Select Committee on Finance, Public Expenditure and Reform, and Taoiseach díospóireacht -
Wednesday, 18 Nov 2020

Finance Bill 2020: Committee Stage (Resumed)

Acting Chairman (Deputy Steven Matthews)

In order to provide for the smooth running of the meeting, any member acting in substitution for a member of the committee should formally notify the clerk now if they have not already done so. Divisions will be taken as they arise. Members attending this meeting should be aware that, pursuant to Standing Order 106(3), they may move their amendments but cannot participate in voting on those amendments.

On behalf of the select committee, I welcome the Minister for Finance, Deputy Donohoe, and his officials. We will now resume on Part 5, section 52 of the Bill.

The position in relation to amendments listed under section 54 is complex and an order of the committee will be necessary before consideration of section 54 commences in order to minimise the rotation of teams of ministerial advisers. A motion to this effect in the name of the Chair was circulated to members yesterday.

It is proposed:

"That –

(1) Amendments 150, 157, 163, 168, 169 and 170 be postponed until section 74 has been disposed of,

(2) Section 61 be postponed until amendment 170 has been disposed of

(3) amendments 152, 162, 164, 166 and 167 be postponed until section 57 has been disposed of,

(4) section 57 be postponed until amendment 165 has been disposed of,

(5) amendments 153, 154, 156, 158, 159, 161 and 171 be postponed until section 55 has been disposed of, and

(6) amendments 155, 160 and 165 be postponed until section 58 has been disposed of.”

Is the motion agreed?

Deputy Mairéad Farrell

Will the Acting Chairman clarify that we will or will not be dealing with section 54 when it comes, or is it a short break?

Acting Chairman (Deputy Steven Matthews)

Section 54 is quite complex and in order to facilitate the rotation of ministerial advisers and staff we will set out the amendments in certain orders. That motion was sent to members yesterday. It is just about the order in which we will take the amendments in section 54. Is that agreed? Agreed.

Section 52 agreed to.

SECTION 53

Question proposed: "That section 53 stand part of the Bill."

Deputy Mairéad Farrell

Will the Minister speak briefly to the policy impact of this section?

Minister for Finance (Deputy Paschal Donohoe)

Section 53 amends section 46 of the Capital Acquisitions Tax Consolidation Act 2003, which section provides for the submission of tax returns to Revenue. Section 46 requires the submission of a capital acquisitions tax return where the taxable value of gifts or inheritances within the same group threshold exceeds 80% of the value of that group threshold. This 80% threshold value is calculated by aggregating the value of the current gift or inheritance with the value of previous gifts or inheritances received by a beneficiary.

Section 89 of the Capital Acquisitions Tax Consolidation Act 2003 provides for agricultural relief. The relief takes the form of a 90% reduction in the taxable value of gifted or inherited agricultural property in certain circumstances. Section 90 provides for business relief, which similarly reduces the taxable value of qualifying business property by 90%. The effect of these reliefs on taxable value is that high value property can be received as gifts or inheritances without a requirement for the recipient to submit a return to Revenue.

The current group A threshold, which applies where property is transferring from parents to their children, is €335,000. This means that a person could potentially receive benefits comprising agricultural or business property with a taxable value of up to €2.68 million without having to submit a return.

Agricultural relief and business relief are valuable reliefs and it is essential for the development of capital acquisitions tax policy that the extent to which these reliefs are being availed of, and the cost of the reliefs, is known. In addition, information about the transfer of significant wealth is important from a Revenue compliance programme perspective which, to operate effectively, requires awareness that the reliefs are being claimed, the examination of returns and follow-up investigation if required.

This amendment to section 46 therefore requires the submission of a return when the gift or inheritance comprises agricultural or business property that qualifies for relief, irrespective of the value of that property. Given that beneficiaries would not tend to receive multiple gifts of such property during their lifetime, I do not consider that this new requirement will be onerous, and I am satisfied that the value to be gained from this additional information justifies the new requirement.

Question put and agreed to.

Acting Chairman (Deputy Steven Matthews)

The briefing after this point assumes that an order of the committee dealing with arrangements for the consideration of amendments Nos. 150 to 172, inclusive, has been made as proposed and without amendment.

Amendments Nos. 151 and 172 not moved.

Sections 54 and 55 agreed to.

NEW SECTIONS

Deputy Mairéad Farrell

I move amendment No. 153:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on hybrid mismatches (use of hybrid financial instruments)

55. The Minister shall, within 6 months of the passing of this Act, report the total number of yearly transactions that used hybrid financial instruments (profit participating notes/loans) and their total annual value (in nominal terms).”.

This relates to hybrid mismatches, particularly in instances of double non-taxation, which are of concern to the EU and the OECD. The amendment is designed to shore up the laws on hybrid mismatches. However, I am concerned that special purpose vehicles, SPVs, which I have mentioned throughout this debate, could use hybrid financial instruments to refer to profit participating loans, which will not be captured in this hybrid mismatch. That is why I have tabled the amendment.

Deputy Paschal Donohoe

It might be useful to set out exactly what is meant by a hybrid financial instrument. This is an instrument that is characterised differently for tax purposes under the laws of two or more territories. For example, a financial instrument that is characterised as debt under the laws of one territory but as equity under the laws of another will be regarded as a hybrid financial instrument. A financial instrument, therefore, is only a hybrid financial instrument if different territories treat that instrument differently for tax purposes. While we know how a financial instrument is treated for Irish tax purposes, we would have to know how that instrument would be treated by the other territory or territories that are party to it to know if it is a hybrid financial instrument.

The challenges in identifying hybridity in the context of financial instruments were recognised by the OECD in the base erosion and profit shifting project. This recognised that due to the wide variety of financial instruments and the different ways that territories can treat them for tax purposes, it is almost impossible to identify and define all those situations where cross-border conflicts might exist. This explains why it is not possible to report the total number of yearly transactions that use hybrid financial instruments, nor their total annual value, as requested by the Deputy. On this basis, I do not propose to accept her amendment.

However, as she will be aware, the OECD's recommended approach to address these challenges was for countries to implement anti-hybrid rules. This is what Ireland did in the Finance Act 2019. The anti-hybrid rules address a range of mismatch outcomes, including mismatches that arise due to the hybrid nature of a financial instrument, which result in a tax deduction being obtained in one territory without a corresponding amount being included in another territory. The Irish anti-hybrid legislation contains two rules to neutralise these mismatches as follow. First, under the primary rule, an Irish corporate taxpayer making a payment under a hybrid financial instrument will be denied a tax deduction for the payment to the extent that a corresponding amount has not been included in another territory. Second, where an Irish corporate taxpayer receives a payment under a hybrid financial instrument and the payer territory has not denied the deduction under its own primary rule, the Irish corporate taxpayer is charged to tax on the amount of the deduction.

As these rules took effect from 1 January 2020, they will be reflected in the corporation tax returns for 2020 and later years. Corporation tax returns for 2020 are due to be filed by September 2021 at the latest. Where an Irish corporate taxpayer makes an adjustment under the anti-hybrid rules, it is obliged to disclose the relevant details in the hybrid mismatches section of its corporation tax return for the relevant period. In particular, taxpayers must indicate under which of the rules the adjustment is being made and the quantum of that adjustment. This means that once the corporate tax returns for 2020 and later years have been filed, Revenue will have information regarding the operation of the anti-hybrid rules and the quantum of any corporate tax adjustments required under those rules.

The reason I am not accepting the Deputy's amendment is that from a timing perspective, the information she is looking for will not be available to me by this point and any information that might be available will be incomplete. There is a case for monitoring the number of transactions that are availing of the anti-hybrid rules that I outlined but it will be another year until we have the information in place to allow that to happen.

Deputy Mairéad Farrell

The Minister said it would be impossible to get this information. Is it not the case, however, that there is an automatic exchange of information between Revenue and taxpayers and that this information is publicly available because it is listed on the Stock Exchange?

Deputy Paschal Donohoe

It may well be the case that information is available on the Stock Exchange but I imagine there would be a timing issue there as well on when it becomes available. We simply will not have the information the Deputy is looking for inside the time period she is looking for it. If information becomes available under Stock Exchange rules, I would imagine there would be a similar timing issue. It is unlikely that within the six months the Deputy is looking for, the information would be available through Stock Exchange disclosures either. I can confirm that later in the debate but I am certain that the information that the Deputy wants for this and that I would expect she would require through the Revenue Commissioners will not be available to us inside the six-month period.

Deputy Mairéad Farrell

It is more a timing issue that the amendment refers to six months rather than the non-availability of the information. If I understand the procedure correctly, I will withdraw the amendment in order that I can resubmit it on Report Stage.

Deputy Paschal Donohoe

I made the point to the Deputy a moment ago about the incompleteness of information that might be disclosed to the Stock Exchange. Even if information was made available through a Stock Exchange disclosure inside the six-month period, what we need is to be able to compare transactions across tax jurisdictions. That information will properly sit with the Revenue Commissioners and the issue is one of timing. I am sure Is will be in a position this time next year, for example, to be able to discuss with the Deputy how these rules are being availed of and the numbers of transactions and their values.

While the standard tax rules of taxpayer confidentiality will still stand, the topline information sought will be available at a point in the future but we just will not have it inside six months.

Deputy Mairéad Farrell

That is good. I look forward to having a conversation this time next year and withdraw my amendment so that I can discuss it on Report Stage. I am glad to see that this is simply a timing issue rather than a case of not being able to be done in its entirety.

Amendment, by leave, withdrawn.

Deputy Mairéad Farrell

I move amendment No. 154:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on cost to the exchequer of tax forgone, from companies in receipt of section 110 (Taxes Consolidation Act 1997) tax relief

55. The Minister shall, within 6 months of the passing of this Act, report on the yearly cost of tax expenditures provided to companies in receipt of section 110 of the Taxes Consolidation Act 1997 tax relief.”.

I ask the Minister to advise us on his position regarding the amendment.

Deputy Paschal Donohoe

Section 110 of the Taxes Consolidation Act of 1997 sets out a regime for the taxation of special purpose vehicles set up to securitise assets. This regime is an important part of Ireland's offering as a location for the conduct of financial services. Ireland is not unique in having a securitisation regime. A number of other EU countries have such a regime in place as part of a competitive financial services offering.

The importance of securitisation has been recognised by the European Commission through their work on capital markets union, one of the aims of which is to seek to build a sustainable securitisation regime across the European Union. Securitisations are useful, both for banks in freeing up capital to allow them to continue to lend to individuals and businesses, and for the productive economy as it can underpin the supply of capital market financing to industries and companies in Ireland, Europe and further afield.

The purpose of the section 110 regime, as with other similar regimes worldwide, is to enable noteholders to invest through one structured vehicle without giving rise to an additional layer of tax as compared to a direct investment in the underlying assets. I am advised by Revenue that it is not possible to calculate the amount of tax that would be paid if a company had not submitted a notification to Revenue that it is a qualifying company for the purposes of section 110 of the Taxes Consolidation Act of 1997. This would in any case be an entirely hypothetical estimation as it is unlikely that such transactions would take place here in the absence of securitisation legislation. It is for that reason I cannot accept the amendment.

Deputy Mairéad Farrell

My concern is that the State applies a corporate tax rate on passive income, which is designed to protect against entitles that have little to no economic activity. With section 110, companies are effectively tax neutral due to an ability to use interest-free payments to write down taxable profits. It is for that reason I am interested in pressing my amendment.

Amendment put and declared lost.

Chairman

Amendment No. 155 has been postponed until section 58 is disposed of.

Deputy Verona Murphy

I move amendment No. 156:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

55. The Minister shall, within 3 months of the passing of this Act, prepare and lay before the Oireachtas a report on the taxation measures (included accelerated capital allowances)which can be used to support a programme to secure an update in the national HGV fleet to Euro VI standards and above.”.

Yesterday, we inadvertently discussed amendment No. 156 when it was in fact amendment No. 139 and I ask the Minister to reaffirm what he said about amendment No. 156 and a possible accelerated capital allowances scheme. I also propose to withdraw this amendment and resubmit on Report Stage.

Deputy Paschal Donohoe

It is recognised that the transition to alternatively-fuelled vehicles is a significant challenge for the road haulage sector. The movement of goods by road remains the second biggest source of transport emissions after private car use.

At an EU level, the critical need to reduce emissions from transport has led to agreement on implementing increasingly stringent emissions standards for new heavy goods vehicles, together with a broad policy shift away from supporting conventional diesel and petrol technologies. As part of the transition to EU climate neutrality by 2050, green deal policy objectives include phasing out fossil fuels and transitioning transport to zero or low-emitting alternative vehicle technologies.

At a national level, the transition to low-carbon fuel technologies is not expected to be uniform across the entirety of the Irish freight and haulage sector. It includes the use of electric vehicles in the light commercial vehicle sector and a range of alternative fuel technologies in the heavy duty sector.

In this respect, the Finance Act 2018 introduced an accelerated capital allowance scheme for capital expenditure on gas propelled vehicles and refuelling equipment used for the purposes of carrying on a trade. The scheme allows taxpayers to deduct the full cost of expenditure on qualifying vehicles and refuelling equipment in year one as compared to the normal writing-down period of eight years, thereby providing a cashflow benefit to the sector.

Compressed natural gas offers far greater carbon reduction potential than diesel or petrol in heavy goods vehicles. The introduction of this scheme contributes to the work of the Department's task force on low-emission vehicles, and to achieving our national target to transition to a low-carbon economy.

The scheme is currently scheduled to cease on 31 December 2021. Therefore, next year my officials will conduct a tax expenditure review of the scheme. The review will evaluate the effectiveness of the scheme and make recommendations for its amendment and-or extension.

As the work is already scheduled to take place next year I, therefore, cannot accept the amendment. I want to reaffirm what I said to the committee about the work that is under way, by the Department of Transport, on a grant to support this sector in transitioning towards different kinds of engines because we realise that this is a challenge for a sector that must face other challenges at the same time. I am sure that there will be an opportunity to get the views of the Deputies on the issue of the grant, its design and roll-out, in different ways in the coming months.

As I said yesterday, I will see if it is possible to get a little bit more information on the work that is under way on that and will share it with the Deputies on Report Stage.

Deputy Verona Murphy

I thank the Minister for his reply. I understand now that this scheme already exists.

I with to advise that gas vehicles are not particularly relevant to the Irish market. Some people did partake in the scheme but it has not really been successful. One will find that with the stakeholders involved they will seek more of an upgrade to a Euro 6 diesel as opposed to Euro 6 gas. Also, our infrastructure has not been rolled quick enough and is not aligned with Europe where they are moving away from the gas model. I emphasise that it is a misconception that we are moving towards gas.

I withdraw the amendment with liberty to resubmit it on Report Stage.

Amendment, by leave, withdrawn.

Deputy Denis Naughten

I move amendment No. 158:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on options for enhancement of Employment Investment Incentive relief in Midlands Peat Region

55. The Minister shall, within 90 days of the passing of this Act, publish a report on options for the enhancement of the Employment Investment Incentive relief in the Midlands Peat Region for businesses established at Bord na Móna works in—

(a) County Galway at—

(i) Clonfert, Ballinasloe, and

(ii) Derryfadda/Ahascragh, Ballinasloe,

(b) County Kildare at Ballydermot, Rathangan,

(c) County Laois at—

(i) Clonsast, Portarlington, and

(ii) Cuil na Mona, Portlaoise,

(d) County Longford at Mountdillon, Lanesborough,

(e) County Offaly at—

(i) Ballycon,

(ii) Bellair, Ballycumber,

(iii) Blackwater,

(iv) Blackwater, Shannonbridge,

(v) Boora, Leabeg, Tullamore,

(vi)Croghan, Mt. Lucas,

(vii) Derringlough,

(viii) Lemonaghan, Ferbane, and

(ix) Monietta, Killeigh, Tullamore,

(f) County Roscommon at—

(i) Ballyglass, and

(ii) Conburren, Athlone,

(g) County Tipperary at Littleton, and

(h) County Westmeath at—

(i) Cuil na Gun, Coole, Mullingar, and

(ii) Derrygreenagh, Rochfordbridge.”.

This amendment is in my name and those of my colleagues from across the midland counties. This matter is of interest to every Deputy on every side of the House. There is unanimous support from both Government and Opposition Deputies right across the midlands for the principle behind what I am proposing here. Within the next few weeks, both Lanesboro and Shannonbridge power stations will shut down for the last time. It is the end of an era for peat production and employment right across the midland counties.

Twelve months ago we had a debate on the need to put proactive supports in place in the midlands. During the debate on last year's Finance Bill, I tabled these amendments on Report Stage and they were rejected. The difficulty is that very little progress has been made in the past 12 months. Kieran Mulvey, who was appointed as the just transition commissioner by the Government, has done an exceptional job and has been very open and frank with communities. He has made very clear recommendations but, disappointingly, they have not been followed through on by the Government. We had a very small window and when the just transition commissioner made recommendations, they had to be acted upon.

One of the recommendations was that changes be sought to the EU state aid rules. It is up to the Minister to seek that flexibility. It is not just here in Ireland that it is needed but right across the coal regions of the EU. Peat in Ireland is very similar to coal in most continental European countries. The European Committee of the Regions produced a report earlier this year that specifically highlighted the need to introduce flexibility in EU state aid rules in order that the State, its agencies and local authorities could directly invest in community projects. There is no point in the Government, through the carbon funds, the just transition commissioner and Ministers encouraging communities to think big if there is no mechanism to access the funding needed.

Some funding has been given to communities through the carbon taxes. Ballyforan in County Roscommon received €100,000, which was very welcome. Ballyforan straddles the border between Roscommon and Galway and is a rural community. It will lose one of the Bord na Móna workshops down the road from it and that is having a big impact on employment there. Historically, there were hundreds of jobs in that community between Bord na Móna and Gowla farm but over time they have diminished and now we will see the final closure of that workshop. The people of the town applied to the just transition fund and were successful in accessing funding to draw up a plan for their community. They have a lot of very good, innovative ideas. However, they do not have the 10% in funding that is required to match what they received and they have no mechanism to raise it at the moment because of Covid-19. They have turned to the local authority and it has said it is not in a position to help. As a result, the Department of Environment, Climate and Communications is breaking up that grant into smaller pieces but these people still have to beg, borrow and steal to try to get the co-funding aspect.

This community is acknowledging that there is a problem and rather than going out onto the streets and protesting or putting their hands in their pockets and saying there is nothing they can do about it, these people have proactively rolled up their sleeves and come forward with innovative ideas for the just transition fund. Those ideas have been acknowledged but they cannot get the project off the ground because of that co-funding issue. That is just one example but this is becoming a barrier right across the midland counties. There are barriers, under state aid rules, to the State supporting this just transition where communities are coming up to the mark. In fairness, each and every community within my constituency and the bordering areas is taking a proactive approach to this and is looking at it as a potential opportunity to reconfigure the local economy but someone has to meet them halfway.

The other side of this is that we must put incentives in place for the private sector to come on board. That is the purpose of this amendment and amendment No. 159, to which I will speak later. They address the 20 Bord na Móna workshops across the midland counties, from east Galway over to Kildare, down to Tipperary and up to north Westmeath, which will be mothballed by the end of this year. I am seeking some type of specific incentive to encourage private sector investment in each of those sites. They have the advantage in that they have the three-phase electricity supply that would be needed. They are very large sites and there are very large sheds available that can be used for light engineering works and so forth. The skill sets are also available through the employees who would have worked in those workshops with Bord na Móna. We need private sector companies to look at those locations.

The reality is that the midlands has been the poor relation in terms of investment. In general, a lot of private sector investment goes to the seaboards, the cities and the urban areas around our island and not to the midland counties. We have always been the poor relation in that regard, whether in foreign direct investment or indigenous investment. I am asking that we put an incentive, or a focused, targeted extension system, in place for 20 specific sites in the midland counties to invite the private sector to come and look at these sites. These sites can deliver on businesses' objectives, the Government will actively support them in coming there and they have the local workforce. Long-term sustainable jobs can be created at these locations.

It is frustrating that everyone is talking about the just transition and the move from brown to green. When I served as a Minister, I fully supported that but the intention was for that transition to happen over a ten-year period and that was also the Minister for Finance's intention when we discussed this. Now it will happen over a 12-month period. The mechanisms of Government have not reacted in the same manner in which the decisions have been taken to shut down these facilities. It is vitally important, therefore, that a targeted, focused scheme is in place to encourage investment in this area. It is not just on the industrial side. In fairness to some of the State agencies, they are beginning to look at how we can support the midland counties. In the next few weeks Fáilte Ireland will publish its River Shannon master plan, which will hopefully be used as a blueprint to develop tourism along the Shannon corridor.

It will be producing another master plan for the Beara-Breifne Way, which will deal with another aspect, and a corridor across the midland counties and, specifically, the communities that have been affected by the decision of the ESB and Bord na Móna.

However, Government decisions fail to recognise the unique aspects of the midland region. I can give a practical example, and it is one I raised with the Minister last July with regard to the stay-and-spend initiative. Everyone welcomes the principle and core objective of what the Minister was doing in that regard, and I accept that it has not got off the ground because of lockdown. Perhaps the Minister can tell me now or later today what was the projected spend or cost to the Exchequer for the stay-and-spend scheme this year and what the projected spend for the early part of next year would be. That will give us an idea of what we were looking at spending. As I told the Minister previously, that scheme deliberately discriminated against the midland counties. For example, under the scheme, people can only use Fáilte Ireland-approved accommodation. There are 155 bed and breakfast units in County Kerry registered with Fáilte Ireland. There are 15 in County Westmeath, ten in County Roscommon, nine in County Offaly, three in County Longford and five in County Laois. Straight away, the structure of the stay-and-spend scheme and the requirement to use only Fáilte Ireland-approved accommodation meant that it did not apply in real terms to the midland counties. If one looks at hotels or any other benchmark relating to the scheme, we lost out.

Proportionately, we do not have the same scale of tourism across the midlands, so we are always going to be at a disadvantage. The reality is that tourism probably had less of an impact in our region than it did in other regions which have a much better developed tourism sector. However, there was a golden opportunity here to bring people to our region. It is within an hour's commute from the city of Dublin. People did not have to travel long distances and it would have been an ideal location for short breaks, but when the structures were designed they discriminated against our region. I do not believe that was deliberate, but that is the practical outcome.

My difficulty is that while the Government acknowledges that there is a challenge across the midland counties and has put a just transition commissioner in place, when it comes to practical decisions it is not discriminating in favour of the midland counties, which is the opposite of the announcement originally made when the decision was made by the ESB. The announcement was that in all Government schemes consideration and weighting would be given to applications coming from midland counties and midland communities that were directly impacted by the closure of the ESB and Bord na Móna facilities across the midlands. That is not happening. That is why it is imperative that we put into legislation the specific 20 Bord na Móna workshop sites distributed across the seven midland counties and state that we want to see investment come to those locations.

Acting Chairman (Deputy Steven Matthews)

Amendments Nos. 158 and 159 are being taken together. Does the Deputy feel he has covered amendment No. 159?

Deputy Denis Naughten

I will speak on amendment No. 159 and the Minister can respond to both. Amendment No. 159 relates specifically to the two ESB sites in Lanesborough and Shannonbridge. I will not repeat what I just said, but I will add to it. Kieran Mulvey has been frank and open. While I believe he has been fair to all sides involved, he has been clear in his views on issues. He knows how government works. He has said publicly that the ESB should not proceed with the demolition of the power stations at Lanesborough and Shannonbridge. The ESB official policy on this is that while it is advertising and seeking contractors to demolish both sites, it is still considering other options for the sites. The difficulty is that the ESB is considering options for the sites internally within the company. If the ESB was a run of the mill private company, I could fully understand that. However, it is not a private company. It is a semi-State company. While it has a commercial mandate, and I do not disagree with that, the fact is that it cannot under any circumstances squat on a site to inhibit investment in a region. The company was set up for the specific purpose of electricity supply, but it was also about providing employment. That view is being missed by the ESB. I do not expect the company to employ staff if there is no work for them, but if it cannot utilise a site to create and retain employment, I expect it to release that site to somebody who will do that, rather than coming in with a lump hammer and demolishing the site, which is the current intention.

The ESB is examining internally the potential use of the sites and stations in Lanesborough and Shannonbridge. The reality is that it does not have a use for the power stations in Lanesborough and Shannonbridge. Every one of us has paid for those two power stations through our electricity bills. They are fully paid for, and both facilities have a further ten-year lifespan before they require a major refurbishment. The taxpayers and electricity users in this country have both power stations free of charge for the next ten years. That was the reason a ten-year transition from brown to green energy was put in place for Bord na Móna. These are strategic sites and are extremely useful for other potential investors, but the ESB is saying there are issues relating to title, adjoining landowners and rights of access. Every excuse under the sun will be raised as to why it cannot or should not dispose of those strategic sites.

If the ESB has no use for these sites in power generation and if it were to demolish those sites, I want a commitment from the Government that the sites must be disposed of by the ESB for employment creation in the midlands. That is important because if the Government clarifies that, I believe the ESB will think again. It will not proceed with its plan to demolish the two power stations and, for the first time, will look constructively at other options. I have been presented with two very viable options for both Lanesborough and Shannonbridge whereby they would produce green electricity. This time last year, I put forward a proposal, which I still believe is a viable option, for a third avenue, which is to go to 100% biomass in either or both power plants.

By using the existing Bord na Móna rail network and supporting local landowners to grow willow and biomass I believe that we can make at least one of those power stations financially viable to consume biomass for power generation and to create a significant number of jobs, as well as sequestering carbon from the environment. I can go through in detail with the Minister three separate, viable options in terms of power generation on those sites, but they are not being considered by the ESB at the moment. I believe that is very wrong.

We had a discussion already yesterday about the challenges we have in terms of power generation and stability on the grid as a result of data centres. We have a big challenge in that regard, in particular from 2025 on when we will not have enough generation capacity within the country to meet the significant demands that will be placed on the electricity grid by data centres, yet at the same time we are planning to demolish two power stations within the midland counties, which are strategically located on the grid in terms of grid stability, in particular to provide a reliable electricity supply to the north-west of this country. We are planning to demolish them even though there are viable options that need to be fully considered. We must ensure that those two power stations are not demolished, that we do look at other viable options and that we put an incentive in place, as outlined in amendment No. 159, to look at viable alternatives for those sites that can create employment and hopefully bring about a different approach from the ESB.

Deputy Paschal Donohoe

Before addressing the substance of these amendments I would like to take the opportunity to advise the committee that I am considering bringing forward an amendment on Report Stage on the matter of accelerated capital allowances for farm safety and adaptive equipment.

The employment and investment incentive, EII, is a state aid measure operating within the EU's general block exemption regulations and, as such, it applies equally to all regions in the State. A regional variation of EII would require separate state aid approval from the European Commission. At the moment, areas along the Border, for example, could equally make the point that their SMEs are facing particular difficulties that similarly warrant special variations of measures such as KEEP and EII. As the Deputy will appreciate, I must be careful not to breach EU rules on regional aid.

The second amendment proposes consideration of the extension of relief in the form of capital allowances on industrial buildings and industries in specified areas in counties Offaly and Longford. In broad terms, an industrial building is a building or structure in use for the purpose of a number of specified trades, including, for example, a trade carried out in a mill, factory or other similar premises. A business may claim capital allowances on such buildings, usually at a rate of 4% per annum over 25 years. There is no geographical limit to this provision. Therefore, the relief is already available to businesses incurring qualifying expenditure in the towns named by the Deputy. I note that capital allowances for capital expenditure on plant and machinery for the purpose of a trade are also available, again, irrespective of the geographic location. If the proposal is to consider widening the scope of relief for industries in the named towns to include buildings that would not normally qualify for industrial building allowances, the committee should be aware that it is not possible for the State to provide geographically targeted tax incentives other than in accordance with EU regional aid guidelines. These do not allow for the level of targeting suggested by the Deputy and for this reason I cannot accept the proposed amendment.

I listened to what Deputy Naughten said and the various issues that he raised regarding the future of the power station buildings and his understanding of the plans the ESB has for those buildings in the future. I will pass on the issues to which he referred to the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan. I have visited one of the power stations to which the Deputy referred and I am well aware of the consequences of that building not having a viable plan for future use. I will raise the issues raised by Deputy Naughten with the Minister, Deputy Eamon Ryan.

As Deputy Naughten acknowledged, the ESB is a semi-State company, which makes decisions in accordance with its own mandate. I know the ESB is conscious of the impact of the decisions it is making on current and former employees, and it is trying to handle the issues that are at stake here as carefully and as sensitively as possible.

I welcome the clarification from the Deputy on the stay-and-spend programme. It was not designed to deliberately discriminate against any part of the country and against the counties to which the Deputy referred. We do have to ensure that if taxpayers' money is being used to avail of a relief, that it is being used by businesses that are registered for the activity against which the relief is intended. That is a very reasonable position to hold. As Deputy Naughten clarified, it is not the intention of the Government to discriminate against any part of the country.

I have a brief in front of me on the work that Kieran Mulvey is doing on behalf of the just transition task force and commission. I know the task force published a report on its work on 22 May and the Government made available a further €15 million as part of the July stimulus plan in order to commence a multi-year programme to rehabilitate 33,000 ha of Bord na Móna peatlands. I expect that kind of commitment will form the core of how we will look to support the just transition in the midlands region because the Government is aware of the many difficulties that have been emphasised by Deputy Naughten in his contribution this morning.

Deputy Denis Naughten

I have listened carefully to the Minister's response and I will not go back over the issues. We have discussed them before and I have put the case clearly on the record here.

On a statistical matter, I ask the Minister to come back to me with the figures on the stay-and-spend scheme. I would appreciate that.

I wish to make a brief contribution on the amendment. This time last year, when the decision was made by An Bord Pleanála to refuse planning permission for the two midland power stations in Lanesborough and Shannonbridge to co-fire with biomass, it had a devastating impact right across the midland counties. We were effectively given 12 months' notice of the closure of a major industry, which is the equivalent of Google pulling out of Dublin with 12 months' notice. Had that happened in Dublin, a task force would be put in place and, in fairness, a task force was put in place in the midlands. I acknowledge that quite a number of members of the Cabinet came down and met the communities and their representatives, as would happen if Google pulled out of Dublin. The task force has made recommendations. The difficulty is that if Google were to pull out of Dublin, one could be damn sure that the recommendations would be implemented.

The Minister said he will not act on Kieran Mulvey's recommendations on alterations to state aid rules that would specifically target investment in the midland counties because he does not want to give preferential treatment to them over any other part of the country, even though we are losing the equivalent of Google. I have absolutely no doubt that if Google pulled out of the city of Dublin tomorrow morning, some incentive would be put in place to encourage someone into that office accommodation, but the Minister said that will not happen in the midlands. I am talking about 20 specific focus sites, not an across-the-board issue. If the Government appoints a task force and it specifically recommends alterations targeted at 20 specific locations along the Border, I will fully support that as well. However, across Europe, all the communities, government organisations and EU-wide organisations - the European Commission was involved in what we are talking about as well - have made recommendations that there needs to be alterations to the state aid rules, and the Minister is saying he will not make a special case for the midland counties. That is disappointing.

In addition, Kieran Mulvey has made specific recommendations that the two power plants in Lanesborough and Shannonbridge should not be demolished and that we should fully explore every opportunity for them. In fairness, every Deputy, Senator and public representative in the midlands is unanimous that those two power plants should not be demolished until all opportunities are explored. I have put it to the Minister that there are three power generation opportunities, two with private investors that have approached me and that are interested in getting involved in this and a third which I have referred to previously and which I believe, with the proper governance structures put in place, is financially viable as well, yet the Minister is saying, "Hands off. The ESB has a commercial mandate." It does, but the Government is the company's sole shareholder and there is a mechanism for the Minister and the Minister for the Environment, Climate and Communications, Deputy Eamon Ryan, to give a direction directly to the company. I am not asking it to lose money or to take a penny out of its pocket. In fact, the ESB, disingenuously, has looked for the €5 million that it put into the just transition fund back. It has looked for every single electricity customer in this country to refund that to them, which is wrong. I do not believe that across this country families who are struggling to pay their electricity bills should refund the ESB the €5 million it put into the just transition fund. If any additional money does come through the PSO, it must be ring-fenced and put into that just transition fund and not onto the bank balance of the ESB.

Deputy Paschal Donohoe

The analogy the Deputy drew as to what would happen if Google were to withdraw out of Dublin, and his point that there would be a task force and plans put in place to try to deal with the withdrawal of a large employer from a city, is correct. It is just that, even in that context, the plans to fill a building and to replace jobs would not come through the kinds of targeted tax incentives he is looking for. We would not do that because for a country of our size, we cannot use tax incentives in the geographically focused way to which the Deputy referred. Leaving aside issues of size, it is far more effective and far more targeted to use grants and government expenditure to address the issues to which he refers. Leaving aside the issue of whether we could use tax incentives, and we have a pretty poor track record of demonstrating that tax incentives can work for urban regeneration or the regeneration of towns and villages in the way we would want, the way in which we would do this is through the allocation of funding. It is more effective, can be made more specific and can be tailored, and that is exactly what is happening.

I have already put on the record of the committee the commitment of €15 million to rehabilitate the Bord na Móna peatlands and the effect that is having. In addition, businesses in the midlands have secured €6 million in funding from the regional enterprise development fund. That money is going into businesses in the counties and constituencies to which the Deputy referred. We have the regional enterprise plan for the midlands, launched only in 2019. That is making progress on specific priorities such as an advanced manufacturing centre for the midlands and how we can realise the potential for food and big data in the midlands. Furthermore, under the rural regeneration development fund, specific projects have been funded that look to make progress on particular projects in the counties to which the Deputy referred.

Even in the circumstances to which he referred, therefore, we cannot, and should not, pretend that tax incentives are the way in which we can make progress. It is more effective, more targeted and makes better use of our money to spend taxpayers' money in the areas for the purposes the Deputy outlined, and that is what is happening. Recognition of this was given in our July stimulus plan and in budget 2021, and the issues to which the Deputy referred regarding the use of buildings - again, I have listened to what he said on these matters - I will raise with the Minister, Deputy Eamon Ryan. However, they are not issues for progress in the Bill but, of course, the Deputy is fully entitled to raise them in the debate on the Bill, which I recognise.

I will come back to him with information on the operation of the stay-and-spend scheme once I am satisfied with that. I have been informed during the debate that other holiday accommodation providers that are not legally obliged to register with Fáilte Ireland may choose to be voluntarily listed. This requires the service provider to make a self-declaration that his or her business complies with all statutory requirements. The voluntary application process is very simple and quick and incurs only a nominal fee of €1 for both 2020 and 2021. In fairness, that will not deal with all the issues to which the Deputy referred because that refers only to businesses that are not required to register with Fáilte Ireland, but it is still relevant to the issue he raised.

Deputy Denis Naughten

I will wrap up now because we are banging our heads off a brick wall on this. I understand what the Minister is saying about tax incentives, but he also needs to remember and be conscious of the fact that we are limited in what we can put forward in respect of the Finance Bill. I am agnostic about the vehicles that are used. The core principle is that there needs to be specific geographic targeted incentives in these particular locations. He mentioned the regional enterprise plan. Of course, the plan does not include Roscommon and east Galway because Roscommon and east Galway are in the western plan. As we know, whether we like it or not, and whatever way we slice it and dice it, Mayo, Sligo and Galway city have a disproportionate say in that regard, even though it is a regional plan.

It would make far more sense for Roscommon and east Galway to be part of the midlands plan and the addressing of those challenges. Even something as simple as that would make a significant difference. When I was part of the Government, we designated Athlone as one of the growth centres. Nevertheless, if a person goes over the county boundary on the edge of Athlone, he or she is in a different regional enterprise strategy.

I accept funding and grants are coming, which is welcome. I have given the Minister a practical example of the challenges faced by the community in Ballyforan. I could do the same for Lanesborough, Clontuskert, Shannonbridge and Ballinasloe, where they face the exact same issues. I gave an example yesterday on another aspect of the fund, which is the retrofitting of local authority houses, and this only happens in mixed housing estates. No rural houses are being included. I have no doubt the Minister will ensure that problem is resolved. It is always the same and we just cannot get a practical, implementable, focused and targeted initiative.

The just transition commissioner, Mr. Kieran Mulvey, has said we should hold on to the two power plants. He has said there should be targeted geographic incentives. I ask the Minister to mull over this between now and Report Stage. I will withdraw both amendments, with leave to reintroduce.

Amendment, by leave, withdrawn.

Amendment No. 159 not moved.

Acting Chairman (Deputy Steven Matthews)

We will move to amendment No. 161. Amendments Nos. 161 and 171 may be taken together as they are related.

Deputy Pearse Doherty

I move amendment No. 161:

In page 66, between lines 2 and 3, to insert the following:

“Report on Research and Development Tax Credit

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the Research and Development Tax Credit, its distributional impact across indigenous and foreign-owned multinational firms, and options for its reform to support indigenous enterprise, research and development.".

This amendment proposes a report on the research and development tax credit and its distributional impact across the indigenous and foreign-owned multinational firms and options on its reform to support indigenous enterprise research and development.

The amendment is about the research and development tax credit and it is a central plank of our tax policy, of which Sinn Féin is extremely supportive. For a number of years I argued the research and development tax credit should be increased for small and medium enterprises to 30% and reduced for other businesses to 20%.

The increase in the research and development tax credit for micro and small businesses was adopted in last year's Finance Act, and I welcomed that change, having called for it in a number of previous years. However, we know the research and development tax credit is disproportionately availed of by multinationals and large corporations. The figures show that quite clearly. We saw the change last year and we will see how that has an impact on distribution in future years. This amendment calls for options to be brought forward to look at and reform our research and development tax credit regime.

Given the changes in global tax policy, it is clear our industrial policy must also change. There must be measures to encourage high value growth in research in our domestic economy as this will be more crucial than ever before. This amendment does not call for a change, as such, but it seeks a report into the area of tax policy that could further this end.

A number of reports on this have been done in the past and the Minister accepts and acknowledges the need for this area to be kept under constant review. As I stated, there were changes last year to supports for SMEs and we need to continue that trajectory. It would now be timely to have a further report, given the data that will come through concerning last year's change, on how the research and development tax credit could be further strengthened if necessary.

Deputy Paschal Donohoe

I thank the Deputy. The Irish corporation tax regime contains a small number of tax reliefs, including the research and development tax credit and the knowledge development box. The focus of these reliefs is on the creation of additional employment and on promoting innovation and inward investment, with a view to generating high value-added economic activity in the country.

Deputy Doherty is seeking a report on the research and development tax credit. I note that the Revenue Commissioners publish a report, entitled Research & Development Tax Credit Statistics, which is updated annually with the latest available data from corporation tax returns. This report contains a significant volume of data relating to the research and development tax credit, including the overall cost of the tax credit and the number of claimants, the business sector of the claimant, the size of the claimant, based on employee numbers and a reasonable proxy for large and small and medium companies and a breakdown by value of the credit claimed as profiled against the corporation tax liability of the claimant.

As regards future options for the research and development credit, the Deputy may be aware that the programme for Government includes a commitment to continue to encourage greater take-up by small domestic companies, and to examine certain aspects, such as the pre-approval procedures and record keeping requirements.

I am extending the knowledge development box relief for a further two years. The extension provides certainty for businesses during the current challenging circumstances in the context of a no-deal Brexit and Covid-19. The knowledge development box is an OECD-compliant intellectual property regime, which provides a corporation tax relief for income arising from qualifying assets, such as computer applications and inventions protected by a qualifying patent. To avail of the relief, the assets must result from qualifying research and development activities carried out by the company in Ireland. The knowledge development box will be reviewed prior to its new sunset clause of 31 December 2022, within the five-year timeframe for a measures of this size as recommended by my Department’s tax expenditure guidelines.

With regard to the other amendment and the suggestion of a comparative assessment of the benefits accruing from direct public expenditures by the State in research and development against the benefits derived from tax reliefs, I note that these are not directly comparable. Direct expenditure from the State and tax reliefs are both important policy instruments, and both are being implemented, but they have different objectives and aims.

The objective of tax reliefs such as the knowledge development box and the research and development tax credit is to encourage companies to invest their own resources in undertaking such activities in Ireland and to support higher levels of investment and high-value employment than could be funded by direct expenditure measures alone. The reliefs also foster synergies with the third level sector. For example, in the Finance Act 2019, I increased the outsourcing threshold for expenditure to universities and institutes of higher education from 5% to 15%. This will encourage greater investment and partnership opportunities between industry and the education sector in pursuing practical applications of academic research, with possible spillover effects into the wider economy.

In view of the existing commitments I have made, and as the nature of the companies claiming the research and development tax credit is largely available and published on Revenue’s website, I cannot accept the proposed amendments.

It is relevant to the debate to say that in last year's budget, I put in place measures for micro and small companies doing research and development. As I said in the debate on the Finance Bill at the time, they were subject to a commencement order pending state aid approval from the European Commission, given the targeted natures of measures towards micro and small companies.

Officials in my Department initiated contact with the Commission promptly on this matter and discussions are ongoing but they have been hampered to some extent by Covid-related lockdowns and other priorities with which we have had to deal. Therefore, the measures for micro and small companies have not yet been commenced. There is a need to look at the efficacy of the research and development tax credit in relation to small and micro companies and I indicated my intention to do this in last year's Finance Bill debate. For the reasons I have outlined, that is, the data being available alternatively or the fact that we still need to commence the measures relating to micro and small companies, it would be more appropriate to deal with the issues to which Deputy Doherty refers by looking at already available data or when these measures are implemented for very small companies and the data is available for them at that point.

Deputy Pearse Doherty

I appreciate the fact that data on the distributional impact of the research and development tax credit is published annually but what we do not have is data on options to reform it to support indigenous enterprise in research and development. I note the Minister's comments that he will look at this further and that there are issues around commencement but that is what the report is about. Unless I am picking up something incorrectly, I understand that the Minister is going to do what we are seeking to do with this amendment. Obviously the mechanism here is to ask for a report to be prepared but basically we need this to be looked at in more detail. On that basis, I will withdraw the amendment.

Deputy Richard Boyd Barrett

I made the point yesterday that the research and development tax credit involves such a substantial amount of public expenditure that an analysis of the benefit to society is required. Perhaps the Minister can give us the latest figures on what is projected for this year in terms of this tax credit but my understanding is that it is approximately €700 million and that has been rising in recent years. That money is going to private companies and I suspect, largely, to very big and profitable companies. It seems to me that there is a trade off between expenditure going to those companies whose research and development is focused on increasing their profitability or, alternatively, to our public universities to do research and development that is geared towards societal objectives, that is, things that we as a society decide are important. We should remember that our universities are very significantly underfunded. There is not enough money going into research at third level and many of the people working in third level education have very poor wages and conditions of employment. Many are on temporary contracts and so on. A lot of investment is needed in higher education and in research in our universities. The money that is currently going to private companies through the research and development tax credit would be better spent on our universities. At the very least, we should examine that question and look at it closely to see if there would be more benefit in doing that rather than handing out vast sums of money to a relatively small coterie of profit driven corporations.

Deputy Paschal Donohoe

In response to the Deputy's questions, the Central Statistics Office survey on business expenditure on research and development carried out in Ireland indicates that most firms conducting research and development in Ireland are small and Irish. However, the total expenditure on research and development is indeed dominated by large, international firms. Irish owned firms constituted 82% of the total number of firms who conducted research and development in 2017 but the value of the research and development expenditure conducted by Irish owned firms was 31%.

In terms of the trends in relation to costs, it varies year by year because it depends on the kinds of projects that are undertaken in this country at any given point. In 2012, for example, the cost of the credit was €282 million. It increased in 2015 to €708 million. It now stands at €355 million and that is the most up-to-date figure that I have. I would make the point to the Deputy that it is not a question of either-or. He is arguing for support to enable research and development through our publicly funded universities and institutes of higher education but that is already happening. The Deputy needs only to look at the Tyndall National Institute in Cork, for example, and the value of the work and innovation that is going on there. He should look at the research work that is going on in all of our universities at the moment in everything from life sciences and food to information technology and the use of data. There is a huge amount of State enabled and funded research going on in our institutes and universities. Clearly, Science Foundation Ireland plays a really valuable role in that regard. In addition, it is the case that research and development is taking place within the private sector that is enabled by the research and development tax credit. That research and development, in turn, plays a role in the creation and retention of jobs within our economy, which is of enormous value. It is not a case of either-or. State funded investment in research and development is under way and at the same time, we have important research and development going on in private companies, supported by the aforementioned tax credit. That research and development plays a role in the creation of tax receipts and the retention of jobs in our country, which is hugely important at this time.

Deputy Richard Boyd Barrett

I will briefly give another example of public bodies on which this money would be better spent. In the recent budget I was quite flabbergasted by the Estimate for health expenditure. As we know, the Estimate was significantly increased in the context of Covid-19 and rightly so but in the area of health research in the HSE, there was no increase this year at all. I was absolutely amazed by that because I would have thought that in the context of Covid-19, surely we should be pouring money into public health research, especially given the situation we are facing and our awareness of the importance of research in that area. That is a further example to illustrate my point. Do we want to subsidise, with public money, some IT firm to come up with the 15th upgrade of the iPhone or some such, or would we rather that money went into public health research? I know what I would prefer.

More generally, there is an issue with a lack of funding for our universities. The Minister is saying that we are doing that as well but the investment, per student, in third level education in this country is abysmally low.

I remember attending an event held by one of the student unions last year. It was about the funding of third level education. It was pointed out that there was more investment in horse racing per horse in this country than in third level education per student. Per capita investment in our students is very low. We note that Irish universities have been falling in the international rankings over recent years. It is very obvious that there are other areas in which this kind of public expenditure would be more beneficial from the point of view of our society than handing it to a relatively small group of multinationals. I have made the point. It is obvious that we disagree with the Minister.

Amendment, by leave, withdrawn.

Deputy Richard Boyd Barrett

I move amendment No. 171:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on Knowledge Development Box and other research and development tax reliefs

55. The Minister shall, within three months of the passing of this Act, produce a report on the Knowledge Development Box and other research and development tax reliefs and provide a cost-benefit analysis of the impact of such reliefs in terms of domestic job creation, stimulation of the domestic economy and the promotion of sustainable indigenous industry as compared to the benefits that might be achieved from equivalent direct public expenditures in knowledge, research and development orientated on measures and objectives to benefit society as a whole.”.

Amendment put and declared lost.

Section 56 agreed to.

Acting Chairman (Deputy Steven Matthews)

Section 57 is postponed pursuant to the previous motion.

Deputy Mairéad Farrell

May I speak on section 57?

Acting Chairman (Deputy Steven Matthews)

Section 57 has been postponed pursuant to the motion passed earlier on. We will come to the section once a number of other amendments have been dealt with. We can deal with the Deputy's questions at that time. Is that okay?

Deputy Mairéad Farrell

Yes. I thank the Acting Chairman.

Section 58 agreed to.

NEW SECTIONS

Deputy Mairéad Farrell

I move amendment No. 155:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on Controlled Foreign Companies (CFC)

55. The Minister shall, within 6 months of the passing of this Act, report the total number of companies, disaggregated by counterparty jurisdiction, who have had their exemptions waived as a result of being on the list of the “EU list of non-cooperative jurisdictions for tax purposes”, and the annual change in value (nominal terms) of their cross border transactions.”.

I feel that we discussed this yesterday. Perhaps the Minister can advise me in this regard but I had thought that we had already discussed it. This amendment relates to an issue which we definitely discussed yesterday, that of the blacklist.

Deputy Paschal Donohoe

The EU list of non-co-operative jurisdictions for tax purposes is intended to encourage jurisdictions with harmful tax practices in place to address those features of their tax code in order to enable fair and effective corporation taxation in the European Single Market. The purpose of the list is to encourage positive change through co-operation. The listing of countries is based on screening countries through the objective application of agreed criteria comprising international tax standards.

Ireland’s defensive measures involve modifying the controlled foreign company, CFC, rules in terms of their application to non-co-operative jurisdictions by turning off existing exemptions so that CFCs located in jurisdictions on the list cannot avail of them. This will strengthen the application of Irish CFC rules to Irish-resident companies with a CFC resident in a non-cooperative jurisdiction by imposing less favourable conditions and, potentially, imposing a CFC charge which would not otherwise exist.

With regard to the data the amendment requests to be included in a report, it is not possible to provide this information. The requested report is sought within a period of six months of the passing of the Bill. The information sought will only be available in September 2022 at the earliest, at which point it will only be available in a limited fashion. This is because the section only commences for the accounting periods of companies starting on or after 1 January 2021. For example, a company with a 12-month accounting period starting on 1 January 2021 will file its corporation tax returns in September 2022. Companies with accounting periods commencing later than January will file their corporation tax returns in the months subsequent to September 2022.

The Irish tax code relies on self-assessment and taxpayers will be obliged to ensure they do not avail of the exemptions for CFCs based in listed jurisdictions. Revenue does not expect that the introduction of these measures will impact on a significant number of companies, but it is considering how best to collect the data. However, it should be noted that data around changes in the value of cross-border transactions will not be captured under either the existing or amended CFC rules as this is not the focus of those rules. Rather, CFC rules can result in the income of a foreign subsidiary being subject to Irish tax as if the income was earned by the Irish-resident controlling company, where certain conditions are met.

Ultimately, the purpose of CFC rules is to discourage the artificial diversion of income to low-tax or no-tax jurisdictions. As such, they are not designed primarily to raise Exchequer revenue, but rather to modify taxpayer behaviour, which is in keeping with the purpose of the EU list of non-co-operative jurisdictions for tax purposes.

As the actual risk presented by the existence of corporate structures involving Irish-resident companies and companies resident in non-co-operative territories is thought to be very limited, these defensive measures are intended to act as a deterrent rather than as a revenue-raising measure.

Deputy Mairéad Farrell

Gabhaim buíochas leis an Aire. I thank him for that. We are again looking at a timing issue more than anything else. For that reason, I will withdraw the amendment with a view to speaking on the issue on Report Stage. Put simply, my concern is that profit-switching could take place and that certain companies would be able to move profits to jurisdictions which are not on this blacklist. I hope that a report such as I have proposed could highlight any such activity, which is very important. If it is a matter of timing, that is something at which I am willing to look and I will withdraw the amendment at this stage and speak to the issue at a later date.

Amendment, by leave, withdrawn.

Acting Chairman (Deputy Steven Matthews)

Amendments Nos. 160 and 165 are related and will be discussed together.

NEW SECTIONS

Deputy Denis Naughten

I move amendment No. 160:

In page 66, between lines 2 and 3, to insert the following:

“PART 6

REPORTS

Report on use of Irish taxation system for tax avoidance purposes

55. The Minister for Finance shall, in advance of Budget 2022, publish a report on the use of the Irish taxation system for tax avoidance purposes by companies who source their income from international activities which undermine both the Government’s public health policy and climate policy, and the divestment actions of the Ireland Strategic Investment Fund, namely:

(a) tobacco companies; and

(b) fossil fuel companies.”.

I wish to bring to the Minister's attention a report in The Business Post of 1 November. My amendment relates to that and another connected issue. A probe was carried out by the University of Bath and some Dutch investigative journalists that cast light on how tobacco companies are lessening their tax liabilities. There is nothing illegal about what these companies are doing. We are talking about the four big tobacco companies across the globe. They are using Irish subsidiaries as part of an elaborate tax avoidance strategy according to this research. Between them, these companies generate about €80 billion per annum. Measures have been introduced in this country and every other developed country to try to curb the consumption and purchase of cigarettes by increasing taxes and levies, which, thankfully, has had a resultant drop off in the number of smokers, particularly older smokers; there is still a challenge with younger smokers. What these companies are now doing, however, is maximising the amount of profit they are generating from their existing sales. They are using very elaborate tax vehicles to do that, which are within the existing legal structures.

What I am looking for is for us to close off these vehicles for tobacco companies. It is imperative that we send out a clear message about smoking, the people affected by it and its knock-on impact on our health service by, among other things, probably making people more prone to infections like Covid-19. We also should deal with it at the other end, that is, at the corporate end, and ensure that whatever vehicles are being used, legitimate as they seem to be, are closed off to tobacco companies.

There is another cohort of companies to which this vehicle should be closed off, namely, fossil fuel companies. We have the Fossil Fuel Divestment Act 2018 on which the Minister and I worked closely. This Act clearly states that the Ireland Strategic Investment Fund, ISIF, is divesting itself of investments in companies that derive more than 20% of their revenues from the exploration, extraction or refinement of fossil fuel. ISIF no longer invests in or is divesting from 224 fossil fuel companies.

Our law specifically designates fossil fuel companies in which we will not invest so there is already an acknowledgement in this regard on statute. I am saying that this should also apply to taxation vehicles that may legitimately be used for other purposes and that we should stipulate that fossil fuel and tobacco companies cannot use vehicles and shelf companies to avoid paying their legitimate taxes wherever they should be paid. We have led on global terms in terms of the Fossil Fuel Divestment Act. Here is an opportunity to complement that measure in terms of tax vehicles that are being exploited to avoid paying tax in other countries. This should be done in the case of fossil fuel and tobacco companies.

Deputy Mairéad Farrell

I will comment on amendment No. 165. This is basically to introduce a general anti-avoidance provision whereby a surcharge of 30% is applicable to Irish company revenue when it is established that Irish companies are using intra-group arrangements to significantly reduce their liabilities through money that is being loaned out or channelled back to Luxembourg and other such countries as part of intra-group arrangements. We know certain companies have made profits of over €100 million in 2018 and had assets worth billions of euro and accounts filed in Luxembourg. The bulk of the profits would have been booked and not taxed because of that so we believe it is very important to put forward this amendment.

Deputy Richard Boyd Barrett

Could the Minister tell us the latest available figure for intra-group transactions? I have raised the issue of intra-group transactions as a very significant example of these huge giveaways to multinationals using labyrinthine structures of subsidiaries to avoid tax. Up until recently, the Revenue tables showing the tax reliefs and allowances that are available contained a heading labelled intra-group transactions. The last figure I saw was something like €9 billion and it was rising consistently. It was one of the largest categories of tax relief and had risen very dramatically over recent years. I looked recently at the Revenue table on this and the category of intra-group transactions seemed to have disappeared, which I thought was a bit odd because large companies use multiple subsidiaries to avoid tax. As we need to know the extent of this, could the Minister tell us how much tax relief is being given out under the heading of intra-group transactions according to the latest available figures?

Deputy Paschal Donohoe

I propose to take amendments Nos. 160 and 165 together as they are thematically similar. Aggressive tax planning by multinational companies is a global problem that requires a global solution. We have demonstrated our commitment to being part of this solution by actively participating in international tax reform, enacting domestic legislative changes and supporting the development of effective tax systems in developing countries. Recent years have seen significant progress in global action to address the issue of aggressive tax planning by very large companies. We are an active participant in ongoing discussions at OECD level on such matters as how we can address the tax challenges of digitalisation. In addition, we have worked with our fellow EU member states to agree and implement an unprecedented number of directives on tax co-operation that have been highly successful in addressing aggressive tax planning.

Domestically, a succession of significant measures relating to corporation have been introduced in recent years. The work in this regard continues. The recent budget contained revisions to Ireland's capital allowances for intellectual property in order to ensure that such assets are fully within balancing charge rules, in line with international best practice for such reliefs in other jurisdictions. The Bill introduces certain defensive legislative measures which will provide that Ireland's controlled foreign company rules apply more strictly to companies with subsidiaries operating in jurisdictions that remain on the EU list of non-co-operative tax jurisdictions.

It is worth reiterating that aggressive tax planning arrangements are not designed by Governments but by advisers, lawyers and businesses that devise complex plans to exploit mismatches or gaps in legislation. Where instances of aggressive tax avoidance emerge, the Revenue Commissioners rigorously investigate and challenge such cases through the various anti-avoidance legislative provisions available to them.

The third strand of Ireland's resolve to address this issue is our commitment to helping countries in the developing world to enhance their tax regimes. Ireland's domestic resource mobilisation initiative was launched last year as a collaboration between the Department of Foreign Affairs and Trade, the Revenue Commissioners and my Department. The aim of the initiative is to provide practical assistance to developing countries in their efforts to strengthen their tax administrative capacity.

I would also like to inform the committee that in the near future I plan to publish an update on Corporation Tax Roadmap, which was published in 2018. This update will reflect on the significant measures we have taken and consider what future actions may be needed to ensure that our tax system continues to meet the needs of the modern economy. It will also provide an opportunity to reflect on the evolving international tax environment and the important work on international tax reform that continues at OECD level.

Regarding the points made by Deputy Naughten and his reference to the recent report in the Business Post, it is not my practice nor would it be appropriate for me to comment on the affairs of individual taxpayers. However, the study on which the article was based, which was carried out by the University of Bath in conjunction with some Dutch journalists, suggested that companies use the Irish tax system to reduce their liabilities several ways. Understanding this requires further clarification.

The first of these arrangements is the so-called double Irish. This issue was addressed in the Finance Act 2014. The phasing-out period for this measure ends this year. The report refers to the treatment of intellectual property under Ireland's tax system. However, the recent budget contained revisions to Ireland's capital allowances for intellectual property in order to ensure that such assets are fully within balancing charge rules, in line with international best practices for such reliefs in other tax jurisdictions.

The study to which I refer also references interest payments into Ireland. Multinational groups often structure their affairs so that one company performs treasury functions, including lending to other group companies. The borrower obtains a tax deduction for interest paid while the lender is taxed for interest received. Lending from low-tax jurisdictions into high-tax jurisdictions can result in a tax advantage for the group. However, the deduction in the borrowing jurisdiction will usually only be available if the transaction is structured on a commercial basis with a view to the borrower earning profits. If the jurisdiction of the borrower is not satisfied with the bona fides of the transaction and the commercial rates of interest charged, it can challenge any deduction made.

Deputy Boyd Barrett asked about the latest information I have on intra-group transfers. I do not have that information to hand but I will get it and share it with the Deputy.

Deputy Denis Naughten

I have listened carefully to the Minister and I do not disagree with any of the comments he made. I am talking about putting mechanisms in place to ensure that tobacco and fossil fuel companies cannot use these vehicles. I will ask the Minister to consider what I have said. We will revisit this in further detail on Report Stage. We should be proactive and take a leadership role on this.

Deputy Mairéad Farrell

This is definitely an area that needs to be examined by the Department. For example, we know that one group has companies based in Luxembourg which are used for intra-group financial transactions. These companies had no employees in 2018, produced €123 million in profits in a recent financial year and paid very little tax. One of the advantages of using Luxembourg for intra-group financing arrangements is that the taxable profits of companies in other jurisdictions can be reduced by way of payments made to companies in Luxembourg, which, in turn, pay little or no tax. This is something the Department needs to look at.

Deputy Richard Boyd Barrett

It would be helpful if the Minister could come back with the figures. This is an enormous and growing category of allowances - or loopholes, in my language - which big multinationals with multiple subsidiaries are exploiting in order to avoid tax. I understand that he does not have the information now, but I would also appreciate if the Minister could confirm whether there has been a change in the way the Revenue Commissioners list intra-group transactions in their table of allowances, deductions and reliefs for corporate tax. It would be quite worrying if that were the case. Information on the extent to which these companies are using this loophole to effectively lend themselves money and pay themselves interest needs to be publicly available. What is actually profit then becomes a cost, which reduces their taxable profit by huge margins. This effectively means these firms can write their own tax bills. It is a scam that needs to be investigated. At the very least we need complete transparency about the extent of this. It must be very clearly set out in the Revenue Commissioners' tables on deductions, reliefs and allowances.

Deputy Paschal Donohoe

I will get the information for the Deputy. I do not believe there has been a change in the format of reporting, but I will confirm that in the same communication.

Amendment, by leave, withdrawn.

Deputy Mairéad Farrell

I move amendment No. 165:

In page 66, between lines 2 and 3, to insert the following:

“Report on introduction of measures to combat aggressive tax avoidance

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of measures to combat aggressive tax avoidance, such as a tax surcharge of 30 per cent applicable to Irish company revenue when it is established that Irish companies are using intra group arrangements to significantly reduce their liabilities through the transfer of money and assets to other countries.”.

Amendment put and declared lost.

Sitting suspended at 11 a.m. and resumed at 11.43 a.m.

Deputy Neale Richmond took the Chair.

SECTION 57

Acting Chairman (Deputy Neale Richmond)

I have been asked to note that if Department of Finance officials run out of the two-hour time slot allocated and sections are postponed, they cannot resume on the postponement moved until the Schedule is disposed of, and provisions will be covered by one question after 5.24 p.m., and will be dealt with later.

Question proposed: "That section 57 stand part of the Bill."

Deputy Mairéad Farrell

On section 57, I will be interested to hear the Minister's clarifications, but it is my understanding that the Bill seeks to limit the unnecessary duplication of reporting transactions across the EU by allowing for an intermediary to make use of a filing exemption, where they have evidence that a filing has been made by an intermediary in another member state. I am curious about this. We know that mandatory disclosure requirements differ across the EU from member state to member state. Some member states are more transparent and require more in terms of the information that companies are required to file, rather than other questions. My question concerns the filing of exemptions for intermediaries. To take a hypothetical example, let us imagine a situation in which a corporate group structure utilises numerous special purpose vehicles, SPVs, in different jurisdictions for cross-border financial transactions and let us suppose that one of those SPVs is based in a jurisdiction with more limited disclosure requirements, while another is based here, requiring more disclosure. If the Irish intermediary is able to avail of a filing exemption because filing has taken place in a jurisdiction that requires less information, does the Irish regulator seek a copy of the original filing made in that other jurisdiction that is more limited in its requirements and is the Minister concerned that less stringent reporting requirements in other EU jurisdictions mean that this Irish filing exemption could increase the risk of tax and regulatory arbitrage on cross-border transactions?

Deputy Paschal Donohoe

The disclosure requirements are the same across the EU, so there is no possibility for taxpayers to engage in any kind of disclosure arbitrage. The requirements are the same and under the agreements that we have now in respect of the exchange of taxpayers' information, it would be open to the Revenue Commissioners to access the declaration that is made in other tax jurisdictions. This amendment just refers to how the information is filed and who does it; it does not affect the taxpayer meeting the requirements either here in Ireland or anywhere else.

Deputy Mairéad Farrell

It was my understanding that there are differences but I will take the Minister's word on it, and I will look at the issue in greater detail myself later on.

Question put and agreed to.

Acting Chairman (Deputy Neale Richmond)

Amendment No. 152 has been ruled out of order.

Amendment No. 152 not moved.

NEW SECTIONS

Deputy Mairéad Farrell

I move amendment No. 162:

In page 66, between lines 2 and 3, to insert the following:

“Report on abolition of Local Property Tax

55. The Minister shall, within one month of the passing of this Act, prepare and lay before Dáil Éireann a report on options for the abolition of the Local Property Tax.”.

Amendment, by leave, withdrawn.

Deputy Mairéad Farrell

I move amendment No. 164:

In page 66, between lines 2 and 3, to insert the following:

“Report on introduction of measures to combat hoarding of land

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the introduction of measures to combat the hoarding of land needed for development, examining the options for and efficacy of a vacant property tax and land value tax.”.

This amendment relates to combating land hoarding. The Minister is very much aware of the seriousness of the housing crisis. I am from Galway city, so anything we can do to deal with the housing crisis and to ensure that this kind of land hoarding does not happen is really important. Like every member of this committee, the issues of homelessness and housing are being brought to me by constituents.

We must do anything we can do to combat land hoarding and to ensure we do everything in our power to tackle this housing crisis.

Deputy Paschal Donohoe

I agree with the Deputy about the need for us to do all we can to respond to the great challenges we have in providing good homes for our citizens. I too have a lot of experience of this matter in my constituency. This area has been the subject of a lot of reports. The amount of land that is classified as being vacant in public debates on the matter is overstated. This is being debated in other reports we have done.

I propose that we have a look at the whole matter of the interplay between taxation and the valuation of land, and the impact that has on housing. In particular, we will soon set up an independent commission on taxation and welfare, which is a programme for Government commitment. I propose that one of the terms of reference under that commission would examine the potential for taxation measures in supporting the best use of development land and at dealing with issues relating to vacant properties and unused land.

It is a while now since this matter has been looked at through reports I have been involved with, and I believe that the commission on taxation could play a valuable role in that work. That is a way we propose to evaluate the matter, as raised by the Deputy.

Deputy Mairéad Farrell

I welcome that commitment. That is good news. We cannot overstate the impact of land hoarding. I will not name any sites but anybody who lives in Galway city or who has been to the city knows exactly what I am talking about. I thank the Minister and I welcome that.

Deputy Paschal Donohoe

The issue of vacant land, issues of ownership, and the role tax can play in these have been long debated within this committee. I do not want to raise expectations around what the commission on taxation will do but this specific issue of vacant land, derelict properties, the role of tax and how we can penalise where necessary and have the right incentives in place through such penalties are some of the kinds of matters the commission on taxation could look at. It could also look at the matter in the context of where the property and land market stands at the moment. I aim to get that commission on taxation set up as soon as I can and as soon as we can identify the right personnel to do it. We will then ask the commission to look at that matter.

Acting Chairman (Deputy Neale Richmond)

Is the Deputy pressing the amendment?

Deputy Mairéad Farrell

No. I welcome what the Minister has said. I really hope that will lead to development on this. I have been raising the topic for a long time because of a particular issue in Galway.

Amendment, by leave, withdrawn.

Acting Chairman (Deputy Neale Richmond)

Amendment No. 165 is postponed until after the disposal of section 58.

Deputy Mairéad Farrell

I move amendment No. 166:

In page 66, between lines 2 and 3, to insert the following:

“Report on introduction of a progressive Wealth Tax

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on options available for the introduction of a comprehensive and progressive wealth tax. The report shall include options for; the collection and collation of data necessary for the assessment of such a tax, categories of wealth to be included in such a tax, rates applied to certain categories of wealth under such a tax, proposals for the assessment and collection of such a tax, and estimated revenue raised under those options.”.

This amendment relates to a progressive wealth tax. Given the fiscal impact of Covid-19 and the demand for larger and better State and public services, the Government should conduct a review of a wealth tax. This could be done in conjunction with the ESRI, as was done in November 2016. This would better aid the Dáil and the public debate as we emerge from this crisis.

Deputy Paschal Donohoe

At this point I will signal Report Stage amendments overall, if I may. To date, we have signalled an amendment relating to sections 11,15 and 60. Earlier today I noted a Report Stage amendment when speaking to amendments 158 and 159. I also want to signal the possibility for an amendment relating to section 44.

On the matter raised by the Deputy, the issue of wealth taxes has been long debated within this committee. Given the mobility of wealth within an open economy like Ireland, and also given how much wealth is absorbed in property here, which is taxed, I believe that the role a wealth tax could play in Ireland is completely overstated. It would not be beneficial at all. Leaving aside my view on the matter, and as I have said we already tax wealth very effectively through, for example, the local property tax, the main reason it would not be beneficial is that reports were done on this in 2016 and in 2018. The latest report that is available to us is less than two years old, so I do not believe a further report is merited on top.

Deputy Mairéad Farrell

I disagree with the Minister on this. It will be interesting if we have a report to see whether a wealth tax is overstated as he said. I disagree and it would be interesting to see that report. I will press the amendment.

Amendment put and declared lost.

Amendment No. 167 not moved.

Section 59 agreed to.

SECTION 60

Acting Chairman (Deputy Neale Richmond)

Amendments Nos. 173 to 175, inclusive, are related and will be discussed together.

Deputy Paschal Donohoe

I move amendment No. 173:

In page 81, to delete lines 37 to 39, and in page 82, to delete lines 1 and 2 and substitute the following:

“(b) In this subsection ‘shares’ includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—

(i) a share which represents ownership of an underlying share and which can be traded independently of the underlying share,and”.

I propose to take amendments Nos. 173 to 175, inclusive, together. They all amend the section and relate to new arrangements that will apply for the issue of new Irish securities and the settlement of trades in Irish securities.

Amendments to the Capital Acquisitions Tax Consolidation Act 2003 were contained in the draft Finance Bill and are being further amended now. The Stamp Duties Consolidation Act 1999 was not amended in the draft Bill and it is being amended now.

Trades in Irish corporate securities are currently settled in a central securities depository, CSD, in the UK known as CREST. This CSD is operated by Euroclear UK and Ireland, EUI, a UK incorporated company. Stamp duty is chargeable on the transfer of securities within the CREST system. Revenue has an agreement with EUI since 1996 for the collection and payment of this stamp duty.

Following Brexit, it will no longer be possible for trades in Irish securities to be settled in a CSD that is not based in an EU member state. The EU has approved a temporary equivalence arrangement for CREST to cover the transition period.

In October 2018, Euronext, the owner of the Irish Stock Exchange, announced that it had selected another company in the Euroclear Group - Euroclear Bank Belgium - as its preferred long-term settlement provider post-Brexit. The Migration of Participating Securities Act 2019 has been enacted to enable existing securities to migrate from EUI to the Belgian CSD on 30 March, 2021.

The main Irish tax impacted by the migration of Irish securities to the Belgian CSD will be stamp duty. Euroclear Bank is developing the necessary IT systems to enable the collection and payment of stamp duty within its existing Belgian CSD. My officials and Revenue officials have been engaged in ongoing discussions with Euroclear Bank to agree the new arrangements. Unfortunately, it was not possible to finalise the stamp duty legislation that would underpin the new arrangements in time for its inclusion in the Bill, as drafted.

This is now being done in this amendment.

The current legislative provisions underpinning the stamp duty charge where dematerialised or uncertificated securities are transferred within an electronic settlement system are contained in Part 6 of the Stamp Duties Consolidation Act 1999. To adapt the traditional stamp duty charge on the execution of a written document to an electronic securities settlement system, the charge is applied to an electronic instruction given by the operator of an electronic securities settlement system to transfer a security within that system. Such an operator must have entered into an agreement with Revenue for the payment of stamp duty. EUI is the only operator to have such an agreement. After 30 March 2021, EUI will no longer be an operator for the purposes of the stamp duty charge and the existing stamp duty provisions will cease to be relevant. For this reason, new provisions are being inserted into the Stamp Duties Consolidation Act 1999, as a new chapter 2 in Part 6, which are intended to come into operation on 30 March 2021. While these will be stand-alone provisions, they will to a large extent be modelled on the existing provisions.

The new provisions will be wider in scope than the existing ones. They will apply not just to transfers of securities within the Belgian CSD but to any other transfers of dematerialised Irish securities. They will also apply to certain indirect interests in Irish securities such as depository receipts and depository interests. After Brexit, it will be possible for trades in depository interests in Irish securities to be settled in the CREST system and transfers of these depository interests will be chargeable to stamp duty. Both Euroclear Bank and EUI will enter into arrangements with Revenue for the collection and payment of stamp duty. I may bring forward a Report Stage amendment in respect of this section.

Amendments to the Capital Acquisitions Tax Consolidation Act 2003 were included in the Finance Bill on publication in section 60(4). These amendments related to the charge to gift tax and inheritance tax on the receipt of interests in Irish shares. However, different wording to describe the same matter is now being used for the stamp duty amendments. To ensure consistency and clarity, the capital acquisitions tax amendments in the Bill as published are now being amended to align with the relevant stamp duty amendments.

I recommend these amendments to the committee.

Amendment agreed to.

Deputy Paschal Donohoe

I move amendment No. 174:

In page 82, to delete lines 21 to 25 and substitute the following:

“(b) In this subsection ‘shares’ includes any legal or equitable interest or right in, or in relation to, a share, whether such interest or right is directly or indirectly held, and, without prejudice to the generality of the foregoing, shall be deemed to include—

(i) a share which represents ownership of an underlying share and which can be traded independently of the underlying share, and”.

Amendment agreed to.

Deputy Paschal Donohoe

I move amendment No. 175:

In page 82, after line 40, to insert the following:

“(5) The Stamp Duties Consolidation Act 1999 is amended in Part 6 by constituting sections 68 to 78 as Chapter 1 of that Part and inserting the following Chapter after that Chapter:

“CHAPTER 2

Special provisions relating to dematerialised securities

Interpretation (Chapter 2)

78A. (1) In this Chapter—

‘central securities depository’ or ‘CSD’ has the same meaning as in the CSD Regulation;

‘CSD Regulation’ means Regulation 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No. 236/2012;

‘dematerialised securities’ means securities in respect of which physical certificates or documents of title indicating ownership have been eliminated such that the securities exist only as accounting or book entry records;

‘depository receipt’ means a security which represents ownership of an underlying security and which can be traded independently of the underlying security;

‘immobilisation’ means the act of concentrating the location of securities in, or on behalf of, a CSD in a way that enables subsequent transfers of interests in those securities to be made by book entry;

‘interest in securities’ means—

(a) any legal or equitable interest or right in, or in relation to, a security,

(b) a depository receipt,

(c) an indirect interest or right in, or in relation to, underlying securities arising from the immobilisation or dematerialisation of the securities, or

(d) without prejudice to the generality of paragraph (c), an interest or right in, or in relation to, securities which are held in, or on behalf of, a CSD, the rules of which require holders of interests or rights in, or in relation to, securities to hold those interests or rights by way of a co-ownership interest in a fungible pool of underlying securities;

‘relevant system’ means a securities settlement system that is operated by a CSD;

‘securities’ means any stocks or marketable securities;

‘securities settlement system’ means a formal arrangement with common rules and standardised arrangements for the execution of transfer orders by electronic means;

‘third country CSD’ means a CSD located outside the European Union that would come within the CSD Regulation if it were located in the European Union;

‘transfer order’ means a properly authenticated instruction to transfer an interest in securities.

(2) A reference to a CSD in this Chapter includes a reference to a third country CSD.

(3) This Chapter applies solely to the transfer of interests in dematerialised securities.

Transfer of interest in securities through relevant system

78B. (1) Where a transfer order effects a transfer of an interest in securities through a relevant system, the transfer order shall, for all purposes of this Act, be deemed to be an executed instrument of conveyance or transfer of such securities, the date of execution of which shall be deemed to be the date of execution of the transfer order.

(2) A transfer order that effects a transfer of an interest in securities outside a relevant system shall be deemed to be a transfer order effecting such a transfer through a relevant system and subsection (1) shall apply accordingly.

(3) Where a transfer of an interest in securities is effected by a transfer order relating to a single netted settlement of two or more contracts for the transfer of interests in the same type of securities, each individual contract constituting the single netted settlement shall be deemed to be a transfer order and subsection (1) shall apply accordingly.

Relief for intermediaries and clearing houses

78C. In relation to a transfer order or a deemed transfer order referred to in section 78B—

(a) the exemption from stamp duty under section 75(3) in relation to a recognised intermediary (within the meaning of subsection (1) of that section) in respect of certain instruments of transfer shall also apply in respect of the transfer order or deemed transfer order and section 75 shall apply accordingly, and

(b) the exemption from stamp duty under section 75A(2) in relation to a recognised clearing house (within the meaning of subsection (1) of that section) in respect of certain instruments of transfer shall also apply in respect of the transfer order or deemed transfer order and section 75A shall apply accordingly.

Duty charged

78D. (1) Where a transfer order, or a deemed transfer order, is, by virtue of section 78B, chargeable with stamp duty under or by reference to the heading ‘CONVEYANCE or TRANSFER on sale of any stocks or marketable securities’ in Schedule 1, duty shall be charged under that heading at the rate of one per cent of the consideration for the transfer to which the transfer order, or deemed transfer order, gives effect.

(2) Notwithstanding subsection (1)—

(a) where a transfer operates as a voluntary disposition inter vivos, the reference in that subsection to the consideration for the transfer shall, in relation to the duty to be charged, be construed as a reference to the value of the interest transferred, and

(b) where the calculation results in an amount that is not a multiple of one cent, the amount so calculated shall be rounded to the nearest cent, and any half of a cent shall be rounded up to the next whole cent.

Payment of duty

78E. (1) Subject to subsection (2), any duty charged by virtue of section 78B shall be due and payable on, and shall be paid to the Commissioners on, the date on which the transfer order, or deemed transfer order is executed.

(2) Notwithstanding subsection (1), the Commissioners may enter into an agreement with a CSD, or other party, in such form and on such terms and conditions as they think fit, in relation to the payment of stamp duty and where such an agreement is in force, any duty paid in accordance with the agreement shall be deemed to have been paid to the Commissioners on the date on which it became due and payable.

(3) Notwithstanding section 2(3), the transfer order, or deemed transfer order, that is charged to stamp duty by virtue of section 78B shall not be required to be stamped and, accordingly, sections 4, 6, 8, 11, 14, 20, 127 and 129(1) shall not apply.

(4) For the purposes of subsections (3) and (4) of section 2, the transfer order, or deemed transfer order, that is charged to stamp duty by virtue of section 78B shall be deemed to be duly stamped with the proper stamp duty when such duty, and any interest relating to such duty, is paid to the Commissioners.

(5) Where duty that is due and payable on the date on which the transfer order, or deemed transfer order, is executed is paid after that date, interest shall be charged on that duty, calculated in accordance with section 159D from the date on which the transfer order, or deemed transfer order, is executed to the date of payment of the unpaid duty.

Assessments and appeals

78F. (1) If, at any time and for any reason, it appears that no or insufficient duty has been paid to the Commissioners, they shall make an assessment of such amount of duty or additional duty as, to the best of their knowledge, information and belief, ought to be charged, levied and paid and the accountable person shall be liable for the payment of the duty so assessed.

(2) If, at any time and for any reason, it appears that an assessment is incorrect, the Commissioners shall make such other assessment as they consider appropriate and this other assessment shall be substituted for the first-mentioned assessment.

(3) An accountable person aggrieved by an assessment made on that person under this section may appeal the assessment to the Appeal Commissioners, in accordance with section 949I of the Taxes Consolidation Act 1997, within the period of 30 days after the date of the notice of assessment.

(4) In default of an appeal, in accordance with subsection (3), being made by an accountable person to whom a notice of assessment has been issued, the assessment made on the person is final and conclusive.

Overpayment and repayment of duty

78G. (1) Where, on a claim in accordance with subsection (2), it is proved to the satisfaction of the Commissioners that there has been an overpayment of duty in relation to a charge to duty by virtue of section 78B, the overpayment shall be repaid.

(2) A claim for repayment shall be made in such form and manner as may

be decided by the Commissioners.

(3) A claim for repayment shall be made within the period of 4 years from the date of execution of the transfer order or deemed transfer order giving rise to the claim.

Obligations and penalties

78H. (1) Where a transfer order, or a deemed transfer order, effects a transfer of an interest in securities, a CSD, a transferee or a person acting on a transferee’s behalf in relation to the transfer of the interest in securities, as the case may be, shall—

(a) retain evidence in legible written form, or readily convertible into such a form, in sufficient detail to establish the amount of duty, if any, with which the transfer order or deemed transfer order was chargeable,

(b) retain the evidence referred to in paragraph (a) for a period of 6 years from the date on which the transfer order or deemed transfer order was executed, and

(c) make any such evidence available to the Commissioners on request.

(2) A CSD, a transferee or a person acting on a transferee’s behalf in relation to the transfer of the interest in securities, as the case may be, who fails to comply with subsection (1) shall be liable to a penalty of €1,265.”.”.

Amendment agreed to.

Section 60, as amended, agreed to.

Acting Chairman (Deputy Neale Richmond)

Section 61 has been postponed until a later date.

SECTION 62

Question proposed: "That section 62 stand part of the Bill."

Deputy Mairéad Farrell

Could the Minister tease this section out a little? I would like to know how the warehousing would happen. I might have follow-up questions.

Deputy Paschal Donohoe

Section 62 inserts a new section 28C into the Emergency Measures in the Public Interest (Covid-19) Act 2020 to provide for the warehousing of temporary wage subsidy overpayments received by employers which must be refunded to Revenue. Section 28 of the Act legislated for the TWSS introduced by the Government to provide financial support to workers affected by the Covid-19 crisis. The scheme enables employees whose employers are affected by the pandemic to receive significant supports directly from their employer through the payroll system. Section 28(9) of that Act provides that where the Revenue Commissioners have paid an employer a temporary wage subsidy for a specified employee and the employer did not pay that employee an additional amount equivalent to the temporary wage subsidy or was not entitled to receive a subsidy in respect of an employee, the employer is obliged to refund the subsidy to the Revenue Commissioners.

Revenue will shortly be conducting a reconciliation exercise on the TWSS. Arising from that exercise, it is expected that some employers who received a temporary wage subsidy will be required to refund amounts received in excess of their entitlement to Revenue. Under section 28(13) of the Emergency Measures in the Public Interest (Covid-19) Act 2020, employers will also incur interest on amounts of subsidy to be repaid at a rate of 8% per annum, calculated from the date on which the subsidy was received. This is the same rate that applies to underpayments of income tax. Notwithstanding that some employers were not entitled to receive certain TWSS payments or did not pass on TWSS payments received, it is recognised that the 8% interest rate is quite severe, not least in the current circumstances.

This section allows employers to warehouse overpayments due to be refunded to Revenue for a period of at least 12 months. No interest will be charged during this 12-month period, after which a reduced interest rate of approximately 3% per annum will apply until the Covid-19 relevant tax has been paid in full. The provision applies to businesses that, as a consequence of the impact of Covid-19 related restrictions, are unable to pay their Covid-19 relevant tax and have complied with PAYE obligations as well as obligations imposed on employers under the TWSS and EWSS. All small and medium-sized enterprises whose tax affairs are dealt with in Revenue’s business division or personal division qualify automatically. Other employers will qualify if they believe they cannot pay their Covid-19 relevant tax as a result of the effect on their business of Covid-19 and have notified Revenue of that opinion.

As with the tax debt warehousing for VAT and PAYE employer debts, the scheme has three periods. The first is the Covid-19 restricted trading phase, which commences on 26 March 2020, the first day of the "applicable period" for the TWSS, and runs to the end of the first full bimonthly VAT period after which the business has resumed trading. Period 2, the zero interest phase, runs for 12 months from the end of period 1 and may be extended by order of the Minister for Finance but can end not later than 31 December 2022. Period 3, the reduced interest phase, runs from the end of period 2 until the employer’s Covid-19 relevant tax is paid in full.

No interest will apply to Covid-19 relevant tax during periods 1 and 2 and a rate of 3% per annum will apply in period 3. Employers will be able to warehouse debts as long as they continue to file returns, make an agreement before the start of period 3 to repay the outstanding amounts of excess TWSS, and abide by that agreement. If they fail to do so, the normal interest rate of 8% per annum will be reimposed. The extension of the tax debt warehousing scheme to excess TWSS payments is a vital liquidity support to business. I commend this section to the House.

Question put and agreed to.

Sections 63 to 66, inclusive, agreed to.

SECTION 67

Question proposed, "That section 67 stand part of the Bill."

Deputy Jim O'Callaghan

Obviously, members will be aware that a taxpayer who wishes to dispute a tax assessment made by the Revenue Commissioners may appeal to the Tax Appeals Commission. The law at present is that the taxpayer has to pay the tax in advance. The matter is then determined by the Tax Appeals Commission and if the taxpayer is correct and the tax was not payable, the money will be paid back to the taxpayer along with interest at 4%. However, the effect of section 67 appears to be that the Revenue Commissioners would not have to pay interest to a taxpayer who was found to be correct in his or her appeal to the Tax Appeals Commission. Is my reading of the section correct? If so, does the Minister not think there might be an unfairness there in terms of taxpayers having to pay penalties and interest when in the wrong, but when the taxpayer is in the right, there does not seem to be any downside for the Revenue Commissioners?

Deputy Paschal Donohoe

The Deputy's interpretation is correct, but I should state that if a taxpayer is engaging with the Tax Appeals Commission, he or she does not have to pay the tax that is being disputed. However, the Deputy's interpretation is correct.

Deputy Jim O'Callaghan

I ask the Minister to clarify that. If a taxpayer pays the tax and it is subject to an appeal, he or she will not get the interest payment back.

Deputy Paschal Donohoe

That is correct.

Question put and agreed to.

Sections 68 and 69 agreed to.

Acting Chairman (Deputy Neale Richmond)

Consideration of sections 70 and 71 has been postponed to a later point.

Sections 70 and 71 postponed.

Sections 72 to 74, inclusive, agreed to.

Amendments Nos. 150 and 157 not moved.

NEW SECTIONS

Deputy Pearse Doherty

I move amendment No. 163:

In page 66, between lines 2 and 3, to insert the following:

“Report on maintaining Mortgage Interest Rate Relief

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on maintaining the current Mortgage Interest Rate Relief until such time as mortgage interest rates are equivalent to the European average.”.

Amendment, by leave, withdrawn.

Deputy Pearse Doherty

I move amendment No. 168:

In page 66, between lines 2 and 3, to insert the following:

“Report on tax deduction for apartment management charges

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax deduction of apartment management fees, and the introduction of RTB-registered tenancy and the prior payment of management charges as conditions for tax deduction eligibility.”.

This amendment calls on the Minister to prepare a note or report on the issue of tax deduction of apartment management fees and lay it before the Dáil, as well as the introduction of RTB-registered tenancy and prior payment of management charges as conditions for tax deduction eligibility. It is a simple proposal and I hope it is one to which the Minister can agree. Obviously, the report does not have to be inserted into the Bill. If the Minister is agreeable to considering this issue and coming back to it on Report Stage, that would make sense.

The situation is that landlords are entitled to avail of a tax deduction for management fees that have been incurred and invoiced. That is appropriate. We are not suggesting it is inappropriate. We are saying that two things should be attached as conditionality for landlords to be able to avail of that tax deduction, namely, that the tenancy should be registered with the RTB - I do not think anybody would disagree with that - and that they must show that the management charges were paid. I think that is appropriate because apartment owners have raised the issue consistently with Oireachtas Members, including the Sinn Féin spokesperson on housing, Deputy Ó Broin, of the deduction being claimed in circumstance where an invoice may have issued but the management charges had not been paid. The amendment is about making sure that those conditions are met.

Deputy Paschal Donohoe

We debated this issue during consideration of the Finance Act 2019 and went through the detail of the matter. I am not in a position to accept the amendment. I will outline the reasons I differ with the Deputy in respect of this policy. I will send him a note between now and Report Stage in which I will outline why his rationale for advocating this amendment is not one I can support.

The core issue here is that Deputy Doherty appears to be suggesting that where management fees are not paid, none of the deductions under section 97 of the Taxes Consolidation Act should be allowed. I do not agree. Although I accept that there are difficulties with the non-payment of management fees in some developments - I am familiar with such issues - I do not agree that changing the rules of tax deductibility would solve the problem. It would not address the non-payment of management fees by owner-occupiers and it does not seem fair to link the allowability of all expenses to the payment of one of them. Property owners may be in dispute with management companies for a variety of reasons, such as the non-provision of services under a management agreement. I am not convinced that the tax system is the best place for or is best suited to resolving these kinds of contractual disputes.

That is the core of the reason I would not support the policy change the Deputy is advocating. I have a fair bit of material regarding the various matters he has raised, and I will send it on to him with a note before Report Stage to see whether it changes his view on the matter.

Deputy Pearse Doherty

I appreciate that. I will welcome the information. What we are seeking to ensure is that tax cannot be deducted from management fees that have not been paid. I will go through in detail what the Minister suggested if it is sent to me before Report Stage. We can then discuss it in greater detail. I will withdraw my amendment in line with what the Minister has said. We will probably submit an amendment for Report Stage when we get the documents the Minister is going to send on to us.

Amendment, by leave, withdrawn.

Deputy Pearse Doherty

I move amendment No. 169:

In page 66, between lines 2 and 3, to insert the following:

"Report on tax relief for dental expenses

55. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on tax relief for dental expenses, in particular non-routine procedures, its equitability, and options for including non-routine dental treatments such as dentures, etc.".

This seeks a report on tax relief for dental expenses, particularly expenses associated with non-routine procedures. It refers, in particular, to "options for including non-routine dental treatments such as dentures". It seems to be a simple amendment. We will see what the Minister has to say about it.

Everybody will agree it is important that those with missing teeth should have them replaced as soon as possible with a device such as a bridge, implant or, as in many cases, dentures. This is not just important aesthetically in the sense that it gives people self-confidence, but it is also important so people can have a proper diet, which is crucial if they are to have a healthy lifestyle. People who have loose or ill-fitting dentures often try to avoid certain foods, which is unhealthy for them. We are aware that a scheme has been established by the Revenue Commissioners to claim tax reliefs on dental expenses. It is called the Med 2 scheme and it is very much used by many people throughout the State.

Under the Taxes Consolidation Act 1997, tax relief can be claimed on non-routine dental procedures, such as those for crowns and bridges, but it cannot be claimed on routine dental procedures such as procedures to obtain new dentures, denture repairs, filling and cleaning. Those who have worked in the industry for many years can understand how denture repairs, fillings and cleaning could be classed as routine dentistry and therefore would not be eligible for the relief, but they do not understand how providing new dentures could fall into this category. They tell me that people change their dentures probably every seven to 15 years. For some, it could be ten 20 years. In some cases, people have been wearing dentures for up to 50 years. Therefore, there is clearly no routine to this at all. It is not a case that the dentures have to be disposed of after a certain period. It can be from seven years to 50 years.

Contact has been made with the Chief Dental Officer, who has investigated the issue. I understand the officer cannot find where the Revenue Commissioners came up with the classification of procedures to obtain new dentures as routine. Also, the officer is not sure whether there was ever consultation with the Department of Health on the matter.

There is an issue of fairness. There are those who may be able to afford an implant or bridge if they lose a tooth and who can obtain tax relief as a result, but there are some who cannot afford the treatments and therefore opt for dentures. Consequently, they are not entitled to any tax relief. While those with dentures do not fall into any particular socioeconomic class, there are indications that it is those from a lower socioeconomic background who are in the majority and therefore denied the type of tax relief in question.

We are asking for a report. What we are really asking for is that the legislation be amended to include procedures for new dentures in the description of non-routine procedures or to omit them from the description of routine procedures, thereby allowing people replacing their dentures to make a Med 2 claim for tax relief in the same way that somebody obtaining an implant, bridge or crown can avail of the support. It is an issue of fairness. It might have been an oversight. I am interested in hearing what the Minister has to say about it.

Deputy Mairéad Farrell

I want to add my voice to that. Deputy Doherty outlined the position very well. It is an issue of compassion. I would imagine it is an issue on which we can find common ground. I am sure we all know people, including family members, with dentures. I just cannot imagine the discomfort of ill-fitting dentures. We can all agree that a little compassion could be shown and that we could find common ground.

Deputy Paschal Donohoe

The rationale behind income tax relief for health expenses is broadly intended to provide assistance for significant or exceptional health expenses. Expenses for treatment of a routine nature or minor nature are, therefore, typically excluded. An example of this is that routine dental treatment does not attract the relief, though orthodontic treatment does.

Consistent with this rationale, tax relief in respect of qualifying health expenses is provided for in the Taxes Consolidation Act 1997. Routine dental treatment is explicitly excluded under the legislation and is defined as "the extraction, scaling and filling of teeth and the provision and repairing of artificial teeth or dentures". However, an individual can claim tax relief in respect of non-routine dental care provided by a registered practitioner. A comprehensive and non-exhaustive list of relevant procedures is available on the Revenue Commissioners' website. This list includes major interventions such as periodontal treatment for gum disease and orthodontic treatment to provide braces.

The exclusion of expenses incurred in respect of routine dental treatment has been in place since the relief's inception in 1967 and I am satisfied that the legislation, as drafted and implemented, provides sufficient flexibility for expenses that should qualify. There are no plans to change these arrangements at this time. In this regard, I note that tax relief for medical expenses is a commonly availed of relief. The most recent data, from 2018, highlight that 522,800 taxpayer units utilised the relief at an Exchequer cost of €156 million.

If routine dental expenses, such as those associated with dentures, were tax-relieved, it would inevitably lead to calls for other treatments similarly to qualify for relief, which could greatly increase the overall cost of the tax relief. Given the many budgetary challenges we face, I question whether this cost increase would be worth justifying. However, the Deputy will be aware that in recent years, there has been an increase in the level of dental benefits available through the social insurance system administered by the Department of Social Protection. In this regard, it is noted that tax relief is of assistance only to individuals who have sufficient tax liability and therefore direct expenditure may be a more effective way of targeting assistance to those who may need a specific support.

For the reasons outlined, I do not believe a report of the nature described would be beneficial so I do not propose to accept this amendment.

Deputy Pearse Doherty

That is a very disappointing response from the Minister. If he listened to the dental profession, dentists would tell him very clearly that dentures are not routine. Dentists have given a description about how they can range from seven to 50 years. There is an issue of fairness and equality here given that bridges and implants are deemed as non-routine but dentures are not. The chief dental officer from the Department of Health should be engaged with us here. This is something I feel strongly about. I understand from those working in the profession that the tax relief is the difference for some, although not all, as to whether they will continue to wear loose fitting or inappropriate dentures, which as I outlined, have a negative impact on their health and is not appropriate. This is a 20% tax relief for non-routine dental treatment.

Nobody is suggesting that fillings, scaling and cleaning are not routine. Likewise, the cleaning of dentures is routine, but the provision of dentures is non-routine. We should not decide on it ourselves. I am not a dentist and neither is the Minister. If he talks to dentists in the profession, they will tell him that it is not routine. There is an issue of fairness here in how we treat different types of procedures, some that are more costly and out of reach of individuals and, therefore, cannot be availed of, but if they were to be availed of, they would be entitled to tax relief. He can see the list in terms of what is available in the non-routine category such as crowns, veneers, Rembrandt-type etched fillings, gold posts and gold crowns, implants, chrome cobalt splints and other such treatments are entitled to tax relief but dentures are not.

Deputy Paschal Donohoe

The issue is not a matter of the particular procedure that we are referring to here. While I respect the views of dentists, I have to be mindful of the fact that this is an issue that is broader than just dentistry. I refer to how we define what kind of health expenses qualify for tax relief. I could not agree to a change in regard to a dental expense and not expect that similar issues would be raised by other professions on behalf of those that they are looking after and to whom they are trying to give good healthcare.

This is not a matter of compassion. I am as compassionate towards those who need support with dental care as the Deputy but through our social insurance system we have a way in which we try to increase the availability of dental benefits and doing so in recognition of the need that is there. This is not just a dental matter; it relates to the principles by which we define what kind of health expense justifies a tax relief. It is for that reason that I am not in a position to accept the amendment. I will check with my Department to see if there has been correspondence with the chief dental officer on the matter and if there is anything I am missing in the argument that has been made. I will certainly follow up the matter with his office between now and Report Stage.

Deputy Pearse Doherty

I thank the Minister for his response. I can understand his concern on the wider issue. It is a big tax relief claimed by many people. Unfortunately, many others do not claim this tax relief, despite the fact that they are entitled to it and that they can still claim it four years in arrears. That is something we would encourage people to do for medical expenses. This is an issue of equality because it should not be the case that the Minister can cherry-pick what is in or out. What is in is non-routine dental treatment and what is out is routine dental treatment. The question posed by those in the profession is how a bridge or implant can be non-routine yet dentures are routine. It does not make sense. I have heard what the Minister said. I will withdraw the amendment and consider it again on Report Stage, but in the intervening period I ask him to not only review the correspondence that might have come into him, because it might have gone to the Department of Health as opposed to the Department of Finance, but that his officials reach out to the chief dental officer and to Department of Health on this issue. We can discuss their views on Report Stage and perhaps have a more round assessment of the issue before we conclude the Bill.

Deputy Paschal Donohoe

We will do that. I will see what correspondence has been received on the matter and use that then for the Report Stage debate. This is a matter of equity, but it is also a matter of equity in terms of how we treat other healthcare expenses and that is the issue here. I must ensure that there is consistency across how all healthcare expenses are treated from a tax relief point of view but, as I said, I will check up on relevant correspondence before we get to Report Stage.

Amendment, by leave, withdrawn.

Deputy Pearse Doherty

Could I ask for clarification, Acting Chairman, because I know we are skipping different sections? Has amendment No. 179 been disposed of?

Acting Chairman (Deputy Neale Richmond)

No, it has not been disposed of and we are about to discuss it next.

Acting Chairman (Deputy Neale Richmond)

As none of the proposers of amendment No. 170 is present, the amendment is deemed to have fallen.

Amendment No. 170 not moved.

NEW SECTION

Acting Chairman (Deputy Neale Richmond)

Amendments Nos. 176 to 180, inclusive, are related and will be discussed together by agreement.

Deputy Paschal Donohoe

I move amendment No. 176:

In page 83, to delete lines 5 and 6, and substitute the following:

“61. (1) Section 28 of the Emergency Measures in the Public Interest (Covid-19) Act 2020 is amended—

(a) in subsection (12), by deleting paragraph (b), and

(b) by inserting the following subsection after subsection (12):

“(12A) A person aggrieved by an assessment or an amended assessment to relevant tax made on that person may appeal the assessment or amended assessment, as the case may be, to the Appeal Commissioners, in accordance with section 949I of the Act, within the period of 30 days after the date of the notice of assessment or the amended assessment, as may be appropriate.”.

(2) Section 28A (inserted by section 2(2) of the Financial Provisions (Covid-19) (No. 2) Act 2020) of the Emergency Measures in the Public Interest (Covid-19) Act 2020 is amended—

(a) in subsection (5)(a), by substituting “Department of Business, Enterprise and Innovation” for “Department of Business, Jobs and Innovation”, and

(b) in subsection (6)(b), by substituting “subsection (3)” for “subsection (2)”.

(3) Section 28B (inserted by the Financial Provisions (Covid-19) (No.2) Act 2020) of the Emergency Measures in the Public Interest (Covid-19) Act 2020 is amended—”.

I am introducing several Committee Stage amendments related to changes to the legislation providing for the employment wage subsidy scheme, EWSS, and the temporary wage subsidy scheme, TWSS.

The first is to alter the rates of subsidy given to a qualifying employer from 20 October 20202 until 31 January 2021. This implements changes previously agreed by the Government on 19 October that the EWSS subsidy may be up to €350 per week.

As a result of this change, the weekly rates of subsidy payable to the employer will be: €203 of a subsidy per employee paid between €151.50 and €202.99; €250 per employee paid between €203 and €299.99; €300 per employee paid between €300 and €399.99; €350 per employee paid between €400 and €1,462. The subsidy payable will remain nil for employees paid less than €151.50 and more than €1,462 per week.

The second change is to bring forward the date of payment of the EWSS subsidy. Similar to the payment schedule that applied under the TWSS, the subsidy payment will be made to the employer as soon as practicable after payroll, generally within two working days.

The purpose of this change is to minimise the delay between employees being paid and their employer receiving the subsidy to thereby reduce the cash flow burden of the wage bill on employers at this time.

This is consistent with the overall objective of the EWSS to support employment.

The third change relates to the turnover test to be met by qualifying employers which requires that they compare current operations with business operations pre-pandemic, in 2019. For EWSS claims from 1 January 2021, the benchmark period for the turnover test will be rolled forward to quarters 1 and 2 of 2021 compared with the same period in 2019. This will update the benchmark period for the new year for all recipient firms and ensure new firms may enter the scheme from January 2021, should the need arise.

Technical amendments will also be made, including the mechanics of clawing back subsidy overpayments from the employer by allowing that a future EWSS claim may be proportionally reduced, rather than require the overpayment be returned, and to update references to now outdated appeals provisions and bring the EWSS appeals process in line with current tax appeals provisions. I recommend these amendments to the committee.

Deputy Pearse Doherty

I will speak to amendment No. 179. I welcome that the issue of the proprietary director, which I raised previously with the Minister, has been dealt with. Sinn Féin has been calling for a higher rate of EWSS and I welcome that the Minister has brought forward an amendment to increase the payment to €350. Will the Minister clarify how long that payment will last? Is it dependent on the level of restrictions in place in the State at any given time? In circumstances where there are varied restrictions in different regions, will that have any impact on the higher payment?

Deputy Paschal Donohoe

The higher payment rates are applicable until 31 January 2021 and will not be affected by health level guidance between now and then. They will, therefore, remain at these higher levels up to that point. I can only operate the employment wage subsidy scheme on a national basis. I do not have the ability to operate this on a regional or county-specific basis. That is where the CRSS is designed to operate.

Deputy Pearse Doherty

With regard to the amendment, is there power in the legislation to extend the date of the higher rate through a ministerial order if, God forbid, we went into a level 5 restriction period in, say, April or May? Are there powers for the Minister to reintroduce the higher rate or would that require legislative change? I note what the Minister said regarding the CRSS scheme. This is, however, separate and complementary to it. Does the Minister not see the benefit of or merit in being able to vary this scheme on a regional basis?

Deputy Paschal Donohoe

As the date of 31 January 2021 is fixed in the legislation, I do not have the ability to extend beyond that date. In the normal operation of the EWSS, flexibilities are open to me regarding how it operates but the higher rates are fixed in legislation until the end of January next year. I will take stock of this issue as we approach that point and make further decisions about the EWSS.

On the Deputy's point about county-specific or regional-specific schemes, the reason we introduced the CRSS was to try to have a measure in place that will be specific to different geographical areas of the country. I anticipate this will continue to play a role in supporting businesses that are subject to higher levels of public health guidance than business in other parts of the country. The EWSS and TWSS are nationwide schemes and I do not have flexibility with regard to those schemes. I am concerned about how it would be possible to operate such a scheme unless it is nationwide.

Deputy Pearse Doherty

I disagree with the Minister. He does not have this power because he decided to introduce the scheme in a manner that does not give him such a power. There is a way around that. The fact is he introduced the higher rates which, as I said, are welcome. He had set his face against doing that, however. Sinn Féin argued for months that the rate paid under the scheme was too low. Unfortunately, we had to have severe restrictions imposed for health purposes, which necessitated legislative change. That shows that this has not been thought through. There is an issue here. The Minister should have allowed for change on a regional basis and the option to introduce the higher rate at a given point in time.

The CRSS is in operation, and we are legislating here for a higher rate of the EWSS. The schemes will be complementary. If there is a severe lockdown in the first quarter of next year, businesses will need to avail of both schemes again. That will not be possible in the case of one of them without legislative change. It demonstrates a lack of foresight, planning and preparation that it would require the Oireachtas to come together and pass what could possibly be deemed emergency legislation to allow this to happen in circumstances where none of us knows what restrictions could apply to the Houses of the Oireachtas at that point. It is a mistake not to provide the scope to reintroduce this.

Naturally, I am not in favour of giving the Minister these kinds of powers and would normally take the contrary view that the matter should go before the Houses of the Oireachtas. We are not, however, in normal times and we need the ability to be able to reintroduce and turn these supports on and off in line with other restrictions. As I said, the fact is that the CRSS will run complementary to this during the period to December and January because it is needed at this point. Both schemes are needed and may, unfortunately, be needed at some point in the future. Without legislative change, however, the power will not be available to provide anything but the low rate of €203 to these businesses. That is a mistake. I will leave it at that.

Deputy Paschal Donohoe

We moved to the higher level of the EWSS when we moved back to level 5. I reject entirely the idea that this has not been thought through. This is a very effective scheme which has saved hundreds of thousands of jobs. As the economy opens up and public health guidance improves, it is absolutely necessary that we begin to reduce the level of subsidy available as otherwise we will end up with a scheme that is still running when the need for it has lessened. That would create huge affordability issues for the Minister for Finance of the day. We reduced the subsidy when the economy was opening and when, unfortunately, we had to close parts of the economy again, we increased the subsidy. That is good policy. Even in the current legal framework, I had the ability to increase the subsidy to this level before these amendments to the Finance Bill were tabled, let alone accepted, as I hope they will be. In making those points, I also acknowledge, in the interests of fairness, the support the Deputy has afforded to this scheme.

Acting Chairman (Deputy Neale Richmond)

I will put the amendment.

Deputy Pearse Doherty

Just to respond briefly, the Minister is picking me up wrong on the point I have been making about this scheme. I am fully conscious that these measures are under the management control of the Revenue Commissioners.

The legislation has probably been pushed to its outer limits in allowing for payments that are in excess of the upper limits of what has actually been legislated for. This is appropriate because there was political consensus, not only from the Government, in the form of a commitment to deal with this in future legislation, but also from the Opposition in supporting the measures and the direction of travel regarding what the Minister wanted to do. I cannot understand why somebody would challenge it but if there were a legal challenge, we could be into difficulty. This is the whole point. This is the core area I was suggesting.

There is no provision in the Bill to turn on higher rates of the EWSS if we go to level 5 again in the future. That is the problem. It is a fact that the Minister does not have the ability to turn it on or turn it off. We could all be at level 2 in a matter of weeks but the supports will continue to run to the end of January. I am not against this, I support it but I believe the supports are too low even at less restrictive times. The point is that we could be at level 5 again in March and the Minister has no ability to do this without introducing legislation. Even allowing Revenue to pay these at higher rates requires legislative change at a given point. This is my contention with regard to it not being thought out. It is not that the scheme is not worthy. The scheme is worthy and we have been arguing for additional support for the scheme. What is not thought out is that we do not know where we are going to be and, therefore, we do not have the flexibility in the scheme to increase the payments again because the payments will reduce as we, hopefully, enter a period of fewer restrictions at the end of January. We may need them again in February or March and this would be impossible without legislative change. This is where I contend this has not been thought out.

Amendment agreed to.

SECTION 61

Deputy Paschal Donohoe

I move amendment No. 177:

In page 83, to delete line 11.

Amendment agreed to.

Deputy Paschal Donohoe

I move amendment No. 178:

In page 83, between lines 33 and 34, to insert the following:

"and

(iii) in the definition of "wage subsidy payment", by substituting "subsections (7), (8) and (21)(aa) and (c)" for "subsections (7), (8) and (21)(c)",".

Amendment agreed to.

Deputy Paschal Donohoe

I move amendment No. 179:

In page 84, to delete line 17 and substitute the following:

"(b) shall be irrevocable.",

(c) in subsection (2)—

(i) by substituting "this section shall apply to an employer for the period 1 July 2020 to 31 December 2020 (in this subsection referred to as ‘the specified period’), where" for "this section shall apply to an employer where", and (ii) in paragraph (a)(i)(I), by substituting "there will occur in the specified period" for "there will occur in the period from 1 July 2020 to December 2020 (in this subsection referred to as ‘the specified period’)",

(d) by inserting the following subsection after subsection (2):

"(2A) Subject to subsections (4) and (5), this section shall apply to an employer for the period from 1 January 2021 to the date on which the qualifying period expires where—

(a) (i) in accordance with guidelines published by the Revenue Commissioners under subsection (20)(a), the employer demonstrates to the satisfaction of the Revenue Commissioners that, by reason of Covid-19 and the disruption that is being caused thereby to commerce—

(I) there will occur in the period from 1 January 2021 to 30 June 2021 (in this subsection referred to as ‘the second specified period’) at least a 30 per cent reduction, or such other percentage reduction as the Minister may specify in an order made by him or her under subsection (21)(b), in either the turnover of the employer’s business or in the customer orders being received by the employer by reference to the period from 1 January 2019 to 30 June 2019 (in this subsection referred to as ‘the second corresponding period’),

(II) in the case where the business of the employer has not operated for the whole of the second corresponding period but the commencement of that business’s operation occurred no later than 1 May 2019, there will occur in the part of the second specified period, which corresponds to the part of the second corresponding period in which the business has operated, at least a 30 per cent reduction, or such other percentage reduction as the Minister may specify in an order made by him or her under subsection (21)(b), in either the turnover of the employer’s business or in the customer orders being received by the employer by reference to that part of the second corresponding period, or

(III) in the case where the commencement of the operation of the employer’s business occurred after 1 May 2019, the nature of the business is such that the turnover of the employer’s business or the customer orders being received by the employer in the second specified period will be at least—

(A) 30 per cent, or

(B) such other percentage as the Minister may specify in an order made by him or her under subsection (21)(b), less than what that turnover or those customer orders, as the case may be, would otherwise have been had there been no disruption caused to the business by reason of Covid-19,

or

(ii) the employer’s name is entered in the register established and maintained under section 58C of the Child Care Act 1991,

and

(b) the employer satisfies the conditions specified in subsection (3).",

(e) in subsection (3) by substituting "subsection (2)(b) or (2A)(b)" for "subsection (2)(b)",

(f) in subsection (5)—

(i) by substituting "by virtue of subsection (2) (apart from paragraph (a)(ii) thereof) or (2A) (apart from paragraph (a)(ii) thereof)" for "by virtue of subsection (2) (apart from paragraph (a)(ii) thereof)", and

(ii) in paragraph (b), by substituting "subsection (2)(a)(i) or (2A)(a)(i), as may be appropriate" for "subsection (2)(a)(i)",

(g) in subsection (7)—

(i) by substituting "subsections (8), (9) and (12A)" for "subsections (8) and (9)", and

(ii) by substituting the following paragraph for paragraph (d):

"(d) a payment or an aggregate payment required under this subsection to be made by the Revenue Commissioners to the employer in relation to a qualifying employee or qualifying employees shall be made by the Revenue Commissioners as soon as may be practicable after the date of the notification by the employer of the payment of emoluments to the qualifying employee or the qualifying employees concerned;",

(h) in subsection (8)—

(i) by substituting "subsections (9), (21)(aa) and (21)(c)" for "subsections (9) and (21)(c)", and

(ii) by substituting the following paragraphs for paragraphs (a) and (b):

"(a) in the case where the employer pays the qualifying employee gross pay of at least €151.50 per week but not more than €202.99 per week, the sum of—

(i) €151.50 per contribution week, or

(ii) where the date of the payment of the emoluments by the employer to the qualifying employee is in the period beginning on 20 October 2020 and ending on 31 January 2021, €203 per contribution week,

and

(b) in the case where the employer pays the qualifying employee gross pay of not less than €203 per week but not more than €1,462 per week, the sum of—

(i) €203 per contribution week, or

(ii) where the date of the payment of the emoluments by the employer to the qualifying employee is in the period beginning on 20 October 2020 and ending on 31 January 2021—

(I) €250 per contribution week, where the gross pay so paid to the qualifying employee is not more than €299.99 per week,

(II) €300 per contribution week, where the gross pay so paid to the qualifying employee is not more than €399.99 per week,

or

(III) €350 per contribution week, where the gross pay so paid to the qualifying employee is at least €400.00 per week,",

(i) by inserting the following subsection after subsection (12):

"(12A) Where, apart from this subsection, a payment or an aggregate payment would be required to be made by the Revenue Commissioners to an employer under subsection (7), the Revenue Commissioners may, instead of making the payment or the aggregate payment, set the amount of that payment or any part of that payment against any amount that is required to be refunded by the employer to the Revenue Commissioners in accordance with subsection (11).",

(j) in subsection (14)—

(i) by deleting paragraph (b), and

(ii) by inserting the following subsection after subsection (14):

"(14A) A person aggrieved by an assessment or an amended assessment to relevant tax made on that person may appeal the assessment or amended assessment, as the case may be, to the Appeal Commissioners, in accordance with section 949I of the Act, within the period of 30 days after the date of the notice of assessment or the amended assessment, as may be appropriate.",

(k) in subsection (17)—

(i) in paragraph (a), by substituting "subsection (2) or (2A)" for "subsection (2)", and

(ii) in paragraph (b), by substituting "subsection (2) or (2A)" for "subsection (2)",

(l) in subsection (20)(a), by substituting "subsection (2) or (2A)" for "subsection (2)",

(m) in subsection (21)—

(i) by inserting the following paragraph after (a):

"(aa) make an order that any day referred to in paragraphs (a)(ii) and (b)

(ii) of subsection (8) as the day on which the period there referred to shall begin on, or end on, shall be such other day as the Minister considers appropriate and specifies in the order,",

(ii) in paragraph (b)—

(I) by substituting "subsection (2)(a)(i) or (2A)(a)(i)" for "subsection (2)(a) (i)", and

(II) by substituting "section 28A(3)" for "section 28A(2)",

and

(iii) in paragraph (c), by substituting "section 28A(3)" for "section 28A(2)",

and

(n) in subsection (22) by substituting "(a), (aa), (b) or (c)" for "(a), (b) or (c)".".

Amendment agreed to.

Deputy Paschal Donohoe

I move amendment No. 180:

In page 84, to delete line 18 and substitute the following:

"(4) Subsection (1) shall be deemed to have come into operation on 27 March 2020.

(5) Subsection (2) shall be deemed to have come into operation on 20 October 2020.

(6) Subsection (3) (apart from paragraphs (i) and (g)(i) thereof) shall be deemed to have come into operation—

(a) as respects paragraph (j) thereof, on 1 August 2020,

(b) as respects paragraphs (a) (apart from subparagraph (iii) thereof) and (b) thereof, on 1 September 2020,

(c) as respects paragraphs (a)(iii), (h), (m) (apart from subparagraph (ii)(I) thereof) and (n) thereof, on 20 October 2020,

(d) as respects paragraph (g)(ii) thereof, on 1 November 2020, and

(e) as respects paragraphs (c), (d), (e), (f), (k), (l) and (m)(ii)(I) thereof, on 1 January 2021.".

Amendment agreed to.

Section 61, as amended, agreed to.

Sections 70 and 71 agreed to.

Acting Chairman (Deputy Neale Richmond)

Sections 72 to 74, inclusive, have already been disposed of. As the Schedule was discussed with section 72, I propose that the proceedings on the Bill be brought to a conclusion by one question, as permitted by the order of the Dáil of 17 November. This is desirable arising from the fragmented way it was necessary to consider the Bill. Is that agreed? Agreed. I propose therefore: "That any amendments set down by the Minister for Finance and not disposed of are hereby made to the Bill. In respect of any section not disposed of, that the section or, as appropriate, the section, as amended, is hereby agreed to and the Schedule and the Title are hereby agreed to."

Question put and agreed to.

Acting Chairman (Deputy Neale Richmond)

I thank everyone, particularly the clerk and the secretariat.

Deputy Pearse Doherty

I thank everybody who helped us facilitate Committee Stage. I really appreciate all of the help.

Deputy Paschal Donohoe

I wanted to make that point but I was on mute. I thank all of the officials who have facilitated all of this over many hours, including on Monday. I thank them for their co-operation in allowing this very important process to run smoothly and effectively, and allowing the committee and I to fulfil our roles. I thank all of the officials. I thank all of the members of the committee who, while we have disagreed at times have been present for many hours and have looked to hold me to account and to improve the Bill. My thanks to all.

Deputy Jim O'Callaghan

I also want to thank all of the officials for a very efficient process.

Deputy Bernard J. Durkan

That applies to us all. It was an excellent performance.

Acting Chairman (Deputy Neale Richmond)

On that note, we can end it.