Written Answers Nos. 161-174
162. Deputy Jim O'Callaghan asked the Minister for Finance the impact that the increase in interest rates will have on Government spending over the next two years; and if he will make a statement on the matter. [31826/22]
Amharc ar fhreagraIreland has benefitted over the last several years from very accommodative monetary policy. This allowed the State to borrow at historically low interest rates during the pandemic to fund the necessary fiscal response. Given the current inflationary environment, this era of monetary policy is now coming to an end: in short, interest rates are rising and it will be more expensive to borrow in the future.
Given the relatively long average maturity of Irish debt, the impact of increased interest rates will not be fully felt in the short-run. As a result, we have the opportunity to mitigate the risk by acting now to restore the public finances to a sustainable path.
Continuing to maintain elevated levels of public expenditure through borrowing will increasingly leave us exposed to future economic shocks. To address this, Government set out its medium-term budgetary strategy in the Summer Economic Statement last year. The strategy is based around an expenditure rule, whereby core expenditure growth will be kept under control through fixed ceilings linked to the trend growth rate of the economy.
Of course, this strategy was framed in a very different inflationary environment than today. This year’s Summer Economic Statement, to be published in the coming weeks, will update the parameters for discussions around Budget 2023 and will set out the budgetary stance for next year.
163. Deputy Michael Fitzmaurice asked the Minister for Finance if he will raise the capital acquisitions thresholds between aunt and uncles to nieces and nephew; and if he will make a statement on the matter. [31930/22]
Amharc ar fhreagraAs the Deputy is aware, for Capital Acquisitions Tax (CAT) purposes, the relationship between the person giving a gift or inheritance (i.e. the disponer) and the person who receives it (i.e. the beneficiary) determines the maximum amount, known as the “Group threshold”, below which CAT does not arise.
The Group A threshold (currently €335,000) applies, inter alia, where the beneficiary is a child (including adopted child, stepchild and certain foster children) of the disponer. The Group B threshold (currently €32,500) applies where the beneficiary is a brother, sister, nephew, niece or lineal ancestor or lineal descendant such as a grandchild of the disponer. The Group C threshold (currently €16,250) applies in all other cases.
Any prior gift or inheritance received by a beneficiary since 5 December 1991 from within the same Group threshold is aggregated for the purposes of determining whether any tax is payable on a benefit. Where a person receives gifts or inheritances that are in excess of his or her relevant tax-free threshold, CAT at a rate of 33% applies on the excess benefit.
Accordingly, where a person receives a gift or inheritance from his or her aunt or uncle, the Group B threshold of €32,500 will apply. CAT will be payable by the person at a rate of 33% to the extent that the benefit received, when aggregated with any prior gift or inheritance received since 5 December 1991, exceeds this threshold.
Nieces or nephews of the disponer may qualify for favourite niece or favourite nephew relief in respect of gifts or inheritances of business assets. The relief allows a niece or nephew who qualifies for the relief to avail of the Group A threshold. Qualifying nieces or nephews are those who have worked substantially on a full-time basis for a period of five years prior to the gift or inheritance being given in carrying on, or assisting in the carrying on, the trade, business or profession, of the disponer.
For the nephew or niece to be deemed to be working substantially on a full-time basis in the business he or she must work:
- more than 24 hours per week at the place where the business, trade or profession is carried on; or
- more than 15 hours per week at the place where the business, trade or profession is carried on exclusively by the disponer, any spouse or civil partner of the disponer and the nephew or niece.
The options available for providing increases to CAT thresholds are considered in the context of available resources as part of the annual budgetary process and like all matters need to be balanced against competing demands. At the moment, I do not believe that a compelling case can be made for increasing the CAT Group threshold that applies between aunt and uncles to nieces and nephew.
164. Deputy Réada Cronin asked the Minister for Finance if her Department will examine the process by which car registrations can be purchased without applicable proof of car ownership; and if he will make a statement on the matter. [31961/22]
Amharc ar fhreagraSubject to certain exceptions, all vehicles used in the State are required by law to be registered here. I am advised by the Revenue Commissioners that vehicle registrations cannot be processed without satisfactory proof of ownership. Requiring certain records of ownership, such as the vehicle registration certificate as part of the registration process helps to: prevent the registration of vehicles that have been stolen or previously written-off for insurance purposes; ensure the correct categorisation and history of vehicles; and verify a vehicle’s point of origin for taxation purposes.
In the case of new vehicles, applications for registration are usually made by motor retailers who are familiar with the registration process, and queries about the vehicle ownership documents seldom arise. In the case of used vehicles that need to be registered – typically because they have been imported from outside the State – both national and EU legislation require that the previous registration certificate be provided in order to process the registration.
Revenue’s website sets out Information about the various documents and proofs that need to be provided in order to register a vehicle. Recognising that most used vehicle imports which are presented for registration have been sourced in the UK, the website includes details about how to register such vehicles, including the particulars of the UK vehicle documentation that needs to be provided.
Finally, if the Deputy is aware of any potential cases of vehicle registration without appropriate proof of ownership, she should bring the information to Revenue’s attention so that it can be investigated.
165. Deputy Eoin Ó Broin asked the Minister for Finance the steps that he has taken to date on ensuring a contribution from relevant industries to the funding for dealing with defective block and or future defective building remediation; if he will provide a list of all meetings to date; the dates when these meetings occurred; if he will provide a report from the meetings; and the plans on the issue of industry contributions at this time. [32021/22]
Amharc ar fhreagraAs the Deputy will be aware, it is the Government’s firm intention to find appropriate solutions for those ordinary home-owners who have been affected by the defective concrete blocks issue.
The Programme for Government reflects this commitment.
That commitment is further reflected in a Government decision taken on 30 November 2021 regarding the Defective Concrete Block Grant Scheme, which agreed a number of actions to help address the defective blocks issue. One of those proposed actions was that a levy on the construction sector was to be put in place to raise in the region of €80m a year, and it is that levy to which this question refers.
My officials, with the assistance of colleagues in other Departments and agencies, as well as from Revenue, have been working on identifying and evaluating a range of options in regards to such a levy. Once this work is further advanced it may be necessary to seek the views of relevant stakeholders, before I will be in a position to make any final decision on the proposed levy.
As work on this matter is an ongoing process, involving regular, sometimes daily, communications and meetings of all types, (i.e. not only formal meetings), and at all levels, I cannot provide the breakdown sought by the Deputy.
Nor, given the need for this policy development work to progress in a confidential manner, can I provide any indication of the progress or direction on this matter to date.
I can however confirm that I remain confident that I will be in a position to update the Dáil on how this matter has progressed at the time of Budget 2023/Finance Bill 2022.
Separately, and in line with a different Programme for Government commitment, the Minister for Housing, Heritage and Local Government, Deputy Darragh O’Brien established a working group to examine defects in housing. This working group has been meeting regularly since March 2021. The group’s terms of reference are focused on fire safety, structural safety and water ingress defects in purpose built apartment buildings, including duplexes, constructed between 1991 and 2013. The Minister
The Minister for Housing, Heritage and Local Government expects to receive the report of the working group in the coming months and will give full consideration to its contents at that time.
166. Deputy Cormac Devlin asked the Minister for Finance the number of lifetime loans that have been issued to older persons over the past five years in tabular form; and if he will make a statement on the matter. [32094/22]
Amharc ar fhreagraLifetime loans are regarded as a niche product, provided by regulated entities, usually to those aged 60 years and over. As a product offered by regulated financial service providers, the competent authority in Ireland is the Central Bank of Ireland. The Central Bank has informed me that it does not publish figures on lifetime loans.
However, if a regulated entity wishes to engage in the provision of lifetime mortgages or home reversion schemes then, in addition to the requirements of the consumer protection framework that apply to the provision of mortgages generally, the Central Bank via Consumer Protection Code 2012 has imposed a number of specific requirements relating to lifetime mortgages and home reversion agreements.
In particular it requires that, prior to providing a lifetime mortgage or a home reversion agreement to a personal consumer, a regulated entity must ensure that the personal consumer is made aware of the importance of seeking independent legal advice regarding the proposed transaction.
167. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter (details supplied) regarding stamp duty; and if he will make a statement on the matter. [32153/22]
Amharc ar fhreagraStamp duty is chargeable on the transfer of residential property such as apartments and houses at the rate of 1% where the consideration or market value does not exceed €1 million. Where the consideration or market value exceeds €1 million, stamp duty is chargeable at 1% on the first €1 million and 2% on the balance. Stamp duty is chargeable on the transfer of non-residential property (including agricultural land) at the rate of 7.5%.
I am advised by Revenue that there is no stamp duty chargeable on the inheritance of any property, regardless of who the beneficiary is. However, where a person transfers property to a child, for example by way of a gift, stamp duty will be chargeable on the market value of the property transferred. There are no stamp duty exemptions or reliefs in relation to transfers of residential property from a parent to a child. However, consanguinity relief may be available in relation to transfers of agricultural land.
Consanguinity relief provides for a 1% rate of stamp duty to be applied where a transfer of agricultural land (by sale, purchase, exchange, or gift) is made between certain related persons, provided certain conditions are met. In the absence of the relief, the non-residential rate of 7.5% would apply. The relevant relationships for the purposes of this relief are:
- Lineal descendent (child, step-child, grandchild etc.);
- Parent, step-parent and grandparent;
- Husband, wife and civil partners;
- Brother, sister, step-brother and step-sister;
- Aunt and uncle; and
- Nephew and niece.
Section 61 of the Adoption Act 2010 provides that, for the purposes of stamp duty chargeable on a conveyance or transfer of land, an adopted person will be regarded as the child of the adopter or adopters.
Furthermore, section 1 of the Stamp Duties Consolidation Act 1999 extends the definition of child to individuals who have been in long-term fostering arrangements. Specifically, it provides that a "child" includes a person who resided with, was under the care of, and was maintained at the expense of the transferor (or lessor) for a period of 5 years before reaching the age of 18.
Accordingly, adopted children and certain fostered children may qualify for consanguinity relief, in the same way as biological children do.
Further information in relation to consanguinity relief is available on the Revenue website at www.revenue.ie/en/tax-professionals/tdm/stamp-duty/stamp-duty-manual/schedules/schedule1-to-SDCA-1999.pdf.
Prior to Finance Act 2011, consanguinity relief was also available in relation to the sale or gift of residential property to related persons. However, I am advised by Revenue that consanguinity relief in respect of agricultural land is now the only tax relief that is available in the case of property transfers between related persons and, as set out above, biological children, adopted children and certain fostered children may all benefit from this relief.
In the event that the information contained in this reply is felt to not adequately clarify the position, you, or the taxpayer concerned, may wish to contact Revenue directly for further assistance.
168. Deputy Pearse Doherty asked the Minister for Finance with reference to the Programme for Government commitment that tax credits and bands will be index-linked to earnings, the data on which this earnings growth is based; if it is based on Central Bank projections of compensation per employee growth of 2.3%, 4.7% and 5.1% in each of the years 2022, 2023 and 2024 respectively in its latest quarterly economic bulletin; and if he will make a statement on the matter. [32161/22]
Amharc ar fhreagraAs the Deputy will be aware, the Programme for Government, “Our Shared Future”, states that “From Budget 2022 onwards, in the event that incomes are again rising as the economy recovers, credits and bands will be index linked to earnings. This will be done to prevent an increase in the real burden of income tax, to prevent more low income workers being taken into the tax net because of no changes to the tax system and to ensure there is no increase in the number of people having to pay higher income tax and USC rates.” The Deputy will note that this commitment contains a proviso relating to the path for economic recovery.
In terms of earnings, the basis for the Department’s outlook are forecasts published annually in the Budget and Stability Programme Update (SPU). Both publications set out point-in-time projections for compensation of employees (or total remuneration paid to all non-agricultural employees by employers in return for work done), and compensation per employee (average pay per non-agricultural employee in the economy). A number of CSO publications inform the Department’s outlook, including the Quarterly National Accounts, Labour Force Survey, and the Earnings, Hours and Employment Costs Survey (EHECS).
Projections for earnings growth have been particularly complex in recent forecast rounds. The labour market was at the frontline of the pandemic, and a number of headline indicators were affected by the unprecedented impact of Covid-19 on the economy. This includes measures of underlying wage growth, which were distorted by compositional shifts associated with the sectors and workers most impacted by necessary public health measures.
As the Deputy will appreciate policy formulation will take place over the coming months, with the Summer Economic Statement (SES) setting out the broad economic and fiscal parameters for the Budget taking into account the overall macro-fiscal position. The Budget 2023 Economic and Fiscal Outlook will set out the labour market and earnings projections. It is within this context, and in particular these wage growth data considerations, that any new tax measures will be considered as part of Budget 2023 deliberations.
169. Deputy Alan Kelly asked the Minister for Finance if he spoke with the World Bank President during his recent visit to Washington DC. [32216/22]
Amharc ar fhreagraI did not have an opportunity to speak with World Bank President David Malpass during my recent visit to Washington, DC. I last met with him at the most recent meeting of G7 Finance Ministers and Central Bank Governors, which took place in Bonn in mid-May.
170. Deputy Paul Kehoe asked the Minister for Finance if he will consider raising tax exemption limits for people aged 65 years or over or provide further extra tax credits to mitigate against the rising cost of living; and if he will make a statement on the matter. [32330/22]
Amharc ar fhreagraThe general position is that all tax expenditures and reliefs, including measures of the type mentioned by the Deputy, fall to be considered as part of the annual Budget and Finance Bill process.
The tax code provides for a number of tax credits and reliefs for those aged 65 and over.
The current age exemptions limits mean that single, widowed or surviving civil partners aged 65 or older do not pay any income tax if they earn less than €18,000 per annum with a threshold of €36,000 in place for a married couple or civil partners where one person is 65 years of age or older. The relevant income thresholds may be increased further if the individual has a qualifying child. The thresholds are increased by €575 in respect of both the first and second child, and €830 in respect of each subsequent child.
Marginal relief may be available where the individual’s or couple’s income exceeds the relevant exemption limit but is less than twice that amount. Where marginal relief applies, the individual or couple is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. Once the income exceeds twice the exemption limit marginal relief is no longer available and the individual pays tax under the normal tax system. It should be noted, however, that where the individual’s income is greater than the exemption limit but below twice that limit, the taxpayer is always given the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands.
Persons aged 65 or over may also avail of the age tax credit, which currently amounts to €245 per year for single persons or €490 per year for married couples or civil partners. Reduced rates of USC also apply for persons aged 70 or older where their total income is €60,000 or less.
As such, the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers.
Additional guidance on the range of tax credits and reliefs that may be available for individuals over 65 years of age can be found in Tax and Duty Manual Part 15-01-26, which can be located at the following link – Tax and Duty Manual: www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-26.pdf.
With regard to the cost of living increases, the Government is acutely aware of the cost pressures currently facing businesses and households, including people aged 65 years or over, and has responded to help alleviate some of this burden. On a cumulative basis, the Government has announced €2.4 billion in cost of living measures since last October. These measures include changes in tax and social welfare, the provision of an energy credit for households and a temporary reduction in the rate of VAT on the supply of certain energy products.
171. Deputy Róisín Shortall asked the Minister for Finance the rationale behind the current tax regime for Exchange-traded funds in Ireland, including the higher-than-previous tax rate applied to gains and the approach to deemed disposal; and if he will make a statement on the matter. [32370/22]
Amharc ar fhreagraThe term “Exchange Traded Fund” or “ETF” is a general investment industry term that refers to a wide range of investments. ETF investments can take many different legal and regulatory forms even where they are established within the same jurisdiction.
An ETF is an investment fund that is traded on a regulated stock exchange. A typical ETF can be compared to a tracker fund in that it will seek to replicate a particular index.
There is no separate taxation regime specifically for ETFs. Being collective investment funds, they generally come within the regimes set out in the Taxes Consolidation Act 1997 for such funds. The domicile of the ETF will generally determine the applicable fund regime, specifically whether the ETF falls within the domestic fund regime or the offshore fund regime.
Where the domestic fund regime applies, a ‘gross roll-up’ applies such that there is no annual tax on income or gains arising to a fund but the fund has responsibility to deduct an exit tax in respect of payments made to certain unit holders in that fund. To prevent indefinite or long-term deferral of this exit tax, a disposal is deemed to occur every 8 years. Where the offshore fund regime applies, the applicable tax treatment depends on the location and nature of the fund.
Income and gains arising from investments into Irish and EU domiciled ETFs are subject to income tax at a rate of 41% on a self-assessment basis. Such income and gains are not subject to Pay Related Social Insurance (PRSI) or Universal Social Charge (USC) liabilities. This charge to tax does not apply in the case of unit holders who are non-resident. In the case of non-resident investors, liability to tax on gains from the fund will be determined in their home jurisdiction.
To assist taxpayers in determining the appropriate tax treatment for investments in ETFs, Revenue has published guidance which is available at www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-27/27-01a-03.pdf.
There are currently no plans to review the taxation of Exchange Traded Funds.
172. Deputy Alan Dillon asked the Minister for Finance if he will outline the work undertaken within his Department to drive insurance premiums down to affordable levels; and when promised legislation reforms will be enacted to support these measures. [32374/22]
Amharc ar fhreagraAt the outset, it is important to note that neither I, nor the Central Bank of Ireland, can direct the pricing or provision of insurance products, as this is a commercial matter which individual companies assess on a case-by-case basis. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive).
Nonetheless, this Government recognises the concerns felt by many groups regarding the cost and availability of insurance, and has therefore prioritised insurance reform via the Action Plan for Insurance Reform which was published in December 2020. As the Deputy may be aware, the Government published the second Action Plan for Insurance Reform Implementation Report, which shows that work is progressing well to implement these important reforms, with 80% of the actions already being delivered.
The Action Plan is a whole-of-Government strategy contains several initiatives expected to positively impact insurance costs. For example, the new Personal Injuries Guidelines have significantly lowered award levels for many common injuries, with the latest data from the Personal Injuries Assessment Board (PIAB) indicating that the overall average award has reduced by 42% compared to 2020. Consistent implementation of the Guidelines should therefore lead to a reduction in the cost of claims, which is the main driver of the cost of insurance.
Another key development with regard to home and motor insurance costs has been the Central Bank’s decision to prohibit price walking from 1 July 2022. This is a form of dual pricing whereby customers are charged higher premiums relative to the expected costs the longer they remain with an insurance provider. This ban is a balanced approach that will protect customers who prefer to stay with their current provider from being subject to a ‘loyalty penalty’, while still allowing customers to benefit from discounts from new providers.
Other actions which aim to assist in lowering insurance costs include measures to reduce fraud, the enactment of legislation making perjury easier to prosecute, as well as efforts by the Office to Promote Competition in the Insurance Market to attract new providers. Work is also continuing across Government to drive forward the outstanding aspects of the Action Plan, including: further changes intended to reduce costs such as strengthening the PIAB (which is under the responsibility of the Minister for Enterprise, Trade and Employment); and reforming the duty of care (which is under the responsibility of the Minister for Justice). It is my belief that the overall implementation of the Action Plan should help to improve both the cost and availability of insurance.
Finally, recent data from the Central Statistics Office shows that average private motor insurance prices have fallen by 41 per cent since their peak in July 2016, and it is my hope that these ongoing reforms will bolster this downward trend in the wider insurance market, to the benefit of consumers, businesses and community groups.
173. Deputy Darren O'Rourke asked the Minister for Finance if he has examined reducing VAT on imported electric vehicles; the estimated annual cost of reducing VAT on EVs to the lowest possible level; and if he will make a statement on the matter. [32389/22]
Amharc ar fhreagraThe VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In general, the EU VAT Directive provides that all goods and services are liable to VAT at the standard rate, currently 23% in Ireland, unless they fall within categories of goods and services specified in the Directive, in respect of which Member States may apply a lower rate or exemption from VAT.
Electric motor vehicles are not included in the categories of goods and services on which the EU Directive currently allows a lower rate of VAT or an exemption to be applied, and so they are liable to VAT at the standard rate, currently 23%.
I would like to advise the Deputy that the VAT collected on EVs was in the region of €70 million in 2021, and the VAT collected on EVs this year has been in the region of €73 million up to 31 May 2022. These estimated figures are based on Vehicle Registration Tax data relating to EVs.
174. Deputy Pearse Doherty asked the Minister for Finance the estimated first and full-year costs of indexing personal tax credits, the employee tax credit and the earned income tax credit at a rate of 1% while simultaneously tapering personal tax credits, the employee tax credit, the earned income tax credit at a rate of 2.5%, for every €1,000, for individual incomes between €100,000 and €140,000. [32475/22]
Amharc ar fhreagra175. Deputy Pearse Doherty asked the Minister for Finance the estimated first and full-year cost of tapering personal tax credits, the employee tax credit, the earned income tax credit at a rate of 2.5%, for every €1,000, for individual incomes between €100,000 and €140,000. [32478/22]
Amharc ar fhreagra184. Deputy Pearse Doherty asked the Minister for Finance the estimated first and full-year costs of indexing personal tax credits, the employee tax credit and the earned income tax credit at a rate of 2% while simultaneously tapering personal tax credits, the employee tax credit, the earned income tax credit at a rate of 2.5%, for every €1,000, for individual incomes between €100,000 and €140,000. [32831/22]
Amharc ar fhreagra185. Deputy Pearse Doherty asked the Minister for Finance the estimated first and full-year costs of indexing personal tax credits, the employee tax credit and the earned income tax credit band at a rate of 3% while simultaneously tapering personal tax credits, the employee tax credit, the earned income tax credit at a rate of 2.5%, for every €1,000, for individual incomes between €100,000 and €140,000. [32832/22]
Amharc ar fhreagraI propose to take Questions Nos. 174, 175, 184 and 185 together.
I am advised by Revenue that as their micro-simulation modelling tool, Tax Modeller, is built to model scenarios on a taxpayer unit basis (i.e. including jointly assessed couples as taxpayer units), it is not possible to estimate changes to tax credits on an individual basis for a projected tax year.
However, incomes recorded on historic tax returns can be used to estimate the potential yield and/or cost associated with the adjustment of tax credits. As 2019 is the latest year for which full tax return data is currently available to be analysed, Revenue has undertaken estimates in relation to the 2019 tax year for both indexing and tapering the tax credits referred to by the Deputy to provide an estimated net yield that may arise from this proposal.
It should be noted that although the value of the personal tax credit, employee tax credit and the earned income credit has increased since 2019, (as provided for in Budget 2022), the 2019 values for the credits were utilised for consistency purposes in preparing these estimates.
Based on this, I am advised by Revenue that:
- The yield in 2019 from tapering the credits as outlined by the Deputy would have been an estimated €270m and €325m on a first and full year basis respectively;
- The yield in 2019 from increasing the personal, employee and earned income tax credits by 1% while simultaneously tapering these credits as outlined by the Deputy would have been an estimated €205m and €255m on a first and full year basis respectively;
- The yield in 2019 from increasing the personal, employee and earned income tax credits by 2% while simultaneously tapering these credits as outlined by the Deputy would have been an estimated €145m and €180m on a first and full year basis respectively;
- The yield in 2019 from increasing the personal, employee and earned income tax credits by 3% while simultaneously tapering these credits as outlined by the Deputy would have been an estimated €85m and €105m on a first and full year basis respectively.
As these estimates are based on tax returns for 2019, a different outcome to the above estimates may arise if the policies mentioned by the Deputy were implemented.
