Written Answers Nos. 51-70
51. Deputy Matt Carthy asked the Minister for Finance if he has considered the creation of new, or repurposing of existing, financial instruments under the Strategic Banking Corporation of Ireland, with regard to the current challenges facing the self-employed and the small and medium enterprise sector. [17910/22]
View answerThe Strategic Banking Corporation of Ireland (SBCI) is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs that address failures in the Irish SME finance market as well as encouraging and promoting competition and innovation, and the efficient and effective use of EU resources and financial instruments.
The SBCI achieves this through the provision of low cost liquidity and risk-sharing guarantee activities that support the provision of appropriately priced, flexible funding to Irish SMEs.
The SBCI does not lend directly. Rather, the SBCI operates through its partner finance providers, known as on-lenders. The SBCI has provided funding to a mixture of both banks and non-bank finance providers.
The SBCI has an independent Board and SBCI activities are subject to extensive due diligence processes in advance of any decisions to lend or provide guarantees. The SBCI's schemes and on-lender criteria are designed to mitigate risks to Irish taxpayers, European funding and to SME borrowers.
Since the SBCI commenced operations in March 2015 and to the end of 2021, it has delivered €2.8bn to more than 46,000 SMEs. During 2021, the SBCI delivered €819m to 10,012 SME’s through its risk-sharing and liquidity operations.
Guarantee Schemes are operated by the SBCI on behalf of the Department of Enterprise, Trade and Employment and Department of Agriculture, Food and the Marine. Under such schemes, loan facilities are made available through finance providers utilising their own funds at interest rates below the market rate.
One of the responsibilities of the Minister for Finance is to ensure that those viable businesses who wish to access credit from bank and non-bank sources can do so. This includes monitoring of sectoral demand for credit from SMEs using the SME Credit Demand Survey.
The Department of Enterprise, Trade and Employment and the Department of Agriculture, Food and the Marine also monitor access to finance on an ongoing basis with a view to adapting and repurposing existing loan schemes to target those businesses that most need them.
For example, the Department of Enterprise, Trade and Employment has commissioned a review of the Future Growth Loan Scheme, which is a long term lending scheme introduced to help SMEs access finance for strategic investment purposes. The findings from this work will help in informing future policy considerations in relation to long-term lending.
To conclude I would strongly encourage businesses to avail of existing low-cost lending facilities provided by the SBCI and available through a range of lenders including commercial banks, certain credit unions and non-bank lenders.
53. Deputy Cormac Devlin asked the Minister for Finance if he will be updating economic forecasts for 2022; and if he will make a statement on the matter. [20527/22]
View answerMy Department published updated macroeconomic projections for 2022 in the draft Stability Programme Update (SPU) on 13th April. These projections are prepared against a backdrop of the war in Ukraine and the associated economic and financial sanctions.
The main channel through which the war is impacting the economy is through higher energy and commodity prices. Higher energy prices have resulted in higher inflation, which is now expected to peak at 6¾ per cent in the second quarter and average 6¼ per cent for 2022 as a whole. Higher input prices, global supply chain disruptions and a tight labour market are also adding to non-energy or ‘core’ inflation.
The pass through effect of soaring energy prices will be reflected in rising costs for businesses and households. Rising costs will undermine business profitability and reduce household purchasing power. This, alongside heightened uncertainty will see firms hold back investment. As a result, my Department has revised down our growth forecasts for this year – as measured by modified domestic demand (MDD) - by 2¼ percentage points, and now expects growth of close to 4¼ per cent in 2022.
One positive development since the autumn forecasts has been the recovery of the labour market, with the level of employment now at its highest ever level. Given the strong rebound in employment last year, employment growth is now set to slow over the course of 2022 in keeping with the overall outlook. The unemployment rate is projected to close the year at 5½ per cent and by end of next year we should be approaching full employment.
Given continued geopolitical uncertainty, however, the margin of uncertainty around these projections is significant, with the balance of risks firmly tilted to the downside. In light of this uncertainty, my Department published an additional, more severe scenario as part of the SPU, in which wholesale oil and gas prices return to their early-March levels and remain elevated relative to baseline this year and next. In this scenario gas and oil prices would be around 75 and 50 per cent respectively above the price assumptions underpinning the central economic forecast. In this scenario, inflation would peak at around 9¼ per cent in the third quarter and average 8¼ per cent in 2022; the shock would weigh on consumer spending and MDD growth as well.
Government is acutely aware of the growing challenges many households and businesses face, particularly given rising price pressures. The priority is to minimise the impact on those who are most impacted; the Government can help, but cannot fully insulate all from the burden of higher energy prices.
54. Deputy James Lawless asked the Minister for Finance the total revenues raised by excise duties to date in 2022; the comparison with the same period in 2021; and if he will make a statement on the matter. [20529/22]
View answerI am advised by Revenue that the amounts raised through Excise Duty to the end of March in 2021 and 2022 are €1,283 million and €1,368 million respectively.
56. Deputy Aindrias Moynihan asked the Minister for Finance the reason for different criteria under social protection entitlements and taxation in which a cohabiting couple have to be jointly assessed under social protection entitlements but cannot be jointly assessed for tax purposes as cohabitants; if a review will be considered to change this taxation rule to allow cohabiting couples to apply to be jointly assessed for tax purposes; and if he will make a statement on the matter. [21440/22]
View answerWhere a couple is cohabiting, rather than married or in a civil partnership, they are treated as separate and unconnected individuals for the purposes of income tax. Each partner is a separate entity for tax purposes, therefore, cohabiting couples cannot file joint assessment tax returns or share their tax credits and tax bands in the same manner as married couples.
The basis for the current tax treatment of couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980), which held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.
The treatment of cohabiting couples for the purposes of social welfare is primarily a matter for the Minister for Social Protection. However, it is based on the principle that married couples should not be treated less favourably than cohabiting couples. This was given a constitutional underpinning following the Supreme Court decision in Hyland v Minister for Social Welfare (1989) which ruled that it was unconstitutional for the total income a married couple received in social welfare benefits to be less than the couple would have received if they were unmarried and cohabiting.
To the extent that there are differences in the tax treatment of the different categories of couples, such differences arise from the objective of dealing with different types of circumstances while at the same time respecting the constitutional requirements to protect the institution of marriage. Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership which is why they are not accorded similar tax treatment to couples who have a civil status that is recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of social and legal policy development in relation to such couples.
57. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which steps can be taken to curb inflation in the short to medium term; his plans in this regard; and if he will make a statement on the matter. [21409/22]
View answerInflation picked up sharply over the course of the last year and in March stood at 6.9 per cent. Almost every advanced country in the world is in the same position, with euro area inflation reaching a record 7.4 per cent in March. The rise in wholesale energy prices is the key contributor and reflects the rapid rebound in global demand and, more recently, the war in Ukraine.
Looking ahead, energy prices increases will continue to feed into higher inflation over the coming months. The war has also led to a spike in the price of other commodities while further impairing global supply chains. Pass-through price effects are therefore expected in other sectors, such as food via higher fertiliser and fuel costs for instance, as well as other goods. Inflation is now expected to peak at around 6¾ per cent in the second quarter and average 6¼ per cent for the year as a whole. While inflation will remain elevated throughout 2022, inflation is expected to ease next year and average 3 per cent in 2023.
The Government is very conscious of the impact of rising prices on citizens and businesses and has accordingly introduced a series of measures in recent months at a cost of over €2 billion. Firstly, Budget 2022 contained a combined income tax and social welfare package amounting to almost €1.1 billion. A suite of measures was then introduced in mid-February, amounting to around €500 million, including an energy credit of €200 to every household in the country and a once-off lump sum payment of the fuel allowance. In March, Government announced reductions in excise duty of 20 cent per litre for petrol and 15 cent per litre for diesel.
Earlier this month we announced further measures amounting to almost €200 million. These measures included a temporary reduction in the VAT rate for electricity and gas to 9 per cent, an additional once-off lump sum payment of the fuel allowance and an extension of the reduction in excise duty to mid-October.
The Government is acutely aware of the cost pressures households’ and businesses face. However, resources are limited, the priority is to minimise the impact on those who are ill-equipped to respond, we cannot cushion the impact for all. Given the current dynamics at play, we must remain prudent in our approach – conscious that broad fiscal measures at this point in time could lead to further inflationary pressure which would be counterproductive in nature. My Department will continue to monitor the inflation situation closely and take appropriate actions when necessary.
59. Deputy Martin Browne asked the Minister for Finance the reason that the eligibility criteria for access to the disabled drivers and disabled passengers scheme were inequitable and needed to be changed; the further reason that he and his Department failed to respond to those concerns despite warnings from members of the Disabled Drivers Medical Board of Appeal and when those warnings were first raised with him. [21437/22]
View answer68. Deputy Pearse Doherty asked the Minister for Finance the reason, despite repeated warnings from members of the Disabled Drivers Medical Board of Appeal to him and his Department, including in June 2018 and in December 2020, that the eligibility criteria for access to the disabled drivers and disabled passengers scheme were grossly inequitable, excluded many genuinely disabled persons and needed to be changed, he and his Department failed to respond to those concerns; and when those concerns were first raised with him. [21474/22]
View answerI propose to take Questions Nos. 59 and 68 together.
The Disabled Drivers & Disabled Passengers Scheme (DDS) provides relief from VRT and VAT on the purchase and use of an adapted car, as well as an exemption from motor tax and an annual fuel grant.
The Scheme is open to severely and permanently disabled persons who also meet one of six specified medical criteria, as a driver or as a passenger and also to certain organisations. In order to qualify for relief, the applicant must hold a Primary Medical Certificate issued by the relevant Senior Area Medical Officer (SAMO) or a Board Medical Certificate issued by the Disabled Driver Medical Board of Appeal. Certain other qualifying criteria apply in relation to the vehicle, in particular that it must be specially constructed or adapted for use by the applicant. In the event that a PMC is not granted by the relevant Senior Area Medical Officer an appeal may be made to the independent Disabled Drivers Medical Board of Appeal (DDMBA) who operate out of the National Rehabilitation Hospital in Dun Laoghaire.
The current medical criteria were included in the Finance Act 2020, by way of amendment to Section 92 of the Finance Act 1989. This amendment arises from legal advice in light of the June 2020 Supreme Court judgement that the medical criteria in secondary legislation was not deemed to be invalid, nevertheless it was found to be inconsistent with the mandate provided in Section 92 of the Finance Act 1989 (primary legislation).
As the Deputy will appreciate this Scheme confers substantial benefits to eligible persons and changing the medical criteria to a more general mobility-focused criteria, would raise the already considerable cost of the Scheme in terms of tax foregone to the Exchequer. Any increase in the cost of the Scheme would require a concomitant increase in tax, reduction in public expenditure, or increase in the Exchequer deficit.
While I am very aware of the importance of this scheme to those who benefit from it, I am also aware of the disquiet expressed by members of this house and others in respect of the difficulties around access to the scheme.
Accordingly, I gave a commitment to the House that a comprehensive review of the scheme, to include a broader review of mobility supports for persons with disabilities, would be undertaken. In this context I have been working with my Government colleague, Roderic O’Gorman, Minister for Children, Equality, Disability, Integration and Youth. We are both agreed that the review should be brought within a wider review under the auspices of the National Disability Inclusion Strategy, to examine transport supports encompassing all Government funded transport and mobility schemes for people with disabilities.
This the most appropriate forum to meet mutual objectives in respect of transport solutions/mobility supports for those with a disability.
The NDIS working group, chaired by Minister Anne Rabbitte, with officials from both my Department and the Department of Children, Equality, Disability, Integration and Youth as well as others, held its first meeting on the 26th January 2022. My officials will continue to work closely with officials from the Department of Children, Equality, Disability, Integration and Youth, to progress this review, and on foot of that will bring forward proposals for consideration.
60. Deputy Marc Ó Cathasaigh asked the Minister for Finance his views on a 0% VAT rate applied to bikes and e-bikes, including supply, rental and repair, in view of the agreement reached on 7 December 2021 by the Council of the European Union; and if he will make a statement on the matter. [20492/22]
View answerOfficials in my Department are currently reviewing the options now available to Ireland in setting VAT rates. This will include consideration of the new options available to Member States as a result of the recently updated EU VAT rules when setting VAT rates as well as the new limitations introduced on how reduced rates may be applied.
Decisions about tax changes are generally taken in the context of the Budget and, as part of our normal annual Budget preparations. In this context, various options for tax policy changes will be considered by the Tax Strategy Group prior to Budget 2023.
62. Deputy Niamh Smyth asked the Minister for Finance his plans to implement reforms in view of the increasing cost of insurance premiums; the latest discussions his Department has had on this issue; the bodies or organisations that the discussions have taken place with; and if he will make a statement on the matter. [16927/22]
View answerInsurance reform is a key priority for this Government as identified in the Programme for Government and reflected in the Action Plan for Insurance Reform which was published in December 2020. Furthermore, the Cabinet Committee Sub-Group on Insurance Reform is overseeing the implementation of this reform agenda, and meets regularly in this regard. The Action Plan sets out 66 actions to protect consumers and improve the business environment; introduce more competition into the market; prevent fraud and reduce the burden that insurance costs represent on business, community and voluntary organisations. I would note that the second Action Plan Implementation Report published this March this year showed that reform is progressing well, with some 80% of actions in the Plan now being delivered and the remaining initiated. It is my hope that the cumulative impact of these reforms will be to improve both the cost and availability of insurance for consumers, businesses, and community, voluntary and sporting organisations. Some of the key achievements of the Action Plan to date include:
- implementation of the Personal Injuries Guidelines to replace the Book of Quantum;
- introduction of Regulations to ban on price walking for home and motor insurance, commencing on 1 July;
- establishment of the Office to Promote Competition in the Insurance Market within the Department of Finance;
- publication by the Central Bank of its National Claims Information Database Report on employer and public liability insurance, and the completion of its Review on Differential Pricing in the motor and home insurance sectors; development of legislative proposals to enhance and reform the role of the Personal Injuries Assessment Board (PIAB);
- enactment of the Criminal Justice (Perjury and Related Offences) Act 2021, which places perjury on a statutory footing for the first time; establishment of an ‘Insurance Fraud
- Office’ within the Garda National Economic Crime Bureau, and
- introduction of new regulations on solicitors advertising.
The remaining priority actions for completion include: reforming the law on occupier’s liability to rebalance the duty of care (Occupiers’ Liability Act 1995);
- enhancing the enforcement powers of the Competition and Consumer Protection Commission (CCPC) through the Competition Amendment Bill;
- progressing legislative proposals to reform the PIAB; and,
- reducing insurance fraud, including by introducing revised guidelines for reporting insurance fraud.
Although not included in the Action Plan, the Insurance (Miscellaneous Provisions) Bill 2022 is continuing to progress through the Oireachtas. Planned to be enacted this summer, it will support further policy development that is evidence-based and tailored to the specific circumstances in the Irish market. It is a pro-consumer piece of legislation, and will enhance transparency in this important sector. It is my hope that it can be passed through the Oireachtas without delay. In terms of engagement, there has been ongoing engagement with industry – both individual insurers and Insurance Ireland – on an ongoing basis. Minister of State Fleming has met individually with the CEOs of the eight main insurers in the Irish market, twice following the adoption of the Personal Injuries Guidelines, in order to hold them to account on their commitments to pass on all savings from the insurance reform agenda to customers. In these meetings, and during his ongoing engagement with industry, Minister of State Fleming has consistently stressed the importance of insurers reflecting lower claims costs through reduced premiums, and the need for insurers to respect the Guidelines by not settling for amounts that are inconsistent with them. These engagements have been positive, with insurers confirming again recently that they are committed to passing on savings from the Guidelines, and are adhering to them in their direct settlements. During these meetings, Minister of State Fleming also impressed upon insurers 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. Another development of the Action Plan for Insurance Reform was the creation of the new Office to Promote Competition in the Insurance Market within the Department of Finance. The role of the Office, which is chaired by Minister of State Seán Fleming, is to assist in reducing insurance costs by promoting competition in the Irish insurance market. Since its establishment, the Office has held over 70 meetings with a wide range of key stakeholders, including representative bodies, providers and other civic society groups, to understand the gaps in the Irish insurance market. The Office has been working closely with the IDA to bring new entrants into the Irish insurance market and to improve its overall competitiveness. Officials have developed a customised proposition for potential market entrants and have identified a shortlist of specific targets to engage intensively with. This will, in the first instance, target providers who offer insurance in areas which have been identified as ‘pinch-points’ in the Irish market. Finally, on the issue of premium prices, I would note the Central Statistics Office’s most recent Consumer Price Index data shows continuing decreases in the price of motor insurance. Motor insurance prices are now 40.0% lower than their peak in July 2016. I believe that we need to look at the price reductions in the context of the Government’s overall reform strategy. Work remains ongoing across Government to deliver these elements of the Action Plan, and to expand these price reductions into other types of insurance.
63. Deputy Richard Boyd Barrett asked the Minister for Finance if he will consider closing down tax loopholes such as section 110 that could be utilised by oligarchs and other financially dubious entities; and if he will make a statement on the matter. [21449/22]
View answerSection 110 of the Taxes Consolidation Act 1997 is the section of the corporate tax code which creates a tax neutral regime for bona-fide securitisation and structured finance purposes. Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union. This is a European Commission initiative to mobilise capital in Europe, a main objective of which is to build a sustainable securitisation regime across the European Union.
Securitisation involves the creation of tradeable securities out of an income stream or projected future income stream generated by financial assets. Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing. Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield.
Reviews undertaken by the Central Bank of Ireland have identified just under 2% of the 3,000 Special Purpose Entities (SPEs) in Ireland as having links to Russia. It is currently estimated that about one in three of those (that is, 17 SPEs, being 0.5% of the total SPE population) is directly linked to individuals in scope of the sanctions regime.
It is important to note that Irish SPEs, including Section 110 vehicles (securitisation companies) are fully in scope of the sanctions regime. There is nothing specific in the Section 110 framework that is of particular relevance to Russian investors or originators and such vehicles are a common feature of financial service centres.
All natural and legal persons in the State are obliged to comply with EU sanctions. A breach of financial sanction is a criminal offence. Accounts, funds or other assets must be frozen without delay so that they cannot be made available, directly or indirectly, to the sanctioned person, entity or body.
The sanctions also include a prohibition on the listing and provision of services on EU trading venues, including Euronext Dublin (formerly the Irish Stock Exchange), in relation to transferable securities of Russian and Belorussian entities which are majority State-owned.
65. Deputy Willie O'Dea asked the Minister for Finance if he intends to extend the timeframe for the reduction in VAT on gas and electricity to 9%; and if he will make a statement on the matter. [20565/22]
View answerThe Deputy should note that any decision in relation to extending the timeframe for the reduction in VAT on gas and electricity to nine per cent will be made in the context of the Budget and, as part of our normal annual Budget preparations. In this context, various options for tax policy changes will be considered by the Tax Strategy Group prior to Budget 2023.
66. Deputy Marc Ó Cathasaigh asked the Minister for Finance his views on the expansion of the bike to work scheme in order to include businesses set up as sole trader or partnership arrangements, as the scheme currently applies only to limited company status; and if he will make a statement on the matter. [20493/22]
View answerSection 118(5G) of the Taxes Consolidation Act 1997 (TCA 1997) provides for the ‘Cycle to Work’ scheme. This scheme provides an exemption from benefit-in-kind (BIK) where an employer purchases a bicycle and associated safety equipment for an employee or director.
Under section 118B TCA 1997 an employer and employee may also enter into a salary sacrifice arrangement under which the employee agrees to sacrifice part of his or her salary, in exchange for a bicycle and related safety equipment.
Where a bicycle or safety equipment is purchased under the ‘Cycle to Work’ scheme or through a salary sacrifice arrangement, certain conditions must be met.
These conditions include the following:
1. The bicycle must meet the definition of a ‘pedal cycle’. A ‘pedal cycle’ means:
- A bicycle or tricycle which is intended or adapted for propulsion solely by the physical exertions of a person or persons seated thereon, or
- A pedelec, being a bicycle or tricycle which is equipped with an auxiliary electric motor having a maximum continuous rated power of 0.25 kilo-watts, of which output is progressively reduced and finally cut off as the bicycle reaches a speed of 25 kilometres per hour, or sooner if the cyclist stops pedalling.
2. The exemption applies to the first €1,250 of expenditure incurred by the employer in obtaining a bicycle and related safety equipment. This exemption limit is increased to €1,500 for pedelecs or ebikes and related safety equipment. Employers may incur costs in excess of these limits, but any such excess will not qualify for the exemption and will be liable to tax.
3. The bicycle and related safety equipment must be new and must be purchased by the employer.
4. The bicycle and related safety equipment must be used by the employee or director mainly for the whole or part of their journey to or from work.
5. An employee or director can only avail of the ‘Cycle to Work’ scheme once in any 4-year period, commencing with the date the employee or director is first provided with a bicycle or bicycle safety equipment. Prior to 1 August 2020 an employee or director could only avail of the Cycle to Work scheme once in any 5-year period.
The ‘Cycle to Work’ scheme is only applicable where the bicycle and safety equipment is provided by an employer to either a director or someone in its employment. Thus, where an employer/employee relationship does not exist, for example, in the case of self-employed individuals, such individuals cannot qualify for the scheme themselves. However, if a self-employed person employs people, those employees may avail of the scheme (subject to meeting the required conditions). As such, the scheme is not limited to employees of companies only.
67. Deputy Ged Nash asked the Minister for Finance if he will report on the respective European Union and OECD negotiations on a proposed new global minimum corporation tax rate; the estimated cost to the Exchequer of a United States global intangible low-taxed income rate of 21%; if his Department has undertaken or intends to undertake an updated analysis of the potential cost to the Exchequer of proposed changes; if so, if this will include the potential loss to the Exchequer of a United States global intangible low-taxed income rate of 21%; and if he will make a statement on the matter. [21424/22]
View answerOn 8 October 2021, Ireland, along with 136 jurisdictions, signed up to a two-pillar International agreement at the OECD/G20 Inclusive Framework on BEPS to address the tax challenges arising from the digitalisation of the economy.
Pillar One will see a reallocation of 25% of residual profits to the jurisdiction of the consumer. The scope is confined to multinational groups with turnover in excess of €20 billion annually. Residual profit is profit greater than 10% of turnover. Pillar Two provides that the minimum effective rate is 15% for in-scope businesses (MNEs over €750m revenue).
Signatories to the agreement, including Ireland and the United States, are working intensively at the OECD working parties to reach agreement on the technical detail required to ensure these complex provisions are transposed robustly and in co-ordination by all signatories to the agreement.
In respect to Pillar One, the OECD have divided the work into 14 building blocks which are under development with drafts released for public consultation periodically.
For Pillar Two, Model Rules were published by the OECD in December 2021 and the European Commission subsequently published a legislative proposal, the Minimum Tax Directive, to transpose Pillar Two within the European Union. Ireland has been actively involved in the technical negotiations on the Directive since the start of 2022 and we support the current draft text which is broadly faithful to the OECD agreement. It is hoped that final agreement on the Directive can be reached soon between all EU Member States. This will allow its coordinated implementation in national laws across the EU to proceed.
In relation to the overall cost of the package, it has been estimated that the cost to the Exchequer arising from joining this agreement will be in the region of €2 billion annually, however it remains difficult to accurately estimate the impact at this stage pending completion of the ongoing technical work. The outcome of these discussions, coupled with the future business decisions of multinationals, will have significant implications for our future corporation tax receipts – the scale of the effect will only become fully known with time. Once the technical work is complete and the architecture has been agreed a more robust estimate on the overall cost can be provided.
69. Deputy Éamon Ó Cuív asked the Minister for Finance the most up-to-date projected Exchequer deficit for 2022; the way this compares with the forecasts on budget day; the main reason for the change in forecast; and if he will make a statement on the matter. [20988/22]
View answerMy Department updated its fiscal projections in the Stability Programme Update earlier this month.
An Exchequer deficit of €1.1 billion is now forecast for this year; this compares with the Budget 2022 projection of €7.7 billion.
The main driver of the improvement is stronger projections for tax revenue. My Department now expects tax revenue to amount to almost €76 billion this year, an upward revision of over €5½ billion compared with that set out in Budget 2022.
The upward revision in the tax projection is due to two factors. First is the better-than-expected outturn for last year, which was driven by strong income and corporation tax receipts. Secondly is the very strong momentum in tax receipts in the first quarter of this year driven by VAT, income tax and corporation tax.
The better-than-assumed budget deficit has helped to partly offset the increase in public debt during the pandemic - in other words, the increase would have been significantly higher but for the revenue surprises.
Nevertheless, public debt still stood at €236 billion - or nearly a quarter of a trillion euros - at the end of last year. On a per capita basis, this is one of the highest figures in the world. With sovereign borrowing costs now rising, it is crucial that we put the debt-income ratio on a downward trajectory.
70. Deputy Ged Nash asked the Minister for Finance if a new 30% rate of income tax is being considered by the Government, as announced by the Tánaiste in March 2022; his views on whether the programme for Government pledge on income tax cuts is prudent in view of the recent Stability Programme update and within the current fiscal and economic context; and if he will make a statement on the matter. [21425/22]
View answerIt is normal practice for a number of issues and options in the personal income tax space to be examined or explored in the context of the annual Budgetary process.
This work may have regard to the prevailing economic circumstances and outlook as well as to Government Programme commitments and to any other matters which ought to be taken into account.
The Tax Strategy Group process provides a forum where elements of the work at official level can be set out. Matters in the nature of those mentioned by the Deputy may well be considered as part of the process.
The specific commitment on income tax contained in the Programme for Government states that “from Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net, and to ensure there is no increase in the number of people having to pay higher income tax and Universal Social Charge rates”.
The Deputy will note that the commitment contains a proviso relating to the trajectory of the economy.
The Department of Finance published its updated economic and fiscal forecasts in the Stability Programme Update earlier this month.
In light of the economic shock associated with the invasion of Ukraine, the Department is projecting a General Government deficit of €2.0 billion, or 0.8 per cent of modified national income for this year. A modest surplus of €1.2 billion, or 0.5 per cent of national income, is projected for next year reflecting the unwinding of Covid-related expenditure, although this will be offset by significant expenditure to support Ukrainian refugees fleeing the war. The projections for next year incorporate a tax package of €500 million as set out in last year’s Summer Economic Statement.
Risks to the central forecast are firmly tilted to the downside and, given the degree of uncertainty, the margin of error around these projections is sizeable, particularly the assumptions around the path for energy and other commodity prices.
Ultimately, Budget 2023 proposals for consideration by the Government, including those in relation to personal income tax, will be developed in a prudent manner consistent with economic circumstances.
