Written Answers Nos. 322-346
322. Deputy Michael Ring asked the Minister for Finance the way the BIK taxation regime can be reformed to achieve the reductions set out in the Climate Action Plan 2023 (details supplied); and if he will make a statement on the matter. [13086/23]
View answerRecent 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. The policy actively encourages lowering the emissions profile of the company car fleet, which will form part of the range of policies targeting the emissions reductions set out in the Climate Action Plan.
I am aware that 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.
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.
However, I recognise that that the new regime is resulting in a significant number of employees with vehicles in the typical emissions range experiencing larger increases in their income tax liabilities since the start of 2023.
To address the issue, I have received agreement from my government colleagues to introduce a relief of €10,000 to be applied to the Original Market Value (OMV) of cars in Categories A-D in order to reduce the amount of BIK payable (this is not applicable to the highest emission cars in Category E).
In effect, this means that, for the purposes of calculating BIK liability, employers may reduce the OMV by €10,000. This treatment will also apply to all vans and electric vehicles. For electric vehicles, the OMV deduction of €10,000 will be in addition to the existing relief of €35,000 that is currently available for EVs, meaning that the total relief for 2023 will be €45,000.
In addition, I will be changing the upper limit in the highest mileage band by way of a 4,000km reduction, so that the highest mileage band is now entered into at 48,001km. This will go some way to address the point raised by the Deputy in relation to mileage.
These temporary measures will be retrospectively applied from 1 January 2023 and will remain in place until 31 December 2023. It is proposed to introduce the measures at Committee Stage of the Finance Bill 2023.
323. Deputy Pearse Doherty asked the Minister for Finance if the rent tax credit is envisaged as being a permanent part of the tax base in the years ahead; if the rent tax credit is in the base for 2024, 2025, 2026, 2027 and 2028; and if so, its cost in each year. [13089/23]
View answerThe €500 rent tax credit introduced in Budget 2023 will be available until 2025, at an estimated cost of €200 million per year.
In 2023 renters can claim the relief in respect of rent paid in both 2023 and in 2022. This is reflected in my Department’s fiscal projections, which include a €400 million impact from the rental credit for 2023 and €200 million thereafter until 2025, the last year incorporated in the most recent suite of forecasts published as part of Budget 2023 .
Given that refunds of tax paid may be claimed up to four years after the relevant tax year, it may be expected that legacy costs may arise for the period after the sunset of the scheme at end-2025.
324. Deputy Pearse Doherty asked the Minister for Finance if his Department will provide a five-year forecast with respect to the fiscal position in the upcoming Stability Programme Update (details supplied). [13092/23]
View answerMy Department produces, and publishes, two set of macroeconomic and fiscal projections each year – its spring forecasts (set out in the annual Stability Programme Update) and its autumn forecasts (set out in the Economic and Fiscal Outlook that accompanies the annual budget).
In this regard, the Government will publish the April 2023 Update of the Stability Programme in the coming weeks, setting out the Department's updated forecasts. Member States are required to include economic and fiscal forecasts to 2026.
In relation to the forecast horizon, my officials are cognisant of the views of the Irish Fiscal Advisory Council on the need for a longer-term forecast horizon. As preparation of the document continues over the coming weeks, consideration is being given to the length of the forecast horizon.
325. Deputy Paul Murphy asked the Minister for Finance if he agrees that it is a common strategy by Irish banks to assign their legal or equitable rights over debts and securities to so-called vulture funds; if he endorses this practice; his views on whether this practice is in the best interests of the Irish consumer; and if he will make a statement on the matter. [13133/23]
View answerLoan sales are a commercial decision for the Board of Directors of any bank. In my role as the Minister for Finance I do not have a role to play in making such commercial decisions.
The Central Bank has advised that it does not comment on the commercial decisions of banks. However, the Central Bank has also advised that its focus is on ensuring continued progress by the banks on sustainable distressed debt resolution, through the multiple tools available.
This includes restructuring activity undertaken by the banks via the proactive engagement (by banks) with distressed borrowers on the implementation of suitable alternative repayment arrangements. The Central Bank notes that it expects that this is the primary method by which banks resolve distressed debt, however, the Central Bank also notes that this is one of a number of distressed debt resolution tools including accounting write downs, mortgage to rent, engaging through the Insolvency Service, sales and securitisations and the legal process.
The distressed debt method selected by a bank is based on individual circumstances and implemented in the best interest of the customer. This can occasionally include the transfer of a customer to a non-bank entity that has the potential to provide a broader range of alternative repayment arrangement options.
It is important to note that where a loan is sold or transferred to another regulated entity, the protections that were available to borrowers prior to the transaction continue to be in place with the new owner. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with Irish financial services law that applies to ‘regulated financial service providers’.
This ensures that consumers whose loans are sold or transferred, maintain the same regulatory protections, including under the various Central Bank statutory Codes of Conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013 (CCMA).
326. Deputy Paul Murphy asked the Minister for Finance if he accepts that Irish banks have sought to move lending off their balance sheets to improve their standing under capital adequacy rules; his views on whether the effect of the securitisation of Irish mortgages gives rise to questions regarding the true ownership of these assets; and if he will make a statement on the matter. [13134/23]
View answerI am advised by the Central Bank of Ireland that the transfer of assets via a securitisation will typically need to fulfil a “true sale” analysis. This is a legal test developed by the courts to determine whether a transaction is properly characterised as a sale or secured loan.
Where necessary, originators will need to consider with their legal advisors whether a relevant transaction satisfied the true-sale legal tests. As each securitisation can be structured differently and take different forms, the question of the conclusive ownership of assets after a true-sale securitisation must be assessed on a case-by-case basis.
Irrespective of the ultimate owner of these loans, the protections that are available to borrowers prior to the transaction continue to be in place with the new owner. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 if a loan is transferred or sold, the holder of the legal title to the credit must be authorised by the Central Bank and must comply with Irish financial services law that applies to ‘regulated financial service providers’.
This ensures that consumers whose loans are sold or transferred, maintain the same regulatory protections, including under the various Central Bank statutory Codes of Conduct, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013.
With respect to capital adequacy rules, it is the case that the more risky a bank’s assets are, the higher a bank’s capital requirement. This is to ensure that banks can sustain losses, when they occur, without risking the bank’s survival.
Irish retail banks’ mortgage modelled Risk Weighted Assets are higher than the EU average. This results primarily from the relatively high historic credit risk experience in Ireland, the longer workout process on defaulted loans and uncertainty in relation to collateral realisation and the relatively elevated levels of non-performing loans and restructured loans in Irish banks.
One of the lessons from the post-2008 crisis is that banks did not fund themselves with sufficient capital to protect themselves against losses. The higher capital requirements increase the cost of lending for Irish banks, but now leave them in a more resilient position, reducing the risk of systemic stress events. The experience of the COVID-19 pandemic has highlighted the importance of a resilient banking sector that can withstand adverse shocks.
327. Deputy Brendan Howlin asked the Minister for Finance if he will review the application of the rental tax credit, to ensure that the children of a property owner who are registered tenants in the property with the RTB paying a market rent, can avail of this credit on the same basis as any other renter; and if he will make a statement on the matter. [13140/23]
View answerThe rent tax credit was introduced under Finance Act 2022 and is, subject to a number of conditions, broadly available in the following three circumstances:
1. where the claimant makes a qualifying payment in respect of a residential property which they use as their principal private residence;
2. where the claimant makes a qualifying payment in respect of a residential property which they use to facilitate their attendance at or participation in their employment, office holding, trade, profession or an approved course; and
3. where the claimant makes a qualifying payment in respect of a residential property which their child uses to facilitate their attendance at or participation in an approved course.
One of the conditions attached to the credit relates to the relationship between the claimant, tenant and landlord.
Where the relationship between the claimant and the landlord is that of parent and child, or vice versa, the rent tax credit will not be available in any instance. This will be the case irrespective of the nature of the tenancy concerned and its Residential Tenancy Board registration status.
The rationale behind the prohibition on tenancies of this nature is that if such arrangements were allowed to qualify for the relief, it would leave the tax credit open to possible manipulation where parents and their children could collude to create a tax advantage for either party, which was not warranted.
The operation of the Rent Tax Credit will be closely monitored by my Department in conjunction with Revenue in the coming months and the question of whether any further adjustments are needed will be considered in the context of the Budget and Finance Bill process later this year.
Further details in respect of the rent tax credit, including comprehensive guidance on the eligibility criteria, can be found in Tax and Duty Manual Part 15-01-11A at the link below:
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-11A.pdf
328. Deputy John Paul Phelan asked the Minister for Finance the conditions of approval in establishing the approved profit-sharing scheme for a company (details supplied) under categories; and if he will make a statement on the matter. [13199/23]
View answerAn Approved Profit-Sharing Scheme (APSS) provides a mechanism whereby a company may appropriate shares to its employees and the employee is, subject to certain conditions, exempt from an income tax charge on the share appropriation. The appropriation is however subject to Universal Social Charge (USC) and Pay Related Social Insurance (PRSI).
Under this scheme an employee may be allocated shares up to a maximum annual limit of €12,700. The APSS rules state that the shares must be held in trust for a minimum period of two years.
The legislation on APSS can be found in sections 509 to 518 of the Taxes Consolidation Act (TCA) 1997 and Schedule 11 TCA 1997.
Prior Revenue approval is required in order to set up an APSS scheme and in order for a scheme to be approved there are certain conditions that must be satisfied. Comprehensive guidance material on an APSS can be found on Revenue’s website, specifically in Chapter 10 - Approved Profit Sharing Schemes (APSS) of the Share Schemes Tax and Duty Manual available at - www.revenue.ie/en/tax-professionals/tdm/share-schemes/chapter-10.pdf. This guidance sets out, in detail, the various requirements that must be satisfied under the headings general conditions, conditions relating to the trust, conditions relating to the shares and conditions relating to the participants. The requirements to be met by an APSS are very detailed and set out below is an overview of some of the key conditions that must be satisfied.
Overview of some of the key conditions:
- The scheme must provide for the establishment of a trust that is resident in the State, and the trustees, out of monies paid to them by the company concerned or in the case of a group scheme paid to them by a participating company, must purchase or subscribe for shares which satisfy the conditions relating to the shares. The trustees must perform their functions in accordance with a trust instrument. The Trust Instrument must be constituted under the law of the State. The shares purchased or subscribed for by the trustees must be formally allocated to individuals who are eligible to participate in the scheme.
- The functions of the trustees must be clearly set out in the Trust Instrument. This should include general functions relating to the purchase of shares for appropriation to participants, the transfer of the shares into the participant’s name after the period of retention and to look after the interests of the participants, as shareholders.
- The scheme must not contain any features which are neither essential nor reasonably incidental to the purpose of providing employees and directors with benefits in the nature of interests in shares.
- The scheme must not contain any features which have the effect of discouraging employees from participating in the scheme.
- The scheme must not be associated in any way with loan arrangements under which directors or employees borrow from their employer in order to take part in the scheme.
- Where the company setting up a scheme has control of another company or companies, the scheme may be extended to all or any of the companies over which it has control. A scheme of this kind is called a group scheme. Where the company setting up the scheme is a member of a group of companies, the scheme must not have the effect of conferring benefits wholly or mainly on directors of companies in the group or on those employees of companies in the group who are in receipt of higher or the highest levels of remuneration.
- The basis of calculation of entitlement under the scheme must be clearly set out in the rules of the scheme or in an appendix to the rules.
- The scheme must provide that the total initial market value of the shares appropriated to any one participant in a year of assessment will not exceed the annual limit.
- To ensure that the shares acquired by the participants in an APSS are ordinary shares with normal rights attaching to them, the legislation provides that only certain types of shares may be used for the purposes of a scheme.
- Certain conditions pertaining to the participants also apply.
It may be necessary for a company to make amendments to an APSS, which can be made by Deed or Board Resolution, depending on the rules of the schemes. For example, a company may wish to change the basis of entitlement under the scheme. Approval of such alterations by Revenue is required in order to retain the approval status.
I am advised that Revenue engaged with the company referenced in the details supplied and its advisers on the matter of its APSS during 2021 and follow up engagement was expected to take place. However, Revenue has received no further contact from the parties concerned since then. If further contact with Revenue is required, the company may contact Revenue using the following email address - shareschemesection@revenue.ie.
329. Deputy Paul Kehoe asked the Minister for Finance the reason a person who is renting a room in a house owned by their parent which is not the principal residence of the parent, at market rent and registered with the RTB, cannot claim the rental tax credit; and if he will make a statement on the matter. [13319/23]
View answerThe Rent Tax Credit, as provided for in section 473B of the Taxes Consolidation Act 1997 (TCA 1997), was introduced by Finance Act 2022 and will be available in respect of qualifying payments made during the 2022 to 2025 years of assessment inclusive.
The credit may be claimed, subject to a number of conditions, broadly in the following three circumstances:
1. where the claimant makes a qualifying payment in respect of a residential property which they use as their principal private residence;
2. where the claimant makes a qualifying payment in respect of a residential property which they use to facilitate their attendance at or participation in their employment, office holding, trade, profession or an approved course; and
3. where the claimant makes a qualifying payment in respect of a residential property which their child uses to facilitate their attendance at or participation in an approved course.
One of the conditions attached to the credit relates to the relationship between the claimant, tenant and landlord.
Where the relationship between the claimant and the landlord is that of parent and child, or vice versa, the Rent Tax Credit will not be available in any instance. This will be the case irrespective of the nature of the tenancy concerned and its Residential Tenancy Board registration status.
The rationale behind the prohibition on tenancies of this nature is that if such arrangements were allowed to qualify for the relief, it would leave the tax credit open to possible manipulation where parents and their children could collude to create a tax advantage for either party, which was not warranted.
In designing tax measures, there is a balance to be struck between providing support to as many people as possible consistent with the overall policy intention behind the measure and ensuring that there is an appropriate degree of control in the management of limited Exchequer resources. The current rules for the Rent Tax Credit seek to achieve such a balance.
Further details in respect of the credit, including comprehensive guidance on the full range of conditions which must be met and how to make a claim, can be found in Tax and Duty Manual Part 15-01-11A at:
www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-11A.pdf.
Finally, the operation of the Rent Tax Credit will be closely monitored by my Department in conjunction with Revenue in the coming months and the question of whether any further adjustments are needed will be considered in the context of the Budget and Finance Bill process later this year.
330. Deputy Ged Nash asked the Minister for Finance if he will provide information on the status of the Ireland Strategic Investment Fund investments in a company (details supplied); if he is concerned at the exposure of these investments given the parent company has been taken over by the Federal Deposit Insurance Corporation of California; and if he will make a statement on the matter. [13412/23]
View answerIn respect of the Ireland Strategic Investment Fund’s (ISIF) investment relationship with SVB Financial Group the NTMA has advised me that as of end February 2023, ISIF has approximately $100 million invested in 5 investment funds managed by SVB Capital, which is a subsidiary of the SVB Financial Group. The distributions received by ISIF from these investments since 2012 exceed the amount invested. These investments have been structured in a manner that legally ring-fences them from the rest of the SVB Financial Group. This means that ISIF does not expect any material impact on these investments arising from recent developments.
331. Deputy Carol Nolan asked the Minister for Finance if his Department is engaging in any assessment of the collapse of a bank (details supplied) and the potential implications for Irish investors; and if he will make a statement on the matter. [13443/23]
View answerI understand that the Deputy is referring to the recent collapse of Silicon Valley Bank (SVB). As the Deputy will be aware swift action was taken by the US and UK regulatory authorities following the collapse including guaranteeing deposits and the sale of SVB (UK).
A meeting of the Financial Stability Group (FSG) took place on Monday 13 March to discuss the collapse of SVB. The FSG comprises senior management from the Department of Finance, the Central Bank of Ireland, and the National Treasury Management Agency.
The FSG established a sub-group to co-ordinate enhanced monitoring and reporting on the domestic impacts arising from the failure of SVB. The sub-group includes officials from my Department, the Central Bank and the NTMA, as well as officials from Departments and Agencies which have a direct relationship with the tech sector in Ireland. The sub group will meet and engage on a regular basis and report to the FSG and Minister.
I should highlight the limited direct impact on the Irish financial system of the failure of Silicon Valley Bank and the retail banks operating in Ireland have no exposure to this Bank.
332. Deputy Pádraig Mac Lochlainn asked the Minister for Finance if he plans to increase income tax exemption limits for persons aged over 65 years in the time ahead. [13444/23]
View answerThe age exemption applies for any year of assessment where an individual is aged 65 years or over and his or her total income does not exceed €18,000. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.
Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies the individual or couple is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system.
It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.
I have no current plans to increase these thresholds further. However, it is important to take into account that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. For example, persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or Pay Related Social Insurance.
It should be noted that the recent Commission on Taxation and Welfare (CoTW) recommended that age should be removed as a factor for determining the charge to Income Tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, located at the following link - www.gov.ie/en/publication/7fbeb-report-of-the-commission/
My Department has begun initial work on a review of the personal tax system, taking account of the recent report of the Commission on Taxation and Welfare, and considering a range of personal taxation issues. I recently launched a public consultation on the personal tax system, inviting stakeholders to provide their views and feedback. Further details are available on the Department's website - www.gov.ie/en/consultation/3ee22-minister-mcgrath-launches-public-consultation-on-the-personal-tax-system/
333. Deputy Louise O'Reilly asked the Minister for Finance the annual increases in the retail price of the most popular price category MPPC for a 20-pack of cigarettes since 2011; the portion of the increase related to taxes; the portion of the increase due to price rises by the tobacco industry in tabular form; and if he will make a statement on the matter. [13488/23]
View answer334. Deputy Louise O'Reilly asked the Minister for Finance the estimated revenue that would be raised annually if tobacco taxation were to be increased annually on a pro-rata basis so that all packs of 20 cigarettes cost at least €20 by 2025; and the estimated revenue that would be raised annually if an equivalent annual tobacco tax on roll-your-own cigarettes was introduced. [13489/23]
View answerI propose to take Questions Nos. 333 and 334 together.
I am advised by Revenue that the table below shows the annual increases in the retail price of the most popular price category (MPPC) for a 20 pack of cigarettes since 2011, together with the portions related to tax increases and trade increases.
|
MPPC |
Tax |
Trade |
Total Increase |
MPPC |
|
|
Year |
at 1 January |
Increase |
Increase |
at 31 December |
|
|
€ |
€ |
€ |
€ |
€ |
|
|
2011 |
8.55 |
0.25 |
0.10 |
0.35 |
8.90 |
|
2012 |
8.90 |
0.28 |
0.12 |
0.40 |
9.30 |
|
2013 |
9.30 |
0.10 |
0.10 |
0.20 |
9.50 |
|
2014 |
9.50 |
0.40 |
0.10 |
0.50 |
10.00 |
|
2015 |
10.00 |
0.50 |
0.00 |
0.50 |
10.50 |
|
2016 |
10.50 |
0.50 |
0.30 |
0.80 |
11.30 |
|
2017 |
11.30 |
0.50 |
0.20 |
0.70 |
12.00 |
|
2018 |
12.00 |
0.50 |
0.20 |
0.70 |
12.70 |
|
2019 |
12.70 |
0.50 |
0.30 |
0.80 |
13.50 |
|
2020 |
13.50 |
0.30* |
0.20 |
0.50 |
14.00 |
|
2021 |
14.00 |
0.70** |
0.30 |
1.00 |
15.00 |
|
2022 |
15.00 |
0.50 |
0.30 |
0.80 |
15.80 |
|
2023 |
15.80 |
0.00 |
0.00 |
0.00 |
15.80*** |
|
*The tax increase in 2020 of €0.30 aggregates an increase of €0.50 in excise in October 2020 and a €0.20 reduction in VAT from 23% to 21% on 1 September 2020. |
|
|
**Includes the increase of €0.50 in excise in October 2021 and the increase of €0.20 in VAT to 23% on 1 March 2021. |
|
|
***The latest price for the MPPC at 14 March 2023 is €15.80. |
In relation to Question 13489/23, I am advised by Revenue that its Ready Reckoner for calculating the impact of potential changes in rates of taxation includes estimates for the full year yield from changes in duties on packs of 20 cigarettes and on roll-your-own tobacco on page 25. The Ready Reckoner is available at: www.revenue.ie/en/corporate/information-about-revenue/statistics/ready-reckoner/index.aspx.
The Ready Reckoner estimates assume pro-rata increases in other tobacco products and also assume no behavioural change.
335. Deputy Pádraig O'Sullivan asked the Minister for Finance if he will ensure that mortgage provides in the Irish market furnish their customers with proper information and clarity on how interest rate increases are accrued on their accounts (details supplied); and if he will make a statement on the matter. [13547/23]
View answerThe Central Bank has put in place a range of measures in order to protect consumers who are mortgage holders. The consumer protection framework in place 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 requirements put in place by the Central Bank complement the European legislative framework, including the Consumer Mortgage Credit Agreements Regulations (the ‘Mortgage Credit Regulations’).
It is also worth noting that in 2017 the Central Bank introduced specific requirements for lenders to explain to borrowers how their variable interest rates have been set, including in the event of an interest rate increase.
Further measures were introduced in 2019 to help consumers make savings on their mortgage repayments, provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework.
Provision 6.6 of the Consumer Protection Code requires that a regulated entity must notify affected personal consumers on paper or on another durable medium of any change in the interest rate on a loan.
This notification must include specific information, including details of the date from which the new rate applies, the old and new rate, the revised repayment amount, as well as an invitation for the personal consumer to contact the lender if he or she anticipates difficulties meeting the higher repayments.
Finally, Schedule 3 of the Mortgage Credit Regulations outlines the mathematical formula in order to calculate the annual percentage rate of charge (APRC). In addition, the European Standardised Information Sheet (ESIS) provided for in Schedule 2 of the Mortgage Credit Regulations must be provided to a customer at the pre-contractual stage of an in-scope mortgage application, which outlines among other items, what the APRC is comprised of.
336. Deputy Chris Andrews asked the Minister for Finance the interest of NAMA in a site (details supplied); the status of the ownership and the remaining length of tenure; and if he will make a statement on the matter. [13554/23]
View answerI am advised by NAMA that the Agency, through its group entity National Asset Property Management Limited (“NAPM”), holds a long leasehold interest with 40 years remaining in a site at Block 19, which contains the Dry Docks. The freehold of the site is owned by Waterways Ireland. I am advised that a joint disposal of the entire site, combining both the long leasehold and freehold interests, will be undertaken by NAPM and Waterways Ireland. It is expected that this sale will progress in due course.
337. Deputy Róisín Shortall asked the Minister for Finance the timeline he is working toward in drafting access to cash legislation, as recommended by the Retail Banking Review; and if he will make a statement on the matter. [13584/23]
View answerThe Retail Banking Review, published in November 2022, recommended that the Department of Finance should 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.
It is intended that one piece of legislation will be drafted for all three recommendations on access to cash. My officials are already working on Heads of Bill for this important piece of legislation and will bring the Heads to Government before the end of this year to seek approval to draft the Bill and to submit it for pre-legislative scrutiny to the Joint Oireachtas Committee on Finance, Public Expenditure and Reform and the Taoiseach.
338. Deputy John Brady asked the Minister for Finance if a help-to-buy application can be reassessed in circumstances in which the applicant has been approved for the help-to-buy scheme and lengthy delays of 12+ months are experienced by the developer in constructing the home, resulting in prospective homeowners incurring increased rental costs; and if he will make a statement on the matter. [13601/23]
View answerHelp to Buy (HTB) scheme assists first-time purchasers (FTP) with the deposit they need to buy or build a new house or apartment. It offers a refund of Income Tax (IT) and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous four years, subject to limits outlined section 477C Taxes Consolidation Act 1997.
The current HTB process includes three stages - application stage, claim stage and verification stage. It is during the first stage, the application stage, that a FTP establishes the maximum amount of relief due to them, based on the amount of IT and DIRT they have paid over the previous four years. In order to make an application, the FTP must be registered with Revenue’s online service.
Under section 477C(7), a HTB application will expire in certain circumstances, and in order to remain valid, a claim must be submitted by the FTP before an application expires. Where an application expires, a new application will need to be resubmitted by the FTP. Where an application has to be resubmitted due to the expiration of a previous application, the refund years shall be based on the new application.
The circumstances covered in section 477C(7), leading to the expiration of an application, include the following:
(i) it is discovered that the FTP did not satisfy a condition of HTB,
(ii) the FTP’s tax clearance is rescinded, or
(iii) a valid claim is not submitted before 31 December of the tax year in which the application is made. It should be noted here that, where an application is made during the period 1 October to 31 December, and a claim is made on foot of such an application in the period 1 January to 31 March of the following year, the claim will be deemed to have been made in the prior year.
Revenue's Tax and Duty Manual 15-01-46 Help to Buy, under paragraph 11.1, provides worked examples of how section 477C(7) operates. The manual is available from www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-46.pdf
As noted above, the HTB refund due to a FTP is calculated with reference to the amount of IT and DIRT paid by them in the four years prior to submitting an application. Sections 477C(5) and (5A) provide for how the HTB refund is calculated and rental costs incurred by the FTP do not form part of the HTB refund. I am advised by Revenue that, as the HTB scheme is based on refunding amounts of tax already incurred by applicants, it would not be appropriate to include rental costs in the calculation of the refund.
However, I am further advised by Revenue that the person concerned may be entitled to claim the Rent Tax Credit for the years 2022 and 2023. Information relating to the Rent Tax Credit are set out on the Revenue website at: www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/rent-credit/index.aspx.
339. Deputy Noel Grealish asked the Minister for Finance if the Revenue Commissioners, in its actions to combat the illicit trade of tobacco products has conducted searches of online websites; if so, how many seizures have been made due to illegal products being sold online; and if he will make a statement on the matter. [13625/23]
View answer340. Deputy Noel Grealish asked the Minister for Finance if the Revenue Commissioners have discussed partnership measures with internet companies, particularly social media platform providers, to disrupt the sale of illicit tobacco products on their platforms; and if he will make a statement on the matter. [13626/23]
View answerI propose to take Questions Nos. 339 and 340 together.
I am advised by Revenue that it uses a range of measures to tackle the sale of illicit cigarettes, including online sales. At the core of these measures is identifying and targeting the smuggling of illicit tobacco products into the State, with a view to disrupting the supply chain, seizing the products and, where possible, prosecuting those involved. Revenue’s strategy involves developing and sharing intelligence on a national, EU and international basis, the use of analytics and detection technologies, which includes analysis of online activities, ensuring the optimum deployment of resources on a risk-focused basis.
The smuggling of tobacco products has a transnational and cross border dimension and, in addition to Revenue’s ongoing cooperation with An Garda Síochána in this area, Revenue also works closely with its counterparts in other jurisdictions including colleagues in Northern Ireland through the Cross Border Joint Agency Task Force (JATF), and international bodies including OLAF (the EU’s anti-fraud agency), Europol and the World Customs Organisation. I am informed that Revenue does not have partnership measures in place with internet companies.
Revenue’s analysis of online activity resulted in 39 seizures in 2022 and 11 seizures to date this year. I am aware that Revenue monitors trends in the illicit tobacco trade on an ongoing basis and adjusts its actions and redeploys its resources to counter any new developments or methodologies employed by the criminal gangs involved in that trade. I am satisfied that combating the threat that the illicit tobacco trade poses to legitimate business, consumers, and the Exchequer continues to be a priority for Revenue.
Finally, if businesses or members of the public have any information regarding the sale or supply of illicit tobacco, they can contact Revenue on the confidential free phone number 1800 295 295.
341. Deputy Niamh Smyth asked the Minister for Finance if the 0% VAT rate introduced on newspapers on 1 January 2023 was passed on to the consumer with a price reduction, given the price of nearly all newspapers has remained the same; and if he will make a statement on the matter. [13629/23]
View answerThe Deputy should note that pricing decisions in relation to goods or services are a matter for the businesses supplying them. There is no obligation for a business to pass on savings to customers arising from a reduced rate of VAT.
342. Deputy Colm Burke asked the Minister for Finance if he will give consideration to the granting of enhanced tax credits specifically targeted at young adult carers, to enable them to remain in the workforce; and if he will make a statement on the matter. [13745/23]
View answerAs the Deputy will be aware, this Government remains fully committed to supporting and protecting those most vulnerable in society through both tax and expenditure measures.
The Irish tax code provides for a wide range of tax credits, reliefs and allowances for individuals who are carers or have care responsibilities. Eligibility for these tax credits, reliefs and allowances is based on the conditions and criteria attached to each individual measure and the claimant’s personal circumstances.
Revenue pro-actively corresponds with different cohorts of taxpayers to publicise the range of credits which they may be entitled to claim, however any individual who requires assistance in determining the full range of credits and reliefs which he or she may be entitled to claim, based on their personal circumstances, should contact the Revenue office which deals with his or her tax affairs. Contact details for various Revenue offices can be found at the following link: www.revenue.ie/en/contact-us/index.aspx.
Furthermore, this Government believes that taxpayers enter the income tax net and the higher rate of income tax at too low an income level. Accordingly, over the last two Budgets, the Government have introduced income tax packages which have effectively indexed the main personal tax credits and income tax standard rate bands within the fiscal resources available. For example, the single person and the employee tax credits have been increased by €125 or 7.6 per cent from €1,650 to €1,775. As a result the entry point to income tax for a single individual has increased from €16,500 to €17,750. In addition, the single person standard rate band has increased by €4,700 or 13.3 per cent from €35,300 to €40,000. These changes were carefully designed to ensure that workers, including those with care responsibilities, did not find themselves in a position where they pay income tax for the first time or more income tax solely because of wage growth inflation.
In relation to the Deputy’s specific question, the position is that I have no plans to enhance or introduce tax credits specifically targeted at young adult carers. For the Deputy’s convenience details of the main credits, reliefs and allowances available for individuals who are carers or have care responsibilities are set out below, with further details available at the following link: www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/index.aspx.
It is important to point out that these tax credits, reliefs and allowances are available in addition to other supports provided by Government bodies such as the Department of Health, the Department of Social Protection and the Department of Children, Equality, Disability, Integration and Youth to assist those with caring responsibilities.
Exempt Income
An exemption from income tax applies in respect of the carer’s support grant and the domiciliary care allowance, which are payments made by the Department of Social Protection.
Standard Rate Tax Band
The standard rate band, which is the amount of an individual’s income that is subject to tax at the standard rate of tax (currently 20 per cent), is provided for in section 15 of the Taxes Consolidation Act (TCA) 1997.
The standard rate tax band due to a single person or surviving spouse or civil partner for the 2023 year of assessment is €40,000. This increases to €44,000 where the individual is entitled to the single person child carer tax credit (see below).
For jointly assessed married persons or civil partners, the standard rate tax band due depends on whether both parties to the couple have their own source of income. If only one party is in receipt of income, the standard rate tax band due to the couple for the 2023 year of assessment is €49,000. This can be further increased by up to €31,000, raising the total standard rate band due to the couple to a maximum of €80,000. The actual increase applicable in such cases is the lesser of €31,000 or an amount equal to the specified income of the lower earning party.
Single Person Child Carer Tax Credit
The single person child carer tax credit is provided for in section 462B TCA 1997 and is available to any single person who has a “qualifying child” resident with him or her for the whole or greater part of the year of assessment. The credit is granted in the first instance to the primary claimant who may, if he or she so wishes, relinquish it for the year of assessment to a secondary claimant. A single person, for this purpose, is an individual who is not jointly assessed to tax as a married person or civil partner, living with his or her spouse or civil partner or cohabiting with a partner.
A qualifying child includes a child born in the tax year, a child who was under the age of 18 at the start of the tax year, or a child who was over the age of 18 at the start of the tax year if he or she is either in full-time education or is permanently incapacitated by reason of mental or physical infirmity from maintaining themselves (having become so incapacitated before reaching the age of 21 or whilst in full-time education).
The tax credit due, where the relevant conditions are met, is valued at €1,650 and only one credit is due to a claimant in the year of assessment irrespective of the number of qualifying children who reside with him or her.
Incapacitated Child Tax Credit
The incapacitated child tax credit is provided for in section 465 TCA 1997 and is available to any individual who has living, at any time during a year of assessment, a child who:
1. if under the age of 18, is permanently incapacitated by reason of mental or physical infirmity to such an extent that there is a reasonable expectation that the child would be incapacitated from maintaining him or herself if they were over the age of 18; or
2. if over the age of 18, is permanently incapacitated by reason of mental or physical infirmity from maintaining him or herself and had become so incapacitated either before attaining the age of 21 or whilst in full-time instruction at any university, college, school or other educational establishment.
The tax credit due, where the relevant conditions are met, is valued at €3,300 and a separate credit is available in respect of each child who meets the conditions set out above. Where the claimant qualifies for both this tax credit and the dependent relative tax credit in a year of assessment, he or she will be granted this credit only.
Dependent Relative Tax Credit
The dependent relative tax credit is provided for in section 466 TCA 1997 and is available to any individual who maintains, at his or her own expense:
-any relative (including the relative of a spouse or civil partner) who is incapacitated by old age or infirmity from maintaining himself or herself;
-either his or her own or their spouse or civil partner’s widowed parent (whether incapacitated or not); or
- a child of either the claimant or his or her spouse or civil partner, who resides with the claimant and on whose services the claimant, by reason of old age or infirmity, is compelled to depend.
In addition, any income due to the person being maintained by the claimant must not exceed the specified amount which, for the 2023 year of assessment, is €16,780.
The tax credit due, where the relevant conditions are met, is valued at €245 and a separate credit is available in respect of each person the claimant maintains. As noted above, this credit cannot be claimed in conjunction with the incapacitated child tax credit.
Home Carer’s Tax Credit
The home carer tax credit is provided for in section 466A TCA 1997 and is available to jointly assessed married couples or civil partners where one spouse or civil partner (the ‘home carer’) stays at home to take care of a dependent person.
A dependent person includes:
- a child in respect of whom the home carer, or his or her spouse or civil partner, is in receipt of child benefit;
- an individual aged 65 years or over; or
- an individual who is permanently incapacitated by reason of mental or physical infirmity.
The dependent person must normally reside with, or in close proximity to, the married couple or civil partners for the relevant year of assessment.
To obtain the full tax credit, which is €1,700 for the 2023 year of assessment, the home carer’s income for the year must not exceed €7,200. Carer’s Benefit and Carer’s Allowance received by the home carer is disregarded for this purpose. Where the home carer’s income is between €7,200 and €10,600 a partial credit will be available, but the credit available will be reduced to nil where the home carer’s income exceeds €10,600.
In addition, married couples or civil partners cannot claim both the increased standard rate band for dual income couples and the home carer tax credit in the same year of assessment. In practice, Revenue will grant whichever relief will provide the most beneficial treatment to the couple.
Employing a Carer
Relief for the cost of employing a carer to care for an incapacitated person is provided for in section 467 TCA 1997 and is available to any individual who incurs costs in employing another person to care for his or her spouse or civil partner, or a relative of their own or of their spouse or civil partner.
The incapacitated individual can be the claimant themselves, if he or she is the one who incurs the relevant cost.
The relief available, where the relevant conditions are met, is given by way of a deduction and is equal to the lesser of the cost incurred by the claimant and €75,000.
This relief cannot however be claimed where the person employed to take care of the incapacitated person is the same individual in respect of whom the claimant receives either the incapacitated child or dependent relative tax credits.
Finally, it is important to note that the cumulative relief available to individual taxpayers cannot exceed the total amount required to reduce his or her income tax liability to nil.
343. Deputy Pearse Doherty asked the Minister for Finance the full-year cost of mortgage interest relief against rental income in the years 2020, 2021 and 2022. [13947/23]
View answer344. Deputy Pearse Doherty asked the Minister for Finance if there is a cap on the total amount of mortgage interest relief that can be claimed by a landlord against rental income; and if he will make a statement on the matter. [13948/23]
View answer345. Deputy Pearse Doherty asked the Minister for Finance the estimated cost in 2023 of mortgage interest relief against rental income in view of rising mortgage interest rates; if his Department has assessed the increased cost in light of changing monetary policy; and if he will make a statement on the matter. [13949/23]
View answer346. Deputy Pearse Doherty asked the Minister for Finance the full-year cost of mortgage interest relief against rental income in the years 2016 to 2022, inclusive. [13950/23]
View answerI propose to take Questions Nos. 343, 344, 345 and 346 together.
Section 97 of the Taxes Consolidation Act 1997 (TCA) sets out the deductions allowable in computing rental income chargeable to income tax or corporation tax under Case V of Schedule D. Income chargeable under Case V is computed on the gross amount of rent receivable less allowable expenses incurred in earning that rent, as specified in section 97(2). Among other things, these expenses include 100% interest relief on loans used to purchase, improve or repair a rental property, colloquially referred to as mortgage interest relief for landlords.
I am advised by Revenue that data on the rental sector including incomes and deductions are compiled and published on the Revenue website at www.revenue.ie/en/corporate/information-about-revenue/statistics/income-distributions/rental-income.aspx
However, as a taxpayer’s tax liability is calculated based on the combination of all incomes, reliefs, credits and deductions, Revenue advise that it is not possible to provide an exact tax cost for the allowable interest deduction on loans used to purchase, improve or repair a rental property. This is just one of a suite of allowable expenses which landlords may deduct from their gross rental income and, as a demand-led expenditure, it is not possible to forecast with certainty the expected cost outturn for 2023, particularly in light of recent fluctuations in interest rates.
In order to estimate tentative costs of the measure to date, it is possible to look at the amounts claimed and apply an average marginal rate of tax of 30%. Using this approach, Revenue have provided the table below, which sets out the estimated tax costs of the allowable interest against residential rental income for the years 2016 to 2020 (the most recent year for which fully analysed data are available).
These costs are based on the amounts claimed regardless of the level of residential rental income received. In cases where the rental income was lower than the expenses declared, the full tax cost of each item would not accrue. Therefore, the costs outlined in the table can only be considered as broadly indicative of the estimated tax cost for a given year.
|
Year |
Allowable interest claimed on residential rental income €m |
Estimated tax cost using average marginal rate of 30% €m |
|
2016 |
388 |
116 |
|
2017 |
370 |
111 |
|
2018 |
357 |
107 |
|
2019 |
377 |
113 |
|
2020 |
344 |
103 |
There is currently no cap on the amount of mortgage interest relief that can be claimed by a landlord against rental income, provided that the loan complies with the conditions in section 97(2)(e) of the TCA. Where borrowed money is used to purchase, improve, or repair an entire premises, but only part of the premises is let, the interest must be apportioned between qualifying and non-qualifying interest on a just and reasonable basis; for example, on the basis of the floor area that is let/not let.
Between 7 April 2009 and 31 December 2018 there was a cap on the amount of interest relief that could be claimed as a deduction for rented residential premises. The deduction against rental income was restricted to a percentage of the interest as follows:
· interest accrued on or after 7 April 2009 to 31 December 2016 – 75%;· interest accrued from 1 January 2017 to 31 December 2017 – 80%;· interest accrued from 1 January 2018 to 31 December 2018 – 85%.
For the purposes of the restriction, Revenue advise that interest was treated as accruing on a daily basis and the date the loan was taken out was not relevant.
Finance Act 2018 restored full deductibility of interest accruing on such loans from 1 January 2019.
In order to qualify for interest deductibility, a rented residential property must be registered with the Residential Tenancies Board. Further guidance as to the deductibility of loan interest in computing rental income is provided for in Tax and Duty Manual Part 04-08-06, available at: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-04/04-08-06.pdf.
