From stay and spend to the domicile levy, some budget blunders for Jack Chambers to avoid

He’s barely been in the job a wet week but, already, newly appointed Minister for Finance Jack Chambers has to start thinking about October’s budget.

And it won’t be just any budget given that it will be the last one before the next general election (with mounting speculation that an election will be called for November). So the pressure will be on to please the electorate more than usual.

Chambers would do well, however, to avoid vote-grabbing measures that might sound wonderful, but end up being hardly worth the effort.

Here, we recall some budget measures in years gone by that never quite took off.

Stay and spend

Cast your minds back to the heady pandemic days of the autumn of 2020, when the Government introduced a scheme aimed at encouraging people to stay in Ireland and spend money across the hospitality sector, which had been badly hit by the arrival of Covid-19.

A bit like the UK’s Eat Out to Help Out scheme, which offered a discount of £10 (€11) to the consumer at the point of purchase once the restaurant or hotel had registered with the scheme, the Stay and Spend scheme offered a €125 tax credit, which was earned by claiming 20 per cent back on money spent in bars, hotels, cafes and restaurants up to a total spend of €625. A couple stood to benefit from up to €250 through the scheme.

Participants included everyone from Adare Manor in Co Limerick, and the Shelbourne Hotel in Dublin, to Eddie Rocket’s and Costa Coffee.

However, the scheme was beset with complexities. You had to spend €25 to claim the benefit; alcohol wasn’t allowed under the scheme, which meant that you needed a separate receipt itemising the amount spent on food. If you shared a meal with a friend, you would both need separate receipts to claim; the hospitality provider had to register with Revenue and display a sign disclosing that they were part of the scheme; you had to pay tax in the first place to claim it back; and you also had to file a tax return, a Form 12 for PAYE workers, to get your money back.

In addition, claiming the refund — which, you might recall, would have been as little as €5 on a spend of €25 — was also cumbersome. Taxpayers had to download a Revenue receipts tracker app and upload each receipt to claim. Those who didn’t have a smartphone were required to make their claim online or by post.

Worst of all, perhaps, was the fact that you couldn’t claim your credit straight away — you had to wait until the following tax year. So, you could have been waiting quite a while for that €5 towards your tea and scones.

Unsurprisingly, the take-up was poor.

As one letter writer wrote at the time to this paper: “In the US, Donald Trump put $1,200 in every citizen’s account. And we criticise him.”

Another factor of course was the pandemic. Soon after the scheme was announced, the country entered a Level 5 lockdown, which included a ban on intercounty travel and the closure of restaurants and bars.

When it was first announced, then minister for finance Paschal Donohoe claimed it would cost the exchequer about €270 million, based on more than €1 billion in spending.

In the end, fewer than 25,000 taxpayers availed of the credit. And the spend? Just €6.6 million, meaning that it cost the Government a paltry €1.3 million.

Stay and Spend closed on April 30th 2021 and not a word has been heard of it since.

Tax-free savings for first-time buyers

Plus ça change … 10 years ago, buying a home was also a difficult endeavour, in the aftermath of the financial crisis. In light of this, in the 2014 budget, then minister for finance Michael Noonan announced a grand plan to help first-time buyers (FTBs) get on the property ladder: tax-free savings for the four years before the purchase of a home.

At the time, Dirt on interest was charged at a rate of 41 per cent (it has since fallen to 33 per cent), while Central Bank of Ireland rules meant that FTBs had to come up with a deposit of about 15 per cent to buy a home (this has since come back to 10 per cent).

“As a result, first-time buyers will be able to save for their first home and retain 100 per cent of the interest that they earn on their savings,” Mr Noonan said of the scheme, adding that it was likely that the banks would introduce new savings products to support the initiative.

However, this was not the case.

And this wasn’t the biggest problem with the scheme. First of all, you could only claim a refund of Dirt once conveyancing on the property was concluded. So, once you had already saved up enough for a deposit in other words — which kind of made the scheme a bit redundant.

Moreover, tax-free savings were already available at the time through the State Savings scheme, sold through An Post.

And unlike paying Dirt, which happens automatically, you had to claim your refund through the local property tax platform.

Figures showed that based on an interest rate of 4 per cent, someone saving €10,000 over four years would have saved an additional €110 through the scheme (or €220 for a couple saving €20,000). Hardly something to get too excited about.

Dismissed by the opposition as a “gimmick”, the scheme ran between October 14th, 2014 and December 31st, 2017.

It was expected that some 9,500 FTBs would be eligible for the measure in 2015, at a total cost of some €2.8 million.

In the end, however, just 138 FTBs availed of the relief that year, at a total claim cost of €150,000. In fact, over the years 2015-2021, according to Revenue, just 2,100 property buyers claimed the relief.

Domicile levy

A post-Celtic Tiger measure, the levy was introduced by the late Brian Lenihan (then minister for finance) in December 2009, to extract tax from the wealthy Irish who are domiciled, but not resident for tax purposes, in Ireland.

Levied at a rate of €200,000 a year, it applies to those whose worldwide income exceeds €1 million; whose Irish assets are valued at greater than €5 million and who have paid less than €200,000 in income tax.

At a time when recession and financial austerity loomed, Lenihan said the levy would make sure that “every wealthy Irish domiciliary who pays little or no income tax makes a contribution to the State”.

When it was first announced, it was suggested that as many as 440 wealthy would be obliged to pay the levy — a level which could have generated as much as €88 million a year.

However, take-up never got anywhere close to those figures. In its first year of operation, 25 people paid the levy, while the latest figures from Revenue show that just 11 paid the levy in 2022, with €1.8 million collected.

This has led the Commission on Tax and Welfare to note that the levy has underperformed, with the income collected “negligible” — just €2.3 million on average a year.

It may not be around much longer as the levy is due to be reviewed, in tandem with a review of the remittance basis of tax by the Department of Finance.

Mortgage interest relief

The jury is still out on this one, as it still has some way to run.

Introduced in last year’s budget, this measure initially seemed a crowd pleaser, promising, as it did, up to €1,250 back on interest paid on a mortgage. Given sharp rises in borrowing costs as the European Central Bank hiked up rates, many households across the country had experienced a hit to their finances.

It was expected to benefit some 160,000 homeowners.

But the devil was in the detail, and this detail precluded many from availing of the relief. First, your interest bill had to be higher in 2023 than 2022 (and many people didn’t qualify given that they were on fixed-rate mortgages); your outstanding mortgage had to be between €80,000 and €500,000 and you had to be compliant with property tax.

As a result, the scheme has had much lower take-up than expected.

In late June, then minister for finance Michael McGrath told the Dáil that there had been 20,248 successful claims made by the middle of that month, totalling just over €19 million. This indicated an average claim of about €940.