Tuesday, 26 Mar 2013

Written Answers Nos. 190-207

Property Taxation Exemptions

Questions (190)

Peter Mathews

Question:

190. Deputy Peter Mathews asked the Minister for Finance his plans to exempt pensioners from paying the property tax; and if he will make a statement on the matter. [14873/13]

Written answers

Minister for Finance

The Government agreed with the recommendation of the "Thornhill Group" (the inter-Departmental Group, chaired by Dr Don Thornhill, which considered the structures and modalities of a property tax) that a universal liability to the Local Property Tax (LPT) should apply to all owners of residential property with a limited number of exemptions. Limiting the exemptions available allows the rate to be kept low for those liable persons who do not qualify for an exemption. There is no specific exemption from the requirement to pay LPT for pensioners under the Finance (Local Property Tax) Act 2012 (as amended), though such persons may be entitled to an exemption on other grounds or may qualify for a deferral subject to meeting the qualifying conditions. The Thornhill Group considered the provision of waivers or deferrals for households unable to pay the tax or where a payment requirement would cause hardship. As a general principle, eligibility for deferral should be based on gross income. The system of deferrals in place is targeted at cases of need, where there is an inability to pay the local property tax under specific conditions.

The property must be the sole or main residence of the liable person and his or her gross income must be below certain thresholds. The thresholds are €15,000 for a single person and €25,000 for a married couple, civil partners or cohabiting couple. Deferral in respect of half of the local property tax payable is possible, where the gross income is above the threshold but less than €25,000 in the case of a single person and €35,000 in the case of a couple. (These partial deferral limits are each €5,000 higher than those recommended by the Thornhill Group). Owner/occupiers whose sole source of income is a state pension should qualify for a deferral. Deferred Local Property Tax and interest will have to be discharged on the sale/transfer of the property.

Question No. 191 answered with Question No. 178.

Negative Equity Mortgages

Questions (192)

Dominic Hannigan

Question:

192. Deputy Dominic Hannigan asked the Minister for Finance his plans to help persons in negative equity who want to move home; and if he will make a statement on the matter. [14892/13]

Written answers

Minister for Finance

Firstly, I must confirm to the Deputy that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and, as such, it is a commercial decision for each lender to decide what products they will provide including a negative equity mortgage. It is not appropriate for me, as Minister for Finance, to comment on or become involved in the detailed mortgage position of mortgage holders. However, I have been advised by the Central Bank that they have engaged with mortgage lenders in relation to negative equity mortgages to develop a mortgage product that would allow home owners to sell their existing home and transfer the negative equity portion of the original loan to the new loan. In order to ensure that proposals in relation to such mortgages are consistent with the Central Bank’s consumer protection and prudential policy objectives, the proposed criteria for any such facility need to be agreed in advance between mortgage lenders and the Central Bank.

While the provision of negative equity mortgages will facilitate people moving homes and generate transactions in the housing market, it is not expected that there will be a large take up of this product, as all sales must comply with the affordability and suitability provisions set out in the Consumer Protection Code.

Some lenders are offering this product, while others are considering making such a product available.

Financial Services Regulation

Questions (193)

Pearse Doherty

Question:

193. Deputy Pearse Doherty asked the Minister for Finance , further to his announcement on mortgage arrears on 13 March 2013, if financial institutions will continue to prepare their accounts under international financial reporting standards, and particularly if the requirement to write down the value of certain loans to the value of the underlying security will lead to the necessity for banks to produce two sets of accounts. [14901/13]

Written answers

Minister for Finance

The Central Bank has informed me that its publication on Mortgage Arrears Resolution Targets, which can be accessed on the Central Bank’s website at http://www.centralbank.ie, addresses the use of IFRS standards in the context of MARS targets and on page 16 states: “An entity which prepares their financial statements in accordance with International Financial Reporting Standards (IFRS) is required to comply unreservedly with all of the requirements of those Standards. The Central Bank is conscious that its guidelines in respect of provisioning against impaired loans must be consistent with those standards and is satisfied that the approach to provisioning set out below meets that consistency requirement.”

Mortgage Arrears Proposals

Questions (194)

Pearse Doherty

Question:

194. Deputy Pearse Doherty asked the Minister for Finance , further to his announcement on mortgage arrears on 13 March 2013, if he will quantify by reference to the most recently available data, the number of proposed sustainable mortgage solutions that the banks are targeted with proposing by end of June 2013; the number of proposed sustainable mortgage solutions that the banks have proposed by 13 March 2013; and if he will specify what is meant by proposing and if proposals must be in writing to borrowers. [14902/13]

Written answers

Minister for Finance

As the Deputy is aware on 13 March 2013 the Central Bank announced new measures to address mortgage arrears which included the publication of performance targets for the main mortgage banks. These targets are set in relation to both Principal Dwelling Homes (PDH) and Buy to Let (BTL) mortgages and have been set for banks regarding sustainable resolution for arrears cases which are 90 days or more overdue. This new approach is aimed at ensuring that banks offer and conclude sustainable solutions for their customers in arrears by setting specific performance targets and proposing revisions to provisioning standards. The Central Bank's targets stipulate that:

- By end June 2013, the banks should have proposed sustainable mortgage solutions for 20% of mortgage loans that are over 90 days in arrears, and

- By end September 2013, 30%, and

- By the end of 2013, 50%.

The targets will become progressively more demanding so that the vast majority of distressed borrowers will have been proposed solutions by end 2014.

The latest Central Bank mortgage arrears statistics for the end of December 2012 indicates that 94,488 (11.9%) accounts of PDH mortgages and 28,421 (18.9%) of BTL mortgage accounts were in arrears of more than 90 days.

The Central Bank's Mortgage Resolution Strategy Targets, which can be accessed on the Bank’s website at http://www.centralbank.ie , defines a sustainable solution as one of the following:

a) An arrangement concluded under a bank’s Mortgage Arrears Resolution Process (MARP), in accordance with the Code of Conduct on Mortgage Arrears, where the borrower is cooperating under the MARP and the bank has satisfied itself that the arrangement provides a sustainable solution which is likely to enable the customer to meet the original or, as appropriate, the amended terms of the mortgage over the full remaining life of the mortgage, including repayment of the original or an agreed revised principal sum where offered. This may include an interest only or other temporary solution for a period if it is likely that full repayment of the original or revised principal will be achieved over time, or where there is a payment plan to return the account to sustainability through the clearance of arrears;

b) A personal insolvency arrangement effected under the Personal Insolvency Act 2012; or

c) If an arrangement could not be reached or is not appropriate, that the PDH or BTL property securing the loan has been voluntarily sold or, failing that, any situation where a Specified Credit Institution takes possession of the property including by way of voluntary agreement with the borrower or by Court Order or otherwise.

In determining whether a proposal constitutes a sustainable solution, the Central Bank has informed me that the lender will need to evaluate both actual and prospective affordability for the distressed borrower and the capital implications for the credit institutions in terms of their prudential responsibility to minimise losses.

While the Central Bank is not mandating any particular model of restructuring and while sustainable solutions will be arrived at on a case-by-case basis, there are some fundamental principles that must be respected. These include:

- An affordability assessment of the borrower based on both their current and prospective future servicing capacity for all borrowings;

- A realistic valuation of the borrower’s assets, in particular their property, and

- The use of an appropriate interest rate when discounting future income flows, which should take account of the lender’s cost of funds.

The Central Bank has advised that it will assess compliance with these principles in its supervisory audit of compliance with the targets, including through analysis of a sample of modifications.

Section 37 of the Code of Conduct on Mortgage Arrears provides that where an alternative repayment arrangement is offered by a lender, the lender must provide the borrower with a clear explanation, in writing, of the alternative repayment arrangement.

Central Bank of Ireland Issues

Questions (195)

Pearse Doherty

Question:

195. Deputy Pearse Doherty asked the Minister for Finance the terms of the Agreement on Net Financial Assets overseen by the European Central Bank. [14903/13]

Written answers

Minister for Finance

The terms of the Agreement on Net Financial Assets and related issues is a matter for the Central Bank of Ireland and the ECB and not something that I can comment on.

IBRC Liquidation

Questions (196, 197)

Pearse Doherty

Question:

196. Deputy Pearse Doherty asked the Minister for Finance if he will confirm the proportion of the €25 billion of sovereign bonds used to swap with the Irish Bank Resolution Corporation for its €27.7 billion of promissory notes, that are directly held by the Central Bank of Ireland. [14904/13]

Pearse Doherty

Question:

197. Deputy Pearse Doherty asked the Minister for Finance if he will set out, in tabular form, by country the holdings of €25 billion of sovereign bonds used to swap with the Irish Bank Resolution Corporation for its €27.7 billion of promissory notes. [14905/13]

Written answers

Minister for Finance

I propose to take Questions Nos. 196 and 197 together.

I have been advised that the Central Bank of Ireland received €25bn of marketable sovereign bonds in lieu of the Promissory Notes. The Central Bank will hold the sovereign bonds in its trading portfolio and will sell them over time. The timing of bond sales set out is a minimum schedule and can be accelerated as market conditions allow. I have been informed that the schedule set out means the Central Bank will sell the €25bn of bonds in various tranches:

- 2013 – no sale

- 2014- €0.5bn

- 2015-2018 – €0.5bn annually

- 2019-2023 – €1bn annually

- 2024-end – €2bn annually.

Deposit Guarantee Scheme

Questions (198)

Pearse Doherty

Question:

198. Deputy Pearse Doherty asked the Minister for Finance if he will provide an assessment of the adequacy of the deposit guarantee scheme overseen at the Central Bank of Ireland in the event of the failure of any of the main Irish financial institutions. [14906/13]

Written answers

Minister for Finance

I am satisfied that there are adequate measures in place to protect depositors in the institutions covered by the Deposit Guarantee Scheme (DGS), which is funded by the credit institutions covered by the scheme and is backed by the Exchequer. The Financial Services (Deposit Guarantee Scheme) Act 2009 provides for the operation of the Deposit Protection Account (DPA). Credit Institutions are required to maintain a balance in the DPA equivalent to 0.2% of their total deposits (subject to a minimum of €50,000 for each bank or building society). The total balance in the DPA was €388m at end December 2012 and has reduced to €379m following compensation payments to IBRC depositors.

In the event of a credit institution being unable to repay deposits, the Central Bank is authorised to make compensation payments to eligible depositors to a maximum of €100,000 per person per institution. The cost of compensation payments is charged against the balances in the DPA. In the event that the cost of compensation exceeds the balances in the DPA, the 2009 Act provides for the Central Bank to be reimbursed from the Central Fund within 3 months, subject to my approval.

Subsequently, credit institutions would be required to replenish the DPA and to repay the government for amounts advanced to cover the immediate cost of compensation. I am authorised to specify the period for repayments and the interest rate chargeable.

Banking Sector Remuneration

Questions (199)

Pearse Doherty

Question:

199. Deputy Pearse Doherty asked the Minister for Finance further to the publication of the Mercer Report on pay and perks, the investigation, if any, he has carried out into the reported practice in Spain where executives of Bankia were ordered to pay back annual incentives paid before the bailout. [14907/13]

Written answers

Minister for Finance

I had noted the actions taken in Spain for the demand of the return of certain incentive payments already made from a cadre of executives of the Spanish bank, Bankia, as part of its recapitalisation late last year. The situation while analogous in some respects to our banking recapitalisations would not appear to be similar in all respects to the domestic circumstances underpinning our recapitalisations. Also the different legal systems in the two countries would also be a factor for consideration.

I am also conscious of on-going legal cases in this sensitive area and would be reluctant to make further comment on that basis.

I would point out that the Review of Remuneration Practices and Frameworks at the Covered Institutions stated that bonus payments are no longer payable at the banks.

Banking Sector Remuneration

Questions (200)

Pearse Doherty

Question:

200. Deputy Pearse Doherty asked the Minister for Finance further to the publication of the Mercer report on pay and perks, the reason employees in banks have seen their salaries increase to levels which are amongst the highest in Europe, whilst employees in the public sector are being asked to accept pay cuts. [14908/13]

Written answers

Minister for Finance

The Review of Remuneration and Practices and Frameworks at the covered institutions revealed that salaries for continuing employees has increased within a range of 4% to 6% due to pay increases awarded in 2009 and individual promotions across the remaining three covered institutions. No pay increases have been provided to the generality of the employees since that time and the Review states that bonuses are no longer payable at the covered institutions. It is not correct to say that the Review indicates that bankers salaries are among the highest in Europe. In fact, the Review opines that at senior executive level and above salaries are generally behind the market as compared to quoted Irish companies and the Mercer European Financial Services survey and significantly behind when incentives are taken into account.

The Government has taken the decision that with the remaining Covered Institutions still incurring losses it was an inescapable conclusion that the cost base of the institutions needs to be reduced further. This is essential if they are to return to profitability, be in a position to support the economy and repay the State’s investment through a return to private ownership.

In terms of next steps, I, on behalf of the Government, have directed the banks to come up with plans as to how they intend to address this issue in a manner that can help meet the State's objectives. I expect the value of those plans to mean a saving of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.

Financial Services Ombudsman

Questions (201)

Pearse Doherty

Question:

201. Deputy Pearse Doherty asked the Minister for Finance if he will confirm that the Financial Services Ombudsman, due to the Irish bank Resolution Corporation Act 2013, cannot now investigate complaints by mortgage holders against the IBRC; and if he will make a statement on the matter. [14917/13]

Written answers

Minister for Finance

Firstly, I must point out that the Financial Services Ombudsman is independent in the performance of his statutory functions and it would not be appropriate for me to comment on how he performs those duties.

The Irish Bank Resolution Corporation Act 2013 was passed on 7 February 2013. Pursuant to the provisions of the Act, I made a Special Liquidation Order for the purpose of winding up IBRC.

Section 6(6) of the Act specifically provides that the making of a special liquidation order does not preclude any investigation by certain authorities, including authorities which may investigate any person under or by virtue of any enactment, rule of law or contract. The Financial Services Ombudsman investigates complaints by eligible consumers in respect of certain conduct by regulated financial service providers pursuant to part VIIB of the Central Bank Act 1942.

Therefore, I have been advised that the Financial Services Ombudsman is not precluded from investigating complaints by mortgage holders against the former IBRC due to the new Act.

As I mentioned, the Financial Services Ombudsman is independent in the performance of his duties and I understand that he may have taken a more restrictive interpretation of the Irish Bank Resolution Corporation Act 2013 provisions.

IBRC Liquidation

Questions (202)

Billy Timmins

Question:

202. Deputy Billy Timmins asked the Minister for Finance the position regarding employees of the Irish Bank Resolution Corporation (details supplied) and the need to restore the value of the severance terms previously agreed so that when their work is completed, they are not placed at a further disadvantage; and if he will make a statement on the matter. [14951/13]

Written answers

Minister for Finance

As the Deputy is aware, following the appointment of the Special Liquidator IBRC employee contracts were terminated in the Republic of Ireland. As a result of the termination of the employment contracts, employees are entitled to apply for a statutory redundancy payment and a statutory notice payment, subject to the limits prescribed by statute. Claim forms for statutory entitlements have now been distributed to all employees entitled to such claims.

The vast majority of employees were re-hired by the Special Liquidators for a minimum period of 6 months to ensure an orderly wind-down of the business. I am sure the staff will continue to work to ensure a satisfactory outcome for Irish taxpayers while they remain in employment under the liquidation process. Furthermore, it is likely that some staff may, be re-hired by NAMA or other purchasers of the assets in due course as the Special Liquidator completes the sale of the assets of IBRC.

Property Taxation Application

Questions (203, 205)

Michael Healy-Rae

Question:

203. Deputy Michael Healy-Rae asked the Minister for Finance the number of persons tasked with the job of dealing with appeals that will go forward from persons disputing the amount of money being sought from them in property tax; where they will be based and the type of resources available to them; and if he will make a statement on the matter. [14967/13]

Michael Healy-Rae

Question:

205. Deputy Michael Healy-Rae asked the Minister for Finance whether house owners who are disputing the amount of money being sought in the property tax will first of all have to pay the full amount and then put forward an appeal on that decision; and if he will make a statement on the matter. [14993/13]

Written answers

Minister for Finance

I propose to take Questions Nos. 203 and 205 together.

Local Property Tax (LPT) is a self-assessed tax so in the first instance it is a matter for the liable person to determine the valuation band that their residential property falls into and then to calculate and pay over the amount of tax due. I am advised by the Revenue Commissioners that, in common with the procedures for other taxes, they will accept the self-assessment made by the liable person provided it is made honestly and reasonably. In cases, therefore, where the liable person has made their best efforts at self-assessing the valuation band for their property and has submitted their Return and paid, or made arrangements to pay, the tax, the likelihood of disputes arising would be expected to be very low.

The Deputy refers in his Questions to persons disputing the amount of money being sought from them in property tax. This may be a reference to the Notice of Revenue Estimate that is being sent by Revenue to all liable persons as part of the general issue of LPT Returns that recently commenced. I am advised by the Revenue Commissioners that the question of appealing the Estimate does not arise. The Revenue Estimate is not based on a valuation of individual properties, nor should it be regarded as an accurate calculation of the amount of LPT that a liable person should pay. The Revenue Estimate is an amount of LPT that will be pursued if a liable person does not submit his or her LPT Return with his or her self-assessment of their property's valuation band. Accordingly, a person does not appeal the estimate – he/she displaces it by completing the return, self-assessing the value and filing the return. It is very simple, there is nothing to appeal - just file the return with the person’s own assessment of the LPT due and arrange to pay it.

Because LPT is a self-assessed tax, the likelihood of formal appeals arising should not be high. A common feature of a self-assessment system is that return is filed which is generally accepted by Revenue. A number of returns are reviewed at a later date by Revenue and supporting documentation may be requested. At the end of a review, if there isn't agreement, Revenue may raise an assessment which the taxpayer may then appeal.

In the context of LPT, Revenue has stated that their concern this year is to establish the register and to get the tax up and running. At a later date, they will analyse the returns received and will review a proportion of those returns. Their likely approach will be to ask a property owner to validate his/her self-assessment. Depending on the outcome of the review and in a minority of cases where agreement is not reached, Revenue will raise an assessment of additional LPT due. This may be appealed to the Appeal Commissioners. As with other self-assessed taxes, one of the conditions to appeal Revenue's assessment is that the person must submit a Return and pay his or her own assessment of the tax due - not Revenue’s assessed amount - within 30 days of the date of the Notice of Assessment.

Finally, the determination of all tax appeals is the responsibility of the Office of the Appeal Commissioners - an Office under the aegis of my Department, entirely separate from the Office of the Revenue Commissioners. There are currently two Appeal Commissioners who are completely independent in carrying out their statutory role. The extent to which the introduction of the LPT will impact on the work of the Appeal Commissioners cannot be accurately predicted at this stage. While I do not anticipate that the number of appeals on LPT matters to be considered by the Appeal Commissioners will be substantial, I will keep the matter under review and regard will be had to the issue in the context of a wider review of the appeals process which should commence shortly.

State Banking Sector

Questions (204)

Shane Ross

Question:

204. Deputy Shane Ross asked the Minister for Finance the way he intends to cast his votes representing 15% of the shared capital, on behalf of the taxpayer, on each resolution individually due for decision at the Bank of Ireland AGM on 24 April; and if he will make a statement on the matter. [14977/13]

Written answers

Minister for Finance

As the Deputy will be aware the Bank of Ireland has only issued the documentation for the Annual General Court on 24 April in the last couple of days. My Department will fully peruse all the documentation before deciding the appropriate vote for each of the resolutions and as always, will vote in the best interest of the State and to maximise the return to the taxpayer of the funds invested in the Bank.

Question No. 205 answered with Question No. 203.

Bank Codes of Conduct

Questions (206)

Michael Healy-Rae

Question:

206. Deputy Michael Healy-Rae asked the Minister for Finance his views on correspondence (details supplied) regarding repossession of farm equipment by a bank; and if he will make a statement on the matter. [14995/13]

Written answers

Minister for Finance

My Department has no responsibility in relation to the seizure of farm equipment. I would expect that such seizures are carried out in accordance with the law and that proper notice was given to the person affected regarding alleged outstanding debts on the equipment. However, if that was not the case and the Deputy suspects that an illegal action took place in relation to this particular seizure, then the matter should be reported to An Garda Síochána. The Deputy might also like to check with the Central Bank to see if the agents of the Bank in question operated in accordance with the Central Bank’s Code of Conduct for Business Lending to Small and Medium Enterprises.

Tax Code

Questions (207)

Dominic Hannigan

Question:

207. Deputy Dominic Hannigan asked the Minister for Finance if he has projected the amount an average person will lose a year when maternity benefit is taxed from July; and if he will make a statement on the matter. [15069/13]

Written answers

Minister for Finance

The precise number of recipients that will be liable to income tax on their maternity benefit payment is not available. However, I understand that the Department of Social Protection have estimated that the average weekly maternity benefit recipients in 2013 to be 22,800, including those who will not have an increased liability to income tax.

As a result of maternity benefit payments becoming liable to income tax for all claimants, from the 1 July 2013, a number of possible tax outcomes could arise:

1. An individual may pay no income tax on their maternity benefit payment as their tax credits will be sufficient to reduce their tax liability to zero.

2. An individual may pay income tax on some or all of their maternity benefit payment at the standard rate.

3. An individual may pay income tax at the standard rate on a portion of the maternity benefit and the higher rate on the balance of the maternity benefit payment.

4. An individual may pay income tax on their maternity benefit payment at the higher rate.

Accordingly, the tax liability on maternity benefit payments will ultimately depend on the total income of the individual or couple concerned in the tax year or years concerned.

I would point out though, that maternity benefit payments will remain exempt from Universal Social Charge and PRSI.