Tuesday, 26 Jul 2022

Written Answers Nos. 441-455

Tax Yield

Questions (441)

Gerald Nash

Question:

441. Deputy Ged Nash asked the Minister for Finance the estimated yield from a levy of 25% on the profits accruing from rental of residential property; and if he will make a statement on the matter. [41664/22]

Written answers

Minister for Finance

I am advised by Revenue that on the basis of the information included in the Form 11 income tax returns in relation to the tax year 2019, which is the latest year available, the potential yield from imposing a 25% levy, in addition to the marginal rate of tax which already applies, on the net profits accruing from the rental of residential property would be in the region of €511m.

I am further advised by Revenue that, on the basis of the information included in the Corporation Tax returns filed for the same tax year of 2019, the potential gross yield from imposing a 25% levy, in addition to the current tax rate of 25%, on the net profits accruing from rental of corporate residential property would be in the region of €53m.

Banking Sector

Questions (442)

Brendan Griffin

Question:

442. Deputy Brendan Griffin asked the Minister for Finance if he is satisfied that customers wishing to switch mortgage providers may do so without undue difficulty at present; if he will review this to examine if the process can be made easier for customers; and if he will make a statement on the matter. [41727/22]

Written answers

Minister for Finance

The Central Bank’s consumer protection framework includes a number of measures to protect consumers who are taking out a mortgage and seeks to ensure that lenders are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle.

The framework includes protections under the Consumer Protection Code 2012 (the Code), the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR), the Consumer Credit Act 1995 (CCA) and the Code of Conduct on Mortgage Arrears (CCMA).

Where a borrower chooses to switch their mortgage to a new lender, the decision to approve the transfer remains a credit decision for the new provider, who will have its own set of acceptance criteria. However, the Central Bank expects that lenders are mindful of consumers’ interests in any decision-making during this period of unprecedented change in the retail banking sector in Ireland.

The Consumer Protection Code 2012 (the Code) applies to regulated financial service providers providing regulated activities within the State. Where a consumer decides to switch their mortgage to a new provider, chapter 5 of the Code requires that regulated entities must carry out an affordability and suitability assessment, prior to offering, recommending, arranging or providing a credit product to a personal consumer. Regulated entities must seek sufficient information from the consumer to understand their needs and their likely ability to repay the debt, before they can offer, recommend or provide a product or service to them.

In addition, in 2018 enhanced measures were introduced to the Code to assist consumers who are switching to another mortgage product with the same lender. These measures were put in place to help consumers make savings on their mortgage repayments. They also provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework. These enhanced measures became effective from January 2019.

The mortgage switching measures added to the Code in 2019 require lenders to:

- Tell their consumer about cheaper mortgage options they have available 60 days before they come out of a fixed rate mortgage;

- For consumers on variable rate mortgages (other than on a tracker rate), notify consumers every year as to whether they can, or cannot, move to a cheaper interest rate as a result of a move in their Loan to Value interest rate band, subject to the provision of an up-to-date valuation and any other requirements that may apply.

- Where the consumer requests, provide an indicative comparison of the total interest payable on the consumer’s existing mortgage and the interest payable on the new mortgage or alternative interest rate on offer by that lender. Where the lender provides this information, they are also required to provide a link to the relevant section of the The Competition and Consumer Protection Commission's (CCPC's) website to allow consumers to compare potential mortgage switching savings available from other lenders.

- Clearly explain the pros and cons of any mortgage incentives such as cashback offers;

- Give the consumer all the information they need to switch, including how long the process will take; and

- Give the consumer a decision within ten business days of receiving a completed mortgage application.

The Central Bank has also published on its website research on the area of mortgage switching, an infographic, and an explainer to raise consumer awareness and understanding of mortgage switching rules.

The Competition and Consumer Protection Commission (CCPC) website also provides a "Money Tools" resource and information on mortgage switching for consumers.

Earlier this year I also launched the third phase of the "Switch Your Bank" campaign. Following on from the successful delivery of two advertising campaigns which promoted awareness on the benefits of switching, this phase builds on this work by seeking to identify and develop tools which will better enable consumers to complete their switches.

The Economic and Social Research Institute’s (ESRI) Behavioural Research Unit has been contracted to carry out an experimental research project that will focus on the behavioural aspects of switching, including mortgage switching. The aim of this work is to identify the most successful ways to help consumers to negotiate the complexities of financial products and boost consumers’ decision-making, with a focus on those decisions that have the greatest financial consequences for households.

Question No. 443 answered with Question No. 385.

Tax Code

Questions (444)

Holly Cairns

Question:

444. Deputy Holly Cairns asked the Minister for Finance his views on introducing a farm income volatility tool into the Irish tax code. [41756/22]

Written answers

Minister for Finance

The Deputy may wish to note that a farm income volatility tool currently exists within the Irish tax code.

Section 657 of the Taxes Consolidation Act 1997 provides for income averaging, which allows farmers to pay tax based on the average of five years’ farming profits and losses. This means one-fifth of the profits for the five years is charged to tax for the year. If a farmer opts in to averaging, they must remain within the averaging scheme for a minimum of five years. If they revert to the normal basis of assessment a review will be done. However, a farmer may also elect to temporarily step-out of averaging for a single year. A special additional step-out arrangement related to the pandemic was put in place for 2020 where a farmer had already stepped out in one of the preceding four years.

Further information on this tax measure is available from the Revenue website at:

www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-23/23-01-34.pdf

In terms of changes to existing income averaging provisions or introduction of any additional farm income volatility tools, decisions on taxation matters are made in the context of the annual Budget process, and, as the Deputy will be aware, it is a long-standing practice of the Minister for Finance not to comment in advance of the Budget on any tax matters which might be the subject of Budget decisions.

Tax Code

Questions (445)

Holly Cairns

Question:

445. Deputy Holly Cairns asked the Minister for Finance his views on reduced VAT rates on renewable products and services. [41757/22]

Written answers

Minister for Finance

As the Deputy will be aware, the EU VAT Directive, with which Irish VAT legislation must comply, sets out in Annex III those categories of goods and services to which a reduced rate of VAT may be applied.

There is no provision in the EU Directive for the VAT treatment applied within one of those Annex III categories to differentiate between goods or services as to whether they are renewable or not.

Tax Credits

Questions (446)

Holly Cairns

Question:

446. Deputy Holly Cairns asked the Minister for Finance his views on permitting farmers to claim back VAT on farm safety equipment. [41758/22]

Written answers

Minister for Finance

I am advised by Revenue that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU and Irish VAT law farmers may elect to register for VAT or be treated as flat-rate farmers for VAT purposes.

Farmers who elect to register for VAT have an entitlement to reclaim VAT on costs incurred in relation to their agricultural business including farm safety equipment. A farmer who has elected to register for VAT is obliged to charge VAT on their supplies and can also claim a deduction for VAT incurred on costs that are used for the purposes of their taxable supplies.

Alternatively, farmers can remain unregistered and opt for the Flat Rate Scheme which is designed to compensate non-VAT registered farmers for the VAT incurred by them on the purchase of goods and services relating to their activities. The Scheme sets out a percentage amount, known as the flat-rate addition, which unregistered farmers apply to their prices when selling to VAT-registered businesses. Farmers are allowed to retain this amount themselves, as a compensation for the VAT borne by them on their input costs. This simplification reduces the administrative burden for them as there is no need to register for VAT to recover VAT borne on their inputs. The Scheme is governed by EU VAT law and the level of the flat-rate addition allowed under the Scheme is required to be reviewed annually. From 1 January 2022 the flat-rate addition is 5.5%.

Tax Reliefs

Questions (447, 448)

Holly Cairns

Question:

447. Deputy Holly Cairns asked the Minister for Finance the full range of tax reliefs that a family may claim for children and adult children in full-time third level education; and his plans to increase these tax reliefs in Budget 2023. [41759/22]

Holly Cairns

Question:

448. Deputy Holly Cairns asked the Minister for Finance if he will introduce tax reliefs on loans that individuals or families must take out for full-time third level education courses. [41760/22]

Written answers

Minister for Finance

I propose to take Questions Nos. 447 and 448 together.

Section 473A of the Taxes Consolidation Act 1997 (TCA) provides for income tax relief in respect of qualifying fees paid by an individual for one or more approved third level education courses, subject to the conditions set out in that section. Approved courses may include full-time and part-time undergraduate and postgraduate courses provided by approved colleges, universities or institutions of higher education. The relief is granted at the standard rate of income tax (currently 20%) and is available to the individual who incurs the qualifying fees, although they may not be the student who attends the course.

Qualifying fees mean tuition fees, but do not include administration fees or examination fees, student centre or union levies or accommodation costs. The maximum amount which can qualify for relief is €7,000 per course per academic year, and when determining the amount eligible for relief the following amounts must be deducted:

- any portion of tuition fees that are or will be met directly or indirectly by grant, scholarship, employer contribution or other similar means; and

- the first €3,000 paid in respect of a full-time course or €1,500 paid in respect of a part-time course.

Those who pay tuition fees in instalments can claim tax relief in the year in which either the academic year commenced, or the instalment is paid.

Relief may be claimed in respect of more than one student, however in such cases the amount eligible for relief is equal to the total fees paid by the individual (subject to the €7,000 cap per course) less €3,000. The general effect of this is that all claimants will get full tax relief on the tuition fees, less the student contribution, for each of the second or more students in respect of whom they incur qualifying fees.

A full list of approved colleges and courses beginning in the 2022 academic year can be found on Revenue’s website at: www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/approved-colleges-and-courses.aspx.

Full details of the relief, including the conditions that apply, are set out on the Revenue website at www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/index.aspx.

In addition to the above, there are also exemptions from tax that apply to payments received by students including, for example, grant payments made to students in higher education under Student Universal Support Ireland (SUSI). Also, income arising from a scholarship is exempt from income tax, USC and PRSI, where the conditions for relief in section 193 TCA are met. Further details in relation to the scholarship exemption can be found on Revenue’s website at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-26.pdf.

The Rent-a-Room scheme, under section 216A TCA, also supports the accommodation needs of third level students and others by providing significant levels of relief to accommodation providers offering rooms for rent within their sole or main residence. The relief is offered, inter alia, to providers of accommodation for full or part-time students, including lettings for an academic year, an academic term or four-day-a-week "digs". An individual cannot avail of Rent-a-Room relief for payments for accommodation in the family home by a child of the individual, or the individual’s spouse or civil partner, regardless of whether the child has claimed tax relief on the rent paid. There is no restriction where rent is paid by other family members, for example, nieces and nephews. Further details on this relief are available from Revenue's website at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-32.pdf

Proposals for tax expenditures, such as the one proposed by the Deputy in respect of loans for the purpose of attending full-time third level education, are dealt with in the context of the annual Budget and Finance Bill process. As the Deputy will appreciate, I must be mindful of the public finances and the many demands on the Exchequer; tax reliefs, no matter how worthwhile in themselves, lead to a narrowing of the tax base. Under my Department's Tax Expenditure Guidelines, tax measures should only be considered in circumstances where there is a demonstrable market failure and where a tax based incentive is more efficient than a direct expenditure intervention.

Question No. 448 answered with Question No. 447.

Question No. 449 answered with Question No. 385.

Question No. 450 answered with Question No. 328.

Question No. 451 answered with Question No. 328.

Question No. 452 answered with Question No. 328.

Budget 2023

Questions (453)

Pádraig O'Sullivan

Question:

453. Deputy Pádraig O'Sullivan asked the Minister for Finance if consideration will be given to increasing the tax credits available to family carers in Budget 2023; and if he will make a statement on the matter. [41897/22]

Written answers

Minister for Finance

The Government remains fully commitment to supporting and protecting those most vulnerable in society through both tax and expenditure measures. The Irish tax system contains a number of provisions including the Home Carer Tax Credit, Incapacitated Child Tax Credit and the Dependent Relative Tax Credit amongst others which have been introduced to provide additional supports to family carers.

The Deputy will be aware that tax expenditures and incentives are reviewed as part of the annual Budget process. However, it is a long-standing practice of the Minister for Finance not to comment in advance of the Budget on any tax matters that might be the subject of Budget decisions.

Question No. 454 answered with Question No. 385.

Question No. 455 answered with Question No. 399.