Written Answers Nos. 194-213
194. Deputy Patrick Costello asked the Minister for Finance the efforts being made by his Department to alleviate the cost of mortgage increases, in light of recent ECB interest rate increases; and if he will make a statement on the matter. [30586/23]
View answerThe formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB) and, as the Deputy is aware, the ECB has increased official interest rates over recent months as it attempts to combat inflation. The level of official interest rates influences the overall level of interest rates throughout the economy. However, the setting of retail lending rates by individual lenders is a commercial matter for that lender and I have no function or role in such decision making matters by financial institutions. A number of measures are in place to support households facing rising interest rates. In particular, the Central Bank has introduced a number of increased protections for variable rate mortgage holders which can which help mortgage holders identify lower cost mortgage options.
Firstly, it made changes to the Consumer Protection Code to require mortgage creditors to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates.
Secondly, it also increased the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.More recently, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers. With respect to mortgages, the Central Bank is especially focused on ensuring that firms have the resources and arrangements in place to assess applications from existing and new or switching borrowers in a manner that is timely and based on prudent lending standards applied consistently across all applicants.
It should also be noted that the Government has responded swiftly and decisively, multiple times, to help to offset the most severe impacts of inflation, with a particular focus on protecting the most vulnerable.
Overall, €12 billion in direct relief has been made available to counter the effects of inflation, with the policy response designed to avoid generating second round effects that could lead to an inflationary spiral. This has helped many households, including mortgaged households, with the increased costs of living.
195. Deputy Brian Leddin asked the Minister for Finance if, in the context of the higher rate of VAT at 23% which is charged to customers who undertake car rental and car sharing journeys for a period of five weeks or more cumulatively in a given full year, he will outline the full-year VAT yield arising from both the 13.5% and 23% VAT rates; and if he will make a statement on the matter. [30609/23]
View answer196. Deputy Brian Leddin asked the Minister for Finance if he will provide details on the projected difference in annual VAT revenue for a scenario whereby a reduced VAT rate of 13.5% would apply to car rental and carsharing journeys that occurred cumulatively instead of consecutively for journeys of five weeks or more per annum; and if he will make a statement on the matter. [30610/23]
View answerI propose to take Questions Nos. 195 and 196 together.
I am informed by Revenue that a breakdown of net tax receipts, including VAT, by economic sector is available on the Revenue website at: revenue.ie/en/corporate/information-about-revenue/statistics/receipts/receipts-sector.aspx
VAT registered persons are associated with a particular economic sector using the NACE classification. However Revenue does not have data to provide a breakdown of the costs associated with the transport and storage sector. It is therefore not possible to provide the details requested by the Deputy.
197. Deputy Rose Conway-Walsh asked the Minister for Finance for an update on the proposed digital euro; and if he will make a statement on the matter. [30631/23]
View answerIreland is supportive of the examination of the possibility of a digital euro by the EU institutions. A properly-designed digital euro has the potential to unlock major benefits for citizens, businesses, Member States and the overall functioning of our economic and monetary union. It would also contribute towards digitalization efforts within our economies.
At the same time, it could have a number of important economic and societal implications. There are a number of important technical questions to be examined, and experimentations to be done to ensure the robustness and resilience of a digital euro before it is introduced on a large scale.
The ECB published an initial report on October 2020, which examined the idea of Central Bank Digital Currency (CBDC), a “digital euro”. The ECB launched the investigation phase of the digital euro project in October 2021. The investigation phase aims to address key issues regarding design and distribution and is expected to end in October 2023. This phase does not prejudge any future decision on the possible issuance of a digital euro.
The European Commission is expected to propose a Regulation to establish a digital euro in Q2 2023 and the ECB will accommodate any necessary adjustments to the design of the digital euro that may emerge from legislative deliberations.
The ECB Governing Council will review the outcome of the investigation phase in autumn 2023 and decide, on this basis, whether or not to move to a realisation phase. It is important to note that this phase is not the issuance of a digital euro but a further period to prepare for a digital euro issuance.
Ireland therefore supports the work of the European Central Bank and the European Commission as they examine important technical questions to ensure the robustness and resilience of a digital euro before it is introduced on a large scale.
Additionally, further work is required to engage EU citizens, articulating and proving the practical use value that a retail digital euro would have for them, if any
198. Deputy Rose Conway-Walsh asked the Minister for Finance for an update on domestic and EU plans to protect the use of cash in our society and economy; and if he will make a statement on the matter. [30632/23]
View answerIn 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. There has also been 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.
Cash usage can be looked at from two sides: access to cash and acceptance of cash.
In November 2022, the Retail Banking Review was published by my Department. It concluded that, despite the decline seen in cash usage, cash remains an important element of the payments system and the broader economy and it is essential that cash remains readily available to customers through ATMs and other means across the country. It also concluded that there was still reasonable access to cash at the moment but noted that neither the Minister for Finance, nor the Central Bank, had any powers to ensure this.
Accordingly, the Review recommended that the Department of Finance should develop Access to Cash legislation and prepare heads of a bill in 2023 with the initial objective of developing criteria that would secure access to cash at about the levels prevailing in December 2022 but also provide for such criteria to be amended appropriately in future as and when cash usage declines further. The key objective is to ensure that evolution of the access to cash infrastructure does not move ahead of society's needs and expectations and that the future evolution is handled in a fair, transparent and equitable manner.
Under the bill, ATM operators and CIT companies will be also be authorised and supervised by the Central Bank in order to protect the resilience of the cash system.
The Retail Banking Review also recommended that the Department of Finance should lead on the preparation of a new National Payments Strategy to be ready in 2024. The Strategy should be informed by, and aligned with, the retail payment strategies of both the EU Commission and the Eurosystem.
The Strategy will set out a roadmap for the future evolution of the entire payments system, taking account of developments in digital payments, the use of cheques and other issues. It will also examine how future changes should be made to the legislative Access to Cash criteria.
Importantly, it will consider and consult on whether to legislate pre-emptively to give the Minister for Finance the power to require certain classes of firms, sectors or sub-sectors to accept or facilitate (to an appropriate level) the acceptance of cash and whether it should be Government policy that public bodies should accept or facilitate the acceptance of cash for the payment of goods, services, taxes, levies, fees or charges.
Finally, at EU level, it is expected that the Commission will publish a proposal on legal tender later this month that will likely include measures that will aim to ensure everyone in the Euro Area will have sufficient and effective access to cash and that there is greater acceptance of cash across the board.
199. Deputy Aodhán Ó Ríordáin asked the Minister for Finance if there are any plans to bridge the gap between the tax relief rates available to drivers and passengers under the disabled drivers and disabled passengers scheme, as passengers are currently entitled to €6,000 more a year than drivers; and if he will make a statement on the matter. [30640/23]
View answerThe Disabled Drivers and Disabled Passengers (Tax Concessions) Scheme (DDS) provides relief from Vehicle Registration Tax and VAT on the use of an adapted car, as well as an exemption from motor tax and an annual fuel grant.
The Scheme is open to severely and permanently disabled persons as a driver or as a passenger and also to certain charitable organisations. In order to qualify for relief, the applicant must hold a Primary Medical Certificate issued by the relevant Senior Area Medical Officer (SAMO) or a Board Medical Certificate issued by the Disabled Driver Medical Board of Appeal. Certain other qualifying criteria apply in relation to the vehicle, in particular that it must be specially constructed or adapted for use by the applicant.
To qualify for a Primary Medical Certificate an applicant must be permanently and severely disabled. The terms of the Disabled Drivers and Disabled Passengers Scheme set out six medical criteria as legislatively mandated, at least one of which is required to be satisfied in order to obtain a Primary Medical Certificate.
The maximum amount of VRT/VAT relief provided and the length of time a vehicle must be retained depends on the applicant and the nature of adaptations as below.
|
Category |
Adaptations |
Specific Adaptations |
Extensive Adaptations |
Wheelchair AccessibleAdaptations |
|
Driver |
€10,000 |
€16,000 |
€22,000 |
€48,000 |
|
Passengers |
€16,000 |
n/a |
€22,000 |
€32,000 |
|
Organisations |
€16,000 |
n/a |
€22,000 |
n/a |
|
Organisations (5 or more disabled persons) |
no limit |
n/a |
||
|
Vehicle must be held for |
2 years |
3 years |
6 years |
6 years |
Vehicles may be new, imported (not previously registered in the State) or used (previously registered in the State). Where applicable VRT exemption or repayment is first provided, then VAT repayment on adaptation and purchase costs, up to the allowable limit. Any vehicle, including electric vehicles, can avail of DDS reliefs subject to meeting qualifying conditions in respect of the individual and of the vehicle.
Revenue information suggests that these levels of relief are sufficient, and in many cases are generous, relative to the VAT charged on adaptation costs, noting that the DDS is intended as a vehicle adaptation scheme. Thus, there are no plans to amend the levels of relief.
200. Deputy Mattie McGrath asked the Minister for Finance if he will investigate if, and the reason why, NAMA-NALM is permitted to use an Irish citizen’s personal tax number in its own interest (details supplied); and if he will make a statement on the matter. [30642/23]
View answer201. Deputy Mattie McGrath asked the Minister for Finance to investigate the reason NAMA-NALM was able to use the personal tax number of a person (details supplied)); and if he will make a statement on the matter. [30643/23]
View answerI propose to take Questions Nos. 200 and 201 together.
I am advised by NAMA that it has acted at all times in accordance with its legal obligations to the Revenue Commissioners on the payment of relevant taxes and information required thereon. The individual referred to is in ongoing litigation with NAMA. As it is before the Courts, it would not be appropriate for me, as Minister for Finance, to make any comment.
202. Deputy Richard Bruton asked the Minister for Finance if he is aware that the CSO is showing that the cost of home insurance has gone up by 23% in the past six months; if he has assessed the forces behind this rise; if further investigation or new policy initiatives are warranted; and if he will make a statement on the matter. [30755/23]
View answerI am aware that home insurance costs may be rising for some consumers. However, with regard to the Deputy's question, I note that according to the latest CSO Consumer Price Index data for May 2023, the price of ‘insurance connected with the dwelling was 18.9 per cent higher year-on-year, although it did reduce by 2 per cent in the month from April 2023. Over the period related to the the question, I note that it rose by 9.2 per cent in the last six months (compared to November 2022).
A key driver of home insurance is the property rebuild cost (or reinstatement value), which is based on the total cost to reconstruct the property. As the Deputy will be aware, construction costs are currently subject to intense inflationary pressure. The latest CSO Wholesale Price Index for May 2023 illustrated that the cost of building and construction “materials” rose by 9 per cent in the year. As construction costs generally increase, rising rebuild and repair costs can also be expected to impact upon home insurance premiums.
Neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products, as this is a commercial matter which individual companies assess on a case-by-case basis. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).
Notwithstanding this, the Government is keenly aware of the impact that insurance costs can have on many groups – including homeowners - and has therefore prioritised reform of this sector via the Action Plan for Insurance Reform. Regarding the cost of home insurance, a key Action Plan deliverable has been the Central Bank’s ban on price walking. This pro-consumer ban will protect customers who prefer to stay with their current home insurer from being penalised just for doing so, while still allowing others to benefit from ‘switcher’ discounts from providers who may also seek to compete on price.
However, it is important to understand that the price walking ban does not mean home insurance premiums cannot rise, as they are affected by many factors, including current construction inflation. It is therefore important for policyholders to compare with other providers to ascertain if they can get a better consumer-focused deal by switching. Finally, it should be noted Insurance Ireland has detailed advice around home insurance and the benefits of shopping around on its consumer website, www.understandinginsurance.ie
203. Deputy Holly Cairns asked the Minister for Finance if he will provide an update on the provision of a grant-aided, needs-based vehicular adaptation scheme to replace the disabled drivers and disabled passenger's scheme; and if he will make a statement on the matter. [30770/23]
View answerThe National Disability Inclusion Strategy Transport Working Group (TWG), comprising members from a range of Departments, agencies and Disabled Persons Organisations, was tasked under Action 104 to review all Government-funded transport and mobility supports for those with a disability, including the Disabled Drivers and Disabled Passengers Scheme (DDS). The NDIS TWG final report was published on 24th February 2023 and welcomed the proposal put forward by my Department that the DDS should be replaced with a needs-based, grant-aided vehicular adaptation scheme, i.e. to provide direct financial assistance to individuals needing vehicle adaptations according to their needs, to meet their personal transport requirements and ultimately to facilitate independence and participation in society.
The NDIS TWG final report also noted both the outdated approach of the Disabled Drivers and Disabled Passengers Scheme and the fact that the scheme needed to be addressed as a matter of priority. The Working Group agreed that proposals in this regard was a clear deliverable on which work could begin in the relatively near future.
I very much welcome the Taoiseach’s recent comments that he will convene all the relevant Departments to develop meaningful proposals arising from the Working Group’s final report and my officials in the Department of Finance will engage constructively in that process.
204. Deputy Brian Stanley asked the Minister for Finance the projected revenue raised in first-year 2024 and full-year terms from the scheduled increase in carbon tax on 1 May 2024 and 9 October 2024, respectively and combined. [30794/23]
View answerI am advised by Revenue that the anticipated revenues to be raised in first-year (2024) and in a full-year from the legislated increases in the carbon tax in May 2024 and October 2024 are estimated as follows.
|
Estimate |
Carbon €m |
VAT €m |
Total €m |
|
First Year |
43.0 |
3.8 |
46.8 |
|
Full Year |
151.1 |
15.1 |
166.2 |
These estimates are based on the most recent full year data available and do not account for any future behavioural changes.
205. Deputy Willie O'Dea asked the Minister for Finance if he is aware that the residential zoned land tax, as currently constituted, could have profound implications for many farmers and small landowners who are not developers, but have owned their land for generations; if the Government will provide exemptions from the residential zoned land tax for individuals who are not developers; and if he will make a statement on the matter. [30816/23]
View answerFinance Act 2021 introduced Part 22A Residential Zoned Land Tax (RZLT) into the Taxes Consolidation Act 1997. The RZLT is designed to prompt residential development by landowners of land that is zoned for residential or mixed-use (including residential) purposes and that is serviced.
RZLT is an annual tax, calculated at a rate of 3% of the market value of the land within its scope. The tax will be due and payable from 2024 onwards in respect of land which fell within the scope of the tax on or before 1 January 2022. Where land is zoned or serviced after 1 January 2022, the tax will be first due in the third year after the year in which it comes within scope.
It is important to note that, to come within the scope of RZLT, the land, including farmland, must be both zoned for residential use and serviced. Land that is zoned for residential use, but which is not currently serviced, is not within the scope of the tax and will only come within the scope of the tax should the land become serviced at some point in the future.
Land will be considered to be serviced for the purposes of the tax where it is reasonable to consider that the land has access to, or may be connected to, public infrastructure and facilities, including roads and footpaths, public lighting, foul sewer drainage, surface water drainage and water supply, necessary for dwellings to be developed on the land and with sufficient service capacity available for such development.
A draft RZLT map was published by local authorities on 1 November 2022. The purpose of the draft map was to allow landowners, including farmers, to see if their land is within the scope of the tax. If a landowner identified that their land is included on the draft map and believes that it should not be, they had the opportunity to make a submission to the local authority by 1 January 2023 seeking to have the map updated and their land removed from the map, or they could have sought to have their land rezoned.
The local authorities considered the submissions received and made written determinations on whether the land should stay on the map or be removed from it by 1 April 2023. If a landowner requested a rezoning of their land, the local authority considered the request and, if appropriate, commenced a variation procedure to alter the zoning of the land. This variation procedure, and the local authority’s decision on whether or not to commence one, is part of the normal zoning process. If the landowner disagreed with the determination, they could appeal to An Bord Pleanála.
Agricultural land which is zoned solely or primarily for residential use meets the criteria set out within the legislation and therefore falls within the scope of the tax. These zonings are considered to reflect the housing need set out within the core strategy for the relevant local authority area and landowners within such zonings may fall within the scope of the tax, in the interests of ensuring an appropriate supply of housing on zoned lands.
It should also be noted that, while residential properties may appear on the local authority RZLT maps, residential property which is subject to LPT is exempt from RZLT. Further information regarding RZLT maps and related submission/variation processes are available on each local authority website, or at www.gov.ie/rzlt.
Furthermore, Finance Bill 2022 introduced an exemption for land that is within the scope of the tax but is subject to a contract that precludes the landowner from developing it. For the exemption to apply, the contract must have been entered into prior to 1 January 2022, i.e., prior to the introduction of RZLT. For example, where a farmer leased land prior to 1 January 2022 and the requisite conditions are met, the farmer may claim an exemption from the tax for the period of the lease.
206. Deputy Duncan Smith asked the Minister for Finance if, when a company is paying a pension out of its company funds, the pension is liable to the pension levy; and if he will make a statement on the matter. [30846/23]
View answerI assume the Deputy is referring to the pension levy which was charged on pension schemes from 2011 to 2015 in accordance with section 125B of the Stamp Duties Consolidation Act 1999.
The levy was introduced in the wake of the financial crises, at a time when the economy was in very serious difficulties. It was charged on the market value of assets in pension schemes held on 30 June in each year at a rate of 0.6% (2011 to 2013), 0.75% (2014) and 0.15% (2015).
The levy was discontinued from 2016 and currently, private pension holders are not required to pay a pension levy. Liability for the levy rested with trustees of pension schemes and others responsible for the management of pension fund assets.
Under the legislation, the payment of the levy was treated as a necessary expense of a pension scheme and it was a matter for the trustees or insurers to decide when and how the levy should be passed on to scheme members and to what extent, given the particular circumstances of the pension schemes for which they were responsible. I have no detailed information on the decisions made by pension fund trustees or others in relation to the passing on of the full or a partial impact of the levy to the current, deferred or former (retired) members of pension schemes.
I am aware, however, that where trustees have made the decision to pass on the impact or part of the impact of the levy to pensioners that a smaller reduction in pension payments over the lifetime of the pension may have been made in many cases in preference to a larger reduction over a shorter period.
207. Deputy Christopher O'Sullivan asked the Minister for Finance if he intends to increase the tax exemption of €200 per year on the income received by domestic micro-generators from their suppliers by way of the CEG. [30900/23]
View answerMicro-generation of electricity is the small-scale production of electricity by consumers who generate electricity at their own homes for their own consumption and sell the excess electricity produced. Section 216D in the Taxes Consolidation Act 1997 provides for an exemption of up to €200 from income tax, USC and PRSI for certain profits arising to a qualifying individual who generates energy from renewable, sustainable or alternative energy sources for their own consumption. The profits which are exempted are those from the generation of residual electricity at an individual’s qualifying residence from 1 January 2022 until 31 December 2024. Any income in excess of this €200 which is earned from micro-generated electricity must be declared by the individual on their annual tax return and will be subject to income tax, USC and PRSI in the usual manner. The exemption is available to any individual who is the electricity bill payer, and who resides in the property. If there are two or more people named on the electricity bill, each person may avail of the €200 exemption. The aim of the tax exemption is to remove the potential administrative barrier that could be created by the declaration and payment of tax on a relatively modest amount of income earned from the micro-generation of electricity from renewable, sustainable or alternative forms of energy. The €200 disregard was set to ensure that the majority of domestic renewables self-consumers, who typically have an installation of below 6kW, will pay no tax on income from this source. It is not intended to act as a financial incentive in and of itself. With regard to income, it is a general principle of taxation that, as far as possible, income from all sources should be subject to taxation. Ireland has a progressive income tax system which is structured such that the more income you have, the more tax you pay. As a person’s income increases they move up through the various rates and bands and, as a result, while the levels of net pay increase overall, the amount of tax they pay also increases. While decisions regarding taxation measures are usually made in the context of the annual Budget and Finance Bill process, I currently do not have any plans to increase the amount of the disregard.
208. Deputy Cathal Crowe asked the Minister for Finance if he is aware that owners of homes with defective concrete blocks are, in the main, unable to have their homes remortgaged; how he proposes to address this with pillar banks; and if he will make a statement on the matter. [30936/23]
View answerAs the Deputy will be aware, the Government response on the defective concrete block issue is primarily led by my colleague the Minister for Housing, Local Government and Heritage. Nevertheless, I recently met with the banking and insurance defective block redress group to discuss their real concerns on this issue, including in relation to mortgages and financing issues.
I understand the very difficult situation faced by homeowners whose houses are affected by defective concrete blocks, and the Government is determined to assist households in this situation. In relation to any request for new credit, while the decision on such applications is a commercial matter for individual lenders, I will engage with the banking sector with a view to addressing as far as possible the various banking related issues raised by the group.
I welcome the fact that Banking and Payments Federation Ireland also met the group and I understand that there will continue to be an engagement between the group, departments and the industry on these and other related matters.
209. Deputy Richard Boyd Barrett asked the Minister for Finance the full-year revenue that would be generated by increasing the corporate tax rate to 20% and 25%; and if he will make a statement on the matter. [30992/23]
View answerIreland’s corporate tax regime has been built on certainty and predictability, and the 12.5% corporation tax rate on trading income has been a cornerstone of that regime for over 20 years. This stability has enabled companies to plan long-term investments in Ireland, generating employment and increasing economic activity.
The Deputy will be aware that Ireland signed up to the OECD Two Pillar agreement in October 2021, including the agreement of a global minimum effective rate of 15%, on a jurisdictional basis, for in-scope entities. Work is ongoing with a view to introducing the necessary legislation in Finance Bill 2023, and the Deputy may be aware that a Feedback Statement containing draft approaches to key parts of the necessary legislation was published in March.
Ireland will continue to be able to offer a 12.5% rate for businesses out of scope of the agreement, i.e. businesses with revenues less than €750m. This means that over 95% of companies operating in Ireland are outside of the scope of the global minimum effective tax rate of 15% and they will continue to be taxed at the 12.5% rate.
On a straightforward, mathematical basis there would be a large theoretical yield from increasing the 12.5% trading rate of corporation tax to 20%. However, as has been demonstrated in research published by my Department and the ESRI, it is likely that such changes would lead to lower levels of economic activity and behavioural changes in the investment decisions of multinational companies. It is likely that this would result in lower employment in the multinational sector, leading to reductions in tax revenues across a number of tax heads. Therefore, it is not possible to accurately or robustly estimate the potential yield from an increase in the corporation tax rate as proposed by the Deputy.
210. Deputy Richard Boyd Barrett asked the Minister for Finance the full-year revenue that would be generated by imposing a minimum effective corporate tax rate of 15% on pre-tax gross trading profits before deductions, reliefs and allowances and assuming no behavioural change; and if he will make a statement on the matter. [30993/23]
View answerThe trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%. Some of the main features of the current corporation tax regime are its simplicity and that it applies to a broad base. Changing this rate (or imposing additional levies on corporate profits) would involve increased complexity and could change the attractiveness of Ireland's corporate tax offering.
It is my understanding that the Deputy is referring to the gross trading profits of companies data which is released annually by Revenue. As with individual income taxpayers, companies can use net credits, deductions and reliefs against their profits to reduce taxable income or CT payable. For example, companies are entitled to capital allowances in respect of certain expenditure and these can be set against profits and, where a company has losses or carries forward losses from a previous accounting period (subject to conditions), these can be used to offset against its CT liability in a variety of ways. Loss-relief is a standard feature of corporation tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another.
In October 2021 Ireland, along with almost 140 other countries in the OECD/G20 Inclusive Framework, signed up to an historic agreement to reform the international tax framework as it applies to large corporate groups. Building on the original Base Erosion and Profit Shifting (BEPS) project, the agreement contains a two-pillar solution to address the tax challenges arising from digitalisation and globalisation. Recognising how multi-national enterprises (MNEs) across the globe now operate commercially and generate value, this significant reform will ensure that the international tax framework keeps pace with these developments in a coordinated way.
Pillar Two of the agreement will see the adoption of a global minimum effective tax rate of 15% applying to multinational companies with global revenues in excess of €750m. Ireland will retain its 12.5% corporation tax rate on trading profits for the 95% of companies in Ireland that are out of scope of the agreement.
Pillar Two will be implemented in Ireland largely via the EU Minimum Tax Directive, which was agreed in December 2022 and has a transposition deadline of the end of 2023. Work on implementing the Directive is well underway in my department.
It is important to recognise that the minimum corporate tax rate is only one element of the OECD Two Pillar agreement. Any projected changes to corporation tax yields following implementation must also take into account Pillar One, which provides for a reallocation of certain profits to market jurisdictions. An initial estimate of the potential cost of implementation of both pillars of the OECD agreement in terms of reduced tax receipts was published in 2020 as being potentially in the region of €2 billion per annum - approximately 20% of CT revenue at that time. This remains as the estimate used for budgetary purposes currently as it continues to be very difficult to accurately estimate the full impact while so many aspects of the OECD agreement remain undecided.
211. Deputy Richard Boyd Barrett asked the Minister for Finance the latest available figures for total pre-tax gross corporate trading profits for 2022; and if he will make a statement on the matter. [30994/23]
View answerI am advised by Revenue that the latest available information from tax returns in relation to corporate trading profits is for the year 2021 and is published on the Revenue website at: www.revenue.ie/en/corporate/information-about-revenue/statistics/income-distributions/ct-calculation.aspx Additionally, further analysis of these returns and information in relation to Corporation Tax payments in 2022 is published at: www.revenue.ie/en/corporate/documents/research/ct-analysis-2023.pdf Returns for 2022 are due mainly in the second half of this year and statistical analysis of these returns is likely to be published in the first half of 2024.
212. Deputy Richard Boyd Barrett asked the Minister for Finance the full-year revenue that would be generated by imposing a financial transaction tax of 0.1% on shares and securities and 0.01% on derivatives; and if he will make a statement on the matter. [30995/23]
View answerI am taking this question to refer to the model of Financial Transactions Tax proposed by the European Commission, initially in 2011 and then revised under the EU’s enhanced cooperation procedure in February 2013. The proposed rate on exchanges of shares was 0.1% and the proposed rate for derivative transactions was 0.01%.
Based on the data currently held by the Revenue Commissioners or my Department it is not possible to accurately estimate the yield of a Financial Transactions Tax modelled on that proposed by the EU, i.e. a tax of 0.1% on share and bond transactions and 0.01% on derivative products. An important further consideration would also need to be given as to whether the existing Stamp Duty regime could co-exist with any Financial Transactions Tax proposal which might be implemented in such a scenario.
Ireland already has a tax on financial transactions, a Stamp Duty on transactions in shares, stocks and marketable securities that currently stands at 1%. I am advised by Revenue that the yield from this tax has been in the range of c. €380 to €500 million in the last five years. This data along with other information on stamp duty receipts is available on the Revenue website. Instruments used in the financial services industry such as derivatives are generally exempt from stamp duty, unless they relate to immovable property in Ireland or shares in Irish registered companies.
For additional information, in relation to a possible Financial Transactions Tax as an own resource for the EU budget, leaders agreed as part of the July 2020 Multi-annual Financial Framework (MFF) agreement that a Financial Transactions Tax may form part of a package of new own resources to finance the EU budget. However, at this point, no such proposal has been put forward by the Commission. If and when this happens, I will examine any proposal based on its merits and ensure it meets the criteria of fairness and equity.
213. Deputy Richard Boyd Barrett asked the Minister for Finance the full-year revenue that would be generated disallowing historic losses (losses forward) as tax deductions for banks and insurance companies; and if he will make a statement on the matter. [30996/23]
View answerI am advised by Revenue that information in respect of losses forward by sector for the most recent years available is published in Revenue’s annual report on Corporation Tax, available on the Revenue website at www.revenue.ie/en/corporate/documents/research/ct-analysis-2023.pdf
Data in respect of banks and insurance companies only is not available. However, Figure 5 in the Revenue paper shows the amount of losses forward claimed by banks and other financial institutions is €99.3 billion in the year 2021. Approximately €2.7 billion of this was used in that year giving rise to a tax cost of approximately €0.3 billion. Therefore, the annual yield from disallowing claims in respect of historic losses for banks and other financial institutions would be in the region of this amount, assuming no significant change in the financial performance of the entities concerned.
As the Deputy is aware, loss relief for corporation tax is a long-standing feature of the Irish corporate tax system and a standard feature of corporation tax systems in most OECD countries. It recognises the fact that a business cycle runs over several years and that it would be unfair to tax income earned in one year and not allow relief for losses incurred in another. Loss relief works by allowing a deduction for losses incurred in one accounting period against profits earned in another period. I would also note that changes to tax law are generally made on a prospective basis, so any losses already in the corporation tax system would not typically be affected.
Should such a restriction be introduced, it could have knock-on implications for the cost of lending and deposits, and for the cost of insurance for consumers and businesses in Ireland. It could also be expected to decrease the value of the State’s remaining shareholdings in the banks, because tax losses forward are included as a “deferred tax asset” on a company’s balance sheet and any restriction would lead to write-downs in the value of those assets.
As regards Irish banks, it should also be noted that they do currently pay some Irish corporation tax, as the tax losses forward do not shelter profits made in all their corporate entities.
The Deputy may recall that, in 2018, Department of Finance officials produced a detailed technical note for the Committee on Finance, Public Expenditure and Reform, and Taoiseach on the subject of both bank losses and corporation tax losses more generally. This paper is available online at www.gov.ie/en/publication/436ff7-technical-note-on-the-potential-consequences-of-changes-to-the-treat/. It was further updated and re-circulated to members during the 2019 Finance Bill process.
