Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 29 Jun 2022

Double Taxation Agreements: Discussion

Chairman

I welcome the Minister and his officials. I draw their attention, as well as that of members, to the notice on privilege and the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official either by name or in such a way as to make him or her identifiable. Parliamentary privilege is considered to apply to the utterances of members participating online in a committee meeting once their participation is from the parliamentary precincts. There is limited privilege should you be outside the House. It is important that we observe the general guidelines given to the committee.

Today we are dealing with double taxation agreements with the Isle of Man and Guernsey. I invite the Minister to make an opening statement.

Minister for Finance (Deputy Paschal Donohoe)

I thank the committee for the opportunity to be here today to bring before the members two draft Government orders giving force of law in Ireland to two new protocols to the existing limited-scope double taxation agreements, DTAs, with Isle of Man and Guernsey.

Deputy Pearse Doherty

On a point of order, is there a copy of the opening statement? It was not circulated to the committee members and we are at a loss here. Usually we have copies.

Deputy Paschal Donohoe

My apologies to the Deputy if he does not have one. We have some copies here that we can give members.

Deputy Pearse Doherty

My apologies for interrupting. It is just that it is technical, so it is handy to have it.

Deputy Paschal Donohoe

Absolutely. We will provide it to members. My apologies for that.

As I said, it refers to two protocols to the existing DTAs with Isle of Man and Guernsey. Ireland signed the original agreement with the Isle of Man in 2008 and with Guernsey in 2009. The protocols for the Isle of Man and Guernsey were signed on 18 November 2021 and 8 December 2021, respectively.

As the members will recall, arising from the OECD base erosion and profit shifting process, known as BEPS, Ireland ratified the multilateral convention to implement tax treaty related measures to prevent BEPS in 2018. The convention was discussed at this committee and in the Dáil and was included in the Finance Act 2018. The multilateral convention came into force for Ireland in 2019 and it has been the means for updating the majority of Ireland’s existing double taxation agreements to make them BEPS-compliant. Our existing agreements with Isle of Man and Guernsey were not updated by the multilateral convention but will instead be updated bilaterally to reflect the BEPS changes. That is what the two protocols before the committee today now seek to do.

Ireland has been to the forefront in both signing and ratifying the multilateral convention and these bilateral protocols are another important step in the implementation of the OECD BEPS actions. As for those partner jurisdictions that have not yet signed the BEPS multilateral convention, Ireland has written to them to discuss options for implementing the BEPS recommendations. We are committed to ensuring that all our double taxation agreements meet the required prescribed standards agreed in the BEPS process. A common feature of the protocols with both the Isle of Man and Guernsey is the incorporation of strong anti-avoidance measures and tools for tackling tax treaty abuse. Both bilaterally-agreed protocols contain the prescribed standards to which Ireland committed during the BEPS project.

With regard to the protocol to the Isle of Man agreement, Ireland signed its agreement with Isle of Man in April 2008. In March 2018, the Isle of Man’s Treasury asked the Revenue Commissioners if the 2008 agreement between Ireland and Isle of Man could be updated by protocol instead of using the multilateral convention to implement tax treaty related measures to prevent BEPS.

Ireland agreed to the request. Negotiations happened in 2018 and concluded in January 2019. That protocol was signed in November of last year and is now before the committee. The Guernsey treaty protocol was signed in March 2009. In June 2017, Guernsey also asked the Office of the Revenue Commissioners if the agreement could be updated by protocol. Ireland agreed to the request and negotiations took place, beginning in 2017 and concluding in October 2018. The protocol was signed in December of last year and is before the committee today.

Our network of double taxation agreements is an important aspect of our competitiveness in attracting investment and facilitating Irish business in operating internationally. In addition, double taxation agreements are a cornerstone of our trade policy and provide greater certainty and fairness for taxpayers regarding their tax obligations in foreign jurisdictions and they are key to the prevention of double taxation.

The benefits of double taxation agreements are well known but concerns have been expressed that treaties may inadvertently facilitate aggressive tax planning. These concerns were central to the BEPS project and to the multilateral convention on BEPS. Updating our existing double taxation agreements, whether via the multilateral convention or bilaterally, helps to ensure they cannot be used for aggressive tax planning arrangements. Ireland has been a strong supporter of the BEPS process since its inception. We continue to engage positively at both EU and OECD level in dealing with the tax challenges that arise from the digitalisation and globalisation of the economy including through signing up to the historic two-pillared agreement at the OECD last October. Proactively updating our treaty network to incorporate anti-BEPS measures is an example of that support.

It is timely that I am before the committee today because, following the approval of the Government, I published our tax treaty policy statement earlier this week. The rationale for publishing that statement is to take stock of our existing network and formalise our broad treaty policy. We have come from a period of expansion of the network to the point where we have treaties with the vast majority of our international trading partners. In order to inform the treaty policy statement, I launched a public consultation in April of last year that ran until May 2021. I received submissions from a broad range of stakeholders including business groups, practitioners, NGOs and members of the public. These are all available on the Department of Finance website. My officials held a series of stakeholder engagements to discuss the content of the submissions in detail and the insights we gained from those engagements were important in the drafting of the tax treaty policy statement.

The main thrust of the statement is that we aim to formalise the existing policy of maintaining and enhancing the network of double taxation agreements that facilitate international movement, trade and investment, including through the creation of a priority list of potential partners. A separate dimension of the policy relates to a specific policy for least developed countries, the definition of which is taken from the UN and will evolve as the UN updates its list periodically. One of the main features of this element of the policy statement is that Ireland will not approach least developed countries to seek a tax treaty and, where approached by least developed countries, we will be mindful of their particular and distinctive needs.

If Dáil Éireann approves the making of these orders by the Government, I will include the orders in the Taxes Consolidation Act 1997 by way of an amendment in the upcoming finance Bill. This will enable Ireland to complete the necessary notifications to finalise the ratifications of both protocols. I commend the orders to the committee. I am happy to answer any questions the Chairman or members may have.

Chairman

Before I call Deputy Doherty, I welcome Nicholas and Krzysztof Lesniak, a father and son from Poland, and Will Mulholland, who is no doubt from Kilkenny. They are very welcome and I hope they enjoy the proceedings of the committee.

Deputy Pearse Doherty

I hope our visitors find the debate on the double taxation agreements with the Isle of Man and Guernsey riveting. They are very welcome to the committee. I have a couple of questions for the Minister on the protocols in respect of both jurisdictions. The Minister mentioned that it was requested that both be dealt with by way of protocol rather than through the multilateral convention. Will he explain to the committee the benefits of taking this approach rather than the approach of the multilateral convention from the perspective of Guernsey and the Isle of the Man? Will he outline the objectives of each protocol separately and the amendments that have been made in respect of the double taxation agreements as they stand?

Deputy Paschal Donohoe

Before I go into the nature of these protocols, I will deal with the Deputy's first question as to why these matters are being dealt with via bilateral amendment rather than through the multilateral instrument. It is up to the Isle of Man and Guernsey to outline why they believe it is in their interest to do it in this way but Revenue and my Department considered it and the view of my officials was that, given the focus we are putting on the implementation of the BEPS process, the best way to ensure compliance with our standards was to do this through protocols negotiated bilaterally. The recommendation of Revenue and my officials aims to deliver on the spirit of the kind of change we want to see. We believed a bilateral negotiation was the most effective way to proceed. It is not as clear to us as it normally would be whether the multilateral instrument would fully apply to the kinds of agreements we have with the Isle of Man and Guernsey because those agreements are quite limited. They really only focus on individuals whereas other double taxation agreements I have presented to the Oireachtas are broader and include corporate and business information and activities. These relate to individuals only. Because of that, and independent of the views of the other jurisdictions, we were of the view that we should do it bilaterally to deliver against the standards we believe are appropriate for the exchange of information between individuals.

To go on to what is included in the agreements between Ireland and the Isle of Man and Guernsey, the protocols aim to put in place required minimum standards to allow us to be confident that we are adhering to the BEPS process. The first provision, which is contained in the first article of both protocols, inserts a new preamble into the original agreements. This preamble contains an expressed statement emphasising the role of the treaty in combating tax abuse. The second minimum standard provides for an anti-abuse rule which denies treaty benefits in cases where obtaining that benefit was one of the principal purposes of the arrangement or transaction entered into. I understand that this is referred to as the principal purposes test and involves looking at what the purpose of the transaction is. That is contained in Article 3 of our Guernsey protocol and Article 4 of the protocol with the Isle of Man.

Deputy Pearse Doherty

Will the Minister outline how the exchange of information will operate? What bodies are going to be responsible for exchanging information? What will the process be when one of those bodies detects or suspects incidents of tax evasion?

Deputy Paschal Donohoe

My colleagues here inform me that the agreement on the exchange of information is contained in a separate agreement between the jurisdictions. The agreements before us are limited in the scope of their application.

As I stated, they only deal with the income of individuals. They contain a mutual agreement procedure for the adjustment of profits of associated companies; that is all.

As regards tax information, we have a tax information exchange agreement with the Isle of Man and Guernsey. This is in line with the OECD model, which deals with the effective exchange of information on tax matters. It sets out the minimum standards for achieving effective exchange of information with those two jurisdictions. The way it happens is that the competent authorities, that is, the tax authorities in the Isle of Man or Guernsey, would contact our tax authority about matters of concern, or vice versa. I understand that is done through a common reporting system which brings to bear a standard way in which financial account information is shared.

Deputy Pearse Doherty

I thank the Minister. He mentioned in his opening statement that, in the context of the tax strategy papers and the tax treaty policy statement that was published, there is work ongoing in respect of the aim of the Department to have double tax agreements with all G20 countries. That is not the case at present. There are four countries outstanding with which there is no double tax arrangement or agreement in place. Several of the other double tax agreements are more than 40 years old and may not be fully concurrent with international norms at this time, given the changes, particularly in recent times, and the need to incorporate the OECD minimum standards and best practices aligned with the OECD BEPS project. Given that we are quite a distance from even having double taxation agreements with several of those countries and the agreements with other countries are out of date, will the Minister update the committee on the stage he is at with the negotiations? What is the timeline for the incorporation of standards under the OECD BEPS process? Will he provide the committee verbal and written outlines in respect of where he is at with all that and when are the expected horizons for new agreements that are compliant with BEPS?

Deputy Paschal Donohoe

As to the reason we brought forward the policy statements we published earlier in the week, some of it is informed by my experience of presenting double tax agreements to the committee through several years and some of it by the concerns and perspectives that have been shared here. We are aware of the perspectives that have been raised by stakeholders, especially with regard to our double taxation agreements, DTAs, with the developing world. In terms of where we are at the moment, we now have 76 DTAs, of which 73 are in effect. There are three that have been signed but are not yet in effect. In terms of our priority for further agreements, it is Brazil, Argentina and Indonesia. We do not yet have DTAs with Colombia or Costa Rica, which have now joined the OECD. Our priorities are to conclude agreements with G20 countries. In terms of what that sequencing will look like, our first priority is G20 countries, namely, Brazil, Argentina and Indonesia. After that, we will move to developing tax treaties with OECD member countries as well as EU accession countries. Following that, we will move on to how we update existing treaties.

In terms of where we are with bringing our agreements in line with the OECD process, much of that has happened through the enactment of the multilateral instrument to which I referred in my opening statement. It is the case there are some countries for which a bilateral approach is more appropriate.

Deputy Pearse Doherty

In the context of reaching a double tax agreement with the Isle of Man, it is common for holding companies connected with Irish companies to have residency in jurisdictions such as the Isle of Man. What is the Minister's understanding of that? Why it is seen as beneficial to those holding companies and their shareholders?

Deputy Paschal Donohoe

Is the Deputy asking about why companies would be registered in the Isle of Man?

Deputy Pearse Doherty

Yes. Holding companies that are connected with Irish companies are resident in jurisdictions such as the Isle of Man. It is a common feature. In the context of double taxation agreements, what is the Minister's understanding of the rationale and relevance and benefits of this practice?

Deputy Paschal Donohoe

Companies make decisions in respect of locating a presence in the Isle of Man. My judgment is that some of them make those decisions from a tax planning perspective. The agreement we are discussing, however, is a very limited one. It only deals with individuals and the limited business dimension I mentioned earlier. As such, companies that have a holding presence in the Isle of Man do not benefit from the agreement being put in place. It is a limited agreement relating to individuals. My officials and I will consider carefully whether the broadening of the agreement is necessary at any point. We believe it is appropriate it is a narrow agreement in the way I introduced to the committee.

Deputy Pearse Doherty

My next questions relate to the Isle of Man, Guernsey and other jurisdictions. The statistics compiled by the Department of Finance indicate there has been a sharp increase in the number of persons claiming non-domicile status in Ireland in the past two years. What is the Minister's understanding in that regard? Will these treaties have any effect on that?

Deputy Paschal Donohoe

Revenue has informed me these agreements will not affect individuals who might have non-domicile status in the Isle of Man or Guernsey. If the Deputy wishes to have further information on that or a note on it, I will be happy to furnish that to him.

Deputy Pearse Doherty

I would appreciate that. The Minister referred to the OECD BEPS process and pillars 1 and 2. I am sure he will be observing the challenges that some countries, not least the United States, face in the implementation of those pillars. It may be a challenge to get this through the US Congress, for instance. We can speculate on whether it will go through but that will be up to those at that level. It has always been the view of the Government that this needs to be done at global level. Has that view changed or evolved recently? Is it still the view of the Government that all parties that are signed up to the process need to implement it and, if that is not the case, then we should not be a party to this? There is an emerging view that, for example, pillar 2 will be transposed through a directive at European level. Does the Minister believe pillar 2 should take effect in Europe regardless what other parties, such as America, decide to do? That would be a very different view from the one we have. In fairness, I shared the same view. It would be a different view from the one the State had a number of years ago that this needed to be dealt with not at European level but at global level. I am not asking the Minister to speculate but it is a real prospect. Is it still the view of the State and the Department of Finance that this has to be a global implementation and, if it is not, we will not be proceeding at European level? Alternatively, is the State now committed to proceeding at European level in terms of pillar 2 regardless of whether any other jurisdiction has a difficulty or challenge or fails to transpose this into its law?

Deputy Paschal Donohoe

We are committed to progressing this at European Union level.

I believe America will make progress on its global intangible low-taxed income, GILTI, rate as well, so both will happen. Like the Deputy, I will refrain from speculating about what will happen in the US. It is up to them to make the decision but I believe we will see the EU and the US implement this change. A matter we will have to reflect on and are considering concerns the critical mass of countries in the OECD that is adequate to say this agreement has been implemented. That is particularly a matter for pillar 1.

Deputy Pearse Doherty

That is fair enough. Of those countries making up the critical mass, for us America is a crucial party. I want to get an accurate reflection of where the Department stands on this. Am I to take from the Minister's comments that, regardless of what America does, though the Minister believes it will progress this, we are committed to transposing BEPS pillar 2 through the European directive and, therefore, the minimum effective rate will take effect? That could have a substantial implication for policy here.

Deputy Paschal Donohoe

It could have. Because of the sensitivity of this, I do not want to comment too much on scenarios that could unfold in the future. If America cannot go forward with the implementation of changes in the minimum effective tax rate, it will have a huge effect of where we are overall with the OECD process, not just on pillar 2 but also on pillar 1, because America is so fundamental to it. We have indicated we will support and be part of a minimum effective tax directive. I expect America to do the same, to change and implement GILTI changes as the year goes on.

Deputy Pearse Doherty

I will focus on pillar 2 because it has been implemented through a directive at European level. Is there anything in that directive that will allow us to look at this again if America does not implement or has challenges in implementing pillar 2?

Deputy Paschal Donohoe

Not currently. It is always up to us to request the Commission to consider where we are and look at the status of a directive, but the minimum effective tax directive is drafted in a way we believe is compliant with the OECD agreement and represents a fair interpretation of the agreement that was reached. It will be up to us to decide at any point if this should be assessed or reviewed.

On a practical level, all these moments could be converging into one window anyway because one country is indicating it will not support the minimum effective tax directive for its own reason. The way things are going, we are rapidly getting to the point where it will be clear what America will do while the European Union is making a decision in roughly the same period regarding the status of the directive. The Deputy's question is an important one and I do not suggest it be left aside, but we are getting to a window in which it will not be a theoretical matter because we will have a fair idea what will happen in the US anyway.

Deputy Pearse Doherty

One will not jump before the other. Both will jump at roughly the same time. That allows us to look at what the picture is.

Deputy Paschal Donohoe

It is clearly understood that the ability of America to move forward on both pillars is an essential element of what this will look like.

I will emphasise another point on where we are. It is my strong view that if this OECD agreement does not move forward, our country will be presented with a whole other set of risks and challenges. In the absence of the OECD agreement, the risks of countries doing their own thing, which was acute in 2018 and 2019, will be back again. That would be a very challenging position for open economies like ours which rely on tax co-operation. That is why, even with the different points the Deputy has put to me, I believe overall it is very much in our interest to see this matter resolved in the OECD.

Deputy Pearse Doherty

Absolutely.

Deputy Paschal Donohoe

If it is not, we will be back to where we were a few years ago.

Deputy Pearse Doherty

I agree with those points. I thank the Minister.

Deputy Bernard J. Durkan

I thank the Minister and the officials. Have there been any unfortunate experiences in respect of any previous double taxation agreements that we should learn from?

Deputy Paschal Donohoe

I am not aware of any. Generally, the experience of our country has been that they are reasonably positive and beneficial processes to be part of.

Deputy Bernard J. Durkan

Given the importance of the European Union and United States in this regard, is the Minister satisfied the level of agreement reached between the European Union and third countries is adequate to safeguard the Union's resources?

Deputy Paschal Donohoe

I am, but the Department has been considering what is the best practice for the work we do in the future with regard to double taxation agreements. We are well aware of some of the issues and concerns raised with us, especially regarding our engagement with the developing world. While I would not describe that as a matter for EU concern, we felt it was appropriate and that we wanted to do it. That is why we have done that.

Deputy Bernard J. Durkan

I agree. Could any other EU country have a different arrangement with third countries which might in any way affect the operation of the double taxation agreement we have with other European countries or that other EU countries have with themselves?

Deputy Paschal Donohoe

Countries are free to enter into agreements with other jurisdictions as they see fit. That is the whole point of the BEPS process: that we have common standards in place so there is a level playing field on certain aspects of tax co-operation. What this should look like is that, as more and more countries transpose the common standards as we have done through a multilateral instrument, any opportunities for inappropriate tax planning are gradually eroded because everybody moves up to a common standard. It is possible that competitive advantage could be gained through how different countries do double taxation agreements, but that is why the OECD process matters so much. It aims to bring everybody up to a certain standard.

Deputy Bernard J. Durkan

As we all move near the same standards, is the Minister satisfied no loopholes can be exploited in the interim to benefit a European country, Ireland or a third country, regardless of location?

Deputy Paschal Donohoe

If Revenue or I become aware of issues we believe are illegal and inappropriate, of course we will respond to them. Can I guarantee the Deputy there is nothing out there that should be of concern to us? In truth I cannot.

Tax planning and tax law are immensely complex areas. However, I will go back to the point I offered a moment ago. The value of the OECD agreement is that putting common standards in place reduces the possibility for tax mismatches and ambiguities. I firmly believe that doing this will reduce over time the opportunity for the kind of practices to which the Deputy referred.

Chairman

With the Minister's agreement, we will park this matter and dispose of it at the end of the meeting. He might take a couple of general questions at this point.

Deputy Paschal Donohoe

Of course.

Chairman

On a general question, for a long time, including during the period in office of former Minister for Finance Michael Noonan, this committee has always raised the issue of the taxation agreement with Taiwan. At a time when the world is changing rapidly and other European countries are seeking a presence in Taiwan, and our colleagues in the European Union have trade offices in that country, we have not really established a trade office there, even though Taiwan has a population of 24 million. The previous discussion we had about the DTA with Taiwan indicated that we would use the UK model of wording to have that agreement, but it has never been brought to conclusion. Given the shift in world politics and the global economy, and observing the one China policy and the actions taken by our European partners, is it not time for us to complete that taxation agreement and to move quickly to reopen our offices in Taiwan to a far greater degree in order that the trade between both countries can be supported more directly?

Deputy Paschal Donohoe

I thank the Chairman for his long-standing interest in this matter. As he has acknowledged, like the rest of its EU partners, Ireland adheres to the one China policy. As a result, we do not have diplomatic relations with Taiwan. However, this does not preclude the development of economic trade relations. Some of my EU colleagues have negotiated a DTA with Taiwan. At present, my Department is consulting with the Department of Foreign Affairs and the Revenue Commissioners to examine whether an agreement, with equivalent effect to a DTA with Taiwan, might be concluded in a manner consistent with our foreign policy.

As the Chairman will be aware, an amendment was made to section 826 of the Taxes Consolidation Act in the Finance Act 2015 to allow for agreements to be made with non-governmental entities such as Taiwan. This has paved the way legally to conclude an agreement with Taiwan. Discussions between officials, including those from Revenue and the Department of Foreign Affairs, on next steps are ongoing, but there are not at present any formal negotiations between Irish officials and representatives of Taiwan.

The Chairman is correct to point out that IDA Ireland had an office in Taiwan. I understand it was closed in 2011 for economic reasons. I am not aware of any plans at present to reopen it but I will certainly raise that with IDA Ireland.

Chairman

Do the representatives of Taiwan have to take the next step, or is it Revenue or the Department's officials, to pave the way for the type of agreement the Minister has just outlined?

Deputy Paschal Donohoe

I am sure I will get a view from my officials in a moment regarding who needs to take the next step and where that stands but, as I said earlier in response to Deputy Doherty, we have priorities as regards who we will conclude DTAs with. The current priority is to prioritise G20 countries first. Given that Taiwan is not a member of the G20, I do not expect we will make any immediate progress on that.

Chairman

I will record my dissatisfaction with that because, as I said to the Minister, going back to the time when Michael Noonan was Minister for Finance, all efforts were made to try to conclude an arrangement with Taiwan. In respect of the political position regarding China and Taiwan, I understood the arrangement the UK and other countries have was at an advanced stage between representatives of Taiwan and the Department of Finance. To resurrect that arrangement or proposal would not take from the urgency of completing the G20 list. I again say to the Minister that there is a strong connection between Taiwan and Ireland. Taiwan is a market of 24 million people and is anxious to play its part on the world stage. We know why it has been hampered in doing that. This type of arrangement does not fly in the face of any political position. Our European partners are actively promoting trade in Taiwan and actively reaching agreements. We could take an off-the-shelf agreement for these countries and use it for Ireland. I encourage the Minister and his officials to perhaps look at the arrangement. It is a signal to traders doing business on both sides that we are players in the market.

Deputy Paschal Donohoe

As I said, I am very much aware the Chairman has raised this matter with me regularly. I appreciate the interest he has in it. I understand, from a correspondence point of view with Taiwan, and a tax perspective, we have responded to the different correspondence it has shared with us. A key issue that is still unresolved is how such an agreement could be concluded and signed. I will be very open with the Chairman, because he has raised this matter with me regularly, that one of the things we have done in our tax treaty framework is to state who we want to do when. We are putting the focus on three other G20 states. The issue regarding how the treaty could be signed is a substantive issue. I cannot pledge to the Chairman that it is one we can easily or immediately resolve but I will ask my officials to take a look at the matter and come back to me with an update on it. I want to be open with the Chairman about the priority it is receiving at present.

Chairman

I appreciate that. I ask the Minister to keep us updated.

At a previous meeting, I asked him about tax exemption limits for people aged 65 and over. I had not got my facts at that time and I said I would come back to the Minister on it. The gentleman who rings me, Liam, explained there is a particular cohort of people who are on the State contributory pension who may have, in his case, a pension from the local brewery. There is an exemption of up to €36,000 for married people or those in civil partnership. It is up to €18,000 for single or widowed people. The levels were higher than that but were then reduced. Since it has been reduced, even a small increase in the pension will drive Liam over the limit. I am sure there are just a small number of pensioners in that category.

I hope in the context of the budget that increasing the exemption might be looked at to take these people out of the bracket where they pay tax, thereby allowing them to benefit from the small increases they would get either from the State pension or their work pension. It is a small amount of money for the Government but a big amount of money for this group of people. It would make a difference to them. It is worthwhile considering all of these issues. The Minister might consider them to be minor issues in the broad scheme of things but they have an impact in a negative way on this cohort of pensioners. I want to bring this to the attention of the Minister and ask him to look at it.

Deputy Paschal Donohoe

I will certainly take it on board. If the Chair wants to give me the details of his constituent we will contact the person.

Chairman

I ask the Minister to look at it in the broader context.

Will the Minister comment on the recent AIB fine? Separate to this but in the AIB family is the EBS tied agents issue. To bring the Minister up to date on the EBS issue, it went to mediation and people have been appointed. It has got very legalistic and it seems an obstacle is being placed in the way of any step forward in progress. AIB should be encouraged to resolve this ongoing issue once and for all. I had hoped it would be reasonable in the context of the framework and the process but it appears it is driving those waiting for a resolution into a never-ending legal process. This is not what was asked for. Given the length of time that people have waited, the number of agents who have since passed away and the lesser number that remain, if there was good faith on the side of AIB and EBS it would be resolved. It shows a culture in the bank again that seems to want to push groups such as this to the limit in the process. I know things with banks are not fair and that "fair" is not a word they use but it is not good business practice or a good culture to stand over. AIB should be encouraged to show it intends to resolve the EBS issue once and for all. I also mentioned the fine and I ask the Minister to comment on it.

Deputy Paschal Donohoe

The fine of €96.7 million is the largest fine imposed by the Central Bank with regard to the tracker mortgage issue. The scale of the fine shows how seriously the matter was taken by the regulator. It shows the scale of harm and difficulty caused to many tracker mortgage holders. I recognise the role of the committee in continuing to give this matter the prominence it deserves. The fine and the work the Central Bank has done show the importance of a strong regulator and its willingness to sanction behaviour it believes to be unacceptable.

The Chair knows I cannot comment on the EBS issue and I should not do so because it is subject to legal proceedings. What I will do, which is what I do every time the Chair raises the issue with me, is to pass on the fact he has raised the matter with me in the Oireachtas to AIB and make sure it is aware of his concerns on the matter. I am afraid I have to limit myself in what I can say as it is a matter of legal engagement.

Chairman

The fine imposed on AIB by the regulator was a pittance in the world of banking. Of the 41,000 tracker mortgage issues there are still 1,000 or more that are unresolved. It would appear the banks are back to a culture where they circle the wagons and protect themselves. They do not want to get to the end of the tracker mortgage issue. It is not quite finished as yet. The regulator should be given teeth to deal with this and to give more information to the public on what is going on in the banking system. Consumer protection should be separated from the Central Bank so it is more independent and visibly on the side of the consumer. The committee will return to it.

The regulator was soft on the bank and soft on how the tracker mortgage issue was dealt with. I recall the previous regulator sitting at a meeting telling us the number of tracker mortgages involved was approximately 4,000. On that particular day in 2017 I adjourned the meeting and asked the regulator to go back and check his figures. He came back with a similar figure. We know now that figure was wrong because it has grown to 41,000. To say the banks behaved badly is to put it mildly. The banks have behaved badly. They have been scurrilous towards their customers. It is time to look at the regulation and the regulator. The regulator should be seen to be actively involved in responding to the various complaints made. This is what brings me to the conclusion that consumer protection should be completely independent of the Central Bank. I am expressing my own view on this.

Deputy Pearse Doherty

I concur with what the Chair has said on this. Although the role of the Central Bank in the tracker mortgage scandal concluded a while ago we know the scandal is not over. The committee, working collectively with all its members, has done a good bit of work on trying to shed a light on this and pushing those organs of the State that also failed customers in this regard. When people turned to the Financial Services Ombudsman at the early stages all the cases were rejected. We have to remember this. The Central Bank's comment, even today, is that it cannot get involved in individual issues. It was only through the perseverance of individuals that the issue was pursued and the Financial Services Ombudsman found in favour of them. It was fought all the way through.

I have not had an opportunity to raise this issue with the Minister. We are shocked and appalled at what went on in the banking sector. We are shocked and genuinely feel for people who are victims of the tracker mortgage scandals, particularly those who lost their houses. Many lost more than money. They were severely impacted in terms of their mental health. Permanent TSB, a bank of which the Minister is a major shareholder, recently fought a case brought to the Ombudsman. I know the individual who took the case. The individual relayed to me very clearly that the bank fought him tooth and nail. He won his case. Permanent TSB has confirmed to me in recent weeks that up to 200 individuals will have to be dealt with in the same way. I do not think that will be the end of the story.

The banks have set up a culture board and all the rest. When we have banks still fighting consumers in 2022, years after the investigation and examination by the Central Bank concluded, I argue strongly it is not a customer-centric approach. We cannot have a David versus Goliath approach. That is not fair. The case I am speaking about took years. I am sure the Minister is well aware of the avalanche of paperwork involved. Permanent TSB has a legal team. The individual had to deal with all of the correspondence and respond to it. If, at any time, had he buckled and said it was not worth it or not enough, up to 200 individuals would not know they were also victims of the tracker mortgage scandal.

In the middle of all that, the Central Bank did not spot this or step in. Therefore, we must improve consumer protection. There is a real need to look at where consumer protection lies. We must examine the legislation to allow the Central Bank to step into the shoes of victims, whether those of businesses in respect of the insurance they had for Covid-19 or of individuals impacted in respect of issues such as the tracker mortgage examinations. We have not given the Central Bank the powers to do that. As we are coming out the other side of this, I am mindful that there are, as I believe, still hundreds, if not thousands of cases, to be processed. Some of those may end up in the courts. In that context, we must state that the fines are not the end of this matter. The Garda will undertake its piece. Information in this regard has been provided to the force and it will be up to the Garda to deal with that aspect.

As politicians, we must examine this 15-year period where regulations were continually breached. How do we now improve the situation to ensure it never happens again? If representatives of the banking sector come knocking on the Minister’s door, which they are likely to do because there is a campaign by the sector to get him to allow the banks to pay bonuses and to breach the €500,000 pay limit, he should tell them to sling their hook. AIB was breaching regulations until eight weeks ago. It is amazing that this was happening.

The committee has heard from all the CEOs. They have apologised. They have told us they are now customer-centric and all the rest of it. Then we see the facts. This type of practice was going on until eight weeks ago in AIB. Equally, Permanent TSB is fighting these customers. We never see these aspects. If this individual had not come to me, I would not have known what was happening. This is not the approach we want in the banking sector. We must reach a point in the banking sector in this State where we are able to draw a line under what happened. We will only be able to draw such a line, however, when we have dealt with all these issues and they are behind us. We need to reach the point where our banking sector is doing what it should be doing, which is lending to individuals and making a return for shareholders, while also meeting the needs of ordinary people, businesses and the economy. This situation has dogged the banking sector for so long, but it is its fault. The banks are continuing to breach the regulations and continuing to act in the way they have. I fear this committee will be dealing with these issues for quite a while to come.

That was a longer contribution than I expected to make, but this situation has not been dealt with. The change we needed in the sector has not happened. If that change has not happened after 41,000 people had money taken from their accounts, family homes were taken and hundreds of millions of euro had to be forced to be paid back, as well as compensation to these victims, then I do not know what it is going to take. The Minister has a role here as the shareholder in some of these banks.

Deputy Paschal Donohoe

The Deputy knows, though, that part of the limitation I have as a shareholder is that I cannot get involved in commercial decisions. Deputy Doherty knows this.

Deputy Pearse Doherty

The Minister can get involved in cultural decisions. Can I make this point?

Deputy Paschal Donohoe

No, I listened to the Deputy and I ask him to let me finish.

Deputy Pearse Doherty

My apologies. I will come back in.

Deputy Paschal Donohoe

I ask the Deputy to just let me conclude. The Deputy knows that as a shareholder I cannot and do not get involved in commercial decisions. All that being said, what happened with the tracker mortgage issue was an absolute scandal. I used that word when the scale of harm involved for so many became apparent, not just to those families and people affected but to this committee and to me. The scale of what happened was a scandal. It was wrong that the issue developed in the first place. How the matter was dealt with and how the banks dealt with the regulator was also something that I believed at the time was unacceptable.

I have three points to make about it. First, I believe that the scale of fines imposed on AIB in this regard shows the seriousness with which the matter has been dealt with by the Central Bank. Between the fine, redress and compensation from AIB and from EBS, the total cost has been over €300 million. A large share of that €300 million has been accounted for by customers getting their money back in the first place. Nonetheless, I believe the fine imposed shows the seriousness with which the Central Bank has dealt with this issue. Second, the strong view I convey to the committee is that if we separate consumer protection from the financial regulator, then we will undermine consumer protection in the long run, because the most effective way of dealing with consumer protection is by having it done through the financial regulator for the banking sector. Third, Garda investigations are underway into some of these matters. While I know the committee will have wanted me to have moved this matter forward faster than I have, we will be bringing forward the senior executive accountability regime, SEAR, legislation. I hope to publish that next week.

Deputy Pearse Doherty

What role does the Minister have in the reappointment of the directors of AIB at the AGM?

Deputy Paschal Donohoe

I play a role in that at the AGM.

Deputy Pearse Doherty

Is it not the case that the Minister has the majority say in respect of the appointment of directors of AIB?

Deputy Paschal Donohoe

That is correct.

Deputy Pearse Doherty

Therefore, while the Minister has no role regarding the commercial decisions of the bank, these directors who have been directing AIB - not all the directors and many of them would not have served at all during the earlier stages of this period - have been found by the Central Bank to be in breach of regulations for 15 years and to have continued to do so right up until eight weeks ago. Has the Minister considered what view he will take regarding reappointing those same directors to the board of the bank that has been levied with the largest fine the Central Bank has ever imposed?

Deputy Paschal Donohoe

The issues we are discussing were instigated and are primarily the responsibility of the management of the bank. That has been made clear by the regulator. I have reappointed the directors that have been in place in AIB. I believe they have performed their functions well and I supported them at AGMs. Those who were at the heart of the scandal we are referring to were those who were managing these loans rather than the directors themselves.

Deputy Pearse Doherty

That is fine, but regarding the directors on the board of AIB whom the Minister has appointed and reappointed, how long have they now served on the board of the bank?

Deputy Paschal Donohoe

I will have to get that information for the Deputy. In fairness, I came to the committee to discuss the double taxation agreement, but I did of course say I would take any questions the committee wished to put to me, which I always do. I will get the information Deputy Doherty wants.

Deputy Pearse Doherty

I accept the Minister has no role in respect of the commercial decisions of AIB. He does, though, have a responsibility, as the shareholder on behalf of the Irish people, in respect of shaping the culture in that bank. I agree with him regarding the management. We know, however, that the directors have a role in this regard as well, particularly when they are aware, as they would have been for years, that there has been an issue within the bank concerning tracker mortgages. I refer to the findings of the Central Bank, particularly those concerning recent years, in respect of AIB having failed to apply the principle of stop the harm and having continued to pursue individuals. Legal notices were issued for the repossession of those people's homes, despite the tracker mortgage examination finding that these individuals were within its scope. Two individuals lost their family homes as a result of this harm continuing. In that context, then, it is appropriate to find out - and I do not know the answer here either way and I do not want to cast aspersions - whether the current directors were involved during that period. What efforts, and I am sure there have been efforts, were taken to ensure that the breaches of the regulations that were plentiful and continued until eight weeks ago were halted by AIB? I asked the question earlier of how we can change the culture in the banks. This is a context where the Minister has a role in appointing the directors of the bank.

We will just give them a clean bill of health. The first thing the Minister needs to do is ascertain in detail the role the directors - in the years since their appointment - played in trying to ensure that what happened in the bank did not actually happen. We know that it did happen. These homes were repossessed in recent years. The regulations continued to be breached up until recent times.

On what date will the summer economic statement be published?

Deputy Paschal Donohoe

I hope it will be next week. We have just accepted an invitation from the Committee on Budgetary Oversight for Thursday next. We will need to have it published by then.

Deputy Bernard J. Durkan

I have raised a couple of issues with the banks before, including one relating to the availability of an ATM in the Houses of the Oireachtas. I received various reasons as to why it was not possible. I do not accept those reasons. Almost every small business in the country has the convenience of an ATM machine. When one asks what it is there for, one is told that it is for convenience of customers. When the ATM was removed from Leinster House, it was done on the grounds that money was not being made or was being lost, that the administration had changed or that the banks were no longer doing it. Whatever way the banks are operating, given the relationship between the banks and the Oireachtas in recent the past number of years, if I were them, I would make some effort to restore the ATM machine in question. It was a snub to remove it at the time it was done, during the lockdown, and to base the condition for its removal on the fact that it was used very little. I find that difficult enough to believe, because of the representations I have received from Oireachtas Members and staff in particular. I ask that the matter be raised again as soon as possible.

I wish to raise other issues on which the committee has engaged before, including the transfer of accounts between banks. I do not want answers today, particularly if the they are not available, but I will insist on written answers. The transfer to other financial institutions was found to be cumbersome. It was allegedly a simple provision, which not everyone agrees with. It was not simple or easy; it proved difficult for many people. I would have thought that an electronic transfer between the outgoing banks and the incoming banks would have been simple to organise, on a national basis, and that it would have alleviated considerable anxiety and worry for customers and been of great benefit.

In the course of what I have heard from constituents in recent times, I have noticed that some long-standing customers had overdrafts, which were sometimes used, but that no provision was made for these to remain in place after the transfer. Instead, there was a provision for credit cards. Of course, we all know the difference between the two. One entails an interest rate of whatever the nominal interest rate is and the other entails a fairly hefty rate. I ask that the banks come back to the committee with a view to resolving the issue of equal treatment on the transfer of business interests.

There are a number of issues relating to the people who have lost out. Deputy Doherty referred to the individuals who lost out and lost their homes. I am sure that all Members of the Houses have done their level best to make sure that did not happen. They have lost some. We possibly lost some. We held and still hold some. The fact of the matter is that it is very easy for a lending institution to come along and tell someone that he or she is in debt and has broken the agreement and that his or her loan is no longer sustainable, but the Irish people rescued the banking system here. The Government, on behalf of the Irish people, rescued and paid for the banking system. The banks did not lose anything, except their good name or whatever kind of name they had at the time. We have not gone away and nor are we likely to.

I pay tribute to the lending institutions that have dealt sympathetically with customers. I cast a wary eye on those that did not. We will need to continue to monitor the situation. I do not want an immediate response, unless somebody decides to give an administrative response, but I want a response in writing within the next two to three weeks, before the Dáil goes into recess.

Deputy Paschal Donohoe

We will definitely get back to the Deputy on those matters. It shows his prominence and seniority within the Oireachtas that other Members make representations to him about issues such as this. I can only imagine worried colleagues coming to Deputy Durkan to express concern about the absence of an ATM in Leinster House, because they know there is no better man than the Deputy to raise the matter.

Deputy Bernard J. Durkan

We do not know yet. We will see.

Deputy Paschal Donohoe

Well, there we go. The three banks - Bank of Ireland, AIB and Permanent TSB - should absolutely come before this committee to answer questions with regard to their work. With regard to the shifting over of accounts and how that is going, I will certainly furnish to the committee details of the engagement that I, my officials and the Central Bank have had with the banks that are leaving and those that are staying for the switchover of accounts later in the year. It is a gigantic logistical exercise in respect of which the remaining banks have had to deploy many people. I do not have the information with me. I was not anticipating the question.

Deputy Bernard J. Durkan

I understand.

Deputy Paschal Donohoe

However, I will get the information and I will write to Deputy Durkan with it.

Chairman

As always, Deputy Durkan goes beyond the stated item on the agenda, and has been very helpful. No one discusses banks and the fallout from the banking system without mentioning Mr. Edmund Honohan. I attended his courts on many occasions just to hear first-hand the stories of how people were treated by the banks. I wish him well in his retirement. He is an extraordinary character and has done significant work in the context of understanding or giving understanding to those who are studying the law that come before him or indeed customers of banks that have been blackguarded in one way or the other. He has always treated everyone fairly. I do not think he was treated very well by the President of the High Court, but that is for another occasion. I wish him well. The manner in which he conducted his business as Master of the High Court is an example to all of the other courts as to how they should be and how to apply humanity and compassion to some of the cases that come before them.