Written Answers Nos. 106-119
108. Deputy Pearse Doherty asked the Minister for Finance his response to the European Commission's opening of an infringement procedure against Ireland and issuance of a formal letter of notice regarding incorrect transposition of the 4th and 5th Anti-Money Laundering Directives; and if he will make a statement on the matter. [22790/24]
View answer117. Deputy Rose Conway-Walsh asked the Minister for Finance his response to the European Commission's opening of an infringement procedure against Ireland and issuance of a formal letter of notice regarding incorrect transposition of the 4th and 5th Anti-Money Laundering Directives; and if he will make a statement on the matter. [22792/24]
View answerI propose to take Questions Nos. 108 and 117 together.
On 24 April, the European Commission issued a letter of formal notice, citing, what it considers, as an incorrect transposition of the Fifth AML Directive by Ireland. This was one of the three notices issued on that date to Ireland on transposition matters across different Government Departments. On the Fifth AML Directive, the Commission contend that there was an incorrect transposition of the requirements for Ireland’s Central Register for the Beneficial Ownership of Trusts (CRBOT), which is operated by the Revenue Commissioners. The issues cited by the Commission relate to the mechanisms for accessing the information and for ensuring that the information filed is both accurate and complete.
The Central Register of Beneficial Ownership of Trusts (CRBOT) was established to help prevent money laundering and terrorist financing by improving transparency on who ultimately owns and controls Irish Trusts. Anti-Money Laundering (AML) legislation requires each EU Member State to establish such a Register. Revenue welcomes the acknowledgement by the Commission that this Register is operational and also appreciates their understanding that Trusts differ from legal entities in terms of the breadth of their structures and the fact that they do not all have filing obligations allowing easy identification as would be the case, for instance, in relation to companies covered by the Companies Registration Office.
I understand that the Department of Finance is already engaging on an ongoing basis with Revenue on a number of legislative changes to augment the powers of the Registrar to help improve compliance with the relevant obligations. This has been in progress before the EU Commission letter. In addition, I have been informed that Revenue undertakes compliance activity on an ongoing basis to increase registration levels. For example, in 2022/23, a campaign focused on Special Purpose Vehicles took place to increase registration in this sector. The total registration numbers have nearly doubled from the figure of 6,354 referenced in the Commission’s letter to 11,536 as of 31 March 2024. There are continued outreach and compliance activities to increase the numbers registered on the CRBOT in high-risk sectors.
Apart from officials of Competent Authorities (for example, Gardaí) and law enforcement Agencies, access to the Trusts Register was designed to facilitate ‘designated persons’ (i.e. designated financial and non-financial businesses and professions having anti-money laundering obligations) in carrying-out due diligence as part of their AML obligations. The system operates by providing access to the CRBOT Trusts Register through a token system. This minimises data protection risks, while enabling access to persons who need to have access under AML requirements. The data protection risks are significant given the prevalent use of Trusts in Ireland, often for low-risk activities, and the sensitivity of the data held. Access to the Register remains free to minimise the compliance costs on designated persons in carrying out their AML due diligence.
Ireland recognises the importance of an EU-wide harmonised approach in the fight against Money-Laundering and the Financing of Terrorism. Ireland continues to closely work with the Commission and our EU colleagues in this regard. The Department of Finance is actively engaging with Ireland’s Beneficial Ownership Registers, including working closely with the Revenue Commissioners and the Central Register for the Beneficial Ownership of Trusts, in supporting the strengthening of its powers through legislative changes to help the Register fulfil its mandate in line with EU law. Ireland is committed to fulfilling its EU AML requirements whilst protecting data as required under GDPR.
Ireland has 60 days from receipt of the letter to respond to the Commission, my officials are engaging with the CRBOT in preparing a response.
109. Deputy Richard Boyd Barrett asked the Minister for Finance if he is considering in budget 2025 introducing a wealth tax on the top 5% of wealthiest households; and if he will make a statement on the matter. [22764/24]
View answerIt is important to note that there are already a number of wealth taxes in place in Ireland, including Capital Gains Tax (CGT), Capital Acquisitions Tax (CAT) and Local Property Tax. Certain forms of Stamp Duty also act as taxes on wealth charged in a number of ways, including on the acquisition of shares, stocks and marketable securities of Irish registered companies, and on the acquisition of property both residential and non-residential.
In total, the net receipts from these forms of tax came to just under €4.2 billion in 2023.
A 2022 report from Commission on Taxation & Welfare identified challenges that would impede the implementation of a specific wealth tax. They found that a new tax on net wealth should not be introduced without in the first instance attempting to substantially amend Ireland’s existing taxes on capital and wealth. Rather than introducing a specific tax on wealth, the Commission maintains that it would be more effective to re-examine the primary existing forms of wealth tax, CGT and CAT. These are taxes on wealth that have well-established, but distinct, bases and are well-understood in their operation.
The Government has also taken action against inequality through our tax and welfare system. The strong redistributive role of the Irish tax and welfare system is evident in the range of supports that were introduced to help mitigate the impact of the Covid-19 pandemic and in the series of measures designed to limit the impact of the current cost of living pressures. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI.
Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country. The current structure of the income tax system operates as an effective means of income redistribution, helping to reduce the comparatively high levels of market income inequality to around the EU average.
It is projected that the top one per cent of taxpayer units, who are those with annual income in excess of €290,000, will pay just over 24 per cent of total Income Tax and USC in 2024. This is a very large proportion of the total Income Tax and USC take from such a small cohort of taxpayers. In comparison, 80 per cent of taxpayer units, which is the cohort of income earners with annual income of less than €69,500 and account for about 2.74 million taxpayer units, will pay 21 per cent of total Income Tax and USC.
Therefore, I do not have immediate plans to introduce another wealth tax in addition to those set out above. However, as with all areas of tax policy, the taxation of wealth, will be kept under review throughout the annual budgetary process.
111. Deputy Christopher O'Sullivan asked the Minister for Finance the work being undertaken by ISIF to support the State's climate action targets; and if he will make a statement on the matter. [22745/24]
View answerThe National Treasury Management Agency (NTMA) have informed me that the Ireland Strategic Investment Fund (ISIF) has a statutory mandate to invest on a commercial basis in a manner designed to support economic activity and employment in Ireland.
In line with this mandate, ISIF focusses its efforts on making transformational investments across its impact themes of Housing and Enabling Investments, Climate, Scaling Indigenous Businesses, and Food and Agriculture.
In respect of Climate investments, ISIF seeks to make investments that are consistent with and enable delivery of the State’s climate action targets. ISIF announced in late 2021 an ambition to invest €1 billion in Climate related investments over the following 5-year period.
As announced by ISIF in April 2024 it has made €636m of Climate investments further to this commitment, which is ahead of the schedule stated in 2021 and ISIF is on track to invest significantly more than €1 billion in Climate over the 5-year period.
Since its inception, ISIF has made circa €930m of Climate investments with a particular focus to date on renewable energy infrastructure and provision of growth capital to companies delivering decarbonisation solutions.
112. Deputy Jennifer Murnane O'Connor asked the Minister for Finance the total number of rent tax credit claims made in Carlow for each of the years 2022, 2023 and to date in 2024; and if he will make a statement on the matter. [22704/24]
View answerThe Rent Tax Credit, as provided for in section 473B of the Taxes Consolidation Act 1997 (TCA 1997), was introduced by the Finance Act 2022 and may be claimed in respect of qualifying rent paid in 2022 and subsequent years to end-2025.
For the tax years 2022 and 2023, the maximum value of the credit is €1,000 per year in the case of a jointly assessed couple, and €500 in all other cases. Finance Act 2023 increased the value of the credit for the 2024 and 2025 tax years to a maximum of €1,500 for a jointly assessed couple and €750 in all other cases.
I am advised by Revenue that the Rent Tax Credit statistics currently available relate only to claims by PAYE taxpayers.
Claims in respect of the 2022 and 2023 years of assessment can be made by PAYE taxpayers by submitting an Income Tax return for that year. For claims relating to 2024, PAYE taxpayers have the option of claiming the Rent Tax Credit due to them either as rent is incurred or at the end of the year through their Income Tax return.
Self-assessed taxpayers claim the credit in the year following the payment of rent through their annual Income Tax return Data on these claims for 2022 is not yet available. Revenue advise me that it will become available in the coming months, once the self-assessed tax returns for that year are fully analysed.
Rent Tax Credit claims are made are on a ‘taxpayer unit’ basis. A taxpayer unit is either an individual with any personal status who is singly assessed or a couple in a marriage or civil partnership who have elected for joint assessment.
Data for claims relating to PAYE taxpayers for Carlow are as follows:
• 2,506 taxpayer unit claims for 2022,
• 2,179 taxpayer unit claims for 2023,
• 385 taxpayer unit claims for 2024.
This gives a total of 5,070 claims for all years (as of May 7) for Carlow.
113. Deputy Seán Haughey asked the Minister for Finance if he will report on the stability programme update 2024 he published in April; and if he will make a statement on the matter. [22681/24]
View answerThe Stability Programme Update published last month sets out the Government’s macroeconomic and fiscal forecasts. The SPU is a technical document and the projections are prepared on the basis of the policy position set out in Budget 2024, with no new policy measures incorporated.
It is important to highlight that due to new economic governance rules at the European Union level, this is the last time we will be submitting an SPU document. Going forward, Member States will be required to prepare and submit medium-term plans to the European Commission. These plans will commit Member States to an agreed multi-year net expenditure path and will be monitored through Annual Progress Reports. Ireland will publish its first medium term plan in the autumn.
Turning to the forecasts, available evidence suggests the economy is in reasonable shape, at least in aggregate terms. Looking ahead, some of the headwinds that have dominated over the past year are set to ease and this should support a pick-up in economic activity. Crucially, the energy shock is dissipating and the disinflation process is now well advanced, with headline inflation of just over 2 per cent forecast for this year – consistent with price stability. As inflation continues to ease this will boost real wages, real household incomes and in turn consumer spending. Against this backdrop, MDD growth of 1.9 per cent is projected for this year as a whole.
On the public finances, a headline surplus of €8.6 billion is projected for this year, the equivalent of 2.8 per cent of modified national income (GNI*). However, this surplus is heavily reliant on potentially transient ‘windfall’ corporate tax receipts. If these receipts are excluded there would be an underlying deficit in the public finances.
To help mitigate this vulnerability, Government is establishing the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, to invest windfall receipts to help prepare for future structural costs and investment needs. However, the best way to ensure we approach future challenges from the strongest possible position is by continuing to pursue a budgetary policy that is balanced, sensible and sustainable.
114. Deputy Jim O'Callaghan asked the Minister for Finance when the review of the standard fund threshold will be concluded; and if he will make a statement on the matter. [22749/24]
View answerThe Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes, taxable in the normal manner, which was introduced in Finance Act 2006. The regime achieves this by imposing an additional tax charge on the value of retirement benefits above set limits when they are drawn down.
The SFT limit was initially set at €5 million when it was first introduced. Following two initial increases on the basis of an earnings adjustment factor in 2007 and 2008, the SFT has been amended downwards twice. The first reduction took place in December 2010 as part of a package of measures to deliver significant savings in the broad pension area following agreement reached with the EU/IMF. The SFT was further reduced in Finance Act 2013 to €2 million, with effect from 1 January 2014.
Significant changes have taken place since 2014, both in terms of the supplementary pension landscape and the economy. Therefore, in December 2023 I announced an examination of the SFT regime which is currently underway. The review is considering a number of specific issues as outlined in the published terms of reference including the level of the SFT and the operation of the SFT regime.
A public consultation was carried out as part of the examination, which provided interested parties with the opportunity to share their views on the current regime and propose potential changes. This consultation closed on 11 February 2024 and the responses are feeding into the work of the examination.
Regarding the timescale of the examination, I anticipate that the report will be presented to me by summer 2024 for my consideration and I will consider these in the context of the annual Budget and Finance Bill process.
115. Deputy Cathal Crowe asked the Minister for Finance his expectations for living standards for households in the remainder of 2024; and if he will make a statement on the matter. [22567/24]
View answerThe most significant challenge to households’ living standards in recent years has been inflation which has put pressure on real household incomes. Inflation reached multi-decade highs in 2022, averaging 8.1 per cent with a peak of 9.6 per cent in June 2022 (as measured by the HICP). Whilst the initial driver of this inflationary pressure was a surge in global energy prices, it subsequently became increasingly broad-based as price pressures spread throughout the economy.
Since then, enormous progress has been made in reducing inflation with headline HICP inflation of just 1.6 per cent in April. Across the year as a whole ,Department is forecasting an average inflation rate of just over 2 per cent.
Despite significant challenges, the labour market has performed remarkably well in recent years. The unemployment rate averaged just 4.3 per cent last year, alongside employment growth of 3.4 per cent. Looking ahead, my Department expects employment to continue to expand this year, and forecasts pay growth of 4.5 per cent on a per-head basis. With inflation expected to continue to ease over the near term, real wages are projected to return to growth this year, with workers regaining purchasing power.
Therefore, my expectation is that falling inflation combined with robust wage growth will boost real household incomes and living standards significantly throughout the year.
116. Deputy David Stanton asked the Minister for Finance to report on the recent visit of the Minister of State with responsibility for financial services, credit unions and insurance to Frankfurt; and if he will make a statement on the matter. [22726/24]
View answerThe official visit to Frankfurt was the first international engagement since my appointment as Minister of State at the Department of Finance. An invitation to deliver the keynote address at an event organised by the Irish Consulate in Frankfurt along with the Ireland for Law initiative was the catalyst for the visit which featured an intensive engagement programme of meetings with industry, institutions and local State Government representatives from Hesse.
In addition to meeting with Hessian State Secretary for Federal, European and International Affairs and Bureaucracy Reduction, Ms. Karin Müller, I met with the chief economist of the ECB, Philip Lane. Frankfurt is a key European financial centre and it is vital for the development of our own financial services industry to have strong links with the city and the decision makers there. The visit was very successful in progressing my work in leading on the Ireland for Finance strategy to develop the international financial services sector in Ireland.
118. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 42 of 10 April 2024, his plans for the phasing out of the help-to-buy scheme; and if he will make a statement on the matter. [22680/24]
View answerThe Help to Buy Scheme was introduced in 2017 with the purpose of assisting first-time buyers with the deposit required to purchase or self-build a new house or apartment to live in as their home. The relief is only available in respect of new builds, with a view to increasing the supply of new housing and stimulating demand.
The Help to Buy scheme has been a significant support for first time buyers of new homes. To 1 May 2024, the most recent data available, some 46,599 first-time buyers, either singly or as part of a couple, have benefited from the scheme.
As the Deputy is aware, Finance Act 2023 extended the Help to Buy scheme for a further year to the end of 2025. The scheme was also amended to enhance its interaction with the local authority affordable purchase scheme. This amendment will enable the use of the affordable dwelling contribution received through the affordable purchase scheme for the purposes of calculating the 70% loan to value requirement, thereby facilitating access for a greater number of affordable purchase scheme purchasers to the Help to Buy scheme.
The Deputy has previously raised concerns regarding the potential that the scheme may exacerbate housing prices, and, as has previously been stated, policy makers were aware at the time that the scheme was being developed that it was not without risk. Likewise, they were aware that there was a danger that, against a background of constrained supply, the initiative could serve to increase prices for new homes, thus potentially undermining to some extent the affordability aspiration of the scheme. However, on all occasions when the matter was formally examined to date, concerns in this regard were not borne out by the review data.
Studies carried out by Indecon Economic consultants found that the main driver of house prices was the mismatch between supply and demand rather than the existence of the scheme. Similarly, the review by Mazars in 2022, found that there is no definitive evidence that Help-to-Buy pushed up the price of new houses. In fact, Mazars found that the prices paid for new homes by people who received the Help to Buy relief were slightly lower than new house prices in the economy in general, likely because of the €500,000 price eligibility cap.
There have been some significant changes in the market even since the Mazars report on the scheme was published. The increase in interest rates in the intervening period means that further stability and certainty is needed for first time buyers who may now face higher mortgage interest rates. I decided that now is not the time for the withdrawal of supports for those purchasers. The extension of the Help-to-Buy for a further year to 31 December 2025 takes account of the need for certainty in the market pending the increase in new housing supply envisaged by the Government’s Housing for All strategy.
As I indicated on Budget Day, I confirm that the Help to Buy scheme will continue to be examined to see if any additional changes are necessary.
119. Deputy James O'Connor asked the Minister for Finance the number of help-to-buy claims approved in Cork since 1 July 2020, along with the number of applicants associated with these claims; and if he will make a statement on the matter. [22687/24]
View answerThe Help to Buy (HTB) scheme is administered by Revenue to assist first-time buyers with buying or building a new house or apartment. The scheme gives a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid in the State over the previous four years, subject to qualifying criteria outlined in the legislation.
In the July 2020 stimulus plan, the scheme was amended so that the level of support available to first-time buyers was increased to the lesser of €30,000, increased from €20,000, or 10%, increased from 5%, of the purchase price of a new home or self-build property; or the amount of income tax and deposit interest retention tax paid in the four years before the purchase or self-build. The scheme was extended in its enhanced form in Budget 2021. The HTB scheme was extended in the Finance Act 2022 for a further two years to the end of 2024, and again in Finance Act 2023 for a further year to the end of 2025.
Applications for the HTB scheme may be made on a provisional basis as first-time buyers seek to clarify their entitlements in advance of commencing the purchase of a property. An application will only progress to the claim stage if and when the applicant decides to purchase a property that is eligible for the scheme. It is at the claim stage that the property address details become available.
I am advised by Revenue that the number of HTB claims approved since 1 July 2020, with an address in County Cork is 4,094, and the number of applicants associated with these claims is 7,519. These figures include data in relation to both purchases and self-builds.
