Tuesday, 29 Jan 2013

Written Answers Nos. 257-266

Tax Code

Questions (257)

Noel Grealish

Question:

257. Deputy Noel Grealish asked the Minister for Finance if he will consider removing the interest restriction applying to private landlords who have taken out loans for the provision or upgrading of private rental property, in view of the fact that it can give rise to a taxable gain on a loss; his views that the restriction is unfair, especially as it only applies to private landlords and not to those operating formal businesses; if its continued application since its introduction in the April 2009 supplementary budget can be justified on grounds of tax inequality, notwithstanding that the estimated cost of removing the restriction is €95 million per year; and if he will make a statement on the matter. [4173/13]

Written answers

Minister for Finance

This question relates to the restriction on the deductibility of interest in computing taxable rental income from residential property: in the case of interest accruing on or after 7 April 2009 (insofar as it would otherwise be allowable) the deduction available to the landlord is limited to 75% of such interest. For the purpose of this reply, I am treating the reference to “formal businesses” as being a reference to trading businesses. In this regard, I am advised by the Revenue Commissioners that there is no inherent right to interest deductibility in the case of investment property and this is reflected in the structure of the tax code. Unlike in the case of a trading business, where the law provides that taxable income is closely aligned to the accounting profit (subject to certain explicit prohibitions), for landlords, whether individuals or companies, the taxable amount is the gross rent as reduced by a very limited number of specified deductions set out in section 97 (2) TCA 1997. While those specified deductions have generally included interest on borrowed money to purchase, improve or repair the rented premises, that entitlement has been removed or restricted on a number of occasions. An example was the interest restriction imposed between 1998 and 2002 in respect of certain rented residential property borrowings (following the Bacon reports).

Question No. 258 answered with Question No. 237.

State Savings Schemes

Questions (259)

Michael McGrath

Question:

259. Deputy Michael McGrath asked the Minister for Finance in the context of the recent reduction in interest rates paid on State savings products, if he or his Department had been lobbied by any of the covered institutions in favour of such reductions; if he or his Department expressed a view to the National Treasury Management Agency in respect of the pricing of these products; and if he will make a statement on the matter. [4180/13]

Written answers

Minister for Finance

Officials of my Department regularly engage with the National Treasury Management Agency (NTMA), covered institutions and other stakeholders on a wide range of issues, including the cost of funding. The NTMA is responsible for the State Savings schemes which includes Savings Certificates, Savings Bonds, Prize Bonds, the National Solidarity Bond, Instalment Savings and Deposit Accounts such as the Ordinary Deposit Account and the Deposit Account Plus. The NTMA keeps the suite of State Savings products and the interest rates paid on them under constant review to ensure that the products remain competitive and attractive to retail investors, while balancing the funding requirements and financing costs of the State.

In December 2012, my Department received a submission from the NTMA, for my approval, to reduce the interest rates on State Savings products, thereby lowering the cost of funding for the State for new funds. I approved the new rates proposed in the light of trends in interest rates in the domestic market generally and of the need to maintain market share in the retail investment sector given the important contribution made by retail investors in the State Savings products to the funding of the National Debt.

European Stability Programmes

Questions (260)

Michael McGrath

Question:

260. Deputy Michael McGrath asked the Minister for Finance the supervision process that is imposed on countries that have exited the excessive deficit procedure but who still have over 75% of loans drawn down from the European Financial Stability Facility outstanding; and if he will make a statement on the matter. [4201/13]

Written answers

Minister for Finance

As part of its response to the global economic and financial crisis, the EU has adopted a number of measures. This began with EU 2020, the EU’s growth strategy for the decade which aims to make the EU a smart, sustainable and inclusive economy. This was followed by the European Semester to which was added the Euro Plus Pact and the so-called ‘six-pack’ which came into effect on 13 December 2011. The ‘six-pack’ is the name given to a legislative package, comprising of five regulations and one directive, designed to reform and strengthen the Stability and Growth Pact and to introduce new macroeconomic surveillance. The proposed ‘two-pack’ is a further step in this process and is, to a great extent, a natural extension of the measures contained in the ‘six-pack’. It is applicable to euro area member states only. The first piece of proposed legislation in the two-pack is in relation to ‘the monitoring and assessment of draft budgetary plans and on ensuring the correction of excessive deficits’. The second proposed regulation under the two-pack, is on the strengthening of economic and budgetary surveillance, and sets out explicit rules for enhanced surveillance.

As part of this proposed regulation, a post-programme surveillance process will be put in place and maintained for a Member State until the balance outstanding under EU-sourced financial assistance falls below 25% of the total. This covers all EU funding sources, including bilateral loans. Under the terms of this draft regulation, which is now close to being finalised, the Commission shall conduct, in liaison with the ECB, regular review missions in the Member State under post-programme surveillance to assess its economic, fiscal and financial situation.

The reports generated following such missions shall be considered by the European Council, and the Council, acting by qualified majority on a proposal from the Commission, may recommend to the Member State to adopt corrective measures.

European Stability Mechanism

Questions (261)

Michael McGrath

Question:

261. Deputy Michael McGrath asked the Minister for Finance if he has sought a deferral of interest payable on loans from the European Financial Stability Facility and European Financial Stabilisation Mechanism; if he sees merit in such a course of action; and if he will make a statement on the matter. [4202/13]

Written answers

Minister for Finance

The deferral of interest on loans received under a programme of financial assistance from the European Financial Stability Facility (EFSF) and European Financial Stabilisation Mechanism (EFSM) that you propose arose in the context of the recently agreed package of measures designed to further assist Greece regain financial stability. The interest Greece will pay on its EFSF loans (it has no loans from the EFSM) will be deferred for 10 years, but will continue to accrue and that accrual will itself be subject to interest. It is important to note that the concessions that have been agreed are specific to Greece and are accompanied by significant additional conditionality. In Ireland on the other hand we have entered the final year of our programme. As such our focus is on making a successful exit from the programme and a return to sustainable market based funding.

Ireland’s needs, as a country exiting a programme, are very different to those of Greece. We are however examining the Greek package to see if aspects of it offer any possible benefit to Ireland, particularly in the context of our programme exit. In this context, the Deputy will be aware of the recent decision by the Eurogroup and ECOFIN to consider a request for an extension of maturities for the EFSF and EFSM funding for Ireland and Portugal. This proposal will be examined by senior officials and will then come back to Finance Ministers for decision.

Property Taxation Exemptions

Questions (262)

Michael McGrath

Question:

262. Deputy Michael McGrath asked the Minister for Finance his estimate of the number of houses that will be entitled to an exemption from the local property tax; and if he will make a statement on the matter. [4205/13]

Written answers

Minister for Finance

The Finance (Local Property Tax) Act 2012 sets out in detail how Local Property Tax (LPT) is to be administered and provides how a residential property is to be valued for LPT purposes. The Act also provides for a number of specific exemptions from the charge. A broad outline of exempt properties include:

- New and previously unused properties that are purchased from a builder or developer between 1 January 2013 and 31 October 2016;

- Properties purchased by first time buyers between 1 January 2013 and 31 December 2013, if occupied as their sole or main residence;

- Residential properties owned by a charity or public body and used to provide accommodation and support for people who have a particular need to enable them to live in the community;

- Registered nursing homes;

- Unoccupied properties which had been the sole or main residence of a person who has vacated the property because of long term mental or physical infirmity;

- Properties fully subject to commercial rates;

- Diplomatic properties exempt under other legislation;

- Residential properties constructed by a builder or developer that remain unsold and have not been used as dwellings;

- Properties in unfinished housing estates as prescribed by the Minister for the Environment, Community and Local Government.

In addition, I recently advised the House that I will bring forward proposals to exempt properties prescribed by the Minister for the Environment, Community and Local Government as pyrite affected homes.

I am informed by the Revenue Commissioners that it is not possible to provide an estimate of the number of houses in unfinished or pyrite affected estates that will qualify for exemption from LPT until the Minister for the Environment, Community and Local Government has prescribed them and in relation to the other categories until the relevant LPT tax returns have been submitted and the exemptions claimed by property owners.

NAMA Property Leases

Questions (263)

Michael McGrath

Question:

263. Deputy Michael McGrath asked the Minister for Finance the average length of time that the National Assets Management Agency takes for processing applications for rent abatement for commercial clients; the process for making such applications; and if he will make a statement on the matter. [4206/13]

Written answers

Minister for Finance

The Department cannot provide all the details requested by the Deputy in the time available. This information should be available within the next week and, accordingly, I will issue a reply to the Deputy at that stage.

NAMA Property Sales

Questions (264)

Michael McGrath

Question:

264. Deputy Michael McGrath asked the Minister for Finance if the National Asset Management Agency has requested a lifting of the restriction on it selling properties back to defaulting debtors; if he sees merit in such a course of action; and if he will make a statement on the matter. [4207/13]

Written answers

Minister for Finance

NAMA has not requested a lifting of the restriction on it selling properties back to defaulting debtors. I do not believe there is merit in such a course of action at this time as I consider it appropriate that NAMA has put procedures in place to deal with this issue.

Civil Service Code of Conduct

Questions (265)

Seamus Healy

Question:

265. Deputy Seamus Healy asked the Minister for Finance if, in view of the recent resignation of a senior official (details supplied) who was head of Shareholder Management Unit, in his Department to take up a senior position at Bank of Ireland and their possession of vital up to date information which might be of advantage to now privately owned Bank of Ireland and its North American investor, and in view of the fact that the current Government had agreed to the sale of over 35% of BOI to North American investors for €1.1 billion though the State had invested circa €5 billion in BOI and now holds a mere 15% share of ownership, less than half that owned by the North American investor, the possession by the senior official of knowledge of the affairs of competitors of BOI, including State owned AIB and Permanent TSB which may be of advantage to BOI, the prohibition on senior civil servants taking up employment in private sector for 12 months after resignation from the public service to avoid such conflicts of interest, the fact that the senior official in question was employed by the National Treasury Management Agency and seconded to his Department, the senior official concerned and or the section of his Department of which he was head was involved in anyway in the process that lead to the sale of 35% of BOI to the North American investor in Summer 2011 whether by advice or otherwise; if he will extend the 12 month stay on senior public servants taking up employment in private sector employment to those on secondment in order to preclude conflicts of interest; if he will further extent the same 12 month stay to senior employees of the National Treasury Management Agency [4209/13]

Written answers

Minister for Finance

The Civil Service Code of Standards and Behaviour contains provisions regarding acceptance of outside appointments and of consultancy engagement following resignation or retirement. The code does not apply to directors or employees in State bodies in the wider public service. I am informed by the National Treasury Management Agency (NTMA) that NTMA employees have notice periods of one or three months and six months in the case of the Chief Executive. All NTMA employees are subject to section 14 of the National Treasury Management Agency Act, 1990 which prohibits an employee from disclosing any information obtained while carrying out their duties as employees of the NTMA. NTMA employees are also subject to the Official Secrets Act. Contravention of the NTMA Act and the Official Secrets Act is a criminal offence and the prohibition on disclosing confidential information applies indefinitely and extends to former employees. I understand the Chief Executive of the Agency is reviewing NTMA policy in this area.

Tax Reliefs Availability

Questions (266)

Michael Creed

Question:

266. Deputy Michael Creed asked the Minister for Finance if persons in receipt of invalidity pension are exempt from DIRT tax; and if he will make a statement on the matter. [4210/13]

Written answers

Minister for Finance

I am informed by the Revenue Commissioners that there is no specific exemption from DIRT for a person in receipt of invalidity pension. However, an exemption does apply to a person who is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself and who would be entitled to a refund of the entire amount of DIRT deducted by a Financial Institution. The Finance Act 2007 introduced arrangements that allow a person to have any interest earned on money on deposit automatically credited to their savings account by their Financial Institution without deduction of DIRT where they satisfy certain conditions.

The conditions are:

A Where the individual (or their spouse or civil partner) is aged 65 or over

The individual must submit a declaration on form DE 1 to the financial institution where the account is held to the effect that they or their spouse or civil partner are aged 65 years or over during the year and—

1. in the case of an individual who is single, his or her total annual income does not exceed the current exemption limit of €18,000, or

2. in the case of an individual who is married or in a civil partnership, the joint total annual income of the individual and his or her spouse or civil partner does not exceed €36,000.

B All other cases

The individual must apply to their local Revenue tax office requesting the exemption and stating that he or she is permanently incapacitated from maintaining him or herself and that his or her (or spouse or civil partner’s) tax credits for the year will exceed the tax that would be chargeable on his or her (or spouse's or civil partner’s) total income (this is essentially gross income from all sources, including invalidity pension, deposit interest etc). The tax office will then notify the financial institution where the account is held that the individual qualifies for the automatic exemption. Where a person’s income exceeds the relevant exemption limit by a small amount, he or she will not be entitled to the exemption but may be entitled to a partial refund of the tax deducted.