Employment Investment Incentive Scheme Data

Questions (83, 84)

Michael McGrath

Question:

83. Deputy Michael McGrath asked the Minister for Finance the estimated annual cost of removing the 30% share ownership restriction for the EIIS; and if he will make a statement on the matter. [28761/19]

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Michael McGrath

Question:

84. Deputy Michael McGrath asked the Minister for Finance the estimated annual cost of increasing the annual cap for the EIIS from €150,000 to €1 million; and if he will make a statement on the matter. [28762/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 83 and 84 together.

In order to ensure compliance with Article 21 of the Group Block Exemption Regulation ("GBER")(Commission Regulation N°651/2014), the 30% share ownership restriction on connected persons was removed in Finance Act 2017.

GBER requires that risk finance aid schemes such as the EII should be restricted to independent private investors and not provide relief to persons with close connections to the undertaking. The change came into effect on 2 November 2017 and at the time of the announcement it was estimated that the saving for the Exchequer would be between €6 million and €10 million based on 2016 data. This represents the latest available estimate of the effect of the change.

I am also advised by Revenue that based on investments made under the EII for each tax year to date, the additional cost of increasing the cap on relief as suggested by the Deputy is as set out in the following table:

Tax Year

Additional Cost €m*

2012

1.1

2013

0.8

2014

2.2

2015

3.0

2016

2.1

2017

0.7

*These figures are based on actual data and assume that there is no change in investments or behavioural patterns resulting from the proposed change.

Tax Data

Questions Nos. 86 and 87 answered with Question No. 76.

Questions (85)

Michael McGrath

Question:

85. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of expanding the Start-Up Refunds for Entrepreneurs, SURE, scheme to include new business founders that were previously self-employed; the number of persons availing of the SURE scheme; the cost of the scheme; and if he will make a statement on the matter. [28763/19]

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Written answers (Question to Finance)

Start Up Refunds for Entrepreneurs (SURE) provides a refund of tax paid in the previous six tax years to those previously in PAYE employment, or recently unemployed, where they invest funds into a new company set up by them.

I am advised by Revenue that there is no statistical basis on which to estimate the cost of broadening the scheme to self-employed taxpayers as it is not possible to quantify the potential uptake resulting from the proposed change.

I am also advised by Revenue that the cost and uptake details in respect of the scheme are as follows:

Year

Cost (€M)

Uptake

2016

1.9

80

2015

1.8

86

2014

1.8

59

2013

1.3

60

2012

1.6

88

The most recent year for which data are presently available is 2016, it is expected that 2017 will be available in the coming weeks.

Finally, the Deputy may wish to be aware that the most up-to-date information on cost and uptake for the scheme is available at the following link:

https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/costs-expenditures.aspx.

Questions Nos. 86 and 87 answered with Question No. 76.

VAT Registration

Questions (88)

Michael McGrath

Question:

88. Deputy Michael McGrath asked the Minister for Finance the estimated cost of increasing the VAT registration threshold for SMEs and the self-employed to €50,000, €60,000, €80,000 and €90,000, respectively; if this is possible under EU regulations on VAT; and if he will make a statement on the matter. [28766/19]

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Written answers (Question to Finance)

VAT is governed by the EU VAT Directive (Council Directive 2006/112/EC), with which Irish VAT law must comply. The Directive provides that VAT registration thresholds may only be raised by Member States to maintain their value in real terms, that is, they may only be increased in line with inflation. Our VAT thresholds were increased to their current values, €37,500 for services and €75,000 for goods, on 1 May 2008 and as the Central Statistics Office figures show the consumer price index is below the level it reached in 2008, it is not possible to increase these thresholds.

Ireland’s VAT registration thresholds for small enterprises and the self-employed are among the highest in the EU. In addition, SMEs benefit from a range of VAT simplification measures including simplified and electronic invoicing, special schemes for retailers and pharmacists, the facility to make VAT returns on a bi-annual or annual basis, the cash receipts basis of accounting where the trader is not required to pay VAT until payment for the supply is received, the facility for small businesses to submit an annual VIES return rather than monthly and the Mini One Stop Shop (MOSS) which allows business to register, file and pay VAT due in all Member States through the Irish MOSS system.

Tax Credits

Questions (89, 90, 91, 92, 93)

Michael McGrath

Question:

89. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of increasing the research and development tax credit to 30% for unquoted SME companies; and if he will make a statement on the matter. [28767/19]

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Michael McGrath

Question:

90. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of removing the restriction on outsourcing for the research and development tax credit; and if he will make a statement on the matter. [28768/19]

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Michael McGrath

Question:

91. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of accelerating the research and development tax credit from 33 months to 12 months for a start-up SME; and if he will make a statement on the matter. [28769/19]

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Michael McGrath

Question:

92. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of having up-front research and development tax credit refunds for early stage scaling companies; and if he will make a statement on the matter. [28770/19]

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Michael McGrath

Question:

93. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of moving to a pre-approval process for the research and development tax credit; and if he will make a statement on the matter. [28771/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 89 to 93, inclusive, together.

I am advised by Revenue that statistical information in respect of the Research & Development (R&D) credit is available at link; https://www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/index.aspx for all years up to 2017.

Regarding Question 89, the estimated cost of increasing the credit to 30% for SMEs (defined here as companies with less than 250 employees) is in the region of €30 million.

Regarding Questions 90 and 92, information in respect of the additional cost of the credit that would arise if the outsourcing restriction was lifted, or in respect of the uptake by early stage scaling companies, are not available from tax returns data. Therefore, there is no reliable basis to allow an estimate of the cost to be provided.

Regarding Question 91 the changes proposed to the R&D credit would have cash-flow impacts (in terms of timing of payments to the Exchequer) but would not ultimately incur an additional cost assuming there was no widening of the scope of the R&D to which the credit applies. The impact of these proposals cannot be ascertained in the absence of forecasts of likely future expenditure on R&D by such companies.

Regarding Question 93, a pre-approval process for the R&D credit should not incur an additional cost to the exchequer. At present a company claims the R&D tax credit on their self-assessed tax return. Revenue has advised me that in putting together a claim for the R&D tax credit, the company must be satisfied that the claim will pass both the science test (i.e. that the activity is a qualifying activity) and the accounting test (i.e. is the amount of the claim correct).

Where, during risk profiling, Revenue identifies an uncertainty in respect of whether or not the activities are qualifying R&D activities, it will engage the services of an independent technical expert to validate the scientific/technological merits of the activity. Should a pre-approval process be introduced, limitations on the availability of these experts would give rise to delays, potentially acting as a barrier to companies carrying on R&D. In respect of the accounting test, it is not possible to verify that an amount is expended on qualifying R&D activities until the activity is carried on and the costs incurred. As such, in addition to the difficulty of implementing an equitable pre-approval process in relation to the science test, it is not possible to put in place an effective pre-approval process for the accounting test.

European Central Bank

Questions (94)

Pearse Doherty

Question:

94. Deputy Pearse Doherty asked the Minister for Finance the analysis carried out on the impact of the programme of quantitative easing of the ECB on the economy in terms of GDP, GNI* and other metrics in recent years; the forecasts that exist for its impact into the future; and if he will make a statement on the matter. [28772/19]

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Written answers (Question to Finance)

The primary objective of the European Central Bank (ECB) is to maintain price stability within the euro area by implementing monetary policy which is consistent with an inflation rate of below, but close to, 2 per cent over the medium-term. In this regard, the euro area flash headline inflation rate in June was stable at 1.2 per cent. The ECB projects that inflation will remain below target across the forecast horizon, reaching 1.6 per cent in 2021.

Quantitative easing (QE) refers to the large-scale asset purchases conducted by the European Central Bank (ECB) in order to combat persistently low inflation. The ECB’s Asset Purchase Programme (APP) and other monetary policy measures made a substantial contribution to the economic recovery in the euro area and Ireland. As a small and highly open member of the monetary union, disentangling the exact effect of the asset purchase program on Irish GDP is difficult. However, euro area estimates suggest that, on the whole, non-standard monetary policy measures including the asset purchase program, Targeted Long-Term Refinancing Operations (TLTROs) and others, will increase real GDP by approximately 1.9 percentage points cumulatively between 2016 and 2020, with the strongest impact occurring in 2016 and 2017. [1] Any increase in euro area real GDP growth in aggregate also has a strong second round impact on Ireland, by increasing foreign demand from Ireland’s trading partners.

Overall, economic evidence generally points to QE as having had positive effects on the European economy, contributing to lowering sovereign debt yields and providing a small boost to bank lending, investment, real GDP, headline inflation, and medium-term inflationary expectations. The Irish economy has benefited in particular via a reduction in sovereign borrowing costs, additional liquidity in the banking sector, and an improvement in economic activity in key export markets.

Research by the Central Bank [2] has also shown that the announcement effect of the APP caused a compression of Irish bond yields. Over the course of the APP, the average yield on Irish sovereign bonds decreased, despite increased issuance and a longer maturity profile of outstanding debt, which demonstrates that the APP had a favourable impact on the cost of servicing Irish debt. The decrease in sovereign yields passed through into lower bank funding costs and ultimately to more favourable financing conditions to households and firms.

My Department will continue to monitor monetary policy developments, including with respect to growth and inflation in the euro area, and advise accordingly. While it is not possible to predict the future path of ECB monetary policy or interest rates, guidance from the ECB suggests that monetary policy is likely to remain accommodative for some time yet. I am aware of the ECB President Mario Draghi’s recent speech (18th June) on twenty years of the ECB’s monetary policy, where he referred to the current economic outlook and downside risks facing the European economy. President Draghi noted that in the absence of a return of inflation to the ECB’s target additional stimulus will be required. Furthermore, in the coming weeks, the ECB Governing Council will consider how the instruments at their disposal can be adapted commensurate to the severity of the risk to price stability.

[1] Hammermann, Felix & Leonard, Kieran & Nardelli, Stefano & von Landesberger, Julian, 2019. "Taking stock of the Eurosystem’s asset purchase programme after the end of net asset purchases," Economic Bulletin Articles, European Central Bank, vol. 2. <https://ideas.repec.org/a/ecb/ecbart/201900021.html>

[2] https://www.centralbank.ie/docs/default-source/publications/quarterly-bulletins/quarterly-bulletin-signed-articles/the-irish-government-bond-market-and-quantitative-easing-(larkin-anderson-and-furlong).pdf

Small and Medium Enterprises Supports

Questions (95, 96, 97, 98, 99, 100)

Michael McGrath

Question:

95. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of removing the restriction for the key employee engagement programme, KEEP, on employees to work in a single company in a group in order to enable them to work in the companies within a group structure; and if he will make a statement on the matter. [28791/19]

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Michael McGrath

Question:

96. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of removing the requirement for an employee to work full-time in a company for the key employee engagement programme, KEEP; and if he will make a statement on the matter. [28792/19]

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Michael McGrath

Question:

97. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of removing the requirement for the key employee engagement programme, KEEP, that all shares in a company must be new shares; and if he will make a statement on the matter. [28793/19]

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Michael McGrath

Question:

98. Deputy Michael McGrath asked the Minister for Finance the cost of the key employee engagement programme, KEEP, in 2018; the number of persons that availed of same; and if he will make a statement on the matter. [28794/19]

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Michael McGrath

Question:

99. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of removing the restriction to 50% of the employee’s annual emoluments for the key employee engagement programme, KEEP; and if he will make a statement on the matter. [28795/19]

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Michael McGrath

Question:

100. Deputy Michael McGrath asked the Minister for Finance the estimated full year cost of increasing the €3 million share option market value restriction to €6, €12 and €24 million, respectively and removing it altogether in relation to the key employee engagement programme, KEEP; and if he will make a statement on the matter. [28796/19]

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Written answers (Question to Finance)

I propose to take Questions Nos. 95 to 100, inclusive, together.

The Key Employee Engagement Programme (KEEP) came into effect on 1 January 2018. The aim of the incentive is to support SMEs in Ireland in competing with larger enterprises to recruit and retain key employees, by way of a targeted share option programme.

KEEP provides for an exemption from income tax, USC and PRSI on any gain realised on the exercise of a qualifying share option. With limited exceptions, a key employee must hold the option for twelve months prior to exercise. However, it is likely that employees may hold the KEEP share options for a number of years before exercise, as the options must be granted at not less than market value on the date of grant, so a benefit will only arise to the employee if the shares increase in value from that date. Where share options are exercised, and the shares are subsequently sold, such individuals will be subject to Capital Gains Tax on the disposal of the shares.

As KEEP is a demand-led scheme, uptake will depend on the decisions made by qualifying SME companies with regard to the offering of share options to employees, and also on the growth in value of the employer company shares in the period between grant and exercise of the options. The uptake of KEEP thus far has been limited. Given the longer-term nature of the incentive, Revenue has, as yet, relatively little information on which to estimate the cost and other consequences of possible changes.

I am advised by Revenue that, as there is no information available on the potential increased uptake of KEEP if employees were allowed to work in multiple companies within a group structure, or if the shares were not restricted to new shares, there is no underlying data on which to estimate a cost of removing such restrictions. Under KEEP, only full-time employees or directors who are required to work at least 30 hours per week with a company are eligible to participate.

I am also advised by Revenue that there is no information on the potential increased uptake of the programme if the requirement in respect of being a full-time employee was removed. As such, there is no underlying data on which to estimate the cost of such a change.

I am further advised by Revenue that some 10 companies granted qualifying share options to 87 key employees during 2018 (the first year of the scheme). As no exercises occurred in 2018, there is no cost to the exchequer for 2018 in terms of income tax, USC and PRSI. Returns for 2019, which will contain details of all options granted and exercised during 2019, will not be filed with Revenue until 31 March 2020.

With a view to enhancing the attractiveness of the scheme, Finance Act 2018 amended the restriction applying to the total market value of shares which can be granted by the qualifying company to a qualifying employee, by increasing the limit from 50% of salary to 100% of salary (i.e. that participants may now receive of equal values of shares and salary). This required state aid approval from the European Commission, which has recently been granted, and I expect to commence this change shortly. Revenue advise me that there is no underlying data on which to estimate the cost of this change.

Currently, the total market value of the issued but unexercised qualifying share option a company may grant cannot exceed €3 million. Revenue advise me that it is not possible to estimate the number of companies who might exceed the €6 million, €12 million or €24 million thresholds outlined by the Deputy and thus benefit from raising this restriction or removing it.

Finally, and as the Deputy may be aware, my Department recently carried out a public consultation process in relation to KEEP and other tax incentives targeted at the SME sector with a view to identifying possible enhancements that might be made to the scheme to make it more efficient and effective. The intention is that issues raised by stakeholders during the consultation will be analysed and proposals will be submitted to me for consideration in the context of this year's Finance Bill.

Disabled Drivers and Passengers Scheme

Questions (101)

Niall Collins

Question:

101. Deputy Niall Collins asked the Minister for Finance if he will act on comments made by the Ombudsman (details supplied) and also communicated directly to him by the Ombudsman; and if he will make a statement on the matter. [28824/19]

View answer

Written answers (Question to Finance)

The Disabled Drivers and Disabled Passengers (Tax Concessions) Scheme provides relief from VAT and VRT (up to a certain limit) on the purchase of an adapted car for transport of a person with specific severe and permanent physical disabilities, payment of a Fuel Grant, and an exemption from Motor Tax.

To qualify for the Scheme an applicant must be in possession of a Primary Medical Certificate. To qualify for a Primary Medical Certificate, an applicant must satisfy one of the following conditions:

- be wholly or almost wholly without the use of both legs;

- be wholly without the use of one leg and almost wholly without the use of the other leg such that the applicant is severely restricted as to movement of the lower limbs;

- be without both hands or without both arms;

- be without one or both legs;

- be wholly or almost wholly without the use of both hands or arms and wholly or almost wholly without the use of one leg;

- have the medical condition of dwarfism and have serious difficulties of movement of the lower limbs.

The Scheme represents a significant tax expenditure. Between the Vehicle Registration Tax and VAT foregone, and the fuel grant, the scheme cost €65m in each of 2016 and 2017, rising to €70m in 2018. This figure does not include the revenue foregone in respect of the relief from Motor Tax provided to members of the Scheme.

I understand and fully sympathise with any person who suffers from a serious physical disability and can’t access the scheme under the current criteria. However, given the scope and scale of the scheme, any possible changes to it can only be made after careful consideration, taking into account the existing and prospective cost of the scheme as well as the availability of other schemes which seek to help with the mobility of disabled persons, and the interaction between each of these schemes.

Accordingly, I have no plans to amend the qualifying medical criteria for the Disabled Drivers and Disabled Passengers Scheme at this time.

Disabled Drivers and Passengers Scheme

Questions (102)

Brendan Smith

Question:

102. Deputy Brendan Smith asked the Minister for Finance his plans to amend and improve the criteria for the primary medical certificate in view of the difficulties facing applicants and the high level of applications being rejected; and if he will make a statement on the matter. [28847/19]

View answer

Written answers (Question to Finance)

The Disabled Drivers and Disabled Passengers (Tax Concessions) Scheme provides relief from VAT and VRT (up to a certain limit) on the purchase of an adapted car for transport of a person with specific severe and permanent physical disabilities, payment of a Fuel Grant, and an exemption from Motor Tax.

To qualify for the Scheme an applicant must be in possession of a Primary Medical Certificate. To qualify for a Primary Medical Certificate, an applicant must satisfy one of the following conditions:

- be wholly or almost wholly without the use of both legs;

- be wholly without the use of one leg and almost wholly without the use of the other leg such that the applicant is severely restricted as to movement of the lower limbs;

- be without both hands or without both arms;

- be without one or both legs;

- be wholly or almost wholly without the use of both hands or arms and wholly or almost wholly without the use of one leg;

- have the medical condition of dwarfism and have serious difficulties of movement of the lower limbs.

The Scheme represents a significant tax expenditure. Between the Vehicle Registration Tax and VAT foregone, and the fuel grant, the scheme cost €65m in each of 2016 and 2017, rising to €70m in 2018. This figure does not include the revenue foregone in respect of the relief from Motor Tax provided to members of the Scheme.

I understand and fully sympathise with any person who suffers from a serious physical disability and can’t access the scheme under the current criteria. However, given the scope and scale of the scheme, any possible changes to it can only be made after careful consideration, taking into account the existing and prospective cost of the scheme as well as the availability of other schemes which seek to help with the mobility of disabled persons, and the interaction between each of these schemes.

Accordingly, I have no plans to amend the qualifying medical criteria for the Disabled Drivers and Disabled Passengers Scheme at this time.