Alan Dillon
Question:183. Deputy Alan Dillon asked the Minister for Finance if consideration will be given to an issue (details supplied); and if he will provide an update on the matter. [29097/24]
View answerTax Code
Questions (183)
Written answers
I am advised by Revenue that under general charging rules in Ireland, the extent to which a taxpayer is liable to tax on his or her US-sourced income depends on his or her residence and domicile position for Irish tax purposes. An individual who is resident and domiciled for Irish tax purposes is liable to Irish income tax on their worldwide income. An individual who is resident, but not domiciled, for Irish tax purposes is liable to Irish income tax on Irish-sourced income, but a liability to tax will only arise on their foreign sourced income only to the extent that this income is remitted to the State. This is known as the remittance basis of taxation.
Further information regarding the above is available at the following link: www.revenue.ie/en/jobs-and-pensions/tax-residence/index.aspx.
Therefore, the extent to which the payments are chargeable to Irish income tax depends on the residence and domicile position of the taxpayer. The taxpayer may, however, be able to claim relief from double taxation under the Ireland-US Double Taxation Treaty (DTT) in respect of income that has been subject to tax in both jurisdictions.
I am further advised by Revenue that section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign pensions which are paid to Irish resident taxpayers. Where these pensions are disregarded for income tax purposes in the hands of a resident of the country of source (in this case the USA), they are also disregarded for income tax purposes in this State, provided the country of source has a similar income tax system to Ireland. This means that, in general, if a USA pension (for example an occupational pension) is not subject to tax in the USA, then it will not be subject to Irish Income Tax.
There is an exception to this general rule in relation to United States social security pensions, which are excluded from the scope of the section. The specific treatment of United States social security pensions is dealt with under Article 18(1)(b) of the Ireland-US DTT. The DTT provides that United States social security pensions paid to Irish residents are exempt from tax in the United States, but are subject to tax in Ireland. Revenue guidance material on section 200 is available in Tax and Duty Manual Part 07-01-09 Certain Foreign Pensions, which is available on Revenue’s website - www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-07/07-01-09.pdf.
Without further specifics, the foregoing is a general overview of the position based on the information provided.
Currency Circulation
Questions (184)
Marc MacSharry
Question:184. Deputy Marc MacSharry asked the Minister for Finance if legislation will be introduced to allow consumers the continued option to pay for services in cash (details supplied); and if he will make a statement on the matter. [29101/24]
View answerWritten answers
In June 2023, the terms of reference for a National Payments Strategy (NPS) were published, and work on the NPS has commenced. The work of the NPS will take account of the changing payment landscape and ongoing legislative developments at EU level, including proposals on instant payments, payment services, legal tender and the digital euro. Access to cash and acceptance of cash are also being examined as part of this work.
The Department of Finance sought views from across Irish society though a public consultation. A Consultation Paper on the NPS was prepared to guide the discussion and is available on the Department’s website, consult.finance.gov.ie/en. The Consultation Paper has three main areas of focus:
• Payments roadmap
• Acceptance of cash
• Access to cash [the development of the access to cash legislation is a separate work stream]
The consultation process closed on 14 February 2024 and the responses to the public consultation will form an important part of the NPS. A summary of the submissions was published on the Department’s website and can be found here : www.gov.ie/en/publication/ebcb3-national-payments-strategy-public-consultation-summary-of-submissions/.
Specifically, in relation to cash acceptance, there is a need to ensure that cash can be accepted as a means of payment where appropriate. The NPS work will, therefore, look at the acceptance of cash and consider if legislation should be introduced to require certain sectors or sub-sectors to accept or facilitate the acceptance of cash.
At the same time, I and the Government are mindful of developments in the European Union. In June 2023, the European Commission published a proposal for a Regulation on the legal tender of euro banknotes and coins. In October 2023, the European Central Bank provided its opinion on the proposal, and in the European Parliament, a draft report on the proposal was tabled in January 2024. The proposal has been considered by a Working Party of the Council of the European Union, representing ministers of the Member States, at a number of meetings. The most recent meeting of the Working Party on the proposal took place in June 2024.
Credit Availability
Questions (185)
Claire Kerrane
Question:185. Deputy Claire Kerrane asked the Minister for Finance the reason financial institutions are refusing credit to self-employed persons as per changes to the Credit Register; when these rules changed; the way they were changed; the lookback period for credit now used; what this means for small businesses trying to access finance where they ran into difficulty during the economic recession through no fault of their own but restored their business, paid off loans and have no such loans outstanding today and yet, cannot access credit; and if he will make a statement on the matter. [29178/24]
View answerWritten answers
The Central Credit Register (CCR) is established by the Central Bank under the Credit Reporting Act 2013. The Act provides that lenders must submit personal and credit information to the CCR on all loans for €500 or more, and make an enquiry on the CCR when considering a loan application for €2,000 or more.
Credit information submitted by lenders in respect of new loan applications is held on the CCR for a period of 6 months from the date on which the information is entered on the register and credit information submitted by lenders in respect of loan agreements is held on the register for a maximum period of 5 years at any given time. Where all liabilities under the loan agreement have been discharged, the credit information is held on the register for a period 5 years after the loan is discharged.
It should be noted that the information from the CCR forms part of the range of information available to lenders when making credit decisions. However, it does not provide guidance, or contain a recommendation or outline a prohibition for lenders on the decision they should make on a particular application for credit. Subject to complying with applicable law and regulatory requirements, it is a matter for lenders to make their own lending decisions in accordance with their own credit policies and risk appetites.
It is important that SMEs have appropriate access to credit any my Department monitors this area of credit activity. Since 2011 my Department has published the SME Credit Demand Survey which is the most comprehensive survey of its kind, covering over 1,500 respondents through in-depth discussions and capturing a full picture of the SME landscape in Ireland, with micro, small and medium-sized enterprises accurately represented as per the percentage make-up of SMEs in Ireland.
Regarding the demand for credit, the latest Survey published on 25 April 2024 shows that of the SMEs surveyed, 18% applied for bank credit in 2023, broadly unchanged over recent years. The majority of those not applying stating they had sufficient internal funds (76%). Over the last decade, the share of SMEs applying for bank finance has fallen by around half, from 35% to 18%.
In relation to those businesses refused credit, the Credit Review Office (CRO) was established in 2010 to ensure viable SME and Farm businesses have access to credit from Irish banks (AIB, BOI, PTSB). It provides an independent appeals process, reviewing credit and loan applications of up to €3m refused by the banks.
Appeals can review new credit applications, existing facilities that have been reduced or withdrawn and requests to restructure a credit facility. The CRO also operates an informal “Help Line” service where the Reviewers engage directly with SMEs/farmers who have credit/banking related issues providing information and updates.
From its inception in April 2010 to end December 2023, the CRO has received 1,368 applications, with 970 reaching a final conclusion. The CRO upheld the appeals of 60% of those businesses and farms that completed a review through them resulting in the banks providing credit of €82.4m to SMEs and Farms.
A further 46 applications seeking €7m were withdrawn during the appeal process and approved by the banks. Where credit applications cannot be supported at the time of the appeal, the outcome of the review will generally include a suggested roadmap to make future bank applications more likely to succeed.
Question No. 186 answered with Question No. 179.
Artificial Intelligence
Questions (187)
Peadar Tóibín
Question:187. Deputy Peadar Tóibín asked the Minister for Finance if his Department has ever used artificial intelligence, such as ChatGPT, in drafting Dáil speeches or responses to Parliamentary Questions; and if he will make a statement on the matter. [29278/24]
View answerWritten answers
I can confirm for the Deputy that the Government approved Interim Guidelines for the Use of Artificial Intelligence (AI) in the Public Service earlier this year. In doing so, the Government recognised the opportunities AI presents to help improve the delivery of public services to our citizens. These guidelines also established that AI tools used in the civil and public service must comply with seven key requirements for ethical AI.
My Department follows advice from the National Cyber Security Centre (NCSC) released in June 2023. This advice set forth not to use GenAI to generate responses to correspondence such as Parliamentary Questions or public representations; nor to rely on GenAI to assist in designing or drafting Government policy. The NCSC guidance also recommended that new technology should only be adopted based on a clearly defined business need following an appropriate risk assessment.
As such, I can confirm that access to GenAI tools is blocked by my Department’s IT provider.
Departmental Equipment
Questions (188)
Peadar Tóibín
Question:188. Deputy Peadar Tóibín asked the Minister for Finance the number of laptops or mobile phones owned by his Department that have been lost or stolen in each of the past ten years. [29296/24]
View answerWritten answers
I can confirm to the Deputy that my Department takes cyber, network and data security extremely seriously. All members of staff issued with a Department-owned laptop or mobile phone must confirm their acceptance of the department’s laptop and mobile phone policies. These policies require staff to inform our IT providers immediately if their Department issued laptop or mobile phone has been lost or stolen. Staff are also advised to report the event to relevant policing authorities. My Department and IT provider follow relevant guidance from the National Cyber Security Centre (NCSC) on mobile device management for public sector bodies and mobile device security.
The number of lost or stolen devices as reported by my department’s IT provider in each of the past ten years is as follows:
|
Laptop |
Laptop |
Mobile Phone |
Mobile Phone |
|
|
Year |
Lost |
Stolen |
Lost |
Stolen |
|
2024 |
0 |
0 |
1 |
1 |
|
2023 |
1 |
0 |
0 |
0 |
|
2022 |
0 |
1 |
2 |
0 |
|
2021 |
0 |
0 |
1 |
0 |
|
2020 |
0 |
0 |
1 |
0 |
|
2019 |
0 |
0 |
5 |
0 |
|
2018 |
0 |
0 |
2 |
0 |
|
2017 |
0 |
0 |
1 |
1 |
|
2016 |
0 |
0 |
3 |
0 |
|
2015 |
0 |
0 |
0 |
0 |
Primary Medical Certificates
Questions (189, 213)
Carol Nolan
Question:189. Deputy Carol Nolan asked the Minister for Finance when the criteria for accessing a primary medical certificate will be updated; if he will accept that the current approach is not fit for purpose; and if he will make a statement on the matter. [29309/24]
View answer
Aindrias Moynihan
Question:213. Deputy Aindrias Moynihan asked the Minister for Finance what changes are being considered under the disabled drivers and disabled passengers scheme to ensure that the scheme is replaced with a needs-based, grant-led approach; and if he will make a statement on the matter. [29713/24]
View answerWritten answers
I propose to take Questions Nos. 189 and 213 together.
The Deputies should note that my Department and I share concerns that the Disabled Drivers and Disabled Passengers Scheme (DDS) is no longer fit-for-purpose and believe it should be replaced with a needs-based, grant-led approach for necessary vehicle adaptations that could serve to improve the functional mobility of the individual.
However, this is very much a matter for Government as whilst my Department has oversight of the DDS, I do not have responsibility for disability policy.
As the Deputies are aware the National Disability & Inclusion Strategy (NDIS) Transport Working Group recommended that the DDS be replaced with a modern, fit-for-purpose vehicular adaptation scheme. This is in line with the general view that we need to move away from a medical criteria-based approach to a needs-based approach.
Under the aegis of the Department of Taoiseach officials from relevant Departments and agencies are meeting to discuss the issues arising from the NDIS report including how the DDS can be replaced.
The Department of Finance submitted a note to the group with my predecessor's approval in mid-January 2024. This note outlines a proposal for a replacement scheme for the DDS which would be a needs-based, grant-led approach for necessary vehicle adaptations. Further consideration is being given to this matter through the establishment of sub-group of the Department of Taoiseach working group. This sub-group will start its work shortly and is expected to report in the Autumn.
Fiscal Policy
Questions (190)
Jim O'Callaghan
Question:190. Deputy Jim O'Callaghan asked the Minister for Finance the action taken to ensure sustainable public finances since July 2020; and if he will make a statement on the matter. [29315/24]
View answerWritten answers
Reflecting both the wider economic recovery and the success of Government fiscal policy, our public finances have rebounded strongly despite facing a number of unprecedented challenges, including Brexit, a global pandemic and the energy price shock. The steady growth in income tax and VAT revenues have been a clear indicator of the fundamental resilience of our economy.
However, as Government has repeatedly warned, the headline fiscal position remains exposed to volatile corporation tax receipts. The strong performance of this revenue stream has increased the risk of relying on ‘windfall’ revenues, i.e. receipts not linked to the domestic economy, to fund permanent expenditure commitments.
The inherent volatility of this highly concentrated tax base has been apparent over the last number of months, with volatile year-on-year swings, in both directions, seen in several key payment months.
Government has taken steps to address the risks around ‘windfall’ corporation tax revenues. The establishment of two new long-term investment vehicles, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, will enable Government to invest windfall receipts to help prepare for future fiscal challenges while, at the same time, helping to ensure that they are not used to funding permanent spending.
Ultimately, of course, the best way to ensure the sustainability of the public finances is to maintain a sensible and balanced budgetary strategy.
Banking Sector
Questions (191)
Jim O'Callaghan
Question:191. Deputy Jim O'Callaghan asked the Minister for Finance the measures taken to ensure a strong retail banking sector since July 2020; his assessment of the impact of these measures; and if he will make a statement on the matter. [29316/24]
View answerWritten answers
The critical importance of a stable and viable retail banking sector for the Irish economy has been, and continues to be, a key priority for Government and for my Department.
It was for this reason that Minister Donohoe commissioned the Retail Banking Review in late 2021 following on from the widespread changes in the sector over the previous several years, culminating in the decisions by Ulster Bank and KBC to exit the Irish market. The Review, which was conducted by officials in the Department with assistance from other Government agencies and Departments and was published in November 2022, made a wide range of recommendations to improve the sector and customers' experiences. Each recommendation identified the body or bodies responsible for delivery of that recommendation and, where appropriate, contain timelines for delivery of the recommendations. The implementation of the recommendations that are directed at the Banking Division in my Department were embedded in the business plans in 2023/2024.
The recommendations addressed critical matters such as access to cash, ongoing support for SME lending, developing a financial literacy strategy and preparing a new national payments strategy. Work on all these is ongoing.
With regard to access to cash, the General Scheme of the Finance (Provision of Access to Cash Services) Bill 2024 was published in January 2024, and drafting of the Bill is nearly complete and I expect to be bringing it to Government shortly to seek approval to publish. The key objective of the Bill is to ensure that the future evolution of our cash infrastructure is managed in a fair, transparent and equitable manner that meets the needs of society.
This Bill will also address a number of other issues recommended in the Review including the supervision of ATM deployers and cash-in-transit providers and it will introduce a requirement that the Central Bank has to prepare cost benefit analyses, when making regulations under section 17A of the Central Bank Reform Act 2010 and Section 48 of the Central Bank (supervision and Enforcement) Act 2013, that consider the potential impacts on customers and fair competition in the financial markets in the State.
In line with the Review's recommendation, the Department is leading the development of a national financial literacy strategy to fulfil certain OECD obligations. The aim of the strategy is to develop a sustained, coordinated approach to financial literacy. On 19 April last, the Department published a mapping report on the development of the strategy and I hosted a stakeholder event on 5 July and approximately 91 public and private sector organisations participated in the stakeholder event representing industry, education, civil society and Government Departments and agencies. The event provided stakeholders with the opportunity to share their views on priorities for, and potential stakeholder contributions to, the national strategy. It is anticipated that the final National Financial Literacy Strategy will be published by the end of 2024.
In addition, the Strategic Banking Corporation of Ireland’s ongoing mission is to deliver financial supports to Irish SMEs that address failures in the Irish credit market, while driving competition in the lending market and it has done so through a variety of schemes since 2020. Through providing an 80% guarantee from the State, they partner with on-lenders from the financial services industry which are responsible for the final 20% liability, encouraging competition in the banking sector and lower-cost lending to SMEs to an extent and scale that would not have been possible without the SBCI’s intervention. Schemes currently open for applications are the Ukraine Credit Guarantee Scheme (UCGS), the Growth and Sustainability Loan Scheme (GSLS) and the Home Energy Upgrade Loan Scheme (HEULS).
In terms of work ongoing between my Department and the Central Bank of Ireland, the Retail Banking Review report contained a number of important recommendations and implementation of several of the recommendations requires close collaboration between the Department of Finance and the Central Bank. These include preparing a new payment strategy to ensure that consumers have access to the services they require in the future. The Central Bank is working with the Department of Finance and supporting this work by allocating resources and providing ongoing technical advice. The National Payment Strategy will be published this year.
The Review also made a number of recommendations concerning consumer protection which complement the Central Bank's review of the Consumer Protection Code, including those relating to branch closures and services. The Central Bank launched a review of the Consumer Protection Code (the Code) in October 2022, ensure that the Code remains fit for purpose as consumer needs change and new technology-driven products and services are brought to market. The review examines the role of consumer protection in supporting a well-functioning financial system and the importance of key aspects such as high-quality regulation, transparency, and appropriate levels of competition supported by innovation, a flow of new entrants and ease of switching between products and providers.
The Central Bank consulted on proposals to evolve their approach to helping innovation in late 2023. These proposals included:
• Enhancing an Innovation Hub to deliver deeper, clearer and more informed engagement with the innovation ecosystem.
• Establishing an Innovation Sandbox Program, which will involve informing the early stage development of selected innovative initiatives (which are consistent with public policy objectives) by providing regulatory advice and support within the program.
The outcome of the consultation the reflects a positive endorsement of the enhancements underway in the Innovation Hub and clear support for the Central Bank’s proposal to create an Innovation Sandbox Programme.
I am informed that the Central Bank will continue to drive the enhancement of the Innovation Hub as outlined above, to facilitate deeper engagement with innovators and that these enhancements have already begun with the launch of the updated structured engagement process with the Innovation Hub and a refreshed Innovation Hub website page now live. Additional website content will be added throughout 2024 and beyond.
Based on the feedback received, as part of the consultation process, the Central Bank will establish and deliver the Innovation Sandbox Programme in 2024, which aims to provide regulatory advice and support for innovative projects and firms. The programme will take a thematic approach and prioritise innovations that promote better outcomes for consumers and the financial system. I am informed that the Bank intend to issue a call for potential participants in Quarter 3 2024.
Looking to work ongoing in terms of the EU, Ireland is actively participating in the negotiations of several EU legislative proposals which will help ensure a strong retail banking sector in Ireland. The second Payments Services Directive is being strengthened by the third Payment Services Directive (PSD3) and a new Payment Services Regulation (PSR). Under these proposals a number of new measures will strengthen the retail banking sector both in Ireland and the wider EU by growing the open banking industry, fighting the rising incidents of authorised payment fraud, and increasing the harmonisation of payments regulation across the EU. Also under negotiation is the proposal for a regulation on the establishment of a digital euro, which will offer consumers an addition option when they go to pay.
In addition to the active EU legislative proposals outlined above, my officials are working on transposing several pieces of EU legislation that will strengthen the retail banking sector. The Instant Payments Regulation will require all banks/PSPs to offer instant payments to their users - this measure is especially beneficial for Ireland as currently no major Irish bank offers instant payments.
Another piece of EU legislation which is currently being transposed is the Digital Operational Resilience Act (DORA). DORA will strengthen the IT security of financial entities including Irish retail banks ensuring that Europe’s financial sector will be resilient against operational disruptions, the measures taken in DORA are of key importance given the increasing digital footprint of Ireland's retail banking sector. DORA will strengthen the Irish retail banking sector in the area digital operational resilience. DORA entered into force on 16 January 2023 and will apply as of 17 January 2025.
Finally, the Central Bank (Individual Accountability Framework) Act 2023 significantly enhances the powers of the Central Bank to ensure that regulated financial service providers and those working for them act in the best interests of consumers. The Individual Accountability Framework will drive positive changes in terms of wider banking culture, and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles. It gives the Central Bank the regulatory tools necessary to ensure that consumers dealing with financial service providers in Ireland can be confident that their best interests will be protected. The success of the Framework will not be measured by more enforcement, but by less need for enforcement, as firms and individuals take greater responsibility for the running of organisations. The Act ultimately seeks to improve the culture of the financial sector and boost public trust in it.
Legislative Measures
Questions (192)
Cathal Crowe
Question:192. Deputy Cathal Crowe asked the Minister for Finance if he will update legislation in terms of vulture fund repossession of homes and, more immediately, order a complete cessation of any possession proceedings in the interim period given recent High Court rulings; and if he will make a statement on the matter. [29328/24]
View answerWritten answers
Legislation relating to the enforcement of security, the Land and Conveyancing Law Reform Act 2009 is a matter for my colleague the Minister for Justice.
Anyone who is experiencing difficulties dealing with debt, including mortgage debt, should contact the Money Advice and Budgeting Service (MABS). MABS offers free impartial advice on dealing with debt.
I would also highlight to the Deputy that there is a robust framework in place to protect people who are dealing with issues such as arrears on mortgages. The Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s consumer protection framework and is a key part of the Central Bank’s mortgage arrears framework.
The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.
The objective of this statutory Code is to ensure that regulated entities have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears. Due regard must be given to the fact that each case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.
Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm. The CCMA does not prescribe the solution which must be offered. The CCMA includes requirements that alternative repayment arrangements must be appropriate and sustainable and based on a full assessment of the individual circumstances of the borrower.
This framework requires lenders to exhaust the options available from the suite of alternative repayment arrangements offered by them before taking action which may result in borrowers losing their home (whether by voluntary sale or repossession).
The CCMA also requires regulated entities to have an appeals process in place to enable a borrower appeal a decision by a regulated entity, including where the borrower is not willing to enter into an alternative repayment arrangement or where the regulated entity declines to offer an alternative repayment arrangement. The appeals procedure must inform borrowers of their right to refer the matter to the Financial Services and Pensions Ombudsman (FSPO).
In relation to repossessions, consumers continue to benefit from the protections contained in the Code of Conduct on Mortgage Arrears (CCMA). Provision 56 of the CCMA provides that a regulated entity may only commence legal proceedings for repossession of a borrower’s primary residence where the regulated entity has made every reasonable effort under the CCMA to agree an alternative repayment arrangement with the borrower or his/her nominated representative, and the specific timeframes set out in the CCMA have been adhered to or the borrower has been classified as not co-operating and notified in accordance with the CCMA.
Finally, as the Deputy will be aware, I cannot comment on cases which are before the Courts.
Social Insurance
Questions (193)
Pearse Doherty
Question:193. Deputy Pearse Doherty asked the Minister for Finance if the revenue raised from now legislated increases in PRSI in each of the years 2024 to 2028 are included in the revenue projections for the years 2025, 2026, 2027 and 2028 under the Stability Programme Update; and if he will make a statement on the matter. [29329/24]
View answerWritten answers
The general government revenue for the Stability Programme Update 2024 includes projections for the years 2024 to 2027, and the year 2028 is not part of the forecasted period.
The government decision to increase the PRSI rate is included in the SIF revenue forecasts and therefore in the general government revenue projections.
The increases of the PRSI rates will be effective from 1 October in the respective years.
Tax Code
Questions (194)
Steven Matthews
Question:194. Deputy Steven Matthews asked the Minister for Finance further to Parliamentary Question No. 181 of 2 July 2024, the position regarding the income threshold for the exemption limit to deposit interest retention tax (details supplied); if this can be reviewed to allow for greater flexibility for those that are marginally above that level of income; and if he will make a statement on the matter. [29432/24]
View answerWritten answers
It is assumed that the Deputy is referring to the exemption from Deposit Interest Retention Tax (DIRT) for taxpayers aged 65 years or over, subject to certain exemption limits.
As the Deputy will be aware, where an individual is aged 65 years or over, and their total income does not exceed the annual exemption limit of €18,000, interest may be received without paying DIRT. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000 per annum.
Marginal relief is available in such situations where the individual’s income exceeds the exemption limit but is less than twice that amount. Where marginal relief applies the individual is taxed at 40% on all income above the exemption limit to a ceiling of twice the exemption limit. The system of marginal relief ensures that in cases where an individual's income rises above the exemption threshold that their net income will not decline, as the 40% income tax rate only applies to the proportion of income above the threshold. 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 entitled to the benefit of the more favourable treatment as between the use of marginal relief or the normal tax system of credits and bands. In circumstances where the individual no longer benefits from the age exemption or marginal relief they will benefit from the increases to the main personal tax credits in recent Budgets.
The increases to the main personal tax credits in Budget 2024 (€100 increase to the single, employee and earned income credits and a €200 increase to the credit for married couples/civil partnerships) means that the effective entry point to income tax has increased for all taxpayers, including those aged over 65. From 2024, the effective entry point to income tax for an individual in receipt of the single person credit, employee/earned income credit and the age credit has increased by €1,000 per annum from €18,975 to €19,975 per annum.
The Deputy may be aware that the Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to income tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, at the following link- www.gov.ie/en/publication/7fbeb-report-of-the-commission/.
As part of the Personal Tax Review published last year, my Department set out further analysis of the recommendations of the Commission on Taxation and Welfare, including in respect of the age exemption limits. The Report is available at the following link - www.gov.ie/pdf/?file=https://assets.gov.ie/273335/96f70eb1-64e1-4f02-9096-e36f306a048b.pdf#page=null. As a result I have no plans to increase the age exemption limits at present.
Tax Exemptions
Questions (195)
Colm Burke
Question:195. Deputy Colm Burke asked the Minister for Finance if he will raise the taxation exemption threshold for single persons and married couples aged 65 and over; and if he will make a statement on the matter. [29461/24]
View answerWritten answers
As the Deputy is aware, the age exemption applies for any year of assessment where an individual is aged 65 years or over and his or her total income does not exceed €18,000 per annum. Where an individual is a married person or civil partner and is jointly assessed to tax, the age exemption will apply where either individual is aged 65 or over and where the couple’s total income does not exceed €36,000 per annum. 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.
It is important to note that 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. The system of marginal relief ensures that in cases where an individual's or couple’s income rises above the exemption threshold that their net income will not decline, as the 40% income tax rate only applies to the proportion of income above the threshold. 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 entitled to the benefit of the more favourable treatment between the use of marginal relief or the normal tax system of credits and bands.
I have no plans to increase the age exemption limits. However, it should be noted that in circumstances where the individual or couple no longer benefits from the age exemption or marginal relief they will benefit from the increases to the main personal tax credits in recent Budgets.
The increases to the main personal tax credits in Budget 2024 (€100 increase to the single, employee and earned income credits and a €200 increase to the credit for married couples/civil partnerships) means that the effective entry point to income tax has increased for all taxpayers, including those aged over 65. From 2024, the effective entry point to income tax for an individual in receipt of the single person credit, employee/earned income credit and the age credit has increased by €1,000 per annum from €18,975 to €19,975 per annum.
It is important to take into account that the current tax arrangements for persons aged 65 or older compare favourably with the tax treatment of the generality of taxpayers. 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 per annum. Social welfare income such as the State Contributory Pension and State Non-Contributory Pension are excluded from the calculation when determining if an individual’s income has exceeded the €60,000 income threshold. Furthermore, the State Contributory Pension and the State Non-Contributory Pension are not chargeable to USC or Pay Related Social Insurance.
The Commission on Taxation and Welfare recommended that age should be removed as a factor for determining the charge to income tax and USC. The report stated that the determination of an individual’s tax treatment based on age narrows the base and breaches the concept of horizontal equity, whereby those with similar income should pay the same proportion of that income in taxes. It also breaches the concept of intergenerational equity. Further details are set out in the Report of the Commission, at the following link - www.gov.ie/en/publication/7fbeb-report-of-the-commission/.
Finally, as part of the Personal Tax Review published on Budget Day last year, my Department set out further analysis of the recommendations of the Commission on Taxation and Welfare, including in respect of the age exemption limits. The Report is available at the following link - www.gov.ie/pdf/?file=https://assets.gov.ie/273335/96f70eb1-64e1-4f02-9096-e36f306a048b.pdf#page=null
Tax Reliefs
Questions (196)
Seán Canney
Question:196. Deputy Seán Canney asked the Minister for Finance if he will reverse the proposed cap of €10 million, due to come into force on 1 January 2025, on retirement relief under the capital gains tax relief for a business being passed onto a child, as the cap will pose an existential threat to the viability of many family businesses; and if he will make a statement on the matter. [29505/24]
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The Deputy's question refers to a relief commonly known as 'CGT Retirement Relief'. In particular the Deputy refers to the relief available under section 599 of the TCA 1997 which grants relief to individuals who dispose of qualifying assets used in the course of a business or farm trade to a child, as defined in the section. Currently unrestricted relief is granted on the disposal of such assets by individuals aged 55 to 65 and the relief is capped at €3 million for individuals aged 66 or over.
Finance Bill 2023 increased the age at which the current €3 million threshold applies, from 66 to 70, and introduced a limit of €10 million on the value of qualifying assets in respect of which relief is available where such assets are disposed of by individuals aged 55 to 69 to a child. The new €10 million limit is informed by the recommendations made by the Commission on Taxation and Welfare in respect of retirement relief in their report published in September 2022. The new age limits and the €10 million cap will apply to disposals made on or after 1 January 2025.
I understand the importance of ensuring the smooth intergenerational transfer of such businesses from one generation to the next so that they can continue to grow and contribute to the economy. I have asked my officials to engage with relevant stakeholders to discuss their concerns. I will further consider this matter once this engagement has concluded.
Tax Data
Questions (197)
Pearse Doherty
Question:197. Deputy Pearse Doherty asked the Minister for Finance the first and full-year costs of reducing the first rate of USC from 0.5 to 0 percent, reducing the second rate of USC from 2 to 0 percent and increasing the threshold to the third rate of USC from €25,760 to €45,000. [29532/24]
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The Department of Finance has opened its pre-budget costings service, this is available with effect from 1 July 2024. The procedures for availing of this service are set out in a letter dated 1 July 2024 from the Secretary General of the Department to all recognised parties and technical groups in Dáil Éireann. To ensure efficiency and fairness all costing requests should be made in this manner, via the standard request format template, instead of the Parliamentary Question system at this time.
Question No. 198 answered with Question No. 179.