If the Minister is ready, we can go ahead with his opening statement.
Vote 9 - Office of the Revenue Commissioners (Supplementary)
I am pleased to have the opportunity to appear before the committee today to discuss the 2023 Supplementary Estimates. As Minister for Finance, I will be discussing two of the four Votes within the finance group of Votes, namely, Vote 9 - Office of the Revenue Commissioners and Vote 7 - Office of the Minister for Finance. I look forward to a fruitful and positive exchange.
On Vote 9, the Office of the Revenue Commissioners plays a vital role in our economy by collecting taxes and duties due to the State. In 2022, Revenue collected a record €83.1 billion in gross receipts against total administration costs of €491.7 million.
The UK’s departure from the European Union has had a major impact on Irish businesses and has necessitated a shift in trade patterns, supply chains and the system of customs and other controls. The Revenue Commissioners and other State agencies are required by law to comply with customs controls, sanitary and phytosanitary checks and other regulations in respect of goods moving between the United Kingdom and Ireland. The advent of such checks has necessitated investment in our ports. The request for a Supplementary Estimate for the Revenue Commissioners relates specifically to Rosslare Europort and the need to replace temporary facilities with permanent infrastructure. The infrastructure in Rosslare is being developed by the Office of Public Works, OPW, on behalf of Revenue and other Departments and agencies. The permanent infrastructure project consists of the construction of terminal 7, enabling works and a new border control post. The works will consist of various phases of construction that will deliver new and improved facilities, entry and exit access and significant upgrading of the infrastructure in several areas. The total cost for the Rosslare project is €236 million, inclusive of VAT. Costs are being apportioned across the relevant Departments and agencies. The apportionment ratio in respect of the Revenue Commissioners is 34.4%, with Revenue’s total portion over the lifetime of the project expected to cost €81.3 million.
In order to meet these costs, as well as some related expenditures at Dublin and Rosslare ports, a Supplementary Estimate of just under €53 million is required by the Office of the Revenue Commissioners. It is envisaged that much of these costs will be met from the Brexit adjustment reserve. As Deputies will know, the fund was set up in 2021 to help countries, regions and sectors worst affected by the UK’s withdrawal. The Brexit adjustment reserve will work on a retrospective basis with expenditures from 2020 to the end of 2023 included in Ireland’s claim. I am happy to confirm that a significant amount of the infrastructure improvements at Rosslare Europort will qualify for funding under the fund.
Turning to the Department of Finance, Vote 7, the Department requires a technical Supplementary Estimate for 2023 in relation to an overspend of approximately €400,000 in subhead A3, committees and commissions. The excess on the subhead will be funded through savings on subhead A1, administration pay. The overspend is the result of costs linked to an agreement on backdated pay costs with the National Rehabilitation Hospital, NRH. The agreement was made in order to get the Disabled Drivers Medical Board of Appeal up and running again. In February 2023, the NRH withdrew from the hosting arrangement it had provided to the appeals board. The agreement had been in place for the previous 20 years. Under the agreement, the Department of Finance paid the consultant’s salary when the consultant on the board acted as chair. Following the resignation of the board in November 2021, the Department stopped paying the salary of the consultant as no work was being carried out on the board. The NRH argued, however, that there was a 2005 agreement whereby the Department of Health would fund the consultant’s salary once the consultant was no longer required full time on the board of appeal. Consequently, in order to address this issue and to enable continued hosting arrangements for the appeals board within the NRH, the Department of Finance agreed to provide funding for the consultant post in question for the period November 2021 to December 2022, and for 2023.
Accordingly, the Department of Finance transferred just under €517,000 to the Department of Health to cover the consultant post’s costs. This transfer has given rise to the technical Supplementary Estimate now required on the Vote. In summary, my objective in relation to the appeals board has always been for the board to commence hearings as soon as possible. This expenditure will allow that to happen and it is now expected that the appeals board will recommence hearings in the first half of next month, with the first four meetings scheduled for 5, 7, 12 and 14 December.
I thank members for their attention and commend the 2023 Supplementary and technical Supplementary Estimates for the Revenue Commissioners and the Department of Finance to the committee. I look forward to our discussions.
I thank the Minister. It has been a busy engagement over the past two weeks, given all the different opportunities. We are dealing with the Supplementary Estimates for the Minister's Department and Revenue. I will come to Revenue in a moment. I cannot imagine this will take much time.
There are far more important and wider issues than what is at stake here in respect of the Supplementary Estimate for the Disabled Drivers Medical Board of Appeal. We have raised those issues previously and my colleagues raised them on the floor of the Dáil during oral questions earlier today. It is an intolerable position where people with disabilities have been left in this situation for years as a result of a scheme that is not up and running.
The Minister again said in his statement that the board will commence as soon as possible. As we know, the issues that led to the previous board resigning en masse is the fact this scheme is not fit for purpose. There is supposed to be a new grant-based scheme. When does the Minister expect this? It will be a transition away from the Department to a separate Department. When does he expect it to be operational?
Will he take me through what role the consultant provides to the board? Will he explain what role the consultant played in 2022?
I will answer the second question first. I thank the Deputy for his comments and questions. The consultant chaired the appeals board, and administered and managed the list of appeal applications. Since the board stood down, the consultant has not had any role to play in effect. There was a disagreement as such as to the issue of costs for the period in question. The consultant remained employed, presumably by the NRH. It was able to point to an agreement from almost 20 years ago regarding the Department of Health paying the consultant's salary. As I said in my opening statement, in a situation where the consultant was not fully employed in respect of the work of the appeals board, and to move matters on to get the appeals board back up and running, the Department took the view that the costs should be met by the Government. In effect, they were met by the Department of Finance and went on to the Department of Health and then on to the NRH so that we could get an agreement in place to get the appeals board back up and running.
With regard to the new scheme, I cannot give any definitive date because it is not entirely within my control. Departmental officials are actively contributing to the work of the senior official level group that is being led by the Department of the Taoiseach. There have been two meetings and there will be further meetings with a view to progressing the working group report we discussed in the House earlier today. We want it done as quickly as possible. I recognise the limitations of the existing scheme and that it does not meet all of the needs that are there. I also recognise the lack of flexibility in reflecting individual circumstances when it comes to the eligibility criteria for the primary medical certificate. A new needs-based scheme is required and that will have to be developed. I cannot confirm a definitive timeline because it is not entirely within the control of the Department. It requires a number of other Departments to make an input into it.
The consultant was paid in the region of €250,000, probably a little less, perhaps €230,000.
Yes, a little less than €250,000.
It is somewhere in the ballpark of €230,000 per year. Is that the consultant's salary for just doing the work on the board of appeals? I presume this consultant is employed by the National Rehabilitation Hospital, as the Minister said, and, therefore, he or she was doing important work for the NRH and we were covering his or her entire wage. Is that the position?
Yes, that is the position. When the appeals board was up and running the Department was covering the full wage even though, as the Deputy said, the consultant was working for the NRH on other normal work.
The day job.
Yes, the day job as such. As a statement of support from the Government to the NRH for hosting the appeals board, the cost of the consultant's salary was fully met by the Government, from the Department of Finance to the Department of Health and then onto the NRH. This has been reinstated. The period in between has been covered to get this back up and running.
As a result of the board resigning en masse the consultant could not fulfil his or her position and, therefore, the National Rehabilitation Hospital must pick up this bill because the person is employed to do important work for the hospital, which did not have a funding stream. This is the case that has been resolved.
Correct.
The salary of this consultant is in the region of €230,000. Is this as a result of the work he or she was doing for the NRH or was there an uplift in the salary as a result of the work he or she was doing for the board?
It was the standard salary for the day job as such. There was no uplift or additional money in respect of the work associated with the appeals board.
I appreciate that.
With regard to Vote 9 and the Revenue Commissioners, there are a number of changes, mainly driven by a significant net capital overspend of €47 million. There is also a non-pay overspend of approximately €12 million. Will the Minister start with the non-pay element? It is almost a 10% overspend. Will he explain what is driving the non-pay part? Is it all consultancy and reports? What is happening in Rosslare?
The elements that make this up are office equipment and external IT services, consultancy, value for money and policy reviews, motor vehicles and frontier management expenses.
Does the Minister have a breakdown of this €12 million? How much is in consultancy? How much is in IT? I am not sure whether this has been shared with us. I do not have it before me.
We can certainly share this is if the Deputy does not have it. For office equipment and external IT services, it is just under €6.3 million and for consultancy, value for money reviews and policy reviews, it is just under €2.5 million. With regard to motor vehicles and frontier management, Revenue incurred additional costs of €2.55 million due to unforeseen additional expenditure arising from the recent seizure and detention of the MV Matthew.
What would that-----
There are also preparatory works on the seized MV Shingle to facilitate its transfer to a new berthing bay.
Obviously very good work has been done by Revenue and other agencies on these issues. I want to focus on the capital overspend. There is €51 million for Brexit infrastructure capital, which the Minister has outlined is for Rosslare Europort in the main. Surely some of this was foreseen. Estimates were prepared this time last year, or perhaps it was earlier this year. This is not something that fell out of the sky with regard to the issues with infrastructure upgrades for Rosslare. Given the level of expenditure we are speaking about, of more than €50 million, how come this was not captured in the original Estimates of the Department?
It was not allocated at the time. Funding was not previously provided during the 2023 Estimates due to uncertainty about costs at that time. The planning and tendering process was ongoing.
It was always the intention that it would be allocated once there was more certainty as regards the costs, the tendering was complete and we had a more accurate estimate of the costs. As we indicated in the opening remarks, we anticipate that most of it will be covered by the BAR. Within the cut-off and the eligibility rules in the BAR, that is essentially where it will be funded from. It will be allocated once we know what the figures are.
I understand that it is part of our application as regards the BAR, which will be decided on at the end of the project when the money is expended. I imagine, however, that that is just not good budgeting, particularly when we come to the House to look at Estimates for this year and the Minister is telling me his Department knew there would be significant additional expenditure and it was not as part of the Estimates. With a lot of these Estimates, it is very rare that we will look at projections and outturns and they will be exactly bang on. We understand that there will be fluctuations either way. With respect to the Minister, however, I do not think that is a valid reason not to include what is substantial expenditure by the Department which would be known at the start of the year. I make that point from a policy point of view. It is an unfair way to deal with the Estimates.
Yes, but there would be provision under the BAR heading which would not have been allocated to individual Votes. Then, once we have certainty around the costs, the allocation would be made but it would be provided for within the overall expenditure framework, within the provision that is made in the expenditure book for the BAR. It would not be allocated to the specific Vote, however. I take the point the Deputy is making, but-----
I understand that, but if 35% of it was going to fall with Revenue, and not to split hairs on this, there should have been an allocation of something. It is a significant amount of spending.
It is.
It is 10% of the overall budget we agreed earlier this year and it will increase, obviously. There is more for next year. Even though we are likely to recoup that through the BAR, I think it should be included.
The final question I will ask the Minister about the Estimates relates to Revenue. We had this discussion in the context of the finance Bill and we talked about the increase in tobacco duty, which went up by 70 cent. Is that correct? Was it 70 cent or 75 cent?
It was 75 cent.
We talked about the pinch point where you drive more into the illicit market, the illegal market, and more sales from outside the State in the form of duty-free. The Minister helpfully provided the figures which show there is trend there. I will make the point again that I am very concerned that the illegal cigarette market is normalised. It is acceptable. You go to any pub or any gathering and people will talk about how they bought dodgy cigarettes. I think 17% of cigarettes now are estimated to come from the illegal market. That is a substantial amount of tobacco being consumed from that and a substantial number of people knowingly purchasing illegal cigarettes. That is a wider policy discussion as to what happens when we continue to increase the price of cigarettes, which we are doing for really good, valid health reasons. These cigarettes have to be smuggled into the country and they are being smuggled in in greater quantities. What is Revenue's ability to detect that at a large scale?
On a separate issue, I have made the point before that you can now, with your partner, book a flight to Europe and get a night's accommodation and, if you are a smoker, by buying cigarettes duty-free you will have paid for the flights and the accommodation and your cigarettes for the next couple of weeks will be cheaper because of the differential there. Some people, I imagine, are not carrying just the carton to which they are entitled; there might be an extra carton. What is Revenue's capacity first and foremost as regards policing the smugglers of large cigarettes? Are we losing that battle, given the amount now in circulation?
In the overall area of enforcement and compliance, the Revenue has around 2,000 professionals. This is an area of priority for them and they have had a lot of success. I do not have data to hand about the level of seizures, the value, the volume and so on. We can certainly provide whatever information the Deputy needs in that regard, but the Revenue has been given significant resources to support them in that work.
I have just been handed some data on cases and court fines, for example, as regards the smoking of tobacco. I will put it on the record if the Deputy so wishes.
Yes, please.
Section 119 of the 2001 Act, as amended, sets out the penalties imposed for the smuggling of tobacco into the State. The maximum prison sentence that can be imposed is 12 months, with summary conviction in the District Court of five years on indictment in the Circuit Court. A fine may be imposed by the courts in addition to a term of imprisonment, and any tobacco seized is liable to forfeiture, as is any vehicle used in transporting the product. I have a table here that sets out the number and value of fines imposed by the courts since 2019. In broad terms, the number of cases is 40 to 50-plus and level of fines is €100,000-plus, in effect. The Government has ensured through the finance Acts over the years that Revenue has the necessary statutory powers to tackle the illicit tobacco trade. The current legislative framework provides an effective basis for undertaking this important work; however, I remain open to considering any proposals the Revenue may bring forward for further enhancements in that regard.
There is extensive co-operation between Revenue and the Garda in combating the illicit trade. The relevant agencies in the State also work closely with their counterparts in Northern Ireland to target the organised crime groups responsible for a large proportion of the illegal tobacco market. In addition, co-operation takes place with other Revenue administrations and international agencies, the European Anti-Fraud Office and Europol in the ongoing programmes at international level to tackle the illicit trade. I am open to further legislative amendments or changes that may be required if Revenue seeks additional powers or additional resources. That is the information I have to hand this afternoon.
I welcome that.
Finally, as regards the point the Minister makes about welcoming and being open to consideration of any additional powers, if 17% of cigarettes that are consumed are illicit, that means that one in six cigarettes smoked in this State is illegal and smuggled into the State through organised crime groups. I imagine that those organised crime groups are not just involved in the smuggling of cigarettes; I presume they are involved in other criminal activities as regards gangland crime and other issues. I am really concerned. If there is that level of consumption of illegal product, as I said, there is nearly a normalisation of this. When there is an increase in price, there is a greater incentive for both the consumer and the illegal operator to take this risk. I know the Revenue is doing what it is doing, but the figures are going in the wrong direction, even though there is detection, seizures and all the rest. There is still more illicit product coming in now than ever before, so, especially when there is a policy change for the right reasons, there has to be a policy on enhanced detection. Whether it is enforcement or not, I am not sure, but I would be very interested to hear the views of the Revenue as to how we deal with that. It is a bad thing for society if there is an acceptance that people will do something that is illegal or if that is normalised.
I thank the Deputy. Perhaps it might be helpful if we provide an information note about what enforcement activity is undertaken by Revenue and the nature of it. This is one issue.
The second issue is a valid policy question about considering the impact of further price changes through excise decisions on the level of smuggling, in effect, of tobacco into Ireland. It is something that must be considered in any future decisions being taken.
I thank the Minister.
I have a similar question. We considered this issue on Committee Stage as well. I refer to some of the campaigns in respect of enforcement and catching this activity, and this might not always be the answer, but there certainly does need to be a stronger campaign to prevent or discourage these types of endeavours, which lead to a loss of revenue but also, as a knock-on effect, a loss of jobs. In the retail sector, where businesses have many costs coming at them, anything we can do to try to ensure jobs are kept locally would be better.
Deputy Bernard J. Durkan took the Chair.
It is similar regarding the issue of coal. Again, what we are trying to achieve with carbon taxes, and not everyone supports them but their aims are well intentioned in my view, causes the price of coal to go up. We can see it being advertised clearly that pallets of coal are being brought in and sold in the South extremely easily. Carbon taxes have not been paid on this coal and the revenues have not been surrendered, so it is impossible for local SME suppliers to match the prices. Again, the knock-on impact is a loss of jobs, which is not what we are trying to achieve. There is a similar kind of campaign, but in some cases it is becoming normalised to undertake this activity. We need to push back on this situation. Revenue does great work in many areas, but a strong message must also be sent out that this type of undertaking is, in effect, the same as smuggling. People do not see it in this way, and this is where we need to strengthen the messaging, if we can.
On the work undertaken at Rosslare Europort, I recognise the need for it to be undertaken and I compliment Revenue and all the other agencies on their response to Brexit. At a difficult time, these agencies made it as easy as they possibly could coming into that January, when there was a great fear of what would happen in our ports concerning goods coming in and going out. Overall, it is quite a good story. I understand the need for this investment. I just want to ensure we are on track to have the work completed before the end of the year. I ask this because my understanding is that the funds have to be drawn down and spent in 2023 to qualify for Brexit Adjustment Reserve funding.
Turning to the appeals board, I am glad the issue has been sorted out and it is going to be back up and running. Some of these problems seem to drag on a little longer than they should. The most important point, however, is that we cannot get to the stage fast enough where we have this needs-based scheme the Minister talked about. I know he is playing his part in trying to make this happen, but most people looking in probably do not understand why it takes so long. What we really need is a change to this scheme that will accommodate some common sense. I refer to a situation where a consultant or the appeals board can see an option to take an understanding approach. While not every box might have been ticked, a common-sense approach based on needs would allow for the person concerned to get through that appeal. This does not seem that complicated, yet it seems very hard to get it to this stage. The sooner it happens, the better. I understand this involves not just one Department, and this is where the difficulty probably lies, but we need to get this in place as quickly as we possibly can.
I thank the Deputy for his comments. We will arrange for some information to be provided in relation to Revenue activity on the enforcement side when it comes to coal. On the issue of Rosslare Europort, the construction work there has been under way since last month. It is estimated it will take 18 to 24 months to be completed. I acknowledge the Deputy's comments in relation to the appeals board. I am glad to see dates are now set for hearings and we can start eating into the approximately 11,000 cases.
Can spending beyond this year still count for the BAR funding?
It is for work completed up to the end of September 2024 in respect of spending incurred by the end of this year.
That is fine. I thank the Minister.
I will ask a few questions. On Brexit, as far as Revenue is concerned, have all the requirements that presented been provided for or are they in the course of being provided for now? Is the Minister satisfied everything possible has been done to ensure this is the case?
Yes. We have been working on this since 2016 and we are fully implementing the various non-tariff customs controls now. As the Leas-Chathaoirleach will be aware, many Irish businesses involved in exporting goods to Great Britain will, for the first time, experience in early 2024 the non-tariff custom controls. From the perspective of Revenue, certainly, it is fully implementing all the provisions agreed as part of the different agreements following Brexit.
Another question concerns a bugbear of mine. It is not really relevant at this stage, but I intend to pursue it again. I refer to the decision by the European institutions in recent times to sidestep, as I would see it, the authority of the member state to look after its own taxation policies and to cross-reference in this regard with state aid and competition. I know the Minister has made provisions in this regard, insofar as can be done, but is it valid to inquire as to whether this is a subtle way of bypassing the member state's involvement in and responsibility for fixing its own taxes?
Taxation decisions continue to be governed by unanimity at EU level and Ireland will always be a strong defender, certainly this Government will be, of the protection of this principle of unanimity. I think the Deputy may be referring to the corporate own resource proposals from the European Commission, which are not agreed at this point. We have made our views well known in this regard. That proposal, in particular, would have significant implications for Ireland's contribution to the EU budget because of the level of multinational activity here in Ireland. While what is proposed is not a tax on the multinationals, it is an increase in a member state's contribution to the EU budget based on the amount of profits reported in that country. It is another way, therefore, it might be argued, of opening up the issue. It is not, however, agreed. It is subject to unanimity, and our position has been consistent on this issue.
I thank the Minister. It would appear the Commissioner with responsibility in relation to competition rules, and involved in that particular issue for some time, intends to continue in this regard. Insofar as the particular outgoing or incoming Commissioner is concerned, it appears this issue will continue to be pursued along these lines to the extent that a question mark may be held overconfidence in the economy from the perspective of foreign direct investment, for example.
I also wish to inquire about the degree to which Apple is being deemed or implied to have had a special sweetheart deal with the Government. I have asked many questions about this context over the years, as did the Minister when he was in opposition. I had no reason to believe such a deal was in position. It is now being implied that there was such a deal, or at least a question mark has been raised over this. Would it now be opportune to firmly rebut this suggestion in view of the likelihood of a continuation in this vein?
At a previous meeting, I mentioned that a financier, a multimillionaire, in the company of Oxfam, toured Europe, America and this country outlining the allegation that Ireland was a tax haven. I do not think this is good for the country. I do not think it is good for the Minister's Department, of which he has the right to have full control without reference to revered investors who are multimillionaires. They have their own agenda, and the Minister knows what this is as well. I am just a bit uneasy about this situation.
I am asking the Minister to confirm that I do not need to worry.
In recent weeks, we received an opinion from the Judge Advocate General in the Apple case, that will be taken into account by the European Court of Justice, which may reach the same conclusion or a different one. The ECJ may well refer the case back to the general court or it may deal with the case and arrive at a definitive judgment. That remains to be seen. As long as the matter remains live, we cannot get into detail on it, except to reaffirm the Government's position that no state aid was given in this case and the appropriate amount of tax was charged to and paid by Apple for the years in question. We await the judgment.
I will make the overall point that Ireland is in a good place as regards corporate tax reform. We signed up to the international agreement in October 2021. This committee and the House have now legislated for the transposition of the EU minimum tax directive and that builds on a series of reforms that have been implemented under the corporate tax reform roadmap. Ireland is in a good place and has a good story to tell when it comes to playing our part in the area of international corporate tax reform. We will continue to do so. We have faithfully implemented the obligations we signed up to. It is a matter for other countries to decide on their approach. We offer certainty, predictability and stability in our corporate tax policy and that will remain the hallmark as long as this Government is in office.
I thank the Minister for assisting with our consideration of the Supplementary Estimates.