Dáil Éireann Debate, Tuesday - 21 May 2024
61. Deputy Pearse Doherty asked the Minister for Finance to outline his views on the success of the mortgage interest tax credit; and if he will consider amending its design to ensure that all mortgage holders who have seen a significant increase in the mortgage costs they are facing will receive adequate support. [23004/24]
Amharc ar fhreagraIn the past two years, mortgage interest costs have soared for households. They have increased by 71% over the past two years. As the Minister knows, some mortgage holders are being charged more than 7%. These are loans that were sold, in particular to vulture funds, as a result of the policy of two of the parties in government. As the Minister knows, Sinn Féin has called for mortgage interest relief to be applied at source for well over a year. The Government finally acquiesced to a mortgage interest credit, which kicked in in January.
Given the soaring mortgage costs so many households face amid a wider cost-of-living crisis, how does the Minister assess the performance of the Government-styled mortgage interest tax credit, given the low uptake?
I thank the Deputy for the question. Mortgage interest tax relief, in the form of the mortgage interest tax credit, introduced in the most recent budget, is a one-year temporary relief available to homeowners with an outstanding mortgage balance on their principal private residence of between €80,000 and €500,000 on 31 December 2022. It is available at the standard rate of income tax and is based on the increase in the interest paid in 2023 over interest paid in 2022. The value of the relief is equal to the lesser of 20% of this excess interest amount or a maximum of €1,250.
In order to avail of the relief, taxpayers must file a 2023 income tax return and upload their certificate of mortgage interest for 2022 and 2023 and confirmation of their mortgage balance at 31 December 2022. Furthermore, taxpayers must be compliant with local property tax requirements and must have paid income tax in 2023.
The relief operates by way of a credit offset against a taxpayer’s income tax liability for 2023. I am advised by Revenue that, as of 15 May, 21,181 taxpayer units made a claim for this relief on their 2023 PAYE income tax return and 18,803 claimants received a refund of tax, totalling over €17.8 million. Of these, 243 claimants paid less in tax than the full credit they claimed. Revenue notes that other credits and reliefs claimed, such as those relating to health expenses and tuition fees, may also have contributed to the overall amount of refunds issued. A further 2,119 claimants are either in a balanced position or had an underpayment reduced by the mortgage interest tax relief being applied to their record. An additional 259 claimants are not in a position to benefit as they did not pay any income tax in 2023. Information is not yet available for self-assessed taxpayers as these taxpayers have until the end of October this year to submit their 2023 income tax return. Data is not available in respect of the number of people who may be entitled to claim the tax credit but who have not yet filed a return and made a claim. It should be noted that taxpayers have four years to submit claims for tax credits and tax reliefs. As I have said on many occasions, I encourage all those who are eligible for this credit or any other credit or tax relief to make a claim. I will come back to the Deputy with further information in a moment.
From the figures the Minister has put on the record today, it is patently obvious that he has taken a very good idea from Sinn Féin, although he and his Government resisted it for quite a while. However, when he finally gave in, he made a mess of the design of it. The fact that despite there being 700,000 mortgage holders across the State, only 18,000 households have received the full benefit of the mortgage interest tax credit at this point speaks volumes. Some €125 million was allocated for this tax credit yet only €15 million or €16 million has been claimed so far. As we pointed out during the debate on the legislation, one of the problems is that applicants are required to submit an income tax return and certificate of mortgage interest for 2022 and 2023. I warned the Minister that this would act as a disincentive. That is why Sinn Féin and I argued that it should be a deduction at source, which is how tax relief used to apply. However, because the Minister took so long to perform his U-turn and acknowledge the good idea put forward by Sinn Féin, Revenue was not given sufficient time to build capacity to implement this deduction at source, leaving us with this flawed scenario. Does the Minister accept that, given the level of uptake, this credit is failing?
I do not accept the Deputy's assertion in that regard. I point to the fact that almost 22,000 taxpayer units, some of whom may be couples given the way they are counted by the Revenue Commissioners, made a claim for this relief as part of their 2023 PAYE income tax return. I expect that many more will do so over the eligibility period. Although it was an estimate, the figure provided to me at the time was that approximately 208,000 eligible accounts, predominantly tracker and variable mortgages, representing approximately 165,000 properties would be eligible for the relief. That means that many thousands of people who have paid significantly increased sums in interest as a result of the monetary policy of the ECB are entitled to claim this mortgage interest tax credit. I encourage them to do so. The process is relatively straightforward. Many thousands have successfully done so already.
The Minister has made a mess of the design of it, as we pointed out at the time, because he took too long to acknowledge what Sinn Féin had spent a year arguing for. It is not just that; he has locked out countless homeowners, tens of thousands, who have seen their mortgage interest rates increase. For example, by requiring that claimants have a balance of over €80,000, he has locked 138,000 mortgage holders who have seen their interest costs rise out of the scheme. Worst of all, his tax credit discriminates against those with low incomes. I raised the case of a single mother whose mortgage interest has gone up by - listen to this - €5,000. She is denied and locked out of the Minister's scheme. Why? It is because of the flawed design and because her income is too low. When the Ministers, Deputies Humphreys and Donohoe, announced this, they said there would be another scheme under the Department of Social Protection. It does not exist. Just like the Government's affordable homes, it does not exist. People are being told to send a unique email to a place only to then be told to go to MABS. Let me tell the Minister about another person. She is also a mother. Her annual interest has risen by €8,000. She is denied the Minister's tax credit. Why? It is because she claims the incapacitated child tax credit and the home carer's tax credit. Her income is too low. Her interest has gone through the roof and the Minister's scheme locks her out. He has made a mess of mortgage interest relief. He should acknowledge that and change it now in order that these families will no longer be locked out of the scheme.
I do not accept that at all. This is a non-refundable tax credit. There was engagement with the Revenue Commissioners for many months in the lead-up to the budget last October. They were very clear with me and my officials that it was not possible to put in place the necessary IT infrastructure to-----
That is because the Minister took so long to make this decision.
No, not at all.
It is.
There was very early engagement with the Revenue Commissioners on that issue.
We had deduction at source for years.
The Deputy raised the cases of specific individuals. From what he has said, I assume they do not have an income tax liability and are therefore not able to avail of a non-refundable tax credit. I am following up on that issue with Revenue and the Department of Social Protection. There is a need for information sharing between the two but a commitment was given that people who do not have a tax liability would not be denied access to the support we announced on budget day and that commitment will be honoured. Work is under way in that regard.
