Written Answers Nos. 165-185
165. Deputy Jim Daly asked the Minister for Finance the progress that has been made between his Department and the Department of the Environment, Community and Local Government in relation to the establishment of a compensation scheme for uninsured businesses affected by recent flooding; and if he will make a statement on the matter. [43161/12]
View answerAn interdepartmental working group has been established in relation to the matter of compensation for businesses affected by the recent flooding in Cork. This working group, which has representation from the Department of Finance, the Department of the Environment, Community and Local Government and the Department of Public Expenditure and Reform, is exploring the practicalities surrounding the establishment of a contingency fund for the payment of compensation to businesses in respect of flooding or other such events.
166. Deputy Gerry Adams asked the Minister for Finance if the 30% rate of mortgage interest relief has been passed onto all mortgage holders who bought houses between 2004 and 2008; if he will ensure that homeowners have benefitted from this relief or is their a requirement on homeowners to claim this relief themselves. [43168/12]
View answerThe Revenue Commissioners administer mortgage interest relief through the Tax Relief at Source [TRS] system. The 30% rate of mortgage interest relief, applicable to people who took out their first qualifying home loan between 2004 and 2008, came into effect with the enactment of the Finance Act 2012. The regulations provide for the granting of the relief due to the borrower by the lender within the tax year. Mortgage interest relief is provided to the relevant mortgage holders via on-going electronic data file transfers between Revenue and each of the 132 individual qualifying lenders. To apply the new 30% rate, specific technology developments were required to Revenue’s and to each of the lenders computer systems. Revenue's systems were upgraded to implement the 30% rate in December 2011, but the speed of upgrading has not been uniform across all of the lenders. Revenue has been in continuous communication with the various lenders in regard to finalising their IT enhancements and to date the upgrades required to give effect to the 30% rate have been completed by all but one of the lenders. At this point all of these lenders have either implemented the rate or will do so with effect from November.
Revenue is currently in direct contact with the remaining lender to ensure that the 30% rate is paid to borrowers within the current year and applied retrospectively. Revenue has received commitment from the lender that its IT system will be upgraded and the new rate will be implemented within the current tax year.
In January of this year Revenue advised lenders to continue to grant tax relief at the rate of 25% to those entitled to the new 30% rate while IT upgrades were being completed. The 25% rate was applied in all cases while the IT systems were being upgraded. In all instances the additional relief either has or will be applied automatically to borrowers once the necessary IT changes are implemented.
167. Deputy Martin Ferris asked the Minister for Finance if he will explain the role of the public interest directors in the AIB and in other financial institutions; and if he will make a statement on the matter. [43169/12]
View answer168. Deputy Martin Ferris asked the Minister for Finance if the public interest directors in the banks provide him with regular reports; and if he will make a statement on the matter. [43170/12]
View answer172. Deputy Simon Harris asked the Minister for Finance if he will provide a list of all public interest directors that he appointed to bank boards; the role of these public interest directors; the number of times they report to him; and if he will make a statement on the matter. [43204/12]
View answerI propose to take Questions Nos. 167, 168 and 172 together.
As the Deputy will be aware this Government has not appointed any public interest directors to the boards of the Covered Banks since taking office. The dates that the existing public interest directors were appointed are shown in the table below.
The legal position is that any director appointed to the board of the covered institutions whether under the Credit Institutions (Financial Support) Scheme 2008 or otherwise is subject to the requirements of company law in relation to the discharge of their responsibilities as a company director. As such, the director is legally bound to act in what he or she believes are the interests of the separate legal entity that is the institution itself. These are the directors so called fiduciary responsibilities. To address the scope for actual and perceived conflicts between the fiduciary duties of the directors of financial institutions under company law and the wider public interest in circumstances where those institutions have received huge financial support from the State, legal clarity, not just to the role of the public interest director but to that of the entire boards of those institutions, was provided under Section 48 of the Credit Institutions (Stabilisation) Act 2010. It provides that the overriding duty of directors of the covered institutions relates to the public interest as set out in the Act.
Accordingly, public interest directors do not have a formal reporting relationship to the Minister or to the Department of Finance. As Minister for Finance, I am strongly committed to ensuring that the boards of the covered institutions act at all times in a manner fully consistent with key public interest objectives for the banking sector.
The following table sets out the current public interest directors at each of the covered banks.
|
Bank |
Public Interest Directors |
Date of Appointment |
|
AIB |
Mr. Dick Spring |
January 2009 |
|
BOI |
Mr. Tom Considine Mr. Joe Walsh |
January 2009 January 2009 |
|
PTSB |
Ms Margaret Hayes Mr. Ray MacSharry |
December 2008 December 2008 |
Dr. Michael Somers is a Government Nominee (not a Public Interest Director) appointed to the AIB board on 14 January 2010 under the terms of NPRFC’s investment of €3.5bn in AIB of May 2009.
169. Deputy Dan Neville asked the Minister for Finance his views on Bank of Ireland interest rates (details supplied); and if he will make a statement on the matter. [43178/12]
View answerAs the Deputy will be aware, the Bank of Ireland’s policies in relation to lending rates is a matter for the board and management of the institution. Notwithstanding the fact that the State is a significant shareholder, I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as set out in the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. A Relationship Framework has been specified that defines the nature of the relationship between the Minister for Finance and the bank. This Framework was published on 30 March 2012 and can be found on my department’s website
(http://banking.finance.gov.ie/presentations-and-latest-documents/). Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of the bank, having due regard to their customers and the impact on profitability, particularly where the cost of funding to the bank, including deposit pricing, is under pressure. Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time.
The Government and BOI are acutely aware of the social and economic impacts that any lending rate increases may have in the current environment. However, the bank has informed me that the majority of its lending products are currently priced on a par with their peers, with interest rate increases required in order to return the Bank to profitability and long term viability.
170. Deputy Brendan Griffin asked the Minister for Finance his views on a matter (details supplied); and if he will make a statement on the matter. [43182/12]
View answerI am advised by the Revenue Commissioners that the specification for the identification mark (the “registration plate”) that must be displayed on vehicles is contained in the Vehicle Registration and Taxation (Amendment) Regulations, 1999 (Statutory Instrument No. 432 of 1999). These Regulations do not permit the application of special arrangements in relation to the registration plate to be used on coaches or any other category of vehicle. The existing registration mark is integral to the operations of a number of agencies apart from Revenue, including An Garda Síochána, the Department of Transport, Tourism and Sport, the Department of the Environment, Community and Local Government and the National Roads Authority. Any change to the existing specification could only be undertaken after an assessment of the impact of such changes, including in relation to the systems and other changes that would be required.
I am advised that there are no plans to undertake such a review.
171. Deputy Billy Kelleher asked the Minister for Finance the total tax relief on the cost on employing a carer in 2011 or the latest year available; the number who currently benefit from tax relief on the cost of employing a carer; and if he will make a statement on the matter. [43202/12]
View answerThe most recent year for which detailed information is available on the number of taxpayers availing of income tax relief in respect of employing a person to take care of an incapacitated individual is for income tax year 2010. In that year an estimated 1,620 taxpayers benefited from the relief at an estimated cost to the Exchequer of €6.9 million.
The numbers availing represent income earners who were in a position to absorb at least some of the tax relief and thereby give rise to an Exchequer cost. They do not include the numbers of potential claimants whose entitlements to other tax reliefs were sufficient to reduce their liability to tax to nil without reference to the specific relief. The numbers availing are rounded to the nearest hundred as appropriate.
A married couple that have elected or have been deemed to have elected for joint assessment is counted as one taxpayer.
173. Deputy Simon Harris asked the Minister for Finance the amount of taxpayers' money that has been given to AIB for the purpose of writing down mortgages; the amount that has been used by this bank for that purpose; if he has satisfied himself that the bank is utilising such public funds for the purpose they were given; and if he will make a statement on the matter. [43205/12]
View answerAs the Deputy will be aware, the Irish banks were required to raise €24.0bn in capital following the 2011 Prudential Capital Assessment Review (PCAR) in order to remain above a minimum capital target of 10.5% Core Tier 1 in the base scenario and 6% Core Tier 1 in the stress Scenario. The Central Bank made its decision on required recapitalisation based on loan-loss projections along with further calculations concerning the prospective income, expenditure, and deleveraging plans of the banks as outlined in the 2011 Financial Measures Programme (FMP) Report.
In order to arrive at a stressed loan-loss estimate that was fully credible to the international markets, the Central Bank engaged BlackRock Solutions, a specialist in analysing potential loan losses under stressed conditions. I must reiterate that the stress test scenarios were designed to represent extreme but plausible events, but they were not forecasts.
In terms of mortgages, the Central Bank has informed me that the following projected losses for the period 2011-2013 were used for capital determination purposes:
|
€million |
AIB |
BOI |
ILP |
EBS |
Total |
|
- |
Base |
Stress |
Base |
Stress |
Base |
Stress |
Base |
Stress |
Base |
Stress |
|
Residential Mortgages |
2,005 |
3,066 |
1,361 |
2,366 |
1,624 |
2,679 |
848 |
1,380 |
5,838 |
9,491 |
|
Total |
9,545 |
12,604 |
7,380 |
10,119 |
2,114 |
3,421 |
975 |
1,577 |
20,014 |
27,722 |
In terms of troubled mortgage customers, the Central Bank is now engaging with all regulated mortgage lenders to ensure that each lender has appropriate strategies and plans to deal appropriately with all its customers experiencing mortgage difficulties. In addition, the protections of the Central Bank’s Code of Conduct on Mortgage Arrears will continue to be available to co-operating borrowers who are experiencing difficulty on their mortgage in respect of their principal private residence.
174. Deputy Billy Timmins asked the Minister for Finance the position regarding the increase in mortgage rates by AIB in view of the hardship another increase will cause for persons already facing hardship; the action he will take in order to stop this increase in view of the billions the State has put into this bank; the way in which the money put into AIB by the State has been used to assist persons in trouble with their mortgages; and if he will make a statement on the matter. [43211/12]
View answerThe Deputy will be aware that the Bank’s policy in relation to interest rates is a matter for the management and board of the institution. I have no role in the day-to-day commercial and operational decisions of the banks, which include these matters. These decisions are taken by the board and management of the institution. Notwithstanding the fact that the State is a significant shareholder in the institution, I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. However, the Government is aware of the significant difficulties some homeowners are facing in meeting their mortgage obligations and it is committed to advancing appropriate measures to assist those mortgage holders who are experiencing real and genuine difficulty. In this regard, the Government is now actively implementing the main recommendations contained in the report of the Inter-Departmental Working Group on Mortgage Arrears.
A number of significant milestones have now been achieved:
- The Personal Insolvency Bill was approved by Government and published last June and the Committee stage of the Bill was passed by the Dáil last month;
- The Minister for Housing and Planning has formally launched the “mortgage to rent” scheme on a nationwide basis;
- Lenders have now provided details to the Central Bank on their proposed forbearance and loan modification options and some forbearance measures have been introduced on a pilot basis with a further roll out later in the year;
- Also an extensive independent mortgage advice framework has now been put in place by the Minister of Social Protection comprising (i) an enhanced website www.keepingyourhome.ie; (ii) a Mortgage Arrears information helpline; and (iii), the provision of free independent ‘one-to-one’ professional financial advice to borrowers when considering a long term forbearance/resolution offer from their lender. The list of accountants providing this service is located on the www.keepingyourhome.ie website.
The Government remains very committed to progressing these measures, which are in addition to existing supports such as the protections afforded by the Central Bank Code of Conduct on Mortgage Arrears, to assist genuine mortgage holders in difficulty and the Government sub-committee on mortgage arrears, which is chaired by An Taoiseach, continues to meet to ensure this receives priority attention across relevant Departments and agencies.
175. Deputy Peter Mathews asked the Minister for Finance if the €1 billion unsecured bond redeemed by AIB in full on 2 October 2012 was funded by increasing ELA borrowing from the Central Bank of Ireland or if it was funded directly or indirectly, in whole or in part by reducing the bank's assests; and if he will make a statement on the matter. [43218/12]
View answerAIB has informed me that the Bank has not availed of ELA facilities since H1 2011. Therefore no drawings of ELA funding were required in respect of the €1bn senior unsecured bond repayment of 2 October 2012. The bond repayment was effected from the bank's holding of liquid assets.
176. Deputy Arthur Spring asked the Minister for Finance if he has any estimate of the total value of taxes lost to the State as a result of the 10,686 people who were non-resident for tax purposes in 2010, as per information from the Revenue Commissioners; and if he will make a statement on the matter. [43221/12]
View answer186. Deputy Arthur Spring asked the Minister for Finance if he has any estimate on the total value of taxes lost to the State as a result of the 10,686 persons who were non-resident for tax purposes in 2010, as per information from the Revenue Commissioners; and if he will make a statement on the matter. [43339/12]
View answerI propose to take Questions Nos. 176 and 186 together.
I am advised by the Revenue Commissioners that individuals who are not resident in Ireland for tax purposes, are liable to income tax in respect of income earned in Ireland (e.g. income from rental properties; income from a trade, profession or employment; fees from directorships), capital gains tax (CGT) in respect of gains from the disposal of Irish situated assets (e.g. land, buildings, minerals and shares that derive their value from such assets); individuals who are non-resident but ordinarily resident in Ireland are liable to CGT on worldwide gains and gift tax or inheritance tax in respect of gifts and inheritances of Irish situated property.
In addition, non-resident individuals who are Irish domiciled are liable to the Domicile Levy.
I am further advised by the Revenue Commissioners that the figure of 10,686 quoted in the question does not refer to people who are non-resident for tax purposes. It is the number of people who are non-resident for tax purposes, and who file a tax return to Revenue because they may have tax liabilities for the reasons set out above.
It is important to note that the circumstances of individuals who are non-resident for tax purposes but who file tax returns can vary widely. They include, for example,
*Irish nationals who have moved abroad for work reasons but who retain their home here (their tax return is generally only in respect of rental income on their Irish home);
*foreign nationals who never resided here but who have investments (including property) here;
*foreign nationals who worked here for a period and who may have acquired Irish tax residence for that period (for example, individuals who worked here on a temporary assignment) may retain an Irish tax liability, after ceasing to be resident, in respect of investments made in Ireland during their period of residence.
177. Deputy Eoghan Murphy asked the Minister for Finance further to Parliamentary Question No. 50 of 26 September 2012, the transactions by Allied Irish Bank and Irish Life and Permanent that require his approval. [43249/12]
View answerThe AIB and Irish Life & Permanent Relationship Frameworks referenced were published on the Department of Finance website on 30 March 2012 and as previously advised to the Deputy are available at the following links:
http://banking.finance.gov.ie/wp-content/uploads/Allied-Irish-Banks1.pdf and
http://banking.finance.gov.ie/wp-content/uploads/Irish-Life-and-Permanent1.pdf.
The matters which require specific approval under the Relationship Framework are the appointment of the Chairman and Chief Executive Officer. Other matters may require either consultation with the Minister or notification under the Relationship Framework.
178. Deputy Peter Mathews asked the Minister for Finance if he will correspond with the President of the European Central Bank putting the ECB on formal notice that by way of matching and off setting the redemption by Allied Irish Bank of €1 billion unsecured bond on 2 October as a consequence of the legacy duress imposed on the Government by the ECB, he will consider as extinguished and cancelled an equivalent €1 billion of eurosystem loans to AIB, ECB loans/Central Bank of Ireland ELA loans; and if he will make a statement on the matter. [43251/12]
View answerThe Government is of the view that it would not be in Irish interests to have AIB fail to meet a senior debt repayment obligation, be it to private investors or the Eurosystem. Furthermore and as the Deputy will be aware, any bank accessing standard or non-standard liquidity assistance from the European Central Bank is required to pledge collateral in return for funding. In any event AIB has an important mandate to supply credit and essential banking services across the country. It is important that its business model remain intact so that it can eventually regain access to international funding markets in a meaningful way and eliminate its dependence on the Irish state.
The Deputy will be aware that when this Government took office it attempted to enforce burden sharing with senior unguaranteed bondholders in particular institutions that were no longer core elements of the Irish financial system. Intensive discussions were held with our European partners and particularly President Trichet of the ECB in the run-up to the announcement of our stress tests on 31st March last year. At that time the President believed that such action was not in the interests of Ireland or the Euro Area. This matter was discussed again with President Trichet on a number of occasions including the Ecofin meeting in Poland in September 2011.
Nevertheless, I would like to again reiterate that this Government is currently in discussions with our European colleagues in relation to securing a deal on the Irish bank debt and further detailed work will continue to ensure that the positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer.
179. Deputy Finian McGrath asked the Minister for Finance in view of the fact that Allied Irish Bank is State owed, his views on whether AIB is justified in putting up their interest rates to such an extent that it is going to put more pressure on the average household; and if he will insist that due to the low interest rate from the ECB that they keep their current interest rates. [43253/12]
View answerThe Deputy will be aware that the Bank’s policy in relation to interest rates is a matter for the management and board of the institution. I have no role in the day-to-day commercial and operational decisions of the banks, which include these matters. These decisions are taken by the board and management of the institution. Notwithstanding the fact that the State is a significant shareholder in the institution, I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. In terms of troubled mortgage customers, the Central Bank is now engaging with all regulated mortgage lenders to ensure that each lender has appropriate strategies and plans to deal appropriately with all its customers experiencing mortgage difficulties. In addition, the protections of the Central Bank’s Code of Conduct on Mortgage Arrears will continue to be available to co-operating borrowers who are experiencing difficulty on their mortgage in respect of their principal private residence.
180. Deputy Pearse Doherty asked the Minister for Finance to assess the improvement to competition in the banking sector. [43263/12]
View answerA fundamental element of Government policy as set out in the Programme for Government has been to stabilize and restore an effective and functioning banking system. This involved the radical restructuring of the domestic banking system which was announced last year and recalibrated the banking system by introducing the two pillar banks structure thereby creating a banking sector more proportionate to the size of the economy. Other domestic and foreign players remain important competitive instruments in the sector. With the recovery of the economy their role in providing choice in domestic banking services will be important enhancements to the competitive framework. Separately the Deputy should also be aware that in the European Commission’s December 2011 approval of the Bank of Ireland revised restructuring plan under state aid rules, the State has committed to undertake a number of market opening measures in order to enhance competition in the Irish banking market. Measures included amending Section 149 of the Consumer Credit Act 1995 in order that price regulation and fees will not be applicable to new entrants in their first three years of commencing business in Ireland and other changes to the Consumer Credit Act 1995 to make it easier for new entrants to provide the option of electronic banking. The state aid approval also provides for specific market entry opportunities facilitated by Bank of Ireland to ensure access to the domestic market for interested international competitors should such circumstances arise. As I have previously stated, I would welcome interest that foreign entities may have in entering into or expanding in the Irish market.
181. Deputy Pearse Doherty asked the Minister for Finance if he will estimate the annual revenue that would be generated if a 0.1% financial transaction tax were to be imposed in this jurisdiction on the trading of bonds, derivatives and shares. [43264/12]
View answerAt my request, the Economic and Social Research Institute (ESRI) and the Central Bank prepared an assessment of the Financial Transactions Tax (FTT) as proposed by the Commission. This report was circulated to Oireachtas Members and published by me in July. Given the wide variation in the estimated revenue yield from an FTT when different factors are taken into account and the uncertainty as to the form the tax would take, the report states that more detail would be needed on the final shape and scope of the tax before a definitive conclusion could be reached about its impact on the Irish financial system and taxation revenue. The report indicates that the “net revenue gain for Ireland from the introduction of an FTT … is likely to be modest”. Based on assumptions used by the Commission, including their proposed rates (the proposed rate on the exchanges of shares and bonds was 0.1% and the proposed rate of derivative contracts was 0.01%), the report estimates the potential yield from the FTT to be between €490m and €730m. Under the Commission’s proposal, 2/3rd of this yield would have gone directly to the EU to fund its Budget. Based on the report’s estimate, the net yield to Ireland from an FTT where we retained only 1/3 of the total collected here would be in the region of €163m to €243m – not dissimilar to the current yield from Stamp Duty on share transfers (€195m in 2011) which would have been abolished had we accepted the Commission proposal.
The Commission’s rates, on which the ESRI/Central Bank report’s estimate is based, vary from the rates suggested in the Deputy’s question.
The report identified the following downsides and potential downsides to the introduction of an FTT: Financial sector impact : An FTT could displace financial sector activity, especially when alternative locations are readily available – in this case the UK. This would pose a real risk to Ireland given the financial services sector accounts for 10% of GDP; Macro-economic impact: An FTT would likely lead to a lower level of economic activity in the financial sector, which might also result in lower receipts from income tax and corporation tax; Exchequer impact: A 1% stamp duty applies on transfers of shares in Irish companies. As indicated above, the Commission’s proposal would involve the abolition of this tax and the loss of existing Stamp Duty revenue, c. €180 m in 2010 and €195m in 2011.
I have stated from the outset of discussions on the FTT that any such tax would have to apply on a wide international basis and at a minimum on an EU-wide basis to avoid distortionary and behavioural impacts. Such impacts should be taken into account in considering any estimates of the potential yield from such a tax.
182. Deputy Pearse Doherty asked the Minister for Finance if he wll estimate the number of persons in this jurisdiction employed directly in, or in support of, trading of bonds, derivatives and shares. [43265/12]
View answerNeither my Department nor the Central Bank compile detailed information in relation to direct or indirect employment in the trading of bonds, derivatives and shares. The Central Bank regularly publishes statistics on the volumes of trading in this sector, on its website, which may be of interest to the Deputy. The most recent data runs to end-July and was published in mid-September. See: http://www.centralbank.ie/polstats/stats/sis/Documents/2012m07_ie_securities_issues_statistics.pdf.
183. Deputy Pearse Doherty asked the Minister for Finance the annual tax that would be generated from applying a 2% tax on the current market value of residential property whose registered owner is not a natural person but a corporation or trust or other non-natural person. [43267/12]
View answerI am informed by the Revenue Commissioners that, as they do not have a statistical basis for compiling estimates of yield in relation to proposals for the taxation of residential property, it is not possible to provide the information requested by the deputy. While there are data sources which provide information on property ownership – for example, the Property Registration Authority and the databases for the Non-principal Private Residence charge and the Household Charge – none of these sources has information on current valuations and therefore it is not possible to estimate the yield that would be generated from a 2% tax on residential property whose registered owner is not a natural person.
184. Deputy Pearse Doherty asked the Minister for Finance the annual loss to the Exchequer of stamp duty on property transfers being avoided as a result of property being transferred via shares in companies including companies incorporated in other jurisdictions, or through changes to trusts. [43268/12]
View answerI am advised by the Revenue Commissioners that Stamp Duty is a charge on documents, which are mostly legal documents, used in the transfer of property. The current rates of stamp duty on the transfer of property are:
*For non-residential property, 2% of the purchase price
*For residential property, 1% on the amount of the purchase price up to €1m and 2% on the excess over €1million.
The rate of stamp duty on the transfer of shares is 1%. Shares in a foreign company are not Irish situated assets. Accordingly, a charge to stamp duty does not generally arise on the transfer of such shares. Where property is held on trust, a liability to stamp duty can arise where there is a change in the underlying beneficial ownership of the property on the documentation executed in connection with the change of ownership.
It cannot be assumed that a decision to hold property through a company, rather than directly, is intended to facilitate the avoidance of stamp duty. In general, such decisions are taken primarily for commercial reasons.
I am informed by the Revenue Commissioners that as the purchase and sale of shares are chargeable with stamp duty at a uniform rate of 1% without regard to the nature of the underlying assets in the companies in question, it is not possible to separately identify the stamp duty paid on shares in companies whose value derives wholly or partly from property.
185. Deputy Thomas Pringle asked the Minister for Finance if he intends to pay public money to the ESM; and if so, the amount in advance of the legality of the ESM being considered by the ECJ. [43323/12]
View answerThe European Stability Mechanism (ESM) was established by the Treaty establishing the European Stability Mechanism (ESM Treaty) was signed by Euro Area Finance Ministers on 2 February 2012. It provides for the establishment by the Euro Area member states of the ESM as an intergovernmental organisation under public international law. Legislation is required for Ireland to ratify the ESM Treaty. The ESM Act passed all stages of the Oireachtas, and was signed into law by the President on 3rd July.
The ESM Treaty and the underlying legislation in the ESM Act, as well as the European Council Decision from March 2011 proposing an amendment to Article 136 TFEU concerning stability mechanisms, was the subject of an extensive legal challenge in the High Court in June, and a subsequent comprehensive appeal in the Supreme Court in July, relating to its compatibility with the Bunreacht na hÉireann and also with the EU Treaties and the validity of the European Council Decision. The challenge in relation to Bunreacht na hÉireann was unsuccessful, as was a request for an injunction to restrain Ireland’s ratification. A number of questions of EU law were referred by the Irish Supreme Court to the Court of Justice of the European Union. Ireland ratified the treaty on August 1st by lodging the instrument of ratification with the Depositary.
The ESM Treaty, at article 48.1 provides that the ESM will enter into force when instruments of ratification, approval or acceptance have been deposited by signatories whose initial subscriptions represent no less than 90% of the total subscription. The ESM Treaty accordingly entered into force on 27th September 2012 following its ratification by 16 of the 17 Euro area member states, representing over 99.8% of its subscribed capital base. All 17 Euro Area Member States have now ratified the ESM Treaty.
The ESM Treaty provides that it shall have a capital base of €700 billion of which €80 billion is paid in capital. Ireland’s share of this paid in capital is €1.27 billion, based on the contribution key of 1.5922% set out in annex 1 of the ESM Treaty. The Treaty provides that this contribution is to be paid in five equal tranches. The Euro Group Finance Ministers agreed in March 2012 that two of the five equal tranches would be paid this year, and subsequently agreed, in September 2012, that both of these tranches should be paid in October 2012. For Ireland, these two tranches will amount to €509.508 million in accordance with our contribution key %, and this amount will be paid this week, in accordance with our obligations following our ratification of the ESM Treaty and its entry into force.
