As we begin our debate, it is encouraging for me as Minister for Finance to be speaking in the context of a growing economy in which more people are now at work. The end-November Exchequer returns show very robust tax figures, reflective of the continued recovery in the real economy. While corporation tax is the stand-out performer against profile, the year-on-year increase in taxes is broad-based. For example, VAT receipts are up 9% and income tax receipts are up 5%. As a result of these stronger than expected revenues, our deficit forecast for this year is below 2% of GDP and we are well on our way to a balanced budget earlier than originally forecast. Ireland's debt, which peaked at 120% of GDP in 2012, is forecast to be below 100% of GDP by the end of this year.
While all of these metrics are going in the right direction, the Government is not complacent. Far from it. Budget 2016 which delivered a tangible return to the public through reduced taxes and focused increases in expenditure was framed to comply with our fiscal rules which are designed to prevent a return to the boom-bust policies of the past. The economy is growing strongly and we have made significant progress, but the job of recovery is not yet complete. There is work to do and the Government and the country will continue to do it.
The Finance Bill 2015 as passed by the Dáil contains 90 sections and is 124 pages long. I turn to those sections now, although Senators will understand that time does not permit me to cover everything.
Part 1 of the Bill deals with the universal social charge, income tax, corporation tax and capital gains tax. Sections 2 and 3 provide for income tax and USC changes. From 1 January 2016, the entry threshold for USC will be increased from €12,012 to €13,000, thereby removing more than 40,000 workers from the scope of the charge entirely. It is estimated that more than 700,000 income earners will not be liable to USC at all from next year. It should be noted that this statistic includes individuals with incomes in excess of €13,000, as not all income is within the scope of USC. For example, social welfare payments are not liable to the charge. The Bill also provides for reductions in the three lowest rates of USC. The amount of income liable at the second USC rate is also being extended to ensure a full-time worker on the newly increased minimum wage does not become liable for the third rate of USC, which is itself being reduced to 5.5%. In addition, section 2 provides for an exemption for employees from USC on employer contributions to PRSAs, to bring the USC treatment of such contributions in line with employer contributions to occupational pension schemes. I brought forward these changes following the significant discussions on the USC treatment of PRSAs, to which I listened carefully, during the course of the debate on the Finance Act 2014 last year.
Section 4 provides for an increase in the home carer tax credit to €1,000 per annum and also increases the income threshold for home carers at which the credit begins to be withdrawn. The change is from €5,080 to €7,200.
Section 9 extends the home renovation incentive for a final year to the end of 31 December 2016.
Section 11 provides that an employer may provide an employee with a single annual voucher or non-cash benefit to a maximum of €500 without applying PAYE, PRSI or USC.
Section 14 removes from the list of specified reliefs for the purpose of the high earner restriction the exemption from income tax for profits and gains from the management of woodlands.
Section 15 introduces an incentive to encourage landlords to make their properties available to tenants in receipt of social housing supports. It is one part of a package of measures developed by the Government to improve rent stability, which was introduced on Report Stage in the Dáil. The incentive will be available to landlords who enter into a three-year commitment to rent a property to a tenant in receipt of housing supports. When the conditions of the incentive are met, the landlord will be allowed to claim a deduction for 100% of relevant mortgage interest, an increase on the 75% which is currently available. The increased deduction will be claimable on an arrears basis at the end of the three-year period provided the conditions of the scheme have been met.
Section 17 amends the film tax credit following the budget announcement of an increase in the cap on qualifying eligible expenditure at €70 million per production.
Section 18 makes a number of amendments to the employment and investment incentive. Certain changes to the terms of the employment and investment incentive are made in order to ensure it complies with the European Commission's general block exemption regulations from a state aid perspective. In addition, the incentive is being extended to companies which already own and operate nursing homes for the purpose of raising funding which can be spent on extending such nursing homes or residential care units associated with them. The changes are included in a financial resolution that came into effect on budget night. The increased amounts a company can raise in single year and over its lifetime which I announced last year have now come into effect.
Section 19 makes a number of amendments in relation to certain tax reliefs for farmers. It extends the period for which stock relief is available to 31 December 2018. This includes standard stock relief, stock relief for young trained farmers and stock relief for registered farm partnerships. It also makes a number of amendments to the registered farm partnership regime. These clarify certain conditions and introduce a requirement that all participants in the partnership are active farmers. A provision to allow the Minister for Agriculture, Food and the Marine to appoint inspectors to determine whether registered farm partnerships are operating as required is also included.
Section 19 also introduces limited tax relief for succession farm partnerships, a succession planning model that encourages older farmers to form partnerships with young trained farmers and to transfer ownership of the farm within a specified period to that young trained farmer. The section also provides for an appeals mechanism with regard to decisions made by the Minister for Agriculture, Food and the Marine on registered farm partnerships or succession farm partnerships.
Section 20 introduces the petroleum production tax. The tax will apply to petroleum profits from discoveries made under petroleum authorisations issued from June 2014. An Oireachtas joint committee report on Ireland's offshore oil and gas regime published in May 2012 recognised that retrospective changes to fiscal and licensing terms carry a risk of long-term reputational damage, and recommended that existing agreements be adhered to, irrespective of changing circumstances. Therefore, the new terms are designed to strike a balance between maximising the financial return for the State from future discoveries and attracting high-risk exploration investment to prove the potential of our offshore natural resources.
Sections 26 and 28 make minor amendments to the Taxes Consolidation Act 1997 regarding the introduction of Irish collective asset management vehicles and alternative investment funds. These changes bring the tax regime into line with the regulatory regime and ensure that Ireland will maintain its place as an internationally renowned centre for fund management and administration.
Section 27 amends the tax code in respect of capital allowances for certain aviation services facilities to comply with EU state aid de minimis guidelines. These amendments were brought into effect by a financial resolution on budget night.
Section 29 provides that additional tier 1 or AT1 capital instruments are to be regarded as debt instruments for corporate and withholding tax purposes. This will ensure the same tax treatment applies to these instruments as in other European countries.
Section 30 extends the three-year start-up corporation tax relief for new start-ups that begin trading over the next three years.
Section 32 contains the legislative provisions to implement the knowledge development box tax arrangement that I announced in the budget. The section provides that a 6.25% rate of corporation tax will apply to profits attributable to certain patents and copyrighted software which are the result of qualifying research and development carried out in Ireland. The intention behind the knowledge development box, or KDB, is to encourage companies to develop intellectual property and thereby engage in substantive operations that have high added value for the Irish economy. The Government has already made a commitment that the KDB will comply with OECD rules and, once introduced, it will be the first OECD-compliant box in the world. This puts Ireland in a unique position to offer long-term certainty to innovative industries planning their research and development investments.
Section 33 introduces country-by-country reporting in line with the approach agreed as part of the OECD's BEPS project. This introduces a requirement for multinationals with Irish parent companies to file country-by-country reports of their income, activities and taxes with the Revenue Commissioners.
It will apply for fiscal years beginning on or after 1 January 2016 and the first reports must be filed with Revenue by the end of 2017.
Section 35 replaces the existing capital gains tax relief applying to disposals of qualifying business assets by individual entrepreneurs and business people with a simplified relief which will apply, from 1 January 2016, a capital gains tax rate of 20% rather than the general rate of 33% to the first €1 million of qualifying gains.
Section 38 amends section 542 of the Taxes Consolidation Act 1997 in order to put individuals who dispose of land used as part of their business before and after 1 January 2016 but who receive compensation payments in 2016 in the same position for tax purposes, particularly with reference to the capital gains tax entrepreneur relief, by specifying that, in respect of compensation payments received on or after 1 January 2016, the date of receipt of the payment will be treated as the date on which the disposal of the land occurred.
Section 43 provides for the budget announcement that the reduced rate of alcohol product tax available for beer brewed in small breweries may be claimed upfront or by repayment. This is subject to a commencement order and will come into operation once the Revenue Commissioners have made the necessary changes to the collection system. This section also updates the definition of “counterfeit goods” to reflect the new definition in EU legislation.
Section 45 gives effect to the increase in the rates of tobacco products tax, which came into effect on budget night. This measure is expected to raise €8 million in 2015 and €61.4 million in 2016.
Part 3 of the Bill deals with value-added tax, VAT. The VAT-related sections in the Bill, sections 51 to 60, inclusive, do not signal major policy changes and are largely technical in nature. Their primary focus is to prevent fraud, provide clarity and correct anomalies in the existing VAT Consolidation Acts.
Part 4 of the Bill deals with stamp duties. Section 62 adds an additional qualification for the purposes of the young trained farmer stock relief. The new qualification is the bachelor of science honours degree in agriculture awarded by the Dundalk Institute of Technology.
Section 63 extends the relief from stamp duty on transfers of agricultural land, including farm houses and buildings, to young trained farmers until 31 December 2018.
Section 64 provides for the new stamp duty charge on cash cards and combined cards. The current position is that stamp duty is charged annually at the rate of €2.50 for each cash card and €5 for each combined card, subject to certain exemptions, which are to remain unchanged. This flat rate charge is being replaced with a 12 cent charge on withdrawals of cash from ATMs using these cards, which will be capped at either €2.50 in the case of cash withdrawals or €5 in the case of combined card withdrawals. The new basis of charge and the revised reporting requirements for issuers of cards will come into effect on 1 January 2016.
Part 5 of the Bill deals with capital acquisitions tax. Section 67 increases the group A tax-free threshold for transfers of gifts and inheritances from parents to their children and below which capital acquisitions tax does not apply by approximately 25%, from €225,000 to €280,000, with effect from 14 October 2015.
That is a full summary of the main aspects of the Finance Bill. There were a limited number of amendments in the Dáil and I have referred to them and explained their purpose. I commend the Bill to the House and thank Members for their attention.