As Deputy McConalogue is not present to take Question No. 6, we will move to Question No. 7.
Other Questions
Question No. 6 replied to with Written Answers
Tax Reliefs Application
Bríd Smith
Ceist:7. Deputy Bríd Smith asked the Minister for Finance his plans to review the present system of tax relief that operates in the film industry; and if he will make a statement on the matter. [40724/17]
I have already asked this question of the Minister for Culture, Heritage and the Gaeltacht and the Minister for Business, Enterprise and Innovation but I have never been able to get a full answer. I want to pre-empt the question by saying I fully support the arts industry and the attempt to increase the production of film and create jobs. However, there is a problem with what is known as section 481 of the Taxes Consolidation Act 1997. I ask the Minister to make a statement on the review of that measure, what he thinks of it and whether we can have proper oversight of it.
Prior to 2015, film relief took the form of an investor tax relief which provided an incentive to individual and corporate taxpayers to invest in Irish film production. The relief was granted by way of a deduction from total income of the amount invested for the year of assessment in which the qualifying film investment was made. The Finance Act 2013 amended the scheme such that, rather than providing relief to investors, instead, from 1 January 2015, a payable tax credit of 32% is payable directly to a producer company. The tax credit reduces the corporation tax liability of the producer company in that period. Where the tax credit exceeds the tax due for the qualifying period, the tax credit will be a payable credit. The current scheme is due to expire on 31 December 2020.
As it concerns tax expenditure, section 481 is subject to the requirements of my Department in regard to tax expenditure guidelines. A full analysis and review of that section will be undertaken prior to any announcement on the extension of the relief and this will be done well in advance of any potential extension beyond 2020.
In terms of the operation of the scheme to date, the most up-to-date figures I have available are that the provisional number of claimants of the tax credit in 2015 was 1,102, with a cost to the Exchequer of €69.7 million.
I want to ask about oversight of this tax break. Surely if the State is to dispense such a generous scheme, while I agree with it dispensing generous schemes to encourage the arts and the film industry, should the State not have some oversight of how the scheme is administered? I have evidence that shows widespread abuse of this scheme, and I am sure other Deputies also have such evidence because, when people come to us, they come to many different parties and groups. The abuse is of the workers themselves in the way they are used by the film industry, where very highly trained workers are often taken on as trainees and told there are no other positions available. In this way, the industry uses camera crew, sound men and other types of trained professionals at a very cheap rate. This probably links in to the increased use of precarious, illegitimate and bogus contracts in this country. Employers seem to be finding any scheme possible to undermine workers' rights and I think this scheme is being used in that abuse.
I have a later question from Deputy Richard Boyd Barrett about this general issue and I have some broader figures in regard to the issue raised by Deputy Smith that I will be sharing with him as well.
In regard to the two ways in which this scheme is overseen, it is done both at departmental level and then by the Revenue Commissioners. Regarding the work that happens through the Minister for Culture, Heritage and the Gaeltacht and her Department, applicants can only access this tax relief if they receive a tax certificate from the Department of Culture, Heritage and the Gaeltacht, having regard to the category of the film and the contribution it will make either to the film industry in the State or the promotion or expression of Irish culture. Therefore, the policy end is overseen by the Minister for Culture, Heritage and the Gaeltacht.
In regard to the concerns Deputy Smith has on the protection of employees, the Revenue Commissioners now also have to issue a certificate highlighting how the employer has to comply with particular forms of legislation. The Revenue Commissioners require that if an organisation or a company receives the section 481 approval letter, they must be satisfied the organisation or company is compliant with the law in regard to the taxation Acts, capital gains tax Acts, the Value-Added Tax Consolidation Act 2010 and all social welfare and pensions Acts.
That all sounds very good but the reality is that some €7 billion has been given to the industry in the past 15 years in tax breaks, which is very generous. Although I do not disagree with that if it is performing the function it set out to perform, which is to give training and to nurture homegrown talent instead of abusing workers' rights, then it is absolutely the right thing to do. However, what we find in reality is that there is a very high degree of abuse of the workers within the industry and, in some cases, tax breaks are being given to companies which do not even film in Ireland, which cannot be legitimate. We need better oversight than what the Minister has described, whereby the Revenue Commissioners demand certain certificates and criteria and the Minister for Culture, Heritage and the Gaeltacht gets them to sign a form that says this, that or the other, while there is no actual oversight of the administration of the scheme. As we have seen, and the Minister will be discussing this with other Deputies later, there is a gross abuse of workers' rights taking place across all industries at the moment. If one industry does it, they are all going to copy that because they seem to be able to get away with it.
I take this opportunity to ask the Minister a question I raised with him and his predecessors previously. As Minister for Social Protection, I commissioned a study and review which was to be carried out between the Department of Social Protection and the Department of Finance. I cannot for the life of me understand, unless this has been released yesterday or today, why that study has never been published given that it has been available for possibly up to a year. The report was based on submissions, including very detailed submissions by the Irish Congress of Trade Unions. If we had the information that is held in that report, we could perhaps identify a way of moving forward in regard to this very difficult issue for workers who are forced to become self-employed when, in fact, they are traditional employees.
What is the Deputy's question?
I think I know what the Deputy's question is; I believe she is referring to the report entitled, Consultation on the use of intermediary-type structures and self-employment arrangements-----
And bogus self-employment.
The Deputy raised that report with me in recent parliamentary questions. I have checked its status and I expect the report will be published very soon and may well provide a framework for, or insights into, dealing with this issue.
In regard to the point Deputy Collins put to me, or rather Deputy Smith-----
That is fine. The Minister will get used to me eventually.
In regard to the point Deputy Smith put to me on the statistics on the operation of the scheme, I have the figures for 2016 and 2017 on the number of companies and films. For example, in 2016 it was 54 companies in respect of 74 films; and in 2017 up to the end of the first quarter, it was 15 companies in respect of 21 films. I have a list of all of the films or productions that received the grant. If the Deputy has any concern in regard to the employment terms or how that relief is being transferred on the ground, she might make those specific examples available to me and I will certainly share them with either the Revenue Commissioners or the relevant agency.
The purpose of this relief is to translate it into cultural activity that delivers good employment and meets the policy objectives I have described. For the information of the House, I understand that across 2015 and 2016 some 3,415 full-time jobs were created in this sector, many of which we attribute to this policy.
Perhaps the Minister would email the lists to me.
Tax Collection
Eamon Ryan
Ceist:8. Deputy Eamon Ryan asked the Minister for Finance if he has considered the reintroduction of a tax on super-normal profits - in the context of profits generated by the rezoning of land - as a mechanism for reducing the price of land, which is increasing as a result of ongoing speculation. [33188/17]
In the Green Party's period in government we helped to introduce a tax on super-normal profits relating to speculation in land. This is an essential measure to try to avoid a return to the housing bubble conditions and to bring down the cost of building. It is interesting that the Society of Chartered Surveyors Ireland said earlier today that the cost of building in Dublin is incredibly high, largely due to high land prices. Will the Department of Finance consider reintroducing such a tax and what would the arguments be against such a measure?
I am advised by Revenue that the National Asset Management Agency Act 2009 amended the Taxes Consolidation Act 1997 by providing for an 80% windfall tax on profits or gains arising from disposals of development land to the extent that those gains were attributable to a relevant planning decision.
Section 31 of Finance Act 2014 repealed the 80% tax rate on these profits or gains with effect from 1 January 2015.
The impetus for this latter amendment to the Taxes Consolidation Act 1997 came from the views expressed by various parties in both the private and public sector, with which the Minister for Finance at the time agreed, that the windfall tax provisions were acting and would act as an impediment to land rezoning, land development and redevelopment and to land sales for development.
The reintroduction of such a windfall tax on a similar basis is likely to act as a disincentive to landowners to dispose of such property, which could be detrimental to the Government policy to encourage home building.
The Department of Housing, Planning and Local Government is developing a new national planning framework, Ireland 2040 Our Plan. It will provide a national planning framework to guide national, regional and local planning and investment decisions for the years ahead, building on and co-ordinating the existing regional and local authority planning processes.
Does the Minister agree with Mr. Justice John Kenny's 1973 report which said that the profits accruing from a public decision to rezone land rightly belong to the public rather than the developer? The report found that the lack of such a tax on the profits that accrue from a rezoning decision leads to a tendency to hoard land. Rather than being a disincentive for owners to dispose of land, it is actually an incentive for people to speculate on, store and hoard land. Have we learned nothing from that Kenny report? The legislative provision to which I refer was introduced as a practical way to introduce Mr. Justice Kenny's recommendations. There would have been constitutional difficulties in the context of interfering with property rights but a tax on super-normal profits was a very real and practical way of getting away from the incentive to speculate on or hoard land, which is contributing to increases in the cost of accommodation. Does the Minister disagree with the Kenny report? Does he not think that land hoarding and the whole game regarding land speculation were two of the main causes of the property crisis? Why would the Minister not try to tackle that problem at source?
I agree with many of the points made by Deputy Eamon Ryan. The hoarding of land and the lack of supply of land, especially the lack of zoned land and the pricing thereof, lies at the heart of many of the difficulties we are now facing in the housing market. I accept much of the analysis the Deputy has offered on this issue. Where I differ with him on the introduction of a so-called windfall tax would be in the context of the point at which the tax liability is calculated when a transaction goes through. My concern is that this would act as an impediment to the release of land to allow more homes to be built. I wish to highlight the measures we have brought in, such as the vacant site levy, and the fact that capital gains tax relating to the type of land we are discussing stands at 33%. I introduced an increase in stamp duty on commercial property in the budget, which is another way of achieving the objective of increasing the availability of land for residential development. It is a concern that bringing in a tax measure of the kind suggested and of such magnitude would actually impede the release of land for the delivery of homes.
The Minister agrees in principle to the tax but he disagrees with the timing. Am I right in that interpretation? Is it that it would act as a disincentive? When will the time be right for us to attack this fundamental lack of justice, as well as the rot which lies at the centre of the high-price housing and property bubble instincts that exist in this State? When will be the right time to introduce such a tax? Are we for ever to agree that the profit accruing from a council decision to rezone lands belongs to the landowner and not to society? The Green Party introduced the tax on super-normal profits and, as I recall, the main argument given when it was removed was that it had not raised any revenue. It had not raised revenue because the State was in the middle of a slump. That was the right time to introduce it. If we do not reintroduce something of that nature now when will we do it? Will it be when another bubble develops?
As already stated, I agree with much of the analysis relating to the issue. I clearly said that I disagree with the solution the Deputy is proposing. I was clear on that. I disagree because it is my view that bringing in a tax such as that to which the Deputy refers could actually slow the release of land for the development of homes. That is my analysis of the issue.
When seeking to ensure that the taxpayer, or the State, benefits from gains that are conferred by zoning decisions, this happens through the use of capital gains tax. This tax is based on the price at which the land is sold. In turn, and as the Deputy is aware, that price is influenced by the zoning decisions to which he refers.
That is 6%-----
I thank the Minister.
Stamp Duty
Michael McGrath
Ceist:9. Deputy Michael McGrath asked the Minister for Finance if he has engaged with farming representative organisations in respect of the change in stamp duty announced in budget 2018; if consideration has been given to alterations to the young farmer stamp duty relief and consanguinity relief; and if he will make a statement on the matter. [44696/17]
Martin Kenny
Ceist:10. Deputy Martin Kenny asked the Minister for Finance the way in which he will ensure that farmers are not affected by stamp duty increases aimed at commercial developers. [44729/17]
My question relates to the budget day announcement of the increase in non-residential stamp duty. I understand that we will discuss the Finance Bill later this evening and this question is in anticipation of that. Serious concerns have been raised, especially regarding the transfer of a farm from one generation to the next and the fact that this may be affected by the increase to 6%. I know the Minister has made the announcement in respect of the Finance Bill and I look forward to the debate on that later.
I propose to take Questions Nos. 9 and 10 together.
In my Budget Statement, I announced an increase in the stamp duty rate for all non-residential property transactions, including those relating to agricultural land, from 2% to 6%. On the recommendation of the Minister for Agriculture, Food and the Marine, I also announced an extension of consanguinity relief for another three years and that the stamp duty rate applying under that scheme would be fixed at 1%. Consanguinity relief is availed of in transferring farms to younger family members. It encourages the early transfer of farms to younger generations and is mostly relevant where the transferee does not qualify for an alternative relief, such as the young trained farmer stamp duty exemption.
In the aftermath of the Budget Statement, I received correspondence from farming interests regarding a number of issues, including stamp duty. I have decided that in addition to extending the period of the relief and fixing the associated stamp duty rate at 1%, the age rule for the consanguinity relief will be removed. This means that it will be possible for all gifts and sales of farmlands to closely related family members who do not qualify for the 100% exemption available under the young trained farmer scheme to benefit from consanguinity relief at a stamp duty rate of 1%. The question of an age limit will be revisited when the measure comes up for review towards the end of 2020.
The young trained farmer relief scheme will not be affected by the stamp duty rate change because it provides for a full stamp duty exemption where the qualifying criteria are met.
I thank the Minister for his reply. The issue raised is quite unusual. We had the announcement on budget day and the following day the Minister for Agriculture, Food and the Marine, Deputy Creed, informed us that the increase was not going to apply to farmland. We all said "Fine, great, it is not going to apply to farmland". It turns out that the Minister was mistaken and that the increase applies to farmland. The Minister for Finance says that the measure is to encourage the transfer of land early in the career of the farmer rather than waiting for him or her to reach his or her 80s or 90s.
That is what was encouraged but now the Government has changed the policy and will allow people to live to 100 while keeping the land. The day before they pass on to the Lord, they can transfer the land back without any stamp duty being imposed. The very policy the Government set out to achieve has now been turned on its head. I stand to be corrected, but it suggests it was not thought through in the first place. That is the first issue.
The main issue here and what my question really relates to is the following. While I accept the issue about young farmers and qualified farmers, I spoke to a man yesterday evening who is milking 65 cows and who wants to buy 40 acres of land beside his farm. To buy that land he will now have to pay 6% stamp duty. He gets up early in the morning and works very hard, pays his taxes and produces the goods. I listened to the exchanges earlier and I ask the Minister to look at what he is doing for society compared to Apple with its tax deal and the banks, which pay no tax on their profits. It seems totally unfair. I ask the Minister to address that particular point.
This is a tax rate which stood for most of our recent history at 9% before going to 6% and then down to 2%, where it has remained for the past number of years. I assure the Deputy that when I made the decision, I was fully aware, as with any decision, of all of the consequences of what I was putting to the Dáil on budget night. I accept that it causes difficulty, concern and increased cost for people, but at 2% the rate was unsustainably low. If we cannot use periods like the present to change rates like this, the tax base will continue to be too narrow. That is why this decision has been made. It is my understanding that the Sinn Féin budget proposal included a proposed change to stamp duty on commercial property. The party was proposing what we did on budget day.
That was for commercial property, not agricultural land.
The Deputy will have been as aware as I am of the definition of "commercial property". In putting the point to me about relief, he neglected to state that we have brought the relief in at 1% with no age limit for the next three years and that at the end of three years, we will revert to an age limit. The way in which we are looking to maintain the incentive is by having this window in place for three years only. At the end of the three year period, it will revert to an age limit fixed by the Minister of the day. I did that in recognition of the concerns raised with me in relation to the integrity of the family farm. A measure like this was justified, which is why it is included in the Finance Bill.
The Minister fails to accept the gravity of the situation. The average farm income in this country is half the average industrial wage, which is the issue here. Farmers are struggling to survive. In many cases and where they depend on the farm alone, the only way to survive is by expanding. To expand, they must buy land beside them. This aspect is recognised and the Minister for Agriculture, Food and the Marine raised the issue with the Minister for Finance. It is clear that he said it was not just for the young farmer or where a farm was in a family, but it is also an issue for the person who wants to expand his or her holding. There are all kinds of schemes in place, including TAMS, to assist farmers in that regard, yet the Government comes back and takes away with the other hand. It smacks of something that was not thought through.
I echo my colleague's points. Agricultural land should be exempt as proposed in the amendment we supported on budget night when the resolutions went through. I wish to refer to a tangential issue relating to this by which many individuals may be caught. Certainly, I am aware of one person who purchased a large quantity of land to ensure a farm was commercially viable. The last transaction went through on budget night and an invoice was generated by Revenue for 6% stamp duty. The individual does not have the additional €10,000 or €11,000 to pay the 6% rate. As the deal was concluded before 31 March, the family will be charged 2%, but they have to pay it now and there will be a late penalty if they do not. I ask the Minister to speak to Revenue to ensure there are no late penalties for individuals who have purchased land and face a 6% levy until the Finance Bill goes through. It is really important so that people are not in default of their tax liabilities. They have only four weeks to pay that tax liability. It is important for people who entered into genuine transactions and are now caught out because it is not possible to get a loan to cover the additional 4%.
I welcome the change from the budget day announcement with the publication of the Finance Bill. There are farmers who had not transferred farms to the younger generation prior to age 67 and so had failed to avail of the consanguinity relief. They have now been provided with the opportunity to have the transfer go through at the 1% rate, which will hopefully happen. A related point is that there is a CGT exemption for the sale of certain farmland where the proceeds are used to acquire other farmland for the purposes of consolidating the overall farm land holding. In those limited circumstances where the CGT exemption applies, will the Minister consider applying an exemption to the stamp duty increase also?
Regarding Deputy Martin Kenny's points, I am well aware of the gravity of any decision that I make on taxation. I am crystal clear about it. I go back to the broad point that this rate of 2% was one third of what it had been a number of years ago. If we fail to use periods like this to bring rates like that back to a more sustainable level, we create the seeds of a tax system that is unable to cope with difficulty in the future. That is why I made this change.
I ask Deputy Doherty to give me the details of the individual to whom he referred. I will look into the matter on his behalf. It is our clear intention that anyone who has signed a contract for a land transaction avails of the 2% rate. If the Deputy has a concern about an individual transaction, I ask him to share it with me so that I can look into it and ensure it is dealt with correctly from a policy point of view. I am sure the Revenue Commissioners will be aware of it too.
Deputy McGrath referred to farm consolidation. There is a capital gains tax for that particular area where transactions take place to consolidate farms. I have not looked at the issue to date because the overwhelming number of the contacts I received related to the provision of clarity on the applicable stamp duty rate where contracts are already signed and the consanguinity issue, which I have dealt with in the Finance Bill.
Brexit Issues
Michael McGrath
Ceist:11. Deputy Michael McGrath asked the Minister for Finance the work that the Revenue Commissioners are undertaking in preparation for Brexit; the arrangements being considered for the Border area in view of the likelihood of the UK leaving the customs union; and if he will make a statement on the matter. [44695/17]
James Browne
Ceist:15. Deputy James Browne asked the Minister for Finance the steps he has taken to date and plans to take in preparation for post-Brexit customs checks at ports here specifically Rosslare Europort; and if he will make a statement on the matter. [44711/17]
David Cullinane
Ceist:40. Deputy David Cullinane asked the Minister for Finance the reason his predecessor refused to publish the report prepared for him by the Revenue Commissioners on the impact of Brexit on customs. [44712/17]
Joan Burton
Ceist:73. Deputy Joan Burton asked the Minister for Finance the steps the Revenue Commissioners have taken to identify possible customs posts on the Border; the locations that have been examined for these posts; and if he will make a statement on the matter. [44757/17]
I wish it to be absolutely clear that the Fianna Fáil position on a hard border is that we do not support it. Our objective, which we share with Government, is that there should be no hard border on the island of Ireland. However, I want to ask the Minister about the work of Revenue, whose representatives were before the finance committee in May. At the committee, they gave extensive evidence on the advance or preparatory work being done. I seek an update on that in light of recent political developments.
I propose to take Questions Nos. 11, 15, 40 and 73 together.
Like all Government agencies, Revenue is actively engaged in examining a range of scenarios in order to support Ireland's objectives. This work is being undertaken within a whole-of-Government framework led by the Department of Foreign Affairs and Trade. While the precise customs arrangements that will apply after Brexit will depend on the outcome of negotiations between the EU and UK, it is clear that political solutions must be found before technical resolutions can be applied. I am informed by the Revenue Commissioners that it is not possible, at this juncture, to assess what specific arrangements would be required if the UK left the customs union or what post-Brexit checks would be carried out. The Chairman of the Revenue Commissioners has previously confirmed that Revenue is not looking for sites for customs posts.
In respect of the Revenue report referred to, I am advised that this was a draft working document that was subsequently published on Revenue's website on 11 October 2017. The paper was a preliminary analysis compiled internally by Revenue in September 2016 to support its scenario examination and deliberative process following the UK vote in June 2016 to exit the EU. However, it is important to note that matters have moved on significantly since then and, in particular, since Article 50 was triggered. As such, this document remains in draft form and was not finalised as it was overtaken by consequent major developments and policy statements and does not reflect Revenue's current view on Brexit. Their current view was set out clearly in the chairman’s opening statement to the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach on 25 May 2017.
The Government's priorities in respect of the unique concerns that arise for Ireland are very clear - to maintain the common travel area and to protect the gains of the peace process and the Good Friday Agreement in all its parts, including avoiding a hard border. The Government welcomes that these priorities have been reflected in the EU's negotiating position and further welcomes and supports the task force's paper, Guiding Principles on the Dialogue for Ireland-Northern Ireland, which was published on 7 September. The paper builds on the European Council guidelines and reflects the priority Irish issues identified by the Government, including that, in view of the unique circumstances on the island of Ireland, flexible and imaginative solutions will be required to avoid a hard border, including any physical border infrastructure. This must be achieved in a way which ensures that Ireland's place within the Internal Market and customs union is unaffected. The paper also makes it clear that it is the UK's responsibility to propose workable solutions in this regard. It is the Government's view that the UK staying in the customs union and Single Market, or as close as possible to that, would be the best solution.
However, it is important that internal analysis continues in the meantime. Several helpful reports and working papers have been published by the ESRI, InterTradeIreland and business representative bodies. Most recently, my Department and Revenue co-sponsored an ESRI study, working paper 573, on Ireland's international trade and transport connections, which was published on Thursday, 12 October 2017.
I would be glad to have confirmation of Fianna Fáil's position.
It has never been in doubt.
I was listening to BBC radio on the way to Dublin earlier and I heard one of the party's representatives arguing for the hardest of borders. The Deputy might want to send her the memo but, hopefully, she is on her own on that issue.
She is.
We are discussing the Revenue's report. The Minister mentioned that a great deal of other internal work is being done by ESRI, InterTradeIreland, and business organisations. Are we to believe that the Revenue Commissioners have stopped all contingency scoping exercises relating to different potential Brexit scenarios? Is it the case that Revenue has not undertaken any scoping measures since the draft report, which is quite old? Did the Minister's predecessor or his Department intervene with the Revenue to leave the report as is because at the time it was leaked, we had the commissioners before the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, as well as the former Minister for Finance who denied any knowledge of this type of scoping activity? Were instructions given to the Revenue Commissioners? Is the Minister telling us that no scoping exercise is being done to address different Brexit scenarios from a Revenue and a customs point of view?
The Minister said the onus is on the UK side to come up with workable solutions but the problem is it will not nor does it want to because the UK is happy to leave the Border open. The issue is on the EU side because if the UK leaves the customs union, which looks increasingly certain, there will be an obligation on the EU to protect the integrity of that union and the Revenue will be the national agent of the European Commission. It is a European Commission competence. The Minister needs to answer the question. If the UK leaves the customs union, which looks increasingly certain, what are we looking at in respect of Border arrangements? There has been some change in the Revenue position regarding preparatory work. The Minister needs to clarify whether the Revenue Commissioners are continuing to conduct analysis and contingency work, to examine options, to scale up IT infrastructure and so on because those were the types of issues they put on the record at the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach in May but there seems to have been a change.
We are involved in a negotiation at the moment on an issue that will have a profound effect on our island. With regard to the Deputy's statement about the British Government's view of a customs unions, it is crucial that we gain clarity regarding what its customs policy will be. The Government's view is clear. A customs policy that is as close to the current arrangements as is feasible will provide the best framework whereby we do not return to a hard border. This is a key strategic priority of the Government in managing this issue. The Chairman of the Revenue Commissioners has stated that they are not involved in any work that will prejudge the outcome of these negotiations because they are political and they are ongoing.
Is there no contingency planning going on within the Revenue? I travelled here from Donegal earlier and I passed through Clady Bridge. I do not want to see customs posts. The House has spoken regarding special status for the North, something the Government has not put on the table. I find it difficult to think that an agency that may be responsible for ensuring the collection of customs duties is not doing any scoping whatsoever. It baffles me, not because it should provide a solution to the British Government but it should inform our negotiators as to the different scenarios that may be on the table in the negotiations. I asked two questions. Will the Minister confirm the Revenue is not engaged in contingency planning in respect of the application of customs duties at the Border? Was there an intervention, direct or otherwise, by the Minister, the Department or Government in respect of the Revenue ceasing the type of work it was doing on the draft report or any other work it intended to do?
Of course, the Revenue Commissioners are inputting into and sharing information with our negotiating team regarding the different outcomes that could emerge from the negotiations that are under way relating to Article 50 but political agreement must first be achieved. We are clear that a customs policy that is as close as possible to the current customs union will minimise any of the difficulties our island will then need to face. The Revenue Commissioners are aware of the negotiations that are under way, they are inputting into our team as the negotiations continue and we will be prepared for the outcomes that emerge from the British decision to leave the EU. First and foremost, however, we need to reach political agreement on what will be the customs policy between Britain and the EU and the impact of that on the island. Neither my Department nor I influenced the Revenue Commissioners in any way in respect of their work and I am not aware of such influence having been exerted on them.
Economic Data
Bernard Durkan
Ceist:12. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economic indicators remain on course and in line with expectation for the foreseeable future; the extent to which specific factors have impacted or are likely to impact in a negative way; and if he will make a statement on the matter. [40415/17]
This question relates to the need for ongoing monitoring of the economy with particular reference to the economic indicators affected by recent developments such as US economic retrenchment, Brexit, and the Apple tax decision, all of which will have an impact on them one way or the other.
The strong performance of the economy is expected to continue over the short run. As part of budget 2018, my Department is forecasting real GDP growth of 4.3 % for this year and 3.5% for next year. The benefit of this growth will be felt in the labour market, with an additional 48,000 jobs projected to be created next year.
Recent economic indicators have generally been positive. Real GDP grew by 5.8% in the second quarter of this year on an annual basis. This follows annual growth of 5.2% in the first quarter. While headline GDP figures can be exaggerated in an Irish context, other indicators such as employment, unemployment trends and taxation receipts confirm the strong recovery.
Employment growth remains strong with an annual rate of 2.4% recorded in the second quarter of 2017, representing the creation of more than 48,000 additional jobs over the year. The increase in employment remains broad-based, with gains recorded in 11 of the 14 sectors reported by the Central Statistics Office, CSO. The continued growth in employment has seen the unemployment rate fall from more than 15% in 2012 to 6.1% in September 2017.
However, a number of risks are present, including the UK’s decision to exit the EU and the possibility of significant tax reform in the US. In addition, the sharp appreciation of the euro rate against sterling is posing significant challenges, particularly for traditional sectors such as the tourism sector and areas sensitive to cross-Border trade. These sources of uncertainty highlight the importance of careful management of the public finances and of competitiveness-oriented policies that improve the resilience of the economy.
In summary, I am satisfied that the economic indicators remain stable and that our economic fundamentals are strong, although the level of uncertainty remains elevated. In this regard, it is critical that appropriate polices are implemented and that is what the Government will continue to do.
To what extent are contingency plans in place or will they be put in place to address the issues that are likely to emerge from the issues to which the Minister has already referred, and the European Commission's attitude to the imposition of tax in this jurisdiction on profits earned in other jurisdictions? To what extent has it been possible to identify the specific impact in each case? What measures can be taken in that regard?
The Deputy referred to the European Commission and its views on taxation. Our views are clear on the matter. I outlined them earlier on in response to Deputy Michael McGrath. I do not foresee any circumstances in which the ability of our State to set our corporation tax rate in the way we do so at the moment will be affected by the proposals from the European Commission.
More broadly, all of this debate emphasises the need to have an economy that has many sources of growth, as opposed to the single source of growth in the period leading up to the crash, which was construction, supported by our banking sector. It is a further reason to take all the steps we can to make our national finances as resilient as possible, where we reduce the need for our State to borrow and have our national debt on a path where it is beginning to fall.
Does the Minister have specific proposals in mind to rebut, react to and offset the possible negative impact of discouragement of foreign direct investors to invest in the Irish economy? To what extent does his Department continue to monitor the likely impact and what is likely to happen in the event of Brexit, US retrenchment and the Commission's proposals coinciding and impacting negatively on a country of our size?
We would be banjaxed then, Bernard.
That is exactly the point.
We are seeking to manage all those risks carefully. This is why we are increasing the amount of resources available to agencies which are involved in promoting Ireland to ensure that our message about the Irish economy and its attractiveness is well understood by all. Our recent record in job creation and investment into our country points to the ability of our agencies and the Government to communicate that proposition well abroad. We will continue to do so and make available all the resources needed to do it.
Tax Compliance
Richard Boyd Barrett
Ceist:13. Deputy Richard Boyd Barrett asked the Minister for Finance the figures for 2015 and 2016 and to date in 2017 for the tax revenue from the relevant contracts tax, RCT1, tax head; the gross figure and the figure net of refunds, deductions and allowances in the construction sector; the number of construction workers to which this relates; the comparative figures for the same years for PAYE workers in the construction sector; if he is satisfied that the tax take from RCT1 in the construction sector is fully capturing the sector's tax liability; and if he will make a statement on the matter. [44724/17]
Richard Boyd Barrett
Ceist:38. Deputy Richard Boyd Barrett asked the Minister for Finance if he will report on recent efforts to clamp down on bogus self-employment; the number of workplace raids the Revenue Commissioners have participated in with the joint investigations unit; the nature and consequence of these raids; and if he will make a statement on the matter. [44722/17]
One of the main methods through which unscrupulous cowboy builders and building contractors deny construction workers proper pay and conditions and rob the taxpayer of, I would argue, tens if not hundreds of millions of euro is bogus self-employment, which is a euphemism for tax fraud. I wish to ascertain the latest net figures from the RCT1 tax head for construction workers. How many workers are employed in construction under that head? How does the net tax revenue compare with that from construction workers under the PAYE system?
I propose to take Questions Nos. 13 and 38 together.
I am informed by Revenue that many outdoor operations are carried out by their joint investigation units with some operations carried out on a multi-agency basis with other Departments or agencies such as the Department of Employment Affairs and Social Protection and the Workplace Relations Commission. The role of Revenue’s joint investigation units is to detect non-compliance with tax and duty obligations, including the non-operation of the PAYE system, arising from bogus self-employment.
As regards recent work of Revenue’s joint investigation units, for the first half of 2017, they carried out 5,450 outdoor visits, of which 1,841 were with other agencies. Revenue officers visited a total of 656 building sites, of which 231 visits were with other agencies. The results of this activity include the registering of 78 businesses as an employer for PAYE purposes, the registering of 685 individuals as employees and the registering of 145 persons as self-employed. As regards the construction sector, 38 persons were registered as an employer for PAYE purposes, 227 individuals were registered as employees and 44 persons were registered as self-employed. In addition, 291 individuals in the construction sector were re-classified from subcontractor to employee.
The Deputy will be aware that the PAYE system applies to the wages of employees in all sectors whereas relevant contracts tax, RCT, applies to subcontractors in the construction, meat processing and forestry sectors.
As to the Deputy’s specific question on RCT-related figures for 2015 and 2016 and to date in 2017, I will give the Deputy a table of the figures given to my officials by Revenue.
Today?
Yes. Broadly, on those figures for 2015, the tax collected under the RCT system was €200 million.
Is that net or gross?
Deputy, through the Chair.
These are the tax collected overall figures. For 2016, it was €255.5 million. For 2017, to the end of September, the figure was €230.8 million.
I will study the details of the raids made by Revenue's joint investigation units afterwards. Those are interesting facts. I can tell the Minister, however, that the raid which I think was prompted by my question in July on the Dolphin's Barn refurbishment site was a joke. It took place in the canteen. People were invited to come into the canteen rather than officials from Revenue and the Workplace Relations Commission going around the site, grabbing people and asking them for their details. It was a way out of getting to the bottom of what was going on at that site.
Some of the people whose details were taken on that day, who would have been identified as being employed on that site on that day, got notification from Revenue that they started their employment only a month later, even though they had been working on that site for several months, which suggests a significant problem.
It is interesting that the Minister cannot tell whether these are gross or net figures. I put it to him that this is very important because the gross figure in previous years comes down to a net figure of next to nothing when offsets and repayments are taken into account. We need to get the net figure coming in under relevant contracts tax, RCT, after refunds and offsets.
This was discussed in a previous question by another Deputy. I thank the Minister for saying that the publication of the report on bogus self-employment, which I commissioned as a Minister, and on which the Departments of Social Protection and Finance cooperated, including reference to the then Department of Jobs, Enterprise and Innovation, is imminent. I have been asking about this for well over a year. The report was very specific. There was extensive input from the trade unions, particularly the Irish Congress of Trade Unions, ICTU. I do not understand why it should not be released.
People are going onto sites and do not have a choice. A 25 year old construction worker may feel that-----
That was my question.
The Deputy is over time.
-----he will never be injured but many who end up with injuries have no social insurance coverage and that can affect them for the rest of their lives.
I will provide a table for Deputy Boyd Barrett that will give, in a fair amount of detail, the figures he was looking for. I do not accept the distinction between gross and net taxation. People pay their tax and that is collected but the table I have here goes through the tax collected under the RCT system, and any tax then offset against tax liabilities and so on. I will provide all of that information to the Deputy.
I cannot comment on the operation mounted on the site the Deputy referred to because I do not have information on how it was conducted. It is clear from the number of visits made by the Revenue Commissioners, and the outcome of those visits, as I told the House a moment ago, that it is having an effect in dealing with this issue. Looking at the number of employees registered, at the reclassification of individuals, this appears to be the very kind of activity that the Deputy has been calling for. These are the figures for the number of on-site visits and their effect. I will soon receive a report from the working group I mentioned earlier to Deputy Burton and others and the paper emerging from that will be published.
I would welcome any action by the Government on this matter and indeed the raid on that site that followed the question I raised with the Minister. The problem is that it has not come with a proper outcome. The workers involved received notification from Revenue that they started their employment in August following the question I raised here in July, even though they were on site in July and would have got the workers' details then and the workers were employed from April or May. What was going on before August? Are the subcontractor and main contractor being held accountable for the fact that there was undoubtedly tax fraud going on prior to that? Still the record has not been rectified.
The difference between net and gross is very important. In 2009, for example, there was €436 million gross tax paid under RCT. The offsets were €490 million, meaning that the revenue for RCT net was minus €53 million. Less than no tax came in from RCT. There were probably 60,000 or 70,000 workers under that heading, with no tax coming in. By comparison, under pay as you earn, PAYE, tax, there would be hundreds of millions of euro in tax. That is the comparison we need to get to because the public is losing tax revenue because of bogus self-employment.
The Deputy never made reference in his question to supplying me with details of a particular raid or visit attached as he could have done. If he had given me that information I might have been able to respond to some of the points he made publicly or privately. The Deputy, however, chose not to do so.
Because I have another question. The Minister's answer related to other matters I had not asked about.
The Deputy comes in here and raises allegations about a particular activity of the Revenue Commissioners but if he had given me advance notice of that issue I might be in a position to respond but the Deputy did not do that.
I was responding to the Minister's comment about raids.
In respect of the efforts of the Revenue Commissioners to deal with this matter I have outlined the amount of activity that has happened in response-----
That is what I was responding to.
I am puzzled as to why the Deputy wants to keep interrupting me on this matter. He alleges that nothing is happening and when I try to tell him-----
I did not say that.
That is fair. He does not allege that nothing is happening but he alleges that not enough is happening and when I try to update the House on what is happening the Deputy wants to continue to interrupt me in so doing.
I was about to say, before the Deputy concluded, that compliance activity in this sector alone, for example in 2016, yielded €54.7 million for the Exchequer, which is a result of 17,801 interventions made by the Revenue Commissioners, which points to how seriously this matter is being taken.
Written Answers are published on the Oireachtas website.