Written Answers Nos. 16-30
17. Deputy Richard Bruton asked the Minister for Finance the value to date of requests for tax changes in the 2022 Budget in pre-budget submissions; the main areas for which allocations have been sought; and if he will make a statement on the matter. [44805/21]
View answerIn advance of the Budget, as Minister for Finance I receive a large number of pre-budget submissions on a wide range of issues.
These can range from highly detailed and developed proposals for specific changes to existing taxes, reliefs, exemptions and allowances to more straightforward requests, for example, to increase the single person tax credit. Many submissions contain proposals across a range of taxes and allowances that are of particular relevance to the sector in which the person or representative organisation operates. Some are from individuals describing their personal circumstances to place their proposals in context.
The Deputy will be aware that many representative organisations publish their pre-budget submissions on their websites and see it as part of their communication strategy with their members.
I can confirm that this year I have received approximately 260 submissions to date. My officials and I consider the contents of these submissions in the context of the forthcoming Budget but do not, as a matter of course, estimate the cost of the proposals contained in each submission.
Therefore, it is not possible to place a cash value on the individual proposals and requests or an overall value on their sum. I should add that there is a considerable degree of overlap between many pre-Budget submissions. This can arise coincidentally without necessarily pointing to prior consultation between individuals or organisations. However, it would not be unusual to receive multiple copies of the same or very similar submissions. This can arise when the organisation sends copies of the submission to public representatives who then forward it to me.
As I have previously said, proposals for changes to taxes that reduce the amounts collected create an additional cost, and that cost must be recovered elsewhere. However, very few submissions provide funding suggestions for their proposals and those that do usually propose tax increases for others.
The submissions received cover all the main tax heads dealt with in the Finance Bill, Income Tax, Corporation Tax, Capital Gains Tax, Excise, VAT, Stamp Duties and Capital Acquisitions Tax. A number also make reference to the various Covid-19 related supports that the Government has put in place.
18. Deputy Thomas Gould asked the Minister for Finance the discussions his Department has held with the ESRI following its special report titled Prudent government borrowing can mitigate inadequate housing supply and upward pressure on prices and rent. [44802/21]
View answer59. Deputy Francis Noel Duffy asked the Minister for Finance if he has given consideration to the recent ESRI article which recommends increased borrowing to double capital investment in public housing including the delivery of cost-rental units; and if he will make a statement on the matter. [33423/21]
View answerI propose to take Questions Nos. 18 and 59 together.
It is important to recognise that the Government receives advice from many quarters on many issues. In relation to borrowing, I am aware of the ESRI analysis but, equally, I am aware of other pieces of analysis - including most recently from the Irish Fiscal Advisory Council - that highlight the risks associated with more-and-more borrowing.
In formulating policy, therefore, Government must take all of the advice on board, including that of the civil service. Government also takes into account the fiscal context in its decision-making. This fiscal context is one in which our budget deficit last year was close to €19 billion – the equivalent of 9 per cent of modified national income, with a broadly similar figure anticipated for this year. Our public debt is approaching a quarter of a trillion euros, one of the highest in the developed world. Figures of this magnitude cannot simply be ignored.
But even allowing for this fiscal context, the Government has made substantial commitments to improving housing supply. The recently launched Housing for All strategy commits to increase housing supply and affordability by targeting the delivery of, on average, 33,000 new homes every year to 2030. This includes the provision of over 10,000 social homes per year and an average of 6,000 affordable homes to purchase or rent.
From a fiscal perspective, this strategy is supported by significant investment of over €4 billion in State funding every year to 2030 - this is the highest level of funding ever for house building.
So, from an overall perspective, Government is achieving the right balance in its approach: gradually reducing borrowing for day-to-day expenditure, while expanding capital spending, including in housing, to address supply bottlenecks.
19. Deputy Joe Flaherty asked the Minister for Finance the status of corporate taxation receipts to date in 2021. [44868/21]
View answerThe Exchequer has benefited from better-than-expected corporation tax receipts this year. As of August, the most recent available data, corporation tax receipts were €859 million, or 14 per cent ahead of target and up by some €524 million, or just over 8 per cent ahead of the same period last year.
This over-performance is significant, but would have been even higher were it not for the Covid Restrictions Support Scheme (CRSS). Up to end-August, some €452 million had been deducted from corporation tax receipts and paid to qualifying businesses under the scheme. The Exchequer at end-August received some €7 billion in corporation tax receipts.
I have said on many occasions that the strong growth in corporation tax has been welcome during this period: it has meant that we have to borrow less than we otherwise would. However, I have also frequently warned that these receipts are subject to exceptional unpredictability and volatility. Around half of corporation tax receipts come from a relatively small number of large, highly profitable firms. The concentration in the tax base represents a risk to the stability of the public finances.
The recent level of corporation tax growth will not continue indefinitely. Changes to the international tax environment represent a key risk to the public finances: as a result of ongoing negotiations, Government is planning for a substantial loss to corporation tax revenues: our current estimate is that €2 billion may be lost by 2025. There is still significant uncertainty about the nature of the changes and how the impact will manifest; the actual loss could be even higher.
As a result, I have regularly warned against funding permanent expenditure increases on the basis of this highly volatile and unreliable revenue stream. Government has set out a medium-term budgetary framework in the Summer Economic Statement; one of the key objectives of this is to minimise the risk of uncertain corporation tax receipts being used to finance permanent increases in spending.
20. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he acknowledges that inflation has become an issue likely to impact on Ireland’s economy in the future; the steps taken to date or envisaged to combat this trend; the actual individual direct causes of the inflation; his views on the steps that need to be taken to arrest the trend at an early date; and if he will make a statement on the matter. [44795/21]
View answerI am very conscious of the pick-up in consumer price inflation in recent months.
While Covid-19 had a deflationary impact both in Ireland and internationally last year, inflation has picked up since the beginning of this year. In Ireland, the annual rate of HICP inflation rose to 3 per cent in August – the highest rate since 2008; similar trends have been observed across other advanced economies.
The increase in inflation since the beginning of this year is largely explained by temporary factors, which are expected to fade over time, including ‘base effects’ associated with the normalisation of oil prices following their collapse last spring. More fundamentally, the easing of restrictions led to a rapid rebound in consumer spending, in particular spending on goods, in the second quarter. As the economy continues to re-open, demand will pivot towards contact-intensive service sectors.
Supply by contrast has recovered more slowly than the recovery in demand with, for instance, labour shortages in some service sectors putting upward pressure on prices. Indeed, signs of ‘opening up’ inflation are already evident, with strong increases in prices in the transport and hospitality sectors recorded in the July and August inflation data from the Central Statistics Office . Shipping bottlenecks and shortages of inputs (e.g. semi-conductors, timber) have also raised production costs, putting further upward pressure on prices. Higher trade costs as a result of Brexit may also have contributed to the recent rise in inflation.
The emergence of inflationary pressures has prompted a debate regarding the likely persistence of these price dynamics. Persistently higher inflation could trigger monetary policy changes by the ECB, with implications for the cost of Government borrowing.
In summary, the most likely scenario is that the current pick-up in inflation - in Ireland and elsewhere - is temporary, and will moderate as one-off factors fade and as demand stabilises and supply pressures ease. That said, the possibility of a more sustained and persistent rise in inflation cannot be ruled out. This is another reason why budgetary policy must evolve in line with the improving epidemiological situation; Government adopted a counter-cyclical approach to budgetary policy during the downturn and we will do so in the recovery phase also.
21. Deputy Mick Barry asked the Minister for Finance if he will report on the amount of interest paid on the national debt; and if he will make a statement on the matter. [44870/21]
View answerThe National Treasury Management Agency (NTMA) has informed me, that the net Exchequer cash interest paid in respect of Ireland’s National Debt in 2020 was just over €4.5bn.
This was a reduction of over €0.5bn, or more than 10% on the 2019 figure and some 40% below the 2014 peak.
In the first eight months of 2021, National Debt interest totalled just over €3.2bn, more than €0.5bn or close to 14% below the corresponding period last year.
National Debt interest for the full year 2021 was estimated at just over €3.7 billion in the April Stability Programme Update (SPU), the lowest it has been since 2010. An updated estimate will be published in Budget 2022 next month.
22. Deputy Christopher O'Sullivan asked the Minister for Finance if he will report on his recent engagements with the credit union sector. [44794/21]
View answerI thank the Deputy for his question.
Since the beginning of the year, I have held nineteen meetings with various credit union stakeholders including credit unions themselves, Representative Bodies, various collaborative ventures, the Registrar of Credit Unions and the Credit Union Advisory Committee. These meetings have proven to be very informative and their outputs will feed into the Review of the Credit Union Policy Framework.
Separately, Department Officials from the Credit Union Policy Team have very regular engagement with sector stakeholders, including stakeholder roundtables, the most recent of which took place in early September. They also act as secretariat to the Credit Union Advisory Committee, which meets on a monthly basis.
23. Deputy Matt Carthy asked the Minister for Finance the status of a proposed review into extending section 664A of the Taxes Consolidation Act 1997 to include agricultural contractors for the purpose of providing them similar status as farmers regarding the carbon tax on green diesel. [44744/21]
View answerThe present position is that agricultural contractors are not entitled to avail of relief from increases in the carbon tax on farm diesel under section 664A of the Taxes Consolidation Act 1997.
This is because farming, which is defined in section 654 of the Taxes Consolidation Act, requires that the occupation of farmland; agricultural contracting does not involve the occupation of farmland. The measure is specifically targeted at the farming sector to address the particular problems faced by family farms.
My officials met with contractors' representatives in December 2019 and advised that my Department was intending to schedule a review of the scheme (and related aspects) in the context of a wider report on agri-tax reliefs and the Government's Climate policy.
The onset of the Covid-19 pandemic in the intervening period caused the review to be deferred and it has yet to take place. In the meantime, the status quo has remained in relation to the application and scope of section 664A.
I would note however that, currently, those who incur expenses in relation to farm diesel in the course of their trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.
Having regard to the steady progress that is now being made in reopening the economy and removing the public health restrictions that have curtailed economic activity, my Department is hopeful that the way will be clear for the promised review to be carried out, most likely in the early part of 2022.
24. Deputy Marc MacSharry asked the Minister for Finance the way he plans to increase competition in the insurance sector. [44819/21]
View answerThis Government recognises the importance of a stable, well-functioning and competitive insurance industry. Therefore the Action Plan for Insurance Reform set out 66 actions across a number of policy areas which is aimed at reducing volatility in the market, removing barriers to entry and making Ireland more attractive to insurance companies. The Government recently published the first Action Plan Implementation Report. This shows that work is progressing well to implement these important reforms, with 34 of the 66 actions now complete.
A key achievement of the Government’s reform agenda is the establishment of the Office to Promote Competition in the Insurance Market , which I chair. The Office has held meetings with a wide range of bodies under the four main pillars of the Office work plan – Promotion, Transparency, Engagement and Innovation. These are targeted to promote greater market transparency, champion the provision of consumer information, such as switching campaigns, and encourage greater competition in the insurance market, including where appropriate, through the application of new technologies. I also met with CEOs of the major insurance providers in Ireland earlier this year. I will meet with them again over the coming months to discuss a variety of issues, in particular the need to address customer concerns regarding cost and availability of insurance.
Furthermore, the Department is also working closely with the IDA to bring new entrants into the insurance market to improve its overall competitiveness. Officials from both are developing a customised proposal and are identifying potential providers who offer insurance in identified ‘pinch-points’ segments of the Irish market. This includes those coverage areas impacting businesses, consumers and community and voluntary groups.
In addition, Department is collaborating with the Central Bank to create an insurance databank, which will assist new providers to enter the Irish insurance market. This Programme for Government commitment was also recommended by the Competition and Consumer Protection Commission in its Public Liability Market report which was published in 2020. This is complimented by the National Claims Information Databases (NCID) reports on motor and employers' liability (EL), public liability (PL) and commercial property insurance. These initiatives will provide rich sources of data to both aid transparency and assist in policy formulation.
Finally, I would like to assure the Deputy that securing a more sustainable and competitive market through deepening and widening the supply of insurance in Ireland remains a key policy priority for this Government. In this regard, it is my intention to work with my Government colleagues to ensure the timely implementation of the Action Plan, which is key to improving the cost and availability of insurance for all consumers, businesses and community groups across Ireland.
26. Deputy Pearse Doherty asked the Minister for Finance the estimated revised revenue and deficit projections for each of the years 2021 to 2025, in tabular form in view of recent tax performance as demonstrated in the latest Exchequer tax returns outlined in the Fiscal Monitor for August 2021. [44864/21]
View answerMy Department publishes two sets of (granular) fiscal forecasts each year: in the spring (set out in the Stability Programme Update) and in the autumn (alongside the annual Budget).
Clearly, and as the Deputy is aware, tax revenue has performed strongly over the summer; some of this is permanent - in the sense that it remains in the base - while some is temporary and reflects one-off gains.
My Department is currently compiling its autumn forecasts and these will, as normal, be published in October.
As well as somewhat stronger revenue developments in the base year, it also appears that the economic outlook is somewhat better than envisaged last spring, inter alia due to the earlier-than-assumed re-opening of the economy. This, of course, will have an impact on the budgetary arithmetic and my Department will take all of these factors into account in compiling its revised fiscal forecasts.
I want to stress, however, that the Summer Economic Statement set out a revised fiscal architecture: spending ceilings are now fixed and de-coupled from revenue developments. The objective of this is to avoid pro-cyclical policies and to ensure that windfall gains are not used to finance spending. This is how we will ensure that budgetary policy remains on a sustainable path.
27. Deputy John McGuinness asked the Minister for Finance the status of any recent engagement with the banks in Ireland. [44875/21]
View answerMy officials and I regularly meet with the main retail banks, both in-person, and more recently, using virtual platforms.
In particular, we engage with each of the banks in which the state has a shareholding (i.e. AIB, Bank of Ireland and PTSB) on a regular basis. This engagement has been in place since the State first invested in the banks and it includes regular meetings where a wide range of topics are discussed.
As the Deputy will be aware, earlier this year, Ulster Bank and KBC both announced that they plan to exit the Irish market on a phased basis. As such, my officials and I have been engaging with each of them in relation to their plans. While these are commercial decisions and are a matter for the boards of management of the respective organisations, the Government is supportive of trying to bring about an outcome that is good for the banking sector, as well as for the staff and customers of Ulster Bank and KBC and for the Irish economy generally.
In terms of upcoming meetings, tomorrow I am due to meet Alison Rose, CEO of NatWest, Sir Howard Davies, Chair of NatWest, Jane Howard, the CEO of Ulster Bank, and Martin Murphy, the Chair of Ulster Bank. While this meeting is intended to be general in nature, I will emphasise the importance of an orderly withdrawal of Ulster Bank from the Irish market.
28. Deputy Niamh Smyth asked the Minister for Finance if he will consider introducing a financial incentive for first-time buyers who intend purchasing a vacant property; and if he will make a statement on the matter. [44724/21]
View answerWithin the tax system, the Help to Buy (HTB) incentive is the main instrument through which support is provided to first-time buyers. HTB is a scheme to assist such buyers with the deposit they need to buy or build a new house or apartment. The incentive gives a refund on Income Tax and Deposit Interest Retention Tax (DIRT) paid in the State over the previous four years, subject to limits outlined in the legislation. Section 477C Taxes Consolidation Act (TCA) 1997 outlines the definitions and conditions that apply to the HTB scheme.
For a property to qualify for HTB, it must be new or converted for use as a home, not having been previously been used as a home. In the circumstances where the house was previously used as a dwelling but knocked down and rebuilt, then it is “new”. First-time buyers may purchase a site containing a house which is derelict and which they plan to demolish, in whole or in part, with the intention of building a new house. First time buyers intending to undertake such purchases should contact Revenue via MyEnquiries outlining the specific circumstances of their case and Revenue will consider them on a case by case basis.
In relation to second-hand properties more generally, the HTB scheme is specifically designed to encourage an increase in demand for new build homes in order to encourage the construction of an additional supply of such properties. A move to include second-hand properties within the scope of the relief might not improve its effectiveness; on the contrary, it could serve to dilute the incentive effect of the measure in terms of encouraging additional supply.
Proposals for new or amended tax measures are assessed in accordance with my Department's Tax Expenditure Guidelines. These make clear that it is important that any policy proposal which involves tax expenditures should only occur in limited circumstances, for example where there are demonstrable market failures. In particular, they provide that a tax-based incentive should only be considered where it would be more efficient than a direct expenditure intervention.
Finally, the introduction of such measures is a matter that would generally fall to be considered in the context of the annual Budget and Finance Bill.
29. Deputy Ged Nash asked the Minister for Finance the status of the publication of the tax strategy group papers; and if he will make a statement on the matter. [44842/21]
View answerThe Tax Strategy Group (TSG) is chaired by the Department of Finance with membership comprising senior officials and political advisers from a number of Civil Service Departments and Offices.
Papers on various options for tax policy changes are prepared annually by Department of Finance officials. The TSG is not a decision making body and the papers produced by the Department are simply a list of options to be considered in the Budgetary process. Papers relating to PRSI and social welfare issues are also prepared for the Group by the Department of Social Protection.
As the Deputy may be aware the Tax Strategy Group papers were published on Thursday 16 September on my Departments website.
30. Deputy Ruairí Ó Murchú asked the Minister for Finance the status of his recent engagements in Croatia and Slovenia; and if he will make a statement on the matter. [44779/21]
View answerThese engagements were undertaken in my capacity as President of the Eurogroup. I travelled to Slovenia for the Eurogroup and informal ECOFIN meetings, and there was an opportunity to engage in an additional bilateral with Croatia, as a neighbouring country.
Exchanging views with my Eurogroup colleagues and the European institutions is an essential dimension of the Presidency, whether that is done virtually, or face-to-face when possible, such as this occasion.
On Thursday 9 September, I travelled to Croatia. There, I met with Croatia’s Prime Minister, Andrej Plenkovic, and Deputy Prime Minister and Minister for Finance, Zdravko Maric, to discuss the economic recovery from Covid and Croatia’s preparations for joining the euro.
I had productive discussions over the course of this trip, particularly in relation to Croatia’s progress towards accession of our shared euro currency; including signing a Memorandum of Understanding with the Croatian authorities and the European Commission, to allow Croatia to undertake the necessary technical preparations to be ready to produce euro coins.
On Friday 10 September, I chaired a meeting of the Finance Ministers of the euro area (the Eurogroup) in Slovenia. We were joined by Dr Andrea Ammon of the European Centre for Disease Control, who provided an update on the current health situation in Europe, and the Chair of the European Parliament’s ECON Committee, Irene Tinagli, to reflect on how economic reopening is fuelling recovery. There is evidence of a strong rebound in euro area GDP growth (+2% Q2 on Q1; +13.6% compared to Q2 2020) and strong growth for the hardest hit countries according to the latest Eurostat figures. This new data signals stronger GDP growth for 2021 as a whole, at over 5% in euro area.
I then attended the informal ECOFIN meeting, which took place over the Friday and Saturday, chaired by my Slovenian counterpart, Minister Andrej Šircelj. While in Slovenia, I also had bilateral engagements with Commission Executive Vice President Dombrovskis and Commissioner McGuinness, and my German counterpart, Minister Olaf Scholz.
All necessary health precautions were taken, and I followed public health guidelines during this trip.
