Jimmy Deenihan
Question:58 Mr. Deenihan asked the Minister for Finance if he supports the establishment of a tax advocate with powers to monitor fair treatment of taxpayers. [39142/06]
Other Questions.
Tax Code.
The Deputy's question is related to the calls made on occasion for the establishment of an independent individual or entity whose proposed role would include acting as an advocate for taxpayers who feel unfairly treated by the system. The statutory remit of the Ombudsman already incorporates both of the roles proposed for a taxpayer advocate, namely, acting for taxpayers and investigating actions which are contrary to fair or sound administration.
Since the inception of the Office of the Ombudsman, significant numbers of taxpayers have exercised their right to make complaints to that office. Furthermore, the Ombudsman has carried out a number of special investigations on her own initiative under the Ombudsman Act 1980, such as into the operation of schemes for disabled drivers and the repayment of tax to certain widows. When calls were previously made for the establishment of a taxpayer advocate, the then Ombudsman drew attention to the duplication of role and responsibilities that such a development would involve.
Apart from the statutory role and responsibility of the Ombudsman, other avenues are also open for taxpayers to make their complaints and to seek satisfaction for perceived unfair treatment. They can lodge a customer service complaint about the standard of service received in their personal contact with the Revenue Commissioners by telephone, correspondence, fax, e-mail or in person to a Revenue public office. They can request a review by Revenue of any aspect of the way in which their tax affairs have been handled. Such reviews are undertaken by a senior Revenue official who was not involved in the original decision or, at the taxpayer's request, jointly by an external reviewer and a senior official. Taxpayers who are dissatisfied with specific treatments by Revenue can also make an appeal under statutory provisions which grant access to the appeal commissioners. The appeal commissioners are completely independent of the Revenue Commissioners.
The fact that few people are enthusiastic about paying taxes is all the more reason for effective channels of complaint and appeal by taxpayers against poor service or unfairness. However, given the comprehensive and accessible system already in place for complaints or appeals by any taxpayer who feels unfairly treated by the tax system, it is not obvious to me that there is a case for putting in place the additional layer of a tax advocate's office.
While I understand the Minister's arguments, I draw his attention to the fact that, until comparatively recently, the Revenue Commissioners have had limited interest in refunding overpayments. It was only after the political attention increased that Revenue became conscious of refunds. The perception exists that, while Revenue's systems are highly geared for collecting taxes, as is proper, they are not as good at returning money.
A recent survey conducted among tax advisers revealed an alarming level of discontent with delays in processing and I know from my constituents that the entire system comes close to implosion during January and February, when offices stop taking calls and queues grow lengthy. These issues are not routinely investigated by the Ombudsman because they do not come under the definition of unfairness in her code. No advocate seems to be employed to demand that Revenue, like any other service provider, must be ready to meet demand at peak times.
Situations should not arise in which people are told the telephone lines are closed or that they will have to queue for several hours. I understand why the Minister does not want to duplicate the duties of the Ombudsman, but a role is being missed in that regard. Perhaps if the Minister set out standards for matters such as unacceptable delays and asked the Revenue Commissioners to report on whether they were being met, that process could be begun. A vacuum currently exists and, while Revenue is moving to fill it, the needs of customers are not yet being met.
There is nothing to prevent the Ombudsman from making general remarks about the efficiency and fairness of the system and such remarks have been made in the past. In regard to the general evaluation of tax administration, it is not clear what role a tax advocate could play that is not already provided in the existing political and administrative structures. In countries which have independent taxpayer advocates, the role of the office is to deal with complaints by individuals about administrative matters and does not include addressing system or policy issues.
Apart from the role of the Ombudsman, existing customer complaint and review procedures and the statutory appeals process to the appeals commissioner, the working of the tax system can be discussed at various fora, including the partnership process. In addition to being required to formally report to my office, Revenue is subject to an annual audit examination by the Comptroller and Auditor General, who reports on taxes collected and systems, procedures and practices. The chairman of the Revenue Commissioners is also examined at length by the Committee of Public Accounts with regard to the report of the Comptroller and Auditor General. At times there may well be service pressures, such as a computer breakdown. However, the amount of work in which the Revenue Commissioners are involved, the legislative reforms concerning self-assessment enacted in this House, the much improved relationship between tax professionals and the Revenue Commissioners, and the tax compliance culture that now pertains indicate a sea change compared to the position 20 years ago. I read a report recently that indicated the level of arrears is only 2%.
It may be true that the Revenue Commissioners' effort to modernise, computerise and have a system working to a standard deemed efficient by international criteria has necessitated a consumer focus. I assure the Deputy that the chairman of the Revenue Commissioners will seek, in every way possible, to ensure taxpayers generally receive a fair hearing and assessment and that their credits and entitlements are paid in good time. On foot of service pressures, the chairman sometimes contacts me and departmental officials seeking an increase in staff. We often try to provide for this given the nature of the work done by his office. While there is always room for improvement, there is certainly no institutional reluctance to advance this aspect of the office's work to a greater extent than might traditionally have been the case.
I proposed the establishment of a taxpayer advocacy office about three years ago following a visit I made to the equivalent office in the United States. Despite what the Minister said about an improvement in the revenue system, which improvement I acknowledge, the ordinary taxpayer is not sufficiently empowered and does not have sufficient entitlements vis-à-vis the Revenue Commissioners. In the past three or four weeks, when taxpayers were filling in self-assessment tax forms and making payments through the Revenue Commissioners’ on-line service, it was impossible for them to get through to the office over the telephone. Did the Minister try to call the Revenue Commissioners to experience what PAYE and self-employed taxpayers were experiencing?
Is the Minister aware that the survey by the Irish Taxation Institute, which supports the Labour Party's call for a taxpayer advocacy office, found that the processing time for tax returns now exceeds three months and that 72% of the institute's tax practitioners consider the Revenue's service negative and unsatisfactory. While the Revenue Commissioners have made much progress due to prodding from Opposition parties and have improved their advertising in respect of tax allowances and tax credits, these steps are not enough. Figures will indicate that in excess of €200 million, which taxpayers are entitled to reclaim, will remain unclaimed at the end of this year. Did the Minister telephone the Revenue Commissioners to check what conditions have been like over the past month?
A taxpayer advocacy office is necessary and its remit should be broader than proposed. There is a need for a stand-alone agency to analyse more critically whether tax reliefs are being claimed in a proportionate way. Even the Minister might be prepared to accept that they have been claimed in a disproportionate way in that those with more disposable income have benefited most from the reliefs available. The proposed advocacy office would be in a position to argue this point and analyse the system in a way the Revenue Commissioners could not. The job of the latter is to honour the tax code as decided by the House and determined by the Minister. The Committee of Public Accounts and Comptroller and Auditor General could not carry out the analysis because they consider foregone expenditure accounted for in this House.
Not only is there a taxpayer advocacy office in the United States, there are also relevant NGOs, such as the body of taxpayers that advocates responsible expenditure. It would be in the interest of the Minister and political system in general to establish such an infrastructure because it would allow us all to benefit from improved critical examination of tax expenditure.
The relationship in question is not one of equals. If one's britches are down around one's ankles, one will not argue about the price of treatment with the consultant. Similarly, if the Office of the Revenue Commissioners has many powers in its armoury and the taxpayer has none, it is difficult for the latter to assert his or her rights. The issue of advocacy therefore needs to be addressed in some fashion.
On Deputy Boyle's point, we have enough bureaucracy in the system and I do not believe we need more independent NGOs telling us what to do. The decisions on our tax system and the laws we pass are matters for the Oireachtas, the Members of which are accountable to the people. I do not buy into the concept that we must appoint someone who is answerable to nobody to tell us what to do. The decisions in question involve political judgments.
It would be nice to have someone to answer questions.
Taxation is a political matter.
I am making this general point because I am always amazed at the desire to set up more offices that are answerable to nobody in the view that they would be far wiser than the rest of us, even though the Parliament has been given a job to do.
If the questions we asked were answered, we would not have to appoint anybody.
I am often bemused by this sort of thinking.
The Internal Revenue Service in the United States operates a taxpayer advocacy service headed by a national taxpayer advocate. However, the taxpayer advocate service is not external to the Internal Revenue Service. It deals with both individual taxpayers' problems and problems attracting multiple taxpayers, and with flaws in the tax code. The latter role is referred to as systemic advocacy. The service is not a substitute for established Internal Revenue Service procedure or a formal appeals process.
We have an ombudsman with the power to do precisely what the Deputies believe should be done, that is, make general comments on practice, efficiency, policy and individual failings. There is a tremendous desire to set up more structures and quangos. Given that we have set up the Office of the Ombudsman, there is no need to duplicate its functions.
The Revenue Commissioners have arrangements whereby an external official can operate in conjunction with a senior Revenue official if a taxpayer feels he or she is being treated unfairly. We therefore have systems of redress in place. It is not just a question of politicians talking on behalf of taxpayers as there are tax professionals within the Revenue Commissioners who want the system to work better also.
If many practitioners in the Irish Taxation Institute feel dissatisfied with the Revenue Commissioners, that is their prerogative, but, having spoken to tax professionals, I honestly believe there has been a sea change over the past ten or 15 years by way of qualitative improvements in the relationship between taxpayers, tax professionals and the Office of the Revenue Commissioners. The modernisation of the service is one reason we have an efficient tax collection and administration system. It is generating revenue and allowing us to debate and decide on spending plans in the order of billions of euro.
It would be no harm to stand up for the system now and again. The Revenue Commissioners are doing a good job. If specific problems exist, they should be dealt with but in the knowledge that we have a good, independent service staffed by people of integrity who do their jobs conscientiously and well.
Did the Minister telephone the Revenue Commissioners himself?
The chairman comes to see me.
Did the Minister try dialling the service?
I have a very good accountant who handles all my affairs.
Air Services.
Jan O'Sullivan
Question:59 Ms O’Sullivan asked the Minister for Finance if he has completed the promised review of approval conditions attached to licensed aerodromes by the Office of the Revenue Commissioners following the recent drugs haul from a flight that left from Weston Executive Airport in County Kildare; and if he will make a statement on the matter. [39250/06]
I am informed by the Revenue Commissioners that the review of approval conditions attached to licensed aerodromes is being dealt with as a priority. I outlined to the House on 18 October last in response to an earlier question that the review was likely to take approximately six weeks. The Revenue Commissioners now inform me the review is on target and should be completed within Revenue around the end of November.
I have raised this issue with the Minister before. The country is being swamped by drugs, particularly my constituency, which is adjacent to Weston Aerodrome. It is unfortunate that such remarkable loss of life is associated with drug crime and the easy availability of drugs. Has the Minister for Finance given any thought to what the reform might entail? He previously told us there had been 12 scheduled and six unscheduled visits to Weston Aerodrome in a year. Will he make them all unscheduled? As matters stand, the strong suggestion is that one could smuggle anything through certain of Ireland's private airports, be it drugs, guns or even human beings.
Does the Minister not feel, given the threat the country faces from drug crime, which is fuelling gun crime, that the Revenue Commissioners must act more expeditiously? For instance, have they initiated any additional visits to Weston Aerodrome since a significant drugs haul was made on a flight originating there? In the course of the Revenue's review, has it carried out any additional checks or visits to private airports around the country?
This incident heightened sensitivity on the part of Revenue, and I am sure it has acted accordingly, although I do not have that information.
The Revenue Commissioners are conducting a review of approval conditions attached to licensed aerodromes, and they are also concentrating on risks in the operation of, and procedures at, such aerodromes. They are focusing mainly on smaller licensed aerodromes such as Weston, and those regional aerodromes where controls are currently being carried out by special compliance teams that, as part of their duties, deal with the smuggling of prohibited goods such as drugs.
All the available evidence from customs administrations worldwide indicates the most effective means of detecting drug smuggling is concentrating on the development and gathering of information and intelligence and employing targeted interventions as a consequence. As soon as we have the conclusions of the report, I am sure they can be acted on.
I am sure the Minister passes through Dublin Airport from time to time. People routinely arrive two or three hours before their flight to go through wide-ranging and intensive security checks. However, the situation at small aerodromes seems extraordinarily lax. I understand the Weston issue first came to attention because of the Ryder Cup. Some of the Americans using the airport were shocked, given their own security profiling, at the complete absence of suitable measures.
Does the Minister have figures on how many times since the episode Customs and Excise have set up a service and examined passengers disembarking from flights in private aerodromes? There is a risk from drugs, and the Minister must also be aware of what is happening in Limerick and on the west side of Dublin. Many Members represent such areas, and the death rate among young people as a result of drugs and guns is genuinely terrifying.
I agree that drugs are a menace and a serious danger to the functioning of society, and we must do all that we can. Increased resources are being deployed to deal with them, by the gardaí, Customs and Excise and everyone else. The Deputy has asked whether the promised review has been completed and if I would make a statement on the matter. That review has not yet been completed, although that will have happened by the end of November.
The supplementary information I can give is of the same nature as what I have said already, confirming what the review covers, such as procedures, what types of aerodromes it is examining, and what best practice is from a customs administration perspective, including the development of information and intelligence critical to detecting drug-smuggling. If there are any further specific questions regarding flight numbers and so on, I am sure we will find the answers.
Mortgage Lending.
Thomas P. Broughan
Question:60 Mr. Broughan asked the Minister for Finance if his attention has been drawn to reports that more lenders plan to launch sub-prime mortgages in 2007 in addition to the existing packages offered by a company (details supplied); if the Financial Regulator is in discussion with these banks to ensure that charges such as arrangement fees and rates are set at reasonable levels and remain at reasonable levels; and if he will make a statement on the matter. [39238/06]
I am aware of the reports referred to by the Deputy. The sub-prime market exists to provide finance to those who have difficulty accessing mainstream credit, usually owing to an adverse credit history or difficulties proving income. Consequently, interest on such loans is normally higher than in the case of mainstream credit, as the lender must allow for a greater degree of credit risk. As the Deputy may be aware, the level of lending in the sub-prime market is currently extremely small.
Sub-prime lenders are regulated in Ireland in respect of their lending activities under the Consumer Credit Act 1995. The Act makes detailed provision for the form and content of the various loan agreements and advertising of consumer credit. The Financial Regulator has powers of investigation, review and enforcement regarding matters covered by the Act. The Act also provides for a procedure whereby lenders not otherwise authorised by the Financial Regulator may be prescribed as a credit institution by the consumer director of the Financial Regulator for the purposes of compliance with the Consumer Credit Act 1995. If so prescribed, the lender in question is then required, under section 149 of the Act, to notify the Financial Regulator for approval of the non-interest charges and arrangement fees that it imposes on its customers. Failure to notify the consumer director in the Office of the Financial Regulator of new charges or changes to existing charges is now an offence.
The Deputy may wish to note that, as part of its consumer protection remit, the Financial Regulator continuously monitors new and developing financial products in the marketplace. In view of my role as Minister for Finance, I will give full consideration to any recommendation from the Financial Regulator that may require a legislative response.
I have previously raised sub-prime lending with the Minister for Finance and the Committee on Finance and the Public Service. I find it paradoxical that the Financial Regulator takes, no doubt correctly, a reasonably tough attitude to building societies, which are the people's banks, particularly for those with whom ordinary banks will not deal. He is even stalling on facilitating very well endowed credit unions to offer more home products. However, at the same time people go from door to door through housing estates, particularly local authority housing estates — not to mention afternoon television — offering sub-prime mortgages.
The subtext in sub-prime mortgages is that they can solve one's financial problems by consolidating one's loans, meaning one could be better off. The hidden part is that there are arrangement fees, and I would like to hear the Minister's views in that regard. Some are as high as 1% of the price of the property, meaning that one could pay €4,000 in arrangement or start-up fees on a €400,000 property. With certain products, if one fails to meet the loan conditions, the provision for penalties is extortionate.
Many people who are less well informed financially lack access to the normal banking system and cannot go to a credit union. They are being pressurised by sub-prime lenders who will make a fortune from them. We spoke earlier of mortgage interest rates crossing the 5% threshold some time next month. Is the Minister concerned that sub-prime lenders may be preying on the vulnerable? People must take responsibility for their financial decisions, but the sub-prime lending market is very much unregulated compared with building societies, ordinary banks and credit unions.
I understand the company to which the Deputy referred is one of a handful of companies operating in this sector, but I have no information on the intentions of such companies in what is essentially a commercial matter for themselves. In regard to the procedures used by the Financial Regulator to determine what charges it will allow a lender to impose, section 149 of the Consumer Credit Act 1995 sets out as criteria the promotion of fair competition, the statement of commercial justification, a credit institution passing any costs onto its customers and the effect on customers of any proposal to impose any charge in regard to the provision of such services. In the case of housing loans, the Act specifically obliges mortgage lenders to inform borrowers of the effect on the amount of their repayment instalments of a 1% increase in interest rates in the first year of their mortgage.
The issue to which the Deputy referred is, therefore, covered by the 1995 Act. If the Deputy is concerned that these companies are not operating within the remit of the Act, she should bring her concerns to the attention of the Financial Regulator for investigation.
Will the Minister for Finance send out a message to some of those entering this potentially hugely profitable market that he will seek to protect consumers? He is passing all responsibility for this issue to the Financial Regulator as though it is nothing to do with him. Will he let it be known that he will not let some of the poorest people in our society be completely ripped off by companies that may operate at a level not many degrees above that of loan sharks?
Moreover, many of these companies are offering roll-up products. Not only can customers get a new mortgage or transfer an existing one but they can also amalgamate car loans and credit card debt and even have something left over to go on holiday. We have spoken about the Central Bank's financial stability report. This is dangerous territory. Has the Minister written to the Financial Regulator and requested a meeting to discuss this issue? Will those vulnerable people who may be ripped off by these companies be left simply to pick up the pieces? Sub-prime lending does not represent a soft lending for the housing market.
As I said, the Financial Regulator has a consumer protection remit in the area of financial services. It was established as a modern regulatory authority that would perform its function in an independent fashion.
The Financial Regulator is not even aware of this problem.
If a practice comes to the Deputy's attention which she believes is not in compliance with the statutes, she should raise it with the Financial Regulator.
I raised it with the Financial Regulator but it did not know about it.
I will raise the matter following this discussion and I am sure it will be investigated. That is the statutory remit of the Financial Regulator. It is a question of ensuring it has the information so it can investigate any issues.
Stamp Duty.
Mary Upton
Question:61 Dr. Upton asked the Minister for Finance the estimated amount of stamp duty raised on premiums paid by motor insurance policyholders to date in 2006; and if he will make a statement on the matter. [39253/06]
A 2% stamp duty is charged on most non-life insurance premiums and this is part of the normal stamp duty system. The exceptions are re-insurance, voluntary health insurance, marine, aviation and transit insurance and export credit insurance. This duty was introduced in 1982 and it yielded €90 million in 2006.
It is not possible to distinguish between the different types of insurance business within the yield from the non-life levy. The purpose of the non-life levy is to broaden the stamp duty base while maintaining low direct tax rates.
Is the Minister satisfied that consumers have enough information about these charges on motor insurance policies? Has he had any contact with the Financial Regulator to increase public awareness in this regard? Is he satisfied that the way these charges are being implemented is correct and fair to consumers?
I have had no complaints about these charges, nor has the Financial Regulator contacted me about them.
Written Answers follow Adjournment Debate.