Tuesday, 24 Jan 2023

Written Answers Nos. 78-103

Insurance Coverage

Questions (80)

Holly Cairns

Question:

80. Deputy Holly Cairns asked the Minister for Finance what steps he is taking to reform the provisions of flood insurance. [3064/23]

Written answers

Minister for Finance

Current Government policy in relation to flood insurance coverage is focused on the development of a sustainable, planned and risk-based approach to managing flooding. Accordingly, €1.3 billion has been committed to the delivery of flood relief schemes over the lifetime of the National Development Plan to 2030. This will protect approximately 23,000 properties across various communities from river and coastal flood risk. This investment is complemented by a Memorandum of Understanding (MoU) between the Office of Public Works (OPW) and industry representatives, Insurance Ireland.

Arising from this approach, data from both Industry representatives and the Central Bank of Ireland indicate that flood insurance coverage is relatively high, and has indeed increased since 2015. However, it is acknowledged that some households are still experiencing difficulties, particularly in areas with demountable flood defences. These systems require human intervention in terms of their deployment. This issue is the subject of the MoU working group between the Office of Public Works (OPW) and Insurance Ireland. Officials from the Department of Finance and other stakeholders also engage constructively with this process.

In terms of reforming the provision of flood insurance, it is important to also acknowledge that the provision and price of insurance is a commercial matter for insurers, based on an assessment of the risks that such companies are willing to accept. Under the EU Solvency II Directive, neither I, nor the Central Bank of Ireland can compel insurers to provide such cover. Furthermore, the Department of Finance has previously reviewed other models such as compulsory insurance and it was found that alternative approaches would likely have a limited impact on the availability of flood cover.

As has been the case, the Department of Finance will continue to monitor and assess any flood insurance matters, including through: its participation in the OPW and Insurance Ireland Working Group; actively encourage industry to have a more responsive approach to the matter; engage with the Central Bank of Ireland; and consider domestic and international policy developments on climate insurance issues as they arise.

Finally, please be assured that both Minister McGrath and I will engage on all aspects of insurance reform, including flood cover issues, and that every effort is being made to encourage a responsive approach from the insurance industry.

Debt Collection

Questions (81)

Richard Bruton

Question:

81. Deputy Richard Bruton asked the Minister for Finance if he has undertaken an assessment of the impact the phasing out of tax warehousing will have on the rate of business failure; and if he is satisfied existing policy options are appropriate to manage this situation. [2756/23]

Written answers

Minister for Finance

During the COVID-19 pandemic, Revenue strongly supported businesses by suspending normal debt collection activities and implementing the Debt Warehouse Scheme to provide businesses with vital liquidity support. In October 2022, Revenue announced an important and significant extension to the Debt Warehousing scheme in light of the challenging economic situation that businesses continue to face.

Under the scheme, most businesses with warehoused debt were due to enter into an arrangement with Revenue to commence repaying that debt by the end of 2022. This timeline has been extended to 1 May 2024. This significant additional time to make repayment arrangements should greatly support businesses and prevent business failure. Importantly, businesses may still avail of the reduced 3 per cent interest rate from 1 January 2023, as opposed to the general interest rate of 10 per cent, when they come to pay the debt.

As end-2022, over 68,000 individual customers are availing of the Debt Warehousing facility with €2.371 billion currently warehoused. A total of 7,018 customers with warehoused debt in excess of €50,000 account for €2.018 billion of the overall warehoused debt figure. It is worth noting also that a total of 1,921 customers with €68 million warehoused debt have voluntarily entered into phased payment arrangements.

It is a condition of the Debt Warehousing Scheme that current liabilities are filed and paid on time. Revenue have advised me that it is closely monitoring cases and is concerned that some businesses are not keeping current returns and payments up to date. If non-compliance persists this will result in the debt warehouse status being revoked.

Revenue have advised me that its expectation is that the extended timeline for the Debt Warehousing scheme to 1 May 2024, together with flexible payment arrangements, will assist most businesses to work through any difficulties and will satisfactorily address the repayment of their tax debt over an acceptable period of time. Revenue has a proven track record in agreeing flexible Phased Payment Arrangements to allow for the repayment of debt over a period of time.

Finally, recent reports indicate that Government supports, including the debt warehousing scheme, have so far prevented the level of business failures that would otherwise have been expected from trading restrictions during the pandemic. For instance, the ESRI estimated that the level of financial hardship would have been 72 per cent higher without the €10 billion in wage subsidies paid by the Government during the pandemic.

Credit Unions

Questions (82, 90)

Robert Troy

Question:

82. Deputy Robert Troy asked the Minister for Finance the way he is supporting credit unions to grow and develop; and if he will make a statement on the matter. [2858/23]

Ciarán Cannon

Question:

90. Deputy Ciarán Cannon asked the Minister for Finance what steps are being taken to ensure credit unions play a key role in the banking sector. [3103/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 82 and 90 together.

This Government recognises the importance of credit unions as a provider of community banking services. The Programme for Government contains commitments to:

- Review the policy framework within which credit unions operate;

- Enable and support the credit union movement to grow;

- Support credit unions in the expansion of services, to encourage community development; and

- Enable the credit union movement to grow as a key provider of community banking in the country.

With regard to fulfilling the commitments in the Programme for Government for credit unions, the Review of the Policy Framework has been completed. In November 2022 the Credit Union (Amendment) Bill was published and it completed Committee Stage in the Seanad in December 2022. A number of amendments to the Bill have been proposed by stakeholders, including the Central Bank and the representative bodies, and potential inclusion of these amendments is currently being considered before progression of the legislation through the Dáil.

The policy proposals contained in the Review address five key objectives:

1. Recognition of the role of credit unions;

2. Supporting investment in collaboration;

3. Supporting Governance;

4. Improving member services; and

5. Transparency of regulatory engagement.

Cumulatively, the desired outcome of these objectives is to strengthen the role of credit unions as a provider of community banking and to further enable credit unions to focus on priorities that will better position the sector to face the challenges and opportunities of the future.

In developing these proposals meetings were held with the Irish League of Credit Unions, the Credit Union Development Association, the Credit Union Managers Association, the National Supervisors Forum, the Registrar of Credit Unions, the Credit Union Advisory Committee, the CEO Forum, collaborative ventures and many individual credit unions.

In total as part of the Review process, over 55 stakeholder meetings were held with the credit union sector and well over 100 proposals were considered.

Question No. 83 answered with Question No. 69.

Tax Code

Questions (84, 97, 102, 126, 137)

Pádraig O'Sullivan

Question:

84. Deputy Pádraig O'Sullivan asked the Minister for Finance his plans to retain the 9% tourism VAT rate beyond 2023; and if he will make a statement on the matter. [3035/23]

Brendan Griffin

Question:

97. Deputy Brendan Griffin asked the Minister for Finance if he will retain the 9% VAT rate for the tourism and hospitality sector; if his attention has been drawn to reports of the vital importance of this measure for counties such as Kerry, which has a proportionately higher reliance on the tourism and hospitality sectors; and if he will make a statement on the matter. [3045/23]

Richard Bruton

Question:

102. Deputy Richard Bruton asked the Minister for Finance the criteria his Department intends to use in deciding whether temporary tax concessions should be extended; and if he will make a statement on the matter. [2755/23]

Peter Fitzpatrick

Question:

126. Deputy Peter Fitzpatrick asked the Minister for Finance if he will extend the 9% VAT reduction for the tourism and hospitality industry further than the current expiry date in March 2023; and if he will make a statement on the matter. [2931/23]

Christopher O'Sullivan

Question:

137. Deputy Christopher O'Sullivan asked the Minister for Finance if consideration can be given to the extension of the VAT rate of 9% for the tourism and hospitality sector beyond February 2023 due to the challenges this sector is currently facing; and if he will make a statement on the matter. [3024/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 84, 97, 102, 126 and 137 together.

The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the Directive provides that all goods and services are liable to VAT at the standard rate unless they fall within Annex III of the Directive, in respect of which Member States may apply either one or two reduced rates of VAT. Ireland currently operates two reduced rates of VAT, 13.5% and 9%, as permitted by the Directive.

Currently, the 9% rate applies on a temporary basis to the hospitality and tourism sectors which includes the supply of hotel accommodation and the supply of meals in hotels (excluding alcohol and soft drinks) until 28 February 2023. The 9% rate was introduced in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic. Through no fault of their own, bars, hotels and restaurants had to close on multiple occasions in response to the public health crisis.

From 1 March 2023, these sectors are due to return to the 13.5% rate. The supply of alcohol and soft drinks remains unchanged at the standard rate of VAT (23%). As I have said on a number of occasions, the government will in the coming weeks examine the full suite of taxation and other measures that are due to expire at the end of February.

In making any decision the Government will balance the costs of the measures in question against their impact.

Economic Growth

Questions (85)

Bernard Durkan

Question:

85. Deputy Bernard J. Durkan asked the Minister for Finance if he remains satisfied that the economy remains on a solid footing, with particular reference to the need to compete with other European countries in terms of stability and growth; and if he will make a statement on the matter. [3050/23]

Written answers

Minister for Finance

The world is facing into a period of lower economic growth, with many of Ireland’s key trading partners likely to see sluggish if not negative growth in the coming quarters. This is a direct result of Russia’s invasion of Ukraine and the restriction on gas supplies, which has led to multi-decade high inflation rates in Ireland and the euro-area more broadly.

With consumer spending and SME investment facing into multiple headwinds of inflation, rising interest rates and a weak trading environment, modified domestic demand (MDD) – a proxy for the domestic economy – is forecast by my Department to grow by 1¼ per cent this year. While this is low relative to non-Covid years, it compared favourably with trading partners, with the OECD projecting economic growth of just ½ per cent for the euro area for 2023 and negative growth in the UK.

However, despite the weaker global outlook for 2023, Ireland remains on a relatively strong economic footing. The number of people in employment was recorded at 2½ million in the third quarter of last year, a record level, while the unemployment rate stood at just 4.3 per cent in December – close to the lowest on record.

Ireland remains an attractive location for foreign direct investment (FDI), reflective of our continued reputation as a stable and pro-enterprise economy internationally. Latest data shows that the stock of FDI in Ireland stands at almost €1.4 trillion. Furthermore, the IDA reported the highest ever increase in FDI employment last year, while overall employment in the multinational sector in Ireland is estimated at over 300,000. Thus, it is clear that while the global economy is entering a slowdown, Ireland remains among the most attractive locations for global FDI.

Nevertheless, the outlook for the international economy is one of extreme uncertainty and there are significant risks to the economic outlook for Ireland, as well as for the wider European economy. I am conscious of the need to maintain our competitive position on an international stage. My Department will continue to closely monitor threats to Ireland’s competitiveness in the year ahead.

Economic Policy

Questions (86)

David Stanton

Question:

86. Deputy David Stanton asked the Minister for Finance his plans regarding the European Financial Forum 2023; and if he will make a statement on the matter. [2871/23]

Written answers

Minister for Finance

The European Financial Forum (EFF) has been successfully produced by IDA in partnership with the Department of Finance since 2016. A decision on whether to host an EFF is taken each year, on a case-by-case basis, following a review of the previous Forum and discussions between IDA, the Department of Finance, and other key stakeholders. In recent years, taking account of the impact of the Covid-19 pandemic, the EFF programme has been slimmed down and the conference has been run as a virtual event with no in-person meetings.

The EFF has traditionally been held in Q1 and a decision was taken not to hold a Forum in Q1 2023 to avoid a scheduling conflict and overlap with the upcoming inaugural Bloomberg New Economy Gateway Europe event organised by IDA. This event was originally scheduled for March but will now take place in Ireland on the 18th and 19th of April. This event will bring together leaders from private and public sectors to discuss analyse and propose solutions to the global economy’s most pressing problems. This event is expected to attract a diverse range of senior C-suite leaders and corporate decision makers, from across all sectors, including financial services, and has the potential to positively highlight Ireland’s economic and financial strengths to a wide audience.

The EFF is now one of a host of financial services events periodically held in Ireland, including Climate Finance Week, the Central Bank’s Financial System Conference and other similar events hosted by industry and representative bodies. A decision on the timing of when it would be best to host the next EFF is one that I, and Minister McGrath have yet to take. I anticipate that we will do so after we have considered the views of relevant interested parties. In order to aid our consideration of the merits of any future Forum my officials are currently in discussions with the IDA on this matter.

Mortgage Interest Rates

Questions (87)

Robert Troy

Question:

87. Deputy Robert Troy asked the Minister for Finance if any action can be taken regarding non-bank lenders not offering an option of fixed mortgage rates to mortgage borrowers; and if he will make a statement on the matter. [2857/23]

Written answers

Minister for Finance

The type of mortgages, including fixed or variable rate mortgages, offered by different categories of Central Bank regulated entity is a commercial matter for each individual lender. In addition, the mortgage interest rates they charge and the basis for the adjustment of the interest rate is, subject to the terms of the particular contract, a commercial matter for individual lenders having regard to their own particular business and operational policies.

Notwithstanding this, as part of its Consumer Protection framework the Central Bank has put in place a range of measures in order to protect consumers who take out or have a mortgage. The consumer protection framework 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. For example, through protections at the initial marketing/advertising stage, in assessing the affordability and suitability of the mortgage and at a time when borrowers may find themselves in financial difficulties.

The framework includes various Central Bank statutory Codes of Conduct such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013. All regulated entities, including retail credit firms and credit servicing firms, are required to comply with the provisions of these codes in their dealings with consumers.

The Consumer Protection Code 2012 requires that all regulated entities explain to borrowers how their variable interest rates have been set including in the event of an increase. Where a borrower is facing an increase in the rate of their mortgage, they can seek to move to another product at their existing lender or switch to a different lender, noting this will be subject to the lending criteria, terms and conditions of the lender to whom they apply.

In this respect, the Central Bank has advised that it has engaged with lenders to ensure the operational capacity is in place to facilitate people to switch at a system wide level.

The Code of Conduct on Mortgage Arrears (or 'CCMA') provides specific protections for borrowers in arrears or facing the prospect of arrears on a loan secured on a primary residence. In particular, a regulated entity must pro-actively encourage borrowers to engage with it about financial difficulties which may prevent the borrower from meeting his/her mortgage repayments.

Also, where a borrower is experiencing repayment difficulty, a regulated entity must explore all of the options for alternative repayment arrangements (known as ARAs) offered by the entity to determine if a more suitable and sustainable repayment option is available based on the borrower’s individual circumstances.

If a borrower is not satisfied with the options proposed, or if the regulated entity declines to offer an ARA, an appeals mechanism is provided for in the CCMA. In addition, a regulated entity must review an ARA at intervals that are appropriate to the type and duration of the arrangement, including at least 30 calendar days in advance of an ARA coming to an end.

Furthermore, the Central Bank also advises that the protection of mortgage loan borrowers, including those in arrears, is a key priority for it and that the Bank will continue to supervise compliance by regulated entities with the CCMA and will investigate any issues that arise, including patterns of behaviour which suggest that the CCMA process is not being followed.

Question No. 88 answered with Question No. 69.

Question No. 89 answered with Question No. 69.

Question No. 90 answered with Question No. 82.

Tax Code

Questions (91)

Richard Boyd Barrett

Question:

91. Deputy Richard Boyd Barrett asked the Minister for Finance to provide details of any role or involvement he has in the proposed Coillte-Gresham House deal in relation to the future of Irish forestry; if he will outline the tax treatment of such an investment plan; and if he will make a statement on the matter. [3143/23]

Written answers

Minister for Finance

I should say that policy responsibility for the development of forestry in Ireland is within the remit of the Minister for Agriculture, Food and the Marine and of course Coillte. I understand that the development of the investment fund referred to by the Deputy arises in the context of the plan to expand forest cover in Ireland to meet climate change targets.

In the context of the issue raised by the Deputy, I can outline the role of the Ireland Strategic Investment Fund (ISIF). For ISIF its statutory mandate is what it refers to as a “double bottom line” mandate of investing for a commercial return and investing to support economic activity and employment in Ireland. ISIF has disclosed that it is investing €25m as part of a wider €200m fund, which will acquire land from farmers and private landowners who wish to sell to the fund at market rates.

ISIF has also informed me that its investment is part of both its Food & Agriculture and wider €1bn climate action investment programme, complementing its existing investments in forestry, renewable energy, energy efficiency and energy storage, and generating further progress in Ireland’s transition to a Net Zero economy.

ISIF complies with all applicable laws including tax law. The tax treatment of the Fund is set out at note 6 on page 189 of the NTMA’s 2021 Annual Report.

Banking Sector

Questions (92)

Brendan Smith

Question:

92. Deputy Brendan Smith asked the Minister for Finance the way he will be protecting banking services in rural areas, especially in relation to the right-to-cash services; and if he will make a statement on the matter. [3066/23]

Written answers

Minister for Finance

In recent years, the banking landscape has changed significantly in Ireland.

The number of banks serving the sector reduced from 12 to 3 as banks were amalgamated or closed down and foreign owned entrants exited the Irish retail market. We have also seen a considerable acceleration in technological developments and the pace of uptake has been accelerated by the COVID-19 pandemic. With that has come a decline in cash usage. Since 2015 the number of ATM transactions declined by 46%. Card payments accounted for 62.4% of the total number of payment transactions in 2021.

Despite this decline, cash remains an important element of the payments system and the broader economy. I acknowledge its importance to certain sectors of the economy such as SMEs, as well as to older individuals or those who wish to use it as a means of controlling their finances.

However, there are costs associated with the cash infrastructure and this has incentivised traditional banks to move away from cash services, resulting in closures of branches, reduction or removal of cash services in branches, closures of ATMs and divestment of entire off-site ATM networks to independent operators.

In light of this changing landscape, in 2021 my predecessor as Minister for Finance instructed this Department to undertake a broad-ranging review of the retail banking sector.

The Retail Banking Review, published in November 2022, contained a number of recommendations. One recommendation was for the Department of Finance to develop Access to Cash legislation and prepare heads of a bill in 2023.

The Review also called on Department officials to prepare heads of a bill in 2023 to require ATM operators to be authorised and supervised by the Central Bank and to provide the Central Bank with responsibility and powers to protect the resilience of the cash system including the authorisation and supervision of cash-in-transit firms in respect of their cash handling activities and related financial services.

This work is now underway by officials in my Department.

Following consultation with the Central Bank and other stakeholders, the Department will establish what the appropriate levels of access to cash are to ensure that any further evolution of the cash infrastructure will be managed in a fair, orderly, transparent and equitable manner for all stakeholders. This will include an examination of the geographical spread of cash access and availability in both urban and rural areas.

Insurance Coverage

Questions (93)

Aindrias Moynihan

Question:

93. Deputy Aindrias Moynihan asked the Minister for Finance the engagement he has had with the motor insurance industry in relation to motor insurance policies and their validity, given the delays in securing NCT appointments; and if he will make a statement on the matter. [3139/23]

Written answers

Minister for Finance

At the outset, it is important to note that neither the Minister for Finance, nor the Central Bank of Ireland, can intervene in the provision or pricing of insurance products. This position is reinforced by the EU framework for insurance (the Solvency II Directive).

As the Deputy will appreciate, policy matters in relation to the National Car Test (NCT) lie with the Minister for Transport. however, I am aware of reported delays in securing NCT appointments, and my officials have engaged with Insurance Ireland, the representative body for insurers, in relation to the provision of motor insurance in this regard.

Insurance Ireland has advised that its members will be pragmatic in their approach to the current delays at the National Car Testing Service (NCTS). Cover will continue to be provided where customers, through no fault of their own, are unable to obtain their NCT due to backlogs at test centres. Motor insurance and road traffic legislation require that motorists maintain their vehicles in a roadworthy condition at all times and this remains the case. Under the current circumstances, provided motorists make every effort to book appointments in the normal way, insurance companies will recognise that the current issue is not the fault of the customer. Motorists should keep evidence of their appointment booking.

More generally, it should be noted that the NCT is a minimum requirement of roadworthiness and is therefore not the only rating factor taken into account in the provision of motor insurance. Insurers will generally require that a car has a valid NCT in order to be covered. However, in making their individual decisions on whether to offer cover and what terms to apply, they will also use a combination of other rating factors, including the age of the driver, the type and age of car, the claims record and driving experience of the driver, the number of drivers, how the car is used, etc. My understanding is that insurers do not all use the same combination of rating factors, and as a result prices and availability of cover varies across the market.

Finally, Insurance Ireland operates an Insurance Information Service for those who have queries, complaints or difficulties in relation to obtaining insurance. This can be accessed at: [e-mail]. Likewise, Brokers Ireland provides assistance to customers who are experiencing insurance accessibility issues and can be contacted at [e-mail].

Budget 2023

Questions (94, 127)

Colm Burke

Question:

94. Deputy Colm Burke asked the Minister for Finance if he will confirm and outline all budget 2023 measures that have taken effect since the start of 2023; when further measures from budget 2023 will take effect; and if he will make a statement on the matter. [3054/23]

Peter Fitzpatrick

Question:

127. Deputy Peter Fitzpatrick asked the Minister for Finance the estimated cumulative cost of the measures taken since and including budget 2023 to help address cost-of-living issues; and if he will make a statement on the matter. [2933/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 94 and 127 together.

Budget 2023 was a ‘Cost of Living’ Budget, focussed on protecting the most vulnerable from the impact of inflation. A total net Budget package of €11 billion was put in place, consisting of €4.1 billion in one-off cost of living supports for last year and €6.9 billion in overall measures for this year. This built upon some €3 billion in cost of living supports introduced over the course of last year.

Budget 2023 measures have been providing relief since the final quarter of last year. Among other measures, this includes three €200 electricity credits to households at a total cost of €1.2 billion, the first of which was disbursed last year, and the Temporary Business Energy Support Scheme, which provides support to businesses struggling with rising electricity bills. A number of other measures, including double payments of social welfare benefits and child benefit, were also implemented in the fourth quarter of last year.

From the start of this year, €1.1 billion in income tax reductions have been in place, protecting employees from moving into a higher tax bracket because of inflation, as well as the €500 rent tax credit. The increases in social welfare measures, including the €12 increase in pension payments and working age social welfare recipients, are also now in place on a permanent basis. A full list of the taxation and expenditure measures introduced in Budget 2023 are set out in the Tax Policy Changes and Expenditure Report publications.

This Government has acted repeatedly and on a significant scale to address the cost-of-living challenge. Budget 2023 is a reflection of the Government's commitment to easing the burden of inflation on households and businesses, through an approach that is economically appropriate, progressive and sustainable.

Tax Reliefs

Questions (95, 109, 140, 242)

Fergus O'Dowd

Question:

95. Deputy Fergus O'Dowd asked the Minister for Finance if he will respond to concerns raised by the many thousands of benefit-in-kind recipients who are facing much higher payments following the introduction of new rates as of January 2023; his views on the new EV BIK rates considering the potential knock-on effect of reducing the number of electric vehicles purchased under the scheme due to extortionate BIK payments; and if he will make a statement on the matter. [2995/23]

Ged Nash

Question:

109. Deputy Ged Nash asked the Minister for Finance if his attention has been drawn to the concerns of those with company cars over the financial impact of changes to the benefit-in-kind regime which came into force this month; if he is considering measures to assist such workers to mitigate the additional costs; and if he will make a statement on the matter. [3088/23]

Frankie Feighan

Question:

140. Deputy Frankie Feighan asked the Minister for Finance if his Department has carried out an impact assessment on the change to benefit-in-kind tax in budget 2023 and the effect it is having on persons who require a car for work; and if he will make a statement on the matter. [3144/23]

Rose Conway-Walsh

Question:

242. Deputy Rose Conway-Walsh asked the Minister for Finance if he has engaged with the Minster for Enterprise, Trade and Employment on the potential impact of change to company vehicle benefit-in-kind rules from 1 January 2023 on workers and businesses; and if he will make a statement on the matter. [62121/22]

Written answers

Minister for Finance

I propose to take Questions Nos. 95, 109, 140 and 242 together.

Recent Government policy has focused on strengthening the environmental rationale behind company car taxation. Until the changes brought in as part of the Finance Act 2019, Ireland’s vehicle benefit-in-kind regime was unusual in that there was no overall CO2 rationale in the regime. This is despite a CO2 based vehicle BIK regime being legislated for as far back as 2008 (but never having been commenced).

In Finance Act 2019, a CO2-based BIK regime for company cars was legislated for from 1 January 2023. From the beginning of this year, the amount taxable as BIK is determined by the car’s original market value (OMV) and the annual business kilometres driven, while new CO2 emissions-based bands determines whether a standard, discounted, or surcharged rate is taxable.

In certain instances, this new regime will provide for higher BIK rates, for example in relation to above average emissions and high mileage cars. It should be noted, however, that the rates remain largely the same in the lower to mid mileage ranges for the average lower emission car. Additionally, EVs benefit from a preferential rate of BIK, ranging from 9 – 22.5% depending on mileage. Fossil-fuel vehicles are subject to higher BIK rates, up to 37.5%. This new structure with CO2-based discounts and surcharges is designed to incentivise employers to provide employees with low-emission cars.

I am aware there have been arguments surrounding the mileage bands in the new BIK structure, as they can be perceived as incentivising higher mileage to avail of lower rates, leading to higher levels of emissions. The rationale behind the mileage bands is that the greater the business mileage, the more the car is a benefit to the company rather than its employee (on average); and the more the car depreciates in value, the less of a benefit it is to the employee (in years 2 and 3) as the asset from which the benefit is derived is depreciating faster. Mileage bands also ensure that cars that are more integral to the conduct of business receive preferential tax treatment.

I believe that better value for money for the taxpayer is achieved by curtailing the number of subsidies available and building an environmental rationale directly into the BIK regime. It was determined in this context that reforming the BIK system to include emissions bands provides for a more sustainable environmental rationale than the continuation of the current system with exemptions for electric vehicles (EVs). This brings the taxation system around company cars into step with other CO2-based motor taxes as well as the long-established CO2-based vehicle BIK regimes in other member states.

In addition to the above and in light of government commitments on climate change, Budget 2022 extended the preferential BIK treatment for EVs to end 2025 with a tapering mechanism on the vehicle value threshold. This means that the quantum of the relief is phased down from €50,000 in 2022, to €35,000 in 2023, €20,000 in 2024, and €10,000 in 2025. This BIK exemption forms part of a broader series of very generous measures to support the uptake of EVs, including a reduced rate of 7% VRT, a VRT relief of up to €5,000, low motor tax of €120 per annum, SEAI grants, discounted tolls fees, and 0% BIK on electric charging.

Finally, it should be noted that this new BIK charging mechanism was legislated for in 2019 and was announced as part of Budget 2020. I am satisfied that this has provided a sufficient lead in time to adapt to this new system before its recent implementation.

Economic Policy

Questions (96, 98)

Bríd Smith

Question:

96. Deputy Bríd Smith asked the Minister for Finance his views on the growth in the number of millionaires in the State, identified in a recent report that showed the two richest people in the State have more wealth than the poorest 50% of the population; and his views on whether Government policy has driven or is responsible for this trend. [3106/23]

Richard Boyd Barrett

Question:

98. Deputy Richard Boyd Barrett asked the Minister for Finance if his attention has been drawn to a report (details supplied) on wealth inequality in Ireland that found the number of Irish people with individual wealth of over €46.6 million has more than doubled between 2012 and 2022, rising from 655 to 1,435 people, and that the two richest people in Ireland have more wealth than the poorest 50% of the population; and if he will make a statement on the matter. [3110/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 96 and 98 together.

The latest data from the Central Bank of Ireland show that Irish household net wealth has more than doubled between the second quarter of 2012 and 2022, to reach €1,025 billion. These data also show that the vast majority of household wealth is held in the form of households’ main residence, with the main driver of increases in wealth in recent quarters being positive revaluations in housing assets.

Importantly though, in addition to wealth growth, data from the Central Bank’s Distributional Wealth Accounts show that net wealth inequality has declined. The Gini coefficient – a common measure of inequality – fell from 0.78 in the second quarter of 2013 to 0.68 in the first quarter of 2022.

The Government is committed to creating a fairer, more equal Ireland. In this respect, Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax all represent taxes on wealth. The Revenue Commissioners estimate that these taxes raised over €2.8 billion last year.

In addition to wealth taxes, the Government takes action against inequality through the broader tax and welfare system. In fact, Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality.

The Revenue Commissioners estimate that the top 1 per cent of income earners, those earning in excess of €263,000 will pay 23 per cent of the total income tax and USC collected in 2023. Those earning less than €65,000 which represents the bottom 80 per cent of income earners, will contribute only 21 per cent of total income tax and USC receipts.

Question No. 97 answered with Question No. 84.

Question No. 98 answered with Question No. 96.

Departmental Strategies

Questions (99)

David Stanton

Question:

99. Deputy David Stanton asked the Minister for Finance if he will report on the work of the fintech steering group established in his Department; and if he will make a statement on the matter. [2872/23]

Written answers

Minister for Finance

The Fintech Steering Group was established in the Department of Finance in 2021 as part of action measure 12 of the Ireland for Finance Action Plan 2021. This reflects the fact that Ireland is uniquely positioned to benefit from global investment in fintech, given our experience in both technology and financial services. To date the Group has worked on discussing cross divisional issues on digital finance and EU files, for example, the regulation on markets in crypto-assets (MiCA) and the digital operational resilience act (DORA), consulting with fintech firms and industry representative bodies, researching some fintech issues in other jurisdictions and tracking market development. Also agreed an action measure for Ireland for Finance Action Plan 2022 with the Competition and Consumer Protection Commission (CCPC) on the development of educational consumer resources to support consumers to engage with fintech.

Following on from this, action measure 2 of the Ireland for Finance Action Plan 2022 committed to implementing the second phase of the work of the Department of Finance Fintech Steering Group by expanding the Group across Government in 2022. The Group now include officials from Departments of Enterprise, Trade and Employment, Further and Higher Education, Research, Innovation and Science, IDA, Enterprise Ireland, Ireland Strategic Investment Fund (ISIF) and Skillnet. The Central Bank of Ireland and the CCPC are observer members. Its first introductory meeting was held on 23 June 2022. The expanded Fintech Steering Group will:

- work to ensure that Ireland’s policy environment will allow digital finance to continue to thrive

- collaborate across Government on fintech issues, communicate our offering and contribute to EU policy making

- work to understand and assess industry policy proposals in order to further advance fintech in Ireland.

To assist the work of the Fintech Steering Group, a Joint Fintech Group was also established last year. It is made up of representatives from the Fintech Steering Group and from industry and it has been established in order to gather a wide variety of expertise to inform the Group’s work. It held its first introductory meeting on 16 November 2022. The purpose of the Joint Fintech Group is to:

- provide strategic guidance on the State’s industrial strategy for digital finance from an expert industry perspective;

- inform the State of the sector’s skills and education requirements for the future;

- act as a pre-consultation forum on policy and legislative developments related to digital finance; and

- act as a forum for the private and public sector to engage on key items of the European Commission’s digital finance agenda.

The Joint Fintech Group is currently made up of fourteen members with six from the public sector drawn from the cross-government Fintech Steering Group and eight from the private sector. It is envisaged that the Group will meet twice a year.

Membership of this Group includes representatives from Departments of Finance, Enterprise, Trade and Employment, Department of Further and Higher Education, Research, Innovation and Science, Skillnet, IDA, Enterprise Ireland, Financial Services Ireland (Part of Ibec), Banking and Payments Federation Ireland, Electronic Money Association Ireland, Sustainable Finance Ireland, Irish Funds, Insurance Ireland, Instech.ie, and Technology Ireland (Part of Ibec). The Central Bank and the CCPC attend as observers.

The continuation of work on digital finance is a priority of the 2022 Update of the Ireland for Finance strategy, which was launched in October 2022 and is available online: www.gov.ie/en/publication/ireland-for-finance-strategy/#updated-ireland-for-finance-strategy

The Ireland for Finance Action Plan 2023 is currently being finalised and is expected to be published in Q1 2023 following Government approval.

Tax Code

Questions (100, 122, 161)

Ged Nash

Question:

100. Deputy Ged Nash asked the Minister for Finance if, in light of a report (details supplied) detailing that Ireland’s richest 1% control a quarter of the country’s wealth, he will review the Government’s approach to taxes on wealth as suggested in the Labour Party’s alternative budget; and if he will make a statement on the matter. [3085/23]

Richard Boyd Barrett

Question:

122. Deputy Richard Boyd Barrett asked the Minister for Finance if his attention has been drawn to the recent call by an organisation (details supplied) for a wealth tax of graduated rates of 2%, 3% and 5% on wealth above €4.7m, in which the organisation stated that such a wealth tax would raise €8.2 billion annually, with the potential to transform Irish public services in health, housing and education; and if he will make a statement on the matter. [3107/23]

Bríd Smith

Question:

161. Deputy Bríd Smith asked the Minister for Finance if he will re-examine the proposal for a wealth tax in Ireland in light of a recent export on wealth and inequality; and if he will make a statement on the matter. [3105/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 100, 122 and 161 together.

I am aware that Oxfam International recently (on January 16th 2023) produced a new report regarding global wealth inequality entitled “Survival of the Richest” which proposes new wealth taxes in Ireland and other jurisdictions.

While I understand the background to calls for a specific wealth tax in Ireland, it is not the case that wealth in Ireland is untaxed, as taxes on wealth are already in place here.

The Oxfam’s report notes:

- “Two-thirds of countries do not have any form of inheritance tax on wealth and assets passed to direct descendants.” Ireland has a significant inheritance tax regime in place in the form of Capital Acquisitions Tax which is charged (with limited exemptions) at a rate of 33%.

- “Rates of tax on capital gains – in most countries the most important source of income for the top 1% – are only 18% on average across more than 100 countries.” Capital Gains Tax is in place in Ireland and it is charged (again with limited exemptions) at a rate of 33% which is well above the 18% average reported by Oxfam.

The Government is committed to creating a fairer, more equal Ireland. While the calls for a specific wealth tax are understandable, there are already a number of wealth taxes in place including Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax. Revenue estimates that these taxes raised over €2.8 billion last year.

Any revenue raised from a new wealth tax may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of such a new tax.

In addition to wealth taxes, the Government takes action against inequality through our tax and welfare system. For instance, the strong redistributive role of the Irish tax and welfare system is evident in the range of supports introduced to help mitigate the impact of the Covid-19 pandemic and the current cost of living pressures on vulnerable households and businesses. The overall distributional impact of Budget 2023 was strongly progressive, with the lowest three deciles experiencing the highest gains as a proportion of disposable income.

Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality.

It is estimated that the top 1 per cent of income earners, those earning in excess of €263,000 will pay 23 per cent of the total income tax and USC collected in 2023. While those earning less than €65,000 which represents the bottom 80 per cent of income earners, will contribute only 21 per cent of total income tax and USC receipts.

In conclusion, I can assure you that all taxes and potential taxation options are kept under constant consideration and it remains a priority of mine to ensure that Ireland maintains its progressive taxation system.

Inflation Rate

Questions (101)

James Lawless

Question:

101. Deputy James Lawless asked the Minister for Finance if he expects the rate of inflation to ease during 2023; and if he will make a statement on the matter. [2986/23]

Written answers

Minister for Finance

Consumer price (HICP) inflation picked up sharply over the past year, with annual average inflation of just over 8 per cent recorded in 2022, compared with around ½ per cent over the past decade. Every advanced economy is in the same position, with euro area inflation averaging 8.4 per cent last year.

While inflation remained elevated at 8.2 per cent in December, this marks a decline from the peak of 9.6 per cent reached last summer, and 9.4 as recently as October. This faster than anticipated easing of the inflation rate is explained largely by movements in wholesale energy prices. Following a surge in prices over the summer and early autumn, gas prices have moderated in recent months. This primarily reflects the milder winter, high European gas storage levels and sufficient LNG supplies with market prices now at around £1.70 per therm, compared with £4 per therm at Budget time. Oil prices have also declined due to the slowdown in global demand.

This easing in wholesale energy markets suggests that inflation has now peaked and is on a downward trajectory. That said, the inflation rate is expected to remain high over the coming months, with a more pronounced easing of the inflation rate anticipated from the second quarter of this year as ‘base effects’ drop out of the annual rate. Despite this, the price level consumers face will remain elevated. Furthermore, due to continued energy supply concerns there remains significant uncertainty around the outlook for inflation.

Against this backdrop, the primary focus of Government has been to do as much as possible to provide relief to households and firms without adding to inflationary pressures. Budget 2023 includes an overall package of €6.9 billion, including adjustments to income tax bands and increases in social welfare and pension rates. Complementing this is a set of one-off measures amounting to €4.1 billion, including three €200 electricity credits to each household, an additional social welfare payment, a double payment of child benefit, the extension of the reduction in excise duties and the VAT rate on gas and electricity to end-February and the Temporary Business Energy Support Scheme. This approach balances the need to provide necessary fiscal support to households and firms while avoiding a situation in which the Government’s response becomes part of the inflation problem.

Looking ahead, my Department will continue to monitor inflationary developments and will publish updated inflation projections in the Stability Programme Update in April. No decision has been made on whether the measures currently in place will be allowed to expire or whether new measures will be introduced. It would be premature to make a decision on further interventions before the prospects for inflation, developments in the public finances and the effectiveness of current measures can be fully evaluated.

Question No. 102 answered with Question No. 84.

Tax Reliefs

Questions (103)

Rose Conway-Walsh

Question:

103. Deputy Rose Conway-Walsh asked the Minister for Finance if he will clarify that a special needs assistant is not a qualifying or eligible profession for flat-rate expense allowances; the reason this is the case; and if he will make a statement on the matter. [3099/23]

Written answers

Minister for Finance

The legislation governing the deductibility of expenses incurred in employment is set out in section 114 of the Taxes Consolidation Act 1997 (TCA 1997), which provides that for an expense to qualify as a deduction against income from an office or employment, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment.

I am advised by Revenue that the flat rate expense (FRE) regime operates on an administrative basis. It applies where both a specific commonality of expenditure exists across an employment category and the statutory requirement for the tax deduction as set out in section 114 of the TCA 1997 is satisfied, namely, that the expenses are wholly, exclusively and necessarily incurred in the performance of the duties of the office or employment by the employee concerned and that such expenses are not reimbursed by his or her employer.

The FRE regime was established to apply a uniformity of approach to tax deductibility for expenses of large groups of employees and to facilitate ease of administration for both Revenue and employees. The expense should apply to all employees in that category and not be discretionary.

Revenue has advised me that it will consider FRE applications where a large number of employees incur broadly identical qualifying expenses which are not reimbursed by their employer. Applications are generally made by the representative bodies in the employment sectors concerned and are considered by Revenue based on the specific commonality of expenses within the employment category and compliance with the strictly applied statutory requirement for a tax deduction.

As matters stand at present, Special Needs Assistants (SNA's) do not come within the scope of the FRE regime. Revenue has confirmed that a submission was received from a representative body for SNA's some time ago. However, it did not contain specific details of the expenses and costs incurred by SNA's and despite requests from Revenue to provide same, the details to assess such a claim in respect of a specific FRE category was never received. I am further advised, that should Revenue receive a submission from representatives for SNA’s, outlining details of expenses which satisfy the legislative conditions, that it will be considered.

Finally, Revenue advises me that it remains committed to the FRE regime and encourages all taxpayers to avail of their full tax relief entitlements. It should be noted that all employees retain their statutory right to claim a deduction under section 114 of the TCA 1997 in respect of an expense incurred wholly, exclusively and necessarily in the performance of the duties of their employment, to the extent to which such expenses are not reimbursed by the employer.