Written Answers Nos. 81-100
85. Deputy Brian Leddin asked the Minister for Finance if he will request that his Department undertake a vehicle taxation report considering the introduction of weight and size-based taxes on private vehicles in Ireland to incentivise a switch to smaller and lighter vehicles, similar to the weight tax in other jurisdictions; and if he will make a statement on the matter. [51579/23]
View answerOfficials from my Department continue to monitor developments in the vehicle taxation area. New proposals are considered and current vehicle tax policies are kept under review as part of the Tax Strategy Group and Budgetary cycle. Going forward, it is possible that vehicle taxes may shift to a weight-based approach in order to protect the vehicle tax base.
Recently, other European countries such as Norway, Belgium and the France have introduced a form of weight based vehicle tax. However, it should be noted that the existing vehicle tax structures in the State currently have a very strong environmental rationale, with the more pollutant vehicles paying higher rates of tax. Additionally, as many heavier vehicles currently on the market are more pollutant – with the exception of large Electric Vehicles - those heavier vehicles incur higher rates of tax, between Motor Tax, Vehicle Registration Tax and the Nitrogen Oxide Charge. Vehicle weight generally correlates with vehicle emissions, therefore within the existing vehicle tax system the heaviest internal combustion engine cars are already subject to higher rates of tax whereas lighter, more efficient cars are subject to lower rates of tax.
Vehicle Registration Tax is an emissions-based tax and is calculated based on the Open Market Selling Price and tailpipe emissions of the vehicle. The rates were changed in Budget 2022 to further incentivise motorists in the market for a new car to make ‘greener choices’. The changes to the rates table increases Vehicle Registration Tax rates progressively from band 9 so that high emission vehicles pay more. This reflects the environmental rationale of the tax and underpins Government commitments to decarbonise road transport.
In recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles, Budget 2019 saw an introduction of a 1% surcharge on all diesel vehicles. Budget 2020 replaced the 1% surcharge with a surcharge tied to nitrogen oxide emissions levels based on the “polluter-pays” principle, where the greater the level of nitrogen oxide a car emits, the higher the surcharge. Budget 2021 saw an adjustment to the surcharge structure so as to underpin its environmental rationale and incentivise the uptake of cleaner cars.
The policy of changing the profile of vehicles registering in this country is working. Following the changes introduced in recent years, significant increases in EV registrations have been mirrored by decreases in the number of high emission vehicles. The middle emissions bands (where most of the volume lies) have also experienced a shift towards lower emission vehicles. The average emissions figure for all vehicles (new and used) in 2020 was 135.6 gCO2/km (band 14). This has fallen to 103.4 gCO2/km (band 7) for 2023 so far. This is clear evidence that vehicle taxation reform is leading to lower emission cars on our roads.
That said, the Budget 2024 Tax strategy Group paper made reference to future exploratory work around adding a weight component to VRT. This scoping work is looking at the possibility of taxation based on weight both in light of an additional way of discouraging larger and heavy vehicles (as the Deputy is referring to), and protecting the tax base as electrification of cars continues. In this regard work is ongoing as part of the TSG process and will be advanced within this policy assessment framework. Therefore I do not believe there is a need for a report.
Question No. 89 answered with Question No. 84.
90. Deputy Richard Boyd Barrett asked the Minister for Finance his views and recommendations with regard to introducing a wealth tax;; and if he will make a statement on the matter. [51575/23]
View answerAs the Deputy should be well aware, wealth can be taxed in a variety of ways, many of which are already levied here in Ireland.
These include Capital Gains Tax and Capital Acquisitions Tax, which are, in effect, taxes on wealth, in that they are paid by an individual or company on the disposal of an asset or the acquisition of an asset through gift or inheritance.
There is also Deposit Interest Retention Tax, which is currently charged at 33%, with limited exemptions, on interest earned on deposit accounts.
We should also not forget Local Property Tax, which is a tax based on the market value of residential properties.
Yet another is certain forms of Stamp Duty, which is charged in a number of ways, including on the acquisition of shares, stocks and marketable securities of Irish registered companies, and on the acquisition of property both residential and non-residential.
In total, the net receipts from these forms of tax came to approximately €4.32 billion in 2022, representing 5.2 per cent of the total net receipts.
It follows that any revenue raised from a wealth tax, no matter what form it takes, may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of a wealth tax.
Also, in examining the topic of a wealth tax, the Commission on Taxation & Welfare, which reported in 2022, identified challenges that would impede the implementation of such a tax. They concluded that a new tax on net wealth should not be introduced without first attempting to substantially amend Ireland’s existing taxes on capital and wealth. As an alternative to introducing a new tax on wealth, the Commission believes the more productive route is to re-examine the primary existing forms of wealth tax, CGT and CAT. These are taxes on wealth that have well-established, but distinct, bases and are well-understood in their operation.
In addition to wealth taxes, the Government takes action against inequality through our tax and welfare system. For instance, the strong redistributive role of the Irish tax and welfare system is evident in the range of supports that were introduced to help mitigate the impact of the Covid-19 pandemic and in the series of measures designed to limit the impact of the current cost of living pressures.
Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality.
In 2024 it is projected that the top one per cent of taxpayer units, who are those with annual income in excess of €290,000, will pay just over 24 per cent of total Income Tax and USC. This is a very large proportion of the total Income Tax and USC take from such a small cohort of taxpayers. In comparison, 80 per cent of taxpayer units, which is the cohort of income earners with annual income of less than €69,500 and account for about 2.74 million taxpayer units, will pay 21 per cent of total Income Tax and USC.
In conclusion, I can assure the Deputy that all taxes and potential taxation options are kept under constant consideration and it remains a priority of mine to ensure that Ireland maintains its progressive taxation system.
91. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 91 of 5 October 2023, if he will provide an update on the Disabled Drivers Medical Board of Appeal; when he expects the appeals process to re-commence; the expected timeline for the clearing of the backlog; what analysis his Department carried out into the reasons for the difficulty in recruiting the new board, as evidenced by the fact that it took four expression-of-interest campaigns in 18 months to fill the positions; and if he will make a statement on the matter. [51363/23]
View answer99. Deputy Pauline Tully asked the Minister for Finance to provide an update on the progress made to date to convene a new Disabled Drivers Medical Board of Appeals; the actions he has taken to clear the backlog of 1,079 appeals outstanding, as of end-August 2023; and if he will make a statement on the matter. [51565/23]
View answer122. Deputy Alan Dillon asked the Minister for Finance to provide an update on the primary medical certificate; the steps taken to implement the appeals board; how he intends to reduce the waiting time for applicants; and if he will make a statement on the matter. [51524/23]
View answerI propose to take Questions Nos. 91, 99 and 122 together.
Progress has been made on efforts to convene a new Disabled Drivers Medical Board of Appeals (DDMBA), to secure hosting arrangements for the DDMBA and to recommence the appeals process.
All five members have now been appointed to the new DDMBA. Funding arrangements between the Department of Finance and the Department of Health have been agreed. On this basis the National Rehabilitation Hospital has confirmed that they will again host the DDMBA. Preparatory work is underway, that will include due deliberation on how best to clear the backlog. It is important to be aware that dealing with the backlog of appeals is very much a matter for the new Board, who are independent in how they conduct their functions. I have no role in this area so cannot comment on how the backlog will be addressed.
My officials met with the NRH and the new DDMBA on Tuesday 7 November to discuss the operational elements of the new Board. The meeting was constructive and as a result it is hoped that the Board will be up and running by mid-December.
The latest figures provided by the DDMBA show that there are currently 1,138 people on the appeal hearing list.
Finally, the Deputy should note that, while I was responsible for appointing the DDMBA members, it was the Department of Health that was tasked with their recruitment. and therefore it was they who organised the four expression of interest campaigns. They invested a considerable amount of time in the process and ensured that it was as well advertised as possible through the appropriate channels. However, what is clear from this exercise is that there was little interest from the medical profession in applying for these positions, thus explaining why the process took so long.
In conclusion, I have every expectation that the DDMBA will give due priority to addressing the backlog of appeals.
92. Deputy Alan Farrell asked the Minister for Finance to report on his Department’s efforts to tackle money laundering within the State; and if he will make a statement on the matter. [51296/23]
View answerFirstly, it is important to note that the Department of Finance does not hold any supervisory or investigative role in relation to money laundering.However, the Department does have a key role in developing policy and legislation to ensure that Ireland’s framework for combating both money laundering and the financing of terrorism adheres to EU and international standards.
The nature of this policy area requires a whole-of-Government approach. Accordingly, the Department of Finance chairs the Government’s Anti-Money Laundering Steering Committee or AMLSC. The purpose of the AMLSC is to provide a national, cross-sectoral forum for the oversight and active review of Ireland’s framework for anti-money laundering and combating the financing of terrorism, or AML/CFT. Membership of the AMLSC consists of a range of bodies, including:- Government Departments, including the Department of Justice and the Department of Enterprise, Trade, and Employment;- State bodies including An Garda Síochána, the Criminal Assets Bureau and the Central Bank of Ireland; and
- supervisors including designated accountancy bodies and the Law Society of Ireland.A full membership list can be provided to the Deputy if required.In relation to the EU’s standards on AML/CFT, negotiations have been taking place on a package of new legislation published by the European Commission in 2021. Officials of the Department of Finance have represented Ireland in these negotiations, which I expect will be concluded in the next few months. Of the four elements to this legislation, one has already been agreed – a recast of the Transfer of Funds Regulation which will extend its obligations to certain crypto asset service providers. The remaining elements still being negotiated include: (i) are a new AML Directive; (ii) the EU’s first AML Regulation; and (iii) a Regulation establishing a central supervisor for AML matters at EU level - the Anti-Money Laundering Authority or AMLA. Considerable work has gone into developing this new legislation, with a priority for the Department of Finance being to ensure the legislation is consistent with Ireland’s Common Law legal system. As the Deputy will be aware, Ireland has also applied to become the location for AMLA, building on our proven expertise in financial services, technology and AML/CFT.
In relation to international standards, the Department of Finance also heads Ireland’s delegation to the Financial Action Task Force, or FATF. The FATF is an inter-Governmental policy-making organisation which sets international standards in the area of AML/CFT. As FATF's work has cross-Departmental and cross-Agency impact, meaning that all members of the AML Steering Committee have input to the consideration and implementation of the FATF standards. Ongoing engagement from members of the Steering Committee allows for informed contributions to the further development and revision of those standards.
Peer reviews known as Mutual Evaluations are a key element of the FATF’s work. Ireland’s last Mutual Evaluation took place in 2017 and our next evaluation will take place between 2027 and 2028. Ahead of this, members of the AML Steering Committee are working to address issues in our framework which have been previously identified.
Among these, the Department of Finance is currently working on two pieces of legislation. The first is an amendment to Section 38 of the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010, which has been incorporated in the Finance (State Guarantees, International Financial Institution Funds and Miscellaneous Provisions) Bill 2023. This amendment will create a requirement for any institution engaging in a correspondent banking relationship to conduct enhanced customer due diligence on the respondent institution involved even if they are located within the European Union and not just outside it, as is currently the case. This addresses an issue previously identified in relation to FATF Recommendation 13 on Correspondent Banking.
The second is a Statutory Instrument, currently being drafted, which is intended to amend Section 42 of the Customs Act to provide for greater penalties for breaches of the requirements relating to the cross-border transportation of cash of €10,000 or more. This is intended to address an issue relating to FATF Recommendation 32 on Cash Couriers.
It should be noted that the FATF plenary agreed in October 2022 that Ireland’s follow-up process from our FATF 2017 evaluation should be deemed concluded, which was in part a reflection of the progress achieved since that evaluation.
I hope this serves to illustrate the work being done by my Department in this area.
Question No. 94 answered with Question No. 84.
95. Deputy Ged Nash asked the Minister for Finance if he plans to index the cap on tax relief (Standard Fund Threshold) on pensions, against wages; and if he will make a statement on the matter. [51430/23]
View answerAs the Deputy is aware, the Standard Fund Threshold (SFT) was introduced in Finance Act 2005, with the purpose of addressing excessive pension accrual, and it applies to all private and public sector pension arrangements. It is provided for in Chapter 2C of Part 30 of the Taxes Consolidation Act 1997 (TCA) which sets out the maximum tax-relieved pension fund at retirement. The SFT regime was introduced as a deterrent to prevent over-funding of supplementary pension provision from tax-relieved sources.
When a pension benefit is crystallised (typically this occurs on retirement), its value is assessed. If the relevant threshold is exceeded, the excess over the threshold (the “chargeable excess”) is subject to an upfront, ring-fenced income tax charge, on top of the normal taxes at the marginal rate due upon draw down of the pension funds. These additional taxes are known as chargeable excess tax (CET) which is charged at a rate 40%.
The SFT was initially set at €5 million. It was subsequently reduced to €2.3 million with effect from 7 December 2010 and further reduced to €2 million with effect from 1 January 2014. The reduction in 2014 occurred together with changes to the valuation factors used to value defined benefit pensions for the purposes of the application of the SFT.
The Deputy may also be aware that I have instructed that a targeted and focused examination of the calibration of the Standard Fund Threshold be undertaken. A Memo for Information on this examination is expected to go to Cabinet shortly.
This examination will include a public consultation to allow all interested parties to share their perspective on this important part of the tax treatment of supplementary pensions. The examination is expected to conclude by summer 2024.
97. Deputy Alan Farrell asked the Minister for Finance to report on his Department’s efforts to increase innovation and competition in Ireland’s banking sector; and if he will make a statement on the matter. [51295/23]
View answerIt is regrettable that Ulster Bank and KBC have decided to exit the Irish market, but these are commercial decisions of both banks. The priority since has been to ensure that each bank withdraws from the market in an orderly manner and to ensure the impact on customers is minimised.
Financial services continues to evolve rapidly, and my Department is engaging with national, European and international developments across a range of areas. I have also welcomed the launch of a public consultation paper on 8 November 2023 by the Central Bank of Ireland which contains proposals to enhance the Central Bank’s engagement on innovation. These proposals include enhancements to the existing Central Bank Innovation Hub and the establishment of an Innovation Sandbox Programme.
In relation to the broader issues of innovation and competition in Ireland’s banking sector, I would like to update the Deputy, in particular, on the recommendations in the 2022 Retail Banking Review, which was established to undertake a broad-ranging review of the retail banking sector as a result of the departures and other changes occurring in retail banking.
The Government approved the publication of the Retail Banking Review and the implementation of its recommendations on 29 November 2022. Each recommendation identifies the body or bodies responsible for delivery of that recommendation and where appropriate contain timelines for delivery of the recommendations. It is for the relevant bodies to consider and implement the recommendations addressed to them. The implementation of the recommendations that are directed at the Department of Finance have been embedded in the business plans of the relevant areas.
For example, in terms of competition, the Department of Finance has begun the scoping exercise to identify actions to facilitate increased sharing of information between the Central Bank and the Competition and Consumer Protection Commission across all relevant areas of their respective remits.
The Review also recommended introducing a requirement for the Central Bank to publish cost benefit analyses when bringing forward regulations that that consider the impact on consumer protection and competition.
The Retail Banking Review contained a recommendation for the Department to lead on the development of a National Payments Strategy in 2024, developing a new strategy that will take account of the changing landscape and determine how best to adapt to it. The National Payments Strategy will also take account of the EU legislative landscape, particularly the proposals on instant payments and payment services.
Implementation of several of the recommendations requires close collaboration between my Department and the Central Bank, and the Central Bank has informed me that it is working on the implementation of recommendations addressed to it.
Other recommendations require implementation by other State agencies, such as the CCPC, Government departments and other relevant stakeholders. It is also crucial that the retail-banking sector ensures the interest of consumers are a priority in their organisations and seek to work together, where possible, to deliver the best outcomes for the economy and citizens. The retail banking sector has been contacted regarding their role in carrying out those recommendations which fall to them.
The Deputy may recall that I published a Banking Consumer Sentiment Survey in September of this year. These surveys are very helpful to identify trends in consumer behaviour, including product choice, competition and innovation, which in turn feeds into evidence-based policy making.
Finally, the Deputy should note that the Credit Union (Amendment) Bill 2022 is due for Report Stage in Dáil Eireann next week, on 30 November. I feel it is important that credit unions continue to develop their lending capabilities in the community in a safe and cost-effective way through collaboration.
The two key amendments in the Bill to enable Credit Unions to be more competitive are:
1. to allow credit unions to take part in both loan participation and loan syndication; and
2. to allow credit unions to refer members to other credit unions in all circumstances, regardless of whether or not the referring credit union provides the services the member is seeking.
These are important enablers in ensuring that the credit union sector enhances member services, grows lending and expands membership.
98. Deputy Brendan Smith asked the Minister for Finance if he will ensure that tax relief for parents in respect of the accommodation costs for students attending further or higher education colleges is applicable in respect of all students, whether studying in this jurisdiction or elsewhere; and if he will make a statement on the matter. [51577/23]
View answer142. Deputy Brendan Smith asked the Minister for Finance if he will amend the conditions applicable to eligibility for the rental tax credit for parents of students in relation to accommodation costs while attending further or higher education college to include students studying outside of this jurisdiction; and if he will make a statement on the matter. [51578/23]
View answerI propose to take Questions Nos. 98 and 142 together.
The Rent Tax Credit, as provided for in section 473B of the Taxes Consolidation Act 1997 (TCA 1997), was introduced by Finance Act 2022. This is an income tax credit which may be claimed in respect of qualifying rent paid in 2022 and subsequent years to end-2025.
For the tax years 2022 and 2023, the maximum value of the credit will be €1,000 per year in the case of a jointly assessed married couple or civil partners, and €500 in all other cases. I have brought forward a measure in this year’s Finance Bill that will further increase the value of this credit. Thus, following enactment of the Bill, the value of the credit for the 2024 and 2025 tax years will increase to a maximum of €1,500 for a jointly assessed couple and €750 in all other cases.
The purpose behind the rent tax credit, introduced as a temporary measure, is to assist as part of the overall response to the accommodation shortage in the private rented residential sector in the State. More specifically, the aim is to provide some financial assistance to renters in that particular sector who may face high rental costs and who do not receive any other housing supports from the State. Owing to this, the eligibility criteria for the credit specify that the rental property concerned must be a residential property located in the State.
As such, neither students attending university outside the State nor their parents are currently entitled to the Rent Tax Credit in respect of rent which they have paid for accommodation outside the State.
As the Deputy will appreciate, in designing tax reliefs, there is always 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. I have no plans to further extend the rent tax credit at this time.
100. Deputy Richard Boyd Barrett asked the Minister for Finance if he will explain the basis of his projection for inflation in 2024 of 2.9% when the annual inflation rate in September was 6.4%, and has been increasing recently; and if he will make a statement on the matter. [46961/23]
View answerInflation reached multi decades high rates last year, peaking as high as 9.6 per cent in July 2022. This increase in inflation was initially driven by a surge in energy prices on foot of the fallout from Russia’s invasion of Ukraine. However, inflation subsequently became increasingly broad based as price pressures spread throughout the economy.
I am pleased to report that we now appear to have turned a corner on inflation. The most recent data suggests that annual inflation for October as measured by the Harmonised Index of Consumer Prices (HICP) was 3.6 per cent, from 5 per cent in September, and down by almost 6 percentage points from this time last year.
The Government is fully aware that the inflationary challenges have not yet abated. Core inflation (which excludes energy and unprocessed food) remains persistently high, with the inflation rate for October at 4.6 per cent. This reflects widespread capacity constraints in the Irish economy, notably in housing and labour markets.
As set out in Budget 2024, my Department forecasts inflation to moderate significantly next year, with the HICP is projected to average 2.9 per cent over the course of the year, hitting 2½ per cent by the end of the year. This reflects the decline in wholesale energy prices feeding into retail prices lowering the price of energy for Irish households. More broadly, the slowing pace of growth in the economy, should allow for an easing in supply and demand imbalances. Of course, while the rate of price growth is forecast to slow, price levels will nonetheless remain elevated. That said, the pace of wage growth, including in real terms, is projected to pick-up next year.
Throughout this period of high inflation, the Government has been at the forefront in supporting the most vulnerable. By responding swiftly and decisively to the cost of living challenges, the Government has helped to mitigate the impact of inflationary pressures on both businesses and households. The temporary and targeted nature of these measures have been designed to avoid adding to the inflationary burden whilst providing support to those most in need.
