Dáil Éireann debate -
Thursday, 1 Feb 2024

Before I come to the question, I have another question for the Minister. Given the deadline for parliamentary questions and that the report was published yesterday, I invite him to make some comments on my belief that Revenue should investigate the tax arrangements of the exit payments by RTÉ. We were not able to table questions on it because of the deadline. It is a significant issue, with almost €250,000 paid to ten individuals. There is a suggestion it should be examined and I ask the Minister to clarify his engagement with Revenue on the matter.

The question I have tabled is on the critical issue of homeowners affected by defective concrete blocks in my county and elsewhere. The Minister and the Department are centrally involved in responsibility for the key issues of the ability of these properties to be mortgaged and insured. For this reason, I ask him to give an update to the Dáil on his engagement with the banking sector, the Department and the Department of housing on this crucial issue.

I thank the Deputy. If I may briefly respond to the first point he made, I am satisfied that the Revenue Commissioners will apply the law without fear or favour. I do not direct them on operational matters but they have all of the powers they need and they will fully discharge their responsibilities. They will engage directly with RTÉ and any other relevant parties to ensure all taxation obligations have been fully met in this regard.

As the Deputy will be aware, the overall Government response on the problems associated with defective concrete blocks is led by my colleague the Minister for Housing, Local Government and Heritage. His Department is engaging with impacted householders and relevant stakeholders and has put in place a scheme of financial support to help affected homeowners. This scheme provides for grants of up to €420,000 to remediate homes and includes ancillary grants of €25,000 to assist homeowners in meeting the costs relating to temporary accommodation, storage and essential immediate repairs.

I understand that some homeowners have identified a potential challenge with funding the commencement of remediation works in circumstances where it is necessary to make a payment to professionals engaged on a remediation project prior to receipt of the first grant payment. The Banking and Payments Federation Ireland, BPFI, submitted an interim funding proposal to the Department of housing to address this timing mismatch.

The BPFI proposes that funding would be provided upfront from a BPFI member to a homeowner on the commencement of remediation works. It is proposed that this funding would subsequently be repaid to the BPFI member on the release of the approved grant payment, subject to any requirement of the scheme. I understand this proposal was reviewed at a subgroup meeting of the implementation steering group, chaired by the Department of housing, on 11 January 2024.

Last year, I asked my officials to engage with the BPFI and officials in the Department of housing to support that Department in exploring the funding mechanism proposal. This work is ongoing and includes consideration of the legislative and operational implications of the proposal. The Government fully understands the importance of this issue in the communities affected by defective concrete blocks. I will continue to work proactively with my Government colleagues, as necessary, to ensure the scheme operates effectively and consistently.

The proposal was put forward last autumn. The BPFI is pressurising the Department to make a decision on this issue. It speaks about the harm being caused and the distress to individuals. This is not the only issue on the table. Other issues relate to the ability of the homes to be mortgaged, which is something we all take for granted. Is it the case that the Government is giving a guarantee that the scheme it has put in place will result in a certificate of remediation, and it is absolutely the position these homes will fully be able to be mortgaged and insured? This is the core question for the Government. These issues fall in the domain of the Minister for Finance. Is this the position of the Government? When will we get to the point where this is actionable? This shows the haphazard nature of the scheme. If it were not for a number of individuals in the redress focus groups, this issue would not even have been on the radar of the Department of Finance or the Department of housing. It is a crucial issue. The issue is whether, after the grant is spent and the houses are rebuilt, they will be capable of being mortgaged and be fully insurable.

The Government position on this is clear. It is our understanding and expectation that once a home is certified and remediated under the scheme, it will be treated for mortgage purposes in the same manner as any other home. This specific issue is being dealt with by the subgroup to which I referred. It met on 11 January. The focus was on the ability of the homes to be mortgaged. The Deputy will be aware of the membership of the group and it includes homeowners in the affected counties, including Donegal, Clare and Mayo. The Department of housing chairs the committee. Other representatives include Engineers Ireland, Insurance Ireland, the BPFI, local authorities and the homeowner's liaison officer. This was the issue that was the focus of the first meeting of the group. Another meeting of the group is planned for this month. I will be kept fully up to date by the officials. I have remained in contact with the BPFI on this specific issue.

I welcome the Minister's response but he said that once a house is certified, it will be capable of being mortgaged and insured. The core issue is that the banks cannot give a guarantee that these properties will be capable of being mortgaged. Why is that? It is because the engineers cannot give a guarantee that they will certify the works. That is what is at the very heart of this. It is one year since the scheme was launched. The scheme has seen a tiny number of new applications because there are so many problems with it, along with the mishmash and the failure of Government to deal with this issue.

This has been on the table for a while. The subgroup only met this month. I have been raising this issue with the Minister since last year. Has the Minister engaged with the BPFI to understand what is at the heart of this? Has he engaged with the engineers who are responsible for certifying these properties? Once they are certified, we know the banks will step in but the problem is that the engineers cannot certify these houses under the scheme because of the way the Government is dealing with it, not least the fact it will not allow foundations in the scheme.

I am very much across the issues involved that are relevant to the work of the Department and the bodies that come under its aegis. The Department is part of the implementation steering group and the subgroup where these issues are being actively discussed. The ability of the homes to be mortgaged was the focus of the first meeting last month and there will be another meeting this month. I have remained directly involved and kept abreast of the situation. I have also spoken directly with the BPFI on these issues.

It is our expectation that once properties have been remediated, where the appropriate certification is provided, that mortgage ability would be restored. That is a reasonable expectation on behalf of the homeowners. I will work with the Deputy and others to ensure that is what happens over the period ahead.

The deadline is looming in May 2024 for businesses to make arrangements with the Revenue Commissioners to repay tax debt warehoused during the pandemic. The Minister made comments to the media when he was in Davos that suggested very clearly that he intends to make changes to the operation of that scheme and potentially to the way in which repayments are to be organised. The word he used was that he intended to be "flexible". Could he put on the record of the House what he means by "flexible" and what his plans are in respect of the tax debt warehousing scheme?

I thank the Deputy for the question. The tax debt warehousing scheme has offered valuable and practical liquidity support to businesses during the Covid pandemic and continues to support businesses as they recover from the impacts of the pandemic and the cost-of-living crisis. It has assisted businesses with their cash flow during difficult trading periods, preventing business failure.

Introduced in May 2020, the scheme allowed businesses to temporarily defer VAT and employer PAYE, certain self-assessed income tax liabilities and wage subsidy scheme and employment wage subsidy scheme overpayments on an interest-free basis for an extended period, up to the end of 2022, or until the end of April 2023 for those availing of the extended scheme. After this, a 3% interest rate applies until the debt is either fully repaid or the customer otherwise exits the warehouse.

A key qualifying condition of the scheme is that all current liabilities are filed and paid on time. The total debt in the warehouse has decreased substantially since January 2022, when more than €3 billion was warehoused for more than 100,000 customers. By 26 January 2024, a total of €1.72 billion was warehoused for 57,435 customers, of whom 70% have outstanding liabilities of less than €5,000. The bulk of the debt, almost €1.5 billion, was warehoused by 5,265 customers with outstanding balances greater than €50,000.

It is important to note that, while payments can be made in advance, businesses do not have to pay all of their warehoused debt by 1 May 2024. Instead, they are required to engage with Revenue to make arrangements to pay the debt over an agreed period, based on their individual circumstances and capacity to pay.

Revenue has advised me that its approach will be flexible in relation to payment plans on warehoused debt. I will respond further in a moment when I have time, but I have been engaging with the Revenue Commissioners and I expect to very shortly finalise some additional flexibilities under the tax debt warehousing scheme. I will be happy to report to the House when I announce them.

Time is of the essence in this regard. It is clear from the figures the Minister provided that a very substantial proportion of those who have warehoused tax debt have actually met their liabilities in full and a considerable number of businesses have made arrangements with Revenue.

It was a very important scheme and it gave viable companies breathing space during the pandemic and made sure they could get back on their feet once normal trading conditions resumed. However, I get a sense from some businesses across the economy that they are adopting a wait-and-see approach. That is why the Minister needs to be very clear, very quickly on what he means by flexibility. I ask him to again put on the record of the House what he means by flexibility, and how pragmatic he and the Revenue Commissioners intend to be in the management of that warehoused debt? He might put the figures on the record. I am sure they are available to him. I assume the vast bulk of those who have yet to engage with the Revenue Commissioners may very well be in the hospitality sector.

It is important to emphasise a number of points. One is that the requirement on businesses is to engage with Revenue now and to enter into an agreement by 1 May 2024. I have seen reports that they must have repaid their tax warehouse debt by 1 May but that is not the case. It is not even necessarily the case that there has to be a downpayment by that date but they must have entered into an agreement, which will then be implemented over a period.

A strict condition of the flexibilities that are currently in place, and the new ones that I will announce, is that businesses must file their current returns on time and they must stay up to date with their current liabilities. The commitment I am giving is that the warehoused debt will be treated very differently, as a separate liability, but it is only on the basis that current returns are made in a timely fashion and the current taxation liabilities are met. Even as it is, there is significant flexibility around payment breaks, deferral of the next payment date due, amendments to payment dates-----

I too urge those companies who have not yet engaged to engage very quickly and not to adopt a wait-and-see approach. Further clarity would be welcome from the Minister in the coming weeks about what it is he intends to do in terms of greater flexibility, as he described it.

There is a balancing act here as well. Where liabilities fall due, businesses ought to pay those liabilities to Revenue. It is interesting to note as well – I am sure the Minister will be conscious of this when he considers how he approaches it – that, for example, the treatment of liabilities of PAYE workers under the PUP and wage subsidy schemes was obviously very different. The option there was either to repay it in full or have their tax credits reduced over a number of years. There is a balance to be struck in paying the money back but also ensuring that we do not get into a situation where there is a significant number of insolvencies. One way has come to my attention whereby the Minister could assist the hospitality sector.

First, the tax debt warehousing scheme is a really good scheme when compared to the interest rates that apply, for example, to other tax debt. Non-warehoused tax debt has a general interest rate of 10% or 8% in the case of income tax underpayments. That just puts in context that this is a really good scheme.

We do have to be fair to all of those who did not avail of tax debt warehousing. More than €30 billion in taxes could have come within the scope of the warehousing scheme and approximately 10% of those responsible for it availed of it, amounting to €3 billion. We need to be conscious of that. I understand that this is a very important issue for many businesses. In terms of the breakdown, which we provided in response to written parliamentary questions in the past, the sector with the largest number of businesses availing of warehousing is construction, not hospitality, with just under 9,200 customers availing of the tax debt warehousing regime, followed by the wholesale and retail trade sector, with 8,600.

In the latest Finance Bill the Minister introduced the residential premises rental income relief scheme, which was a tax break for landlords. It will cost €160 million by 2026. It is important to ask whether, in the first instance, this is good value for money for the taxpayer, given its cumulative cost will reach more than €500 million by 2028. Could the Minister, therefore, outline the deadweight costs, which will be substantial in regard to this relief, his views on the equity that arises, and its effectiveness?

I thank the Deputy very much. Landlords are an essential feature of a functioning housing market. Rising rents are driven by a shortage of supply, so stabilising and increasing the supply of rental properties should ease upward pressure on rental prices and make it easier for prospective tenants to find affordable homes.

The new residential premises rental income relief is a tax relief at the standard rate of 20% against private rented residential income. The purpose of this relief is to provide an incentive for landlords, specifically targeted at attracting and retaining small-scale landlords in the private sector.

The relief will be €3,000 in the tax year 2024; €4,000 in the tax year 2025; €5,000 in the tax year 2026 and €5,000 in the tax year 2027. This will equate to a tax credit of up to €600 in year one, €800 in year two and €1,000 in years three and four. The relief is capped at the individual's tax liability on rental income from residential property.

As the Deputy will be aware, the potential for deadweight was considered as part of the process of creating this relief and it was determined that, as with most tax reliefs, there is, indeed, an element of deadweight in the scheme. On balance, however, this measure is worth implementing and is necessary to retain small landlords in the rental market. To mitigate the issue of deadweight as much as possible the relief is targeted and is only available for the tax years from 2024 and ends in 2027, is capped at the individual's tax liability and rental income from residential property, and relates only to tenancies registered with the RTB or where a landlord leases a property to a public authority. Equally, a relief will be clawed back if at any point within the four years of the first year of assessment in which the credit was claimed the landlord disposes of any of the residential rental premises owned in the first year in respect of which a claim was made. The first-year cost of the relief in 2024 is estimated to be €45 million. Compared with the rent tax credit I announced in the budget, this measure is estimated to cost an additional €88 million in terms of the increase in that credit to the already €200 million it was previously estimated to cost for 2024.

This relief, cumulatively, will cost more than €500 million. The Minister said there is an element of deadweight cost. His officials told and warned him that there would be substantial deadweight elements. They drew comparisons between it and the Celtic tiger tax breaks provided the last time we had a Fianna Fáil Minister for Finance, warning, in their words, that "Previous experience in the not-too-distant past was that such measures were ultimately disastrous". Those are the words of the Minister's officials. They were clear that the evidence did not support the case that tax is a primary factor causing people to exit the rental market or in dissuading people from entering it. They also noted that many landlords are selling up to cash out given the soaring house prices seen under the Minister's Government, as well as those accidental landlords who are seizing the opportunity to sell now given they are no longer in negative equity. The Minister's Department has said this relief will not be effective and will provide a tax break to landlords who have no intention of leaving the market.

I thank the Deputy. This is a measure designed, principally, to retain investment in the private rental sector. The trend in recent years has been very clear. The evidence is there for everyone to see. Over the past year, more than 24,000 notices of termination have been received, and 14,500 of these were stated as being due to the landlord selling the property. Some 60% of all notices of termination issued in the past year have been due to landlords selling the property. Between the first quarter and third quarter last year, 15,000 notices of termination were issued to tenants. Of those, more than 9,000 were because the landlord intended to sell the property. We clearly have a significant challenge, therefore, in supply in the private rental sector and it is important that we use the policy instruments available to the Government to attract landlords into the sector and, principally, right now, to retain the existing investment we have to ensure people can access rental accommodation where they need it.

The Minister's officials have told him that his €500 million landlord tax break will not fix this problem. It will be ineffective and will primarily go to landlords who have no intention of leaving the system. According to figures from the Revenue, more than 41,000 landlords, which is more than one in four, will pay no income tax on their rental income as a result of the Minister's tax break for landlords. We now have a situation where ordinary workers, be they teachers, gardaí, cleaners or people working on the factory floor, are paying a higher rate of tax on their earned income than landlords will pay on their rental profits. This is not fair by any measure. This has been shown by the Minister's officials. How come all his officials are wrong and he is right? How come they are wrong when they are saying this measure has a substantial deadweight cost? How come they are wrong when they draw comparisons with the Celtic tiger tax breaks that Fianna Fáil introduced in the past, which the officials say were, ultimately, disastrous? How come they are wrong when they say this is not the driving factor causing landlords to exit the market? How come they are wrong when they say this relief is going to be ineffective? How come the Minister is right on all these issues?

In the context of that scenario, the Deputy should be prepared to find that the vast majority of his taxation proposals, which comprise up to €3 billion of new tax proposals, will not meet with the support of the officials in the Department of Finance. The thrust of what he is saying, therefore, is that he is going to drop those proposals and not go ahead with them. In that scenario, there is no-----

The elected Government considers all the advice and all the issues and then makes policy decisions. On the issue of deadweight, the Deputy should look at some of his own proposals. For example, he wants to get rid of the local property tax. Where is the deadweight in removing a charge from many people who are well able to afford to pay it? Where is the deadweight in the Deputy's proposal that people with €1 million mortgages should get mortgage interest relief, for example, from the taxpayers?

I am taking this question on behalf of Deputy Shortall. It relates to the change in law by way of statutory instrument last year that, effectively, shut down transparency when it comes to the central register of beneficial ownership of companies. This change came on foot of a Court of Justice of the European Union judgment, but we have interpreted it very differently from other jurisdictions.

I thank the Deputy for the question. In November of 2022, the Court of Justice of the European Union, ECJ, ruled in joined cases C-37/20 and C-601/20 that a provision of the EU anti-money laundering, AML, directive under which information on the beneficial ownership of corporate and other legal entities held in central registers must be provided to the general public is invalid. The court found that the provision interfered with the rights recognised in Articles 7 and 8 of the Charter of Fundamental Rights of the EU.

To ensure our domestic legislation complies with the court's ruling, and following consultation with the Office of the Attorney General, a statutory instrument was prepared amending regulations which govern two of Ireland's registers of beneficial ownership information - the register of beneficial ownership of companies and industrial and provident societies, RBO, that operate under the auspices of the Companies Registration Office, as well as the central register of beneficial ownership of Irish collective asset-management vehicles, credit unions and unit trusts, which is operated by the Central Bank of Ireland.

As Minister for Finance, I signed into law the relevant regulations: SI 308 of 2023, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) (Amendment) Regulations 2023. The Deputy may be aware that a recent political agreement was reached in Brussels in respect of the new EU AML rule book. However, formal agreement, including the text, remains to be agreed by all member states. The EU Council proposes that provision for access to beneficial ownership information by the public should be on the basis of "legitimate interest". Following agreement of the new EU AML package, officials will consider what further amendments to domestic legislation are required as part of the transposition process.

The direct answer to the question is that following the ECJ judgment, my Department consulted with the Attorney General and received advice. On that basis, the statutory instrument was prepared and that is what I signed into law last year. This is an area, though, where policy is developing quite quickly and I expect we will be returning to this issue.

It is having an extreme impact in the way it was handled by way of the statutory instrument. We are aware there is a great number of investment funds. We are also aware of brass-plate companies in the financial services sector. Huge contracts are being allocated by the likes of the Dublin Region Homeless Executive, DRHE, and the Department of Children, Equality, Disability, Integration and Youth. I am certainly well aware of people who I do not believe are the beneficial owners of the companies getting some of these contracts. This change is shutting down transparency. The way this situation has been dealt with by way of the statutory instrument is extreme and ham-fisted, and it is cutting down transparency. We cannot have accountability if we do not have transparency. If we cannot get the names of the beneficial owners and do not know who the beneficial owners of these companies are, and there are companies within companies within companies like a Russian doll, then people will misuse the system because they know they are being sheltered. This is essentially what has happened with this statutory instrument.

I thank the Deputy. As is normal when there is a European Court of Justice judgment that impacts policy or the application of EU law in Ireland, the line Department consults the Attorney General. That is what happened in this case, and that formed the basis of the statutory instrument that was introduced and ultimately signed into law. I am a very strong supporter of transparency in these matters and will do all I can to ensure the previous system is restored, but in a manner compatible with EU law and the decision of the European Court of Justice. I am a firm believer in the vital role journalists play in our democratic system in ensuring information in the public interest is made available to the public. Therefore, I will continue to engage with my officials and the Attorney General on this issue, but I have pointed out that a decision has been made or an agreement has been reached in the context of the new AML rule book that deals with the issue of legitimate interest.

I am aware that things are moving in Brussels, but they move very slowly. In the meantime, we will have a problem with transparency. An over-the-top approach has been taken. In this regard, consider what is happening in other jurisdictions. The likes of France and Latvia have completely ignored the approach. The measure has been interpreted differently in various parts of Europe. We have taken a very conservative, extreme approach that is sheltering people. The vast majority of people who own companies will have no issue but journalists will not be able to write stories about the real offenders whom the register is in place to address because they will not be able to corroborate the identity of beneficial owners. This has been taken to the extreme and we should not have to wait until a change happens in Brussels. If we do, we will be talking about a couple of years.

The Deputy makes the fair point that there are different interpretations of the ECJ judgment across member states. That is the case. As we would be expected to do, we consulted the Government’s legal officer. We received advice and it was on that basis that the statutory instrument was devised. There has been no policy decision and there is certainly no policy intent to restrict access or limit it in any way.

I will engage further on this issue. I accept the Deputy’s point that the EU process will take time. That is the nature of how things work. The Deputy made the case that the Irish interpretation is extreme. It was based on the legal advice provided, but I will ask for it to be examined again because it is important that we be as transparent as possible and allow as much access as we can within the parameters of EU law and in a manner consistent with the ECJ judgment. I make that commitment to the Deputy.