Finance Bill 2025 [Certified Money Bill]: Report and Final Stages
Seanad Éireann — 2025-12-16
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Simon Harris (FG), Wicklow

I thank Senators for their contributions. I will start with Senator Daly's recommendation. As he said, it was not procedurally in order but the point he was making was very much in order and I thank him for making it. I assure him that I have heard him and his views on the matter can be considered as part of the normal budgetary process for future years. I have asked my officials to consider this as part of the tax strategy group in advance of the budget. Every year, as Members will know, we have a tax strategy group that considers various issues, produces papers and makes recommendations. Perhaps this is something we could look at as part of that process. I would also be very happy to sit down with Senator Daly and other interested Senators. I know Senator Casey has an interest, as do many of my own party colleagues in Fine Gael. Perhaps we could sit down with ICOS, have a conversation and tease this through. What I will do now, for the benefit of the House because this is a technical area, is read into the record some initial feedback from the Department, which might help to inform those follow-up meetings that we can have in the weeks ahead.
The proposed recommendation, should it be tabled, would move the 4.8% rate currently applied to livestock in Ireland to 4.5%. This is the rate that is applied when livestock is sold by a VAT-registered business. As Senators will be aware, the farmers' flat rate addition will be reduced from 5.1% to 4.5% from 1 January of next year. The farmers' flat rate scheme is reviewed, as Senator Daly correctly said, each year in the run-up to the budget in accordance with criteria set down in the EU VAT directive. That rate is based on macroeconomic data relating to agricultural inputs and production and the prevailing VAT rate structures averaged over the preceding three years. Revenue's calculations, based on data from 2023 to 2025, indicate that full compensation can be achieved by decreasing the rate to 4.5%. As overcompensation is not permitted under EU law, the change must be introduced in line with the relevant macroeconomic data. Under the special scheme for farmers' flat rate, a farmer, on supplying agricultural produce or services to a VAT-registered business, is entitled to receive from that person, in addition to the amount payable for the supplies, an additional amount known as the flat-rate addition. The business making this payment, be it a meat processor, a cattle mart or another VAT-registered business, can claim a deduction in its VAT return in respect of the amount of the flat-rate addition payable to the flat-rate farmer. This is then subject to the normal rules in relation to reclaiming VAT. When a VAT-registered business makes its VAT returns, the inputs and outputs are calculated and where a business has paid more VAT than it received, its VAT return will result in a refund from Revenue. Where a business receives more VAT than it pays, this will require payment to Revenue. As such, VAT is ultimately only paid by the final consumer and not by VAT-registered businesses. From the perspective of a business, VAT is a neutral tax.
There are two points that I would put out there for further discussion. First, what would the direct benefit be to the business when VAT is neutral from a business perspective because businesses can reclaim it? Second, while we will obviously take the views of the marts seriously and work our way through this together, the benefit of linking it to the flat rate might seem appealing when that flat rate is going down but what if it is going in the other direction? Could there actually be an unintended consequence? Do they want to link it in all circumstances? These are just two issues that I am putting out for discussion.
We have the tax strategy group, which can certainly tease through all of these issues in advance of the next budget. I would very much welcome an opportunity to engage with Government Senators and Senator Daly on this issue along with ICOS and anybody else who has an interest in it. I thank Senator Daly for drawing our attention to what is a serious issue and one that has been raised by people affected.
This is my first time to have an exchange with Senator Nicole Ryan.
It is good to formally meet her and, while we may not agree on some things, I wish her well in Seanad Éireann. When it comes to the budget, she and I frame the budget debate in very different ways. Senator Byrne has framed the budget and the Finance Bill. As I see it on behalf of my party and Government, we see this budget as being about trying to do things to protect jobs, stimulate the building of homes and keep our economy safe. When I think of the budget I think of the three nines: the 9% VAT rate on electricity, the 9% VAT rate on building new apartments and the 9% VAT rate on hospitality. If we did not take decisions in the Finance Bill - that is what we are voting on today - the 9% VAT rate on people's electricity bills would go back up. It is not a good situation when people's bills are far too high. We are making that reduction permanent, at least for a number of years, at a significant cost to the Exchequer, but it is absolutely the right thing to do. If we did not do a 9% VAT rate on apartments, the cost of building an apartment would be 4.5% higher than it is today. I have never built an apartment but we are already hearing from people who do build apartments and we are reading about it and indeed the Oireachtas housing committee heard the benefits of that in terms of projects that were viewed as unviable now being viewed as viable. Last week the Society of Chartered Surveyors Ireland issued a report which said that before the measures we have introduced to try and make apartments viable there were six categories of apartments and only two were viable. Five are now viable. We are doing this not for developers or for anyone other than the young people we hope will be able to buy or rent an apartment.
The 9% VAT rate on hospitality is about making sure businesses in the hospitality sector are viable too, and trying to reduce their costs. It is not an affordability measure; it is a measure to try to help keep the doors open and the jobs going. In many rural towns and villages that I, Senator Ryan and all other Senators visit, at every crossroad there might be a café, a restaurant or a rural pub serving lunch, and their business costs are too high. I gave a clear commitment to them during the election, as did others, that if we were back in government we were going to do this. We were going to get out of the annual cycle of whether the Government would reduce the VAT rate to 9% and all the speculation that goes on for weeks and all the energy businesses have to put in to trying to lobby the Government. We are going to provide clarity and certainty because businesses need that clarity and certainty. I have absolutely no doubt, from talking to coffee shop owners and restaurateurs across the country, particularly in rural regional Ireland, that this measure will help them sustain employment and literally keep the lights on and doors open. For a sector that employs approximately 150,000 people, and when we are seeing some softening in the labour force data, it is an appropriate thing to do.
We have taken a number of measures in relation to research and development. There is always a good debate to be had about how we can make them as effective as possible and I genuinely look forward to engaging with this House on that in the time ahead. Yes, many of the research and development measures we have taken benefit FDI. That is a really good thing. Particularly in a world where there is such a high level of geopolitical and geo-economic headwinds, we want to continue to make this country a really competitive place in which to invest and create jobs that all our constituents benefit from. Interestingly, approximately 89% of the applications - not the amount but the applications for the research and development tax credit - now come from Irish SMEs, which is really good. We need to do more to encourage Irish businesses to avail of that.
As for the old landlords chestnut, I see that in a very different way. It is very hard to have a rental market without landlords. I see measures to help small landlords as a good thing. We recently heard from the County and City Management Association, CCMA, how hard it is to get things like the housing assistance payment to get properties outside of Dublin in particular. It is hard in Dublin but it is harder outside it. When we tease through that, one of the reasons is the lack of small landlords. We cannot on the one hand say we need more rental properties and on the other demonise our landlords. We have to support people to continue to rent out homes and we have obviously taken a number of measures in terms of extending rent pressure zones, bans on no-fault evictions and the like, which are appropriate too.
This Bill also extends mortgage interest tax relief in its current form for another year and makes sure the help to buy scheme is available in respect of properties that are built under the reduced VAT rate. It also extends the living city initiative. I had a debate in the other House in relation to the latter. The living city initiative is a scheme on the tax side to try to help bring derelict and vacant properties back into use. It is being used in the cities and we are now extending it to a number of other areas, including Athlone, Drogheda, Dundalk, Letterkenny, Sligo and others listed in the national planning framework. That will make a real difference.
This budget needs to be seen, through the Finance Bill, in the round. It is instalment one of five. There will be four more budgets delivered in the lifetime of this Government. I am very conscious of the fact that we need to get back to a rhythm of a normal income tax packages in future budgets.
If we continue to keep our economy on the straight and narrow, continue to make sure that it is competitive and continue to be fiscally prudent, I believe we will be in a position to get back into that rhythm of being able to implement key commitments in the programme for Government around income tax and also other key areas around childcare.
I will make a final point on public services. By any objective measure and reading of this budget, we have made conscious decisions to very significantly increase our funding of public services. To take disability alone, hundreds of millions of euro more have gone into disability services, and rightly. I see school children in the Gallery. Capitation fees are being increased for every school in Ireland from next year as well. Extra funding is going directly into every primary school and every secondary school, and more funding is going into special education as well. We have a way to go on student fees but we are making a €500 permanent reduction. It will no longer be a question of "Will the Government, won't the Government?" before every budget. It is a permanent reduction. We are trying to build on that in the time ahead.
I look forward to all of the debates we will have. Those are just some of my responses.

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Retrieved: 2026-08-14T04:54:28+00:00
Sitting date: 2025-12-16