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Tuesday, 26 Mar 2013

Written Answers Nos. 173 - 189

Departmental Staff Numbers

Questions (173, 174)

Mary Lou McDonald

Question:

173. Deputy Mary Lou McDonald asked the Minister for Finance if he will guarantee that the core clerical officers who will now need to be redeployed within or from Revenue, following the recent Conciliation and Arbitration Board decision to allow Revenue outsource to the private sector a contract for call centre work to the value of €4.9 million, will not be required to travel more than 45km from their homes when taking up their new positions. [14792/13]

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Mary Lou McDonald

Question:

174. Deputy Mary Lou McDonald asked the Minister for Finance the number of public sector workers who will need to be redeployed within or from Revenue following the recent Conciliation and Arbitration Board decision to allow Revenue outsource to the private sector a contract for call centre work to the value of €4.9 million; and if the workers will be redeployed within Revenue; and if he will provide a breakdown of the personnel allocated to each grade affected and the total annual pay of the workers affected. [14793/13]

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Written answers

I propose to take Questions Nos. 173 and 174 together.

I am advised by the Revenue Commissioners that no member of their staff is to be redeployed, transferred or moved as a result of the outsourcing of an element of the call service for Local Property Tax (LPT). The use of an external service provider has arisen in the context of additional work associated with the roll out of a new tax. The outsourcing of peak call handling in respect of the LPT will ensure that skilled Revenue staff can continue to provide the necessary customer service to meet their long term, on-going demands and commitments in relation to the strategic priority of maintaining and improving levels of tax and duty compliance.

The €4.9 million figure quoted by the Deputy does not represent the estimate of the cost of the outsourced call centre service. This figure was Revenue's initial estimate of the total cost of providing a telephone call service using both internal and external resources. The nature of the contract is that the external cost will depend on the volume of calls handled, but I am informed by the Revenue Commissioners that it is expected to be very much lower than the figure quoted by the Deputy.

The proposal to address the simpler LPT queries through the outsourcing of limited call services offers a flexible, scalable response to an unpredictable demand. It will also provide assurance that the introduction of LPT will not damage Revenue's overall capacity to deliver for the Exchequer and for the Irish people, an important consideration at any time and vital in the current economic circumstances.

Tax Reliefs Application

Questions (175)

Seán Ó Fearghaíl

Question:

175. Deputy Seán Ó Fearghaíl asked the Minister for Finance if he will address the concerns raised in correspondence (details supplied) regarding the reimbursement of medical expenses; and if he will make a statement on the matter. [15071/13]

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Written answers

Income tax relief in respect of health expenses is allowable in accordance with section 469 of the Taxes Consolidation Act 1997. This legislation provides for tax relief for health expenses incurred in the provision of health care. Health care is defined for the purposes of that legislation as the prevention, diagnosis, alleviation or treatment of an ailment, injury, infirmity, defect or disability and includes care received by a woman in respect of pregnancy. Health care does not include routine ophthalmic or dental treatment. The section provides that tax relief must be either for the costs of the services of a practitioner, defined as a person registered on the register established under the Medical Practitioners Act 2007, or diagnostic procedures carried out on the advice of a practitioner, which includes “physiotherapy or similar treatment prescribed by a practitioner”. Eligibility for tax relief is limited to expenses relating to treatment considered necessary and appropriate by a qualified practitioner.

Section 469 of the Taxes Consolidation Act 1997 consolidated all previous legislation pertaining to relief for health expenses, in particular section 12 of Finance Act 1967 which introduced the relief in the first instance. This section also required that physiotherapy or similar treatment be prescribed by a practitioner before qualifying for relief. This requirement has, therefore, been part of the qualifying criteria since the introduction of relief for health expenses and I am advised by the Revenue Commissioners that guidance and instructions to staff have remained unchanged in this regard.

For 2010 the cost of tax relief for health expenses was €127 million and was availed of by 368,000 individuals who had sufficient income to benefit from a claim. There is no specific breakdown in these figures of the costs related to physiotherapy.

If self-referral for physiotherapy were allowed, an estimate of the additional cost would be unquantifiable, but, undoubtedly, it would increase the overall cost of health expenses relief to the Exchequer. While the Government supports measures to lower the cost of medical treatment which should in turn lower the costs of health care provision by the State, an extension of the relief along the lines proposed would inevitably lead to calls for other treatments to similarly qualify for relief, which would greatly increase the overall cost of the scheme.

I would point out that this issue was raised during the debates in the Seanad on Finance Bill 2013 during which I agreed to re-examine the matter during the course of this year.

Retail Sector

Questions (176)

Eoghan Murphy

Question:

176. Deputy Eoghan Murphy asked the Minister for Finance if it is possible to ascertain the profits earned by foreign retailers operating here; and if he will distinguish between the element that remains here and that which is repatriated abroad. [14697/13]

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Written answers

I am informed by the Revenue Commissioners that the relevant information available is the total amount of gross trading profits returned by all companies trading in the retail sector and referenced under NACE Codes 4711 to 4799 and also code 4532. This includes retail sales of motor vehicles. The available information is derived from corporation tax returns for the year 2010, the latest year for which the necessary detailed information is available. The gross trading profits returned by companies with these NACE codes was €2.4 billion for 2010.

The sector identifier used on the tax records is based on the 4 digit “NACE code (Rev. 2)” which is an internationally recognised economic activity code system. The NACE codes are not essential for the assessment and collection of taxes and duties and the correct allocation and maintenance of these codes is subject to the limit of available resources. NACE code classifications on tax records are compiled by reference to the primary area of economic activity reported by individual and corporate taxpayers on their own behalf and the taxes collected are allocated to those codes without reference to the precise economic activity which generated them. While the accuracy of the NACE codes on tax records is sufficient to underpin broad sector-based analyses there will undoubtedly be some inaccuracies at individual level. This should be borne in mind when considering the information provided. The sector identified for this reply represents the closest equivalents in the NACE code system to the sector mentioned in the question.

I am also informed by the Revenue Commissioners that it is not currently possible to separately identify from their records the amount of these profits that relate to foreign owned companies nor to identify the amount of these profits that are repatriated abroad.

The CSO has recently broken down economic activity by foreign-owned multinational sectors and indigenous - http://www.cso.ie/en/media/csoie/releasespublications/documents/economy/2011/fmeos20062011.pdf. The threshold for inclusion in the foreign-owned category is if 85 per cent or more of the turnover for the sector is accounted for by foreign-owned multinationals. For Ireland this includes software, chemicals and some other sectors, but not retail.

On the issue of profits, it is assumed that foreign-owned retailers generally repatriate profits abroad. However in net terms some profits will remain in Ireland, to the extent that shareholders of these firms are Irish residents.

Home Repossession Rate

Questions (177)

Joanna Tuffy

Question:

177. Deputy Joanna Tuffy asked the Minister for Finance if any consideration has been given to the extension by banks of the moratorium on repossessions to a period longer than 12 months; and if he will make a statement on the matter. [14714/13]

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Written answers

I have been informed by the Central Bank that under the Code of Conduct on Mortgage Arrears (CCMA), where a borrower co-operates with a lender, the lender must wait at least 12 months before applying to the courts to commence legal action for repossession. This 12-month moratorium is intended to provide co-operating borrowers with the necessary time to agree an alternative repayment arrangement with their lender. It commences 31 days after arrears have first arisen on a mortgage account and excludes any time period during which:

the borrower is complying with the terms of any alternative repayment arrangement;

the borrower can consider whether he/she wishes to appeal a decision of the Arrears Support Unit;

an appeal by the borrower is being processed by the lender’s Appeals Board;

and a complaint from the borrower is being processed by the Financial Services Ombudsman.

Under the CCMA, there are two scenarios that affect the application of the 12-month moratorium:

1. Where a lender has complied with the Mortgage Arrears Resolution Process (MARP) and offered an alternative repayment arrangement to the borrower, the 12-month moratorium does not continue to apply if the borrower declines the arrangement offered. A lender must, however, allow for the borrower’s right of appeal to the lender’s internal Appeals Board and to refer the appeal to the Financial Services Ombudsman.

2. Where a lender has deemed a borrower’s mortgage to be unsustainable and declined to offer an arrangement, that lender must wait for whatever period of time remains on the moratorium before commencing legal action. This allows such borrowers some time to consider their situation and to make alternative arrangements.

In relation to 1 above, and in the context of the new Personal Insolvency Act, the Central Bank is now proposing that a lender should be required to give a 30-day notice period, before commencing legal action, to a borrower who has declined an arrangement. This would allow the borrower a period of time to consider his or her options, particularly whether to consult a Personal Insolvency Practitioner.

In relation to 2 above, the Central Bank is seeking views on whether the 12-month moratorium should continue to apply where a lender has deemed a mortgage to be unsustainable (bearing in mind that the time remaining will vary, depending on the length of time a lender has taken to assess a borrower’s case). Or whether the 30 day notice period outlined above, is a sufficient alternative period of time for a borrower to consider his or her options in this circumstance.

The Central Bank has commenced a consultation process on the “Review of the Code of Conduct on Mortgage Arrears” (CP63). Submissions should be emailed to the Bank on or before 10 April 2013. Full details are available on www.centralbank.ie.

Banking Sector Remuneration

Questions (178, 184, 191, 209)

Joanna Tuffy

Question:

178. Deputy Joanna Tuffy asked the Minister for Finance if he will provide an update on the Mercer Report and his response to that report and if he will take into account the extra workload of staff due to reduced numbers of staff and additional tasks; the impact on workers' income from other factors including having to pay higher pension contributions and the wiping out of the value of bank shares previously part of the remuneration package and the need to protect the pay of those workers on the lower and middle salary scale; and if he will make a statement on the matter. [14727/13]

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Billy Timmins

Question:

184. Deputy Billy Timmins asked the Minister for Finance his views on correspondence (details supplied) regarding pay cuts; and if he will make a statement on the matter. [14807/13]

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Michael Healy-Rae

Question:

191. Deputy Michael Healy-Rae asked the Minister for Finance his views on a submission (details supplied) regarding pay levels; and if he will make a statement on the matter. [14891/13]

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Tom Fleming

Question:

209. Deputy Tom Fleming asked the Minister for Finance if he will examine the plea on behalf of frontline staff (details supplied) regarding the Mercer Report; his views on whether these workers are being discriminated against in contrast to persons such as the CEO, Bank of Ireland and other senior bank executives in State-supported institutions who are on huge salaries, bonuses, pensions and so on, in some cases up to €1 million; if he will clarify that his intention is not to penalise frontline staff; and if he will make a statement on the matter. [15091/13]

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Written answers

I propose to take Questions Nos. 178, 184, 191 and 209 together.

When publishing the Review of Remuneration Practices and Frameworks at the Covered Institutions, on 12 March 2013, I indicated that the Government had formed the view 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.

On behalf of the Government, I have now 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.

This point is reinforced in the correspondence supplied by the Deputies where it is asserted that even a target reduction of 6% to 10% in remuneration will not by itself impact significantly on losses now occurring at the covered institutions. If appropriate action is not taken on this front in a timely manner then bank workers will be facing much more unpalatable measures than now proposed. Tackling the cost base is of course only one of many goals that need to be achieved but combined with other measures will deliver the required results.

I would point out in this context that redundancies at the covered institutions have been achieved to date on a voluntary basis on negotiated terms. The effect on employee entitlements arising out of the liquidation of IBRC will serve as a sharp reminder to all sides of the fraught environment in which the banks and the country are operating.

I, and the Government, acknowledge that the sacrifices and changes made by bank employees to date at all levels and recognise that this has been achieved without major industrial unrest in what is a critically important sector. However, it can never be forgotten by management and employees of these banks – both past and present – that without enormous cost to Irish taxpayers these institutions would not have survived and that this needs to be borne in mind during future discussions. If remuneration costs are to be reduced with the aim of a return to profitability then sacrifices at all employees levels will be required.

Bank Deposits Levy

Questions (179, 180, 188, 227)

Shane Ross

Question:

179. Deputy Shane Ross asked the Minister for Finance , in view of the statement by his Department welcoming the Cypriot bailout, if he will outline the elements he welcomes and if it includes the levy on small depositors; the arguments he put forward against the levy on small depositors at the meeing; the discussions, if any, that have been held with the troika on such a levy here, now or in the past; if he will support such a levy were it to be suggested for other countries; and if he will make a statement on the matter. [14745/13]

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Andrew Doyle

Question:

180. Deputy Andrew Doyle asked the Minister for Finance if he will guarantee that deposits under €100,000 in Irish banks will not be subject to a deposit levy; his position on the circumstances in another Eurozone country (details supplied) where a deposit levy has been imposed; and if he will make a statement on the matter. [14746/13]

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Dominic Hannigan

Question:

188. Deputy Dominic Hannigan asked the Minister for Finance his views of the proposal to take money from Cypriot deposit accounts; and if he will make a statement on the matter. [14867/13]

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Pearse Doherty

Question:

227. Deputy Pearse Doherty asked the Minister for Finance if he will explain his decision to welcome the Cypriot loan deal as proposed; his views on whether it is acceptable to levy depositors in a banking crisis but leave senior bondholders untouched; if he put forward any alternative solutions to the levying of depositors, particularly depositors under €100,000; if any discussions have been held regarding this being a potential avenue for Ireland either in the past, or in the future; and if he will confirm that he is still committed to guaranteeing the first €100,000 of a depositor's account in the event of a bank collapsing or needing new capital. [15319/13]

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Written answers

I propose to take Questions Nos. 179, 180, 188 and 227 together.

In answer to media queries, my Department commented that the “agreement of the Programme of Assistance for Cyprus is to be welcomed.” Following many months of uncertainty and negotiations in Cyprus and the Eurozone, the fact that an Agreement was reached between the Cypriot Authorities and the Troika was an important step to stabilise the Cypriot banking system and economy. At that time, my Department did not give any comment on the specific measures the Cypriot Government had agreed with the Troika.

The structure of the levy of deposits was proposed by the Cypriot authorities. The Eurogroup made its views clear to the Cypriot authorities that small depositors should be treated differently from large depositors. To reinforce this point; the Eurogroup reaffirmed that EU law guarantees deposits up to €100,000 per customer, per bank in the event of a bank failure. On 16th March, the Cypriot Government proposed a once-off levy on all bank accounts in Cyprus. The Eurogroup advised against this proposal, but it recognised that fiscal measures such as taxes and levies are matters for individual member states, whether in a programme of assistance of not.

As the Deputies are aware the terms of the bailout agreed for Cypriot banks have now changed in the sense that a levy will now no longer be applied to depositors with deposits of €100,000 or less. Deposits equal to or less than €100,000 will be fully protected and there will not be a system-wide levy. In addition, the Cypriot authorities have agreed that senior bondholders will share fully in the costs of bank resolution.

I can confirm that this Government fully adheres to the EU policy of guaranteeing deposits of up to €100,000 per customer, per bank and would be against imposing a levy on guaranteed savings of under €100,000 as this would in itself undermine the nature of the guarantee. I can also confirm that discussions on a levy never arose with the Troika.

While there is a Deposit Interest Retention Tax (DIRT) on deposits, this applies only to interest earned and does not impact on the guaranteed deposit under €100,000. DIRT is a common form of tax, which ensures that the income earned on deposits, like other income, is subject to tax.

Mortgage Arrears Proposals

Questions (181)

Michael McGrath

Question:

181. Deputy Michael McGrath asked the Minister for Finance if he will ensure that the residential mortgage customers of Irish Bank Resolution Corporation in special liquidation will continue to enjoy the protection of the Central Bank code of conduct on mortgage arrears and other protections in Irish consumer law for the duration of their mortgage; and if he will make a statement on the matter. [14747/13]

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Written answers

I have been advised by the Special Liquidators that the residential mortgage customers of IBRC (in Special Liquidation) continue to enjoy the protection of the Central Bank Code of Conduct on mortgage arrears and other protections in Irish consumer law. The Special Liquidators are currently devising and implementing a sale process in relation to the mortgage portfolio and while it is too early to determine who the ultimate purchasers may be I am advised that the Central Bank Code of Conduct applies to all regulated entities operating in the State with the exception of credit unions.

Illicit Trade in Tobacco

Questions (182)

Paschal Donohoe

Question:

182. Deputy Paschal Donohoe asked the Minister for Finance if his attention has been drawn to the amount of revenue the State lost last year as a result of the importation of illegal tobacco and tobacco products; if he will consider increasing the fine for this offence as a measure to curb the amount of illegal importing taking place; and if he will make a statement on the matter. [14757/13]

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Written answers

I am advised by the Revenue Commissioners that determining the extent of any illicit black market activity and the losses that it causes to the Exchequer is problematic, and that any estimates of such losses need to be viewed with caution. I understand that a survey in respect of 2011 carried out for the Revenue Commissioners and the Health Services Executive found that some 770 million illicit cigarettes were consumed in the State. This would indicate a loss of the order of €258 million, in excise duty and VAT, in that year. A similar survey was undertaken in 2012 and the final results are being compiled at present.

The Revenue Commissioners are conscious that, in addition to the loss of tax revenues, the illicit tobacco trade poses a threat to legitimate businesses and to the Government’s policy of discouraging smoking. Taking action against this illegal activity is, therefore, a high priority for them. Their programme of action resulted in the seizure of over 95 million cigarettes and 5,276 kilograms of tobacco in 2012, and 132 convictions were secured during the year in respect of the smuggling or sale of illicit cigarettes or tobacco.

The penalty in the case of a summary conviction for either the smuggling of tobacco products or the illegal sale of unstamped tobacco products is a fine of €5,000 or a term of imprisonment not exceeding 12 months, or both a fine and a term of imprisonment.

The fines that may be imposed where a person is convicted on indictment of a tobacco-related offence were increased substantially by the Finance Act 2010. In the case of a conviction on indictment for smuggling, a fine not exceeding €126,970 or, where the value of the goods concerned is greater than €250,000, an amount not exceeding three times their value, may be imposed. A term of imprisonment not exceeding 5 years may be imposed instead of, or in addition to, a fine. Where a conviction on indictment occurs in respect of the illegal sale of unstamped products, the Court may impose a fine not exceeding €126,970, or a term of imprisonment of up to 5 years, or a fine and imprisonment.

The specific penalty to be imposed in a particular case is a matter for the Courts. Section 130(3) of the Finance Act 2001 permits a trial judge, in his or her discretion, to mitigate a fine incurred for an offence under excise law, provided that the amount so mitigated is not greater than 50% of the amount of the fine.

I consider that the maximum fines available are sufficiently high at present, having been raised to the current levels in 2010. The penalty imposed by the Court in any particular case is a matter entirely for the Court. In general, the level of penalty applied appears to be well below the maximum provided for in law.

Tax Code

Questions (183)

Derek Nolan

Question:

183. Deputy Derek Nolan asked the Minister for Finance his views on whether the total exemption from CAT on inter-spousal gifts under s70/71 CATCA 2003 remains appropriate, in view of the high profile instances in which it has been abused by certain individual borrowers to frustrate the claims of creditors; and if he will make a statement on the matter. [14778/13]

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Written answers

The position is that a number of exemptions and relief’s from CAT are provided for in CAT legislation. In accordance with the law in most common law jurisdictions, a complete exemption from CAT is available in relation to gifts and inheritances transferring between spouses. Section 70 CATCA 2003 provides that a gift taken by a donee who is at the date of the gift the spouse or civil partner of the disponer is exempt from tax and is not taken into account in computing tax. Section 71 CATCA 2003 similarly provides that an inheritance taken by a donee who is at the date of the inheritance the spouse or civil partner of the disponer is exempt from tax and is not taken into account in computing tax. Under CATA 1976 as originally enacted, no exemption was provided for spouses or surviving spouses. In many cases, a surviving spouse inheriting a relatively small estate comprising of the family home, a widow’s pension and other rights derived from a deceased husband was subject to CAT. Accordingly, with effect from 30 January 1985, all inheritances taken by a spouse from another spouse are exempt from tax. Gifts between spouses are exempt from tax since 31 January 1990.

These inheritance and gift tax exemptions were extended to civil partners as respects a gift or inheritance between civil partners taken on or after 1 January 2011.

The result is that CAT is not now charged on any transfers between spouses or civil partners either by way of gift or inheritance. CAT is effectively postponed until assets are passed on to the next generation.

The principle issue raised in the Deputy’s question is a possible avoidance of debt as opposed to an avoidance of tax. I do not believe that amendments to the sections referred to by the Deputy would deal with the issue raised.

More generally in the context of insolvency, both the Bankruptcy Act and the new Personal Insolvency Act contain provisions and offences regarding actions by a debtor who seeks to fraudulently or illegally deprive or defeat the legitimate rights of creditors.

Question No. 184 answered with Question No. 178.

Tax Code

Questions (185)

Bernard Durkan

Question:

185. Deputy Bernard J. Durkan asked the Minister for Finance if a refund of income tax paid is applicable in the case of a person (details supplied) in County Kildare; and if he will make a statement on the matter. [14833/13]

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Written answers

I have been advised by the Revenue Commissioners that they have contacted the person concerned and arranged to have the necessary details submitted to enable reviews to be dealt with for 2011 and 2012.

Mortgage Arrears Proposals

Questions (186, 187)

Brendan Ryan

Question:

186. Deputy Brendan Ryan asked the Minister for Finance if a lender (details supplied) will be included as one of the main lenders being set targets by the Central Bank to tackle the mortgage arrears problem as announced last week; and if he will make a statement on the matter. [14838/13]

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Brendan Ryan

Question:

187. Deputy Brendan Ryan asked the Minister for Finance if he will provide a list of lenders that will be set targets by the Central Bank to tackle the mortgage arrears crisis as announced last week; and if he will make a statement on the matter. [14839/13]

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Written answers

I propose to take Questions Nos. 186 and 187 together.

The Deputy will be aware that on 13 March 2013 the Central Bank announced new measures to address mortgage arrears, including the publication of performance targets for the main mortgage banks. The targets are set in relation to both Principal Dwelling Homes and Buy to Let mortgages. The 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.

Performance targets have been set for: ACC; AIB; Bank of Ireland; KBC Bank; Permanent TSB; and Ulster Bank.

The Central Bank has advised that these institutions cover the vast majority of the mortgage book in Ireland, accounting for around 90% of mortgages held, and that it will examine whether it should extend the targets to sub-prime lenders in due course.

Question No. 188 answered with Question No. 179.

Property Taxation Exemptions

Questions (189)

Michael McGrath

Question:

189. Deputy Michael McGrath asked the Minister for Finance if he will address a query (details supplied) regarding the local property tax. [14872/13]

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Written answers

The enactment of the Finance (Local Property Tax) (Amendment) Act 2013 on 13 March introduced a number of amendments to the original Act, which includes relief for properties adapted for use by disabled persons. I would like to clarify that qualifying for this relief does not confer on the property an exemption from the charge to Local Property Tax. Section 15A of the Finance (Local Property Tax) Act 2012 (as amended) provides for a reduction in the market value of a residential property that has been adapted for occupation by a disabled person where the adaptation has been grant-aided by a local authority. The person with the disability must occupy the property as his or her sole or main residence after the adaptation is completed. The reduction in value is limited to the lesser of the chargeable value attributable to the adaptation work carried out on the property and the maximum grant payable under the relevant local authority scheme. The relief ends on the sale or transfer of a property that has been adapted, unless the person with the disability continues to reside in the property.

I would like to clarify that a person who adapted a home before 2001 is not excluded from this relief. The relief is dependent on local authority grant aid being paid under S.I. 607 of 2001. However, this particular set of regulations covers adaptation work carried out on or after 1 March 1993 and on foot of applications received by a local authority up to 1 November 2007 at which stage S.I. 670 of 2007 came into effect. Thus, all houses which were grant aided in respect of adaptations in the last 20 years or so could potentially qualify for a measure of relief under section 15A.

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