Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Brexit Staff

Michael McGrath

Question:

1. Deputy Michael McGrath asked the Minister for Finance the status of the preparedness of the Revenue Commissioners for Brexit; the number of customs officials who will be required on 29 March 2019 in the event of a no-deal Brexit; the number of customs officials he anticipates will be operational on 29 March 2019; the extra work that will be required in the event of a transitional period being agreed to; and if he will make a statement on the matter. [44279/18]

This question relates to the preparedness of the Revenue Commissioners for Brexit and, in particular, for all possible scenarios. I understand they have informed the Minister they require 600 additional staff in the scenario of an orderly Brexit where a deal is done and then there is a transition period up to the end 2020. It appears we will fall well short of that by March of next year. I hope the Minister can give a House an update on that matter.

I thank the Deputy for raising this question. I am advised by Revenue that its Brexit contingency plans are progressing well. Revenue's priority to date has been on upgrading relevant IT systems to have the most advanced systems possible to support and facilitate smooth and efficient trade flows. Performance testing is now well advanced and I am assured by Revenue that based on the work completed to date it is confident that the various IT systems will support the expected additional workload arising from Brexit, ensuring customs processes can continue to operate effectively and efficiently in a post-Brexit environment.

Allied to this upgrading of IT systems, I am advised by Revenue that it continues to bring to the attention of trade the range of authorisations and simplifications provided for within the Union customs code, UCC. These authorisations and simplifications facilitate legitimate trade to operate in the most efficient way possible. I am aware that Revenue is meeting with trade and business representative groups and attending industry seminars to discuss the supply chain challenges that can arise for business from Brexit and how the authorisations or simplifications available under the UCC could potentially contribute to meeting those challenges.

Revenue has determined that it will require an additional 600 staff as a result of Brexit. In line with the Government decision of September, Revenue has a comprehensive campaign in place to recruit these additional resources. Internal, interdepartmental and open recruitment campaigns are well under way. An open recruitment campaign undertaken by the Public Appointments Service commenced on 11 September and attracted more than 3,000 applications. Interviews are now under way.

I am assured that Revenue’s plans are on track for the first 200 additional trade facilitation staff to be trained and in place by 29 March 2019. These staff will be assigned to trade facilitation work in the ports and airports and to support trade and business in undertaking an appropriate level of Brexit related preparation.

I will cut to the chase on this one. Revenue has told the Minister it requires 600 additional staff in the scenario of an orderly Brexit and a transition period to the end of 2020. When does it need those 600 staff by? Is it by March of next year or by the end of 2020? The Government will deliver 200 additional staff by the end of March 2019, which is well short of the 600 required, being just one third of the number requested. That is all in the context of a deal being done. What extra resources does Revenue need if this all goes wrong? If we have a cliff-edge Brexit and there is no deal by the end of March 2019, has Revenue given the Minister an estimate of the extra resources it would require in that scenario? If 600 additional staff are required in case of an orderly Brexit, a transition period and a future trade deal between EU and the UK, what number is required if there is no deal? Presumably it will be a significantly larger number. I hope the Minister can give the House clarity on that matter.

I will answer the different questions the Deputy has put to me. The staff the Government will make available to the Revenue Commissioners is in line with what they have requested, namely, 200 staff to be in place by that point in March next year. Our aim then would be to recruit the balance of the staff in the period after that across a transitionary period. The objective of the European Union and the UK is to reach agreement on a transitionary period.

What we will be doing, as indicated in my initial answer to the Deputy, is that we have provision available in relation to use of staff that are already employed by the Revenue Commissioners in relation to setting up panels. Some 3,000 people have now applied for these roles, which is of help.

In the event of a no-deal scenario being reached and a disorderly Brexit, the consequences of that will stretch well beyond resourcing. Political and policy choices will have to be made by the European Union as a whole in relation to this because of the challenges that all member states will face. All of the resource needs that I have been asked to meet I will meet and we will ensure that staff are in place by the deadlines that have been asked for by the Revenue Commissioners and communicated in the Government decision to date.

I thank the Minister for his reply but I must put that "what if" question. If that arises it will go well beyond resource implications, which it will. I assume the Revenue Commissioners, which is a competent professional body, have given the Minister its assessment of what is required by March 2019, in the event of a cliff edge Brexit. It will go well beyond the 600 figure that they have put on it, in the context of a deal or a transition period and a future trade deal between the EU and the UK. Could the Minister answer that straight question as to whether they have given the Minister an assessment of what is required in the event of no deal by March of next year, which is coming around the corner fairly quickly at this stage?

The Minister has clarified that in relation to the 600, they had only asked for 200 by March of 2019 under the central scenario of an orderly Brexit and a transition period. I ask the Minister to confirm the position.

As already mentioned, we are providing staff and resourcing in line with the central scenario and the request that has been placed on me.

We are engaging in evaluation of what could happen in a no deal scenario. The consequences of being in that place stretch beyond resourcing for all of the European Union. In that place and contingency the provisions that are open to us regarding use of existing staff and interdepartmental panels will then be used. This is why the work in relation to the evaluation and upscaling of our IT systems is so important. We will have a technology platform that will be able to deal with the different scenarios. In the event of us getting to a point where an agreement is not in place, which everybody is working to avoid, the consequences for the European Union as a whole will be exceptionally significant.

The first area of guidance in relation to this is where the European Commission is looking at different papers as to how different member states will handle a no deal scenario in different policy areas. We would have to get an indication from the Article 50 task force that we are in a no deal spectrum. To date that guidance has not been provided.

Tax Avoidance

Pearse Doherty

Question:

2. Deputy Pearse Doherty asked the Minister for Finance the steps he will take to ensure high wealth persons pay an appropriate level of tax in view of the information contained in the recent Comptroller and Auditor General report. [44237/18]

We will proceed with Question No. 2 and in the absence of Deputy Pearse Doherty I call on Deputy Donnchadh Ó Laoghaire to introduce the question.

The Comptroller and Auditor General report states that there are 140 high-wealth individuals, millionaires 50 times over, who had a taxable income of less than €125,000. Some 83 of these people have taxable income of less than the average worker. Clearly, there are those in society who are not paying their fair share. Will the Minister commit to bringing in the necessary changes to close these loopholes and exemptions?

As the Deputy will be aware wealth is already taxed in a range of ways. The local property tax is based on the market value of residential properties. Capital acquisitions tax and capital gains tax are levied at 33% on the sale of assets. Bank interest in most cases is subject to deposit interest retention tax and the stamp duty levy on the transfer of shares yielded a net total of €449 million in 2017.

The Comptroller and Auditor General's report notes that both taxable income and income tax payable are determined in accordance with tax legislation which provides the tax expenditures in the form of tax reliefs and tax credits. Such credits and reliefs, where applicable, have the effect of reducing the tax liability of an individual in any given year of assessment. As also stated by the Comptroller and Auditor General in his report, while high earners are well placed to utilise a wide variety of credits and reliefs available, they may also be liable to pay additional tax by virtue of their income in the form of the domicile levy and the high income individual's restriction. This status is determined by assets rather than income, while under the high income individual's restriction, high income earner status relates to those with adjusted income of over €125,000.

The Comptroller and Auditor General's report notes that in 2015, high wealth individuals paid an effective tax rate, including income tax, PRSI and USC, of 39.2% compared with an average rate for all taxpayers of 16.3%. Under the high income individual's restriction, where adjusted income is up to €400,000, a tapered approach ensures that there is a graduated application of this restriction, with the effective rate of income tax increasing towards 30%, as adjusted income increases towards €400,000.

We all appreciate the work of the Revenue Commissioners, and in fairness, on some issues where my colleague Deputy Doherty and others have identified unintended or unjustifiable tax breaks, the Department, the Minister and the Revenue Commissioners have acted. There are concrete steps that could be taken here that have been ruled out. For example in Britain all taxpayers with income over €100,000 have to fill out a tax return. That might merit consideration even at a higher level.

One of the striking parts of the Comptroller and Auditor General's report was how high the threshold in this State is to be considered a high wealth individual. At €50 million it is very high compared to €10 million in Spain or €5 million in South Africa. This threshold should be lower. Imagine what we would be looking at if there were cases of €20 million and €30 million being considered. The methods to reduce tax liability are well known to us. The use of credits and reliefs, in particular, serve an important role in reducing the tax burden for low earners but for high earners they should be phased out. The evidence points to tax avoiders having the upper hand in the race between the hound and the hare. The result is millions of euro foregone in tax that should be paying our nurses, being invested in our economy and reducing our debt. Will the Minister consult with the Revenue Commissioners in reducing the threshold and will he beef up anti-avoidance rules in the Finance Bill?

Any input I get from the Revenue Commissioners in relation to anti-avoidance rules or anything that needs to be done to deal with tax evasion on an individual or a systemic basis I act on.

The policies that we have in place now, I believe, are effective and proportionate. The reason for this belief is backed up by the figures on those, for example, earning more than €400,000. In this example, the 2016 report in this area shows that 149 high income individuals, with an adjusted income of €400,000 or more paid an effective average tax rate of 30.1%. When I include the universal social charge in this, the average tax rate they paid was 40.9%. Anybody over that level of income face a rate of tax that is proportionate to the income that they have. Those who have more should pay more. The tax code that we have in place delivers that.

Banking Sector Reform

Michael McGrath

Question:

3. Deputy Michael McGrath asked the Minister for Finance the steps he plans to take to follow through on the Central Bank's recommendation that an enhanced individual accountability framework be introduced for banks and other regulated financial services providers; and if he will make a statement on the matter. [44280/18]

I want to raise with the Minister the recent Central Bank report into the culture across our banking system and in particular its recommendation that we move towards the introduction of an enhanced individual accountability framework. I want to know if the Minister and the Government support that call by the Central Bank. There is such a regime in the UK for the last number of years. It would be appropriate and a positive step and I look forward to the Minister's response.

As the Deputy will be aware, I have long been on record as stating that there are cultural failings in the banking sector that must be addressed. I want to acknowledge the Deputy's role in addressing all of this, particularly in relation to the tracker mortgage scandal.

The Deputy pursued the issue forensically at the Oireachtas finance committee.

The Central Bank section 6A report on the culture and behaviour of the main retail banks was drafted by the Central Bank in response to my request last November. Indeed, I just spoke on the report at a conference this morning. I reassure the House that many of the specific issues unearthed by the tracker scandal took place more than a decade ago, although the costs still live with us to this day. The new approach to banking supervision has radically changed through, for example, the Central Bank Reform Act 2010, the Central Bank (Supervision and Enforcement) Act 2013 and the European Single Supervisory Mechanism. The Central Bank is now acknowledged as being one of the most robust and challenging institutions in the world.

My Department's analysis of the culture report found that it was a detailed, qualitative and considered analysis of culture within the banking sector. The Central Bank's proposals on enhancing individual accountability by way of conduct standards for all regulated financial services providers and the individuals working within them, having a senior executive accountability regime and enhancing the current fitness and probity regime are being considered by me in light of my intention to introduce a Central Bank (amendment) Bill in early 2019. There is significant merit in the proposals and I look forward to engaging with the Central Bank and the Oireachtas on how we can implement the principles contained in the report in a way that reflects best practice across the world.

For me, this is not about a witch hunt. It is about having accountability at the top level of our financial institutions. The impact of decisions and behaviours is profound. The Minister referenced the tracker scandal. Approximately 3,000 directly affected customers are yet to receive redress and compensation despite us being almost three years on from the commencement of the investigation. It is their money and they have not got it back, which is a scandal. We need accountability across the financial system, particularly at senior levels where decisions are of such significance for people's lives and the conduct of business and trade in our economy.

The Central Bank report was a good one and we have the recent experience of the UK's introduction of a senior managers accountability framework. It is now a global concept. Hong Kong, Singapore, the US and Australia have made moves in recent years to improve accountability frameworks at senior level across their financial systems. The Minister will have the support of our party in making moves to implement what the Central Bank has called for.

I thank the Deputy. I have also considered how Holland has been implementing the regime in question.

Regarding redress and compensation, a total of €580 million had been provided to impacted customers up to the end of August. That amount was their money and it required a large amount of effort from the Central Bank to get to this point.

As to sanctions to date and as the Deputy will be aware, there have been six criminal prosecutions in respect of banking matters, defrauding the Revenue Commissioners, fraud and deception. The Deputy acknowledged the work of the Central Bank. We have a strong enforcement regime reflecting the difficulties of our recent past. On the back of what is a very reflective report from the Central Bank, one that deserves the time we have given to its consideration, I will work with the Deputy, the rest of the Oireachtas and the Central Bank to consider how to progress that into an effective legal regime. There is a need in this respect, which was the point I made earlier today.

It remains to be seen whether the enforcement investigations that are under way in the tracker scandal will deliver answers. The people affected will want to know how it could have happened in the first place, that is, how all the main banks could have made the same mistake in a manner that was adverse to the interests of their customers and was favourable to the interests of the banks. I hope that we get a simple and straightforward answer to that question. There should be individual accountability if people are found guilty of wrong-doing. That is the bottom line. We are nearly three years into the investigation, yet there are still nearly 3,000 customers waiting to get their money back.

The Central Bank's recommendations are crucial and it is imperative that we as a House move swiftly to put them into effect. I hope that the Government will make specific legislative proposals to that end without delay so that people can have greater confidence in the financial system and in there being accountability when things go wrong.

Those customers and citizens who are concerned - I share that concern - about the need for accountability and redress should be cognisant of the amount of money that has now been correctly returned to customers who were wronged.

The inquiry is being led by the director general of the Central Bank. The Deputy mentioned his hope that there would be a single and clear answer. My expectation is that there will be many different answers to this. I only need to reference the recent tribunal report from the Charleton inquiry to point to the fact that, at the root of great difficulties that we have to confront, many factors tend to be at play. I am not going to prejudge what the Central Bank will do, but I have absolute confidence in the focus and effort that it is putting behind understanding why this happened. I have seen at first hand its determination to ensure that the right level of sanction is applied and customers get their money back. I will continue to work with the Central Bank on dealing with this issue.

Tax Code

Danny Healy-Rae

Question:

4. Deputy Danny Healy-Rae asked the Minister for Finance his plans to reduce the take on VAT and excise duties in view of the fact that fuel and motoring costs have risen dramatically since the commencement of 2018. [44241/18]

Fuel and other motoring costs have again been rising significantly in recent times. People in rural Ireland, especially Kerry, are hurting from the extra costs that they must bear. Wages and social welfare payments have not increased to meet their costs. In Kerry and places like it, one cannot go anywhere without a car because there is no public transport.

I thank the Deputy for his question. The point he is making to me about the rising cost of fuel gives a different perspective to the debate that is under way on carbon taxation. The reality is that some forms of fuel are increasing in price. Between January and September of this year, the average prices per litre of petrol and diesel rose by approximately 7 cent and 12 cent, respectively. The prices of these fuel forms are determined by a number of factors from tax to the price of the raw materials and exchange rates. The price of fuel on the forecourt is set by the individual retailer. The current excise rates are 58.7 cent on a litre of petrol and 47.9 cent on diesel. These rates have been in place since 2012 and are kept under review. In budget 2019, I made no changes to these rates and have no intention of changing them further as part of this year's budget.

As was noted in the tax strategy group's environmental paper, the Irish rate of excise on petrol is the 12th highest in the EU while diesel is the tenth highest. They are lower than many of our neighbouring countries.

The Deputy will be aware that, for large-scale diesel consumers, the diesel rebate scheme was introduced in 2013. It offers a partial excise to qualified operators and begins when the price reaches €1.23 per litre, gradually rising to a maximum rebate of 7.5 cent when diesel reaches €1.54 per litre.

The first thing I have to point out is that people with ordinary cars cannot claim back the VAT or any rebate on the diesel. They have no other way of going to work and people have to travel long distances to work. Mothers have to bring children to schools, hospitals and elsewhere. Yes, hauliers can get back the VAT. The cost is so exorbitant. Petrol is €1.45 or €1.46 at the pump and there is 58.7 cent added on to that for excise and carbon. That is very significant. Another 47 or 48 cent is added on to the price of €1.40 for diesel. I am asking if there is any scope for manoeuvre to help these people in rural places who have no other way to travel to and from their homes other than by motor car. They have no rebate or return of VAT available to them.

I fully understand the point the Deputy is making. I understand that for many of his constituents, the car is the only form of transport available to them. I understand that public transport is not always the option it would be for those in our larger cities and towns, whether it be the bus or the train. I know that is not always available. I also acknowledge that our total tax take from fuel is already very high. For example, the contribution that is made from taxation to the pricing of fuel equates to about 60% of the price of a litre of petrol and about 54% of the price of a litre of diesel. While I am not in a position to say that I will be reducing the taxes in the way the Deputy wants me to do, it is in recognition of the issue he has raised that I decided not to change those taxes in this year's budget.

I have to thank the Minister and his Government for not raising the taxes any further. We recognise that the price of oil is going up worldwide. Heating oil is up by 30% and fuel costs generally are up somewhere around 25%. It is my duty to represent the people who are hurting as a result of the exorbitant cost of the fuel they must use to get to work and to do their everyday business. They are really hurting. It is not wrong of me to ask the Minister and the Government to do something to help those who do not have public transport and have no other means of transport other than their motor car. Young and old are affected and with the cost of insurance and everything else it is practically impossible. Many families that need a second car are losing the second car because they cannot afford it with all the costs, and wages and social welfare have not gone up to meet those costs.

It is indeed the Deputy's duty to represent his constituents and it is in cognisance of the points he is making that I made the decision to make no further change to the tax rates that are applicable to the price of fuel. A general point I would make in the debate on carbon taxation that I know is going to ensue from decisions I made on budget day is that if the contention is - and I accept it - that price does change behaviour, if the price of fuel is going up in the way it has in the past, what impact will that of itself have on usage of fuel and on transport choices? The difficulty the Deputy is raising with me is that the transport options available to many of his constituents are different from the options that would be available to those in larger cities and larger towns. As I said, while I am not in a position to announce the reduction the Deputy is looking for, we will be seeing further investment in public transport. The Local Link scheme that has been implemented by the Minister of State, Deputy Griffin, is going to work very well and I am committed to supporting him in those kind of projects in the coming period.

Fiscal Policy

Catherine Murphy

Question:

5. Deputy Catherine Murphy asked the Minister for Finance the commencement date for the establishment of the rainy day fund announced in budget 2019; the initial amount to be transferred to the fund on that commencement date; the five year expected projection for the fund; and if he will make a statement on the matter. [44393/18]

Deputy Catherine Murphy is not in the Chamber. I am using my discretion; it is customary in such cases to make a request to the Ceann Comhairle's office but in view of the number of questions today, I am allowing Deputy Shortall to introduce the question.

Deputy Catherine Murphy is held up at the Committee of Public Accounts.

I can understand that, but normally-----

I just got word of that in the last few minutes so I apologise that I did not go through the proper protocol.

The rainy day fund seems to make sense on the surface of it or on a theoretical basis. It seems sensible to engage in counter-cyclical planning and when there are boom-time corporation taxes, it sounds like it would make sense to put them away for a rainy day. However, there has been very little discussion or debate about this and it is very hard to find out the grounds on which that money might be spent in the future. It is not the same as what a family would do in terms of putting money aside. Can the Minister tell us some more about how this fund would work and specifically about the timings involved?

I want to inform the Deputy that this week I brought the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 to Government and this Bill has now been published. It will be circulated to Deputies in the coming days. It provides the legislative underpinning for the rainy day fund, which will formally be known as the National Surplus (Exceptional Contingencies) Reserve Fund. The timing of commencement of the fund will be contingent on the Bill's passage through the Oireachtas.

The fund is part of a number of measures to help increase the State's resilience to external economic shocks. My intention, as outlined again in budget 2019, is to seed the fund with an initial transfer of €1.5 billion from the Ireland Strategic Investment Fund. I have then provided for Exchequer transfers of €500 million per annum from 2019 to 2023. This will see the fund grow to approximately €4 billion by the end of 2023. In addition, the Bill will provide the possibility of placing windfall tax or other receipts in the fund, where the Dáil by resolution so authorises. The projection of €4 billion by the end of 2023 is contingent on a number of assumptions, namely, that there is a near-zero net carry-cost or return over the period; that there is no event requiring a draw-down; that there are no windfall receipts placed in the fund over the period; and that there is no significant event during the period requiring use of the in-year contingency reserve.

I should explain that the in-year contingency reserve is intended to operate as a potential carve-out from the annual €500 million allocation to the fund. Where, as a result of a natural or other disaster, the Government incurs unforeseeable additional expenditure to mitigate the effects of that event, the payment into the rainy day fund in that year may be reduced by an amount of up to that additional expenditure. I look forward to debating my detailed proposals on Second Stage in the Dáil in the next few weeks.

I thank the Minister. As I said, on the surface it sounds like it is the prudent thing to do. However, when we actually look at the detail it is clear that this is not money that is going to be drawn down when tax receipts are reduced. The Minister said that it is to be a fund that can be drawn down in a force majeure situation where there are external shocks due to natural disaster or some major thing like that. It is not actually in keeping with the common understanding that this is money put aside that can be used in difficult times. It is very specific to natural disaster type occasions.

We have a crisis now in respect of housing. The Government is spending €700 million in rent which is going into landlords' pockets. Surely this is the time to invest those available funds into an area that is of such systemic importance to our economy that it is putting huge pressure on wages, for example. Even employers are looking for that money to be invested in housing now rather than putting it away for some potential future use.

I will make two points in respect of what the Deputy said. First, the rent supplement and housing assistance payments are not being used to supplement landlord profits. They are being used to provide accommodation to citizens who, in the absence of these payments, would be unable to access the accommodation they need and deserve while our social output is increasing. I have a question from Deputy Boyd Barrett on the matter as well and we had a debate on the matter yesterday during parliamentary questions to the Minister for Public Expenditure and Reform.

The Deputy made a second point on the fund. The purpose of this fund, as I have communicated today publicly, is to have money available in exceptional circumstances that are recognised by the Minister for Finance of the day. These must then be agreed by Cabinet and then, in turn, a resolution must be brought to the Dáil on the matter.

My view is that we will only know the value of this fund when we need it. If we face an exceptional shock we will lament not having set it up. As things stand, the level of public debt in the country is a little under €203 billion, which is a fraction of where we were when we faced the last economic shock, a shock we are still trying to put behind us. For that reason I believe this is an appropriate thing to do to help with the long-term challenges our country may face.

Surely the Minister will accept there is a vast capital investment deficit in the country at the moment, and that this is having a major negative impact on the operation of our economy and the quality of life of people. Why would the Government not use available resources now to save in the future? We are over-spending in respect of the cost of the housing assistance payment. Would it not make far more sense to invest in the provision of housing now rather than continuing with the dependence on HAP? Would it not make far more sense to ensure that we did not have long waiting lists for health services? It makes more sense for the Government to invest in the kind of facilities that are badly needed. It makes more sense for the Government to use the money as a catch-up fund to catch up with the under-investment in the capital area that we have saw during the austerity years. The principle centres on spending now to save in the future. Surely the Minister for Finance will accept that it is far more prudent to provide that kind of investment now rather than putting money away for something that may never happen in future.

At what point do we begin to save?

We need to deal with the crisis we have at the moment.

At what point do we being the cycle of trying to save for the challenges we could have in future? I absolutely understand the position, as does the Deputy, because I represent constituents who are dealing with anxiety and trauma in respect of their homes, lack of homes and difficulties in accessing the healthcare services that we all want them to have. That is why, for this year, we have increased investment in capital. "Capital" is a technical word for our hospitals, schools and public transport. We have increased it in this year by €800 million. The key feature of budget 2019 is that for next year we will increase investment in our homes, universities and schools by an additional €1.4 billion.

The Deputy has, on other occasions, pointed to the dangers of how high our debt is and to the dangers of being over-reliant on any particular tax stream. All I am trying to do is get the balance right between getting ourselves ready for the future and dealing with the level of social need that I know to be present today.