Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

International Agreements

Pearse Doherty

Ceist:

51. Deputy Pearse Doherty asked the Minister for Finance the details of the agreement reached by the G7 and outlined in its communiqué published on 5 June 2021 regarding international tax reform in particular the introduction of a global minimum tax rate of at least 15% for each country; the way it will operate; the impact on the State, its revenues and inward investment offering over medium and long-term horizons; his views on this position; his negotiating objective in relation to same in negotiations at OECD level; and if he will make a statement on the matter. [31854/21]

On 5 June, the G7 reached an agreement on concrete actions, including a suite of tax measures to respond to the increasing globalisation and digitalisation of the world economy. Among the measures agreed was the introduction of a global minimum tax rate of at least 15% for each country. All we have is a published communiqué but the Minister was in the room in his capacity as the president of the Eurogroup. Will he update the Dáil on the details of this part of the agreement, the application of the minimum rate and whether that minimum rate will be an effective or headline rate?

I thank the Deputy for raising this issue and I propose to take Questions Nos. 51 and 53 together.

I apologise for interrupting but my understanding is that priority questions cannot be grouped. We sought guidance from the Ceann Comhairle's office and we were told that the Minister's office had been informed of that advice. It is important that we deal with these two matters separately and priority questions cannot be grouped.

I was not informed of that guidance but I am in the hands of the Ceann Comhairle and I am happy to deal with these questions in whatever way he sees fit.

I take it that Deputy Doherty is correct. I was not aware that priority questions could be grouped with each other. My understanding is that priority questions can be grouped with other non-priority questions.

I am happy to be guided by the Ceann Comhairle and to deal with the questions in the way he sees fit.

I thank the Minister.

I welcome the opportunity to brief the Dáil on the international tax discussions on foot of the G7 meeting, which I attended in my role as president of the Eurogroup. It is important to stress that the Government believes that it is in everyone’s interest to achieve a sustainable, ambitious and equitable agreement on modernising the framework for international tax to reflect increasing globalisation and digitalisation. Second, it is also important to highlight that reform of the international tax rules has now been part of a process since 2013. Since 2018, Ireland has constructively engaged in the more recent discussions to find a solution at the OECD. This is the subject of the current negotiations which are expected to conclude this year. The OECD is proposing a two-pillar solution. Pillar 1 concerns the allocation of a proportion of taxing rights, while pillar 2 is in regard to a minimum effective tax rate for larger companies.

The Government noted the communiqué of 5 June from the G7 finance ministers, which includes the desire for a global minimum effective tax rate of at least 15%. Deputy Doherty asked a specific question about that meeting. The only document which emerged from the G7 regarding that group's intent was the communiqué to which the Deputy referred. As important as that communiqué is, and it is important, it is also important to stress that it now provides a large input into a process in which 139 countries are now participating. The minimum rate does create challenges for Ireland and other small countries for good reasons. It is my intention to continue to make the case for an agreement to accommodate Ireland’s low but substantial 12.5% rate.

The Minister knows Sinn Féin supports the OECD base erosion and profit shifting, BEPS, process. The announcement by the G7 of its intention to establish a global minimum effective corporation tax rate of 15% was the view of that group regarding where pillar 2 of that process should land, but there are other views. Pillar 2 in any global minimum effective corporate tax rate will not be decided by the G7 alone, but will be subject to the agreement of 139 countries and jurisdictions under the OECD inclusive framework, including Ireland. It is clear that this process has momentum and that the members of the G7 and the broader OECD are already seeking carve-outs and exemptions for strategic industries and economies under pillars 1 and 2. It is also clear that they will doggedly pursue their own national interests in that process, as is the right of those countries.

We must pursue an outcome that is fair and that works for all countries and jurisdictions party to the process, including Ireland. It is our view in Sinn Féin that any agreement reached at the OECD should accommodate an effective corporation tax rate of 12.5%. What strategy is the Minister going to adopt ahead of the G20 and OECD talks? Does he believe that there is any support internationally for this approach?

The strategy we will be implementing is a continuation of what we have done to date. First, in bilateral engagements with many Ministers, including the US Secretary of the Treasury, Ms Yellen, we will continue to make the case for legitimate tax competition within certain boundaries, with a recognition of the role that our rate plays for our country. Second, inside the OECD process that will be intensifying, we will continue to make the case for that rate and will outline our broader views in relation to other elements of the OECD process. We will do that across the coming three to four weeks. There will be a further OECD meeting in July and another will take place in October. In each of those engagements and in the preceding weeks, we will make the case for our rate and for the competitiveness of small countries.

As the Minister knows, the agreement reached by the G7, which may not be the final agreement, only applies to certain companies. Even if it is applied, it will not affect all companies or foreign direct investment, FDI, companies here in Ireland. At this early stage, what is the Department's view of applying a minimum effective tax rate - whatever rate is agreed through the OECD process - across the board? Is it the Department's view that there should be a rate specific to those companies that fall into the net of having annual turnover of €750 million or more? Is it now time to look at our competitiveness in other areas outside of tax? The housing crisis, for example, has been called out by the National Competitiveness Council, NCC, repeatedly in this regard. Education, research and development, infrastructure and quality of life issues such as childcare and housing are all crucial and will be even more important in the future, given the changes taking place internationally. Is the Department considering committing extra resources and revenue to those areas?

Deputy Doherty first asked if I anticipate that the potential global minimum effective tax rate will cover more companies than are currently encompassed in the G7 communiqué. That is a possibility but the case that we will be making is that regardless of where the rate ends up, if a rate is agreed at a global level, it should only apply to the very largest companies. As Deputy Doherty has already noted, the communiqué as it currently stands only applies to companies generating more than three quarters of a billion euro of global turnover.

The Government has been increasing investment in other areas that are very important to our competitiveness. Taxation is part of our competitive model but there are many different elements in that model.

International Agreements

Pearse Doherty

Ceist:

53. Deputy Pearse Doherty asked the Minister for Finance the details of the agreement reached by the G7 and outlined in its communiqué published on 5 June 2021 regarding international tax reform in particular, the reallocation of profits and taxing rights for multinationals with profits margins above 10 %; the way it will operate if implemented; the multinationals that will be included and excluded; the OECD members that will benefit most in terms of revenue raised as a percentage of their GDP; the OECD members that will benefit least; the impact of the agreement on the State in terms of revenue and its inward investment offering; and if he will make a statement on the matter. [31855/21]

The second component or plank of the G7 agreement on international taxation that was announced was to reallocate profits and taxing rights so that multinationals pay tax where they operate rather than only where their head offices are based. This mirrors pillar 1 of the BEPS process and will, if implemented, affect the State's revenues. However the published communiqué, while offering a broad picture, did not provide the granular details of the proposal agreed by the G7. Having attended the summit, I ask the Minister to update the Dáil on the details of this part of the agreement, what companies it will apply to, how it will be implemented and what the Government's proposals are in relation to it.

I thank Deputy Doherty for his further question on pillar 2. There is no further detail beyond the communiqué to which Deputy Doherty referred. The main element of the statement from the G7 refers to the annual global turnover threshold. Beyond that, there is no further detail agreed between the G7 economies. That will happen within the OECD. The detail will be determined within the OECD and that will then structure the way in which a reallocation of taxing rights will take place. That is obviously something that is very important for Ireland. I have already indicated that out of the two pillars that were up for negotiation, the one that Ireland was willing to initially support was the pillar that covered the reallocation of taxing rights but the direction in which this is now going is towards a potential agreement that will include both pillars.

As I said in my earlier contribution, Sinn Féin supports the BEPS process and believes we should assert our own influence on it. Based on the formula proposed by the OECD, the Department of Finance estimated in January 2020 that this could reduce the State's corporation tax revenue by approximately €2 billion annually. However, the agreement announced by the G7 last Saturday arrived at a different formula, with market jurisdictions wielding taxing rights of over 20% of profits on earning margins above 10%. That differs from the OECD proposal upon which the Department's estimations of tax revenue were based. Can the Minister give us any projections regarding the impact of the G7 proposal on pillar 1, if it were to be implemented? Can he give us further detail on the number or range of companies that would be impacted? For example, under the other pillar, it is companies with an annual turnover of over €750 million. It has been reported that Amazon, with profit margins of 6% in 2020, could evade this measure. What is the Department's view on that?

I thank the Deputy for his question. I am not in a position to comment on the tax affairs of any particular company. Obviously what is driving the process overall is the understandable issue, namely, to address the gap between how tax structures are currently developed across the world and the increasingly digital nature of the global economy. Deputy Doherty asked whether the Department has been able to update its revenue loss forecast from the G7 communiqué. We have not been able to do that because there is not enough detail in the G7 document to be able to form a view regarding how those policies would be executed. That in turn would allow us to model it separately. The second, more principled reason is that the G7 document is a communiqué and is not yet an agreement. We will develop our modelling as the OECD process continues to develop across the year.

Agreement at OECD level can only be reached if that agreement and both pillars operate on a fair and equitable basis. While we know that developing countries will, in all likelihood, be pushing for stronger measures under pillar 2 to increase their own revenues, it is now clear that members of the G7 are seeking their own exemptions and carve-outs for strategic companies, industries and sectors in their own economies. The British Government, for example, is reported to be seeking exemptions under pillar 1 for financial services in the City of London, with HSBC, its largest bank in terms of revenue generating more than half of its income in China. Given that G7 members, like all countries and jurisdictions under the inclusive framework, will press for an agreement that serves national as well as international interests, it is only proper that we work on securing an agreement that serves the common, global good but also Ireland's national interests. At this early stage, does the Minister have any views on what that would mean vis-à-vis this pillar?

I am both publicly and privately making the case for the kind of agreement that Ireland would be willing to support. I am talking about my views on the rates and on the need for an agreement that accommodates small and medium-sized economies and not just the larger ones. In terms of what I believe an acceptable model could look like later on in the year, if agreement can be reached, it is one that will continue to be able to accommodate a low but substantial rate on a broad base of economic activity, as is the case in Ireland. It would also be an agreement that would bring stability to issues that have been ongoing for some time. An agreement brings challenges for Ireland but the lack of an agreement also brings challenges for Ireland. A third feature of any agreement is that it is one that is balanced in the breadth of companies to which it applies, if agreement can be reached. Obviously, our own domestic economy and the small and medium-sized enterprises within it are important and are a priority for the Government.

European Union

Mick Barry

Ceist:

54. Deputy Mick Barry asked the Minister for Finance if he will report on discussions he has had with the European Commission and its latest country-specific recommendations under the European semester process; and if he will make a statement on the matter. [31782/21]

I ask the Minister if he will report on discussions he has had with the European Commission with respect to its latest country-specific recommendations under the European semester process; and if he will make a statement on the matter.

The European semester is a mechanism to co-ordinate economic policies across EU member states to help achieve overall economic stability and growth. On 2 June, the European Commission published the 2021 European semester spring package. As a result of the Covid-19 pandemic, this exceptional semester cycle has been adapted to facilitate the implementation of the recovery and resilience facility, RRF, with the primary change being that for 2021 there are no country reports or country-specific recommendations, CSRs. Instead, the spring package is focusing on providing budgetary guidance to member states.

In that context, member states received three generalised budgetary CSRs. For Ireland, these were: first, in 2022, to pursue a supportive budgetary stance; second, when economic conditions allow to pursue a budgetary policy aimed at achieving prudent medium-term budgetary positions and ensuring budgetary sustainability into the medium term; and, third, to pay particular attention to the composition of public finances, both on the revenue and expenditure sides of the balance, and to the quality of budgetary measures to ensure a sustainable and inclusive recovery.

While the CSRs have yet to be discussed by finance ministers at ECOFIN, my Department has engaged with the Commission and other countries at the relevant Council committees and we have broadly welcomed the publication of this document in spring. Once approved by ECOFIN, the CSRs will then be formally adopted by leaders at the European Council.

In previous years, the European semester has laid significant emphasis on labour activation measures. I imagine that when we get around to it again, if anything, that will be more so the case given the high levels of youth unemployment, so I want to focus on this for a moment. The recent history in this State regarding training schemes has not been great. I need only mention the infamous JobBridge scheme. Participants in JobBridge at the time received €188 per week plus a €50 top-up, which was cheap labour. Are we going to see a repeat of that? What guarantees can the Minister give that we will not see a repeat of that? Nearly 60% of people in JobBridge did not complete their internships and fewer than 20% were offered jobs in their host companies. What guarantees can the Minister give the House that the next round of training, which the Government has in the pipeline, will not be of a similar ilk?

Deputy Barry is correct that at other points the country-specific recommendations referred to how we can get young people trained and back into good jobs quickly after being unemployed. This is important in the context of this pandemic because young people have seen such a big change in their incomes and such a loss of jobs. I assure the Dáil that any plans we put together will be solely focused on how jobs can be created and young people can go into jobs where they will receive the training and support they need to accelerate their careers after the dreadful effects of the pandemic.

I am aware of Deputy Barry's views on other schemes that have existed in the past. He and I will differ on that. Some of those schemes were effective in helping to create work and get young people into those jobs.

The Minister for Social Protection, Deputy Humphreys, has said the new round of training schemes will pay more than the JobBridge scheme with its €50 top-up did in the past. I have argued that a €60, €70 or €80 top-up will not cut it and that there needs to be decent pay for trainees. Will the Minister be more specific than the Minister for Social Protection and give us a broad outline of what the pay rates will be? He mentioned that any plans will be solely focused on jobs. What guarantees can be given that this will be real training and that there will be guaranteed jobs at the end of it? At the very least, the percentage of job offers made should be well in excess of the 20% or less we saw with JobBridge. Last but not least, we have been hearing about the training schemes in the pipeline for some time. When will we get more information and detail about them?

Many of the various training and educational programmes announced by the Minister for Further and Higher Education, Research, Innovation and Science, Deputy Harris, earlier in this pandemic have been implemented. For example, we have had good uptake in the apprenticeship and training programmes that have been put in place. The Minister for Social Protection has said that as we get to the point where our economy is more safely and sustainably open, we will put in place additional training programmes through the Department of Social Protection to help young people get work. Can I give the Deputy a guarantee that there will be jobs available to everybody at the end of them? That will probably be a difficult guarantee to give because we cannot guarantee an outcome on behalf of an employer or somebody who was on a training programme. However, I can guarantee the Deputy that we will do all we can to make sure programmes are in place that help young people to get back to work. The Minister for Social Protection will outline the terms and conditions of those programmes when their design is finalised.

Vacant Sites

Róisín Shortall

Ceist:

52. Deputy Róisín Shortall asked the Minister for Finance if he will examine the possibility of giving the Revenue Commissioners responsibility for collection of the vacant site levy given compliance with this levy is exceptionally low (details supplied); and if he will make a statement on the matter. [32046/21]

I apologise for being late in arriving. We know there is a problem with land hoarding which contributes to the high cost of housing and the lack of adequate supply. The vacant site levy was designed to address this problem but we would all accept that it is simply not working. I am asking the Minister if he will consider redesigning the scheme to give Revenue responsibility for collecting the levy.

Under the vacant site levy provisions of the Urban Regeneration and Housing Act 2015, planning authorities were empowered to apply a vacant site levy of 3% of the market valuation of relevant properties listed on local authority vacant site registers in 2018, which relevant owners were liable to pay in January 2019. The rate of the levy increased to 7% for sites listed on local authority vacant site registers from 2019 onwards, which site owners became liable to pay in January 2020.

I am informed by the Department of Housing, Local Government and Heritage that it proactively engages with local authorities with a view to ensuring that the vacant site levy achieves its full potential in terms of bringing concerned sites into productive use. In this regard, on 8 March 2021, the Department of Housing, Local Government and Heritage requested the submission of a progress report on the collection of the levy by each local authority. Responses have been received from each of the 31 local authorities. The Department is assessing the responses received and intends to proactively engage with individual local authorities and identify any issues to be addressed.

Each local authority has responsibility for the administration of the vacant site levy and register in its respective catchment area. A change in Government policy would be required to reassign the responsibility for collection of the levy to another body. The Deputy refers to the effectiveness of Revenue in collecting the local property tax, LPT, but it should be noted that the LPT is a self-assessed tax for which compliance is very high. Collection of the vacant site levy involves a physical inspection regime which would not align well with how Revenue conducts operations in that area. Careful consideration will be given by me to the role of local authority functions and to the capacity of the Revenue to take on further responsibilities.

I note the Minister did not express confidence in the scheme as it is operating at the moment. Thanks to work being done by the Business Post, it has been reported that last year €21.5 million was owed on vacant sites. In that same year, €21,000 was collected. By any standards, the system is not working.

The local authorities simply do not have the resources or personnel to do the follow-up work. The figures speak for themselves.

A solicitor and tax specialist who is experienced in this area has been in touch with the Minister's Department on several occasions with a proposal for how a new system might operate. That system would be based on self-assessment but would include penalties unless people registered their properties. Such people would have to produce a certificate at the point of sale of the property. I ask the Minister to consider such a system.

If I look at the performance of the vacant site levy, 89 sites were valued at €132 million in 2018. They were liable at the 3% rate in 2019 in respect of their valuation for 2018. For 2019, those 89 sites grew to 181 sites and, in 2020, grew further to 215 sites. Demand letters were issued for 79 of those 215 sites and, as the Deputy has said, €21,000 in payments was received in respect of 2020.

It should be said this was never about revenue generation but was about the use of the land to see if a catalyst could be put in place for that land to be used more productively and efficiently. I am going to give consideration to the future of this tax, its role and whether there is a case for it to be strengthened.

I am happy to send the Minister details of the proposal. It proposes to put the onus on landowners to get themselves put on the register, for them to self-assess and to face a charge on their land when they sell it if they do not self-assess. Minimal change to legislation, whereby the levy is turned into a charge on the land, would be needed to achieve that. Such a system has a lot to recommend it because the present system is simply not working. The purpose of the system is obviously not to generate revenue but it is to make hoarded land available for house building. That is not happening at the moment. If I send him further details of this proposal to put the onus on landowners to register their land, I would ask the Minister to look at them and learn from the success of other schemes in which Revenue has been involved, the non-principal private residence, NPPR, scheme, for example. I am looking for a commitment that the Minister will consider that as a way of achieving what the levy is intended to achieve.

I believe I have seen the piece of correspondence to which the Deputy has referred but just in case I have not, I would be happy to consider it if she could share it with me this evening by handing it to me during a division or later on. I am aware of a few models in respect of this issue. The Deputy correctly made the point that this is not about how we would generate revenue, it is about how we change the use of land. I am aware of different models for how that is done in different countries and just in case I have missed the correspondence to which the Deputy has referred, I would be happy to look at it directly.