Written Answers Nos. 89-120
102. Deputy Richard Bruton asked the Minister for Finance if returns have been collected in the course of the recent registration for local property tax, which will provide the basis for evaluating the role of a vacant home tax; and if he will make a statement on the matter. [62249/21]
View answerThe Government's strategy, ‘Housing For All’ states that my Department will collect data on vacancy with a view to introducing a Vacant Property Tax. The Finance (Local Property Tax) (Amendment) Act 2021 has accordingly enabled Revenue to collect certain information on vacant properties in the LPT return forms submitted by residential property owners last month in respect of the new LPT valuation period 2022-2025. This information together with information from other available sources will be used to assess the merits and impact of introducing a Vacant Property Tax.
The LPT returns are currently being analysed by Revenue and include information on the number and location of unoccupied properties, and the reasons for and duration of this, as of 1 November 2021. I look forward to receiving the results of Revenue’s analysis of this information in 2022. This analysis will be used together with other available sources of information to inform the optimum design of a Vacant Property Tax.
As I have articulated on several occasions it is the clear intention of the Government to introduce a Vacant Property Tax next year. In designing the tax it will be important to achieve an appropriate balance between placing enough pressure on vacant home owners to allow the measure to actually work as an incentive, and ensuring any such tax does not arbitrarily or excessively penalise home-owners in a discriminatory way.
103. Deputy Joe Flaherty asked the Minister for Finance if he will report on his engagement with the insurance industry to address the issues with access to affordable insurance faced by some businesses. [62218/21]
View answer150. Deputy Cathal Crowe asked the Minister for Finance if he will report on his engagement with insurance underwriters and brokers to promote more competition in the past six months. [62319/21]
View answer152. Deputy Cormac Devlin asked the Minister for Finance if he will provide an overview of his engagement with the insurance industry on the importance of sticking to the new personal injury guidelines. [62321/21]
View answerI propose to take Questions Nos. 103, 150 and 152 together.
Insurance reform is a key priority for this Government as evidenced by the fact that implementation of the Action Plan is overseen by the Cabinet Sub-Group on insurance reform, chaired by the Tánaiste.
A significant landmark of the ongoing reforms is the establishment of the Office to Promote Competition in the Insurance Market. This Office, which I chair, is situated within the Department of Finance and has held meetings with a wide range of stakeholders including insurance companies, and representative organisation on issues surrounding competition. Its aims are to help expand the risk appetite of existing insurers and explore opportunities for new market entrants in order to increase the availability of insurance. In relation to this, the Office is working with IDA Ireland to help leverage the ongoing insurance reforms with the aim of targeting new entrants to the Irish market or seeking current incumbents, to expand their existing operations here.
In recent weeks, as part of this work I met with the CEOs of the major insurance providers in Ireland. They have confirmed that they are committed to passing on savings from the Guidelines, and other reforms, to customers. They also reiterated their support for the reform agenda and that they are adhering to the Guidelines in direct settlements with their clients. The need to expand their risk appetite into ‘pinch-point’ sectors that are experiencing issues with availability and affordability of cover, particularly high-risk/high-footfall areas, such as leisure activities was impressed upon providers at all our engagements. Some insurers indicated they are actively considering growing their business in certain areas. Separately, I also recently met with a leading international insurance brokerage firm, and discussed both the question of supply and the Irish market in general. In this regard, I also believe that insurance brokerage firms have an important role in assisting clients in sourcing cover, particularly in niche areas where their expertise and underwriting networks can add real value.
In conclusion, this Government is committed to securing a more sustainable and competitive market through deepening and widening the supply of insurance in Ireland. In this regard, it is my intention to work with my Government colleagues to ensure the timely implementation of the Action Plan which will bring benefits to individuals, businesses, community and voluntary groups across Ireland.
104. Deputy Richard Boyd Barrett asked the Minister for Finance the measures he plans to take to curb inflation and the impact it is having on the cost of living for those on low and middle incomes; and if he will make a statement on the matter. [62402/21]
View answer107. Deputy Richard Boyd Barrett asked the Minister for Finance the measures he is taking to deal with the increasing cost of living and the impact this is having on low and middle-income households; and if he will make a statement on the matter. [62405/21]
View answerI propose to take Questions Nos. 104 and 107 together.
The Government is very conscious of the recent spike in consumer price inflation, which reached 5.4 per cent in November. This, of course, is not unique to Ireland, with the majority of advanced economies recording relatively high rates of price inflation in recent months. That said, it is worth pointing out that this comes after several years of low inflation: the price level in Ireland is well below the level it would have been had inflation been in line with the ECB's price stability target of 2 per cent over the last two decades.
The recent rise in inflation is partly explained by global factors, including the recovery in oil prices following the pandemic-induced decline in prices last year, global supply chain disruptions and the imbalance between supply and demand in the markets for some goods and services following the re-opening of the economy. Many of these factors are expected to fade over the course of next year.
In its Economic and Fiscal Outlook, published alongside Budget 2022, my Department forecast a headline inflation rate of 2¼ per cent both for this year and for next. A scenario analysis was also presented which showed the impact inter alia of higher energy prices on this projection.
The recent rise in wholesale energy prices means there is likely to be some upside to the projection for next year. Nevertheless, the baseline projection that the rate of inflation eases over the course of next year remains valid; while persistently higher inflation cannot be ruled out, this is not the central assumption.
The Government has responded to higher inflation in a timely manner, with a range of measures introduced in Budget 2022 to protect households against increases in the cost of living.
At a macro-level, these include a personal income tax package worth €520m and a social welfare package of over €550m.
At a micro-level, the fuel allowance was increased by €5 per week to compensate lower-income households for higher energy costs as a result of the increase in the carbon tax. There were also increases in the allocation of Early Learning Care and School-Age Childcare to ensure childcare prices do not rise.
Furthermore, following the recent rise in energy prices, the Cabinet this week approved an Electricity Costs Emergency Benefit Payment of up to €100 in 2022 to an estimated 2.1m domestic electricity account holders.
In conclusion, the Government has responded to the mitigate the cost of living increases and my Department will continue to monitor inflationary developments closely.
105. Deputy Colm Burke asked the Minister for Finance the number of householders who made a local property tax return; the number of householders who accepted the initial Revenue Commissioners' determination; if a figure is available for projected revenue that will be raised by the tax in 2022; the way in which this compares with the past five years, in tabular form; and if he will make a statement on the matter. [62110/21]
View answerThe Finance (Local Property Tax) (Amendment) Act 2021 provided for a revaluation of properties to form the basis of the Local Property Tax (LPT) charge from 2022.
LPT for the years 2022 to 2025 will be based on property values on 1 November 2021. It is important to note that LPT is a self-assessment tax and it is the responsibility of each owner to value his or her property. While Revenue provides extensive guidance to assist property owners with this process, it does not determine the value of any property for LPT purposes.
I am advised by Revenue that LPT returns for the next ‘valuation period’ (2022 to 2025) have been filed and are fully up to date in respect of 1.4 million properties. Filing arrangements are being finalised in respect of a further 170,400 Local Authority and Approved Housing Body properties and there are open correspondence queries on hand with Revenue in respect of approximately 40,000 properties. While these queries delay filing, the liable persons are considered compliant. Revenue estimates that the return filing compliance rate is therefore approximately 80%. Furthermore, payment arrangements are in place for approximately 190,000 additional properties where returns are not yet filed, giving an estimated payment compliance rate of 90%.
While the return filing deadline passed on 10 November, it is evident that property owners are still making their best effort to file their returns as these continue to be received by Revenue. The due date for payment of 2022 LPT for those property owners who do not yet have a payment option in place is 12 January 2022.
To date, €119m has been collected for LPT for 2022. Overall new payment methods have been put in place to the value of €390m, and annualised payment methods provide for the collection of a further €47m. As outlined, returns are still being finalised so this is not the final position. The total LPT collected to date in 2021, including monies due in respect of 2021, late payments for 2020 and early payments for 2022, is €531 million. As requested by the Deputy LPT collections in 2016 to 2020 are shown in a table which will appear in the official record. This shows that the LPT collected in 2016 was €463 million; in 2017 €477 million; in 2018 €483 million; in 2019 €474 million and in 2020 €482 million.
|
Year of Collection |
LPT Receipts €m |
|
2020 |
482 |
|
2019 |
474 |
|
2018 |
483 |
|
2017 |
477 |
|
2016 |
463 |
While detailed analysis of the returns will take some time, Revenue publishes preliminary statistics on LPT on a regular basis on its website.
108. Deputy Cathal Berry asked the Minister for Finance the position regarding the application of VAT on utility bills; the rate for same; if he is considering a reduction in the rate; and if he will make a statement on the matter. [62418/21]
View answerI am advised by Revenue that the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. The VAT Directive obliges each Member State to have a standard rate of VAT and also allows that a Member State may choose to have no more than two reduced rates of VAT, which may be no less than 5%, and which may be applied to certain goods and services: any of those listed in Annex III of the Directive. Within this framework, Ireland currently applies a standard rate of 23% and two reduced rates of 13.5% and 9%.
The EU Directive permits derogations from the general rules to allow an individual Member State to continue certain historic tax treatments, such as the application of one of their reduced rates to particular goods and services which are not included in Annex III. Ireland, in line with the VAT Directive and by way of special derogation from the general rule, maintains several “standstill” provisions and derogations that allow us to maintain reduced rates to certain supplies for historical reasons. It is on this basis that Ireland applies its 13.5% reduced rate of VAT to the supply of fuel, gas, oil, and electricity services for both domestic and commercial use. The current 13.5% VAT rate applied to energy products is a ‘parked rate’, governed by Article 118 of the VAT Directive and standstill provisions from 1991 and cannot be reduced below 12%.
109. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to review the single-parent tax credit given the increases in the cost of living and the disproportionate effect this can have on single-parent families; and if he will make a statement on the matter. [62403/21]
View answerThe 2009 Commission on Taxation reviewed the One-Parent Family Tax Credit. It acknowledged that the credit played a role in supporting and incentivising the labour market participation of single and widowed parents but recommended that the credit should be allocated to the principal carer of the child only.
The One-Parent Family Tax Credit was replaced by the Single Person Child Carer Tax Credit from 1 January 2014. The restructured credit is of the same value i.e. €1,650 per annum as the one-parent family tax credit and it also carries the same entitlement to the additional €4,000 extended standard rate band, which increases that band to €36,800 per annum, before liability to higher rate of income tax arises. However, the credit is more strategically targeted, in that it will in the first instance only be available to the principal carer of the child.
The Single Person Child Carer Credit is available if you are the ‘primary claimant’. To be a primary claimant your qualifying child must live with you for the whole, or greater part, of the year (a period greater than 6 months). Ultimately, of course, the allocation of childcare responsibilities is primarily for parents or guardians to agree and a principal carer will be able to relinquish the credit in order than a non-principal carer can claim it.
Issues concerning the Single Person Child Carer Credit are outlined in a review conducted by my Department in 2015, which is contained in the Report on Tax Expenditures, available at the following link: budget.gov.ie/Budgets/2016/Documents/Tax_Expenditures_Report_pub.pdf.
I am satisfied that the Single Person Child Carer Credit in its current form is targeting State resources to where they are most needed. As such, I have no plans to review or amend the Single Person Child Carer Credit at this time.
In relation to the Deputy’s comments on the increased cost of living I would draw the Deputy’s attention to Budget 2022 income tax and USC measures. This included a substantial income tax package comprising of an increase of €50 in each of the main tax credits – personal tax credit, employee tax credit and the earned income credit – from €1,650 to €1,700. An increase of €1,500 in the income tax standard rate band for all earners was also announced. Further, the 2% rate band ceiling for USC will be increased for 2022 in line with the increase in the national minimum wage to ensure that a full-time adult worker who benefits from the increase in the hourly minimum wage rate of €10.20 to €10.50 will remain outside the top rates of USC. Further details can be located at the following link - www.gov.ie/en/publication/7e491-taxation-measures/.
110. Deputy Pearse Doherty asked the Minister for Finance if the information provided in the National Claims Information Database can disclose if reduced claims costs for insurers as a result of the personal injuries guidelines have been passed onto consumers through reduced insurance premiums; and if he will make a statement on the matter. [62364/21]
View answerThe implementation of the new Personal Injuries Guidelines is a significant milestone in the insurance reform agenda, which should lead to reduced claims costs for insurers. The Government is committed to holding insurers to account and ensuring that consumers experience the benefits from the range of measures being implemented under the Action Plan for Insurance Reform. As the Deputy will appreciate, consistent implementation of these Guidelines by insurers, PIAB and the Judiciary will be vital in achieving an improved claims environment.
The National Claims Information Database (NCID) is published by the Central Bank of Ireland. The NCID contains a wealth of data that can provide insights into developments within the insurance sector such as the cost of premiums; the cost and frequency of claims; the settlement of claims; the revenues and expenditures of firms, and the profitability of the sector. As the Deputy is aware, there is no comparable resource in the UK, or indeed any other EU market. As such, the NCID allows us to monitor the impact of any reduced costs that insurers incur on the cost of premiums. I believe this is more valuable than monitoring the impact of a single reform such as the Personal Injuries Guidelines, especially as there are multiple reforms being pursued under the Action Plan, which may also impact on the cost and availability of insurance.
That said, following the publication of the Personal Injuries Guidelines, officials engaged with the Central Bank of Ireland to consider possible further enhancements to the NCID data specification. In this regard, the Bank has outlined its intention to collect additional claim settlement data for all classes of business within the remit of the NCID so as to obtain further information on the impact of the Guidelines on claims settlement.
Finally, it is important to note that it is still early days in terms of assessing the impact of the Guidelines, and any data available to date is preliminary in nature. Nevertheless, I am pleased to note that the latest CSO data, and the recently-published third NCID Report on Private Motor Insurance, both point to a continuing decline in the price of motor insurance. In time with consistent use of the Guidelines this should help to further bolster this downward trajectory, and the NCID will allow us to see whether this is the case. The NCID has already proven to be an excellent tool when it comes to increasing transparency regarding how the cost of claims impacts on the price of premiums. In light of the ongoing expansion that is planned, I believe that it remains the most effective measure to objectively monitor whether savings arising from the Personal Injuries Guidelines, as well as other reforms, are being reflected in premiums.
111. Deputy Holly Cairns asked the Minister for Finance if he will direct banks operating in the State to provide customers with written banking statements on a monthly basis, if requested by the customer. [62342/21]
View answerAll credit institutions in Ireland are independent commercial entities and decisions in relation to the provision of bank statements are made by the boards and management of individual banks.
I am advised by the Central Bank that Chapter 6 of the Consumer Protection Code 2012 ‘Post-sale Information Requirements’ sets out the requirements that regulated entities must follow when providing statements to consumers in relation to deposit, credit and investment accounts, including the consumers right to receive statements on paper.
Provision 6.2 of the Code sets out that in relation to these accounts, a regulated entity must inform a consumer that he or she may request the statements to be provided on paper and, if requested by the consumer, the regulated entity must provide these statements on paper to the consumer.
The Code provides that the regulated entity must provide the consumer with these statements at least annually.
The Deputy may wish to note that the Central Bank is currently conducting a review of the Code and a public consultation on the Central Bank’s proposals for amendments will take place as part of the review giving all stakeholders an opportunity to make submissions.
112. Deputy Brian Stanley asked the Minister for Finance if his Department has the authority to initiate or commission an investigation or a review into the Revenue Commissioners; and if so, the number of investigations or reviews his Department initiated in the past five years. [61505/21]
View answer142. Deputy Brian Stanley asked the Minister for Finance if his Department will consider commissioning an investigation to review the tax agreement signed between the Revenue Commissioners and the courier sector in October 1997 (details supplied) to assess the grounds upon which the deal was signed, the financial implications to the State and to the workers involved and the knock-on effect to other sectors. [61506/21]
View answerI propose to take Questions Nos. 112 and 142 together.
The Deputy will be aware, in accordance with section 101 of the Ministers and Secretaries (Amendment) Act 2011, the Revenue Commissioners are independent in the performance of their functions under, or for the purposes of, the laws governing taxation. Furthermore, all taxpayers have rights of appeal under tax law against assessments to tax raised on them by Revenue.
Regarding the agreement reached between the courier sector and Revenue in 1997, I am advised that the purpose of the arrangement was to ensure that motor bike and bicycle couriers that were engaged on a regular basis by courier businesses were assisted in relation to their tax compliance by having tax deductions made when they were paid for their services. In order to participate in the scheme, the couriers in question had to be bona fide self-employed and as such there was no cost involved to the Exchequer. The courier companies that operated this ‘voluntary PAYE’ scheme did so of their own volition and made the necessary remittances to Revenue based on the deductions from the payments they made to individual couriers.
From the courier’s perspective, no additional costs arose because they participated in the scheme. As they were self-employed, when they filed their annual income tax return at year end, they were given a credit for any tax deducted by the courier companies against their final tax liabilities for the year. In addition, in recognition of the fact that couriers had to cover the costs of insurance, repairs, fuel etc. on their own vehicles, the agreement also provided for a flat deduction of 45% of the courier’s gross annual turnover as expenses of their trade, such that tax only became payable on the balance of 55% of their turnover. This aspect of the agreement was withdrawn at the start of 2019 when PAYE Modernisation was introduced. In common with all other self-employed persons, couriers should now claim any expenses of their trade in their annual income tax return.
I am further advised that the ‘voluntary PAYE’ scheme operated by courier companies has all but ceased to exist, with 2 companies operating the scheme for 10 individual couriers in 2021 and that no similar arrangements exist, or have existed, for any other business sector.
I am advised by Revenue that it conducts a full range of compliance interventions to combat all types of tax evasion. Furthermore, Revenue compliance interventions include a focus on the practice of disguised employment and challenging the inappropriate classification of workers as self-employed contractors. These interventions are conducted by Revenue acting alone or in collaboration with Department of Social Protection officers, who examine the PRSI status of individuals as part of such interventions as well as with officers from the Workplace Relations Commission, who are responsible for examining employee rights including sick leave and other entitlements.
I am fully satisfied that Revenue has and will continue to administer the tax code fairly and in accordance with underlying law. The agreement reached in 1997 between Revenue and the courier industry was a pragmatic approach to secure as much voluntary compliance from within the sector as possible. The instances of the take-up of the scheme today has significantly reduced and Revenue has more administrative powers at its disposal to secure compliance from all commercial sectors than it did back in the 1990s when the agreement was made.
113. Deputy Pádraig O'Sullivan asked the Minister for Finance if the employment wage subsidy scheme, EWSS, rates will be restored for the hospitality sector; and if he will make a statement on the matter. [60863/21]
View answer159. Deputy Brendan Griffin asked the Minister for Finance if he will reinstate the employment wage subsidy scheme for enterprises that need it at this difficult time for traders; and if he will make a statement on the matter. [60439/21]
View answer249. Deputy Violet-Anne Wynne asked the Minister for Finance the position in relation to the reduction in income that many workers in hospitality sector face due to the employment wage subsidy scheme being cut in the coming weeks; and if he will make a statement on the matter. [60861/21]
View answer250. Deputy Ruairí Ó Murchú asked the Minister for Finance his plans for the employee wage subsidy scheme until the new year given the current and evolving Covid-19 situation; and if he will make a statement on the matter. [60852/21]
View answerI propose to take Questions Nos. 113, 159, 249 and 250 together.
The objective of the Employment Wage Subsidy Scheme (EWSS) is to support employment and maintain the link between the employer and employee insofar as is possible. The EWSS has been a key component of the Government’s response to the Covid-19 crisis. It is an economy-wide scheme that operates across all sectors.
In monetary terms, the overall support provided to-date (9th December) by EWSS is over €6.6 billion comprising direct subsidy payments of almost €5.73 billion and PRSI forgone of €902 million to 51,700 employers in respect of over 696,900 employees.
Following the agreement of Government on 3 December 2021, my Department and Revenue sought to develop a proposal to modify the Covid Restrictions Support Scheme (CRSS) to provide for a supplementary subsidy (in addition to EWSS) for businesses which are subject to the latest restrictions on operating. The objective of the modified scheme was to provide targeted, timely and sector-specific support to supplement the reduced EWSS payments to the sector.
However, on further consideration and analysis of the data on CRSS, it proved to be administratively complex to design such a scheme and it would not be possible to have it operational ahead of Christmas as was hoped. The proposed modifications which included a change to both the turnover threshold and the rate, as well as consideration of a higher weekly cap, had the potential to significantly increase the cost of the scheme, particularly in the context of uncertainty around the trajectory of Covid-19 and the impact of the Omicron variant.
Instead, maintaining the enhanced rates of subsidy under the EWSS offers a relatively more efficient and effective way to support affected businesses in the immediate term. As such, the Government decided, and it was announced on Thursday last (9th December), that the enhanced rates of EWSS subsidy would apply for a further two months, December 2021 and January 2022. This will give certainty to businesses when they need it most.
The Government and I have been clear that there will be no cliff edge to supports for employers but we have also been clear that the EWSS cannot run indefinitely, nor is it sustainable to continue with the enhanced rates for a prolonged period of time given the very substantial costs to the Exchequer.
As such, from 1 February 2022, the original two-rate structure of €203 per week and €151.50 per week will apply; for March and April 2022 the flat rate subsidy of €100 per week will apply and the scheme will end on 30 April 2022.
The CRSS will remain in place to support businesses who are required to close or significantly restrict customers from accessing their business premises, and who meet the qualifying criteria. Under the relevant legislation, the CRSS was due to end on 31 December 2021 but is now being extended to the end of January 2022 under the same Government decision of 9 December as mentioned above. Provision is also being made to allow me, as Minister for Finance, to extend the CRSS up to 30 April 2022 by Ministerial Order if deemed necessary.
Amendments to the Finance Bill 2021 were brought forward this week to give effect to the EWSS and CRSS changes mentioned.
Finally, as has been the case throughout the pandemic, the Government will continue to monitor developments closely.
114. Deputy Violet-Anne Wynne asked the Minister for Finance the reason the rate of tax under the proposed residential zoned land tax will be applied at 3%; if he will consider increasing the rate applied; and if he will make a statement on the matter. [62331/21]
View answer132. Deputy Pearse Doherty asked the Minister for Finance the reason the rate of tax under the proposed residential zoned land tax will be applied at 3%; if he will consider increasing the rate applied; and if he will make a statement on the matter. [62366/21]
View answerI propose to take Questions Nos. 114 and 132 together.
The rate of Residential Zoned Land Tax is set at 3% on its commencement in 2024. I have chosen this rate as I believe great care needs to be taken to get the balance right between it achieving its essential purpose of encouraging the release of land for housebuilding purposes, but at the same time not being too penal, so that it runs the risk of being challenged in the courts.
My fear is that if I were to apply a higher rate from the outset, it could change the economics of making a return on capital invested in the land as a business asset, and may make some businesses unviable. Such an approach I believe would be counterproductive and damaging to the goal of meeting the Government's house building objectives over the next number of years.
In summary, I believe it is important to see how the tax operates and then make an assessment as to whether it is working. If it is not leading to an increase in land being released for housing purposes, I will have no hesitation in reviewing the rate, if I deem it likely that this will help the situation.
115. Deputy Ged Nash asked the Minister for Finance his plans to convert the current employment wage subsidy scheme into a permanent, remodelled short-time work scheme in view of the continued impact of Covid-19; and if he will make a statement on the matter. [62144/21]
View answerThe objective of the Employment Wage Subsidy Scheme (EWSS) is to support employment and maintain the link between the employer and employee insofar as is possible. The EWSS has been a key component of the Government’s response to the Covid-19 crisis. It is an economy-wide scheme that operates across all sectors.
In monetary terms, the overall support provided to-date (9th December) by EWSS is over €6.6 billion comprising direct subsidy payments of almost €5.73 billion and PRSI forgone of €902 million to 51,700 employers in respect of over 696,900 employees.
The Government decided on Thursday last (9th December), that the enhanced rates of EWSS subsidy would apply for a further two months, December 2021 and January 2022. This will give certainty to businesses when they need it most. Amendments to the Finance Bill 2021 were brought forward this week to give effect to this change.
For the longer term, the Deputy may wish to note that the Government's Pathways to Work strategy, which was published last July, contains a specific commitment on the issue of a new short-time work support scheme in the following terms:
“Commitment 44: Building on the EWSS/TWSS and drawing on existing international models, explore the possibility of introducing a new Short-Time Work Support scheme to enable employers retain people on their payroll in response to short-duration shocks to employment*.
*Consider of a range of international short-time work support schemes such as the German ‘Kurzarbeit’ and the French ‘Chômage partiel / activité partielle’."
In this regard, work has begun at senior official level on an inter-departmental basis to address this as part of a broader exercise to review the experience from the introduction and operation of Covid-19 emergency income supports paid to/in respect of people whose employment was impacted due to public health restrictions, and to identify lessons learnt. My Department is represented on the relevant group which is chaired by the Department of Social Protection and also includes representatives from the Departments of Public Expenditure and Reform and Enterprise Trade and Employment and from the Office of the Revenue Commissioners.
116. Deputy Cathal Berry asked the Minister for Finance the position regarding the application of VAT on motor fuel; the rate for same; if he is considering a reduction in the rate; and if he will make a statement on the matter. [62419/21]
View answerI am advised by Revenue that the VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply. Under the EU VAT Directive and Irish VAT legislation the supply of motor fuel, specifically petrol and diesel, is liable to VAT at the standard rate, currently 23%.
The Deputy should also note that petrol and diesel are treated differently under Irish VAT law regarding VAT recovery entitlements of VAT-registered taxpayers. VAT-registered businesses are entitled to recover the cost of VAT on the purchase of diesel used in the course of their business, as is the case with most business costs. However, the VAT Consolidation Act provides that VAT on petrol is not recoverable, including by businesses registered for VAT, except where the petrol is purchased as stock-in-trade of the business.
117. Deputy Brian Leddin asked the Minister for Finance if he plans to further revise the rates of vehicle registration tax in view of continued strong sales of fossil fuel vehicles in 2021; and if he will make a statement on the matter. [62409/21]
View answerThe 2020 Finance Act overhauled the structure of rates for vehicle registration tax (VRT) to strengthen the environmental rationale of the tax in line with Government policy to radically reduce emissions from road transport. The rate changes provided for in the Finance Bill 2021 reinforce this progress by increasing the fiscal gap between low emission vehicles and the rest, thus incentivising motorists in the market for a new car to make ‘greener choices’.
Following the changes introduced last year there has been significant increases in electric vehicle registrations in 2021, mirrored by decreases in the number of high emission fossil fuel vehicles. The middle emissions bands (where most of the volume lies) have also experienced a shift towards lower emission vehicles. The average WLTP (Worldwide Harmonised Light Vehicle Test Procedure) figure for vehicles new and used in 2020 was 135.6 gCO2/km (band 14). This has fallen to 122.6 g/km (band 11) to end July 2021. This is clear evidence that VRT reform is leading to lower emission cars on our roads.
118. Deputy Brendan Griffin asked the Minister for Finance if he will review the long-term case for 9% VAT; and if he will make a statement on the matter. [62410/21]
View answerAs the Deputy may recall, I previously asked my Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of Budget 2019. The “Review of the 9% VAT rate: Analysis of Economic and Sectoral Developments” was published by my Department in July 2018, in order to better inform any decision in relation to the 9% reduced rate going forward. In addition to assessing the relevance, cost, value-for-money, and impact to date of the 9% VAT rate, the Review also looked at the estimated impact on the relevant sectors were the rate to be increased. The Review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes. The Review concluded that the VAT rating applied to the tourism sector should not greatly impact demand or employment in the sector. Furthermore, the Revenue Commissioners also published a report on the 9% VAT Rate in June 2018 which analysed the output and employment impact of the 9% VAT rate using Revenue data. The analysis found an estimated increase in employment of on average 1.8 employees for each firm benefitting from the reduced rate in the accommodation and food sector in the year following the introduction of the reduced rate. However, beyond the short term, they were unable to distinguish the impact of the rate on employment from the impact of other factors in the economy.
119. Deputy Holly Cairns asked the Minister for Finance the steps he is taking to enable the credit union movement to grow as a key provider of community banking in the country. [62343/21]
View answerThe Programme for Government includes a number of commitments in relation to the credit union sector.
As part of the Review of the Policy Framework, Minister Fleming conducted extensive stakeholder engagement, meeting with the representative bodies, collaborative ventures, service providers, the Credit Union Advisory Committee, the Registrar of Credit Unions and individual credit unions. The information gained from these meetings will help inform the next steps taken by Government. We intend to issue proposals emanating from the Review of the Policy Framework for consultation shortly.
In terms of supporting the sector to provide essential financial services to local communities, the following are some recent developments which highlight the potential of the sector to fulfil a role in relation to community banking.
Review of Lending and Investment Regulations
The Central Bank has in recent years reviewed both the lending and investment frameworks. Since 1 January 2020, credit unions now have a combined capacity to provide up to €1.1 billion in additional SME and mortgage loans, with further capacity available to credit unions who can comply with certain conditions or on approval by the Central Bank. As of June 2021, credit unions had a combined mortgage and SME loan book of circa €372 million, an increase of 18% year-on-year.
Credit unions are permitted to place their surplus funds that have not been lent to members in a range of investments including Tier 3 Approved Housing Bodies (AHBs). I am pleased to share with the Deputy that two credit union backed funds have received approval from the Central Bank. Credit unions will be able to invest up to €900 million in these regulated funds, which will subsequently lend to AHBs.
SME Lending
Nineteen credit unions were approved in early 2021 for participation in the Covid-19 Credit Guarantee Scheme. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book. Further, in November five credit unions were announced as participants in the €330m Brexit Impact Loan Scheme (BILS). The BILS is a successor to the Brexit Loan Scheme and provides low-cost loans of €25,000 to €1.5m to eligible Brexit-impacted businesses. While its predecessor had been available through participating banks, the BILS will now also be available through participating credit unions, ensuring wider accessibility of the scheme.
In total, SME lending has grown 5.6% year on year to end June 2021.
Access to Finance for Retrofit
The Government significantly increased the funding available to support retrofit in Budget 2022. My officials have been engaging with stakeholders to support increased credit union participation in green retrofit loan schemes.
Other Services
Other than member savings and lending, in order to provide “additional services”, a credit union must be approved by the Central Bank.
66 credit unions are approved to provide current accounts.
The Central Bank has prescribed a list of exempt services which may be provided without requiring approval. The Central Bank is undertaking a review of the Exempt Services Schedule to ensure that the services listed reflect the current financial services landscape. The Central Bank will commence a public consultation shortly – seeking views from stakeholders on the proposed changes arising from this review.
120. Deputy Ged Nash asked the Minister for Finance if he will provide an update on his plans for the tax treatment of interest-free or low-interest loans in view of recent figures from an organisation (details supplied) that show a significant percentage, 42%, of first-time buyers used gifts to help fund deposits needed to secure a mortgage to purchase a home; and if he will make a statement on the matter. [62147/21]
View answerWhere a person is allowed the free use of property, section 40 of the Capital Acquisitions Tax Consolidation Act 2003 provides that the person has taken a gift in each year that they have that free use. The value of the gift is calculated by reference to the difference between any consideration paid by the beneficiary for the use of the property and the “best price obtainable in the open market” for the use, occupation, or enjoyment of similar property for that year. On foot of a recommendation to align the CAT code, I included a provision in Finance Bill 2021 (as initiated) to amend section 40 as it applies to the treatment of interest free (and low interest) loans.
Generally, the calculation of the best price obtainable in the open market for the use, occupation, or enjoyment of an asset is carried out by reference to the value of the gift received. For example, where a person is given the free use of a house, the gift would be valued at what it would cost to rent an equivalent property on the open market. In the case of the free use of money in the form of an interest-free or low interest loan, however, the Revenue practice to date has been to accept the current best financial institution deposit interest rate as the best price obtainable in the open market at the end of each year. As such, the value of these loans has been calculated by reference to the cost of making the gift, rather than the value of the gift received. This is out of step with the way the value of the free use of other types of property is calculated for CAT purposes.
The proposed amendment aimed to address this inconsistency by specifying that the annual value of an interest-free or low interest loan was to be calculated by reference to the best borrowing interest rate obtainable for the same sum. The intention was that a person in receipt of an interest-free or low interest loan would consult the published borrowing rates of the leading financial institutions in order to determine the best rate.
However, while this approach may be in line with the treatment for the free use of other property, it does not take account of the nuances inherent in how financial institutions determine the appropriate interest rate as lenders. Therefore, it may prove difficult to apply in practice. For this reason, I decided to withdraw the amendment at Dáil Committee Stage, to allow for further time and consideration to be given to the proposal.
In relation to the recent publication of the Banking and Payments Federation Ireland (BPFI) to which the Deputy has referred, this shows that almost 42% of first-time buyers, and almost 25% of mover purchasers, used gifts to help fund deposits needed to secure a mortgage to purchase a home. However, they said that the main source of deposits was from savings, with 96% of first-time buyers using savings to fund their deposits for mortgage loans. It is my understanding that the gifts the BPFI was referring to were in the form of outright gifts of money, rather than loans of money, i.e. there was no repayment aspect to these gifts, unlike with an interest-free or low interest loan. The Deputy should note that it has always been the case that where the taxable value of a gift exceeds the relevant Group threshold, which would include gifts of money to buyers to help fund deposits, a CAT liability will arise. I have proposed no changes to the legislation in this regard.
