Tuesday, 11 Jul 2017

Written Answers Nos. 131-145

Tax Code

Questions (131)

Barry Cowen

Question:

131. Deputy Barry Cowen asked the Minister for Finance if his Department or a body under its aegis has explored the prospect of applying local property tax to development sites with or without a building or structure zoned as suitable for residential development; his views on whether this could be a means of introducing a site value tax to reduce land hoarding and reduce speculative investment in development land; and the estimated revenue intake from such a tax. [32216/17]

Written answers

Minister for Finance

Following a commitment given in Budget 2015, a public consultation was conducted by my Department in 2015 on the issue of unused zoned and serviced land with a view to examining what taxation measures might be taken to penalise land owners who do not develop such land.

The Urban Regeneration and Housing Act 2015 (No 33 of 2015) gives Local Authorities new powers to incentivise the development of zoned and serviced land, as well as providing for other measures which are intended to facilitate housing development. The 2015 Act allows for the possibility of applying the vacant site levy to both brownfield (in-fill) and greenfield (new) development sites so long as they are located in designated areas in local authority development plans for the application of the levy. I understand that the Department of Housing, Planning, Community and Local Government proposes to encourage local authorities to apply the levy on as wide a basis as possible (brownfield and greenfield sites) in order to bring housing supply on stream earlier than would otherwise be the case.

On considering the outcome of the public consultation and the enactment of the Urban Regeneration and Housing Act 2015, it was determined that no new tax intended to encourage the development of residentially zoned and serviced land would be introduced.

In relation to a site valuation tax, the Deputy may wish to note that the 2012 report of the Inter-departmental Group on the Design of a Local Property Tax (the "Thornhill Group") comprehensively examined the basis of assessment for the Local Property Tax (LPT), including both the taxable value of the property option and a site value tax (SVT). The report favoured the use of market value of residential properties as the basis of assessment and this recommendation was accepted by the Government.

The Thornhill Group concluded that the arguments for SVT were outweighed by the likely difficulties in ensuring acceptance by taxpayers, i.e., arriving at values that were evidence based, understandable and acceptable to the public in addition to complexities and uncertainties in the valuation effort necessary to put an SVT in place. In contrast, the Group considered that under a market value approach applied to housing, the market value of a residential property would be related to the characteristics of the building itself, the site on which it was located and the characteristics and amenities of the neighbourhood. There would be a relationship between the market value of a house and benefits to the owners in terms of enjoyment of the amenity value of the properties.

At the request of the Minister for Finance, the operation of the LPT was reviewed in 2015 by Dr. Thornhill. A number of submissions to the review favoured changing the basis of determination of LPT liabilities to site value, floor area or variations thereof. Dr. Thornhill considered these but remained of the view that market value is the most appropriate and equitable basis on which to determine LPT liabilities.

Tax Credits

Questions (132)

Pearse Doherty

Question:

132. Deputy Pearse Doherty asked the Minister for Finance the estimated cost of increasing the self-employed tax credit in circumstances (details supplied). [32223/17]

Written answers

Minister for Finance

I am informed by Revenue that the estimated first and full year cost to the Exchequer of increasing the Earned Income Credit (EIC) to levels proposed by the Deputy and tapering the increase by 5% per €1,000 between €80,000 and €100,000, with no additional credit entitlement (above the current €950) when income exceeds €100,000, is outlined in the following table.

EIC increase	First Year €m	Full Year €m
By €250 to €1,200	19	33
By €350 to €1,300	26	46
By €450 to €1,400	33	60
By €550 to €1,500	41	73
By €700 to €1,650	52	93

The figures for the cost of the increase in EIC are based on the Revenue tax forecasting model using latest actual data for the year 2014, adjusted as necessary for income, self-employment and employment trends in the interim. They are based on taxpayer units with married persons or civil partners who have elected or who have been deemed to have elected for joint-assessment counted as one tax unit. They are estimated by reference to 2017 incomes and are provisional and may be revised.

Finally, I am advised by Revenue that, given the current tax structures, major issues would need to be resolved as to how, in practice, the tapering out of tax credits could be integrated into the current system, and how this would affect the relative position of different types of income earners.

Tax Code

Questions (133)

Brendan Howlin

Question:

133. Deputy Brendan Howlin asked the Minister for Finance the 2018 and full-year cost or yield of all additional taxation measures announced as part of budget 2017, in tabular form; and if he will make a statement on the matter. [32238/17]

Written answers

Minister for Finance

The 2018 and full year costs and yields for the tax measures announced in Budget 2017 are set out as follows.

1. REVENUE RAISING MEASURES	Yield 2018 €m	Yield Full Year €m
EXCISE
Tobacco Products Tax Excise duty on a pack of 20 cigarettes is increased by 50c, with a pro-rata increase on other tobacco products. It will raise the price of cigarettes in the most popular price category to €11.00 per pack of 20 cigarettes.	65	65
COMPLIANCE MEASURES
Section 110 Draft amendments to Section 110 will be made in the Finance Bill to address unintended uses of the section. Further amendments will address other issues arising in relation to Funds and property.	See Note 1	35
Tackling offshore tax evasion A comprehensive programme of targeted compliance interventions against those engaged in offshore tax evasion.		See Note 2
Increase resources to confront non-compliance Increasing Revenue staff resources on audit and investigation activities as well as enhancing ICT systems capacity.		See Note 3

2. REVENUE RELIEVING MEASURES	Cost 2018 €m	Cost Full Year €m
USC
Incomes of €13,000 or less are exempt. Otherwise, €0 to €12,012 @ 0.5% €12,013 to €18,772 @ 2.5% €18,773 to €70,044 @ 5% €70,045 to €100,000 @ 8% PAYE income in excess of €100,000 @ 8% Self-employed income in excess of €100,000 @ 11% Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will now pay a maximum USC rate of 2.5%.	-390	-390
INCOME TAX
An increase in the Home Carer Tax Credit from €1,000 to €1,100	-8	-8
An increase in the Earned Income Credit from €550 to €950	-58	-58
Interest Relief – Rented Residential Property The deduction available for qualifying interest payments on monies borrowed to purchase, improve or repair residential rental property is being increased from 75% to 100% over the next 5 years. The deduction will be increased by 5 percentage points each year, with the first increase from 75% to 80% to take effect from 1 January 2017. This measure will apply to both new and existing mortgages. The full-year cost of €70 million, being the cost for full restoration to 100%, will be reached in 2022.	-22	-70
Deposit interest retention tax (DIRT) Reduced rate of DIRT: The rate of DIRT will be decreased by 2% each year for the next 4 years until it reaches 33%. The costs shown are in relation to the first 2% reduction. Each subsequent reduction is currently costed at the same amount. (The full year cost will be reached in 2020)		See Note 4
OTHER INCOME TAX MEASURES
Foreign Earnings Deduction (FED)[1] FED is being extended until the end of 2020. Colombia and Pakistan are being added to the list of qualifying countries. The minimum number of days required to be spent in the qualifying countries is being reduced from 40 to 30 per annum. This will help smaller businesses to access the relief to identify trading opportunities in non-traditional markets for Irish goods and services.	_	-3
Special Assignee Relief Programme[2] To provide certainty to the FDI sector, SARP, which was due to expire at the end of next year, is being extended for an additional 3 years until the end of 2020.	-8	-8
HOUSING
Help to Buy A rebate of Income Tax paid is being introduced to assist first time buyers of newly built homes to fund the deposit required under the Central Bank macro-prudential rules. Income Tax paid over the previous four years will be available for rebate, up to a total value of 5% of the purchase price, up to a maximum of €400,000. Where the new home is valued between €400,000 and €600,000 the maximum relief (i.e. €20,000) will continue to be available. Homes valued at greater than €600,000 will not qualify for any relief. This scheme will run until the end of 2019.	-40	-40
Capital acquisitions tax Changes to tax-free thresholds: The Group A lifetime tax-free threshold applying to gifts and inheritances from parents to children is being raised from €280,000 to €310,000, The Group B lifetime tax-free threshold applying to gifts and inheritances made to parents, siblings, nieces, nephews or grandchildren is being raised from €30,150 to €32,500. The Group C lifetime tax-free threshold applying to gifts and inheritances made to all others (except spouses and civil partners who are exempt) is being raised from €15,075 to €16,250	-25	-25
Rent a Room The ceiling for the rent-a-room scheme is being increased from €12,000 to €14,000 for 2017 and subsequent years. This scheme provides that where a homeowner rents out a room or rooms in their principle private residence they can earn up to €14,000 tax free. The increase will allow homeowners to rent out an additional room at standard rental rates without breaching the new ceiling.	-1	-1
Living City Initiative The Living City Initiative is being amended to encourage an increase in the take-up of the scheme. This initiative is being extended to landlords in respect of rented residential property. In addition, the restriction on the maximum floor size of the property is being removed, along with the requirement that the property must have been previously used as a dwelling.	-2	-3
Home Renovation Incentive The HRI is being extended until 31 December 2018.	-19	-38
ENTREPRENEURS/SELF-EMPLOYED
Accelerated Capital Allowances for energy efficient equipment The existing scheme of accelerated capital allowances for energy efficient equipment is being made available to sole traders and non-corporates.	-3	-3
Start Your Own Business Relief The Start Your Own Business relief provides a limited income tax exemption for individuals who are long term unemployed who set up their own business. It is being extended for a further 2 years until the end of 2018 to encourage additional new start-up businesses.	-10	-10
Revised CGT entrepreneur relief: A reduced CGT rate of 10% will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in qualifying chargeable gains.	-14	-14
RURAL ECONOMY
Fishers Tax Credit A new tax credit is being introduced for fishers to assist the viability of the fishing sector. Fishers who have fished for at least 80 days in a tax year will be entitled to an income tax credit of €1,270 per annum.	-6	-6
Agri-Taxation The Income Averaging regime allows a farmer’s taxable profit to be averaged out over a 5-year period. It is being amended to allow a farmer to “step out” of averaging in a year where income is low. This will be available immediately for farmers who will be paying their preliminary tax towards the end of this month.	_	_
Increase in Farmer’s Flat-Rate Addition from 5.2% to 5.4% (VAT) The farmer’s flat-rate addition will be increased from 5.2% to 5.4% with effect from 1 January 2017	-11	-11
Bog restoration (€2m one-off cost)	_	_
Farm restructuring	-1	-1
Fishing vessel decommissioning	-2	-2
MISCELLANEOUS OTHER TAXATION MEASURES
EXCISE High Efficiency Combines Heat and Power A full carbon tax relief is being provided to incentivise the uptake of HE CHP for fuel inputs used in highly efficient electricity generation	-2	-2
Microbreweries Relief The special relief reducing the standard rate of Alcohol Products Tax by 50% on beer produced in microbreweries which produce not more than 30,000 hectolitres per annum is being extended to apply to microbreweries which produce not more than 40,000 hectolitres per annum. The amount of hectolitres upon which a brewery can claim relief remains at 30,000 hectolitres. This increase is an interim measure to allow for a review of the relief with a view to introducing a tapered relief.	_	_
Vehicle Registration Tax (VRT)[3] The VRT reliefs available for the purchase of hybrid electric vehicles and plug-in hybrid electric vehicles, are being extended to 31 December 2018. Electric vehicles, and electric motorcycles are being extended to 31 December 2021.	-15	-15

Note 1:

I am advised by the Revenue Commissioners that to forecast the yield for section 110 companies and Irish Real estate funds in 2018 requires predicting changes in taxpayer behaviour; as such it is still too early for the Department or Revenue to estimate any potential yield beyond 2017, however based on receipts received to date it is likely that the expected yield in 2017 will be exceeded. This position will become clearer in the last quarter of this year.

Note 2:

The success of this compliance measure considerably exceeded expectations and I am advised by Revenue that so far the one-off (2017) yield has exceeded €75m.

Note 3:

This measure was estimated at the time to have a full-year yield for 2017 of €50m. Increased resources to confront non-compliance have been introduced in both Budgets 2016 and 2017, such measures increase the budget yield forecast but only in the year of the measure. These amounts are then in the base for future years rather than leading to additional yield in future years.

Note 4:

This is a four-year reduction in the rate of DIRT for which the estimated full year cost is €36m.

[1] No impact on the fiscal space.

[2] No impact on the fiscal space.

[3] No impact on the fiscal space.

Property Tax Assessments

Questions (134)

Josepha Madigan

Question:

134. Deputy Josepha Madigan asked the Minister for Finance his plans to extend the freeze of local property tax valuations past 2019; his plans to implement further recommendations of the Thornhill report; and the way he plans to mitigate the effects of rapidly rising house prices in places such as Dublin Rathdown. [32363/17]

Written answers

Minister for Finance

The Department of Finance engaged Dr. Don Thornhill in 2015 to conduct a review to consider and make recommendations on the operation of the Local Property Tax, in particular any impacts on LPT liabilities due to recent property price developments. Dr. Thornhill made a number of recommendations in his report on his review of the Local Property Tax. His central recommendation was for a revised system whereby a minimum level of LPT revenues in each local authority area would be determined by Government, ideally having regard to the apportionment between local authority areas of the historic yield. This in turn would allow for the estimation of LPT rates for each local authority area and the application of these by taxpayers and Revenue. Local authorities could adjust this rate upwards by a factor of up to 15%. This new system was recommended by Dr. Thornhill with a possible interim deferral of the next valuation date until November 2018 or November 2019.

The Minister for Finance subsequently proposed to Government that the revaluation date for the LPT be postponed from 2016 to 2019. This postponement meant that home owners were not faced with significant increases in their LPT in 2017 as a result of increased property values. The postponement also gives sufficient time for the other recommendations in Dr. Thornhill's report to be considered fully by the Government and there are no proposals to change this.

The Finance (Local Property Tax) (Amendment) Act 2015 gave effect to the postponement of the revaluation date of residential property for LPT purposes, and also to two of the recommendations in Dr. Thornhill's report, involving LPT relief for properties affected by pyrite and relief for properties occupied by persons with disabilities.

My Department will be considering issues relating to the implementation of other recommendations in the Thornhill Report in due course in line with the 2019 timeline.

Tax Reliefs Application

Questions (135)

Joan Burton

Question:

135. Deputy Joan Burton asked the Minister for Finance the steps his Department has taken with the Revenue Commissioners to investigate the use of section 110 tax relief by firms since the introduction of the Finance Bill 2017; and if he will make a statement on the matter. [32371/17]

Written answers

Minister for Finance

Revenue is statutorily independent in the exercise of its functions in implementing taxation legislation. Accordingly, my Department has no role in investigating compliance with tax legislation. However, Revenue also has a role in providing me and my Department with advice and data on the operation of the taxation system and I am informed by Revenue that, if any policy issues arise in connection with the practical implementation of the legislation on “section 110” companies introduced in Finance Act 2016, they will provide me with all relevant information necessary for policy purposes, subject to their legal requirements to observe taxpayer confidentiality.

By way of background. section 110 of the Taxes Consolidation Act 1997 sets out a regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax neutral regime for securitisation and structured finance purposes.

The section 110 regime was designed to improve Ireland’s offering as a location for the conduct of financial services. It has achieved that broad goal and the financial services industry now makes use of these vehicles as a support to financial intermediation.

Section 22 Finance Act 2016 restricts the use of the section 110 regime to minimise Irish tax liabilities on Irish property or distressed debt transactions. The core effect of the amendment removes the possibility for section 110 companies to use what are known as 'profit participating notes' to sweep Irish property or distressed debt profits out of the company in a way that ensures little or no Irish tax liability arises.

I am informed by Revenue that the amendments made in Finance Act 2016 came into effect for accounting periods commencing on or after 6 September 2016. The corporation tax returns due for accounting periods ending 31 December 2016 do not fall due until the end of September 2017. These returns will only reflect the impact of the change in “section 110” legislation for the period from 6 September 2016 to 31 December 2016.

All “section 110” companies are assigned to, and managed by, the Financial Services (Banking) District in Revenue’s Large Cases Division. Taxpayers are selected by the District for compliance interventions based on the presence of various risk indicators and interventions are conducted in accordance with the “Code of Practice for Revenue Audit and other Compliance Interventions.” The impact of the 2016 legislative amendment will be reviewed by that District in due course and compliance interventions undertaken where necessary when the relevant tax returns and associated financial statements are reviewed and examined.

Tax Code

Questions (136)

Joan Burton

Question:

136. Deputy Joan Burton asked the Minister for Finance the preparations his Department made in advance of the national economic dialogue regarding the fiscal space for USC and income tax reductions; and if he will make a statement on the matter. [32372/17]

Written answers

Minister for Finance

I take it the Deputy is referring to the National Economic Dialogue 2017 which took place in Dublin Castle last month. The Programme for Partnership Government contains a commitment that budget measures will involve at least a 2:1 split between public spending and tax reductions. This commitment is also contained in the confidence and supply agreement with Fianna Fáil.

The most recent published estimate of the net fiscal space available for 2018, as set out in Budget 2017 last October, is €1.2 billion. I have set out previously that the carryover-cost of measures introduced in Budget 2017 amounts to c.€700 million, leaving c.€500 million available for allocation in Budget 2018 for tax and expenditure measures. The next estimate of the fiscal space for 2018, will be set out in the Summer Economic Statement 2017, which is due to be published this week.

Tax Code

Questions (137)

Joan Burton

Question:

137. Deputy Joan Burton asked the Minister for Finance if his officials have examined the European Commission decision in respect of tax breaks for employees in Sweden when they exercise their share options; and if he will make a statement on the matter. [32374/17]

Written answers

Minister for Finance

As the Deputy will be aware, on a foot of a review of share based remuneration conducted in 2016, it was announced in the last Budget that work had commenced on the development of a new, SME-focussed, share-based incentive scheme, to be introduced in Budget 2018. It was noted that such an incentive would require the approval of the European Commission and that officials would be engaging with the Commission to ensure that the incentive would comply with State Aid rules in advance of the next Budget.

Work on this new incentive is ongoing. In this regard my officials are engaging with the European Commission in relation to satisfying EU State Aid rules. My officials have examined the Commission decision that the Deputy refers to, and have noted its contents particularly with regard to its relevance to the ongoing negotiations.

Living City Initiative

Questions (138)

Barry Cowen

Question:

138. Deputy Barry Cowen asked the Minister for Finance the estimated cost of extending the living city initiative to cover entire structures rather than just historic segments of a structure; to cover all pre-1963 buildings; and to extend the coverage to all areas within the entire city areas of Dublin, Cork, Galway, Limerick and Waterford in budget 2018. [32383/17]

Written answers

Minister for Finance

I am advised by Revenue that there is no data available to Revenue in respect of qualifying premises, or the likely additional uptake, to estimate the cost of extending the Living City Initiative scheme as outlined by the Deputy.

It should be noted that the Special Regeneration Areas for the Living City Initiative were designated following consultation with the relevant city councils and an independent review by a third party advisor. Specific criteria were set down in respect of the areas which should be included within the remit of the Living City Initiative which were required to be taken into account by the relevant city councils when putting forward the proposed Special Regeneration Areas for each city. In particular, it was stated that the Special Regeneration Areas should be inner city areas which are largely comprised of dwellings built before 1915, where there is above average unemployment and which demonstrate clear evidence of neglect, dereliction and under-use. It was specified that areas which are generally regarded as affluent, have high occupancy rates and which do not require regeneration should not be included in the Special Regeneration Areas.

Officials in my Department reviewed the Living City Initiative in 2016 in consultation with the relevant councils and the Department of Arts, Heritage, Regional, Rural and Gaeltacht Affairs. On foot of that review, Minister Noonan announced a number of changes to the scheme in Budget 2017 in order to make the initiative more attractive and effective. The principal change extended the residential element of the scheme to landlords, who are now able to claim the relief by way of accelerated capital allowances for the conversion and refurbishment of property, which was built prior to 1915, where such property is to be used for residential purposes. In addition, the requirement for a pre-1915 building to have been originally constructed for use as a dwelling in order to qualify for the residential element of the Initiative was removed. The floor area restriction for owner-occupiers has also been removed, while the minimum amount of capital expenditure required for eligibility for relief, under all elements of the scheme, was also amended and must now only exceed €5,000. The possibility of extending the special regeneration areas was considered, but it was decided that such a change would dilute the incentive's potential impact on the originally targeted areas and that it would be better to get it working effectively before considering any further extension of the areas eligible.

The review was included in the Report on Tax Expenditures (October 2016) that was published on Budget Day.

Tax Credits

Questions (139)

Barry Cowen

Question:

139. Deputy Barry Cowen asked the Minister for Finance the estimated cost of introducing a new affordable housing tax incentive for private housing developers whereby developers could claim back 100% VAT relief on all housing or apartment units delivered within a build to rent development that are sold or rented out to eligible recipients at affordable levels (details supplied). [32384/17]

Written answers

Minister for Finance

VAT is governed by the EU VAT Directive (Council Directive 2006/112/EC), with which Irish VAT law must comply. Under the VAT Directive, the letting of residential property is exempt from VAT and therefore developers of such property are not entitled to VAT deductibility on their development costs where they let the property. Their rental income from these lettings is exempt from VAT. A property developer is liable for VAT on sales of developed residential property and is entitled to recover the VAT incurred in the development of that property. Under the VAT Directive there is no scope to allow VAT deductibility in relation to the development of properties that are to be put to a tax exempt use.

Tax Credits

Questions (140, 151, 152, 153)

Barry Cowen

Question:

140. Deputy Barry Cowen asked the Minister for Finance the estimated cost of introducing a new affordable housing tax credit whereby landlords would not have to pay tax on rental income for properties let over a five-year period at affordable levels (details supplied). [32385/17]

Barry Cowen

Question:

151. Deputy Barry Cowen asked the Minister for Finance the estimated cost of providing an income tax credit for landlords who accept HAP tenants, which would give them a tax-free allowance on 20% of rental income from a HAP tenancy. [32552/17]

Barry Cowen

Question:

152. Deputy Barry Cowen asked the Minister for Finance the estimated cost of providing an income tax credit for landlords who accept tenants in receipt of rent supplement, which would give them a tax-free allowance on 20% of rental income from a tenancy. [32553/17]

Barry Cowen

Question:

153. Deputy Barry Cowen asked the Minister for Finance if he has explored proposals for tax inducements to landlords if they accept HAP or rent supplement tenants by making the tax treatment of rental income from a HAP tenancy more preferential than the tax treatment of income from a tenant in the private rental market. [32554/17]

Written answers

Minister for Finance

I propose to take Questions Nos. 140 and 151 to 153, inclusive, together.

I am advised by Revenue that there are no data available to estimate the cost of the various measures proposed by the Deputy. Under section 18 of the Taxes Consolidation Act (TCA) 1997, rental income earned by companies and individuals from a property situated in the State is taxable under Case V of Schedule D of the TCA 1997. This basis of taxation makes no distinction between rental income from property let for residential occupation and property let for commercial occupation, or between rental income from private tenants and tenants in receipt of social housing supports. Therefore, landlord income tax returns are not remitted to Revenue in a format in which rental income from tenants who are eligible for rent supplement or the Housing Assistance Payment (HAP) can be separately identified, and there is therefore no basis on which Revenue can cost the proposals as outlined by the Deputy.

The Deputy may be aware that there is already tax relief in place to support landlords in providing accommodation to tenants in receipt of the Housing Assistance Payment (HAP) or rent supplement. The relief was introduced in Finance Act 2015 in order to improve the stability of housing supply to tenants in receipt of these social housing supports. The relief allows a full 100% mortgage interest deduction against rental income (increased from 75% in 2016 and from 80% in 2017) where a landlord undertakes, for a period of at least three years, to provide accommodation to such tenants and registers such undertakings with the Residential Tenancies Board within certain time limits. Further information on this relief is available in section 97 of the Revenue Commissioners – Notes for Guidance – Taxes Consolidation Act 1997 – Finance Act 2016 Edition – Part 4 Principal Provisions Relating to the Schedule D charge, which is available at: http://www.revenue.ie/ga/tax-professionals/documents/notes-for-guidance/tca/part04.pdf

As the Deputy may be aware, a working group was established in early 2017 to examine and report on the tax treatment of landlords (or rental accommodation providers) and to put forward options, where appropriate, for amendments to such treatment. This working group was established as part of the ‘Strategy for the Rental Sector’ which was published by the Department of Housing, Planning, Community and Local Government in December 2016. The working group is chaired by the Department of Finance and its membership consists of officials from the Department of Finance; the Revenue Commissioners; the Department of Housing, Planning, Community and Local Government; and the Residential Tenancies Board. As part of the group’s work, it undertook a public consultation on the tax treatment of landlords and it received almost 70 written submissions from a wide range of interested parties, including individual landlords, representative bodies and charitable organisations. The report of the working group is due to be presented to me by the end of July 2017, to allow for consideration of any of the options put forward as part of my deliberations for Budget 2018.

Tax Reliefs Application

Questions (141)

Maureen O'Sullivan

Question:

141. Deputy Maureen O'Sullivan asked the Minister for Finance his views on tax relief for unmarried fathers based on maintenance support payments made to their children's mother; and his further views on whether it is fair that tax relief is given for payments to former partners and not in respect of children; and if he will make a statement on the matter. [32417/17]

Written answers

Minister for Finance

In order to determine the treatment of maintenance payments for taxation purposes it must first be established if the maintenance payments are legally enforceable or if the payments are on a voluntary basis.

Voluntary maintenance paid on the basis of an informal arrangement between former partners would not be legally enforceable. Such payments are not chargeable as income for taxation purposes in the hands of the recipient and the individual making the payments cannot claim a deduction for the amounts paid.

Maintenance which is payable under a legally enforceable maintenance agreement, for example payments under a Deed of Separation, Divorce Settlement or under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010, is chargeable as income in the hands of the recipient for tax purposes. The person making the payments is allowed, in computing his or her total income for tax purposes, a deduction for the maintenance payments made in the year of assessment for the benefit of the other spouse, civil partner or qualified cohabitant. Sections 1025 (married persons), 1031J (civil partners) and 1031Q (cohabitants) of the Taxes Consolidation Act 1997 contain the relevant provisions.

Only maintenance payments made for the benefit of the other spouse or civil partner qualify for tax relief. Maintenance payments in respect of children are not taxable in the hands of the children or the receiving partner and the parent making the payments cannot claim a deduction for the amounts paid. This is the case regardless of whether the payments are made voluntarily or under a legally binding maintenance arrangement. The effect of this is that the payments are treated in the same way as if the taxpayer was providing for the child out of his or her after-tax income. This is in line with the tax treatment of all other parents, where the cost of maintaining their children is not tax deductible.

Help-To-Buy Scheme

Questions (142)

Fergus O'Dowd

Question:

142. Deputy Fergus O'Dowd asked the Minister for Finance if he will address a matter (details supplied); and if he will make a statement on the matter. [32432/17]

Written answers

Minister for Finance

As the Deputy may be aware, during the Committee Stage debate on Finance Bill 2016, my predecessor agreed to commission an independent impact assessment on the effects of the Help to Buy incentive for completion prior to Budget 2018. Following a competitive tender process, Indecon Economic Consultants were appointed in April to undertake this assessment.

This purpose of the project, in general, is to assess whether the policy objectives on the supply of new homes are being met, what impact (if any) the scheme is having on new and second-hand house prices, and what impact the scheme is having on the residential property market generally.

Once received from Indecon, the contents and findings of the report will be considered and I will decide on any appropriate action(s) to take in relation to its findings, in the context of my deliberations as part of the annual budgetary process.

I would take this opportunity to reassure members of the public who may be in the process of applying for the Help to Buy incentive, or those who currently have applications pending, that speculation concerning its abolition will not impact negatively on their applications. I would propose to signal well in advance, any proposed changes to the incentive following my consideration of the Indecon report.

Social and Affordable Housing Provision

Questions (143, 144)

Eoin Ó Broin

Question:

143. Deputy Eoin Ó Broin asked the Minister for Finance the impact on the expenditure benchmark and expenditure ceilings for 2018 and each subsequent year arising from an increase in local government borrowing of €100 million to €500 million, respectively, in 2018 for the purposes of the provision of affordable housing. [32490/17]

Eoin Ó Broin

Question:

144. Deputy Eoin Ó Broin asked the Minister for Finance the impact on the Government debt and the Government's agreed debt reduction targets as required under the Stability and Growth Pact and fiscal treaty rules for 2018 and each subsequent year arising from an increase in local government borrowing of €100 million to €500 million respectively in 2018 for the purposes of the provision of affordable housing. [32491/17]

Written answers

Minister for Finance

I propose to take Questions Nos. 143 and 144 together.

The Government must ensure that budgetary policy is in compliance with the fiscal rules – formally known as the Stability and Growth Pact (SGP) – which have direct application through a number of EU regulations as well as domestically via the Fiscal Responsibility Act 2012. These rules are designed to ensure budgetary discipline and underpin sustainable economic growth.

Any expenditure funded by borrowing, regardless of the source, is treated exactly the same as any other expenditure and, therefore, be undertaken in a manner consistent with the fiscal rules. Therefore, should local government request government approval to increase levels of borrowing in order to facilitate the provision of affordable housing, any spending of these borrowed funds will reduce available fiscal space.

Furthermore, the Deputy should also be aware that any decision to increase capital expenditure over and above already planned levels would need to balance the danger of potentially over-heating in the economy with the need to address infrastructure priorities and risks such as Brexit.

The debt correction rule states that any general government debt in excess of 60 per cent of GDP should be reduced according to a formula that requires a 1/20th reduction of the excess over 60 per cent per year. Even leaving aside the debt rule, our outstanding debt is over €200 billion and, on a per capita basis, is amongst the highest in the developed world. It is imperative, therefore, that we do not add to public debt.

The most recent estimates for General Government debt were set out in the 2017 Stability Programme Update (SPU) published in April. The impact of an increase of both €100m and €500m in local government borrowing on General Government debt is set out in the table (note that rounding can affect totals).

General Government Debt (€ billions)
	2018	2019	2020	2021
Debt as per SPU 2017	209.8	214.1	209.7	210.9
€100m increase	209.9	214.2	209.8	211.0
€500m increase	210.3	214.6	210.2	211.4
General Government Debt to GDP Ratio
Debt as per SPU 2017	71.2	69.5	65.2	62.9
€100m increase	71.2	69.5	65.2	63.0
€500m increase	71.4	69.6	65.4	63.0

Stamp Duty

Questions (145)

Catherine Murphy

Question:

145. Deputy Catherine Murphy asked the Minister for Finance further to Parliamentary Question No. 231 of 20 June 2017, if he will address the anomaly that has arisen whereby a number of persons sharing accommodation in circumstances in which the aggregate rent for that accommodation is in excess of €2,500 per month are liable for a 1% levy; if he will abolish this levy in respect of tenants sharing a rented property or otherwise address this anomaly in view of escalating rents and the need for persons to share accommodation; and if he will make a statement on the matter. [32522/17]

Written answers

Minister for Finance

My predecessor’s reply to Deputy Murphy’s Parliamentary Question number 231 of 20 June 2017 (alternatively numbered 26932/17) set out the stamp duty treatment that applies to leases of residential property. The Deputy has now asked about the 1% stamp duty charge where a lease exceeds 35 years, or is for an indefinite term, and where the rent exceeds €30,000 per annum (or €2,500 per month). As stated in the previous reply, where a lease is for an indefinite term, it is treated as a lease for a deemed fixed period of one year, with the lease growing each year by a further year.

The Deputy refers to an anomaly whereby the stamp duty charge applies in situations where a number of persons share a residential property with each of them contributing to the overall rent. I am advised by Revenue that there is no anomaly in such a situation and that the Stamp Duties Consolidation Act 1999 provides for this situation. Section 1 of this Act makes a lessee (i.e. a tenant) the accountable person for the stamp duty charge and section 2 provides for a situation where there is more than a single accountable person by making each accountable person jointly and severally liable for the stamp duty charge. The 1% stamp duty charge is levied in relation to a lease and not in relation to an individual lessee. Similarly, in relation to the purchase of a residential property, the same stamp duty charge applies regardless of the number of people involved in the purchase.

I have no plans to change the basis of liability to stamp duty on leases.