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Thursday, 17 Jan 2013

Written Answers Nos. 70-79

Deposit Interest Rates

Questions (70)

Brendan Smith

Question:

70. Deputy Brendan Smith asked the Minister for Finance if he will clarify the matter of recent drop in deposit interest rate by An Post and if he will explain the reason this is justified; if savings of Irish savers are no longer required since the Euro financial crisis and general liquidity has improved somewhat; if we now want to raise borrowings at more expensive rates on the international bond market; if we are trying to divert Irish savers to some other product; if he will explain the drop which is way ahead of recent trends in the market; and if he will make a statement on the matter. [2145/13]

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Written answers

In recent months there has been a significant fall in market interest rates across Europe and particularly in Ireland and this has resulted in the interest rates offered by the banks declining significantly. The recent reduction in State Savings rates is in line with this general reduction in interest rates. This is the first change in State Savings rates since 2007. Irish savers have been very supportive of the Government in its task of funding the Exchequer and the State Savings products remain an important source of funding for the State. In 2012 alone, individuals provided the Government with net funding through the range of State Savings products of over €2 billion.

The Government welcomes and wants to encourage continued support from savers and for this reason, despite the downward trend in interest rates, the Government continues to offer attractive returns on a range of fixed-rate State Savings products and pays 7% on the three-year Savings Bonds, 12% on the four-year National Solidarity Bond, 15% on the five-year Savings Certificate, 17% on the six-year Instalment Savings and 45% on the ten-year National Solidarity Bond.

The interest rates offered by State Savings products reflect both the fact that these savings are a direct obligation of the State and the flexibility of the retail offering compared to, for example, Government Bonds.

Holders of State Savings products can encash their products with one week’s notice and will always receive their initial investment back plus the interest amount appropriate to the period for which the money has been on deposit.

Property Taxation Application

Questions (71)

Thomas Pringle

Question:

71. Deputy Thomas Pringle asked the Minister for Finance the steps the Revenue Commissioners will have to take to recover penalties imposed on liable persons under the Finance (Property Tax) Act 2012; and if he will make a statement on the matter. [2146/13]

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Written answers

The Finance (Local Property Tax) Act 2012 provides for a range of penalties to be imposed on liable persons for non-compliance with their obligations under the Act, such as failure to deliver a return to the Revenue Commissioners, or where a liable person knowingly makes a false statement on a return in order to reduce their liability to Local Property Tax (LPT). The Act also allows for penalties to be imposed for failure to deduct LPT at source from the liable person’s employment income or occupational pension or from certain Government payments, when directed to do so by the Revenue Commissioners. Where penalties provided for in the Act are imposed, they will be treated as an amount of tax due and will be recovered in the same way as an LPT liability amount using the existing powers and processes of the Revenue Commissioners in relation to the collection and enforcement of unpaid tax.

Finally, any LPT or monetary penalty that remains unpaid will become a charge on the residential property to which it relates, and will have to be discharged to Revenue on the sale or transfer of the property.

Tax Collection Forecasts

Questions (72)

Róisín Shortall

Question:

72. Deputy Róisín Shortall asked the Minister for Finance if he will provide an analysis of the basis of calculation for the income tax profile figure of €15,860 million for 2013, an increase of €684 million on the 2012 total; if he will set out the tax value of each of the factors that will increase or decrease the yield over the 2012 figure of €15,176, for example, €90 million in additional yield arising out of budget changes, a decrease in employment levels of some 7,400 in public sector numbers, 5,800 in employment in Exchequer voted services and 1,600 in local authorities with a net decline of approximately €500 million in gross wages and salaries, an expected increase of just 0.2% in net employment numbers, no additional bonus in income tax arising from the error in 2011 with the mis-allocation of PRSI and USC, the expected level of increase in wages and salaries within the economy, the influence of once off factors such as the distribution of shares to Facebook staff after the company's IPO. [2184/13]

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Written answers

Tax revenues are forecast by my Department on a disaggregated individual tax-head basis using relevant macro-economic drivers and, where appropriate, certain elasticity factors. The basic methodology is to estimate the base-year outturn, adjust for any known once-off factors and then grow the adjusted outturn by a macro-economic driver or "macro". Notwithstanding the strengths/weaknesses of the methodologies used to produce the technical forecast, judgement/prudence plays an important role in deciding on a forecast. To this end, the Department liaises closely with the Revenue Commissioners to ensure any emerging trends are identified and all relevant data is taken on board.

It is important to clarify that the income tax forecast for 2013 was based on a projected outturn for 2012 of €15,040 million, representing an estimated increase of approximately €820 million (5.4%) at the time of the Budget 2013 publication. As this forecast was published before the better than expected end-December Exchequer Returns were released, it did not take this improved outturn into account. My Department will release its next set of tax revenue forecasts as part of the 2013 April Stability Programme Update publication.

The Income Tax projection is made up of a number of different components, the largest of which are PAYE and USC PAYE. These are forecast using projected growth in non-agricultural earnings together with an earnings elasticity factor and forecast growth in non-agricultural employment together with an employment elasticity factor. The elasticity factors are produced by Revenue’s taxpayer’s model and take account of the fact that new and existing employees are likely to pay tax at different marginal tax rates. With regard to the expected decline in public sector numbers, this estimate has been factored in to the Department’s non-agricultural employment forecast.

Inclusive of carry-forward from previous Budget measures, an estimated total of €260 million of new Income Tax measures are scheduled to take effect in 2013. New Income Tax raising measures announced as part of Budget 2013 include the Pre-retirement access to funded Additional Voluntary Contributions measure as well as changes to the DIRT rate, amongst others.

With regard to the permanent adjustment to the tax base resulting from the PRSI/Income Tax reclassification issue that occurred in 2012, I would like to inform the Deputy that a residual of approximately €47 million is estimated to benefit revenues in 2013.

Questions Nos. 73 and 74 answered with Question No. 47.

State Debt

Questions (75, 79, 81)

Bernard Durkan

Question:

75. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he has had consultations with his EU colleagues on the issue of the alleviation of the burdens imposed arising from EU/IMF and ECB debt bailout which he inherited from his predecessors with particular reference to the need to ensure alleviation of the impact on the Irish taxpayer and consumer along the lines indicated at the Heads of Government meeting in June 2012; if it is recognised throughout the Eurozone that some acknowledgement of Ireland's sacrifices and success in dealing with the debt problem merits positive recognition; and if he will make a statement on the matter. [2201/13]

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Bernard Durkan

Question:

79. Deputy Bernard J. Durkan asked the Minister for Finance if he has satisfied his EU colleagues regarding the need to ensure an alleviation of the terms of this country's debt repayment arising from the financial bailout; and if he will make a statement on the matter. [2205/13]

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Bernard Durkan

Question:

81. Deputy Bernard J. Durkan asked the Minister for Finance if he is satisfied that his EU colleagues throughout the Eurozone and outside are sufficiently aware of the sacrifices made and hardship incurred by the Irish people in meeting the debt burden arising from the EU/IMF bailout; if he expects to achieve positive recognition of this fact by way of particular or specific arrangements in the future; and if he will make a statement on the matter. [2207/13]

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Written answers

I propose to take Questions Nos. 75, 79 and 81 together.

The Irish Government has been working extremely hard to secure a deal on the Irish bank debt with our European partners and detailed work will continue to ensure that positive moves in Europe are harnessed to maximise the benefit to the Irish taxpayer. This work is one of the Government’s key priorities and will remain a key focus during the EU presidency.

I am satisfied that every available and appropriate opportunity to advance Ireland’s position in relation to legacy bank debt with our European partners is being availed of. The terms sought by the Government are those which achieve the best possible outcome for the Irish taxpayer.

The numerous references in Europe to Ireland’s special status in relation to these discussions give further comfort and the recent comments of European Council President Herman Van Rompuy, following his meeting with the Taoiseach and Tánaiste, in relation to his support for a positive outcome in our negotiations is to be welcomed.

Personal Debt

Questions (76, 77, 78)

Bernard Durkan

Question:

76. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the level of household/personal debt continues to be monitored by his Department; whether particularly positive arrangements can be entered into by the borrowers with such institutions particularly when a situation has been caused by economic factors outside the control of the borrower; and if he will make a statement on the matter. [2202/13]

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Bernard Durkan

Question:

77. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to monitor the level of mortgage debt arrears; if any particular cognisance is taken of the borrower's situation such as loss of employment or business; if any particular set of procedures have been recognised to deal with such situations; and if he will make a statement on the matter. [2203/13]

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Bernard Durkan

Question:

78. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which house repossessions have taken place over each of the past four years to date both in respect of the family home or other circumstances; if it has been found possible to accommodate family home borrowers in the first instance; and if he will make a statement on the matter. [2204/13]

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Written answers

I propose to take Questions Nos. 76 to 78, inclusive, together.

My Department continually monitors the data it receives on mortgage debt. The Central Bank compiles and publishes quarterly mortgage arrears and repossession statistics for both primary domestic homes (PDH) and buy-to-let (BTL) mortgages and my Department monitors these statistics closely. These statistics which go back to September 2009 in respect of primary dwellings, are available on the Central Bank’s website at http://www.centralbank.ie.

There can be many causes of debt, both within and outside the borrower’s control. The Code of Conduct on Mortgage Arrears (CCMA) does not specifically deal with these, rather it sets out procedures to deal with borrowers in arrears or pre-arrears on a mortgage loan which is secured by their primary residence. All regulated mortgage lenders must comply with the requirements of this Code. The CCMA can also be accessed on the Central Bank’s website.

The Code provides that mortgage lenders should allow for a flexible approach in the handling of arrears and pre-arrears cases and that they should aim at assisting the borrower who is in genuine difficulty as far as possible having regard to the specific circumstances. In particular, the CCMA provides that a lender’s Arrears Support Unit (ASU) must base its assessment of the borrower’s case on the full circumstances of the borrower including:

- the personal circumstances of the borrower

- the overall indebtedness of the borrower

- the information provided in the standard financial statement (SFS)

- the borrower’s current repayment capacity, and

- the borrower’s previous history

Furthermore, the CCMA requires that ‘A lender must have a dedicated section on its website for borrowers in, or concerned about, financial difficulties which must include:

- the information booklet required under provision 12;

- information on the level of charges that may be imposed on borrowers that do not co-operate with the lender; and

- a link to any website operated by the MABS that contains information about mortgage arrears.’

The information on the website must be easily accessible from a prominent link on the lender’s home page. Some lenders have developed budgeting tools and videos to help customers complete the SFS and FAQ sections on mortgage arrears and forbearance arrangements on their websites.

The Code also requires that ‘A lender must prepare and make available to borrowers, an information booklet providing details of its Mortgage Arrears Resolution Process (MARP), which must include:

- an explanation of its MARP, including the alternative repayment measures available to borrowers and outline in general terms, the lender’s criteria for assessing requests for alternative repayment measures;

- a statement that the borrower will not be required to change from an existing tracker mortgage to another mortgage type;

- information about the potential availability of relevant State supports such as mortgage interest relief or Mortgage Interest Supplement;

- relevant contact points (i.e., the dedicated arrears contact points not the general customer service contact points); and

- reference to relevant website(s) operated by the Money Advice and Budgeting Services (MABS)’.

The Central Bank has informed me that it recently wrote to all lenders to remind them of these provisions and that their MARP booklet and websites should be updated to include the longer term options as they are rolled out and to make reference to the Government initiatives in this area.

In relation to overall household indebtedness, the latest Central Bank data show that at the end of the second quarter of last year, total household indebtedness amounted to €178.5 billion. This represents a decline of 12½ per cent since household debt peaked at just under €204 billion at the end of 2008. The data also shows that the ratio of household debt to disposable income continues to decline, which is an important trend.

Question No. 79 answered with Question No. 75.
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