Written Answers Nos. 101-120
101. Deputy Pauline Tully asked the Minister for Finance the status of the work that has been carried out to date in relation to a new modern, fit-for-purpose vehicle adaptation scheme to replace the mobility allowance and motorised transport grant that were both discontinued to new entrants in 2013; and if he will make a statement on the matter. [28632/24]
Amharc ar fhreagra116. Deputy Pauline Tully asked the Minister for Finance if he plans to increase the rates available to those eligible for the disabled drivers and disabled passengers scheme; and if he will make a statement on the matter. [28633/24]
Amharc ar fhreagraI propose to take Questions Nos. 101 and 116 together.
The Deputies should be aware 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 as endorsed by the NDIS Transport Working Group in February 2023.
The Deputy should note that the Mobility Allowance and Motorised Transport Grant are matters for the Department of Health, and therefore do not come within the policy remit of my Department. I cannot comment therefore on a replacement for such grant schemes as whilst my Department has oversight of the DDS, I do not have responsibility for disability policy.
I have no plans to make any changes to the DDS (including increasing the rates) as any changes would run counter to the National Disability & Inclusion Strategy (NDIS) proposals to replace the scheme in its entirety. 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.
In relation to the replacement of the DDS, a Senior Officials Group under the aegis of the Department of Taoiseach with officials from relevant Departments and agencies was established to discuss the issues arising from the NDIS report and to map a way forward. One of these issues which is being examined is how the DDS can be replaced. Four meetings of the group have been held, in July, November, December 2023; and March 2024.
The Department of Finance submitted a note to the group with the approval of my predecessor Minister Michael McGrath 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 that could serve to improve the functional mobility of the individual. This proposal is in line with what the NDIS Transport Working Group Report endorsed. Further consideration is being given to the principles and parameters for a new scheme in line with best international practice 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.
102. Deputy Jennifer Murnane O'Connor asked the Minister for Finance the action he is taking to ensure that there will be widespread nationwide availability of ATMs; and if he will make a statement on the matter. [28424/24]
Amharc ar fhreagra114. Deputy Willie O'Dea asked the Minister for Finance if it is his intention that criteria will be prescribed on a regional basis to require that a percentage of the population must be within a distance of no more than ten kilometres from an ATM; and if he will make a statement on the matter. [28430/24]
Amharc ar fhreagra119. Deputy Barry Cowen asked the Minister for Finance if he will ensure that there must be a minimum number of ATMs per 100,000 people; and if he will make a statement on the matter. [28428/24]
Amharc ar fhreagraI propose to take Questions Nos. 102, 114 and 119 together.
The Department of Finance's Retail Banking Review, published in November 2022, concluded that cash, despite a decline in its usage, remains an important element of the payments system and the broader economy and it is essential that cash remains readily available to customers through ATMs and other means across the country.
The Review recommended that the Department of Finance should develop Access to Cash legislation with the initial objective of developing criteria that would secure access to cash at about the levels prevailing in December 2022.
My predecessor published the General Scheme of the Finance (Provision of Access to Cash Services) Bill in 2024 with the objective of establishing a framework to ensure that the future evolution of cash infrastructure in the State will be managed in a fair, orderly, transparent, and equitable manner.
The Bill provides that the Minister for Finance shall prescribe criteria in respect of each of the eight NUTS3 regions in the State to require that:
• a specified percentage of the population must be within a distance of no less than five and no more than ten kilometres from an ATM;
• there must be a minimum number of ATMs per 100,000 people; and
• a specified percentage of the population must be within a distance of no less than five and no more than ten kilometres from “cash service points.” These are locations where cash can be lodged and withdrawn and where there is in-person assistance available. Bank branches, with cash services, and post offices satisfy this definition.
NUTS3 regions are a statistical unit of classification used by the European Union. These regions are: Border, West, Mid-West, South-East, South-West, Dublin, Mid-East, and Midlands.
The Bill also provides for the remedying of “local deficiencies.” These are locations within a NUTS3 region where particular difficulties arise in accessing cash.
The Central Bank will assess such cases and, where warranted, may require designated entities to address the issue. The Central Bank will prepare and publish guidance on local deficiencies prior to implementation of this provision.
The legislation will provide that the access to cash criteria can be amended by the Minister following a review of the criteria by the Central Bank. Reviews will have to be carried out following the publication of Census data or if cash demand drops by 15% in a calendar year compared to the previous year. Reviews may also be carried out at the request of the Minister or on the Central Bank’s own initiative.
In carrying out a review, the Central Bank must take must take account of a number of factors, including the level of cash demand, population changes, operational costs, and financial inclusion. These provisions ensure that the criteria can be adjusted in response to the demand for cash in the State, and will ensure that the framework being put in place is adaptable in relation to demand.
The Bill also brings ATM deployers and cash in transit providers within the regulatory perimeter of the Central Bank of Ireland. Currently, the Private Security Authority (PSA) is the competent authority for Cash-in-Transit (CIT) companies.
Similarly, the operation of ATMs is not a regulated activity and, as a result, there are no applicable codes or regulations. Under this legislation, independent ATM deployers will be required to register with the Central Bank, and the legislation will give the Central Bank the power to make regulations to prescribe requirements for all ATM operators in relation to reporting and service standards.
This includes hours of operation, withdrawal limits, banknote denomination stocking, outages, maximum downtime periods, and signage and communication requirements.
Both the Data Protection Commission and the European Central Bank have been consulted in relation to the legislation. The Data Protection Commission noted that the Bill contains the necessary safeguards regarding any publication of personal data.
The European Central Bank welcomed the core objectives of the legislation, provisions for local deficiencies, and provision for service standards, among other elements.
Drafting of the Bill is nearly completed and I intend to seek Government approval to publish the Bill in the coming weeks.
106. Deputy Alan Farrell asked the Minister for Finance to provide an update on his recent engagement with ECOFIN meetings; and if he will make a statement on the matter. [28222/24]
Amharc ar fhreagraThe Deputy will appreciate that I am answering this question on behalf of the former Minister for Finance, Michael McGrath.
On Thursday 20th June, Minister McGrath travelled to Luxembourg to represent Ireland at the June ECOFIN and Eurogroup meetings.
The meetings started with the Annual Meeting of the Board of Governors of the European Stability Mechanism (ESM) - Minister McGrath attended as the Irish Governor. The Board approved the 2023 ESM Annual Report, including the ESM’s financial statements, and discussed the main developments and key activities of the ESM over the past year.
Following the ESM meeting, Minister McGrath joined his euro area colleagues at Eurogroup on Thursday afternoon. Eurogroup started with a stock-take on the international role of the euro before a discussion on the regular IMF review of euro area policies. Moving into Eurogroup inclusive format, Minsters had a discussion on euro area competitiveness with a focus on the role of industrial policy and market integration.
On Friday morning, Minster McGrath attended a meeting of the Board of Governors of the European Investment Bank (EIB), where, amongst other things, the Board formally endorsed the EIB Group Strategic Roadmap.
This was followed by the ECOFIN working breakfast where Ministers considered the general economic outlook and received a debrief on discussions at Eurogroup the previous day.
The formal ECOFIN then began with an exchange of views on the economic and financial impact of Russia’s aggression against Ukraine. Ministers looked at new proposals for supporting Ukraine including the proposals from the G7 to make additional funds available by leveraging the extraordinary revenues stemming from the immobilisation of Russian sovereign assets.
This was followed by the European Commission presenting the 2024 European Semester Spring Package. The package includes country-specific recommendations, which provide guidance to Member States on their economic, social, employment, structural and macroeconomic policies, and an assessment of Member States’ macroeconomic imbalances. Importantly, the Commission confirmed Ireland's continued compliance with the debt and deficit criteria of the EU's fiscal rules.
The Commission also updated Ministers on the state of play of the implementation of the Recovery and Resilience Facility (RRF). Under this item, the Council adopted of an implementing decision approving Ireland’s modified national recovery and resilience plan (NRRP). The modified NRRP includes our new REPowerEU chapter which will make a valuable contribution to the green transition here in Ireland.
Ministers then had a further discussion of the ‘VAT in the digital age’ package (referred to as ‘ViDA’), which looks at updating VAT frameworks to account for the increased digitalisation of our economies.
It was a full and productive two days that gives a good snapshot of the wide variety of issues that go through the ECOFIN Council formation, along with the variety of different meetings which take place around the main ECOFIN meeting.
107. Deputy Pearse Doherty asked the Minister for Finance if he will commit to postponing scheduled increases in the carbon tax in light of the cost-of-living pressures that households continue to face; and if he will make a statement on the matter. [28567/24]
Amharc ar fhreagraThe Government is conscious of the implications of fuel costs for all sectors of society. This is reflected in the fact that in 2022, in light of the acute impact rising prices were having on households and businesses, the Government provided for temporary cuts in excise rates which, inclusive of VAT amounted to 21 cents, 16 cents and 5.4 cents per litre on petrol, auto-diesel and marked gas oil, respectively.
These temporary cuts to excise rates were initially due to end on 31 August 2022, but following review and monitoring of fuel prices, were extended until February 2023, with a phased restoration of rates occurring in June and September 2023. A final restoration of excise rates was due to take place on 31 October 2023, but Budget 2024 provided for further extension until 31 March 2024, with phased restoration occurring in April and August 2024. The first of these restorations took place on 1 April 2024 adding 4 cent per litre to petrol, 3 cent to auto diesel and 1.7 cent to MGO.
Carbon tax rate increases on petrol and auto-diesel are legislated to occur on 9 October 2024 when the rate of carbon tax will increase from €56 to €63.50 per tonne of carbon dioxide emitted. This will add 2.1 cent per litre of petrol and 2.5 cent per litre of auto diesel, VAT inclusive. Carbon tax increases are implemented annually under the 10-year carbon tax trajectory that was introduced in Finance Act 2020. The 2020 Programme for Government committed to increasing the amount that is charged per tonne of carbon dioxide emissions from fuels to €100 by 2030, and the 10-year trajectory of carbon tax increases delivers on that commitment. The commitment also features as one of the nine reform measures in Ireland’s National Recovery and Resilience Plan.
It is important to note that a significant portion of carbon tax revenue is allocated for expenditure on targeted welfare measures and energy efficiency measures, which not only support the most vulnerable households in society but also in the long term, will mitigate fuel price impacts by reducing our reliance on fossil fuels.
In the long run the best way to protect Ireland from the impact of international fossil fuel prices is to reduce our dependence on them. We will achieve this through the progressive decarbonisation of Irish society and through the steps that will be taken to meet the Government’s commitment to reach net zero greenhouse gas emissions by 2050. The carbon tax has an important role to play in this area, therefore the Government has no plans to postpone scheduled increases.
109. Deputy Brendan Smith asked the Minister for Finance if the Revenue Commissioners have been engaging with farmers and farming organisations in relation to VAT requirements; and if he will make a statement on the matter. [28622/24]
Amharc ar fhreagra121. Deputy Michael Moynihan asked the Minister for Finance his plans to review the VAT treatment of farmers; and if he will make a statement on the matter. [28505/24]
Amharc ar fhreagraI propose to take Questions Nos. 109 and 121 together.
The Deputy should note at the outset that the VAT treatment of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT Directive, farmers can elect whether or not to register for VAT in respect of their farming business, and each farmer’s decision on this matter affects how VAT incurred on their inputs is treated.
Under VAT law, farmers can avail of the Flat-rate Farmers Scheme and remain unregistered for VAT. The scheme allows unregistered farmers to add and retain a percentage charge (known as the “flat-rate addition”) onto the amount they invoice VAT-registered businesses whom they supply with agricultural goods and services in the course of their farming business.
However, in addition to the compensation for flat-rate farmers provided by the Flat-rate Scheme, Irish VAT law also permits flat-rate farmers to reclaim VAT they incur on some particular business expenditure, as set out in the 2012 Refund Order. The Refund Order is permitted under EU law, subject to certain conditions, including that its scope is not extended. This means that the order may not be altered to permit refunds of VAT incurred on farming business costs that are not currently provided for in the order.
I am advised by Revenue that they can only administer the refund order according to the legislation as enacted. Revenue will continue to monitor refund claims for new and innovative products as they are received but can only refund expenditure that is within the scope of the legislation.
Revenue has engaged with the farming sector on the VAT Refund Order (ICMSA and IFA). Revenue officials also attended the Joint Oireachtas Committee on Agriculture, Food and Marine on 8 May.
Following a review of submissions from the representative groups, Revenue published a Tax and Duty Manual on 4 June 2024 to provide guidance on the Refund Order. The manual outlines how VAT can be reclaimed under the Order, the conditions under which VAT may be reclaimed, the types of expenditure on which VAT can be reclaimed, and the information required to make a claim.
Finally, it should be noted that it is always open to a farmer to elect to register for VAT in respect of their farming business and claim a full deduction for the VAT they incur on their business costs, subject to rules on deducibility.
110. Deputy Richard Boyd Barrett asked the Minister for Finance whether in the forthcoming budget he will consider introducing a millionaires' tax on the wealthiest 5% of households, whose average wealth is in excess €4 million each, excluding family homes as progressive replacement for the local property tax; and if he will make a statement on the matter. [28564/24]
Amharc ar fhreagraThe Local Property Tax (LPT) was introduced in 2013 to provide a stable and sustainable funding base for local authorities and is a significant base-broadening measure. LPT has yielded over €5 billion since its introduction, with a yield of over €550 million for 2023.
LPT broadens the tax base and reduces the level of central funding required by local government, freeing up resources for expenditure in other areas. LPT is an essential source of funding for local authorities, accounting for approximately 7% of current income.
All property owners benefit from the essential local services LPT helps to fund. The proper functioning of these services benefit every community and household. Therefore, it is equitable that the cost of providing the services should be shared as broadly across property owners as possible.
In relation to replacing LPT with a tax on high-wealth households, the taxation of property through a recurring annual tax is less economically distortionary than tax imposed on either income or capital. The LPT provides a stable source of funding which is fair and progressive with the owners of the most valuable properties paying most. The tax is equitable, has reference to ability to pay, conforms to international norms and significantly broadens the domestic tax base.
For the reasons outlined, I do not plan to replace the LPT with a tax along the lines suggested by the Deputy.
It should also be noted that there are already a number of wealth taxes in place in Ireland, including the aforementioned Local Property Tax, Capital Gains Tax (CGT), and Capital Acquisitions Tax (CAT). 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.
112. Deputy Joe Flaherty asked the Minister for Finance if he will be introducing new tax measures to help hospitality businesses; and if he will make a statement on the matter. [28481/24]
Amharc ar fhreagraAs the Deputy will be aware, the 9 per cent VAT rate was applied on a temporary basis to the hospitality and tourism sectors until 31 August 2023 when it reverted to the 13.5 per cent rate. The 9 per cent rate was introduced on 1 November 2020 in recognition of the fact that the tourism and hospitality sectors were among those most impacted by the public health restrictions put in place throughout the pandemic.
The economic rationale for a VAT rate reduction at that time, as it was in 2011 when it was also reduced to 9 per cent, was to lower consumer prices, encouraging higher demand, more output and an increase in employment.
Despite facing numerous successive headwinds over recent years, the domestic economy has proven to be remarkably resilient. Looking ahead, as inflation eases, the real disposable income of households should recover and support consumer spending. As a result, households are on a stronger financial footing and this will support demand for contact-intensive services including the tourism and hospitality sectors.
In relation to employment, between the end of 2020 when the 9 per cent rate was re-introduced, and the final quarter of 2023, total economy-wide employment expanded from 2.3 million to reach a record high of 2.71 million, an increase of over 17 per cent. The Q4 2023 Labour Force Survey indicated that employment in the accommodation and food service sector stood at 183,000.
It is noteworthy that 14 EU countries have a VAT rate of 12 per cent or higher on food services. Our nearest neighbour Great Britain and Northern Ireland has a VAT rate of 20 per cent on food services.
It is important to remember that VAT reductions, even temporary VAT reductions, have a cost to the Exchequer. The estimated cost of the 9 per cent VAT rate for tourism and hospitality, from 1 November 2020 to 31 August 2023, was €1.2 billion. This represented a very substantial support by the Government to the hospitality and tourism related sectors.
The cost of a further temporary VAT reduction to 9 per cent for a full year is estimated to be €764 million. Even where the measure is restricted to food and catering services, the estimated full year cost is €545 million.
The Government wants to maintain a healthy and profitable environment for these sectors going forward. However, in making any decision in relation to VAT rates or other taxation measures, the Government must balance the costs of the measures in question against their impact and the overall budgetary framework.
The Deputy will also be aware that, on 5 February, my predecessor, Minister McGrath announced changes to the tax debt warehousing scheme including a reduction in the interest rate on warehoused debt to 0 per cent which, amongst other sectors, will assist businesses in the tourism and hospitality sectors.
The Government has provided significant support to business throughout the period of increasing costs and Budget 2024 contained a number of measures which will support businesses facing increased costs, including the Increased Cost of Business (ICOB) grant, which aims to provide financial support to small and medium sized businesses who operate from a rateable premises, at a cost of €257 million. The grant will be at a rate of half an enterprise’s commercial rates bill, for 2023, for firms paying up to €10,000 in rates. A flat €5,000 grant will be available to firms who pay between €10,000 and €30,000 in rates.
Broader supports for SMEs which were announced in Budget 2024 include the extension of the 9% VAT rate on gas and electricity from end-October 2023 to end-October 2024.
In addition, the Deputy may have noted the wide range of measures brought forward by my colleague, the Minister for Enterprise, Trade and Employment, announced on 15 May. Details of these measures can be found at the following link:
enterprise.gov.ie/en/news-and-events/department-news/2024/may/202405151.html.
Finally, the Deputy should note that any decisions about tax measures to help the hospitality sector is a matter for consideration as part of the Budget 2025 process.
113. Deputy Matt Shanahan asked the Minister for Finance to provide, in tabular form, a regional and county breakdown of the number of businesses who remain non-compliant with the debt warehousing scheme; if he has any concerns as to a disproportionate effect in terms of rural and regional economic fallout; and if he will make a statement on the matter. [23236/24]
Amharc ar fhreagraThe Tax Debt Warehousing scheme was introduced in May 2020 to provide a vital liquidity support to businesses impacted by Covid-19 trading restrictions. The scheme allowed businesses to temporarily ‘park’ eligible taxes on an interest-free basis, the vast majority of which related to VAT and payroll taxes deducted by employers from their employees. Warehouse customers had until 1 May 2024 to put a plan in place to address their warehoused debt prior to the scheme ending. However, Revenue is firmly committed to supporting viable businesses and has taken a flexible and pragmatic approach to the payment of warehoused debt.
On 5 June 2024, Revenue published its detailed statistical report on the scheme, which demonstrates the significant level of engagement with Revenue in the weeks leading up to the 1 May 2024 deadline. The report contains details on the 12,747 Phased Payment Arrangements agreed for €1.2 billion of warehouse debt, in addition to analysis of the 7,042 taxpayers who have been removed from the warehouse. The report is available at the following link:
www.revenue.ie/en/corporate/documents/statistics/registrations/covid-19-support-schemes/2024/warehouse-debt-statistics-030624.pdf.
A breakdown of these 7,042 taxpayers by county is set out in the table below, which shows that the non-compliant former warehouse cases are spread reasonably evenly across counties, with the larger urban areas having a larger share. This is in line with the geographical spread of the cases that availed of the scheme during the years when it was in operation and would not appear to suggest a disproportionate effect in terms of rural and regional economic fallout.
Taxpayers removed from the Tax Debt Warehousing scheme by county:
|
County |
No. of Taxpayers |
Relevant debt (€m) |
|
Carlow |
89 |
0.64 |
|
Cavan |
102 |
0.69 |
|
Clare |
149 |
2.11 |
|
Cork |
663 |
6.85 |
|
Donegal |
237 |
2.26 |
|
Dublin |
2,258 |
45.40 |
|
Galway |
404 |
7.28 |
|
Kerry |
186 |
1.78 |
|
Kildare |
385 |
4.96 |
|
Kilkenny |
136 |
1.36 |
|
Laois |
97 |
1.51 |
|
Leitrim |
57 |
0.39 |
|
Limerick |
231 |
2.78 |
|
Longford |
74 |
0.69 |
|
Louth |
220 |
3.00 |
|
Mayo |
189 |
2.27 |
|
Meath |
306 |
2.72 |
|
Monaghan |
85 |
1.22 |
|
Offaly |
70 |
0.38 |
|
Roscommon |
83 |
1.03 |
|
Sligo |
78 |
0.64 |
|
Tipperary |
176 |
2.19 |
|
Waterford |
188 |
1.78 |
|
Westmeath |
120 |
1.35 |
|
Wexford |
233 |
1.82 |
|
Wicklow |
226 |
3.49 |
|
Grand Total |
7,042 |
100.59 |
This debt is now subject to Revenue's normal collection and enforcement proceedings and is subject to interest at the standard rate of 8 per cent or 10 per cent as appropriate. I am advised that Revenue only commences enforcement proceedings for outstanding tax liabilities as a last resort, where there has been no meaningful engagement from the taxpayer. Revenue has commenced reviewing these cases and will determine the appropriate actions on a case-by-case basis, having regard to the individual circumstances of each taxpayer.
117. Deputy Richard Bruton asked the Minister for Finance if he has considered any innovative policy measures to mobilise the sustained higher levels of saving among Irish consumers post-Covid; and if he will make a statement on the matter. [28639/24]
Amharc ar fhreagraI am pleased to report that Irish households are, on aggregate, in a strong financial position. Irish household deposits increased substantially during the Covid-19 pandemic, as public health restrictions limited expenditure whilst government supports helped maintain the link between employers and employees and protected household incomes. At the height of pandemic, the saving rate, the share of household income that is not used for consumer spending, peaked at 32 per cent. While the household savings rate has since returned to more normal levels it remains above the pre-pandemic level.
Throughout the period of elevated inflation, the Government’s packages of cost of living supports have helped safeguard households from the corrosive effects of inflation. When adjusted for inflation aggregate household disposable incomes increased by 3 per cent between 2021 and 2023. These supports also protected household balance sheets. Indeed, households continue to hold around €154.4 billion in deposit accounts as of April 2024, an increase of 44 per cent compared to the same period in 2019. These savings could be used to boost economic activity through investment or consumption into the future through the financial intermediation system
Looking ahead, household balance sheets are expected to remain in a strong position reflecting the strength of the labour market alongside the significant easing in inflation pressure. Any further policy measures in this space will form part of the normal budgetary process. In this regard, I will set out the broad parameters for the upcoming Budget in the Summer Economic Statement this month.
118. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he proposes to ensure the protection of the public finances in the compilation of the forthcoming budget while at the same time addressing issues such as the impact of inflation on family budgets; if he intends to ensure that this economy remains competitive and at the same time addresses concerns such as vital infrastructure throughout the country; and if he will make a statement on the matter. [28581/24]
Amharc ar fhreagraThis Government has balanced careful management of the public finances with addressing the important issues facing our country. We will continue to take this prudent but supportive approach in the forthcoming budget. As the deputy notes, inflation has been a particularly significant challenge for families in recent years.
Inflation reached multi-decade highs in 2022, peaking at 9.6 per cent in June 2022. This was extremely challenging for households who saw their purchasing power significantly eroded as result. Since then, enormous progress has been made in reducing inflation with headline HICP inflation of just 1.5 per cent in June. This is the lowest rate since April 2021.
Key to this moderation has been the partial reversal of energy prices from extremely high levels. Consumer energy prices in June are estimated to have decreased by 5.6 per cent compared to June last year. This decline captures the fall in wholesale energy prices being passed through to retail gas and electricity bills. I expect further cuts to take place throughout this year as this process continues.
However, I am conscious that pockets of inflationary pressure still remain, particularly in domestic sectors, especially for certain services activities. In part, this is due to capacity constraints in the economy. The labour market is essentially at full-employment and supply-demand imbalances are evident in a number sectors, including housing, a key policy priority area for the Government.
Throughout this period of high inflation, the Government has been at the forefront in supporting the most vulnerable. By responding swiftly and decisively to the cost of living challenges, the Government has helped to mitigate the impact of inflationary pressures on both businesses and households. The temporary and targeted nature of the measures taken by Government have been designed to avoid adding to the inflationary burden whilst providing support to those most in need.
Looking forward, I expect the moderation in inflation to improve households’ purchasing power and support increased consumer spending over the year.
Government will set out the parameters for Budget 2025 in the Summer Economic Statement, which will be published shortly.
120. Deputy Joe Flaherty asked the Minister for Finance if he will be reviewing the tax incentives for the SME sector in the context of Budget 2025; and if he will make a statement on the matter. [28480/24]
Amharc ar fhreagraSMEs are the foundation of the Irish economy, accounting for the majority of employment in the State. Their vital importance to our economy is reflected in our Programme for Government commitments.
The tax system contains a number of incentives and reliefs designed to support SMEs. My predecessor, Minister McGrath, was proactive in both reviewing these measures and introducing targeted new supports, and it is my intention to continue on in this vein.
The taxation measures which are available to help small businesses to access investment, scale-up and expand include the Employment Investment Incentive (EII), the Key Employee Engagement Programme (KEEP), the Revised Entrepreneur Relief and the new relief targeting angel investors. These tax incentives have undergone significant change in recent years following feedback from stakeholders, including in particular the SME community, and a formal review of the EII scheme is currently underway.
The Deputy may also be aware of the Start-Up Relief for Entrepreneurs (SURE) and the Start-Up Capital Incentive (SCI), which assist new companies with early-stage funding, and the section 486C relief from corporation tax available in respect of the first five years of trading for start-up companies with an annual tax liability of less than €60,000. The purpose of the reliefs is to encourage entrepreneurs and start-up companies in Ireland, thereby supporting additional employment and economic activity in the State.
Budget 2024 also provided for an increase in the Research and Development (R&D) tax credit from 25% to 30%, and for a doubling of the first-year payment threshold from €25,000 to €50,000. While these increases are relevant to businesses of all sizes, the will be of particular benefit to smaller companies outside the scope of the new Pillar Two rules introduced with effect from end-2023.
Further information on these incentives is available on the Revenue website at www.revenue.ie .
Finally, the increasing complexity of the tax system is a concern frequently raised by businesses, particularly smaller businesses with more constrained resources, and I am committed to making efforts to simplify the tax system where possible. As part of this initiative, a participation exemption for foreign sourced dividends is to be introduced in Finance Bill 2024. The detailed development work on this project will continue over the coming months and it is intended that, when operational, the participation exemption will provide administrative and competitive benefits for businesses operating in Ireland.
