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Tuesday, 30 Apr 2013

Written Answers Nos. 185-201

Tax Reliefs Application

Questions (185)

Pearse Doherty

Question:

185. Deputy Pearse Doherty asked the Minister for Finance the current rate at which landlords can make mortgage interest deductions against rental income for tax purposes; and the amount that can be raised for the Exchequer if this mortgage interest deduction is reduced to 40%. [20067/13]

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Written answers

I am informed by the Revenue Commissioners that a breakdown between rent received from residential property and other types of property is not sought or provided in tax returns. However based on personal income tax returns filed by non-PAYE taxpayers for the year 2010, the latest year for which this information is available, and making certain assumptions about the data it is estimated that the revenue that would be raised from reducing the level at which individuals can claim interest repayments against tax for residential rental properties from 75% to 40% could be in the region of €157m. Rental income of companies is returned as net of interest on borrowings the figures for interest are not separately distinguished in corporate tax returns. There is, therefore, no basis on which an estimate of the cost of reducing the tax relief involved could be provided. The estimated cost of 2010 residential interest relief is based on assuming that tax relief was allowed at the top income tax rate of 41% and the figure provided could therefore be regarded as the maximum Exchequer cost in respect of those taxpayers. This figure is subject to adjustment in the event of late returns being filed or where returns already filed are subsequently amended.

It should be noted that any corresponding data returned by PAYE taxpayers in the income tax return form 12 is not captured in the Revenue computer system. However, any PAYE taxpayer with non-PAYE income greater than €3,174 is required to complete an income tax return form 11. This return is the source of the figure provided in this reply in respect of individuals. The level at which interest repayments can be claimed against tax for residential rental properties was reduced from 100% to 75% in section 5 of the Finance Act 2009. There is no specific proposal in the Programme for Government to decrease the amount of interest on borrowings that can be offset against rental income for tax purposes, however, as a matter of course all such taxation measures and reliefs are considered in the context of the budgetary process.

Social Insurance Issues

Questions (186)

Pearse Doherty

Question:

186. Deputy Pearse Doherty asked the Minister for Finance if he will set out the matters to which PRSI and universal social charges are currently applied; if he is considering extending PRSI and USC to other forms of income not already subject to the charges. [20068/13]

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Written answers

The position is that PRSI is payable on an individual’s pay and income after allowing relief for capital allowances. Universal Social Charge (USC) is payable on an individual’s pay and income after allowing for losses incurred in, or capital expenditure incurred for the purposes of a trade. In relation to both PRSI and USC, pension contributions are not deducted in arriving at the amounts payable. However, social welfare payments are not liable to either PRSI or USC. In relation to extending PRSI and USC to other forms of income not already subject to the charge, the position is that, in Budget 2013, I announced that the Minister for Social Protection, Ms. Joan Burton, T.D., would be bringing forward legislation to change PRSI contributions as follows:

- Where modified PRSI rate payers have income from a trade or profession, such income and any unearned income they have will be made subject to PRSI with effect from the 1st of January 2013; and

- Unearned income for everyone else will become subject to PRSI in 2014. This means that PRSI will be payable on income generated from wealth such as rental income, investment income, dividends and interest on deposits and savings.

This means that from this year, modified rate contributors who have income from a profession or trade and who were previously not liable to PRSI on that income, are now liable to PRSI at 4% on such income. From next year, all assessed taxpayers, that is, taxpayers who are in the self-assessment system, will be liable to PRSI on their full incomes including rental income, investment income, dividends and interest on deposits and savings.

In relation to USC, the position is that this tax, like all other taxes, is reviewed annually in the context of the Budget and Finance Bill cycle. The Minister for Social Protection has published a booklet entitled “PRSI contribution rates and user guide from 1 January 2013” which gives more information and is available at http://www.welfare.ie/en/downloads/SW14.pdf. The Revenue Commissioners have published a document entitled “Universal Social Charge FAQs” which gives more information and is available athttp://www.revenue.ie/en/tax/usc/universal-social-charge-faqs.pdf.

Question No. 187 answered with Question No. 183.

Tax Yield

Questions (188)

Pearse Doherty

Question:

188. Deputy Pearse Doherty asked the Minister for Finance the amount that could be raised for the Exchequer if ARFs and PRSAs had their imputed distribution rates increased to 6% on amounts under €2 million and to 7% on amounts in excess of €2 million. [20070/13]

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Written answers

An annual imputed distribution rate of 5% applies to approved retirement funds (ARFs) with asset values of €2 million or less and also to ‘vested’ Personal Retirement Savings Accounts (PRSAs where benefits have commenced) on the same basis. A higher imputed distribution rate of 6% applies to ARFs and/or ‘vested’ PRSAs with asset values of more than €2 million. I assume the Deputy is suggesting an increase in the imputed distribution from 6% to 7% for ARFs and/or ‘vested’ PRSAs of more than €2 million in value and an increase from 5% to 6% where the asset values are less than €2 million. I am informed by the Revenue Commissioners that information provided to them in the context of the tax paid on these deemed or imputed distributions does not include information on the value of the ARFs and/or ‘vested’ PRSAs out of which the distributions are deemed to arise. There is therefore no basis on which a definitive estimate of the impact on the Exchequer of the change mentioned in the question could be compiled.

As an exercise that might provide some indication of the scale of the additional tax yield involved, some historical data made available to my Department from private sector sources provides a breakdown of ARFs by value in respect of a number of providers representing an estimated 40% of the ARF market. There is no similar data available in relation to ‘vested’ PRSAs. Out of a total value of some €2.4 billion in ARFs under management by these providers where the average ARF value was just over €127,000, the total value of those ARFs representing individual funds under €2 million was €2.3 billion. The total value of those ARFs representing individual funds of over €2m was €137 million. Based on a very rough extrapolation of these figures to arrive at a broad potential estimate for the total value of ARFs with assets in these value ranges, the estimated additional income tax yield from applying increased imputed distribution rates to such ARFs as set out above would be about €25 million in a full year.

It is important to note that the deemed or imputed distribution measure is designed to encourage draw downs from ARFs and ‘vested’ PRSAs so that they are used, as intended, to fund a stream of income in retirement in the same way as a retirement annuity, for which ARFs are supposed to operate as a more flexible alternative. The measure, in itself, does not give rise to significant tax revenues as it does not apply to actual draw-downs from ARFs and ‘vested’ PRSAs, which are taxed in the normal way. Moreover, increasing the annual percentage notional distribution for ARFs and ‘vested’ PRSAs as suggested in the question would further increase the risk that the retirement income derived by the owners from such funds could be depleted before death.

Tax Yield

Questions (189)

Pearse Doherty

Question:

189. Deputy Pearse Doherty asked the Minister for Finance the amount that could be raised for the Exchequer by reducing the earnings cap for pension contributions to €70,000. [20071/13]

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Written answers

I assume that the Deputy is referring to the current annual earnings cap of €115,000 which operates to limit the level of tax-relieved personal pension contributions in any one year. The annual earnings cap acts, in conjunction with age-related percentage limits of annual earnings, to put a ceiling on the annual amount of tax relief an individual taxpayer can obtain on pension contributions. A breakdown of the cost of tax relief on employee contributions to occupational pension schemes is not available by income tax rate, as tax returns by employers to the Revenue Commissioners of employee contributions to such schemes are aggregated at employer level. An historical breakdown is available by tax rate of the tax relief claimed on contributions to personal pension plans - Retirement Annuity Contracts (RACs) and Personal Retirement Savings Accounts (PRSAs) - by the self-employed and others, to the extent that the contributions have been included in the personal tax returns of those taxpayers. There is, therefore, only a limited statistical basis for providing definitive figures. However, by making certain assumptions about the available information, the Revenue Commissioners inform me that the combined estimated full year yield to the Exchequer from reducing the current annual earnings cap of €115,000 to €70,000 in respect of individual contributions to occupational pension schemes, RACs and PRSAs would be about €130 million.

Budget 2014 Issues

Questions (190)

Pearse Doherty

Question:

190. Deputy Pearse Doherty asked the Minister for Finance if he still intends to meet the €3.1 billion adjustment proposed for this year’s budget. [20072/13]

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Written answers

As I have discussed in recent parliamentary questions, I will not be drawn into speculation on the composition of the next Budget at this stage. The Stability Programme Update which will be discussed at the Oireachtas Committee on Finance, Public Expenditure & Reform later today, incorporates revised economic and fiscal forecasts for the medium term and articulates Government’s position in relation to Budget 2014.

Budget 2013

Questions (191)

Pearse Doherty

Question:

191. Deputy Pearse Doherty asked the Minister for Finance if he will give details of the carry over to this year’s budget from the measures announced last year; and if he will provide a breakdown from whence that carry over will come. [20073/13]

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Written answers

Around €600 million of the revenue consolidation will be provided through carry forward from measures announced in Budget 2013 and prior budgets. This estimate of carry forward is inclusive of an estimated €250 million yield resulting from changes to take effect in 2014 to the maximum allowable pension fund, which was outlined in the Summary of 2013 Budget Measures. The estimated full year yields and/or costs of the tax revenue measures introduced in Budget 2013 are set out on pages A5 – A12 of the Summary of 2013 Budget and Estimates Measures Policy Changes section of the Budget 2013 book. The difference between the estimated yield/cost of a measure in 2013 and in a full year is effectively the carry-over impact.

The biggest source of carry-over in 2014 is from the Local Property Tax, which is estimated to yield a further €250 million. The increase in carbon tax is expected to deliver an additional €16 million next year. The increase in the capital acquisitions tax (CAT) is also expected to deliver an additional €12 million in 2014 and the increase in DIRT an additional €14 million. These are just some of the main sources of positive carry-over from measures introduced as part of Budget 2013. It is also important to consider that some the measures introduced as part of the Budget have a negative carry-over effect in 2014, for example the full year impact of the excise duty relief (estimated -€35 million carry-over impact). For further details the Deputy should consult pages A5 – A12 of the Summary of 2013 Budget and Estimates Measures Policy Changes section of the Budget 2013 book.

Universal Social Charge Exemptions

Questions (192)

Pearse Doherty

Question:

192. Deputy Pearse Doherty asked the Minister for Finance the cost to the Exchequer of taking all those earning the minimum wage of €17,542 out of the universal social charge net. [20074/13]

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Written answers

The current minimum wage is €8.65 per hour. On an annualised basis, this is equivalent to €17,542 assuming a 39 hour working week. I am advised by the Revenue Commissioners that the estimated full year cost to the Exchequer, estimated by reference to 2013 incomes, of increasing the existing Universal Social Charge exemption threshold of €10,036 per annum to €17,542 per annum would be of the order of €131 million. This figure is an estimate from the Revenue tax-forecasting model using actual data for the year 2010 adjusted as necessary for income and employment trends in the interim. It is, therefore, provisional and may be revised.

Question No. 193 answered with Question No. 149.

Property Taxation Administration

Questions (194)

Michael McGrath

Question:

194. Deputy Michael McGrath asked the Minister for Finance if he will ensure that every person who pays the local property tax by whatever means is issued with a receipt as proof of payment. [20150/13]

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Written answers

I am advised by the Revenue Commissioners that since July 2011 paper receipts no longer issue in respect of tax payments. This decision was taken on the basis that the vast majority of taxpayers conduct business with Revenue via its online service. The online service facilitates direct access to payment information and therefore customers have no need for a paper receipt. The change has resulted in significant cost savings in terms of postage, stationery and staff resources. This arrangement now applies to Local Property Tax (LPT) and customers who file online receive an online acknowledgement and have ongoing access to their return and payment details. Customers who file and pay using the paper LPT return will not receive a paper receipt. They will of course have evidence of LPT payments through their own financial institution records. However, in circumstances where a payment fails for whatever reason, then Revenue will make direct contact with the customer. I am also advised that, where customers opt to pay LPT using one of the Revenue appointed third party payment service providers, receipts will issue for each payment made. The appointed payment service providers are An Post Taxpay, Payzone and Omnivend.

Tax Reliefs Availability

Questions (195)

Michael McGrath

Question:

195. Deputy Michael McGrath asked the Minister for Finance his views on whether the current rules regarding capital gains tax retirement relief on the transfer of certain business assets are fair and equitable in view of the fact that, for example, they impose a tax charge of €125,000 on an 85 year old who has been in business for 50 years, but zero tax on a 55 year old selling a similarly valued business after just ten years; if he is satisfied that the law introduced last year to promote early business transfers has failed to achieve its intended purpose and is in fact serving to act as an impediment to such transfers; and if he will make a statement on the matter. [20155/13]

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Written answers

There are two provisions that provide relief in respect of capital gains tax to individuals who dispose of their business or farming assets on attaining certain ages, whether they retire or not. These are Section 598 of the Taxes Consolidation Act 1997 (which in the main is aimed at individuals who dispose of their business or farming assets outside of the family) and Section 599 of the Taxes Consolidation Act 1997 (which is aimed at individuals who transfer their business or farming assets to their children).

Both reliefs are aimed at smaller businesses and have been a feature of the capital gains tax system since its enactment in 1975. In the Finance Act of 2012 the terms of the relief were modified as follows:

Under Section 598, full relief from capital gains tax is granted to an individual aged 55 or over but less than 66 years who disposes of a business or farm where the consideration does not exceed €750,000. Where the consideration exceeds €750,000, any capital gains tax that may be payable is limited so that it cannot exceed 50% of the difference between the amount of the consideration and €750,000.

With effect from 1 January 2014, where an individual aged 66 or over disposes of a business or farm, the threshold by reference to which relief is granted is reduced to €500,000, again with a limit on any capital gains tax payable, where the consideration exceeds €500,000, so that it cannot exceed 50% of the difference between the amount of the consideration and €500,000.

As an interim measure, to facilitate any individual who wants to avail of the relief before the age and threshold changes take effect, an individual aged 66 or over who disposes of a business or farm in the year to 31 December 2013 will qualify for full relief by reference to the €750,000 limit.

Under Section 599, which provides for relief for an individual who passes on his business or farm to his or her child, the relief operates on a similar basis to Section 598, except that the consideration limit is €3 million (introduced in Finance Act 2012) and there is no marginal relief. Therefore, any farmer aged 55 or over who passes on a farm to a child of his or hers which has a value of up to €3 million will be entitled to full relief from capital gains tax.

As I mentioned in my Budget Speech of 2012, the intention of modifying the retirement relief from Capital Gains Tax is to better incentivise the timely transfers of farms and businesses before the current owners reach the age of 66. This approach is in keeping with the policy of the Minister for Agriculture, Food and the Marine of encouraging timely transfer of farm assets and improving the age profile of farming. Both the Commission on Taxation and the Department of Agriculture, Food and the Marine made recommendations regarding the capping of the Section 599 relief at €3 million and these recommendations were considered in the context of the amendments made to the reliefs. The intention of the more favourable reliefs for individuals who dispose of their businesses or farms between the ages of 55 and 66, relative to those who do so from 66 onwards is to encourage the passing on of those businesses or farms to a younger generation, thereby encouraging entrepreneurship and the increased productive use of business assets and farms.

In your question you state that an 85 year old person could incur a capital gains tax liability of €125,000. Based on the current rate of capital gains tax, this would mean that the person would have made a chargeable gain of in the region of €380,000 and where the business or farm was sold, would have realised a significant consideration on the disposal. In such circumstances, a contribution in the form of capital gains tax is considered appropriate. In the case of a farmer transferring his or her farm to a child, the threshold of €3 million is considered to be sufficiently high to ensure that in all but the exceptionally large farms this threshold will ensure that no capital gains tax charge will arise. If a capital gains tax charge should arise on the exceptionally large farms, it is considered appropriate that capital gains tax should be paid on any gain arising. The changes to these reliefs will apply to disposals arising on or after 1 January 2014. Accordingly, it is too soon to comment definitively on their impact at this stage. However, the reliefs will be kept under review.

Property Taxation Administration

Questions (196)

Brendan Griffin

Question:

196. Deputy Brendan Griffin asked the Minister for Finance if he will clarify the position on local property tax liability for adjoining living quarters of rate paying businesses that have no saleable value; and if he will make a statement on the matter. [20161/13]

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Written answers

Based on the information supplied by the Deputy it is not possible to give a definitive reply, however, by way of general information, the following may be of relevance in this case. Local Property Tax (LPT) is a self-assessed tax and is chargeable in respect of a building or a part of a building that is in use or that is suitable for use as a residence. However, it is not chargeable on the part of a building in respect of which commercial rates are payable. If the adjoining living quarters are not included for the purpose of commercial rates, the amount of LPT will be based on the “chargeable value” of the living quarters.

According to the Finance (Local Property Tax) Act 2012 (as amended) the chargeable value of a residential property is defined as the price that the unencumbered fee simple of the property or the residential part of a property, might be expected to fetch on a sale on the open market were the property to be sold on the valuation date in a particular year in a manner that would secure the best possible price for the property and with the benefit of any access to the property that would have existed prior to the sale. This type of hypothetical open market valuation applies to all types of residential property including residential property that is adjoined to or is contained within commercial property, where commercial rates are not payable on the residential element of the property. The open market value is based on a hypothetical sale; therefore it is not relevant that there may be difficulties in selling a property or that there may be a limited market for a particular type of property.

The owner of the business will be required to establish the chargeable value of the adjoining living quarters on 1 May 2013. If the chargeable value is less than €1m, the LPT liability will depend on the chargeable band into which this chargeable value falls. The rate of LPT on properties valued up to €1 million is 0.18%. As there is a banding system for properties the owner will not be required to provide a precise value for the adjoining living quarters if they are valued under €1 million. Properties valued over €1m are liable at 0.18% on the first €1 million in value and 0.25% on any balance over that amount.

Mortgage Arrears Resolution Process

Questions (198)

Michael McCarthy

Question:

198. Deputy Michael McCarthy asked the Minister for Finance the total number of appeals that were submitted by mortgage-holders engaged in a MARP to appeals boards in each of the State's financial institutions within the past 12 months; the total number of those appeals which were not upheld by the appeals board; and if he will make a statement on the matter. [20273/13]

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Written answers

I, as Minister for Finance, have no statutory role in relation to the issues raised by the Deputy. I have been advised by the Central Bank that there are no statistics available from the Central Bank regarding the number of appeals submitted to the Appeals Board by mortgage holders who are engaged in the Mortgage Arrears Resolution Process.

Banking Sector Issues

Questions (199)

Michael McCarthy

Question:

199. Deputy Michael McCarthy asked the Minister for Finance if he will provide a breakdown in tabular form of the number of appeals received by each appeal board in the State's financial institutions within the past 12 months, specifically including the total number of appeals submitted per bank; the total number of appeals upheld per bank; the total number of appeals turned down per bank; and if he will make a statement on the matter. [20274/13]

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Written answers

I have been informed by the covered banks that they do not disclose the information which the Deputy has requested. However the covered banks do provide a significant level of disclosure on their mortgage portfolios in their annual reports.

Mortgage Repayments Issues

Questions (200)

Michael McCarthy

Question:

200. Deputy Michael McCarthy asked the Minister for Finance the number of split mortgages that have been officially sanctioned and approved by AIB, Bank of Ireland, Permanent TSB, Ulster Bank, KBC Bank, and ACC separately since 1 January 2013; and if he will make a statement on the matter. [20281/13]

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Written answers

A number of longer term forbearance /modification arrangements have been introduced by mortgage lenders. These arrangements include mortgage to rent, trade down mortgages, split mortgages, equity participation, interest rate reduction and sale by agreement. The majority of lenders have introduced, or are in the process of introducing, a split mortgage arrangement. The most recently published Central Bank mortgage arrears and repossession statistics, which are for the quarter ending December 2012, are attached and indicates that 52 PDH split mortgage arrangements applied at that point. However, the Central Bank is not in a position, due to reasons of confidentiality, to provide such data in respect of individual institutions. http://www.centralbank.ie/press-area/press-releases/Pages/ResidentialMortgageArrearsandRepossessionsStatisticsQ42012.aspx.

Central Bank of Ireland Issues

Questions (201)

Pearse Doherty

Question:

201. Deputy Pearse Doherty asked the Minister for Finance the constraints that apply to employees of the Central Bank of Ireland in the context of resigning and moving to a private sector organisation where confidential or privileged information acquired at the Central Bank of Ireland may be deployed to the benefit of that private sector organisation. [20285/13]

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Written answers

I am informed by the Central Bank that it has relevant policies and procedures in place to deal with this potential matter and that its current policies and procedures are appropriate. Specifically, this potential issue is taken into account when drafting new contracts for certain roles or reassigning staff to other duties if a potential for conflict arises.

The Central Bank Code of Ethics requires that in the event of an employee intending to leave the employment of the Central Bank to take up alternative employment, self-employment or business, they are obliged to provide early notification to line management when a conflict of interest exists, or might be perceived to exist, between those duties held in the Central Bank and those to be undertaken with the new employer, self-employment or business. In such circumstances, the Central Bank may assign alternative tasks to the individual while their notice period is being served. The notice period may be lengthened in excess of the contractual or statutory notice period, by mutual agreement, where it is felt that this is in the best interests of the Central Bank and the employee.

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