and microenterprises is out of the Minister's hands. I would like some detail about how onerous it would be to apply a rate. It appears that the Minister has suggested that it can happen but that it would be a significant burden on both Revenue and the company. If it is not possible then it is not possible, but we should continue to look at how we can support more research and development, which is important. The Minister said he is willing to look at the other suggestion that I put forward, which comes from the engagement that we are having with business. It is good to see that nearly 70% are able to use that in year 1, but the other 30% are not. We are told that it is a disincentive in the first place, so it is not just about the 31%. I ask the Minister to look at this as part of the Tax Strategy Group papers in the summer, to see if this needs enhancement with regard to how it is paid out to small and medium enterprises. Our suggestion is that it would be paid out in one instalment in one year as opposed to three instalments over 33 months for those that do not have a tax liability.

I would be happy to look at it in the Tax Strategy Group process. The draw-down of the research and development credit for small and medium enterprises for 2019 stood at €801 million. I know that does not give a break down into microcompanies and the smallest companies that are starting up. From the figures that I have here, it looks as if the research and development credit continues to be heavily used by companies that are not the big companies that tend to be associated with this. We will look at this as part of the Tax Strategy Group process.

On the Deputy's point about adopting the research and development regime for smaller companies, my view is that it would end up creating something so complex that, when I am here for next year's Finance Bill, the Deputy would be asking me why no or very few companies are accessing it. I do not think it is worth being in that position. We will instead try to skin the cat differently with the changes that we have made in the EIIS and the changes that we are making by launching a new innovation fund of approximately €90 million, which I believe will yield a different way to support innovation and microcompanies.

On the basis of the Minister's commitment to look at that issue with the Tax Strategy Group, I will withdraw the amendment.

Amendment, by leave, withdrawn.

I move amendment No. 72:

In page 92, after line 39, to insert the following:

“Report on restricting banks from carrying forward losses

37. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on restricting the banks from carrying forward losses against taxable profits in a manner which could result in many institutions paying no corporation tax for the foreseeable future by introducing a 25 per cent cap on profit that can be written off by carried forward losses in any given year and an absolute 10 year limit on the use of loss for this purpose.”.

We are familiar with this amendment. As we know, the late Brian Lenihan brought forward changes to the Finance Act at the time of the bank bailouts to ensure that when banks became profitable again, they would begin to pay tax at an earlier stage. He limited the amount of losses that could be carried forward to 50% for those who received the injection of capital from the State. This continued for a period until Fine Gael and the Labour Party decided to get rid of it and banks were allowed to carry forward 100% of their losses into the future. This is probably more relevant now than ever before. One could argue it by asking if it really matters, since at the end of the day, they will end up paying the tax at some point. The late Brian Lenihan made the point that they needed to start paying tax at the earliest stage possible, which is important.

We have seen a number of banks leave the Irish market. Those banks will not be in a position to pay taxes. We need to be careful with this. It means that banks which are now profitable, having recovered from the impacts of the pandemic, will not pay any corporation tax on their profits in Ireland this year, including AIB and Bank of Ireland. They will pay corporation tax on their profits in England but they will not pay taxes on the profit they make in Ireland. This amendment is about going back to what Brian Lenihan introduced, which reduced the amount of losses that can be carried forward in any given year and ensuring that they cannot carry forward those losses indefinitely. Ireland is one of the outliers in the European Union since it allows the carrying forward of 100% of losses for an unlimited time. Countries usually have percentages that can be carried forward or a period of time like ten or 15 years.

We have only a minute left so I suggest that we suspend until 3.15 p.m. and then we can reconvene and have a response from the Minister.

Before we do that, I wish to mention that I may bring forward an amendment on Report Stage regarding an initiative being developed by the Minister for Agriculture, Food and the Marine on a Brexit-related matter.

Sitting suspended at 2.29 p.m. and resumed at 3.15 p.m.
Deputy John McGuinness took the Chair.

Deputies may recall that in 2018, my Department produced a detailed note for the committee on the subject of both bank losses and corporation tax losses more generally. This technical note was published online and is still available. It considered in some detail the potential implications of restricting the use of losses carried forward, or the introduction of a specific time limit or sunset clause on loss relief, for Irish banks, the wider banking sector or the corporate sector as a whole. Among other considerations, it examined the possible effect of such a restriction on consumers, with the probability an increased cost base for the banks would be passed on to the consumer in the form of higher fees, higher interest rates on loans or lower deposit rates. It also noted potential negative consequences for the valuation of the State’s banking investments and for capital levels in the banks, with possible resulting regulatory impacts. It considered potential effects on competition within the banking sector in Ireland, a factor of increasing relevance as banks have since left the market.

Taking all these factors into account, it is my view it would be detrimental to Irish consumers and taxpayers if a restriction were placed on the use of losses carried forward by the banks. As each of the three pillar banks posted losses in its 2020 financial statements as a result of the Covid-19 pandemic, it is likely limited corporation tax liabilities would have arisen for 2020 regardless of the banks’ historical losses. However, notwithstanding the trading losses forward, the Irish banks have been paying Irish corporation tax in recent years, as the tax losses forward are restricted in their use and do not shelter profits made in all their corporate entities. Given the level of analysis that has been published, I do not believe a further review on the matter is merited and I will not accept the amendment.

I do not want a report either but it is the only way we can table this issue. I want the Minister to take action and revert the measure. I want the banks, AIB and Bank of Ireland, which will make significant profits, to pay tax on those profits by limiting the volume of losses that can be carried forward in a given year, but he is not going to do that. I have read the report but I still do not understand why he will not do that. An argument was made at the time it was important to allow the banks to carry forward losses of 100% because of its potential in respect of capital ratio but those arguments no longer wash. In simple terms, why should our tax code provide that AIB will not pay tax on billions of euro in profit, cumulatively, for the next two decades?

It is because we treat AIB and Bank of Ireland the same as we treat any other Irish bank. I see the banks as entities not just to be taxed but as ones that also have to provide credit, investment and employment to lead to the availability of more homes, jobs and investment in all parts of our country. While I can understand the attractiveness, politically, of a change in tax policy such as that which the Deputy supports, it would, ultimately, undermine the ability of those banks to contribute to more lending for more homes and more attractive and lower rates for customers and would undermine the growth I believe it is in the interests of the economy for them to make.

The Minister's argument is that if we do not tax the banks, there might be a cheaper interest rate on mortgages, even though it is the highest in Europe, or the banks might lend into the economy. It does not make sense. He stated we treat them the same as any other bank but we do not. In regard to AIB, Bank of Ireland and Permanent TSB, there is a relationship framework with the Minister and there are restrictions on what they can do in making certain types of investment or disposing of assets. There are restrictions on the CEO remuneration and bonuses they can pay.

Those restrictions are all there for a reason. The then Minister, Brian Lenihan, brought forward another restriction, namely, that they could carry forward only 50% of losses, and that was there for a reason as well. While the then Government pumped tens of billions of euro into those banks, there was a recognition those losses would mean that when the banks were profitable, they would not pay taxes for decades, and that should be avoided.

That is what is at the heart of this. Anybody could argue the banks should be let go tax free and they might reduce interest rates or whatever. That is not a solid argument, particularly in the case of Bank of Ireland. The Government is disposing of the State's interest in that bank ,although I do not think it is the appropriate time, given the share price. The paper the Minister referred to discussed dividends back to the State but with Bank of Ireland that is not applicable in any meaningful way any more, yet that bank will continue to be able not to pay tax on its Irish profits, whereas it will pay tax on its profits recorded in Britain.

I would have thought the Deputy could recognise the value of banks being able to lend more to enable more homes to be built, and the danger if mortgage interest rates became even more expensive than they already are. Given that ours is an economy two banks have decided to leave, the ability of the banks that remain to lend more in the future, and to avoid their mortgages becoming even more expensive, matters to me as Minister for Finance. Moreover, one of the three banks, Permanent TSB, is in the middle of an exceptionally important transaction, given the exit of a bank from Ireland.

For all those reasons, while I can understand the attractiveness to those who will listen of the case the Deputy is making, my view is making that change will lead to other things happening that will also matter to people. It will, ultimately, affect the capital status of some of those banks, which in turn will undermine their ability to provide other functions I want them to be able to provide, offer cheaper mortgages in future and be able to lend for more homes to be built.

The logic of the Minister's argument is we should never tax the banks because doing so means they will have less capital, will charge higher interest rates and will be less capable of lending into the economy. It is a ridiculous, crazy argument for a Minister for Finance to put forward. There is no rational defence of why we would allow banks, that between them have recorded more than €1 billion in profits, not to pay the corporation tax rate of 12.5% that every other company, no matter how big or small, pays on its profits. The Minister believes these banks should be able to carry forward their losses. I disagreed with many of the policies of the late Brian Lenihan but he had the foresight to recognise the losses being incurred by banks would mean that, if they could operate like any other company, they would pay no tax for decades. Banks are not like any other company. I recognise they are really important to the Irish economy and I recognise what is happening in banking, but the argument we should not tax them for the next couple of decades is ridiculous.

Ordinarily I would be critical of banks for some of the things that have happened over the past 15 years or so, but in this case I think the Minister is correct.

We are at a very sensitive juncture. All efforts need to be made to ensure nothing distracts the banks or gives them an opportunity or excuse for not doing what is required most at this time, which is that pillar banks must lend to people who want to buy and build houses. If they do not lend, where will the money come from? We will become more dependent on the investment funds. That would not be a good idea.

Incidentally, some banks have repaid the bailout they received from a previous Government. Some, admittedly, have not and that is something to which we need to look forward. We need to encourage the banks to lend in the way that is required at this important time for those who are seeking to build homes or buy a house on the marketplace. They banks need to do this consistently for a period and the Government should not distract them by intervening to punish them a little more, on the basis that this would be the normal course of events. The Minister is right in this case. I ask him to carefully monitor the extent to which the pillar banks are preparing to lend to those who are trying to buy their own house. It is not a condition, but there should and needs to be a recognition that this is what they will do.

Two banks have left the country but have retained an interest in it. For what purpose I do not know, and I have put questions down on the matter. I hope the existing remaining banks are not in any way disadvantaged by any competition that might come from the banks that have decided to leave.

It is crucial to the Irish economy that we have an open, transparent, working banking system, one that is available to its customers in a way that has not been shown over the past ten years or so. The banks, without exception, must be committed to putting their shoulders to the wheel in order to ensure the Irish people have available to them opportunities to have their banking requirements met.

I will respond to the concluding comment made by Deputy Doherty. It is a well-proven technique from Deputy Doherty and Sinn Féin to put words in my mouth that I did not say and then attack me for making an argument I did not make. At no point in my argument did I say the banks should never pay tax at any point in the future. I have never said that. However, I did say that, given Deputy Doherty's acknowledged criticism and his point that mortgage interest rates in Ireland are too high and banks need to do more to lead to more homes being built, given my point, which he did not acknowledge, that a massive change is under way in the Irish banking system and the three banks that would be subject to this amendment will have to go through considerable change in the future to deal with the exit of two other banks from the country, and given the need for those banks to be able to lend to deliver more homes and, I hope, reach a point where they will lend more cheaply, the acceptance of this amendment would be counter-productive to realising those goals. That is not an irrational argument. It is one based on trying to make progress on other matters that are important to the people I represent.

Amendment put:
The Committee divided: Tá, 2; Níl, 6.

  • Doherty, Pearse.
  • Farrell, Mairéad.


  • Donohoe, Paschal.
  • Durkan, Bernard J.
  • Matthews, Steven.
  • McGuinness, John.
  • O'Callaghan, Jim.
  • Richmond, Neale.
Amendment declared lost.

I might table less radical proposals in future. Tax on the banks is probably a stretch too far for many in this room.

The Deputy was asking for a report. That was what we voted on.

I move amendment No. 73:

In page 92, after line 39, to insert the following:

“Report on relief for investment in films in the context of employee pay and conditions within the sector

37. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on film relief, in the context of the pay, conditions and training of employees within the sector, and options to enhance the scheme with respect to employee pay, conditions and training.”.

Amendment put and declared lost.

I move amendment No. 74:

In page 92, after line 39, to insert the following:

“Report on digital games relief in the context of employee pay and conditions within the sector

37. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the digital games relief, in the context of the pay, conditions and training of employees within the sector, and options to enhance the scheme with respect to employee pay, conditions and training.”.

The Minister has spoken about an engagement, so I will withdraw this.

Amendment, by leave, withdrawn.

I move amendment No. 75:

In page 93, between lines 2 and 3, to insert the following:

“Amendment of section 604 of Principal Act (disposals of principal private residence)

37. Section 604 of the Principal Act is amended by the insertion of the following subsection after subsection (14):

“(15) (a) This subsection applies where an individual disposes of or of an interest in an asset (being an asset within subsection (2) or (11)) by way of a lottery or game with prizes and the proceeds of the lottery or game exceed the market value of the asset on the date of the disposal.

(b) Where this subsection applies, the consideration for the purposes of computing any chargeable gain accruing on the disposal referred to in paragraph (a) shall be the whole of the proceeds of the lottery or game referred to in paragraph (a) or, where there is more than one prize, so much of those proceeds as are referable to the asset referred to in paragraph (a).

(c) Where—

(i) a gain accrues to an individual on a disposal referred to in paragraph (a), and

(ii) apart from this subsection relief would be given under this section in respect of the disposal referred to in paragraph (a),

then that relief shall be given in respect of the gain only to the extent (if any) to which such relief would be given if, in computing the chargeable gain accruing on the disposal, there were excluded from the computation—

(I) the amount by which the consideration for the disposal of the asset exceeds the market value of the asset on the date of the disposal, and

(II) such proportion of the incidental costs to the individual of the disposal as would be referable to the amount referred to in clause (I).”.”.

Section 37 amends section 604 of the Taxes Consolidation Act 1997, which provides for relief from capital gains tax on the disposal of a principal private residence. The purpose of the amendment is to ensure that, where an individual disposes of an interest in a property that qualifies for principal private residence relief by way of a lottery or game with prizes and the proceeds of such lottery or game exceed the market value of that property, the maximum amount of the gain to which principal private residence relief may apply is that computed by reference to the market value of the property at the date of disposal and not by reference to the full proceeds received on foot of the lottery or game. The costs of disposal are similarly apportioned for the purpose of claiming the relief. In this way, the relief is restricted to the amount that the individual disposing of the property would have received if he or she had sold the property on the open market rather than by lottery or game with prizes, and any amount that the individual receives over and above the market value is subject to capital gains tax in the normal way.

I wish to make a couple of points about this amendment, which deals with a new issue and one that I raised with Revenue recently. I wish to ask about how the amendment is drafted. I am obviously reading it wrong, so will the Minister take me through it? It states:

then that relief shall be given in respect of the gain only to the extent (if any) to which such relief would be given if, in computing the chargeable gain accruing on the disposal, there were excluded from the computation—

(I) the amount by which the consideration for the disposal of the asset exceeds the market value of the asset on the date of the disposal, and [incidental costs under subparagraph II]

If a person raffled off a principal private residence, there was €500,000 in ticket sales and the property was worth €300,000, meaning a profit of €200,000, then the "relief shall be given in respect of the gain only to the extent (if any) to which such relief would be given if, in computing the chargeable gain accruing on the disposal," and we excluded "the amount by which the consideration for the disposal of the asset exceeds the market value", that being, the €200,000.

That is correct.

And then we would exclude incidental costs. Let us say that, in my example, there are no incidental costs. We would be left with a value of €300,000. Is that now deemed the chargeable gain? The chargeable gain should be the profit of €200,000, or is the Minister saying that is the relief being provided?

In those circumstances, it would depend on the change in value of the property.

My officials will correct me if I have this wrong, but using the Deputy's example, if that home is worth €300,000 but had been valued at €100,000 at point of purchase by the owner, the tax would be applied on the difference between the €100,000 and the €300,000, that is, on the €200,000. Actually, as opposed to me saying what has just been said to me by my officials and risking getting a point of detail wrong, I would like to invite one of them to give the Deputy the accurate answer in private session.

The select committee went into private session at 3.51 p.m. and resumed in public session at 4.03 p.m.

The purpose of amendment No. 75 is to deal with individuals who are raffling their principal private residence and the sum of money they are accruing in relation to that, to make sure that the portion above what they would be entitled to get relief on from their capital gains tax, CGT, would be captured by CGT if they received a sum through the raffle in excess of that.

I understand the principle in relation to that, but I want to deal with some of the issues around it. This is a new trend that is happening in the State. It is happening on a professional level through the use of an online platform that is based in the UK, which charges a 10% commission fee. I believe there are serious reasons the Minister should legislate for this. I understand and agree with the principle, but it is illegal to promote gaming or lottery in the State without a licence. That is very clearly stated in section 3 of the Gaming and Lotteries (Amendment) Act 2019. It is open to any private individual or company to get a gaming or lottery permit, but the value of the prize cannot be in excess of €5,000. Only a charity or philanthropic body can allow people to win prizes up to €360,000. I have concerns because people are selling their homes using this method. The company they are engaging with says it does not need a licence and that it is a prize competition. British law is obviously very different to Irish law in this regard. There are loopholes in British law that ensure that it would not fall under the definition of a lottery if one asks a skill-based question. For example, how it gets around it not being a lottery to have a raffle competition for a house in Ireland is by asking which of these countries is home to the kangaroo. A multiple choice of four answers is provided. That question exempts them from having a lottery licence or coming under regulation from the lottery legislation in Britain.

The problem is that people who sell their houses through this means put a lot of their own resources behind it. They have to advertise heavily online, and they could be out by tens of thousands of euro. If the option is closed to them, they will be out of pocket. I have concerns in that regard. Before Report Stage we should look at how this interacts with the Gaming and Lotteries (Amendment) Act 2019 and check the situation with the Department of Justice. I am mindful as well that we have new heads of a Bill coming forward on online gaming in particular, as much of our legislation is catching up with where things are at. I would encourage the Minister to consider that. However, this section does capture the scenario whereby, hypothetically speaking, somebody in Ireland could use that platform and not promote the raffle in Ireland. If it was only promoted in England it would be completely in compliance with the law. Therefore, the intention is to ensure that those games would be captured. I understand that. I will move on to that kind of scenario, but I do not think it is what is happening in practice.

In the definitions on amendment No. 75, it states: "This subsection applies where an individual disposes of or of an interest in an asset (being an asset within subsection (2) or (11)) by way of a lottery or game with prizes and the proceeds of the lottery or game exceed the market value of the asset." The key words I use are "lottery" and "games". In this State, we have the Gaming and Lotteries (Amendment) Act 2019, so if one wants to organise a game, one must have a gaming permit or licence, depending on the value of the tickets and the prize fund. However, in Britain, they have different definitions. Raffall, which is the main company that is raffling properties in Ireland, makes clear that this is neither a lottery nor a game, that it is a prize competition and it falls under that definition by asking questions. Will this amendment capture that definition in relation to those prizes? I am conscious that the Minister may not have the answers.

In the last part of the amendment, the incidental costs that can be offset include the fees that would be charged by the online platform. The most dominant company in the market currently charges 10%, but there are other fees such as paid advertisements. It is not about paid advertisements to sell the house for €300,000, but to say that there are 20,000 tickets available at €20 a ticket. The paid advertisements are sometimes in the print media or on radio but predominantly on online platforms such as Facebook, YouTube or whatever.

They could impose a sizeable cost on the individual.

I have a number of issues in this regard. I know that this deals with one part of it but there is probably a wider conversation required as to how this is happening, how our laws are interacting with England, how online activity muddies all of that and how one polices that. I am concerned. No individual in this State is legally entitled to raffle off their house. This is not accommodated under Irish law. It is illegal, it is an offence and it cannot be done. The only way that a house can be raffled, as we see being done by the GAA, the credit unions and so on, is because they are allowed to apply to the court for a licence to raffle a one-off prize to the upper value of €360,000, but no individual or company is allowed to do that. These are things that are developing quite quickly but this section should be examined by the Department of Justice as to how it interacts with the Gaming and Lotteries Act, in particular, and the new Bill, the heads of which are before us. I support the concept of this. I thank the Chairman.

Does the Minister wish to go through the section?

I thank the Deputy very much for his questions on this part of the Bill. The intent behind this part of the Bill is to ensure capital gains tax is applied in the way we intend. To summarise, he is concerned that by the application of an intent he supports, it might in some way legitimise or regularise an activity that he has policy concerns about. As I understand it from what he has said, this is about the intersection between how we are taxing this activity and how it is regulated by current or future legislation. I am not fully across the gaming or licensing law on raffles in the way he has just described. I will commit to him that before we get to Report Stage, I will go through the issues that he has raised with the Department of Justice and will revert before that Stage on this legislation to try to satisfy and answer the questions he has raised. I can why there would be issues of legitimate concern. While, with my officials, I can answer the tax aspect of what he is raising, he is also raising other matters that deserve a better answer than I can give now.

Is the amendment then accepted by the Deputy?

I think that is fair. I will finish on this point. Any gain in excess of what one would receive from selling privately should be taxed and that is what is being considered here. My concern is that we would not introduce in the Bill the ability to collect revenue from what would be potentially an illegal activity.

As I said, there are circumstances where this could be completely legal but it would have to happen outside our jurisdiction, and so on.

My second concern is that in the definition of lottery and gaming we would need to ensure that we capture the British definition in prize competitions, if we are proceeding with this, . Perhaps it is captured in what we have but it would need to be clarified because that is the only place that it could happen legally. This is going to grow in size because there have been successful lotteries and I understand this. It is great to see somebody who has won and one such person won a house just last week for €20 in Wicklow, I believe, and fair play to them.

It would be horrible to see a situation where, because this is not regulated, it will come to a point where it will be closed down. Many of these online platforms such as Facebook ask people to have Internet protocol, IP, blockers, which means that if these are imposed, someone will not be able to sell tickets in this jurisdiction and could, therefore, be out a significant amount in an unregulated environment. This is completely unregulated because it does not fall under the Gaming and Lotteries Act or the commissioner in Britain.

Amendment, by leave, withdrawn.
Section 37 agreed to.
Question proposed: "That section 38 stand part of the Bill."

The section deals with online or cross-Border mergers. Can the Minister outline to us please what this technical amendment does? While we are dealing with cross-Border mergers, I am aware that the Minister had a lengthy discussion yesterday on cross-Border workers. Arising from last year’s Finance Bill the Minister agreed to look at this in a tax strategy paper and that, I believe, has been done and there is further work to be done on that area.

I do not want to go into that because it was dealt with yesterday and I will revisit that on Report Stage but I want to make one point. The relief that is available at this point in time for cross-Border workers during the pandemic runs out at the end of this year. That means that they will be double taxed if they are working from home. The guidance, as announced last night, to take effect this weekend is for those workers to work at home. Therefore, if they are still in a position where the Government, as a result of the pandemic, is asking them to work from home, they will be subject to double taxation. This again highlights the need for this having to be at least extended. We need to find a wider all-island solution to this issue where workers, for different reasons such as a sick child or whatever, are working from home. Can I ask the Minister to respond to that specific question? Will he ensure that the provisions that are in place for cross-Border workers to be able to work from home and not to be subject to double taxation will continue into 2022?

I will certainly commit to giving that matter consideration. I have not gotten around to it since the announcement was made by the Government yesterday on the requirement to work from home. I am happy to give this commitment and will come back to the Deputy with a speedy answer to the question he has raised.

I appreciate that.

I never actually answered the question on the section. This is a technical amendment to ensure that the meaning of the term “transfer” as used in section 633D is distinguished from the current definition of “transfer” in section 630. The current definition in section 630 of the Taxes Consolidation Act 1997 only refers to transfers of the whole or part of a company’s trade, whereas the mergers directive applies to transfers of all of the assets and liabilities of a company.

Accordingly, in line with the requirements of the mergers directive, the amendment confirms that the term “transfer” in section 633D refers to the transfer of all the assets and liabilities of a company and is not limited to the transfer of a trade. In summary, for the Deputy, it is a broader definition of transfer than is currently in the legislation.

I thank the Minister.

Question put and agreed to.

Amendment No. 76 was discussed with amendment No. 31.

Was this amendment already discussed?

Yes, it was this morning.

I will discuss it when we come to the section again.

Is the Deputy pressing the amendment?

I move amendment No. 76:

In page 93, between lines 18 and 19, to insert the following:

“Report on the application of capital gains tax to all sales of property by REITs and IREFs

39. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the application the full rate of capital gains tax of 33 per cent to

all disposals of property of the rental business of a REIT, IREF, or group of REIT or IREF.”.

Is the Deputy pressing this amendment?

Amendment put and declared lost.

I move amendment No. 77:

In page 93, between lines 18 and 19, to insert the following:

“Report on the introduction of a higher rate of capital gains tax on high-income individuals

39. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of a 40 per cent rate of capital gains tax on the disposal of assets made by high-income individuals, including income generated by gains.”.

This amendment seeks to introduce a 40% rate of capital gains tax, CGT, on the disposal of an asset made by high-income individuals, including income generated by gains. It looks for a report to be brought forward on that concept. I was brought forward with a view to build a better, more responsive State in order to improve our public services and strengthen our social safety net. While some work is ongoing on that with the Commission on Taxation and Welfare, this is a proposal that the Department of Finance should examine. It seeks to introduce a CGT rate equivalent to the higher rate of income tax, including income derived from gains.

The basis for the proposal was stolen from President Biden's American families plan and tax agenda. A White House press release stated:

The President’s tax reform will end one of the most unfair aspects of our tax system: that the tax rate the wealthy pay on capital gains and dividends is less than the tax rate that many middle-class families pay on their wages. Households making over $1 million—the top 0.3 percent of all households—will pay the same 39.6 percent rate on all their income, equalizing the rate paid on investment returns and wages.

He brought forward reforms whereby gains in excess of $1 million would not benefit from the lower rate of capital gains tax, but would be paid at the same rate of income tax at that band. That is similar to my proposal, which I believe is worthy of merit. It would ensure the rate of tax paid on gains for the wealth in this society is the same as the top marginal tax rate levied on income for so many middle-income workers. This would introduce a CGT rate of 40% on the disposal of an assets made by persons in cases where the gains accrued are in excess of individual incomes, including incomes generated by gains. If the Minister were to introduce that, for example, on amounts in excess of €500,000, it would yield €28 million and individuals could still avail of the reliefs legislated for in our tax code.

Deputy Doherty’s amendment seeks a report on the introduction of a 40% rate of capital gains tax on the disposal of assets made by high-income individuals. Revenue has advised the estimated additional revenue that could be generated by introducing such a rate of capital gains tax on the disposal of assets by individuals with income in excess of €200,000, is €305 million. This estimate is based on income and CGT returns for the 2018 tax year, the latest year for which full income information is available and does not include any yield in respect of companies. It assumes no change in behaviour by individuals resulting from the increase in the tax rate.

Increases in rates, such as are contemplated for the purposes of the proposed report, may have a significant behavioural impact. Capital gains tax is dependent on individual behaviour and a change in rate may not produce a corresponding increase or decrease in tax yield. In current economic conditions, any estimate of additional yield must be treated with a high level of caution. The realisation of any estimated yield from an increase in taxation on assets relating to property is subject to movements in the value of such assets, which are currently occurring in the economy. In addition, therefore, the increase in the rate could, in theory, not lead to such a significant change in the yield from the tax.

As the Deputy is aware, CGT, in line with all taxes, is subject to ongoing review, and this forms part of the consideration of the Tax Strategy Group and its paper on CGT which it publishes every year. Given this matter is covered through the TSG process, I do not propose to engage in a separate reporting process on this issue. Therefore, I do not accept this amendment.

There is a specific proposal within this amendment that is worthy of merit. The Minister has not said that this idea would be subject to the tax strategy group paper's, work that will be ongoing this summer. I believe it should. I take the Minister's point on estimates. We can only go on what the Department has provided to us. There is a significant yield from this measure. Is the Minister saying that capital gains tax on individual gains should be charged at the same rate as the top rate of income tax? Would he be open to the proposal of having that considered at the tax strategy group?

If it aids the committee and the Oireachtas in the evaluation of an idea, I will ask that an issue like this be considered as part the TSG process. On a policy point, as raised by the Deputy, we already have CGT rates that are very high in comparison with similar jurisdictions within the OECD and European Union. If it helps the Deputy, I will consider that idea in next year's TSG process.

Amendment, by leave, withdrawn.

I move amendment No. 78:

In page 93, between lines 18 and 19, to insert the following:

“Report on the treatment of capital gains tax with respect to worker-owned cooperatives

39. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the treatment of capital gains tax in instances where a company or shares of a company are purchased by a worker-owned cooperative, and options to amend the capital gains tax regime to promote worker-owned cooperatives and employee ownership.”.

This amendment also relates to capital gains tax and workers' co-operatives. The concept behind this is ensuring that we can support worker-owned co-operatives. This amendment requires the Minister to publish a report on CGT in instances where a company or shares in a company are purchased by a worker co-operative and to consider options to amend the CGT regime, including exempting such purchases from CGT in order to promote employee ownership. This is consistent with section 7 of my colleague, Senator Gavan's, Worker Co-Operatives and Right To Buy Bill 2021, introduced on 28 June this year. We are committed to developing an economy in which workers have a greater share of ownership through work co-operatives. These are businesses in which workers of the enterprises own at least 51% of the enterprise shares. In this structure, ownership and labour work together: by giving workers control, more is given to the communities and so on. It helps retain wealth at local and regional level. It is a more sustainable way. They perform well at meeting local employment needs and there are numerous advantages for them. Work co-operatives are more likely to pay the living wage, have lower pay differentials and so on.

In 2005, the Scottish Government established the state agency, Co-operative Development Scotland, which is a subsidiary of Scottish Enterprise. It was tasked with the responsibility of developing Scotland's co-operative sector. Between 2005, when this agency was established, and 2012, the sector experienced modest growth. This was, however, followed by a substantial 300% increase in the number of worker co-operatives in Scotland. The number of businesses has gone from 30 to 100. Among the measures introduced was an exemption from CGT up to a certain threshold where the sale of the controlling interest in the company was made to an employee ownership trust or worker co-operative.

This will not change the way we do business here or change enterprises dramatically. It is a model worthy of being looked at. A jurisdiction not far from us has looked at this issue and brought forward a taxation proposal to encourage worker co-operatives. Not only is it certainly worthy of consideration, but it should be introduced and monitored to see if this would indeed have a positive impact on the retention and growth of companies.

I understand that the Bill brought forward by the Deputy's colleague moved to Second Stage in the Seanad on 28 June. The Department of Enterprise, Trade and Employment is now close to finalising the general scheme of a co-operative societies Bill, which sets out proposals for the reform of the legislation relating to co-operatives for the first time in almost 130 years. This will enshrine the co-operative model in legislation for the first time. In the context of that enactment of that Bill, the Department of Enterprise, Trade and Employment intends to examine the range of supports that could accompany the modernising legislation, thus ensuring co-operatives are an attractive co-operative option for doing business. In the context of the work that Department is doing, it will examine the supports for and taxation of co-operatives once we are fully clear on the type of change the Department of Enterprise, Trade and Employment wants to make. On the basis of our intention to examine the matter in that context, I do not believe it is appropriate that I, therefore, commit to a report on the matter.

There is a bit of trend here in that nothing has happened in this area for 130 years and then when Sinn Féin produces a Bill the Government undertakes to produce one of its own and to also do something on the taxation end as well. Deputy Mairéad Farrell's Bill on lobbying kick-started the Minister for Public Expenditure and Reform, Deputy Michael McGrath, to produce a Bill in that area. My Bill in regard to moneylenders, which has been kicking around for a number of years, kick-started the Minister for Finance to deal with that issue. There are number other examples from insurance to other issues.

If an idea is a good one, then we should grab it regardless of where it comes from. This amendment seeks only that the Minister would examine this issue in terms of a report. There is no need for a restructuring of the sector. As I said, this is not going to rock the system. It is about exempting from CGT the proceeds from the sale of shares to co-operative structures. I recall that during an engagement I had with the former Minister for Finance, Mr. Noonan, on the introduction of some type of incentive that I thought went too far, his response was that it was okay to introduce and monitor these and, if they do not have the right effect, they can always be amended. That is what we do every year in the finance Bill. This is something that should be considered. As I said, one our nearest jurisdictions, that is, Scotland, is operating an exemption up to a certain threshold. I encourage the Minister to examine that and to get his officials to examine it. We have a tax strategy paper every year. A commitment to look at it in that context would be fair enough. I am disappointed with the response.

Senator Gavan has been championing this issue for many years on behalf of Sinn Féin. I mentioned Scotland. In Spain and elsewhere, there are good examples of how co-operative models can be successful in terms of enterprise and benefits to the local and regional economy, but the model needs help.

Is the amendment being pressed?

Amendment put:
The Committee divided: Tá, 3; Níl, 6.

  • Barry, Mick.
  • Doherty, Pearse.
  • Farrell, Mairéad.


  • Donohoe, Paschal.
  • Durkan, Bernard J.
  • Lahart, John.
  • Matthews, Steven.
  • McGuinness, John.
  • Richmond, Neale.
Amendment declared lost.
Sections 39 and 40 agreed to.
Amendments Nos. 79 to 83, inclusive, not moved.
Sections 41 to 43, inclusive, agreed to.

Would it be possible to take a five-minute sos at this point?

Sitting suspended at 4.45 p.m. and resumed at 4.59 p.m.

I move amendment No. 84:

In page 96, between lines 27 and 28, to insert the following:

“Waiver of excise duty on special exemption orders

44. No duty of excise shall be chargeable, leviable or payable under section 78(4) of the Finance Act 1980 on a special exemption order granted under section 5 of the Intoxicating Liquor Act 1927 in respect of dates falling within the period beginning on 22 October 2021 and ending on 31 December 2021.”.

This amendment provides for the insertion of a new section relating to the waiver of excise duty associated with court fees in respect of applications for special exemption orders. This is based on the Government decision of 19 October 2021 to waive the court fees and associated excise duty in respect of applications for special exemption orders. The decision was in response to the ongoing impact of the pandemic on the hospitality sector and temporarily waived the court fees and excise duty on special exemption orders granted to holders of on-licences permitting the sale of alcohol beyond normal trading hours.

The waiver covered a court fee of €300, which goes to the Department of Justice, and an excise duty of €110, which is collected by the courts on behalf of Revenue and will apply until the end of December 2021. This section provides the legal basis for the waiver of excise duty.

Amendment agreed to.
Question proposed: "That section 44 stand part of the Bill."

I wish to give notice that I may table on Report Stage an amendment relating to excise.

Question put and agreed to.
Amendment No. 85 not moved.
Section 45 agreed to.
Amendment No. 86 not moved.
Section 46 agreed to.
Amendments Nos. 87 to 89, inclusive, not moved.
Question proposed: "That section 47 stand part of the Bill."

Unfortunately, I was 60 seconds too late to move amendment No. 88, and the amendment relating to vehicle registration tax, VRT, changes has also been disposed of. I would have liked to have heard from the Minister on the vehicles to which this would apply.

In the context of section 47.

We are on section 47? Sorry.

The amendment has been disposed of so-----

But Deputy Doherty could possibly speak to the carbon tax amendment.

Then I could speak to it too.

I appreciate that. Sorry - I am getting my sections and my amendments mixed up.

It is amendment No. 88 that the Deputy tabled.

In section 47.

Thank you, Chairman. This is a question about a report on the projected tax revenue generated by increases in carbon tax in each year from 2021 to 2030, its resultant impact on household carbon emissions and its interaction with the national development plan. We have made it clear time and again that we are not opposed to behavioural taxes in principle. We supported sugar taxes, plastic taxes and tobacco taxes earlier, in section 39, and we have supported many other such measures, but they have to work. In the case of carbon tax, we must ensure the alternatives exist for everybody - workers, families and households. Otherwise, all the carbon taxes will do is generate revenue for the State and make households poorer.

We know from the work that has been done that that impact falls on poorer households, lone parent households and rural households in particular. The Government has not implemented the 100% dividend model in respect of carbon taxes as other jurisdictions have done. We in Sinn Féin are opposed to the further increase in carbon tax that has been planned. Some of it has already taken effect in respect of motor fuel, and we can see the impact increased prices are having on individuals. It is not the case they are jumping onto the train or getting out to buy electric cars. This is just leaving many people poorer. There are planned increases on home heating oil later next year, and we know where that has gone to.

There is a need for a focus on energy policy. However, the Government's 2021 climate action plan states:

The planned carbon tax increases are expected to raise an additional €9.5 billion in revenue over that period. This revenue will be allocated ... [in the following ways] ...

This reliance on carbon tax revenue is repeated in the national development plan, which makes clear that €5 billion in additional carbon tax over the period of the NDP has been allocated to increase capital investment in energy efficiency levels. In response to a parliamentary question, the Minister told me the additional carbon tax revenue yield estimate of €9.5 billion was based on an increase in the rate of carbon tax to €100 per tonne by 2030, above the €20 per tonne rate that existed until 2019. Crucially, he said this additional total yield was calculated on a static basis, so it is estimated at an additional €9.2 billion over the period 2021 to 2030 rather than €9.5 billion.

The problem here is that the Government is baking into its assumptions that it will get €9.5 billion in carbon tax revenue and no one will reduce their consumption of carbon between now and 2030. The estimate is on a static basis. The Government has put that estimate into the national development plan and the climate action plan, while we are told the Government's point of view is this is supposed to be about changing behaviour. If it were to be successful, we would be looking at a diminishing return on carbon tax, but that is not what is planned here in numerical terms. Will the Minister clarify that?

I will boil down to the human level the question Deputy Doherty has outlined very well about the rationale for carbon tax and what it is intended to achieve. I got a call this week from somebody who lives in a council house in which the windows and doors are completely inadequate to insulate the house against the cold weather. She moved into the house just a while ago. The whole row of houses is in that condition, and the residents have to blast the heat to keep themselves warm at a level at which somebody who has a well-insulated home and the right to insulate his or her home does not have to do. Tenants in the private rented sector and council tenants have no right to do that. It is not allowed. Also, in many cases they would not be able to afford to do so even if they did have that right. They must, therefore, expend far more money to heat their homes. The woman who contacted me described how, as the cold weather begins to set in, the cost of keeping the heat on in her house has already completely outstripped her weekly budget.

In my area 1% of the social housing stock will be retrofitted next year and approximately 1% was retrofitted last year. That is about 40 houses, and there is no indication at all that retrofitting will ramp up much beyond that. It is worth saying that in the Government's announcements on upscaling the retrofitting of homes, it anticipates, I think I am right in saying, only just over 35,000 homes by 2030. That is out of a total social housing stock of 137,000. The likelihood, therefore, is that many people in either social housing that will not be retrofitted for years or private rented accommodation, where it is up to the landlord, will be pumping money into keeping their homes warm, which they have absolutely no choice about doing, for their own health and well-being, and they will suffer the consequences.

Some of those people will get fuel allowances but many of them will not. The woman I spoke to described the draught coming through the door and windows. In that situation, one is just throwing good money after bad to try to keep the place warm. The heat is going straight out under the door or through the windows, which need to be fixed. The fuel allowance increases will not cover the cost and many people will not get the fuel allowance anyway. People who are working and have an income above a certain threshold will not be entitled to the fuel allowance. That is not just transition. Let us be honest about it. It is unfair to penalise that group of people or to imagine that by increasing the price via carbon tax, they will be forced to change their behaviour when they simply cannot do it.

One could give many other examples. Public transport in particular areas is an obvious example. I do not mean rural areas in particular, although they are particularly badly hit by a lack of public transport, but so too are suburbs. It is a significant issue. Certain areas are not well served by public transport. Indeed, there is often pressure to cut back on public transport services in those areas because they are not considered commercially viable and so on. Therefore, the opportunity for people who are elderly or have mobility problems to get out of their cars is not there. They are unable to get to hospital or the shops without their cars. It is in that context we are saying this tax is unfair and the Minister needs to look at it again, particularly given the massive hikes in energy prices that are currently taking place. I would be interested to hear how the Minister responds. What would he say to the woman who phoned me up in that situation? She is now going to face excessive bills because the Government thinks it is acceptable to increase carbon tax this year.

My point is along the same lines as that made by Deputy Boyd Barrett. The logistics of bringing relief to people who want to insulate their homes to the extent required within a short space of time is definitely going to be difficult. I am thinking aloud, which I know is a dangerous thing to do, especially in politics. One must do it, from time to time. I wonder is there a possibility to arrange a system whereby the grant or grants available can be used as a guarantee with lending institutions in order to enable the household to make the application forthwith and allow the retrofitting to proceed. When the work is done to the required specifications, the lending institution will get its money out of the grant and arrangements can be made to make up any amount that remains outstanding. Something similar was done in the 1980s, relating to the extension of dwellings. It worked very well. Costs were lower at the time but everything is relative. I wonder if that might be a possibility. It would certainly resolve the problems for many people who have homes that are not energy efficient at all and who have no possibility of meeting the deadline within a reasonable time. The State would benefit from reduced energy provision. The householder would also benefit. The difference is fairly substantial.

I was a member of a committee which dealt with energy and transport issues in 2007. A considerable amount of research was done at the time. In my own humble way, I decided I would practise some of the suggestions of that research, and I did. I introduced double glazing all round. I ceased burning coal and introduced a wood-burning stove. There was a considerable difference. There was no real recognition of what was done. Nobody recognised it. Nobody said, "Well done" and told me that was a move in the right direction. Nobody commented at all. As a matter of fact, there was a review done by a television programme. I think one had to be trendy, which is an awful phrase, to qualify for mention in it. I happened to be the only person on that committee who was not mentioned although I was the only one who made any major improvement to the insulation of my house with a view to reducing carbon emissions.

I thank the Deputies for their contributions. It is important to put in context the impact that carbon taxation is having on changes in energy prices that I know are having an impact on the living standards of many commuters and families at the moment. In January of this year, the price of a litre of petrol stood at €1.31. According to AA Ireland, for the month of October the price for a litre of petrol stood at €1.65. That is an increase of 33 cent across the year which, for a tank of petrol or diesel, is having a large effect on the commuting costs many are facing at the moment. However, if one looks at the change across the period from January to October, carbon taxation accounted for 2 cent of that change. Those who appreciate and understand these things as well as I do will say that carbon tax is only one of the taxes levied on petrol and diesel, but if one looks at the movement on the price of a litre of petrol between January and October, 76% of it was due to changes that were not tax-related. While many are facing increases in the cost of energy and fuel at the moment, the majority of the reasons for that are not related to carbon tax. They are driven by the fact that the price of energy globally is going up for many reasons. While I accept that here in Ireland the change we are making in carbon taxation is adding to the cost of energy for many, and commuters felt those increases from budget night onwards, it is a small share of the increase in total cost that many are facing at the moment. If somebody was going to make the argument that carbon taxation is the reason we are seeing an increase in the price of a tank of diesel or petrol, I would reply that it is a contributory factor but it is the smallest of the factors at the moment. There are many other forces at play that are driving the inflation of the cost here and elsewhere.

Deputy Doherty talked about the effect that an increase in carbon pricing can have on the most vulnerable. I understand that, but that is why it is important to read into the record of the committee all of the things that the Government is doing from a budgetary point of view to help support those who might be most affected by such a change. There has been an increase of €2 per week in the qualified child payment for a child under the age of 12 and €3 per week for a child over the age of 12. There has been an increase of €3 per week in the living alone allowance. There has been a €5 increase per week in the fuel allowance. There has also been an increase of €10 per week to the income threshold of the working family payment. The cumulative effect of those increases is that those who have the least are protected the most from the changes we have made in carbon taxation. The ESRI and others would state that carbon taxation has the ability, in the absence of measures that can offer compensation, to be a regressive tax because it is based on how much carbon people use with no regard to their income.

That is why the Government has come forward with a package of measures that are cofunded by the increase in carbon tax to protect those who could be impacted most by a rise in energy pricing and the cost of fuel to which the carbon tax is only a contributory factor but not the cause.

Deputy Doherty said we should not move forward with a measure like this unless options are available to more who face the rising cost of commuting. This is the reason, for example, the Government is involved in the roll-out of the ConnectIreland programme, which tries to expand the bus network available to towns and villages across the country. It is why the Minister for Transport, Deputy Ryan, and the Government have sought to make additional funding available to CIÉ to support the availability of bus services around the country and to put routes in place, through ConnectIreland, that will provide public transport options, particularly for those in our rural towns and villages who do not have the kind of public transport options that they want to have.

Deputy Boyd Barrett's asked what I would say to the older constituent who contacted him. I get those calls myself. I would tell that person that we are making funding available to local authorities to accelerate their retrofitting programmes for local authority housing. That programme is working. I can see it in my own constituency. I can see the homes that are owned and run by Dublin City Council gradually being upgraded. That is happening. Those in the most need of upgrading should be prioritised. I would tell that person that I will do all I can to try to ensure that the local authority prioritises those most affected by having poor energy efficiency in their homes. For those who do not live in local authority housing, we are supporting Sustainable Energy Ireland, SEI, with grant programmes. As the Deputy is aware, at other points there has been a higher demand for grants than there has been money available to SEI to make grants available. That is why as we move into next year and beyond, we are making more money available to fund those grant programmes. At the moment the cost of retrofitting is prohibitively expensive for many. The Deputy will tell me that because it is expensive at the moment, we should not go ahead with these types of changes, or I think he might make that argument to me. I will not put words in his mouth. The Deputy spoke about the older person who contacted him, and I am also contacted, but he will also be aware of all the contact we have from teenagers, children and younger adults who are convinced, and they are right to be convinced, that they will not have the environment and ecology that the Deputy and I grew up with and enjoyed. They are scared about what that will mean for their lives and for their children. They are right to be worried because our environment and world is changing. I do not believe it is honest to argue that we can deal with that scale of change, try to mitigate it and reduce the harm that is coming without saying that we will not put up the price of the ingredient that is the cause of that change. That is what carbon tax is. The vast majority of scientists and economists who are advising governments and policymakers about what to do to deal with this say that carbon taxation is not all the answer but a vital and necessary component. That is one reason this type of change, which is probably the most difficult move in carbon taxing we have made in the last three years, is still on balance the right thing to do. I appreciate all the arguments that the cost of electric vehicles or retrofitting homes is too high. However, we know that where there is consumer demand for technologies the price will fall over time. Take technologies that have become commonplace in our homes, such as televisions or phones. The price of technologies that were prohibitively expensive not too long ago have fallen as demand increased and as the private sector, enabled by governments, responds to that demand. I accept that electric vehicles and hybrids are too expensive for many but they are falling in price and they are cheaper than they were some years ago. There are more vehicles available which have that technology.

That is part of the answer to Deputy Durkan's point. He asked how to make those technologies more readily affordable to more people. There are two ways. The first is that the Government does more to bring the cost down through grants and low-cost loans. We already do good work on that through SEI, for example. The second is that over time the cost of those technologies should fall.

This section is contentious and will be opposed by many on Committee and Report Stages. I appreciate the difficulty that an increase in carbon taxing creates for many now. However, it is a low share of the total reasons for the increases in energy prices. Some 76% of the cost increase in petrol and 71% in diesel is not related to what has happened in tax. Global forces are at play. If we accept that the climate crisis is a crisis that can threaten our civilisation, which are big words to use but I believe that is the prospect we face, then moves such as carbon taxation, as tough as they are, is the right thing to do.

I had an amendment here-----

I am allowing leeway on this but at the end of each section, there cannot be further questioning to and fro. If the Deputy wants a short response, that is fine.

I was speaking on my amendment. The Minister just ignored everything I said, and that he has calculated €9.5 billion into carbon taxes.

I did not come in on that. The Deputy is right. I will come back on that.

Either there is a hole in the financing of the national development plan or the numbers are wrong.

I want to make another point. I was on local radio this morning, not my local radio but Shannonside, on this matter which I have raised with the Minister's Government colleagues for the last month. The number 30 bus which provides connection between Donegal and Dublin, particularly the airport, and goes through Cavan, left people standing on the side of the road at 3 a.m. on Monday morning, missing flights to Germany and other places to go to work, because it did not turn up. Forget about all these glossy brochures that the Government keeps launching, if the Minister lived in rural Ireland he would know that it was the 75th time this year that bus did not turn up in the middle of the night leaving people on the side of the road. He might also be conscious that it was the 109th time in the last year that it did not turn up. That is the reality. Those are the realities for people living in my community and all the rest. The first day I came here, I laughed when someone asked me if I had taken the train.

The last time there was a train in Donegal was in the early 1960s and that is the reality for a lot of people. The reality is that a carbon tax will increase the price of diesel and petrol when their price is at an all time high. Another reality is that for every litre of petrol as much as 95 cent is tax. We know that behavioural taxes work but there must be alternatives. When a bus does not turn up in the dead of night or when people do not have money under their mattresses but the Minister for Finance says that sometime in the future prices will reduce and people will be able to afford the price of an electric car so suck it up in between because we are pushing up the price of heating and petrol. The reality is that a carbon tax makes people poor. I ask the Minister to answer my question. The Government has baked in €9.5 billion of carbon taxes that does not factor in a reduction in consumption. Is this a revenue raising generator? Will there be a 10% reduction in carbon consumption as outlined in the climate action plan? If so, does that leave a hole in the financing of the national development plan so the allocation of €1.5 billion for agriculture and the billions of euro for just transition?

Yet again the Deputy has put words in my mouth. At all times when I responded I was at pains to acknowledge the difficulty that people face who do not have regular public transport or who are let down by public transport in the way that Deputy Doherty has just said. The people to whom he refers are also those citizens who face a change in nature and change in the future of our country. The generations to come will look back at us and ask why we did not do more but they will think of the Deputy-----

No, they will think of the Minister.

-----when they look back at this-----

No, they will ask why the Minister did not provide the buses for them.

-----because they will look back and ask those, who at a time in which we needed to change the use of carbon, what side of the debate one was on. Deputy Doherty has laid out very clearly what side of the debate he is on. By not supporting this measure, in the face of seismic change that is coming and is driven by the use of carbon, he is saying that he is committed to this tax but now is not the right time. I think that is his view.

No, I ask the Minister to provide an alternative.

The problem is, in the last two budgets when energy pricing was lower, he did not support carbon taxes at that point anyway. So in other budgets when we did not have the level of energy pricing that we have now, Deputy Doherty did not support a change in carbon tax in those budgets either. When the generations to come look back on a world that is going to be marked by the movement of people due to environmental reasons such as flooding, and summers that are hotter than we can imagine, they will ask which side of the great debate one was on. Deputy Doherty is on the side of the debate that says it does not want to take any decisions that are capable of delivering change even when that change is difficult.

The Minister thinks that the great debate is on carbon tax.

The Deputy asked me about the use of carbon tax estimates. He is correct to say that I did not answer due to the variety of other issues with which I had to deal. Apologies for that.

The most recent projection provided by my Department for the period 2021 to 2030 is €9.2 billion in additional carbon tax revenues. Projections are point-in-time exercises and the reviews are reviewed periodically to take account of factors such as changes in the macroeconomic environment, policy decisions by Government and other factors. My Department's carbon tax receipts projection for the period 2021 to 2030, in a declining carbon tax base, reflects a change in behaviour in response to the tax among other things. This estimate uses a base of 21.5 metric tonnes of CO2, which reflects the estimated carbon tax base in 2019 informed by carbon tax receipts for that year.

This carbon tax base projections for the period 2020 to 2030 reflect a trajectory of official Environmental Protection Agency, EPA, emissions projections. Specifically, this adjustment reflects the EPA's non-ETS with additional measures and projections for annual equivalent emissions of CO2. The particular scenarios used to inform my Department's projections as it identifies non-ETS emissions are reflective of emissions subject to the carbon tax while ETS submissions are not subject to the carbon tax. It also reflects a with-additional measures scenario, which includes the Government's commitment to a €100 per tonne carbon tax by 2030.

Question put and agreed to.

The Deputy who tabled amendment No. 90 is not present.

Amendment No. 90 not moved.
Question proposed: "That section 48 stand part of the Bill."

How will the operation of section 48 be applied to VAT groups?

This section administers the VAT Consolidation Tax Act in sections 15 and 115 in relation to VAT groups. For administrative convenience where a number of persons, including at least one taxable person, are established in the State and are closely bound by financial, economic and organisational links, Revenue may deem them to be a single taxable person referred to as a group.

Under these arrangements one person or company in the group is responsible for complying with the group's VAT requirements such as lodging returns and payments with Revenue, but each member of the group is jointly and separately liable in the event of non-compliance. The legislation is amended to require that the Revenue Commissioners are notified of a significant change in the organisational links between the persons in a VAT group and to apply a penalty for each taxable period in which Revenue was not notified of that change. The existing legislation does not require that Revenue is informed of any change to the VAT group such as a group person ceasing to trade, although this normally happens in practice in line with published guidance. However, there have been occasions when Revenue has been notified of significant changes to a group's structure and this has led to legal and administrative difficulties as well as a potential loss of revenue. This amendment has been made to put the administrative requirement to notify Revenue on a legislative footing and to apply a penalty where this is not done.

In summary, this refers to where there are changes in the nature of a group and when Revenue is dealing with issues on how the VAT law should be applied to a group that has changed. Revenue has dealt with this on an administrative basis up to this point and now we are looking to put it on a legislative footing.

Question put and agreed to.

Amendment No. 91 is in the name of Deputy Tóibín but as he is not here his amendment falls.

Amendment No. 91 not moved.
Section 49 agreed to.
Question proposed: "That section 50 stand part of the Bill."

Section 50 concerns the cancellation of deposits and is obviously consistent with the recent case law produced by the European Court of Justice, which determined that deposits received from a customer for supplies that have not taken place are subject to VAT. I ask the Minister to clarify, by way of example, to whom the VAT charge will apply.

It will apply to the person, organisation or business that holds the deposit.

Question put and agreed to.
Section 51 agreed to.
Question proposed: "That section 52 stand part of the Bill."

Will the Minister clarify how this threshold will operate in practice? Will there be guidelines issued by Revenue? I would like him to come in briefly on that.

Is this regarding section 52?

I do not think there are any thresholds for it.

Is the Deputy sure it is section 52?

This deals with the issue of refunds where VAT does not apply to the person who paid the VAT in the first place. There is a list of different circumstances in which this will happen. The most notable for me is including the VAT on stocks of radio receivers and record players purchased before 1979 which are now being resold.

That is before I was born.

Okay. I thank the Minister.

Question put and agreed to.
Section 53 agreed to.

Amendment No. 92 was already discussed with No. 90.

It was not because Deputy Nash was not here.

That is right. Deputy Doherty should go ahead.

I move amendment No. 92:

In page 120, between lines 11 and 12, to insert the following:

“Report on the VAT treatment of domestic energy bills

54. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on the VAT treatment of domestic energy bills and options regarding the effective removal of VAT on domestic energy bills either through reduction or rebate, in the context of rising energy prices and their impact on low and middle income households.”.

This amendment looks for the Minister to take action on the treatment of domestic energy bills and options for the effective removal of VAT on domestic energy bills through either a reduction or rebate. This is in a context of rising energy prices and their impact on low- and middle-income households. Let me be clear we are looking for a temporary waiver which recognises there is a major issue with energy prices. The Minister may wish to hit back and ask me what side I am on in the great debate but next time he is talking to Secretary Yellen, or maybe President Biden, he might tell them they are on the wrong side of that debate as well because I do not think any carbon taxes are being introduced at a federal level at the minute. They have a different policy which is supply-side. That is what is needed. We need real investment to ensure we can allow for people to change their behaviour away from fossil fuels and carbon.

There have been 35 hikes in energy prices over the last period. The Minister has acknowledged to me in the Dáil that two European countries are engaging with the Commission on a temporary reduction of their VAT levels on energy. The Minister has made the point, and rightly so, that Spain, for example, was moving from a higher rate than we have. Ours is 13.5% while Spain's was over 20%. However, Spain has reduced energy bills by 11%. The Czech Republic has moved further and zero-rated energy bills. It is engaging with the Commission on this. What the Minister did not acknowledge in the Dáil debate is we have the highest level of energy bills. While other countries might have a higher rate of tax, when we compare the household in Spain, France or Italy to the Irish one we pay a higher cost in terms of our energy bill. Therefore, this pressure on families across the State is quite significant. It is probably felt in different ways in different places. We can see from the Central Statistics Office, CSO, figures that energy prices are increasing. Electricity has gone up. Gas has gone up. Home heating oil has gone up. Significantly, home heating oil has gone up the most. Indeed, in some cases it is more than two or three times more expensive than other ways of heating a home. Home heating oil is the dominant means of heating a home in more rural communities, especially those in the west, north west and Border areas. Unfortunately, these are also communities with lower disposable incomes and houses which are more likely to be energy-poor. This is a real pressure on people facing into this winter.

We are not arguing for reducing VAT on this forever. We are asking if the State can do something at this point in time to take the pressure off families who are at the pin of their collars as a result of these energy price hikes over the winter months. There are two ways to do that. The Government can do as other European countries have done by reducing VAT or follow the Czech Republic and zero-rate it. Alternatively, it can use the toolbox provided to members states whereby a refund is also possible. However, the Minister has decided on an alternative strategy, that is, to actually increase the price of these energy Bills come next year by increasing the carbon tax. That is not the great debate. I am serious. If the Minister thinks that is the great debate we are in serious trouble. The real debate is how to make the necessary investment across broad sectors of society to ensure people have the opportunity to make the transition. The Minister should also remember the biggest polluters are not individuals but large companies. Everybody has their role to play. I will say this again and he can brand me whatever way he wants. We believe in taxes that change behaviour. We have called for them in the past. However, we do not support taxes which are just going to make houses poorer for the sake of it when the Government is not providing alternatives. Thus what is missing in this Finance Bill are the type of initiatives we suggested. Examples of this include additional support for second-hand electric vehicles, additional support for those on lower incomes to purchase electric vehicles, additional support for households for retrofitting, the expansion of our public transport fleet and so on. These are not included.

Returning to the amendment, this is a temporary issue. It is what I would be doing in if I sat in the Minister's seat. I would be looking at introducing a temporary VAT rate of 0% over the winter months to help people with what are unprecedented and unexpected rises in their energy prices. Many households may be able to sail through but others simply were not budgeting for this and in the run-up to Christmas it is putting them to the pin of their collars.

Does Deputy Boyd Barrett wish to speak?

Yes. Was it the Garrett FitzGerald Government that fell over VAT on children's shoes? I am not sure about the Minister's take on the historical debate around climate change and the issues around addressing it or failing to address it and whether he is right that it is a carbon tax. However, if the energy price crisis now unfolding for people continues at the current pace because they cannot do anything to opt for alternatives as those alternatives do not exist then he may have a very serious political problem. Ultimately, the answer is to move away from dependence on fossil fuels, which me must do rapidly to address the climate crisis, and ideally to have more sustainable sources of energy that do not damage the environment and which are not vulnerable to the swings and roundabouts of the market. We need to have the ability to produce our own energy that is in stable supply, is not too expensive and does not pollute and destroy the environment for the future. However, in the meantime, if the policy pursued by the Government is one that ends up punishing the least well-off and those least capable of dealing with the transition, due to the tenure of their homes, their income levels, how the transport issue impacts on them or whatever, I tell the Minister the Government will sabotage efforts to deal with the climate.

We know that some of the more dark political forces in this world have actively tried to turn people against the climate action agenda. Pretty much everyone in here agrees that we need to pursue climate action vigorously in order to address this existential crisis. The biggest danger for us in trying to address the climate crisis - I really mean this and it is not rhetorical flourish - is the fear that fairly dark and dangerous political forces might turn people against the climate agenda and use the fact that it is economically punishing them in order to gain traction for climate scepticism. This should not be a surprise to us.

The Minister has to do something about the energy price hikes. I accept what he said to the effect that the carbon tax is only part of it, but it does add insult to injury in a situation where people are seeing price hikes of hundreds of euros. There is a big distinction between discretionary spending and non-discretionary spending. It seems as if the Government's approach to carbon taxes does not really see this distinction. It is not discretionary for people to heat their homes. Earlier, the Minister told me to tell the woman I spoke about that we are putting money into retrofitting her home. In fact, I did say that to her. I told here there was a retrofit programme but that I had absolutely no idea when her home would be retrofitted. I can take a pretty damn good guess that it will not be for a few years. I hope I am wrong and that when I speak to the council this week I will be told it will go straight down and do the windows and doors. I strongly suspect that this is not the answer I will get, however.

The promise is that at some time it will happen. In our area, 1% of the relevant properties are being done per year. It seems to be the pattern in the Dublin councils that 1% of the social housing stock is being done each year. This is just not good enough. Potentially, the woman to whom I refer could be waiting ten or 15 years at this rate. It will be cold comfort to her, to use a really bad pun, that her doors and windows will be insulated in ten or 15 years' time but that, in the meantime, she has to suck up shockingly high energy costs and, perhaps, get blamed for being a climate laggard because she is not reducing her CO2 emissions. Others who can afford to do this have done it.

It is about the level of comfort. I find that ironic. This is why I am not sure about price signals when it comes to these kinds of usages of CO2. In our budget submissions, we proactively proposed carbon-type taxes on aviation, some of the polluting sectors in the economy and the profits of those sectors that make money from pollution. When we are speaking about expenditures that people have no choice but to make in order to live their lives, and stating that putting a price signal on them will change their behaviour, I do not buy it unless there are alternatives. I suggest the Minister takes seriously the warning that if we get this wrong and do not have a just transition, then we may turn off the climate action agenda significant sections of the population and the people we need on our side to make the necessary climate changes and to carry through the climate action we need to deal with the climate crisis. This would be very dangerous.

There are dangers. I should mention that the Government that fell did not do so as a result of a tax on children's shoes. It fell over VAT chargeable on all clothing and footwear. The Opposition of the day selected the children's bits and that is how it has been tagged ever since. These are the type of things that happen in politics.

I remember back in the 1970s when we built a lot of houses. They were built, in anticipation of the future, with no chimneys. A grant had to be given in order that chimneys could be put in place in countless houses throughout the country. At the time, everyone had been saying it was going to be warm because there was climate change at that time as well, but it went in the opposite direction. There is a pitfall we need to be wary of. I mentioned what I have done in my own small way to address the issues involved. The action we took reduced, by approximately 65%, fossil fuel consumption in the house. When the really savage winter came, which drove temperatures way down, we were able to control the heat and keep 14 or 15 radiators going while at the same time never touching fossil fuels. It was a practical experiment I carried out to prove it could be done. We need to do a few more things.

I am afraid that we could have a cold snap that lasts two or three months, particularly because the weather has been more extreme in recent times. We see this from looking at our televisions. It might be beneficial to consider how it could be dealt with. LPG biogas is one option. It seems to reduce emissions by more than 90%. It may be a step in the right direction in the meantime. It would help to keep people with a reasonable degree of comfort in some shape or form while we stride towards the targets we have to achieve in any event.

I have had many arguments and debates about this in recent years, particularly those who have said it will never happen, that we will never need to adapt our lifestyles in this fashion and that it was all a scare and part of an international scam to scare people. We have to get away from that. I fully accept that the Government is doing what it needs to do as quickly as possible, but it might not be quick enough for the people who will be caught in the meantime. I ask that some provision be made or a plan put in place to address the issues that might arise in the event of a sharp severe cold winter or cold spell during the winter that would affect the people we are speaking about. It affects all walks of society, including the wealthy, the not so wealthy and the poor. Everybody is affected by the extremes of temperatures when they come. Those extremes will come again. I ask that we look at this and not take panic measures but, rather, take steps that will have an impact and to place in the hands of the people the ways and means of working their way out of this particular situation until we reach the position to which we aspire.

Energy price hikes are a huge issue. It will cost a household €800 on average. There have already been 30 hikes since 1 January. People are already hard pressed with the cost of childminding, crèche facilities and rent and now they are faced with this. It is an issue of life or death. There is the concept of excess winter deaths. I have been trying to get my head around it recently. My understanding of it is that it measures the number of people who die over the winter months over and above the number of people who die, on average, over a similar period at other times of the year.

My understanding is that the State, fairly consistently, is at the top of the European table for the highest number of excess winter deaths - 2,000 or 2,500 per annum. Those people do not die simply of the cold; they die of a combination of the cold and fuel poverty. Now that we have this huge surge in energy prices on top of that.

What is the Government doing? The Minister is doing little or nothing, I would suggest. In some European countries, governments have taken significant action, not off their own bat but under extreme pressure from below in society. We have seen that in Spain, Greece and Italy, but there has been little or nothing here. There are things the Government could do. There is a 30% increase in the carbon tax. The Minister does not have to agree and say that the carbon tax should be abolished and replaced, by the way, with a serious tax on the big polluters in big business. He could just say, "Freeze the increase for this year", but the Government will not do that. The Minister could say that we will go down the road of price controls, with a tough maximum per-unit price for electricity and gas for home heating, etc. The Government will not do that. The Minister could say that the ESB should be run on a not-for-profit basis. The ESB made €363 million in the first six months of this year. Up until 2001, the ESB was allowed to operate on a break-even basis. Legislation was introduced and changes were made, and the company cannot do that anymore. It operates on a for-profit basis. It should operate on a not-for-profit basis whereby it would be allowed to break even and give back some of those huge profits to protect householders' living standards and, in some cases, lives this winter.

Deputy Doherty's proposal is a good one. It does all that we, as a committee, can do to suggest that a report be made. The State is charging VAT on these energy bills. The idea of waiving or reducing that is a positive step that could be taken to protect people, but the Minister will not do that.

Briefly, on the idea that this hits the wealthy, the not-so-wealthy and the poor, it may do so. If you are wealthy, you can absorb it. If you are not so wealthy, you will struggle to absorb it, to make ends meet and to heat your home. What many people are doing is rationing and only heating their homes to a fraction of what they really need. If you are poor, and particularly if you are poor and old, you could pay a very heavy price this winter. The policy could and should be changed. I support the proposal.

I thank the Deputies for the different points that they have raised. I will begin with the points put forward by Deputy Doherty. He is correct in stating that two countries within the European Union are pursuing the action that he has described, but 25 are not doing so. As for what those other countries are doing, they are doing the kind of things that we are looking at doing, which is putting in place social welfare measures to support those who are affected the most by it and putting in place other things to try to support families and workers at a time of big challenge.

Of course, the most significant thing we are doing to try to help families with the rising cost of living is to increase tax credits and reduce the amount of income at which somebody pays the higher rate of income tax in Ireland, something which Sinn Féin and Deputy Doherty are opposed to. If the Deputy looks at the Sinn Féin budget submission, which, incidentally, does not include the VAT measure he is now championing, there are no measures that talk about how the Deputy will significantly reduce the cost of living in the way that, for example, the changes that we are making to tax credits and to the standard rate cut-off point are capable of doing. The measure that the Deputy is championing in respect of VAT is not included in the Sinn Féin budget submission. Somebody on a middle income who is experiencing a rising cost of living should benefit from the tax changes that the Government is making from 1 January that are about trying to support workers at a time in which costs are going up, which Sinn Féin is opposed to doing.

I have also taken the opportunity to look at the measures that Deputy Doherty is proposing here to try to make public transport more available. The Deputy is proposing an increase of €49 million in funding for the Department of Transport on current terms, of which €25 million would be a grant for taxi drivers. The Deputy is proposing a change in the Department of Transport funding of €119 million, of which €40 million is for roads improvements - something I would support. However, of that €119 million, only €32 million is increased investment in the public transport fleet. Deputy Doherty is talking about wanting to increase and improve options for those who use public transport but in his alternative budget, which I am sure the Deputy would want to implement if he was Minister for Finance, there is no evidence that he has the thinking, the solutions or the vision to make that happen. This is derived from the document the Deputy has that he has championed.

At a time when we will be approaching a point where we will see families under pressure from energy prices that are going up for reasons that are far bigger than the change in carbon taxes, we will be making a change in personal taxes that is targeted at helping them, which, I accept, everybody will benefit from, and Deputy Doherty is against doing that. The Deputy does not believe that should happen. While I understand why Deputy Doherty is championing this idea, the fact that the majority of countries in the European Union are not doing it points to the fact that there are different ways of doing it. Those are different ways and different policies that the Government is pursuing and implementing, particularly through what we are looking to do with changes in personal taxation.

Deputy Boyd Barrett said something very important about darker forces at work that would seek to introduce further division at a time in which we need to make a change in how we use carbon and how we organise our economies and even our societies in view of the imminence of the climate crisis. I take the Deputy's point that we need to challenge ourselves about how we can maintain public consent for what we are doing at a time when there are already so many pressures evident on building. That is why we are using the money that we are receiving from a higher level of carbon tax to reinvest in things that can be meaningful to help our society cope with the changes that we will have to make and that may be imminent to deal with the climate crisis, such as what we are looking to do with the retrofitting of local authority homes.

I take the Deputy’s point that we need to do more and do it quicker. Ultimately, however, we need to pay for how we are going to do it. That is why we are putting so much of the money back into social welfare measures to maintain that consent.

In the change in carbon tax that is often pointed to as an example of the potential to galvanise public support against this, which is the change in fuel taxation that happened in France, my understanding is that the additional revenue just went into the general coffers of the French state. In Ireland, we have made a very different decision so that we are, in effect, hypothecating the additional tax revenue that comes in from the higher taxes to try to win and maintain public support for the changes we are making at a time in which things are tough enough.

I do not want to rehash the debate we had earlier. I would say to the Deputy, however, that there is another danger here, which is the danger of not being open and honest with those we serve regarding the kind of change that we will have to make. The kind of change that we will have to make will involve using lower amounts of carbon and engaging completely with our environment but in a fundamentally different way. Deputy Doherty is right that this something that states are not in a position to do at the moment. However, it does not take away from the fact that, again, the overwhelming majority of scientists and economists who are experts on this topic say that carbon taxation is part of what we have to do if we are to have any hope of bringing about change in our society in advance of nature completely changing in front of our eyes. I accept it is a difficult argument to make at this point but it is an argument that is worth making, and it is worth making in this Finance Bill and in the months to come as we have to make the case for this measure.

In regard to the points made by Deputy Barry on excess winter capacity, I will definitely look at the data sets to which he referred to understand this a bit more. In the short time in which he made his point to me, I have taken a look to try to understand the issue and the data set to which he referred. Any death that happens in Ireland at any point in the year is a death we are trying to avoid, particularly if it is for reasons we can control or influence. From the quick look I have had at the data to which the Deputy refers, he is correct that, across the winter period, there appear to be pointers of excess winter mortality in the country. However, the same data also indicated there has been a decline in Ireland since 2009, when the recording may first have begun. This is only a provisional point from me and I will study this further before Report Stage. Nonetheless, the data suggest excess winter mortality has declined and that there is a broad set of factors that lead to that.

On the carbon tax point in particular, I go back to what I said earlier, namely, out of all of the reasons the price of energy is going up at the moment, carbon tax accounts for a small share of the total increase in energy prices during this year. It is a small share and there are other reasons behind it. The Deputy made the point we should be taxing the big companies and the big users of energy more but they will be paying carbon tax. Anybody who is consuming the forms of energy covered by this carbon tax will be paying it. They will pay more because they use more energy; they can afford to pay more and they will. Many of those companies are now making commitments to move to net zero and to reduce their use of carbon by 2030. That is the contribution they will have to make to play their part in how we get ready for the change that is coming as we try to reduce harm.

By agreement, the committee decided to suspend at 6 p.m. and resume at 7 p.m. It is a little past 6 p.m. so we will suspend now.

Sitting suspended at 6.05 p.m. and resumed at 7 p.m.
Deputy Steven Matthews took the Chair.

I wish to make a short point on amendment No. 92. As the Minister pointed out, the amendment was not included in the alternative budget, and asked why that is the case. I think he should be afforded an opportunity to hear why it was not in our alternative budget. Indeed, he is the reason for it. The Minister informed us, through a reply to a parliamentary question, that it would not be possible to zero-rate energy prices. That question was raised with the Minister by my colleague, Deputy Mairéad Farrell, in seeking clarification as to whether that would be allowed by the European Commission. The Minister did not respond to Deputy Farrell's request at that time. The day after the budget, the commission published its toolbox to tackle rising energy prices, which allows for a rebate of energy prices, of which the Minister will be aware. On 25 October, the Czech finance minister wrote to the European Commissioner for Economy, Paolo Gentiloni, asking for a temporary waiving of VAT. The reason that we did not argue for this prior to the budget is because the Minister told us it was not possible. However, when we looked at what the Minister's colleagues in the Czech Republic were doing and what the Commission agreed the day after the budget, we called for this support to be introduced for families at this point in time. With that, I wish to press the amendment.

I will put the question, unless the Minister wishes to respond.

Very briefly. It was not possible then; it is not possible now.

Sorry, that is completely and utterly untrue. I ask the Minister to clarify if it is possible to provide a VAT refund under the Commission's toolbox that was published on 13 October. As the Minister knows, and has acknowledged, at least one finance minister has engaged with the Commission on zero-rating VAT temporarily.

I stand by what I said. A zero rate is not possible and cannot be done. Can the Deputy explain to me how to do a VAT rebate?

First of all, the Revenue Commissioners have already run rebates, so it can be done. That is not the issue; the issue is that the toolbox that was published by the Commission on 13 October allows for rebates in relation to energy. That is a tool that is available to the Minister. He said it cannot be done, yet, he acknowledges that the Czech Republic's finance minister is engaged with the European Commissioner for Economy and has legislated to introduce such a measure during the winter.

I stand by what I said. Zero-rating VAT cannot be done. Does the Deputy accept that?

No, what I am-----

You are wrong;-----

-----it cannot be done.

What I am saying is I acknowledge that under the EU tax directive, as we have a reduced rate on energy prices, then it cannot be done. However, what I do acknowledge, and it is why we have called for it, is that we have seen a finance minister stand up for their constituents and engage with the Commission. We understand, from public announcements, that the Commission is going to facilitate that request for the winter months. While it may not have been possible previously, it now appears, with the engagement between a finance minister and the Commission, that it will be possible. However, there is another way to skin the same cat, which is to ensure that we offer a refund or a rebate to the same individuals. That is allowed under the toolbox that was announced by the Commission on 13 October.

A zero-rating of VAT cannot be done. Deputy Doherty has just acknowledged that. As for the rebate, how you would organise a rebate to every energy user in the country, with the urgency that Deputy Doherty is describing, remains to be seen. I stand by what I said. The Deputy is referencing two countries; 25 others did not take such measures. Those other 25 countries are not standing idly by when their citizens are suffering from higher energy costs.

I accept and recognise what the Minister is saying. That does not stop various ministers from all over the EU from jumping up and asking for a rebate or a reduction in VAT. There is no guarantee that that is going to happen. One thing that is sure and certain is that if the European Commission concedes to one minister, there would be a new regime all over Europe. That has to happen automatically. I will hold my counsel and wait to see it happen.

Amendment put and declared lost.
Section 54 agreed to.

Amendment No. 93 in the name of Deputy Nash has been ruled out of order.

Amendment No. 93 not moved.

I move amendment No. 94:

In page 121, to delete lines 16 to 22.

Amendment put and declared lost.

Amendment No. 95 in the name of Deputy Nash has been ruled out of order.

Amendment No. 95 not moved.
Section 55 agreed to.

Amendment No. 96 in the name of Deputy Nash has been ruled out of order.

Amendments Nos. 96 and 97 not moved.
Section 56 agreed to.

Amendments Nos. 98 to 100, inclusive, 102 and 104 have been ruled out of order.

Amendments Nos. 98 to 104, inclusive, not moved.
Question proposed: "That section 57 stand part of the Bill."

I wish to comment on section 57. Amendment No. 112, which is coming up, relates to the same issue. The Minister has decided that the amount of money that will be accrued by the State in relation to the banking levy will be reduced by €63 million. The levy is being extended, but the revenue will be reduced by €63 million. The Minister has indicated that this is a result of KBC Bank Ireland and Ulster Bank leaving the market. However, they have not left the market yet. They are still servicing their loans and they will have a footprint here. Crucially, what will happen is that the loans will be transferred to the other banks, and therefore, the other banks will get larger and will have bigger capacity to make a contribution.

Despite that, the levy will be reduced. I think that is the wrong decision in the context of the discussion we had earlier where the Minister has facilitated, through the Finance Bill and not accepting amendments, that these same institutions will not pay tax on their profits for the guts of two decades. The levy we were getting from the banking sector will be reduced even though these deposits will go to these large banks, in the main. The levy was originally introduced in line with the DIRT tax which was in relation to the level of deposits that the institutions held. We understand the Minister is one of those who is resistant to the idea of 100% redress for the families whose homes are crumbling around them. It probably speaks to why he has not met them. I will not open that again but the reason he should meet them is not because I have asked him many times or that the families have but because it is the decent thing to do. In the context of the Bill that will come in from the State in relation to this, I put it to the Minister about a month ago about the motion that was passed, which, indeed, the Minister voted for on 100% redress and a contribution from the banks. Last week, the Minister confirmed to me in a response to a Parliamentary Question that he has not had any engagement with the banks about a contribution to the mica redress despite the fact that whatever scheme comes forward will improve the balance sheets of those banks substantially. I do not know what it takes. I would really encourage the Minister to go and see the families. I have spoken to them many times and told them that despite the differences of opinion between the Minster and I on politics and those between our parties that he is a decent person. I think that any person who goes into those houses and looks at what is happening to those homes and those families will be impacted. You cannot really learn or read about this, you need to see it and feel it for yourself. I think then that the Minister would have a different approach to some of these measures because the financial institutions need to make a contribution on this. Maybe he has something up his sleeve, such as a levy. This was one way of ensuring that a contribution would be made over the coming years by retaining the levy for a substantial period where the financial institutions would pay a significant price towards the final cost of the scheme.

I was in the Chair yesterday when this was being discussed and I could not contribute, although I wanted to. I dealt with the pyrite situation several years ago when it became obvious at the very beginning. I agree entirely that this is something that the homebuyers or home builders could do nothing about. They were victims of circumstances outside their control. Prior to that, we had the house builders guarantee scheme in this country, which was very effective. It was a simple way by which the construction industry, through self-regulation that worked, tried to ensure that the quality of materials going into the construction of houses was such as not to leave them liable to claims in the future. The insurance companies and local authorities were involved in it. It worked well until somebody decided it was no longer necessary. With pyrite, the guarantee was up to €30,000 and after that there was a serious problem. After €30,000, the problem was still the same for the individual householders. I suggest that whatever arrangement is arrived at that it be done in such a way to ensure that all the constituent bodies are involved. That means the Construction Federation of Ireland, Engineers Ireland, local authorities, insurance companies and the banks all have a contribution to make, and can do so. I am not sure that punishing the banks beforehand will encourage them to do anything like that. The primary aim now should be to address the issues of the appalling disintegration of people's houses.

I walked into those houses back then and it was appalling. I walked into the trenches that were dug in the middle of the houses, in some cases by the people themselves, in an effort to remedy the faults. That was before there was a remediation programme.

This is a serious issue and will become serious for all parts of the country as time goes on. I fully appreciate that people are directly effected by it now and the extent of that. We must all stand in solidarity with the public representatives of all parties in those areas who are united in doing everything possible to try to ensure that the issues are dealt with in a way that does not mean that the people have to live in penury for the rest of their lives. Something along the lines of what was a solid reliable scheme should be put in place. If it has to be done retrospectively, then so be it, but the constituent bodies should be brought into it.

There used to be a clerk of works in local authorities which was dispatched. That was not a good idea. With the banks, there was a system where someone building a one-off house could not draw down the loan unless there was some certification on the quality and condition of the houses. Why would they? They were going to be liable afterwards. All these issues need to be wound into a scheme that will deal with the issue and assuage the concerns of the public, particularly the householders whose quality of life has been seriously threatened by something that was totally and absolutely outside their control.

Unless the Minister can persuade me otherwise, this section should be opposed. I apologise if I am repeating points made earlier. This is effectively a €63 million tax cut for the banking sector. The Minister is planning to exempt KBC and Ulster Bank, which are exiting the market, from the bank levy. The business that KBC and Ulster Bank do will remain and will be taken over by other entities. The projected revenue for the bank levy goes from €150 million to €87 million. We will get €63 million less, even though the amount of banking business that will be conducted in the State will remain exactly the same. The beneficiaries of this will be the remaining pillar banks which will have less tax imposed on them, in terms of the bank levy, than they should for the amount of business they have. Maybe it is Ulster Bank and KBC which are the beneficiaries. The Minister can enlighten us on that. As I understand it, and I am open to hearing what the Minister has to say, this amounts to a €63 million cut in the levy that would otherwise accrue from the banks. It also points to something else, namely, the problem with the banking sector in this country. Given the huge suffering and hardship endured by people in this country in order to bail these people out because of their systemic importance to maintain this banking system.

That is the way I want to put it. People will say that some of those banks were not beneficiaries, Ulster Bank, for example, although it was bailed out elsewhere.

I question the system. We suffered greatly and are still suffering the consequences of the approach that was taken to the banking and financial crash. The banking sector is still in disarray. Let us not forget that it also charges the highest interest rates of any banking sector anywhere in Europe. It has not exactly done us many favours since we bailed it out. Should the lesson that we take from the financial and banking crash, and indeed from the departure of many players in the Irish banking system, not be that we need to fundamentally revise our attitude to how banking operates and look for a different model of banking?

Deputy Barry or Deputy Doherty may well have said this before me but it will not surprise anyone to hear me say that we need to think about a not-for-profit banking model, essentially a bigger version of what credit union banking is about. Credit unions pursue social and societal objectives rather than the bottom line, which is what banks do. That approach leads banks to do certain things or just depart when it does not suit them to do certain things, leaving customers in the lurch, flogging off their mortgages and creating great uncertainty, fear and anxiety. That is a bigger point arising from this.

I ask the Minister to explain how this is justified. It seems to be more pandering to the banks when we need to look at radically reforming the banking sector.

I thank the Deputies. There are three points here. One is about how we respond to the great harm done by mica. I am faced with calls all the time to meet groups about every issue the Government is dealing with that involves the use of money. I am inevitably called on to meet those affected by mica. If I decide to meet residents and homeowners who have had such an awful time with this trauma, it will not be because of public calls for me to do so but because I either feel it is the right thing to do or decide that it can help me with inputting into the decision the Government will make.

On the issue before the committee, it is worth noting that this revenue stream was due to come to an end this year. We had not included in any of our forecasts for 2022 the extension of a bank levy and assumed the continuation of revenues from it. From a budgeting point of view, any decision made about the extension of the bank levy was going to bring in additional revenue versus our budgetary forecasts for 2022.

I made the decision to do this because we have two banks that are either closing down for new business or have closed down. Next year, we will need to see 1.4 million customer accounts transition from the two banks that are leaving Ireland to the three banks we still have. That is a massive change in the loans, savings, business and personal lives of well over 1 million business owners and workers in the State. My view was that any change in how the bank levy was applied could make that more difficult. As to whether we are giving a tax reduction to any bank, AIB, Bank of Ireland and PTSB will continue to pay the same bank levy they paid this year. No bank will receive a reduction in the bank levy. Two banks are in the process of leaving Ireland and since they are leaving this economy, my view was that it was not appropriate that they pay the levy.

Question put and declared carried.
Amendment No. 105 not moved.

Amendments Nos. 106 and 112 are related and may be discussed together.

I move amendment No. 106:

In page 122, between lines 9 and 10, to insert the following:

“Report of Minister

58. The Minister shall, by 31 December 2022, lay a report before both Houses of the Oireachtas reviewing the financial impact of the exit of Ulster Bank and KBC from the Irish market on Allied Irish Bank and Bank of Ireland, whether the levy on certain financial institutions should be increased on Allied Irish Bank and Bank of Ireland as a result, outlining the deferred tax assets still held by these two banks and whether they have increased charges for domestic customers following their increased share of the banking market.”.

I covered quite a few of the arguments in my previous contribution.

Yes. That is what I wondered about that section.

This is the same conversation about the exit of these two banks. I do not quite understand, from the Minister's response, how the decision was reached and what precisely he is trying to effect. I am one of the account holders affected by this and it is of extreme concern, as it is for 1 million other people too. It is a major hassle.

All the account holders and their business will stay here and be transferred over. My point is that all the business stays here. It is just that Ulster Bank and KBC will leave. I cannot figure out who is benefiting from that. As far as I understand, the levy is linked to the amount of business and the deposit interest retention tax, DIRT, obligations of the banks. Do the DIRT obligations change? If they are calculated as they were previously and applied to all the banks, then the DIRT obligation remains the same because there is the same amount of deposits and so on. All of that remains the same. The only difference is that KBC and Ulster Bank have moved out because it suits them. Either they are being rewarded for essentially doing the dirt on a 1 million customers for commercial reasons or the banks that remain, which will now have all of that business and accounts transferred to them, will escape the levy that they would have paid if those people were all their customers to begin with. The amount would remain at €150 million. I take the Minister's explanation that he had not projected it and this is an extension, but assuming the extension was applied to everybody as if all those account holders and business had been in just three banks before, we would be getting €150 million, but now we will get €63 million less. That is how I understand it.

We are looking for a report on all this, reviewing the implications of the banks' departure from the market and whether the levy should now be increased for Allied Irish Banks and Bank of Ireland as a result, including consideration of the deferred tax assets these banks hold. I would like to hear the Minister explain a little more convincingly why he has made the decision. It seems to me somebody is benefiting from an action that will cause a lot of hardship, difficulty, stress and anxiety for 1 million bank customers, who are the same people who helped bail out many of these banks, with the exception of Ulster Bank. They bailed the banking system out and are not getting much thanks for it.

I will do my best Lieutenant Columbo impression. I am not sure I understand this, but I think I do. A €150 million bank levy was paid by five banks last year that between them controlled 100%, or at least the vast lion's share, of the Irish banking industry. This year, €87 million will be paid by three banks that between them control 100%, or the vast lion's share, of the Irish banking industry. If I am wrong, correct me, but it seems to me that is broadly correct. In other words, the banks that control the entire banking industry paid €150 million last year and will pay €87 million this year. I am not an expert on banking or mathematics, as Lieutenant Columbo might say, but that is, in effect, a gift of €63 million to the Irish banking sector.

That is bad enough as a stand-alone fact, but it is worse when coupled with the kind of examples given by Deputy Doherty at the start of this discussion of householders in Donegal, whose houses are crumbling around them, being told they cannot get 100% redress for something that is no fault of theirs. A factor in that situation is the various vested interests that are not being made to pay, one of which is the banking sector. There is something wrong about that whole equation. There should be an increase of €63 million in the levy paid by the remaining banks that control the Irish banking market. Maybe that needs to be teased out a little and a report would be useful in that regard.

I apologise to Deputy Doherty. I made a mistake when reading the amendments. I will take amendment No. 106 now and amendment No. 112 when we get to section 61. Amendments Nos. 112 and 106 are related to amendment No. 105, but we did not take the latter because nobody was present.

I will come in on amendment No. 106, but will speak to amendment No. 112. We will get it over and done with because the Minister will not move on these amendments. Whatever way it is presented, at the end of the day, the banking sector and the same number of deposits and loans will remain in the State, but the levy that is charged will be reduced. It is only being extended for another year but it should be extended for a lot longer than that. We have discussed this earlier and have dealt with this section.

My question is on the mica redress scheme. Does the Minister envisage an additional levy on, or contribution from, the banking sector above and beyond what he is now legislating for? Or is he saying, sin é, that is it and this is the contribution? It appears he is not serious about a contribution from the financial sector because he has not done anything about it. He has not lifted the phone, written to or met representatives from the sector regarding discussion of this issue. I have raised it more times with the CEOs of the banks than the Minister has, which would not be hard because he has raised it zero times. Is this it or is the Minister saying he will consider an additional contribution to the overall sum of the mica redress scheme for those affected homeowners?

It is worth emphasising again that the money that will be brought in next year by the bank levy is not money that was included in our budgetary forecast for next year. It is not a reduction in forecast revenue. We were not expecting to collect it because the tax was due to come to an end this year before I made the decision to extend it. I am doing this to minimise the considerable disruption that I believe will happen, from a consumer perspective, throughout 2022. It was my view that if I overlaid the large amount of change that will happen in Irish banking throughout next year with the extension of this levy, it could create further challenges that could be disadvantageous to customers. That is why I have made the decision.

Can I ask a question?

Let me finish. It is up to the Acting Chairman then as to whether he wants to accept the Deputy's question.

On charging and funding options above and beyond what we are discussing in the Finance Bill, I am considering different ways of delivering the money we will need to meet the needs of those who have been afflicted by the awful experience of mica. I cannot at this point confirm what they are.

I am genuinely confused. When we tabled this amendment, we thought we had either got this issue wrong and missed something or we had actually stumbled upon something. The more I hear the lack of a real rationale other than there will be disruption in the sector, which there will be for 1 million people, as the Minister rightly said, the more I think it is the latter. How, precisely, does not extending the levy to the two institutions that are the cause of that disruption and anxiety benefit the 1 million people who will be seriously disrupted by their action?

If it is a goodbye reward for the two banks that have just deserted those 1 million people, it is bizarre in the extreme. I do not see how it lessens the difficulty, hardship and anxiety one iota. One would have to assume that it is not that, and this is where I would like clarification, but a kind of boon to the three remaining banks. It is saying that given all of this, and the fact they will be getting all these extra customers, we are not going to charge the levy to the same extent we might in the situation where we made the decision to extend it. Otherwise, I just do not see how this lessens or, to use the Minister's phrase, "add to", the difficulty, hardship and so on he is anticipating as a result of these changes.

If it were decided to distribute the €63 million evenly among the 1 million people who had just been disrupted, I could understand the rationale, but that is not what is happening from what I can see. Frankly, I would keep the bank levy going for decades. I take the Minister's point that he had not projected the money so it is not a loss of money to the Exchequer. He decided to extend it by a year. By only levying it on the three remaining banks, less money comes in. However, when there is the same amount of business and it is calculated based on the DIRT payment requirements, which are related to the amount of business, I do not understand why it is less. Does it not mean that the amount of levy being paid as a proportion of the number of accounts is now less?

I do not get why is he doing that. Who is benefiting from this? However the Minister might explain it, I do not see how the customers are benefiting. I do not see how not imposing this levy on the institutions is benefiting the customers. Arguably by getting in additional revenue, which he would if he still collected the €150 million, that would be extra money to the public which he could possibly use to alleviate difficulties, hardship and distress. He has some way to go to convince us that it is beneficial to anybody.

This one is a real head-scratcher. Mention has been made of the disruption to the banking sector in the State next year. However, the beneficiaries of that disruption will be the three remaining banks. They will gobble up the customer base of the two that are heading out the door. The Minister claims he is not increasing the levy on banks because they will suffer disruption, but they will be beneficiaries of the disruption. That does not add up for me. It could be flipped the other way around. The two banks that are exiting keep a footprint here when we owe them nothing. It is a scandal that they are on the way out the door. We appear to be saying we do not think it is fair to have the levy on them despite the fact that they have betrayed the people of the country, have betrayed the country and have a footprint here next year. Whatever way we flip the coin, it does not add up. As I have said, it is a head-scratcher.

Who benefits and who loses? The two that are leaving benefit because they are out the gap. The three that remain benefit because they increase their customer base. The people who do not benefit are the customers. Despite this, the customers lose out because as taxpayers, they are down. I accept that the Minister did not budget it for next year, but year on year, the taxpayers are down €63 million and the banks, as usual, do very well. I would like to hear a bit more about this.

Let me develop my argument further. Given the very different views the Deputies and I have on the economy and our banking system, if I were successful in convincing them that I was doing the right thing with a significant policy decision, I would need to assess the policy and decide whether the decision was right. The starting points the two Deputies across the table have and mine on the banking sector and our economy are radically different. If either of them were to enthusiastically endorse any decision I made regarding our banks, it would probably give me food for thought as to what I was doing.

I was about to say that. I am sure if I were to come out and applaud a policy the Deputies put forward, they would think twice before it went to print.

The Minister would have some questions to answer back.

I take that point.

I will begin by responding to Deputy Barry. He talked about betrayal. He thought it was a scandal on the way out. However, he was not happy when these banks were here. He cannot have it both ways. I do not recall ever hearing him utter a word recognising the role of these banks as employers, investors or lenders. Now that they are out the door, to use his language, he describes it as scandalous and a betrayal. If he feels like that now, why did he not utter some recognition of the role they played when they were here-----

When they were here, I wanted to nationalise them.

-----in employing people, investing and lending? He cannot have it both ways. He cannot bemoan the destructive effect of banks exiting while at the same time he either did not have anything good to say about them when they were here or, as he has just said, formed the view that they should be nationalised-----

They should change their ownership.

-----in which case, the taxpayer would be back to square one, carrying all the risk of our banking system. I thought we had put that behind us. I thought that debate had been won.

Both Deputies asked me about the decision on the banking levy and Ulster Bank and KBC. I wish to emphasise my thinking behind it. The levy is calculated and comes due to be paid in October of next year. At that point we will have two banks that are getting ready to go. That will create further incentives for them to look at how they might reduce the number of current accounts they have. I am eager to avoid that happening. I want to see an orderly transfer of a very large number of current accounts to the remaining banks that we have. I believe if we had left the bank levy in place as it is now, it would have created incentives to accelerate an exit from the Irish market, which would have had consequences that I want to avoid.

The only upheaval I am now interested in is not the upheaval of the banks, because they have decided to go; but is the upheaval that will be involved in more than 1 million people seeing their bank accounts change. While I am concerned about Deputy Boyd Barrett and the choices he will need to make, I am sure many banks are enthusiastic and wondering how they will get his business. I am a bit more concerned about the 1.2 million other accounts that will be changing and the fact that if that is not advanced by the time we get to the point where this levy is calculated, it creates further incentives to minimise the levy and exit the market.

I will come back on Report Stage.

Amendment put and declared lost.
Section 58 agreed to.
Section 59 agreed to.

Nos. 107 and 108 are related and will be discussed together.

I move amendment No. 107:

In page 130, between lines 16 and 17, to insert the following:

“(g) in section 128A—

(i) in subsection (1), by the insertion of the following definitions:

“ ‘relevant person’ means—

(a) an accountable person, or

(b) a person that is required to deliver a statement to the Commissioners under Part 9;

‘return’ means—

(a) an electronic return,

(b) a paper return, or

(c) any statement that is required to be delivered to the Commissioners under Part 9.”,

(ii) in subsection (2)—

(I) by the substitution of “relevant person” for “accountable person”, and

(II) in paragraph (a), by the deletion of “or statement”,


(iii) in subsection (4)(a), by the substitution of “a return” for “an electronic return or a paper return”,”.

Amendments Nos. 107 and 108 seek to correct an oversight which occurred when drafting section 60. If this error is not corrected it would impact on Revenue’s ability to ensure compliance by taxpayers in respect of new electronic statements being introduced for the banking and insurance stamp duties.

Sections 58, 59 and 60 of the Bill provide for the introduction of a streamlined and modernised system for the collection of banking and insurance-related stamp duties under Part 9 of the Stamp Duties Consolidation Act 1999.

Section 58 deals with the modernisation of banking stamp duty. Section 59 deals with the modernisation of insurance stamp duties and section 60 updates the compliance enforcement legislation that relates to these stamp duties. As part of the modernisation programme, the legislation includes the provision for a move from written to electronic statements of stamp duty, as well as an amendment to bring Part 9 of the Act fully within the scope of the compliance provisions which already to apply to other parts of the Act.

As drafted, the legislation did not address the issue of retention of records by taxpayers and the audit of these records, where they related to new electronic statements for banking and insurance stamp duties. To address this, the new provisions inserted by these two amendments ensure taxpayers will have an obligation to maintain records on the new electronic statements being introduced for banking and insurance stamp duties and that Revenue will have the power, under section 128B, to inspect the records related to these statements.

Amendment agreed to.

I move amendment No. 108:

In page 130, to delete lines 17 to 23 and substitute the following:

“(g) in section 128B(1)—

(i) by the substitution of the following definition for the definition of “relevant person”:

“ ‘relevant person’ means—

(a) an accountable person, or

(b) a person that is required to deliver a statement to the Commissioners under Part 9,

and, where records are retained on behalf of a person referred to in paragraph (a) or (b), as the case may be, a person who retains the records;”,


(ii) by the substitution of the following definition for the definition of “return”:

“ ‘return’ means—

(a) an electronic return,

(b) a paper return, or

(c) any statement that is required to be delivered to the Commissioners under Part 9.”,”.

Amendment agreed to.
Section 60, as amended, agreed to.

Amendments Nos. 109 to 111, inclusive, are related and will be discussed together.

I move amendment No. 109:

In page 132, between lines 8 and 9, to insert the following:

“Report on applying a stamp duty surcharge on the purchase of residential property by corporate structures including REIT and IREF

61. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the application of 17 per cent stamp duty surcharge on the purchase of all residential property by corporate structures including REIT and IREF, including structures which derive over 50 per cent of their value from residential property for investment and/or letting purpose, upon the sale of their shares.”

These amendments concern the application of stamp duty. The first concerns the application of a 17% duty surcharge on bulk purchases of all residential property by institutional investment funds, including the bulk purchase of apartments. The second amendment concerns the application of stamp duty surcharge on the purchase of residential property by non-residents. The third amendment concerns the increase in the rate of stamp duty in the commercial property sector.

With regard to the first amendment, and consistent with earlier discussions, we in Sinn Féin are of the view and have argued for some time that a stamp duty surcharge should apply to the purchase of all residential property of investment funds without exception. This amendment will also allow for an assessment of the success or, indeed, failure of the stamp duty measures the Minister introduced in May, with a rate which is too low.

The second amendment calls for an examination of a stamp duty surcharge on the purchase of residential property by non-residents. This was examined in the tax strategy group papers. In the North, a 2% surcharge on acquisitions by non-residents came into effect on 1 April 2021. The stated objective of this surcharge is to help control house price inflation and support residents to get onto and move up the housing ladder. We propose such a measure be examined in the pursuit of a similar objective here on this part of the island.

The third amendment is to examine the increase in the rate of stamp duty in the commercial property sector. Sinn Féin has proposed an increase to 12.5% in the context of budget 2022. This would have an advantage of dampening activity in the market and directing labour resources towards the residential housing sector, where it is most needed. Furthermore, it could review the impact of Covid-19 and the move to remote working on this tax head. As noted in its tax strategy group paper, the Department believes the rebound in commercial property activity and occupancy this year may be more of a reflection of how low demand was during the height of the pandemic and long term, it anticipates lower office demand than pre-Covid levels, due to the implementation of a more permanent remote hybrid working policy.

These three amendments all concern property and stamp duty. The second one is a mirror of what is happening on another part of our island. The application of the 17% on investment funds would apply to all homes, including apartments, and the amendment is about rediverting resources away from commercial property and into house building.

These amendments are well directed. The 10% being charged on some residential property, where it is over nine properties, is completely inadequate to deal with the phenomena of the big property investment vehicles coming in here and bulk buying property. No measure has been taken by the Government to prevent them bulk buying apartments. If the levy is imposed on some parts of the housing sector in terms of homes of ten or more, rather than apartment homes, is the Government concerned these vehicles will simply start to set up entities that will do nine?

I have certainly seen vulture funds behave in that way in my constituency in trying to get around other regulations, including thresholds such as the Tyrrelstown amendment and they have succeeded. If they cannot evict ten tenants, they will evict seven, even though their intention to evict all tenants is clear. However, they do it over a period of time. I do not see why it is not possible for them to do the same, but that is an aside.

These entities are pretty ruthless and profit driven and the last people in whom they have an interest are those who need affordable housing. That is not their interest, at all. They are just here to make money. Indeed, the advertisements on many of their websites to the people who might invest in these entities say they will maximise the value of people's investment. That is how they promote themselves as businesses. They do not say they are trying to do good for housing around the world. They say to people who are thinking of investing that they will maximise the value of their investment.

That is the business they are in and they are not the sort of people on whom we should be relying to resolve a housing crisis, which is about human beings accessing a basic human need. I would exclude them completely from the market. Some 17% certainly goes much further than the Minister is proposing. In some ways, I would be inclined to put it at 90%. I just do not see the value of these people. They should be driven out of the market.

The direction of amendment No. 110 is correct. I highlighted some time ago on Leaders' Questions the issue of hotels being built, while we have a desperate need of housing and a shortage of construction labour. This amendment tries to get at the same issue. The Taoiseach replied that we needed hotels and told me not to counterpose the two. However, there is a shortage of construction labour in this country. If loads of construction workers are building hotels, they are not building houses.

If there is a priority at present, it is to build houses for people to live in, rather than more hotels, which are littering and in some cases destroying this city, because so many of them are being built. They are destroying the city's heritage, as well as directing labour resources which are in short supply and are needed to build homes for people. The objective of these amendments by Deputy Doherty is absolutely right. I am interested to hear whether the Minister really believes the Government's current policies will deter the sort of objectionable activities being conducted by these profit-driven investment vehicles and the damage they are doing.

Does the Minister have measures that prioritise the construction of homes as against less essential construction of the hotel kind? Indeed, is he interested in such measures? I know less about the commercial office sector and whether there is an oversupply. It gets my goat when I see the Seamark Building while travelling on the Merrion Road. I do not know whether the Minister has ever passed it. One of the NAMA developers, Bernard McNamara, built the big blocks beside St. Vincent's University Hospital. They are huge impressive looking buildings. There are about seven or eight of them. At least one, which has been advertised for office space, has been sitting empty for ten years. Do we need those kinds of developments or do we need homes? In some areas, there is clearly an oversupply of office space, such that it cannot be rented. I support the thrust of these amendments and am interested in hearing the Minister's response.

Amendments Nos. 109, 110 and 111 are grouped together and I will speak to each of them in turn.

Turning first to amendment No. 109, as the Deputy is aware, earlier this year I introduced a special 10% rate of stamp duty to apply to the purchase of ten of more houses in any 12-month period by any person or corporate entity. This rate came into effect from 20 May 2021. The new rate does not apply to the bulk purchase of apartments and is subject to a number of other exemptions for social housing purposes.

This measure was complemented by guidelines introduced by the Minister for Housing, Local Government and Heritage under section 28 of the Planning and Development Act 2000 (as amended) Regulation of Commercial Institutional Investment in Housing. The purpose of these guidelines is to ensure that own-door houses and duplex units in housing developments are not bulk-purchased by commercial institutional investors in a manner that causes the displacement of individual purchasers and-or social and affordable housing, including cost-rental housing.

It is too early to evaluate how effective the stamp duty has been as a deterrent to institutional investors. However, on the planning front, there have been a number of instances where An Bord Pleanála granted permission for the developments of new housing estates in Dublin and Galway, subject to conditions that houses and duplexes can only be occupied by individual purchasers and cannot be first owned by a corporate entity. This is a significant development in response to the problem of housing estates being bought in bulk by investors.

As was acknowledged, I excluded apartments from the 10% stamp duty charge. The reason for this was that a key objective of this tax was to achieve a balance between addressing the issue of multiple purchases by institutional investors, while at the same time ensuring that the supply of financing is not undermined, particularly in the construction of new apartment developments. The rationale for this exemption was twofold. In order for apartment complexes to be built, it is necessary in virtually all cases for an institutional investor to commit, through a binding contract, to purchase all or part of an apartment complex on completion. This is a forward-purchase model and is usually entered into once planning permission has been obtained. The benefit of this approach is that it allows a developer to obtain the necessary funds through bank lending to finance the project. This financing could be unobtainable or more expensive in the absence of such a contract and there is, therefore, a risk that these apartments would not be built.

The Department of Housing, Local Government and Heritage has indicated that institutional investors are only likely to commit to such arrangements if they can be certain that, at a later stage, they will be able to sell these apartments. They are concerned that a 10% stamp duty levy would inhibit such a sale and, in turn, discourage such investors from participating in the financing of apartment complexes in this country. Therefore, this is an important distinction as in its absence there is a significant risk that developers might not participate in and might exit the apartment building market because such projects might no longer be viable, and an important element of our future housing strategy would be undermined.

The Government has done a lot to discourage the bulk purchase of houses this year through the tax and planning systems. It will be necessary to afford these measures time in order to evaluate their effectiveness. That is why I do not agree to the amendment that seeks to introduce a 17% stamp duty surcharge on the purchase of all residential property by corporate structures, including real estate investment trusts, REITs, and Irish regulated funds, IREFs.

Moving to amendment No. 110 and the issue of purchases of residential property here by non-residents. Deputy Doherty raised this issue with me last year during the passage of Finance Act 2020 through the House in the context of the UK having announced its intention to apply a similar surcharge from 1 April. The matter was considered by the TSG this year in its stamp duty paper. It included an examination of the potential benefits and drawbacks of introducing such a surcharge here. It found that it was not possible for Revenue to provide an estimate of the revenue that such a measure would generate, due to the fact that there is not a difference of treatment of non–resident taxpayers compared with resident taxpayers for stamp duty purposes when they purchase residential property. The report noted that additional, albeit unquantifiable, revenue could be generated from such a measure. It indicated that such revenue would probably be of small amount. It also suggested that such a disincentive to residential properties being bought as holiday homes by people not resident in Ireland could play a role in releasing housing supply for Irish purchasers, although those purchasers may themselves be acquiring a holiday home or investment property.

The TSG paper acknowledged some potential drawbacks, specifically a possible conflict with free movement regulations if a surcharge were applied to EU residents; a possibly negligible revenue gain if numbers of such acquisitions are low, particularly in light of the potential increased regulatory burden on Revenue and others involved; and the possibility of it acting as a disincentive for workers with valuable skills seeking to relocate to Ireland, while still maintaining tax residency in another country. The UK introduced the 2% stamp duty tax surcharge on 1 April, and I will certainly follow the effect of this. At present, I do not have any relevant data to allow me to form a view in that regard.

Given that the matter has just been considered by the TSG, a report is merited, which is why I do not accept the Deputy’s amendment.

On amendment No. 111, there are a number of distinct components to the report being sought and I will speak to each of them. First, we all acknowledge that remote working has become a feature of this pandemic and is likely to remain, in some form at least, a part of working life into the future. However, at present, we are still in the midst of the pandemic and it is too early to get a clear perspective on how remote working patterns will impact on the commercial property sector over the longer term. More time is needed for this to become clear. However, I acknowledge that stamp duty receipts over the coming years are likely to give insight into how changing work patterns are affecting the sector. In this regard, the committee should note that such receipts fell from €537.64 million in 2019 to €407.6 million in 2020 – a fall of 24.2% in spite of an increase in the rate from 6% to 7.5%.

Second, regarding the impact of activity in commercial property on labour supply, this matter has been raised in the past and I have acknowledged the merit in this as a rationale for changing the rate. While undoubtedly there are some construction roles and skill sets that can transfer smoothly between both residential and commercial property construction, many specialist roles exist for the various construction property types such as house, industrial and office. Even if the non-residential sector experiences a prolonged post-pandemic slowdown, putting aside the highly mobile nature of the workers involved, to get such workers to switch to the residential sector will likely require some retraining over time.

Therefore it is at least possible that a reduction in labour demand in the non-residential property sector may not necessarily result in a corresponding increase in the availability of workers for the residential sector, at least in the short term.

Third, the impact of increasing commercial stamp duty has been examined a number of times in recent years and has resulted in commercial stamp duty increasing from 2% to 7.5% between budget 2018 and budget 2020. In the current economic environment, there will be no guarantee that increasing non-residential rates will generate additional revenue.

However, this area will be looked at as part of next year’s tax strategy group, TSG. I will have a better sense of the direction of travel of such stamp duty receipts at that time and will be in a better position to form a view on this matter. Given we are going to look at that issue through the TSG, I do not, therefore, propose to accept this amendment.

I thank the Minister for his comments. I note the TSG will look at this stamp duty issue in the commercial property sector. We talk about the role of taxes in respect of revenue raising or behaviour changing, and this measure is very much to try to divert activity away from one sector. I am not a person who believes there should be no commercial property. Of course we need commercial property and that type of development, but at this time we need our workforce to be directed as much as possible towards housebuilding in dealing with the existing crisis. If there was ever an opportune time to try to divert people, it would be now. I strongly urge us to look at that. The success in this measure would be a reduction in taxation and a flow of investment and workers into that other channel.

On the stamp duty surcharge on the purchase of residential property, I understand there may be no data and that Revenue has identified there may be some benefits to it and so on. I think the Minister may be going to some extreme lengths to suggest why it could not happen in that there would be more properties for people to buy in this State but they could be bought as holiday homes. That was a good stretch by whoever was writing the Minister’s notes.

We focus again on this issue. We have many cash sales, non-resident sales and institutions buying up property in bulk, and all that restricts the amount of property that is available for first-time purchasers or those who are scaling up or down. That is seriously problematic so we have to look, therefore, at measures we might not look at in other times. We had a discussion earlier today on house price inflation, and this is one of the issues we are trying to deal with.

My county has seen increases in rental income of about 19%. Roscommon was 20%, and we know in terms of rents that house prices are coming very close to the peak of the pre-crisis era. That is no surprise. We were told at the time that house prices would go back to those levels and it was very clear it would happen when it was decided to turn off the tap. It was the Government before Fine Gael were in government, when Fianna Fáil adopted that policy of long-term leasing.

This is, however, about trying to ensure we support home ownership. We hear the Taoiseach always saying in the Dáil that Sinn Féin does not support home ownership. We do but we do not want the investment funds to own the homes. We do not want the non-residents to be snapping them up. We want ordinary people who want to live here and to be part of building their communities to have home ownership at an affordable price and that we are not weighing them down with very significant levels of debt which will have, in the main, to be mortgage-financed.

On the first amendment, which relates to investment funds bulk-buying properties, I know the Minister will dispute this, but it was quite embarrassing for him to have sat here for the past number of years, voting consistently against amendments we brought forward to deal with this issue, only then, thankfully, because of the role played by the media and the public anger at what was happening in Maynooth, for him to be forced into a complete tailspin where he and his officials had to cancel everything and draft emergency legislation within a fortnight that introduced a levy on these funds, but only in the case of the bulk-buying of homes. I argue the rate is too low and can be absorbed.

The biggest problem here is this, and the Minister knows or should know this better than I do. I am from Gweedore in west Donegal but a large number of completions in Dublin are apartments. That is what is happening in this city. In Donegal where I come from, I do not have the figures with me but I would say that over 99% of homes there are houses, not apartments. In Dublin a large number of completions are apartments. Some 47% of all new homes built in Dublin from January to September 2020 were apartments. In the city of Dublin, 85% of homes were apartments. The Minister has handed these over to the vulture funds, the investment funds, which are not financing the construction of them but are entering into, as the Minister acknowledged in his script, purchasing arrangements. No money passes from the funds to the developer until they are completed and these funds then purchase them from the developer, off the market, and they are not available to anybody in this city or elsewhere to be purchased.

I will make the point again where 85% of homes in the city of Dublin are apartments and are being bought by the funds, not by people from Coolock, Drumcondra or Finglas. That is not just the end of the madness. As a result of the tax structure that applies to these funds, these apartments are bought at high costs and push prices up. These funds can do that because they are bought to rent. They are rented out then at high prices and rent rolls but not paying any tax on the rental income. That is a privilege that is not available to any other company or individual in this State bar Irish real estate funds, IREFs and real estate investment trusts, REITs.

When they sell these assets in years to come they will pay no capital gains tax on the uplift. On an asset that may have increased in value by €100 million, they will not pay the 33% capital gains tax on that that any individual or any other company structure would have to pay. It is for those reasons, because there is no taxation within the fund and only dividend withholding tax at a maximum of 20% on disbursement of dividends, that they are able to outbid, push and jack up the prices for these apartments and put prices up across the board. That is what is happening.

I am sick and tired of saying this every single time at this committee. I say to the Minister, surely to God if it is simply not working year after year and he is sitting in the driving seat, maybe it is time to look in the mirror to see if there is another path we can go down. If he continues on this road, it is not good. It is not good for the footprint of Dublin or that he is surrendering Dublin to these funds. It is not good for home ownership or for prices of property across the board.

It is not just I who is saying this and I am sure the Minister will try to dismiss what I am saying. The Department of Finance the Minister leads published a paper in 2019 entitled Institutional Investment in the Housing Market.

The paper noted:

There is a risk that, should ... [buy-to-rent] investment continue at current growth rates, market forces would over the long-term create socio-economic polarisation in some urban areas. Under such a scenario average income earners would be priced-out of purchasing or renting from the private market ...

It also stated: "... there is a risk that at sufficient scale an institutional investor or group of investors could, over time, develop monopolistic ... pricing power". That is happening under the Minister's nose. Not only that, but the Minister is facilitating it. This is eyes-wide-open stuff. Crazy stuff is happening. These are things which cannot be reversed easily overnight because they are going to have a long-term impact on property prices, the shape of Dublin and how people live and are able to go about their lives. It is also wider than just apartments. This amendment is about calling that out. It is about ending that practice. It is about saying, "No, we need to stop this". That is what it is about.

As I said, I know the Minister is not going to budge on this. He has no current plans to do the investor roadshow but his Department is planning the investor roadshow and I am sure he has not told it to stop. That is the reality of it. What has happened is heartbreaking. This is not a natural disaster. It is not a pandemic. It is not what we are facing with Covid-19. It is not climate change and the challenges that will bring. This is a direct consequence of policies he and his predecessor have implemented and which people at this and previous finance committees continue to cheerlead and vote through.

No, I am not finished.

I want to bring in the Deputy's colleague and Deputy Boyd Barrett.

I am the proposer of three amendments which you will probably reject when I push them to a vote. These policies and the decisions which are taken here in the bowels of Leinster House have real and long-term consequences for people. Over a series of years I have sat in this committee and policy after policy has resulted in this. It has pushed house prices beyond the reach of ordinary people. It has led to a situation where houses are not available for ordinary people. It has led us to a point where we have the highest rents in all of Europe in this city of Dublin. That is the reality. The people who have the luxury or the benefit of being able to get a house are then saddled, because of the prices, with having to take out a mortgage, which doubles the amount one must pay back in the long term, at the highest rates. This is where it happens. When we are talking to our constituents next year and prices continue to go up, this is where it happened. This is where the decision is made and this is who made the decision. That is the problem. I will leave it at that. I will be pressing these amendments.

I thank Deputy Doherty. Deputy Boyd Barrett indicated, as did Deputy Mairéad Farrell. Deputy Durkan wants to comment as well. We will go in that order.

We discussed this earlier but it is such and important subject that we must put as much pressure as possibly can on the Minister and the Government to rethink their attitude towards these investment vehicles. Sometimes we repeat phrases so much that they begin to lose their value and we forget what we are talking about when we talk about these vulture funds. If anybody wants to remind themselves, they should go on the websites of the funds. Those are the best places to find out what they are about. They tell you, in very stark, frankly ruthless, terms, what they are about and none of what they are about is the provision of housing to people who need it. There is none of that. I am looking at Lone Star at the moment. I was looking at Kennedy Wilson before that. I have looked at Hines and at Apollo Asset Management. You can go through the whole list of these funds and you will not find a single word on their websites about trying to help people into homes. Not a word. Lone Star, for example, says it specifically seeks to capitalize on market conditions "... in markets that have suffered an economic and/or banking crisis, resulting in a dislocation in asset pricing and value opportunities". That is the literal definition of a vulture. We move in on a situation in distress where assets are undervalued and we gobble them up. Then we unlock value. That is another expression. We do value creation. None of that is about trying to build new houses for people who need them. It is absolutely about literally circling the world looking for undervalued assets in economies in distress and trying to maximise the value. Alternatively, the funds look to where there are specific shortages which mean that they can maximise the value. It is not about addressing the supply; it is about maximising the value they can get from having an asset in a market where there is a shortage.

I would argue that these entities have no interest in increasing supply, or at least not in doing so to the point where rents or prices would actually fall. Why would they ever do that? They want to ensure that the value going back to their investors stays up and that they get the maximum possible return. Thus, it is not in their interests that the problem the Minister says the Government wants to solve, namely, the housing crisis, be solved. It cannot possibly be solved by people who have no interest in solving it but who actually benefit from rents and house prices being obscenely high. In other words, the value of their assets is obscenely high because that is how the funds look at them. That is the language that litters their websites. It is the language with which those involved try to entice people to invest in their vulture funds. They say come to us because we can make you a lot of money by circling and looking for opportunities to do so. That is their agenda, their objective and what they succeed in doing. The consequences of that are unpayable rents, unaffordable house prices and the domination of the housing sector by people who have no interest in resolving the problem we as a society believe it is important to solve.

I do not know whether this is just ideological or whether it is just a mistake the Government has made, but it has got it wrong on this one. Anything we can do, here or anywhere else, to try to make the Government and the Minister reconsider is worth doing because this is a dire mistake. If you want to solve a problem about the basic human need to have an affordable, secure roof over your head, you do not go to entities which, quite literally and unashamedly, are operating as vultures and the objective and raison d'être of which is to be profit-hungry vultures.

When we are discussing these things, it is important to look at the real-life daily impact it has on our communities. Just across from the estate I live in a build-to-rent apartment block is going up. We had street meetings organised by residents to discuss the proposals for what is going to be put in place. I must tell the Minister people in my estate were devastated when they heard it was more than likely going be build-to-rent. I come from an estate that was built in the 1950s and that is home to a very strong and proud community. The residents knew that their children and grandchildren would obviously not be able to buy apartments there and that they would more than likely not be able to afford to rent them either. They were left with two choices. We have had the discussion about affordability. We had a good, long discussion yesterday about the whole issue of the affordability crisis. The reality for the people in my area is they do not really have the choice of staying in the community their parents or grandparents live in and helped build because of that affordability crisis.

Deputy Richard Boyd Barrett: We discussed this earlier but it is such and important subject we must put as much pressure as possibly can on the Minister and the Government to rethink their attitude towards these investment vehicles. Sometimes, you repeat phrases so much they begin to lose their value and you forget what we are talking about when we talk about these vulture funds. If anybody wants to remind themselves, go on the websites of the funds. They are the best places to find out what they are about. They tell you in very stark, frankly ruthless, terms what they are about and none of what they are about is the provision of housing to people who need it. There is none of that. I am looking at Lone Star at the moment. I was looking at Kennedy Wilson before that. I have looked at Hines and at Apollo Asset Management. You can go through the whole list of these funds and you will not find a single word on their websites about trying to help people into homes. Not a word. Lone Star, for example, says it "specifically" seeks to capitalize on market conditions "... in markets that have suffered an economic and/or banking crisis, resulting in a dislocation in asset pricing and value opportunities". That is the literal definition of a vulture. We move in on a situation in distress where assets are undervalued and we gobble them up. Then we unlock value. That is another expression. We do value creation. None of that is about trying to build new houses for people who need them. It is absolutely about literally circling the world looking for undervalued assets in economies in distress and trying to maximise the value. Alternatively the funds look to where there are specific shortages which mean they can maximise the value. It is not to address the supply but to maximise the value they can get from having an asset in a market where there is a shortage. I would argue these entities have no interest in increasing supply or at least not doing so to the point where rents or prices would actually fall. Why would they ever do that? They want to ensure the value going back to the investors in those funds stays up and that they get the maximum possible return. Thus it is not in their interests that the problem the Minister says the Government wants to solve, namely, the housing crisis can possibly be solved by people who have no interest in solving it but actually benefit from rents and house prices being obscenely high. In other words, the value of their is obscenely high, because that is how the funds look at them. That is the language that litters their websites. It is the language with which they try to entice people to invest in their vulture funds. They say come to us because we can make you a lot of money by circling and looking for opportunities to do so. That is their agenda, their objective and what they succeed in doing. The consequences of that are unpayable rents, unaffordable house prices

They either have the option of moving extremely far from where they are originally from or, of course, they have to move into the box room in their parents' house, which is, sadly, the reality for many people, as I described to the Minister yesterday when speaking about a constituent who had come in to meet me. We have gone through a huge number of amendments over yesterday and today and, more than likely, we will go through more tomorrow. Sometimes it is important when we discuss these things that we sit back and think about the impact they have on communities because sometimes we can be that little bit removed from that. As I have seen this in my community, I thought it would be important to mention.

I have listened patiently and carefully to the debate for the past hour or so and am a little surprised by the tone of it for this simple reason. Some of us are coming late to the table on this argument. Some of us were here before, a long time ago, and raised again and again the question of the danger of growing the rental property sector in Dublin and the surrounding towns and cities. Nobody raised a finger. Nobody was willing to stand up and be counted then, despite the fact that I tabled countless parliamentary questions drawing attention to that growth, which occurred for no reason at all other than for certain parties to get a hold of the market. That was long before the crises started. It was the wrong development at the wrong time, and people stood by and looked at it and never said a word about it. It went on from there because the argument in favour of this growth at that time was that it was much cheaper to rent a house. What a load of crazy nonsense. The point I made at the time was that it would soon become more expensive to rent a house than to buy it, and that is what happened. No disrespect at all to our friends in the Opposition, but, despite all these arguments, nobody said anything about this at the time. A couple of us were on our own pointing out what would happen, that is, that the market would be concentrated in a particular area, which would lead to a housing shortage for people who wanted to buy their own homes or to get local authority houses from the local authority. Every kind of turn was put upon it at the time. Now this has become obvious to everybody. Everybody is pointing out what went wrong. Some of us pointed out all these things before they happened. That is one thing about politics. We need to learn to identify the dangers before they occur. We are not good at that and we are not improving either. We need to concentrate on that and do it because, if we do not, we will have calamity after calamity and we will not be able to comment until after, when we will say, "My God, how did this happen? Somebody is to blame for this." "Ourselves" is the answer to that question. I was a strong opponent of this policy at the time. My arguments were proven correct. I do not at all expect anybody to jump up and down and say, "You were very wise to say those things at the time." It was, however, unpopular to say them and to speak in that fashion. I am now repeating what I have said before, as did a number of other people. The core of the argument at the time was that people had a natural inclination to own their own homes, and means should have been found at all times to accommodate them. It does not matter where they come from or what their background is; they are entitled to aspire to that, and we need to help them all the time.

Whatever happens from here on in, let us do the best we can. The die was cast a long time ago but we have to deal with this now. I know things will come around. Wheels turn and come back to where they started, usually, and that will happen again. How soon it will happen I do not know, but I do know one thing: young people - this affects everybody but young people more than anybody else - who are anxious to own their own homes or willing to accept local authority houses or affordable houses they can purchase, or whatever way it comes, want to do that all the time. That is part and parcel of their upbringing. They have always wanted to do that. It is part of their independence. It is also part of the taxation system because, obviously, the fewer affordable houses available to people and the higher the rent goes, the more they have to be paid. It is an economic issue as well, not only for the potential homeowners but for the whole State. It is therefore in everybody's interest to deal with the issues before they occur, preferably, but still we have to deal with them now and we will.

Chairman, I thank you for the opportunity to speak.

I will deal with each of the questions in turn.

To begin in the order in which Deputy Doherty addressed the issues he raised, I refer to the issue of commercial stamp duty, the latitude for it to be increased further and the role it might play in not only raising revenue but also, more importantly, shifting capital into the delivery of more homes. That is one of the reasons I have over recent years increased stamp duty on commercial property. Further evaluation and examination are required as to whether that policy could be used further in the future. I will say a couple of things about this. The rate has gone from 2% to 7.5%, a very large increase, over a few budgets. It has more than tripled at a time when we can see uncertainty surrounding the demand for commercial property in the future. How structural that uncertainty will be and how long it will last I do not know at this point, but the reason I decided not to introduce a further change to stamp duty on commercial property in this budget was that I felt there is enough change going on in that sector at the moment and I did not believe a further change would yield significant additional revenue. The fact that we had seen tax receipts in that tax head decline points to the fact that it is a tax rate that may have a bit less utility at the moment than it has had in the past. As I said, however, this will be looked at through the tax strategy group, TSG, next year.

I outlined a number of different reasons I believe there could be a difficulty with an additional surcharge for non-resident purchasers in Ireland. One reason was that I raised the point as to what could be the use of the home that might be bought for an Irish purchaser. It is not the strongest argument there is. I think there are other reasons that might point to the drawbacks of that measure. Again, that can be reviewed through the TSG and I will be able to consider it in future budgets. We can evaluate the impact it will have in the UK, and I hope information from that becomes clear enough soon.

As for the broader discussion about the role of institutional investors, specifically REITs and IREFs, and to go back to arguments that have been made and will continue to be made again, it is in this committee and in the Dáil that decisions are made that have very significant effects on our economy, on how homes are built, on the cost of those homes and on who is in a position to buy or rent them. Again, however, it is vital to put this discussion about institutional investors into the context of the other things the Government is doing to respond to the housing needs that we know are there, are really significant and are growing for many. I can put the human faces on those cases as well and on constituents I meet who are equally worried about whether they will be able to live in their local community or whether they will find themselves living in the spare room in a few years' time, worried that they might not be able to afford rent tomorrow or afford a home in the future. I meet similar constituents, experience the same feedback and see the same concern that many people have about this. That is why in our budget we have €4.1 billion allocated to make progress on housing.

Contrary to what Deputy Boyd Barrett said, we are not relying on institutional investors to solve our housing needs and the great housing difficulties we have at the moment. They are one of elements that can make a difference to the delivery of more apartments in particular, but they are also why, across next year, we are aiming to build 9,000 social homes and 4,100 affordable and cost-rental units. We want to see the private sector delivering 11,500 homes for private rental and private purchase. In addition to whatever work these investors and entities are doing in building or enabling the supply of more apartments is a Government that is actively involved in building more homes directly or enabling their building through cost-rental and affordable models of delivery, which I hope will deliver even more homes next year, and acknowledges that we need the private sector to build more homes for people who want to own their homes in their entirety without a role for the State. We also acknowledge that the private sector in particular has a role to play in the provision of apartments at scale, that is, to build lots of them. Particularly within Dublin and some of our other cities, we need more apartments to be built across the coming years to respond to the demand for those apartments.

This brings us back to the role of institutional investors. I contend that these funds play a role in apartments being built that would otherwise not be built. The apartments that are the subject of such criticism would not exist at all if we did not have investors like these channelling savings from other parts of the world into the purchase or co-funding of homes that allows them to be built. This is something that happens in many other countries and forms a part of how apartment development in cities takes place. While these apartments are the subject of such criticism, what would be the subject of even more criticism would be if apartments were not being built at all. In a city like Dublin and a number of our other larger cities, we need apartments being built in scale in a way that people will be able to afford. I know that is tough at the moment, but without apartments being built in numbers, we will not be able to respond to the rental needs that so many people have. Institutional investors play a role in the funding and delivery of apartments that, in their absence, would not be built.

I am looking at the alternatives that are being proposed here and the charge that is being made regarding our intentions. The role of these funds is being played beside a State and a Government that, in the first six months of 2021, delivered 2,433 new build social homes and 3,600 social homes in total. The Government has a further 8,750 social homes in the pipeline and another 9,000 at design or tender stage. This is the overall record of what the Government is doing - building homes directly at scale for social and public use, as well as for affordable and cost-rental. Our ambition is to deliver 4,100 of those next year. At the same time, apartments are being built by these organisations that are the subject of such criticism. In the absence of their role, the apartments that they are building would not be built.

Turning to the alternatives, I have looked at what Sinn Féin is proposing as well as its draft budget. Sinn Féin says that it would build 20,000 social homes next year at a cost of €3 billion. That is an average cost per home of €150,000. The question that Sinn Féin will need to answer, just as I answer questions on our housing policy, is how on earth does it believe it can build a home for €150,000. In its alternative budget, it is putting less money into housing next year than the Government is yet it is promising to deliver more homes. The only way it can make that work is at a cost per home that is a fraction of the cost of building homes.

Last night, Sinn Féin voted against a measure that was concerned with trying to increase the supply of rental accommodation. It was the tax code measure, which I have extended, to allow unused rental properties to be renovated by landlords, with some of the costs being defrayed by the tax code. Over the past two years, this measure has been responsible for 3,335 properties coming back onto the rental market. Sinn Féin is planning to build homes at a cost of €150,000, yet it votes against any measure we have that tries to increase the supply of rental accommodation. It is a party that makes much of its claim that it understands the rental crisis, but it opposes any measure that leads to new rental homes being built and, in its own policies, advocates the building of homes at a fraction of the actual cost of building them.

Regarding Deputy Boyd Barrett's points, his view is that he does not want these entities in Ireland at all. As always, he is at least clear in his policy. However, who does he want to build all of the accommodation - houses and apartments - that we will need? He appears to be against profit playing any role in the delivery of anything in our economy. It is a fact that those involved in building homes want to make a profit on their return. In many cases, that profit is reinvested in the delivery of more homes.

I am delighted that the Minister reads our alternative budgets. Maybe they will give him some ideas on how to change direction. The Minister has been in the driving seat and this is only going one direction, which is that house prices and rents are going up and up while availability is going down and down. That is the reality and no one else is to blame. The Minister is right: this is where we make the decisions. He has made the wrong ones time and again. It was only when the public called him out and asked how under God he was allowing these funds to come in and snap up homes from ordinary families that were trying to get homes and start their lives that he was embarrassed into scrambling his officials. Within a fortnight, he had to introduce emergency legislation that he had voted against six months prior. That is the reality.

I am sure the Minister knows how the financing of homebuilding occurs. He will understand that there is Exchequer expenditure and non-Exchequer expenditure. That is why the figures he has misrepresented to the committee are wrong. The €3 billion he mentioned is Exchequer expenditure. I encourage the Minister not to embarrass himself any further and to examine the policy and start implementing the delivery of 20,000 social, affordable and cost-rental homes. But, no. He has spent the past half hour defending the fact that he will continue to support institutional investors coming to Ireland and purchasing apartments in bulk. Some 85% of completions in this city are apartments. They are not available to ordinary buyers and do not even go on the market.

Of those apartments that do go on the market, they cost €450,000 or €500,000. That is what the Minister is defending. Deputy Durkan spoke about how he called this out, and fair play to him if he did, but one did not need be a genius to call out what was happening in the housing sector. I mean the Deputy no offence.

It was long before it happened.

Fair play, but when I was in the Seanad, the Minister of State at the time was former Deputy Michael Finneran. I remember him giving a speech. Someone drew my attention to it on YouTube a number of months ago. Well over a decade ago, I spoke about how crazy it was of Government policy to stop building homes and to enter into long-term leasing arrangements, the nonsense of knocking down derelict or ghost estates, and how we would have a housing crisis, the prices of homes within ten years would revert to where they were prior to the crash and people would be evicted from their homes because landlords would sell up. This was not crystal ball stuff and someone did not need to be a genius. The then Government decided on a course of action just as the Minister before us is deciding on a course of action. He has pursued a policy that can only result in house prices and rents increasing and the profits of the funds increasing. That is what has happened. It is not crystal ball stuff. If one does A, one will get B.

As the Minister is flicking through our alternative budget, I will offer him a novel idea. Let us ramp up investment in social, affordable and cost-rental homes. Let the State step in with the appropriate response and build houses. It has not built houses for years. I have no doubt that the Minister's constituents are giving him the same messages mine are giving me. The difference is that he very much is responsible for the hardships facing many families across the State. I say this not as a personal attack on him but in terms of him being the person occupying the role of Minister for Finance who has continually pursued a policy that has been detrimental to ordinary families across the State. That is the reality. This is where it happens and the Minister is the guy who makes it happen. He is also the person who, if he changes direction, allows us to start to change the narrative. We would start making house prices affordable. I look at the Minister's record, though, which is something from which he cannot shy away. From a taxation point of view, his record on housing has been appalling. How can he stand over it? Prices have only gone in one direction.

The Tánaiste spoke on RTÉ a year and a half ago - I watched it recently - and said that there was good news, in that house prices had peaked and were starting to decrease, as were rents, and that it would be two years before people started to feel it. That was a year and a half ago. In that time, the same thing happened as happened in the years prior, that being, house prices and rents increased and ordinary people were pushed to the pin of their collar. There is tea and sympathy for the funds but no help for ordinary people.

Does the Minister wish to respond?

Absolutely, but at what time are we breaking?

We will have to suspend as soon as we see the vote called in the Chamber, but we will return-----

Are we voting on this group of amendments after I finish?

It depends on how long it takes.

Let us vote on it now.

I am going to give the Minister a chance to respond before putting the question on these three amendments and possibly the question on the section. We may then have to suspend for the Dáil vote.

I suspect we are going to hear the term "non-Exchequer" a great deal more from Sinn Féin in future because the claims it makes cannot be backed up by its figures. It claims that it can build homes at a fraction of the actual cost and-----

No one said that.

-----it continues to make the charge-----

The Minister should defend his record instead of spouting nonsense.

Deputy Doherty, let the Minister make his point.

The louder Deputy Doherty's voice, the weaker the argument.

No. The Minister should not let himself down.

The louder the voice, the weaker the argument. The more the heckling, the shakier the ground. This is the ground that Sinn Féin is on. I will now move on to my record and my future but, more important, the future of what we need to do in respect of housing. Sinn Féin is telling the Irish public to trust it and it can build a home for €150,000, but what is the answer to that? The latest-----

No one ever said that.

These are the figures.

They are not. The Minister does not understand how house building works.

Twenty thousand social homes at a cost of €3 billion. The maths of that is €150,000 per home. The latest incarnation and flowering of the magic money tree from Sinn Féin is the phrase "non-Exchequer". These are the figures in Sinn Féin's calculation.

That is how there is funding-----

As to whether we want to and are going to build more social homes and see the State play a role in that, the answer is an unqualified "Yes". This is not just a promise for the future. Rather, it is the reality of what is happening now. It is the reality of this Government, despite our construction sector being closed for so long due to a pandemic, now having 8,750 social and public homes on site. That is our track record. That is what we are doing.

Any debate on the role of funds in developing more apartments has to acknowledge that the Government is investing directly in more homes being built across the country by local authorities.

Regarding the great challenges in the rental sector, apart from Sinn Féin being a party that last night voted against a measure that, as we speak, has put 3,300 more properties into the rental sector than would otherwise be the case, with 3,300 renters and their families in accommodation, it is yet to outline how it would deliver a supply of rental accommodation. That would not happen without the forward funding and forward purchase by funds that play a role in the delivery of apartments.

As to what we will do in the coming period to respond to renters' needs, the Government has committed to building 4,100 affordable and cost-rental homes next year. Over the next 12 to 18 months, there will be more than 6,000 homes built. That is what we will do. The Deputy appears to have neglected the fact that, in the 18 months since the Tánaiste made that comment, we have had a pandemic in which the construction sector has been closed and countries all over the world have seen house prices increase. All over the world is a matter for other people, though. What I am focused on is how we do a better job in Ireland. We will do a better job through the €4 billion of funding that I have included in the budget to build more homes directly, deliver affordable and cost-rental homes and enable the private sector to ramp up over time to building 20,000 homes per year.

I will put the question now.

May I make a point?

I have let the Deputy in three times and the Minister in three times. Everyone has had answers to questions.

It will only be one point.

One very brief point. Please assist me, Deputy.

This has been going on all night and we have to move on.

I know. For the record and just in case anybody does not understand, when an approved housing body delivers a home through, for example, the capital advance leasing facility, CALF, it utilises Exchequer funding with its own financing, for example, through the European Investment Bank, EIB, or the Housing Finance Agency, HFA. The Minister knows this, but he has used that argument because he cannot defend his own record. Indeed, he has used the same language as his officials used against the Economic and Social Research Institute, ESRI, and Professor Kieran McQuinn in this regard. It is beneath him because he knows very well how housing is financed. It is how the Department itself provides financing. It is Exchequer funding, yet all of it is dealt with as general government expenditure.

The Minister knows this well.

Excuse me, I want to come back in again. Jibes have been made against me. If are going to suspend Standing Orders, I am going to be treated fairly, as it happens. The Department of Housing-----

Deputy Boyd Barrett wishes to comment.

Deputy Boyd Barrett had indicated. I call Deputy Boyd Barrett to come in on a new point on this amendment.

The Minister asked a legitimate question, namely, are we saying there should be absolutely no private sector involvement in housing? What I would say to that is the State cannot rely on funds, investment entities and property and real estate firms - whatever we want to call the vultures, as they are often described these days - to solve our problem, and we have a problem. It would be very difficult for the Minister to say that the decisions of the period 2011, 2012 and 2013, which have been followed through pretty consistently, have not landed us in a massive crisis. It would be very difficult for the Minister to suggest the decisions made when Michael Noonan was the Minister have not landed us in this situation. Have we learned nothing from what the experience has been of those entities coming in here and landing us in this situation?

By the way, while we did have a housing crisis then, it was not a disaster. Some of us did warn about this in those years 2011, 2012 and 2013. When these things were in play, when the big decisions were being made, we said the decision of the State to stop the direct construction of social and affordable housing at that time was going to have disastrous consequences.

There was no money.

Hold on a second-----

The banks took it.

The Government made the decision to put the money into the banks.

What do you mean from where? From the pockets of the working people of this country.

Deputies should speak through the Chair.

I cannot restrain myself on that. It was well known that the banks-----

Deputy Boyd Barrett should finish his point. The Minister has indicated he wants to respond and then Deputy Durkan can come in. Then, I am putting the question. That is my ruling on it.

Absolutely. There was a policy choice or a decision made at that time which was to bring these entities in. At least the Government is remaining consistent because it still thinks they should be here. It is defending the decision to invite them in, it is defending the decision to keep them here, and it is suggesting they are going to contribute even now to resolving the housing crisis. I put it to the Minister that every serious assessment of what has happened since these entities came in makes it clear they are contributing nothing. It is worse than that. They have made a bad situation worse because their intention was not to solve the crisis; their intention was to benefit from the crisis. In the process, they have made it worse.

What is the alternative? There was an alternative then and that was to have used the NAMA portfolio for what it should have been used for, and some of us were absolutely explicit in pleading-----

I have not finished.

We have to suspend. A vote has been called in the Chamber. I am suspending the meeting until ten minutes after the vote is completed.

Will we then continue until 10 p.m.?

I propose we add on the time we lose now to that finish time of 10 p.m., so it might be 10.20 p.m. or 10.30 p.m. At the rate we are going, I think we will need that time.

Sitting suspended at 9.05 p.m. and resumed at 9.26 p.m.

Deputy Boyd Barrett has the floor. He was speaking about the amendment. He was nearly there.

I was. Apologies. I know there is something buzzing behind me. I will genuinely try to be brief.

We have set out our positions and they are clearly divergent. However, it is necessary to answer the questions the Minister put, so that there is no suggestion that there is a lack of internal logic in the arguments that socialists are putting forward on this point. Our argument was and remains that the assets and the means by which one can produce the housing that is necessary, both financial and otherwise, were effectively in the possession of the State at that time. These were in the banks, because we bailed them out, and in the land assets and property assets necessary to deliver the housing. We made a decision in both cases to work towards handing those back to interests that were not primarily interested in solving the housing crisis but in maintaining their financial position or in benefiting from that.

I still think that argument remains the same. The Minister asks who has the capital and says that the State does not have all the capital. First, the State has fairly unlimited access to capital at the moment because of the interest rate situation. There is also huge scope for redistributional taxes in our opinion, as the Minister knows, although I will not go over that argument. Redistribution of taxes would help find the capital. We mentioned the credit unions but let us not forget the banks as well. Where are the savings? One refers to the savings of other countries as being manifest in these vulture funds in coming over here and supposedly helping us with the housing sector. We have our own savings here. Where are they? The are in credit unions and in the banks. The people who hold those savings have a bit more interest in solving the housing crisis than the venture funds, vulture funds or whatever you want to call them in New York. To me, that is self-evident.

There was a time when these funds did not exist. It was the case that 20, 30 or 40 years ago, when this country was much poorer, it was able to deliver social housing. It was able to do so far more effectively than it has been proven to be able to do in the past few decades, when the country has been much wealthier. That is our argument. There are alternative sources for the capital investment. These are the savings that exist in this country in our own banking system. We could access these savings if were to take control of that banking system, which we bailed out, and use them for societal objectives and for social objectives. To be honest, I do not think most people in this country would object to their savings being used for or directed towards solving problems like that.

On the costing of houses, Deputy Doherty has defended Sinn Féin's own position. However, the costings we put in our pre-budget submission were costed by the Minister’s Department. We used the prices for one-bedroom, two-bedroom, three-bedroom and four-bedroom, based on estimates provided by the Department, as to how much it would cost to deliver those houses. As for our proposal for more than 20,000 housing units, the pricing for them in our budget submission was based on estimates given to us by the Government.

I want to say that for the record.

When this debate started earlier this evening I was afraid that I would be bored. I am happy to say that I am no longer bored because I am shocked. I am shocked at the loss of memory, the collective amnesia among the Opposition. Looking back ten years is one thing, but I cannot even rely on them to look back five years and to recall with any kind of accuracy what the situation was.

I am very fond of Deputy Boyd Barrett because he has some good ideas. It is just that when he puts them into operation it is like flying a kite upside down. It does not work that way, so you have to go the opposite route. The thing that takes me to the fair most of all is the point that the previous Fine Gael-Labour Party Government, the subsequent Government and the present Government should have done more, but I ask the question, with what? Does nobody recall that there was no money in the banks and no money to be got out of the banks? There was no credit. We had no credit rating. Mr. Modi was in Government Buildings working out a way to salvage the country, if it could be salvaged. The problem is that nobody seems to remember that now.

I worry about the philosophy behind the thinking when we come to that. You cannot go into a bank and say you are from People Before Profit and that you should get money because you want to spend it. Any cause is a good cause, but they are never going to pay it back, because there is no substance to the argument. I am sorry to have to say that, but it is a fact. Deputy Boyd Barrett knows that himself because he is a reasonable and shrewd guy. I give him full credit for that. It takes a little bit of doing to be able to say that with a straight face.

I want to remind people that some of us were talking about the crash long before it came. The crash is what left us where we are. We got one hell of a belt and we had to drag ourselves up by the bootlaces and struggle on. Then Covid came on top of that again, just to remind us that we were not going to be left alone for too long. When I think back, I used to wake up every morning and wonder if the people in Government Buildings were going to come to any kind of a conclusion that would be to our advantage. We waited, and every time we switched on the television, there were one or two of these guys walking across the street with large, bulging bags, and it was not money that was in them, it was documents. We had failed to run our economy because we did not do what should have been done at the time. We did not manage it. I remember the Minister for Finance saying at the time to somebody across the House that the economy was like a bank, you had to manage it. It was ironic. They needed the banks to be managed, not the economy.

I am not blaming the politicians. I have pointed this out on several occasions. A number of us put down questions to find out what the hell was going wrong. I got one answer to a question in about four years that clearly indicated to me that the fat was in the fire and we were in deep trouble. What I cannot understand is why some of the Opposition in here now do not remember that far back. It is only seven or eight years ago. Why did they not raise those questions? It was to the advantage of the people of the country to be able to raise those questions and say we cannot dig a hole any deeper than it is now.

It is on that point that I want to turn the argument to the future. If some of the philosophies now being put forward are carried through, if the people give an opportunity to our colleagues here to put them into operation, there will be desolation. Venezuela will be like the garden of paradise. There will be nothing like it. It will be an absolute economic desert. That is not going to come until such time as the lending institutions, the international financiers and the people in this country suddenly realise this thing is not what it was made out to be at all. These people do not have an economic plan and they do not have the superior knowledge that they claim to have. They have ideology. It does not count. It is hard facts, brass tacks, that count. We must have a debate that relates to how the economy is managed, how we can spend money that we can afford and how we cannot just go around to people on a door-to-door basis and say we want their money, we have a good idea and we will tell them all about it later. Look at what happened before. Do we want to repeat that? Does anyone in this room want to repeat that and to suffer the indignity of the position we were in?

I remember being called to a meeting in Brussels at that time along with a number of other people. I do not know why I was called. They probably felt that I needed to be beaten up. All of the member states were there, and they castigated this country for what we did and the implications for the rest of the European Union. They were angry. Many people, some who were near neighbours, despised us and ridiculed us on the basis that we were not able to manage the economy, yet here we are going back the same route again. Have we learned nothing at all? Surely, we should have learned something and that it is not that far away that we cannot remember 2007. In 2007 the country was flat broke, and nobody wanted to accept it. In 2005 the country was flat broke, and it still went on. I despair at the debate that we have had for the last half an hour or so. If it is that bad, that we cannot remember what went wrong and we cannot accept it, then we are quite liable to do the same daft things again. It would be stupid if we go down that route.

I will make a final and brief point. I welcome the fact that Deputy Boyd Barrett put together his party's housing budget on the basis of housing figures that were developed by the Department of Housing, Local Government and Heritage and the Department of Finance. The figure from the Department of Housing, Local Government and Heritage for the cost of building a social house nationally is €240,000. It should be familiar to Deputy Doherty because this figure comes from a question that Deputy Ó Broin himself asked the Minister for Housing, Local Government and Heritage.

Is the amendment being pressed?

It is, yes, and it is of note that the Minister could not defend his record in his final contribution, but his claims have no basis or substance. The man cannot stand over his own record.

Amendment put:
The Committee divided: Tá, 3; Níl, 6.

  • Barry, Mick.
  • Doherty, Pearse.
  • Farrell, Mairéad.


  • Donohoe, Paschal.
  • Durkan, Bernard J.
  • Matthews, Steven.
  • McGuinness, John.
  • O'Callaghan, Jim.
  • Richmond, Neale.
Amendment declared lost.
Deputy John McGuinness resumed the Chair.

I move amendment No. 110:

In page 132, between lines 8 and 9, to insert the following:

"Report on introduction of residential stamp duty surcharge for non-residential purchases

61. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of a stamp duty tax surcharge on the purchase of residential property by non-residents.".

Amendment put and declared lost.

I move amendment No. 111:

In page 132, between lines 8 and 9, to insert the following:

"Report on impact of increase in non-residential stamp duty

61. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the impact of Covid-19 and remote working patterns on the commercial property sector, the outlook for commercial stamp duty receipts as a consequence, the impact of commercial property activity on labour supply in the residential property sector, and options to increase rates of stamp duty in the non-residential commercial sector.".

Amendment put and declared lost.

I move amendment No. 112:

In page 132, between lines 8 and 9, to insert the following:

"Report on the bank levy and its annual yield

61. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the bank levy, its operation, applicability and annual yield in the years ahead.".

Amendment put and declared lost.
Section 61 agreed to.
Question proposed: "That section 62 be deleted."

I propose to delete this section.

Can I ask the Minister if he would send a note to the committee on how that would apply if there were, for example, a €20,000 gift from parent to sibling?

Question put and agreed to.
Section 63 agreed to.

I move amendment No. 113:

In page 132, after line 30, to insert the following:

“Amendment of section 82 of Principal Act (exemption of certain receipts)

64. Section 82 of the Principal Act is amended, in subsection (1), by the substitution of the following paragraph for paragraph (c):

"(c) the receipt by a person of any winnings bona fide, in money or money’s worth, from—

(i) betting (including pool betting), or

(ii) any lottery, sweepstake or game with prizes;".".

This amendment aims to address an anomaly between the way in which non-cash prizes are treated for the purposes of capital acquisitions tax, CAT, in legislation and the way in which they are treated for the purposes of the tax in practice. In the normal course of events, the receipt by a person of an asset which he or she has not paid for is a gift for the purposes of CAT. However, section 82 of the Capital Acquisitions Tax Consolidation Act 2003 provides for a CAT exemption for certain types of receipts. These include the receipt of compensation payments for personal injuries and the receipt by an incapacitated person of certain trust funds.

Where a person wins a sum of money from betting, a lottery, a sweepstake or a game with prizes, he or she benefits from this exemption by virtue of section 82(1)(c). Only sums received bona fide qualify. In the absence of this provision, a person could seek to avoid CAT by arranging with the disponer to bet on some event the outcome of which was certain, or which could be controlled by the disponer and donee.

Where a person participates in raffle or draw and wins a non-cash prize, however, the person is deemed to have received a gift for the purposes of CAT. As they are not cash prizes, they do not come within the scope of the exemption for certain receipts provided for by section 82. This means that, strictly speaking, a charge to gift tax arises on the value of the non-cash prize taken by the person in the raffle or draw. Notwithstanding this treatment of non-cash prizes in the legislation, non-cash prizes have, in practice, been given the benefit of the CAT exemption which applies to winnings from betting, lotteries, sweepstakes and games with prizes. This treatment is considered to be in line with the original intent of the exemption, if not the actual wording.

When section 82 was introduced in 1976, it would have been very unusual to see property such as a house or a car being offered as a prize from a game of chance, far more usual was the offer of a cash prize. In recent times, however, the increasingly popular use of raffles and draws for assets such as houses and cars as a means of fund-raising by community-based organisations such as GAA clubs and local schools has highlighted the difference between the legislation and the practice on the ground. This amendment brings the legislation up to date, so that it reflects the current practice whereby non-cash prizes from bona fide raffles and draws are also exempt from CAT.

I am not 100% sure what the change is in the subsection it is replacing. Is it the words "bona fide"? It exempts from capital acquisitions tax winnings from bona fide lotteries, sweepstakes and betting, which I support. What is the change that is taking place? What is to prevent somebody from organising a lottery with a limited number of beneficiaries or entrants, such as somebody with a property they want to leave to one of their nephews are nieces and allows only five nephews and nieces to enter the lottery?

We are making two changes. We are making clear that any sum received in a bona fide way from betting, lottery, sweepstake, game or prize is exempt from capital acquisitions tax. We are also making clear the exemption is no longer restricted to cash prizes.

What is to stop somebody from organising a lottery with five entrants? It could be publicised but only someone's nephews and nieces apply for it and, therefore, acquire an asset exempt from CAT.

That would not be seen as a bona fide event. The Revenue Commissioners would see it as being not bona fide and, as such, it would not benefit from the exemption.

Amendment agreed to.

I move amendment No. 114:

In page 133, between lines 2 and 3, to insert the following:

"64. The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on a levy on energy supply companies to offset the increased cost of heating and energy for households.".

Amendment put and declared lost.

I move amendment No. 115:

In page 133, between lines 2 and 3, to insert the following:

"64. The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on the negative social impacts of gambling and how changes to taxation of gambling could be used to mitigate these impacts.".

Amendment put and declared lost.

I move amendment No. 116:

In page 133, between lines 2 and 3, to insert the following:

“64. The Minister shall, within three months of the passing of this Act, prepare and lay before Dáil Éireann a report on the regressive nature of the current carbon tax system and to look at the options for a fair and progressive system of taxation that considers ability to pay and the goal of a just transition to a carbon-free economy.”.

Amendment put and declared lost.
Sections 64 to 66, inclusive, agreed to.
Question proposed: "That section 67 stand part of the Bill."

This provision deals with the phased withdrawal of the employment wage subsidy scheme, EWSS, with enhanced rates of the wage subsidy to be in operation until 30 November and graduating down after that. I have several questions on this and I know time is running on. The scheme will close to new employers on 1 January. Given where we are at present with case numbers, will the Minister give a commitment that this can be reviewed and changed in advance if it looks like we will face more restrictions in January? Will the Minister explain to the committee what provisions he has to be able to do this without legislative change? Is the Minister considering in conjunction with this a review of the reductions in the pandemic unemployment payment rate in light of the trajectory of cases?

I apologise. I missed the Deputy's second question.

Will the Minister review this policy position now, along with the pandemic unemployment payment? As a Cabinet member he agreed to impose restrictions as a result of public health guidance which mean people will lose their jobs. Last night, he said the pandemic unemployment payment was also cut. This is unfair. When the Government restricts even for the right reasons the ability of somebody to earn a living there is a responsibility on the Government to support them in the sector which it has restricted. This needs to be a quid pro quo in how we implement the public health guidance over this rocky period. The EWSS will be closed to new employers on 1 January but there is no guarantee that we will not be in a situation, and I hope not, when further restrictions will be imposed on sectors.

Therefore, the EWSS may need to be reopened. Will the Minister keep this matter under review? What powers has he to change it or would a change need legislation to be passed?

I will keep this under review, as I have done since introducing EWSS and its predecessor, the temporary wage subsidy scheme. Both of them have paid out more than €8 billion to support employers and have played a vital role in protecting our country's economy. Making a change to the date of 1 January 2022 would require a legislative change.

As to whether I support the Government's current policy on the pandemic unemployment payment, I do. While I accept that last night's decision is impacting workers and businesses, I believe that our decision is the right one. As with any decision, it will have to be kept under review.

I acknowledge the Minister's statement that these matters will be kept under view. The date of 1 January is potentially problematic because the Dáil will not be sitting and God knows how the pandemic will go. Obviously, we all hope that it will go in the right direction and the numbers will decrease, but it could also go in the other direction and the Government could face the same situation it faced in the aftermath of last Christmas and have to take drastic decisions. Therefore, the Dáil would have to be reconvened to pass legislation. Would it not be more appropriate on Report Stage to consider giving the Minister a power to allow the date to be extended with subsequent approval by the Dáil?

I do not believe so at the moment. Even though new entrants cannot join from 1 January on, they can do so all the way up to the end of December. While I can never be certain about where we will be with the disease, which is an obvious point to make by now, if things take a turn for the worse, employers can enter the scheme at any point up to the end of the year. This gives adequate scope to affected employers. At the moment, I believe this is the right balance.

The Minister should consider extending the date or having the power to extend it. The Dáil could be recalled at any time but, judging by last year, it could be under its own restrictions. What we are discussing is the worst-case scenario, but the Minister should consider the date, given the potential impact of not having that support in the first week of January. We all acknowledge the importance of this scheme to the employer, the employee and their connection.

Question put and agreed to.

Amendments Nos. 117 to 119, inclusive, on new sections have been ruled out of order.

Amendments Nos. 117 to 119, inclusive, not moved.
Section 68 agreed to.
Sections 69 to 71, inclusive, agreed to.
Question proposed: "That section 72 stand part of the Bill."

I may table a Report Stage amendment to section 72.

This section deals with tax defaults. The changes in respect of innocent errors avoiding penalties are welcome, but why would the Minister remove the prohibition on a reduction of penalties in offshore cases? Deputy Durkan, who gave us his history lessons, will probably recall how we were nicknamed "Amnesty International" in the 1990s because of all the tax amnesties for offshore cases. I hope that this is not a similar, if different, type of measure. Allowing those who declare offshore funds to avoid penalties is hardly a disincentive to engaging in offshore transactions. Will the Minister justify this change and speak to the issue?

Section 1077E(15)(a) of the Taxes Consolidation Act and the corresponding provisions of VAT, stamp duty and capital acquisitions tax legislation were introduced to facilitate the foreign income and assets disclosure programme in 2017. The provisions were designed to restrict penalty mitigation in a case where a person has or had offshore matters as defined, notwithstanding the making of what would otherwise be a qualifying disclosure. The definition of "offshore matters" was extremely broad and essentially included any offshore income, gain, account or property. The provision removes any incentive for taxpayers to approach Revenue voluntarily to regularise their tax affairs where such regularisation involved offshore matters because there was no benefit in doing so. They cannot avail of mitigation of penalties and cannot avoid publication and potential prosecution, all of which are benefits normally associated with the making of a qualifying disclosure. Therefore, the existence of subsection (15)(a) and related provisions in other Acts is making it more difficult to finalise interventions in many cases. Revenue may be unable to agree the penalty with taxpayers as a higher rate of penalty will apply in any case with an offshore element. In the absence of agreement on the penalty, Revenue must have the penalty determined by a court. This, in turn, can often cause significant delays.

It is considered that the provisions have achieved the objective for which they were introduced, with 3,042 cases having been finalised with a yield of more than €90 million. As noted, the continuation of these provisions is, in some cases, acting as a deterrent to voluntary compliance and, in others, making it more difficult to finalise cases.

I am making this change not only on the advice of my Department, but after my Department has consulted the Revenue Commissioners. The advice from them is that the current maintenance of this provision is making it difficult for them to agree the settlement of issues in a timely way.

We will avoid all penalties for them.

No. Revenue will still be in a position to impose a penalty. In the absence of agreement on a penalty, it can have the penalty determined by a court. There is still provision for penalties to be imposed.

I will revert to this matter on Report Stage.

Question put and agreed to.

Deputy Boyd Barrett is not present to move amendment No. 120 on a new section.

Amendment No. 120 not moved.
Question proposed: "That 73 stand part of the Bill."

This section ends the penalty regime in respect of VAT. It reads: "This section shall not apply in respect of any disclosure made, act done or omission made after the date of the passing of the Finance Act 2021."." Will the Minister outline the rationale for this?

This is similar to the amendments proposed in sections 71 and 72. This amending provision is aimed at simplifying the existing penalty regime in respect of VAT.

Question put and agreed to.
Question proposed: "That section 74 stand part of the Bill."

I ask the Minister to speak to the section. It has to do with ending the current publication regime relating to tax defaulters. Will the Minister explain the rationale?

Section 74 provides for the ending of the current regime for the publication of the list of tax defaulters.

A new publication regime, set out in section 75, will replace the current regime in the context of any fines or other penalties imposed or determined by a court on or after 1 January 2022 or settlements which the Revenue Commissioners accept or undertake to accept on or after that date.

More broadly, since the introduction of this provision in section 1086 of the Taxes Consolidation Act 1997, this has been an important power of the Revenue Commissioners. There have been 30 different amendments in this regard since that provision was introduced. This has resulted in the section being difficult to interpret and, at times, has caused confusion regarding whether certain tax defaulters should be published or not and what specific amounts should be published. This change has been requested on the advice of the Revenue Commissioners and further detail on this aspect is laid down in section 75.

Question put and agreed to.

Amendments Nos. 121 and 122 are related and may be discussed together.

I move amendment No. 121:

In page 157, to delete lines 22 to 25 and substitute the following:

“ ‘qualifying disclosure’ has the meaning given to it by, as the case may be, section 1077E or 1077F, as appropriate, section 116 or 116A, as appropriate, of the Value-Added Tax Consolidation Act 2010, section 99B of the Finance Act 2001 or section 134A of the Stamp Duties Consolidation Act 1999;”.

These amendments make changes to section 75, which proposes to insert a new section 1086A into the Taxes Consolidation Act 1997. This section would supersede section 1086, providing a new regime for the publication of the list of tax defaulters, with effect from 1 January 2022. The first of the amendments proposes to substitute a new definition of “qualifying disclosure” to include a qualifying disclosure made in respect of excise duties. This was omitted in error from the proposed new section 1086A to be inserted into the Taxes Consolidation Act.

The second amendment corrects an omission relating to the exclusions from publication for certain court-determined penalties. Publication of court-determined penalties does not arise where the penalty determined by a court does not exceed 15% of the tax underpaid. As drafted, this exception does not cover situations where the amount of a court-determined penalty does not exceed 15% of the underpaid excise duty.

I support the amendments. This section 75 would replace the old regime of section 74, but why has the threshold for publication on the list of tax defaulters been increased from €35,000 to €50,000?

The publication threshold is indeed €35,000. This threshold is considered low and is based on the combined amount of tax, interest and penalties. Under the current system, given that the interest charge for late penalties is 8% or 10% per year, depending on the tax type, a recent tax underpayment might escape publication because the interest rate charge was relatively low, whereas an underpayment of the same amount from a few years ago might be publishable because of a higher interest liability. It is considered that the publication threshold should be determined based on the tax amount only, as this focuses on the under-declared tax liability. A case is only published where the penalty is 15% or more and the taxpayer has not made a qualifying disclosure. When considered in tandem with those provisions, increasing the threshold to €50,000 focuses the publication process on defaulters and their behaviour and will not dilute the deterrent effect of publication.

Increasing the threshold to €50,000, and confining this to tax only, will reduce the number of cases published and represent a more significant level of default that justifies publication, and thereby shall bring a greater focus on those taxpayers who are published. This may act as a deterrent for those taxpayers who want to protect their good name, thereby achieving the objective of publication. This change also potentially incentivises the disclosure regime even further. The original publication threshold when the regime was introduced in 1983 was £10,000 punts. That was subsequently increased to €30,000 in 2015 and then to €35,000 in 2016.

The increase of the threshold to €50,000 and interest having gone right up there means we are not comparing like with like over time, but it is a big increase. The Minister mentioned that the list will become smaller and he talked about the benefits of that happening. I am not sure if I buy into that suggested benefit of tax defaulters being a little more worried because the list will be smaller and they will be more prominently named in it. I do not think that is what is going to happen here. If this took effect today, what percentage of people would come off the list? Would it be reduced by a quarter or a third? I am asking for a guesstimate, but the Revenue may have done that already.

I will have to come back to the Deputy with that information.

I thank the Minister.

Amendment agreed to.

I move amendment No. 122:

In page 161, lines 15 to 19, to delete all words from and including “or” in line 15 down to and including “1999,” in line 19 and substitute the following:

“(iii) the amount of the difference referred to in subsection (11) or (12), as the case may be, of section 99B of the Finance Act 2001, or

(iv) the amount of the difference referred to in subsection (7), (8) or (9), as the case may be, or the amount referred to in subsection (9A), of section 134A of the Stamp Duties Consolidation Act 1999,”.

Amendment agreed to.

Amendment No. 123 is in the name of Deputy Nash, who is not here to move it.

Amendment No. 123 not moved.
Section 75, as amended, agreed to.
Section 76 agreed to.

Amendments Nos. 124 to 128, inclusive, 130 to 144, inclusive, 147, 149, 152 to 158, inclusive, 160 and 161 are related and may be discussed together.

On a point of order, as we are beyond the time when we were due to adjourn, I suggest that we not go into this section and leave it for the morning instead, if the committee were agreeable. We could, however, dispose of sections 78 to 83, inclusive, now and get them out of the way.

I agree with Deputy Doherty. In fairness, the section and the amendments we are about to deal with concern the zoned land tax, ZLT. It is a big development in tax policy, and we would be better off giving it fuller consideration in the morning.

May I ask a question on the section as I will not be here tomorrow? The Minister can respond to me later rather than immediately. Are we moving on to section 77?

We have reached section 77 and the suggestion is that we leave it in total until tomorrow morning. Is that right?

Deputy Doherty made a good suggestion in pointing out that we could dispose of another group of sections now. When we come back in the morning then, we would just have the ZLT and one or two other things to do. The Deputy's suggestion deserves consideration. I am happy to answer the question from Deputy Matthews, however, if the Chair wishes.

I will have somebody substituting for me tomorrow anyway, so I will ask that Deputy to ask my question on section 77 then.

Is the Deputy certain?

Yes, that is fine.

Amendment Nos. 160 to 162, inclusive, not moved.
Section 78 agreed to.
Sections 79 to 82, inclusive, agreed to.
Amendment No. 163 not moved.
Section 83 agreed to.

We have reached new sections.

We will conclude today's business at this point. For clarity, we will resume tomorrow on section 77, before moving directly to amendment No. 164.

Progress reported; Committee to sit again.