Written Answers Nos. 185-210
185. Deputy Sean Fleming asked the Minister for Finance the schemes available through his Department by way of tax relief or other measures for persons who carry out home improvement works; and if he will make a statement on the matter. [30522/16]
Amharc ar fhreagraThe Home Renovation Incentive (HRI) provides for an income tax credit for homeowners or landlords who carry out repair, renovation or improvement works on their property. The aim of the Incentive is to support tax compliant building contractors by moving activity out of the shadow economy into the legitimate economy. The Incentive was introduced in October 2013. It provides for tax relief for homeowners or landlords by way of an income tax credit at 13.5% of qualifying expenditure. Qualifying work must cost a minimum of €5,000 including VAT at 13.5% rate. The maximum qualifying cost for the purpose of the incentive is €30,000 including VAT at 13.5%. This equates to a maximum tax credit of €4,050. The tax credit is payable over the two years following the year in which the work is paid for.
The Incentive was due to end on 31 December 2016. However, I announced in last week's Budget that I am extending the Incentive for a further 2 years to end on 31 December 2018. This will allow additional time for homeowners and landlords to carry out renovation works and will also provide continued stimulus to the construction sector.
The Living City Initiative is a scheme of property tax incentives designed to regenerate both historic buildings and other buildings in specified cities. The scheme applies to certain special regeneration areas (SRAs) in the centres of Dublin, Cork, Limerick, Galway, Waterford and Kilkenny. The relief applies to both residential and commercial refurbishment and conversion work that is carried out during the qualifying period. There are 2 types of tax relief available under the Living City Initiative - an owner-occupier residential element, and a retail/commercial element. The Deputy may be aware that in this year's Budget there were a number of changes to the initiative to encourage an increase in the take-up of the scheme. The changes included:
- Removing the restriction on the maximum floor size of the qualifying property
- Removing the requirement, for the residential element of the initiative, that the property must have been previously used as a dwelling
- Changing the minimum amount of expenditure needed to qualify from 10% of the value of the property to match the minimum spend under the Home Renovation Incentive, which is €5,000
- Extending the availability of the scheme such that landlords can avail of it in respect of the renovation of rental accommodation in the special regeneration areas.
There is another (limited) tax relief available for expenditure incurred on the maintenance of significant buildings and gardens, which is provided for in Section 482 of the Taxes Consolidation Act 1997. To qualify for this relief the relevant building must be determined by the Minister for Arts, Heritage and the Gaeltacht to be of significant scientific, historical, architectural or aesthetic interest. In addition, the Revenue Commissioners must be satisfied that reasonable access to the building is afforded to the public.
186. Deputy Peter Burke asked the Minister for Finance if he will consider introducing roll over tax relief to be given to persons who are subject to land purchase orders where the proceeds are used to replenish their agricultural holdings. [30540/16]
Amharc ar fhreagraCapital gains tax (CGT) roll over relief was abolished in Budget 2003 in respect of business assets disposed of on or after 4 December 2002, which disposals included lands disposed of by virtue of compulsory purchase orders.
One result of roll-over relief was that the CGT due on an asset disposal was often never paid. While the public finances are improving, it is still the case that the yield from the various taxes, including CGT, needs to be protected.
It is also likely to be the case that where agricultural land is acquired under a compulsory purchase order, the acquiring authorities usually pay a premium over the agricultural value. The premium may well cover the tax due on the disposal and the farmer may well have received the agricultural value of the land in his or her net proceeds after the disposal. This means that farmers are likely to be able to purchase agricultural land of equivalent value to the land acquired under the compulsory purchase order.
An Agri-Taxation review was published in October 2014 in the context of Bud get 2015. It's objective was to maximise the benefits for the farming sector and the wider economy of the existing level of State support through the tax system. The Review set out a strategy for agri-taxation policy for the future and concluded that the three main policy objectives would be:
1. Increase the mobility and productive use of land
2. Assist succession
3. complement wider agricultural policies and schemes, such as supporting environmental sustainability
The Review made policy recommendations, taking into consideration the cost of the existing Agri-taxation measures that were already in existence and the need to protect the position of the public finances. Many of the Review's recommendations have been included in Budget 2015 and subsequent Budgets. However, the Review did not recommend change to the tax treatment of land disposed under a Compulsory Purchase Order (CPO).
I did, however, announce in my Budget 2016 speech the introduction of a revised CGT entrepreneur relief from 1 January 2016 under which a lower 20% rate of CGT will apply to chargeable gains arising on the disposal of an individual's qualifying assets (up to a lifetime limit of €1 million). Last week, in my Budget 2017 speech, I announced that the applicable CGT rate will be further lowered to 10%, effective from 1 January 2017. The revised CGT entrepreneur relief applies to disposals of qualifying business assets by farmers, among others.
I am aware of concerns that have been expressed regarding the lack of roll-over relief on the part of and on behalf of landowners who have been subject to CPO. However, for the reasons outlined, I have no plans to introduce CGT roll-over relief in respect of gains on land disposed of under a CPO.
187. Deputy Willie Penrose asked the Minister for Finance if he will outline in respect of the earned income tax credit which has been increased to €950 in the budget; where a person also qualifies for the PAYE tax credit, the maximum combined value of both tax credits that will be allowed to a taxpayer; and if he will make a statement on the matter. [30592/16]
Amharc ar fhreagraAs the Deputy is aware, I announced in my Budget speech that the Earned Income Tax Credit is being increased by €400, bringing it to €950.
The tax credit is available in respect of an individual's earned income other than earned income that already qualifies for the Employee (PAYE) Tax Credit.
Where an individual has income that qualifies for the Earned Income Tax Credit and also income that qualifies for the Employee (PAYE) Tax Credit, he or she may claim both credits but the aggregate of the tax credits is limited to €1,650 which is the maximum amount available for the Employee (PAYE) Tax Credit.
This is similar to the position which applies where an individual has two separate employments, and is limited to a maximum Employee (PAYE) Tax Credit of €1,650.
188. Deputy Stephen S. Donnelly asked the Minister for Finance if he will provide the details of the costing of the measure with regard to the section 110 and funds changes item within budget 2017; and if he will make a statement on the matter. [30594/16]
Amharc ar fhreagra192. Deputy Pearse Doherty asked the Minister for Finance with regard to his Department's projected yield of €50 million in 2017 from section 110 and funds changes, the portion of this expected yield that relates to section 110 changes and the portion that relates to funds changes; the details of the proposed fund changes; and if he will make a statement on the matter. [30744/16]
Amharc ar fhreagraI propose to take Questions Nos. 188 and 192 together.
In view of the proposed changes to be introduced to Section 110 TCA 1997 in the Finance Bill 2016 Revenue undertook an examination of the financial accounts of a number of Section 110 companies to determine what the potential yield from any proposed changes might be.
The figure of €50 million is largely based on the potential profits made on a sample of mortgages valued at circa €1 billion held by a number of Section 110 companies that were examined. The results of the examination were then extrapolated to a potential mortgage book population of €20 billion. The key assumption that underlies the figure is that only normal trading deductions were allowable, such as interest charged at the normal third party market rates, in calculating the taxable profits (i.e. that no deduction for Profit Participating Notes would be availed of).
As you are aware I published proposals for Section 110 TCA 1997 on the Department of Finance website last month. The amendment has been redrafted to ensure that the proposal is targeted. During the consultation phase other issues concerning property and funds arose and will be addressed in the Finance Bill.
189. Deputy Róisín Shortall asked the Minister for Finance further to box one on page C.22 of the budget book, when each of the adjustments to the fiscal space calculation became known to his Department; and the reason these were not flagged as part of the pre-budget process with the budgetary oversight committee or to Opposition Deputies well in advance of the budget. [30620/16]
Amharc ar fhreagra198. Deputy Michael McGrath asked the Minister for Finance the way in which the fiscal space for 2017 moved from expected circa €1 billion to circa €1.2 billion on budget day in view of his previous comments that the fiscal space for 2017 could not change; and if he will make a statement on the matter. [30818/16]
Amharc ar fhreagraI propose to take Questions Nos. 189 and 198 together.
The Department of Finance produces the macroeconomic and fiscal forecasts underpinning Ireland's Stability Programme Update and the annual Budget process. Forecasts of fiscal variables including available fiscal space are routinely updated in these publications.
I have outlined previously that the fiscal space in 2017 was largely fixed but was subject to certain moving parts. In aggregate, revisions caused an increase in fiscal space of some €200m or approximately ¼ of a percent of the overall general government expenditure of €76.6 billion forecast for 2017.
The fiscal space available for Budget 2017 is reconciled with the estimate published in the SES in Box One of Chapter 3 in the Economic and Fiscal Outlook in the Budget book 2017, the details of which I will revisit here.
For 2017, the reference rates and convergence margins were set by the European Commission in its Spring forecast published in May. However, the GDP deflator used is an average of the Commissions Spring and Autumn deflators. As the Commission's Autumn forecasts will not be published until after Budget 2017, this necessitates using the forecast for the deflator from the Department of Finance's Autumn forecasts published on Budget day.
My Department presented an estimate of this deflator to IFAC and the Budgetary Oversight Committee on October 4th as part of the macroeconomic forecast that was endorsed by the Irish Fiscal Council on October 6th. The Budget deflator reflecting the impact of the 2017 budgetary package reduced fiscal space by €75m. The purpose of the Budgetary Oversight Committee appearance by my officials was to discuss technical aspects of the macro economic forecasts and not to discuss the fiscal situation or policy implications arising.
Revisions to the 2015 general government expenditure estimates were provided on a confidential basis to my Department following the first transmission of this data to Eurostat by the CSO on the 29th September. This data was subsequently published by the CSO in the Government Finance Statistics on October 10th. Revisions to the 2015 outturn have resulted in an update to the Department's estimate of the 2016 and 2017 expenditure base. Notably, the estimates of Gross Fixed Capital Formation (GFCF) were revised for the period 2012 to 2015. To avoid penalising spikes in government investment in GFCF, the European Commission allows this investment to be averaged over a four year period with the result that any changes to the levels of this investment will impact on available fiscal space.
As well as data from the CSO, revenue and expenditure surveys of the Local Authorities and other general government bodies are returned as part of the budgetary process, these also included updated forecasts of GFCF expenditure in 2016 and 2017 updating further the Department's estimates of the expenditure bases used. The combined effect of these changes to the estimates of GFCF expenditure in 2016 and 2017 has increased available fiscal space in 2017 by approximately €120m.
In my answer to the Deputy's other question today, I describe in detail the changes in fiscal space referred to in Budget Box 1 as Revised Carryover. As indicated, this has two elements the first being the impact of the revisions to the Revenue Commissioners methodology regarding the calculation of first year and full year costs of potential Budget tax packages. These changes took effect from June 2016 and the Revenue Commissioners pre-budget 2017 Ready Reckoner went live on 14th July.
The second element was the impact on the cost of indexation in 2017 on the revised tax base which was confirmed following the macroeconomic forecast endorsed by the Irish Fiscal Council on October 6th. These changes combined increased fiscal space by €155m.
190. Deputy Róisín Shortall asked the Minister for Finance if he will provide a detailed breakdown of the €155 million adjustment that was made to the carryover effect of budget 2016. [30621/16]
Amharc ar fhreagra196. Deputy Pearse Doherty asked the Minister for Finance the impact the increase of €155 million will have on the State's compliance with the structural deficit target for 2016 and the expenditure benchmark for 2016 (details supplied); and if he will make a statement on the matter. [30755/16]
Amharc ar fhreagraI propose to take Questions Nos. 190 and 196 together.
At the time of the Summer Economic Statement (SES) it was estimated that there would be c. €1.0 billion in fiscal space for 2017. Amongst other things, this consisted of c. €340 million of carryover from Budget 2016 measures, of which income tax and USC accounted for approximately €292 million. In addition, it was also estimated that the non-indexation of the income tax system in 2016 would yield €300 million in 2016, with a positive carryover of approximately €100 million into 2017.
However, since the SES, the Revenue Commissioners have updated their method of estimating the first and full year costs of tax measures with effect from July 2016. This followed an analysis of the first year/full year apportionment of costs which was undertaken to ensure the estimated apportionment is as accurate as possible. Accordingly, from earlier this year, a larger proportion of the costs/yields of such measures are attributed to the first year, which results in a lower carryover cost in the second year. It should be noted that this does not change the full-year cost of a measure, only the allocation of that cost between first year and carryover costs. Therefore, as a result of Revenue's revised methodology, it is anticipated that more of the cost of the income tax and USC package from Budget 2016 is being incurred in 2016 than was previously estimated. In addition, the carryover cost from the non-indexation of the income tax system in 2016 has also been reduced.
Table 1 at time of SES illustrates the impact of the carryover effect of Budget 2016 measures and non-indexation of income tax system in 2016:
|
Description |
2016 cost/yield |
Full year cost/yield |
2017 carryover |
|
Budget 2016 Income tax and USC measures |
-€595 million |
-€887 million |
-€292 million |
|
2016 Non-indexation of income tax system |
+€300 million |
+€400 million |
+€100 million |
|
Total Net effect |
-€295 million |
-€487 million |
-€192 million
|
Table 2 Budget 2017 illustrates the impact of Revenue's revised methodology on the carryover effect of Budget 2016 measures and non-indexation of income tax system in 2016:
|
Description |
2016 cost/yield applying revised Methodology |
Full cost/yield |
revised 2017 carryover |
|
Budget 2016 Income tax and USC measures |
-€695 million |
-€887 million |
-€192 million |
|
2016 Non-indexation of income tax system |
+€330 million |
+€400 million |
+€70 million |
|
Total Net effect |
-€365 million |
-€487 million |
-€122 million |
|
Impact on Fiscal Space |
-€70 million |
- |
+ € 70 million |
Therefore, the tables above account for c. €70 million of the €155 adjustment to the carryover effect into 2017. The balance of €85 million is accounted for as follows.
At the time of SES, it was estimated that the non-indexation of income tax system in 2017 would yield €300 million in 2017 and €400 million a full year. However, applying Revenues revised methodology and taking account of the updated 2017 tax base and macroeconomic drivers, it now estimated that the non-indexation of the income tax system in 2017 would yield c. €385 million and €450 million in a full year, which accounts for the balance of €85 million in 2017.
The impact of these changes on the expenditure benchmark rule in 2016 was to increase the fiscal space used in the year by €70m as detailed in tables above. However as the Deputy will be aware, there is a significant buffer built into the calculation of Ireland's compliance with the expenditure benchmark in 2016, due to the treatment of the conversion of the AIB preference shares to ordinary shares as a capital transfer (expenditure) rather than a reinvestment of capital. This €70 million does not compromise compliance with the expenditure benchmark rule in 2016.
The impact of this €155 million on compliance with the expenditure benchmark for 2017 (as detailed in Box 1 page C.22 in the Budget 2017 book) gives an extra €155m of fiscal space, thereby explaining a significant portion of the €200 million change in fiscal space.
As regards compliance with the structural deficit target, the impact of the €155 million on the pace of improvement in the structural balance 2016 is marginal, at 0.02p percentage points of GDP. As such, it should have no material impact upon reaching the Medium Term Objective, that is, a structural deficit of -0.5 of GDP by 2018.
191. Deputy Róisín Shortall asked the Minister for Finance the uptake of the special assignee relief programme in each of the years since its inception; and the amount of revenue foregone in each of those years. [30741/16]
Amharc ar fhreagraThe Special Assignee Relief Programme (SARP) is aimed at reducing the cost to employers of assigning key individuals in their companies from abroad to take up positions in the Irish based operations of the employer. It provides relief from income tax on 30% of earnings in excess of €75,000 for the key individuals that are assigned to Ireland for a maximum period of 5 years. It was due to expire at the end of next year but in Budget 2017 I announced the extension of the program until the end of 2020 in order to provide certainty for foreign direct investment following the UK vote to leave the EU.
Detailed reports regarding SARP are published on Revenue's webpage located at http://www.revenue.ie/en/about/research/statistical-reports.html.
These reports provide information on the conditions, eligibility and the calculation of the relief. Furthermore there are statistics covering both the uptake of the relief and the cost to the Exchequer from 2012 to 2014, the latest year for which figures are available. Revenue will publish updates to this information in due course.
193. Deputy Pearse Doherty asked the Minister for Finance the date he will publish the finance Bill. [30745/16]
Amharc ar fhreagraIt is planned to publish the finance Bill 2016 on 20th October.
194. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the assertion from the Irish Fiscal Advisory Council that the State will miss its key borrowing target, the structural balance in 2017, as a result of the €1.3 billion budget 2017 package, as opposed to the €1 billion package mooted in September 2016; and if he will make a statement on the matter. [30753/16]
Amharc ar fhreagraThe Deputy should be aware that the correct comparator with the nominal Budget package of €1.3 billion is the €1.19 billion which was set out in the Summer Economic Statement. This was based on fiscal space of €1 billion, but the effect of capital smoothing meant that actual capital spend of €250m only absorbed €60 million in terms of available fiscal space. Budget 2017 introduced a package of €1.3 billion which uses fiscal space of €1.2 billion.
Based on the Commission's matrix specifying the required annual fiscal adjustment towards Medium Term Budgetary Objective (MTO), the required adjustment in our structural budget balance in 2017 was fixed at 0.6 percentage points. This requirement was set reflecting both our public debt sustainability and the cyclical position of Ireland's economy. The requirement was frozen based on Commission outlook for Ireland as of Spring 2016. The projected pace of structural correction of 0.8 percentage points in 2017 as set out in Budget 2017 exceeds this requirement.
195. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the assertion from the Irish Fiscal Advisory Council that the State will breach its overspending limit, the expenditure benchmark, a result of the €1.3 billion budget 2017 package, as opposed to the €1 billion package mooted in September 2016; and if he will make a statement on the matter. [30754/16]
Amharc ar fhreagraThe Deputy refers to the change in fiscal package between September and the Budget. To be clear, the €1 billion in fiscal space outlined in the context of the Summer Economic Statement (SES) in June 2016 was consistent with full compliance with the expenditure benchmark in 2017. Since then, a number of changes including a revision in the composition of expenditure data from the CSO and a revision in the carryover cost of implementing the 2016 tax package, have meant the permitted fiscal space in 2017 is now some €200m higher than previously estimated. An increase of 0.3 per cent relative to a permitted expenditure ceiling of €69.5 billion should however be seen as modest.
Whilst the increase in permitted fiscal space relative to the SES is measured at €200m, the resulting 2017 fiscal package of €1.3 billion is just €100m higher than communicated in the context of SES. This difference arises due to the 2016 capital package absorbing c. €50m and a reallocation of capital into current spending in 2017 absorbing a further c. €50m.
In contrast to this increase in permitted space, the excess over the permitted spending ceiling alluded to by the Fiscal Council for 2017 and set out in Budget Table A7 relates solely to the €200m increase in EU budget contribution arising due to the July revisions to Ireland's national accounts data for 2015. Net of this higher contribution, Budget projections confirm that the use of this €1.3 billion package in 2017 (i.e. spending the announced €900m in expenditure measures and factoring in the net cost of funding the €300m taxation package), is compliant with the provisions of the expenditure benchmark in 2017.
Even leaving this aside, my Department has projected a 0.8 percentage point improvement in the structural balance in 2017, again in compliance with our obligations.
197. Deputy John McGuinness asked the Minister for Finance the reason the lower rate of VAT is not being applied to the hire of suits, dresses, costumes and so on, as the hire is classified as a service; and if he will make a statement on the matter. [30811/16]
Amharc ar fhreagraThe VAT rating of goods and services is subject to the requirements of the EU VAT Directive with which Irish VAT law must comply. The Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless there is a provision in the Directive that permits the good or service to apply at a reduced rate, the zero rate or to be exempt. As the VAT Directive does not provide for such treatment to apply to hiring suits, dresses or costumes, these services apply at the standard VAT rate.
199. Deputy Róisín Shortall asked the Minister for Finance his estimate of the cost of introducing refundable tax credits. [30862/16]
Amharc ar fhreagraBy a "refundable tax credit", I assume the Deputy is referring to a process whereby, should an income earner have insufficient income to use all of his/her tax credits, the unused portion of the credit would be paid to the income earner by means of a cash transfer.
I am advised by Revenue that they have not undertaken any exercise to estimate a projected cost of refundable tax credits to the Exchequer or the administrative cost of establishing the necessary systems to facilitate the refund of tax credits.
Any such exercise in estimation would be highly complex as it would involve assumptions about the manner in which such a system would operate, its possible effects on individuals not currently in the tax net and how such a system might interact with any social protection payments. In the absence of a fully designed scheme of refundable tax credits that addresses all of the relevant issues outlined, an estimated cost of refunding of credits referred to by the Deputy is not currently available.
The Deputy may also be aware that this matter was looked at in some detail by the Working Group established under the Programme for Prosperity and Fairness to examine the role which refundable tax credits can play in the tax and welfare system. The Group was chaired by the Department of Finance and included representatives from ICTU, IBEC, the various farming organisations, the Community and Voluntary Pillar, relevant Government Departments and the Office of the Revenue Commissioners.
The Working Group found that there were significant disadvantages with such a system. These included the potential negative impacts on the incentive to work, labour supply, labour force participation and overall productivity and output. The Commission on Taxation in its 2009 report also did not recommend the introduction of refundable tax credits.
In Budget 2017 I have continued the process of reducing the income tax burden for low and middle income earners commenced in Budgets 2015 and 2016. These changes are designed to ensure that work pays and to help individuals to transition from unemployment back into jobs and indeed to remove potential blockages that may be deterring part-time workers from taking on additional hours of employment. I do not believe refundable tax credits will assist us in this regard.
200. Deputy Michael McGrath asked the Minister for Finance if he has given consideration to a suggestion in terms of pension access (details supplied); and if he will make a statement on the matter. [30880/16]
Amharc ar fhreagraThe State encourages individuals to save for their retirement by providing generous tax incentives for them to invest some of their earned income in Revenue approved pension saving arrangements. The incentives include exemptions from income tax on pension contributions up to certain limits and exemption from various taxes in respect of pension fund growth. Benefits drawn down at retirement are, in turn, subject to tax at the individual's marginal tax rate, with the exception of the permissible tax-free retirement lump sum.
The details supplied with the question would suggest that the issue being raised relates to small self-administered pension schemes (SSASs) and the capacity of such schemes to invest in investment properties associated with the scheme member.
I am advised by Revenue that SSASs are a particular type of occupational pension scheme in respect of which special requirements apply in relation to their approval, operation and supervision. The reason for these requirements is to ensure that such schemes are established for the bona fide purpose of providing retirement benefits. The concern in this regard reflects the fact that, as such schemes are generally one member schemes, that member typically being a proprietary director, there is potential for a conflict of interest to arise. This is because the individual is not only the sole member of the scheme but is also normally the owner of the company sponsoring the scheme and a trustee of the scheme.
While property investment is permitted by such funds, purchases and disposals must in all cases be at arm's length from the scheme, the member, the sponsoring company, its directors and any associated companies.
The proposal being put forward in the question would effectively require these property related restrictions to be relaxed, so that a member of a small self-administered pension scheme could sell an investment property to his or her scheme or to use part of the scheme assets to invest in property associated with the member.
While I can appreciate the reasoning behind this proposal, I think it is important not to lose sight of the purpose of supplementary pension saving and the generous tax incentives, already mentioned, that the State continues to provide to encourage it. The sole purpose of pension savings is to provide relevant benefits to the scheme member at the point of retirement or, indeed, earlier in the event of retirement on ill-health grounds. The investment opportunities envisaged under the proposal might not represent a prudent investment in many cases and could put the availability of those benefits when needed at undue risk. In addition, investment in a single asset class, as recent history would demonstrate, is rarely if ever a prudent course of action.
While I appreciate that the proposal is well intentioned, it would seem to me to be difficult, if the rules governing investment by SSASs were relaxed in the manner suggested, to resist calls for a broader relaxation to allow, for example, assets such as family or holiday homes to be acquired by a pension scheme or to permit investment in the employing company to stave off short term cash flow difficulties. In other words, it could be a first step towards a dismantling of the very rules that are in place to protect an individual's pension savings.
For all these reasons I would not be in favour of this proposal.
201. Deputy Michael McGrath asked the Minister for Finance the reason full-year yield and cost figures were not included in the summary of 2017 budget measures and policy changes; if he will provide these figures, for each item, as has been the case in previous years; and if he will make a statement on the matter. [30883/16]
Amharc ar fhreagraThe 2017 figures were used in calculating the available fiscal space. For this reason, and in order to present the data in a concise manner, yield and cost figures specifically for 2017 included in the Summary Measures.
The 2017 Yield/Cost and the Full Year Yield/Cost are:
Figures are round to nearest million
* No impact on Fiscal Space
# Full Year Cost not realised until 2019
^ For Agri Measures/Decommissioning of Fishing Vessels/Fishers Tax Credit, €15m already provided in the tax base.
|
Measure
|
Yield/Cost 2017 |
Yield/Cost Full Year |
|
USC Incomes of €13,000 or less are exempt. Otherwise, - €0 to €12,012 @ 0.5% - €12,013 to €18,772 @ 2.5% - €18,773 to €70,044 @ 5% - €70,045 to €100,000 @ 8% - PAYE income in excess of €100,000 @ 8% - Self-employed income in excess of €100,000 @ 11% Medical card holders and individuals aged 70 years and over whose aggregate income does not exceed €60,000 will now pay a maximum USC rate of 2.5%. |
-€335m |
-€390m |
|
Income Tax An increase in the Home Carer Tax Credit from €1,000 to €1,100 An increase in the Earned Income Credit from €550 to €950 Interest Relief Rented Residential Property The deduction available for qualifying interest payments on monies borrowed to purchase, improve or repair residential rental property is being increased from 75% to 100%, over the next 5 years. The deduction will be increased by 5 percentage points each year, with the first increase from 75% to 80% to take effect from 1 January 2017. This measure will apply to both new and existing mortgages. The full-year cost of €70 million, being the cost for full restoration to 100% will be reached in 2022. |
-€7m
-€33m
-€8m |
-€8m -€58m
-€70m |
|
Excise Duties Tobacco Products Tax The excise duty on a packet of 20 cigarettes is being increased by 50 cents (including VAT) with a pro-rata increase on the other tobacco products, with effect from midnight on 11 October 2016. Extension of qualifying limit for excise duty relief for microbreweries The special relief reducing the standard rate of Alcohol Products Tax by 50% on beers produced in microbreweries which produce not more than 30,000 hectolitres per annum is being extended to apply to microbreweries which produce not more than 40,000 hectolitres per annum. Relief is still available on the first 30,000 hectolitres of beer produced. Vehicle Registration Tax (VRT) The VRT reliefs available for the purchase of hybrid electric vehicles and plug-in hybrid electric vehicles, are being extended to 31 December 2018. Electric vehicles, and electric motorcycles are being extended to 31 December 2021. Carbon Tax The fuel inputs used to create high efficiency electricity in combined heat and power are being fully exempted from carbon tax. |
€65m
-
- €1m
|
€65m
-
- -€2m |
|
Other Income Tax Help to Buy An income tax rebate incentive is being introduced to assist first time buyers of new homes to fund the deposit required under the Central Bank macro-prudential rules. It will consist of a rebate of income tax paid over the previous four years up to 5% of the purchase price of up to €400,000. Where new homes are valued between €400,000 and €600,000 the maximum relief (i.e. €20,000) will continue to be available. The house must be a new build and applicants must take out a mortgage of at least 80% of the purchase price. This scheme will run until the end of 2019. Rent a Room The ceiling for exemption from income tax for income received from the letting of a room or rooms in a person s principal private residence is being increased from €12,000 to €14,000 for 2017 and subsequent years. Living City Initiative The Living City Initiative is being amended to encourage an increase in the take-up of the scheme. This involves extending the availability of the scheme to landlords, while for residential applicants it removes the restriction on the maximum floor size of the property, removes the requirement that the property must have been previously used as a dwelling, and reduces the minimum amount of expenditure needed to qualify. Home Renovation Incentive # The HRI is being extended until 31 December 2018. Foreign Earnings Deduction * FED is being extended until the end of 2020 and qualifying countries are being extended to include Colombia and Pakistan. The minimum number of days for travel is being reduced to 30 per annum. Special Assignee Relief Programme * SARP is being extended for a further 3 years until the end of 2020. Start Your Own Business Relief The Start Your Own Business tax relief is being extended for 2 years until the end of 2018. Fishers Tax Credit^ A new tax credit is being announced for fishers to assist the viability of the fishing sector. Fishers who have fished for wild fish or wild shellfish for at least 80 days in a tax year can claim an income tax credit of €1,270 per annum. Decommissioning of Fishing Vessels^ |
-€50m
-€1m
-€1m
- -
-
-€4m
-€4m -€2m |
-€40m
-€1m
-€3m
-€38m
-€3m
-€8m
-€10m
-€6m -€2m |
|
Capital Gains Tax Revised CGT entrepreneur relief: A reduced CGT rate of 10% will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in qualifying chargeable gains. CGT Relief for Raised Bogs |
-€13m
-€2m |
-€14m
- |
|
Capital Acquisitions Tax Changes to tax-free thresholds: The Group A lifetime tax-free threshold applying to gifts and inheritances from parents to children is being raised from €280,000 to €310,000, The Group B lifetime tax-free threshold applying to gifts and inheritances made to parents, siblings, nieces, nephews or grandchildren is being raised from €30,150 to €32,500. The Group C lifetime tax-free threshold applying to gifts and inheritances made to all others (except spouses and civil partners who are exempt) is being raised from €15,075 to €16,250. |
-€22m |
-€25m
|
|
Agri Measures^ Increase in the Farmer s Flat-Rate Addition from 5.2% to 5.4% The farmers flat-rate addition will be increased from 5.2% to 5.4% with effect from 1 January 2017. The flat-rate scheme compensates unregistered farmers for VAT incurred on their farming inputs. The flat-rate addition is reviewed annually in accordance with the EU VAT Directive and the increase to 5.4% in 2017 continues to achieve full compensation for farmers.
Accelerated Capital Allowances for energy efficient equipment The scheme of accelerated capital allowances for energy efficient equipment is being made available to sole traders and non-corporates. Income Averaging Step Out The Income Averaging regime allows a farmer s taxable profit to be averaged out over a 5-year period. This is being amended to allow an opt out in a single year of unexpectedly poor income, which may be availed of for the 2016 tax year. Farm Restructuring Relief |
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DIRT Reduced rate of Deposit Interest Retention Tax (DIRT): The rate of DIRT will be decreased by 2% each year for the next 4 years until it reaches 33%. The full year cost of €36 million will be reached in 2020. |
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Compliance Measures Section 110 and Funds Changes Draft amendments to section 110 will be included in the Finance Bill to address these unintended uses of the section. Further amendments will address other issues arising in relation to Funds and property.
Tackling offshore tax evasion A comprehensive programme of targeted compliance interventions against those engaged in offshore tax evasion. This programme will be underpinned by applying advanced analytics techniques to the range of new data sources available through FATCA, EU and OECD exchange of information initiatives and supported by new legislation designed to encourage early disclosures of liabilities in relation to offshore accounts or assets by i) Denying the opportunity to make a qualifying disclosure in this area after 1/5/2017 and ii) Introducing a new strict liability offence for failure to return details of offshore accounts or other assets. Increase resource to confront non-compliance Increasing Revenue staff resources by 50 (full time equivalent) on audit and investigation activities as well as enhancing ICT systems capacity for data matching and data analytics will lead to a direct increase in tax and duty yield from compliance interventions. |
€50m €30m
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€35m
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€50m |
202. Deputy Michael McGrath asked the Minister for Finance if his Department has a detailed plan on the way to achieve the reduction of the debt to GDP ratio to 45% by the mid-2020s as outlined in budget 2017; if he will provide specific details of the growth and other projections underpinning this objective; and if he will make a statement on the matter. [30884/16]
Amharc ar fhreagraIn last week's budget I announced that the Government has decided to set a new domestic target debt to GDP ratio of 45 per cent to be reached by the mid-2020s or thereafter depending on economic growth. This will allow future Governments to not only apply the rainy day fund but, in the event of future shocks, the capacity to borrow to mitigate the impact of such shocks on the lives of our people. This target goes beyond the requirements of the Stability and Growth Pact, and reflects the fact that as a small and very open economy, a shock in any part of the world affects us. The rationale for this target is:
1. That GDP measures can be quite volatile in Ireland as indicated by the 26% growth rate for 2015 and
2. The need to build up a safety buffer to ensure continuing market access.
The growth outlook underlying this target is as set out up to 2021 in the Fiscal and Economic Outlook published with the Budget last week, and after that an assumed average nominal GDP growth rate of 4.5% out to 2026, made up of real growth of 2.5% and a price increase of 2%. The debt projections make the technical assumption that the 2021 primary balance of 2.6% of GDP is maintained thereafter, with the average implicit interest rate held constant at it 2021 value. This projected timing does not factor in proceeds from the sale of banking assets, which will be used to lower debt.
In order to achieve this target, it is critical that we reach our Medium Term Budgetary Objective or MTO defined as a balanced budget in structural terms - in 2018 - and maintain it thereafter and that is what the Government intends to do.
203. Deputy Michael McGrath asked the Minister for Finance his plans to introduce for SMEs generally a loan scheme similar to the €150 million loan fund for the agri-sector announced as part of budget 2017; the reasons for his position; and if he will make a statement on the matter. [30885/16]
Amharc ar fhreagraThe Cash Flow Support Fund for Farmers is a specific, time bound, initiative that has been made available to the agrisector because of market difficulties currently being experienced and to preserve the growth potential of this sector.
It is supported by €11 million of EU Exceptional Adjustment Aid and further funding from the Department of Agriculture, Food and the Marine, under a derogation from state aid regulations that ordinarily apply to the agriculture sector. This measure will enable farmers to improve the management of their cash flow and reduce the cost of their short-term borrowings so they can continue to trade during the current period of commodity price volatility.
The government is committed to supporting the wider financing needs of SMEs, in all sectors of the economy, and ensuring that there is an adequate supply of affordable and appropriate credit to meet their needs. The Strategic Banking Corporation of Ireland (SBCI) was established to increase the availability of credit to SMEs at a lower cost and on more flexible terms. In this regard, it is encouraging to note that to the end of June 2016, the SBCI has lent €347 million to 8,619 SMEs. On average, the SBCI provides a discount of circa 1.5% on the market interest rate to SMEs.
The SBCI continues to have significant lending capacity; it has funding agreements in place with the European Investment Bank, KfW and the NTMA and has a current funding capacity of over €1 billion to enable it to make low cost loans available to SMEs across all qualifying sectors.
The most recent Department of Finance SME Credit Demand Survey sought the reasons why businesses did not seek credit and the results showed that 84% of respondents who had not applied for credit stated that they did not seek credit because they did not need it. Only a very small minority of respondents, 1%, stated that they did not seek credit because it was too expensive.
The deputy should note that this particular agriculture measure is only possible due to emergency EU funding and it relates to issues that are specific to the agri-sector at present. Given the Government measures already in place to support the wider provision of low cost financing to SMEs and the specific EU assistance available for this agriculture support, there are no plans currently to extend a similar loan scheme to SMEs generally.
204. Deputy Michael McGrath asked the Minister for Finance if he will provide details of the gain for the Exchequer in 2017 through the non-indexation of the taxation system; and if he will make a statement on the matter. [30886/16]
Amharc ar fhreagraAs part of the Budget 2017 preparation it was estimated that the yield for the Exchequer from non-indexation of the income tax system in 2017 would be in region of c. €385 million in a first year and €450 million on a full year basis. This would imply a carryover of c. €65 million into 2018 and likewise the estimated carryover into 2017 from non-indexation of the income tax system in 2016 is similar. It is important to point out that the calculation of non-indexation in 2017 of the income tax system was prepared on the following technical assumptions:
1. The Revenue Commissioners Pre-Budget 2017 Income Tax ready reckoner.
2. The projected increase in non-agriculture wages in 2017.
205. Deputy Michael McGrath asked the Minister for Finance his plans to explore the possibility of establishing a national hedging strategy, involving the expertise of the NTMA, which may be able to give practical assistance to Irish SMEs dependent on the UK export market which are currently suffering from the fall in sterling; and if he will make a statement on the matter. [30887/16]
Amharc ar fhreagraThe UK referendum on EU membership has led to significant fluctuations in the value of Sterling against the euro and this presents challenges for Irish SMEs that export to the UK.
These challenges make the current range of Government supports for the provision of credit even more vital as loans made to SMEs, on the basis of viable business plans, will give them time to diversify into other markets and reduce their exposure to the UK.
It is likely that the recent exchange rate movements may signal a longer term, rather than cyclical, change in the value of Sterling. While hedging can provide some measure of relief and provide SMEs with time to adapt to this change, it is not possible to fully mitigate the long-term impact of currency devaluation through hedging.
State backed, low cost credit can assist SMEs to restructure their cost bases and re-price their products and services so they can continue trading with the UK in the weaker Sterling environment. In this context, it is encouraging to note that SMEs can access lower cost, flexible finance from the Strategic Banking Corporation of Ireland (SBCI). To the end of June 2016, the SBCI has lent €347 million to 8,619 SMEs.
It would not be economically or fiscally sustainable for the State to subsidise an artificially set exchange rate. Indeed, EU State Aid Regulations prohibit countries from directly subsidising exchange rates and hedging products. However, it is important to note that there are multiple financial providers active in the Irish market that can provide a comprehensive and competitive range of hedging and foreign exchange products to SMEs who require them.
The Government will continue to monitor fluctuations in the exchange rate and ensure that the wide range of State supports currently available are tailored to ensure that they provide effective support to SMEs affected by challenges arising from the UK referendum on membership of the European Union.
206. Deputy Michael McGrath asked the Minister for Finance the number of first-time buyers his Department expects to avail of the help to buy scheme, announced in the budget, in 2016, 2017 and 2018; if he is putting any cap on the maximum cost to the Exchequer in respect of the scheme; and if he will make a statement on the matter. [30888/16]
Amharc ar fhreagraAs the Deputy will be aware, the "Help to Buy" initiative announced in the Budget, will provide an income tax rebate to first time buyers to assist them in getting the deposit for their first home, as required under the Central Bank's macro-prudential mortgage rules.
There is no cap on the potential cost to the Exchequer of this scheme. As the initiative is demand-led, it is not possible to forecast the numbers of first-time buyers that will choose to avail of it on an annual basis. However, initial forecasts of the potential costs by my Department for the coming years, as outlined in Budget 2017, are based on figures in relation to the number of new homes built in recent years and the proportion of which are purchased by first-time buyers.
207. Deputy Michael McGrath asked the Minister for Finance the expected outcome if a person availing of the help to buy scheme for first-time buyers announced in the budget does not live in the property for five years; and if he will make a statement on the matter. [30889/16]
Amharc ar fhreagraAs the Deputy will be aware, every tax relief has conditions that must be met in order for eligibility to be established. Under the "Help to Buy" initiative, which is aimed at helping first-time buyers to purchase a newly built principal private residence, if an individual has been found to no longer meet certain conditions under the scheme, such as occupying the house, they may need to refund a portion of the tax rebate that they have received. The full details of the occupancy requirement and any potential clawback of the relief will be set out in the Finance Bill.
208. Deputy Willie Penrose asked the Minister for Finance if, in respect of the €20,000 grant for first-time buyers outlined in budget 2017, it will be applied in respect of a house which was commenced but clearly not finished as it just constitutes a shell, with no septic tank installed or electricity connection; and if same would be classified as a new build whereby the young persons intending to purchase same completed the shell to a satisfactory habitable standard (details supplied); and if he will make a statement on the matter. [30905/16]
Amharc ar fhreagraIn Budget 2017, I announced a "Help to Buy" initiative which will provide an income tax rebate to first time buyers to assist them in getting the deposit for their first home, as required under the Central Bank's macro-prudential mortgage rules. The full definition of what constitutes a new build property, as well as the conditions around self-builds that will be eligible under the initiative, will be outlined in the Finance Bill.
209. Deputy Pearse Doherty asked the Minister for Finance the groups, persons or political representatives he has met in the context of planning budget 2017 and the finance Bill; and if he will make a statement on the matter. [30925/16]
Amharc ar fhreagra210. Deputy Pearse Doherty asked the Minister for Finance the groups, persons or political representatives officials from his Department have met in the context of planning budget 2017 and the finance Bill; and if he will make a statement on the matter. [30926/16]
Amharc ar fhreagraI propose to take Questions Nos. 209 and 210 together.
The Deputy will appreciate that preparation for Budget 2017 and the Finance Bill is a complex matter and it would be impractical to provide a definitive list of every single such meeting that may have taken place.
However, I can advise him that in advance of Budget 2017, I met, along with the Minister for Public Expenditure and Reform, and as I usually do, a number of representative organisations. These were the CIF, IBEC, ICMSA, ICTU, IFA and the Community and Voluntary Pillar. The Pillar, as the Deputy will be aware, comprises seventeen separate organisations. In addition, I met with other organisations including the American Chamber of Commerce, the Drinks Industry Group of Ireland, Newsmedia and the Vintners' Federation of Ireland and with a range of public representatives including Deputies Michael McGrath and Stephen Donnelly. As you will be aware Deputy, officials also engaged with you in the context of the Finance Bill and I attended a number of Fine Gael Parliamentary Party meetings, where the Budget was discussed.
I also met with senior Revenue officials.
I am advised that among the many groups met by my officials relating to Budget 2017 and the Finance Bill were:
- AirBnB
- Alcohol Action Ireland
- DIGI
- IBEC
- Irish Cancer Society
- ICOS
- Irish Stock Exchange
- IFA
- Irish Heart Foundation
- ITMAC
- Linked Finance
- NOFFLA
- SIMI
- Social Justice Ireland.
My officials also met with their colleagues in other Government Departments and agencies. These would have included meetings with Revenue, the Department of Jobs, Enterprise and Innovation and Enterprise Ireland.
Specifically in relation to consultations on amendments to section 110 of the Taxes Consolidation Act 1997 and funds legislation, officials from my Department have met with a number of relevant stakeholders, including representatives from the Irish Debts and Securities Association, the Irish Funds Industry Association and from companies involved in these sectors.
The Deputy should be aware that my officials and I meet with a range of organisations and individuals on a regular basis and it is often the case that the issue of an upcoming Budget or Finance Bill arises in the course of such discussions.
I would note also that in the run-up to Budget 2016 and the Finance Bill I have received to date more than 400 submissions from a wide variety of groups, representative organisations and individuals. All such submissions received are recorded and distributed as appropriate, both in my Department and in the Department of Public Expenditure and Reform, so that their content may be considered by the relevant officials in the context of Budget and Finance Bill preparation.
