Mark Daly (Fianna Fail)
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Recommendations Nos. 1 and 2 are related and may be discussed together by agreement. Is that agreed? Agreed.

Alice-Mary Higgins (Independent)
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I move recommendation No. 1:

In page 7, between lines 19 and 20, to insert the following:

“Report on evidence for special rates of VAT 6. The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on the evidence base for the extension of the 9 per cent rate of VAT on the supply of certain goods and services in the hospitality and tourism sectors, which shall include analysis of the financial health of the sectors and profits in the sectors over the last three financial quarters, as well as the cost to the Exchequer of extending the 9 per cent rate.”.

Recommendation Nos. 1 and 2 relate to the extension of the special 9% rate of VAT for the hospitality and tourism sector. Recommendation No. 1 seeks a report which gives more information on the evidence base for the extension of the special 9% rate, including analysis of the financial health of the sectors and profits in the sectors over the last three financial quarters, as well as the cost to the Exchequer of extending the 9% rate.

It was absolutely right and proportionate that significant State support was extended to many sectors of the economy during the Covid-19 pandemic in order to mitigate its effects. However, it is important that we apply scrutiny when we are looking at certain very profitable business sectors. I realise that hospitality is a very broad spectrum. There are potentially profitable sectors within hospitality. In particular I am thinking of the hotel industry, which is being subsidised by the State despite significant profits. We need to remember that tax reliefs and tax breaks are public expenditure. In that context, I request that when we are making those decisions, we have the best possible evidence base.

I know these are only recommendations and will not likely impact this Finance Bill, but we need to ensure we apply nuance within a measure. Having a more detailed analysis of the sector might allow us to look at, for example, what aspects of the hospitality industry are extremely profitable and what aspects need support.

I will give the example a particular hotel group which was in the news last week, the Dalata Hotel Group. I simply picked this example because it is in the news. It reported the revenue per available room had increased by 28% on the 2019 levels. That is not simply recovery; that is an increase of 28% compared with 2019 levels for a particular hotel chain. That is the kind of nuance we might need to apply on these measures to ensure we are not subsidising very profitable large international hotel chains. The hotel group has seen its revenues boom and, in that context, where is the evidence to support it being subsidised by a tax relief?

Recommendation No. 2 calls for another report.This is about ensuring we have the best evidence base so that we can make better and more detailed and nuanced financial decisions. Recommendation No. 2 proposes a slightly different report. It relates not to the short term but, rather, to the longer term in the context of the impact of the 9% tax rate on the hospitality and tourism sectors since its introduction, "with particular analysis of the impact on wages of workers in the sector, prices for consumers, and profit margins for providers". I, like others, supported the introduction of the 9% rate, but, at the time, we were talking about engagement with what were then joint labour committees, for example, as well as employment standards, and whether we would see a knock-on effect whereby giving this public subsidy to a sector would not simply benefit the shareholders or owners of companies but would also have a significant benefit for those working in the sector. It was about genuinely supporting part of the fabric of society rather than simply supporting people to be in employment. There was a concern that when the State showed generosity to the hospitality sector, even going back to the period post 2008, opportunism was evident in some cases, such as when the roll-out of no-fixed-hours contracts accelerated in certain parts of the hospitality industry and there were poor practices. We are now seeing the beginning of a positive move in that regard. I acknowledge the positive steps taken recently by the Oireachtas towards ensuring fair play and conditions for workers through the passage of the Payment of Wages (Amendment) (Tips and Gratuities) Act 2022, for example. I commend Senator Gavan on bringing forward the original legislation that prompted the Government to bring forward its own legislation, which is very welcome, in respect of the payment of tips and gratuities to hospitality workers.

There has been progress in that area but it would be useful to have an analysis of how the reduced VAT rate of 9% was passed on. We have heard reports regarding the boom compared with pre-pandemic levels. If we had that analysis, it would be useful. We could consider how to continue to provide supports, such as through a reduced rate of VAT, possibly with conditions attached thereto. It is important that workers, customers and communities benefit, as well as company owners or shareholders. If the sector is to continue to receive targeted support, let us make sure the prosperity is reflected across the board.

I have other facts and figures relating to this area. Through the recommendation, I am looking for the Government to do its own research rather than us having to piece this together. Research carried out by Fáilte Ireland in 2022 found that 42% of hospitality and tourism workers did not return to their pre-pandemic employers, while almost one third of workers chose to leave the sector, largely due to pay and conditions. The health of the sector is impacted by the failure to have good and secure working conditions. The Irish Examiner reported in 2022 that the average rate for a hotel room in Ireland increased by 30% from 2019. The recommendations call for a distributional analysis to provide clear evidence in respect of this measure. It should not be a tool that is bluntly applied. Rather, we must ensure it is being used to best effect and in the best possible way to the widest benefit. In that regard, I hope the Minister of State will consider agreeing to either of the recommendations.

Maria Byrne (Fine Gael)
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I understand from where Senator Higgins is coming with regard to hotels that have put up their rates but that is not the case for all hotels. I have had many dealings with small hoteliers and others in the hospitality industry. Yesterday, I spoke to a small hotelier who is so grateful that the 9% VAT was kept and for the supports that have been in place. He believes that if those supports were not in place, his business would not have reopened after Covid. While acknowledging that the reduced rate will be phased out, he believes it has helped to keep his business afloat and to keep people in employment. He employs approximately 80 people in the hotel. Without the reduced rate, he would not have been able to keep those employees on board because of the costs. He is very grateful for the reduced rate. It has been well spent.

I understand that it is to be phased out. The Minister of State, Deputy Richmond, and I were in Limerick recently to meet 38 businesses, some of which are in the hospitality industry. They included pub owners, small hoteliers and large hoteliers. Some of the bigger businesses are showing a profit but these supports have kept the smaller ones afloat. Three businesses on my street that were in the hospitality industry did not reopen after Covid for various reasons. Although the reduced rate has helped many businesses, it has benefited smaller businesses to a greater extent. The extension of the supports has helped those businesses to try to get back to where they were previously. Although I understand from where Senator Higgins is coming with regard to the bigger hotels and profiteering, keeping the supports in place was the right decision. It should be kept under review.

Pat Casey (Fianna Fail)
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As all present are aware, I am involved in the industry. The picture portrayed by Senator Higgins is not true across the board. There is a need to put that on the record. Sadly, VAT is a blunt instrument. It is very inflexible in terms of how it can be applied. The reduced rate was brought in to make business viable. It was not necessarily brought in for it to be passed on directly to the customer. We need to consider what the industry has gone through in the past two years. When one looks past the big chains and the big hotels based in cities to more rural locations with hotels that depend on seasonal business, it is a completely different picture. I refer to tax warehousing. How many small and medium-sized hotels, restaurants and coffee shops had to put their tax into that warehousing because of their inability to pay it back? How much of that is still owed by those businesses?

I have no problem with a report being prepared. If analysis is carried out, we will probably be able to fine-tune things or get a better understanding of the situation. Regrettably, however, there is not the flexibility to apply VAT at a particular rate to a hotel in Dublin but at another rate to a hotel in Wicklow. A holistic approach has to be taken in the context of VAT. On several occasions, I have called for a wider debate on the hospitality industry and the correct VAT rate for the industry. Those in the sector operate in a very high-cost economy here in Ireland. All the input costs are extremely high. That has an effect on the selling price, which has an impact on customers.

With regard to staff, I cannot agree with the broad statement made by Senator Higgins. I lost most of my staff when Covid came. The fact that they did not return was not down to pay; it was because they went home to their own countries, those economies took off and there was no need for them to return to Ireland. It was not all about pay and conditions. I had an incredibly loyal bunch of staff whom I had no choice but to let go. They went home and did not return to Ireland. Senator Higgins suggested that was purely because of pay but there are other conditions that affect whether staff leave the industry and do not return to it. If we had the reports suggested, it is possible that we could analyse this a bit better.

Paul Gavan (Sinn Fein)
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The Minister of State is very welcome to the House. I take on board the remarks of Senator Casey. It is a valid point. There is a difference between the smaller hotel chains and employers and the big chains that are really cleaning up. We know they are cleaning up because their profits are published. I failed to get a hotel room for tomorrow night, when the Bruce Springsteen concert is on. The prices being charged in this city are outrageous. I support recommendation No. 2, in particular. Senator Casey has made the point that good information is always useful. It will help us make clear decisions. There is a point I always make about the hotel sector and Senator Casey will not be surprised that I make it again. In fairness, I think he has agreed with me. That sector needs a sectoral employment order, SEO, to put a base of decency at the floor to address the issue of low pay. It is not the only issue or the only reason people move but it is an issue and has been for some time.

I used to try to organise hotel workers. There are plenty of good employers out there and I am sure Senator Casey is one of them. I do not doubt that but it was noticeable that any time I tried to organise workers in hotels into trade unions, they were fired. That includes in Limerick. They were driven out. The best way to deal with low pay, terms and conditions - because sometimes, as Senator Casey said, it is not just the pay but the conditions, hours and so on - is to put in place an SEO like that done for early years educators. That is the model. If we are giving significant subsidies to the hotel sector, which we certainly are, the least the Government should do is ask the employers to engage in a process. The reason we do not have an SEO is the employer groups, specifically the Irish Hotels Federation, refuse to engage in talks. That is not acceptable to me and it should not be acceptable to the Government.

Alice-Mary Higgins (Independent)
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The reason I do not oppose this section is I think there is a question of ensuring, going into this summer and thinking of seasonal locations and operators, that there is no negative impact in the immediate future. When we did a blunt financial analysis, both times it led to the VAT rate going up but what is needed is a sectoral analysis that is more nuanced and would include the sectoral employment order issue as well as looking at how we support seasonal operators, small businesses and those in the hospitality sector who are not in the overnight business but in the ancillary businesses, including those parts of the industry related to just transition. We are hoping to find some space in terms of just transition within the hospitality sector for areas that would have been engaged in other employments that cannot continue. There is a lot happening.

In laying out these points, I am trying to point to the need not to simply have a discussion in August again. If this is about to expire at some point, it is important to have a plan for what comes next and, as the Minister of State has outlined, that what comes next recognises the diversity of actors and needs in the sector and does not end up simply serving the largest and most profitable actors.

I am happy to withdraw the recommendations for now. I wanted to make sure we have that discussion. There is great expertise and I encourage that it not become a siloed conversation, whereby the conversation about sectoral employment orders only happens in the Department of Enterprise, Trade and Employment and that about VAT only happens in the Department of Finance; meanwhile, we have tourism, culture and just transition. There is a need for a holistic approach to the hospitality industry and a joined-up strategy. If this is a blunt instrument, especially if it is one that is on the way out, we must look to other effective instruments we will bring in to strategically help the industry in the future. I acknowledge there are many reasons people have left but this has been reported as one of the key reasons by research based on speaking to those who have left the sector and remained in Ireland.

I hope we have opportunities for engagement and do not find ourselves at the next crisis point discussing VAT on its own again. I know that is not the Minister of State’s intention, but we have seen it wax and wane: 14%, 13.5%, 9% and back. There is an opportunity to use this time constructively.

Alice-Mary Higgins (Independent)
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I move recommendation No. 2:

In page 7, between lines 19 and 20, to insert the following:

“Review of impact of 9 per cent VAT rate for hospitality sector

6.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on the impact of the 9 per cent VAT in the hospitality and tourism sectors since its introduction, with particular analysis of the impact on wages of workers in the sector, prices for consumers, and profit margins for providers.”.

Mark Daly (Fianna Fail)
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Recommendation No. 3 in the names of Senators Higgins and Ruane has been ruled out of order as it is not relevant to the subject matter of the Bill.

Mark Daly (Fianna Fail)
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Recommendations Nos. 4 to 6, inclusive, are related and may be discussed together by agreement. Is that agreed? Agreed.

Alice-Mary Higgins (Independent)
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I move recommendation No. 4:

In page 8, between lines 5 and 6, to insert the following: "Report on increase in rate of Vacant Homes Tax

7.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on options to increase the rate of tax from 0.3 per cent of the value of a property to a rate of 5 per cent of the value of a property.".

I may have to leave shortly. If I do Senator Gavan will move the other recommendations in my name.

Recommendations Nos. 4 to 6, inclusive, relate to the vacant homes tax. Recommendation No. 4 calls for an increase in the rate of the vacant homes tax from 0.3% to 5%. This was the rate proposed in our Derelict and Vacant Sites Bill 2017. Back in 2017 the Civil Engagement Group and the then Green Party Senator Grace O'Sullivan had been calling for action in respect of vacant and derelict sites. We have all seen the pictures from around the country of vacant and derelict homes. The 0.3% rate set at present is too low to be a meaningful disincentive to property hoarding. It is an issue I raised on the Order of Business last week. I made the point that we need to look to the stick as well as the carrot. While I welcome the new grant schemes in respect of vacant homes the fact is that we have not applied pressure in the other way with regard to vacant homes. We have had very long delays. This is an issue that I and others have been raising since 2017. What significant difference could have been made to the housing crisis we have now if we had had real action in respect of vacant homes from 2017?

We are all aware that the annual price increase of a property in the current market vastly outstrips the rate of the tax. If anything, the tax in its current form is an incentive to retain a property. According to the CSO, property prices increased by 14% between June 2021 and 2022. Astronomic price increases continued for some time. The reality is that a 0.3% tax is not a meaningful incentive to bring a vacant property into use when the owner is gaining 10% or more of the value simply by hoarding the property, speculating on trading the property or having it as an asset on a portfolio that can be sold.

Recommendation No. 5 addresses a different gap in the policy on vacant homes. This is the fact that derelict properties are exempt from the tax. We know that in 2021 only €1.1 million out of the €4.5 million owed in derelict site levies was collected by city and county councils. This is a collection rate of 23%. This is an issue for the State and our finances. A total of 18 councils failed to collect any levy at all. Again there are questions on how we incentivise or press councils to do this. It is a matter for the Department of Finance to address.

If we have a derelict site levy that is not working, we need to ensure we have other measures that do work, as well as looking to see what pressure can be placed to ensure the levy is collected. Perhaps allowing the retention of the funds at local level or ring fencing could make a difference in this regard. In other countries such as France, where taxes on vacant and derelict homes have been successfully introduced, derelict buildings have been included in the same bracket as vacant homes. It is not clear why we have not taken this approach with regard to excluding them from any national revenue measures when clearly the site levies are not adequate and not being collected.

Recommendation No. 6 calls for a report on the options for applying a rate of vacant home tax that varies annually and may be linked to annual residential property price inflation data, with particular assessment of the revenue-raising potential of such a measure and the potential deterrent effects it may have in respect of property hoarding. Whenever vacant houses and homes are mentioned we hear the examples of homes that may be vacant because of the fair deal scheme. There are also homes that are vacant for various other reasons. We also know there are entire apartment buildings with many apartments owned by the same investors that are also empty. I live in the city centre of Dublin and I know there are properties and homes that are left vacant because they are part of a suite or portfolio of assets that are sold and traded on the basis of their potential future revenue. They are treated as devices to store money and as future potential asset returns rather than being used as places to live. This is another area where there may be scope to look to more nuanced measures such as a variable rate. Where we have multiple vacant homes or portfolios of vacant homes, we need to increase massively the pressure on them. More nuanced measures would be a more effective and fair way to deter property hoarding, ensuring that in a given year the level of the tax would be directly linked to property price inflation for that year. The CSO monitors property prices and collects such data already. These data could be used effectively in terms of exploring a variable rate of tax.

Paul Gavan (Sinn Fein)
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Sinn Féin supports these recommendations. It is clear to anyone with common sense that the current rate of the vacant home tax, at 0.3%, is not adequate. Members of the Minister of State's own party have acknowledged as much to me off the record. In the middle of a housing crisis it is unforgivable. We fully support the recommendation on including derelict sites in an effective levy. This is something the Government should act on.

Mark Daly (Fianna Fail)
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Is the recommendation being pressed?

Paul Gavan (Sinn Fein)
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I will withdraw it with the right to resubmit on Report Stage.

Paul Gavan (Sinn Fein)
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I move recommendation No. 5:

In page 8, between lines 5 and 6, to insert the following:

“Report on including derelict properties within scope of the Vacant Homes Tax

7.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on the Vacant Homes Tax, including an assessment of potential revenue raisedand potential positive impacts on housing supply of including derelict properties within its scope, and an assessment of the potential benefits of this in terms of the failure of local authorities to collect Derelict Sites Levies.”

Paul Gavan (Sinn Fein)
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I move recommendation No. 6:

In page 8, between lines 5 and 6, to insert the following:

“Report on variable rate of Vacant Homes Tax linked to property price inflation

7.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on options for applying a variable rate of Vacant Homes Tax, which varies annually and is linked to annual residential property price inflation data as recorded by the Residential Tenancies Board, with particular assessment of the revenue-raising potential of such a measure, and its potential deterrent effect to property hoarding.”.

Mark Daly (Fianna Fail)
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Recommendations Nos. 7 and 8 are related and may be discussed together by agreement. Is that agreed? Agreed.

Paul Gavan (Sinn Fein)
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I move recommendation No. 7:

In page 9, between lines 15 and 16, to insert the following:

“Report on data centres’ participation in the TBESS

8.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on all companies registered for the Temporary Business Energy Support Scheme with either a trade description or economic activity relating to data processing, hosting or related activities, and the amounts they received under the Scheme.”.

Recommendation No. 7 calls for "a report on all companies registered for the temporary business energy support scheme", TBESS, "with either a trade description or economic activity relating to data processing, hosting or related activities, and the amounts they received under the Scheme." The purpose of this recommendation is to establish how many data centres availed of the scheme, as a response to a parliamentary question on the scheme submitted by Deputy Paul Murphy seemed to indicate that companies are not required to provide a trade description when applying for the scheme. Perhaps we could get clarity from the Minister of State on that issue, and assurances that precise information on the nature of companies availing of the scheme will be published in due course. I will not be moving recommendation No. 8.

Paul Gavan (Sinn Fein)
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I move recommendation No. 10:

In page 9, between lines 15 and 16, to insert the following:

“Report on extension of TBESS eligibility to charitable organisations

8.The Minister shall, within three months of the passing of this Act, lay before both Houses of the Oireachtas a report on options for extending eligibility for the Temporary Business Energy Support Scheme to charitable or non-profit organisations which do not carry on a trade which is chargeable to tax, including through the use of refundable tax credits or other means.”.

Recommendation No.10 calls for a report on options for extending eligibility for the TBESS to charitable or non-profit organisations which do not carry on a trade which is chargeable to tax, including through the use of refundable tax credits or other means. We are urging the Minister of State to explore options for providing targeted energy supports to non-profit or charitable organisations which incur significant energy costs but do not qualify for support under the scheme. We know, for example, that essential services like local drug and alcohol task forces have never seen their funding restored to pre-austerity levels. Even before the energy crisis, these organisations were calling for urgent support and funding. In 2021, for example, the Tallaght task force called for €1 million in additional funding in order to be able to continue its work. Considering the fact that since then we have seen energy costs potentially double for organisations like this, on top of the funding shortfall that already existed, we urgently need to explore options for targeted energy supports for these organisations.

Mark Daly (Fianna Fail)
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When is it proposed to take the next Stage?

Maria Byrne (Fine Gael)
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Next Tuesday.

Mark Daly (Fianna Fail)
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Is that agreed? Agreed.

Mark Daly (Fianna Fail)
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When is it proposed to sit again?

Pat Casey (Fianna Fail)
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Next Tuesday at 12 noon.