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Wednesday, 22 May 2013

Written Answers Nos. 82 - 87

Mortgage Debt

Questions (82)

Brendan Griffin

Question:

82. Deputy Brendan Griffin asked the Minister for Finance if he will investigate the practice of the banking sector refusing to engage with lenders that find themselves in further difficulties after restructuring their loans; if the process of restructuring is reducing the cost to the borrower and taking into account future potential income difficulties; and if he will make a statement on the matter. [24705/13]

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Written answers

The Central Bank’s statutory Code of Conduct on Mortgage Arrears (CCMA) sets out, inter alia, the 5 step Mortgage Arrears Resolution Process (MARP) that lenders must have in place for dealing with mortgage arrears cases. The 5 steps are as follows: Step 1: Communication with borrowers; Step 2: Financial information; Step 3: Assessment; Step 4: Resolution; and Step 5: Appeals.

A lender’s Arrears Support Unit (ASU) must base its assessment (step 3) of the borrower’s case on the full circumstances of the borrower including: a) the personal circumstances of the borrower; b) the overall indebtedness of the borrower; c) the information provided in the standard financial statement; d) the borrower’s current repayment capacity; and e) the borrower’s previous payment history.

Where an alternative repayment arrangement is offered by a lender (step 4), the lender must provide the borrower with a clear explanation, in writing, of the alternative repayment arrangement, including: a) the new mortgage repayment amount; b) the term of the arrangement; c) the implications arising from the arrangement for the existing mortgage including the impact on: (i) the mortgage term, (ii) the balance outstanding on the mortgage loan account, and (iii) the existing arrears on the account, if any; d) details of how interest will be applied to the mortgage loan account as a result of the arrangement; e) how the alternative repayment arrangement will be reported by the lender to the Irish Credit Bureau and the impact of this on the borrower’s credit rating; f) information regarding the borrower’s right to appeal the lender’s decision, including the procedure and timeframe for submitting an appeal, and g) the borrower must be advised to take appropriate independent legal and/or financial advice.

The Central Bank has informed me that the lender must monitor the arrangement that is put in place for a MARP case on an ongoing basis and formally review the appropriateness of that arrangement for the borrower at least every six months. As part of the review, the lender must check with the borrower whether there has been any change in his/her circumstances in the period since the arrangement was put in place, or since the last review was conducted. Where a borrower ceases to adhere to the terms of an alternative repayment arrangement, the lender’s ASU must formally review the borrower’s case, including the standard financial statement, immediately.

As set out in the Central Bank’s Mortgage Arrears Resolution Targets (MART) announced by the Central Bank in March 2013, when determining whether a proposal constitutes a sustainable solution, the lender needs to evaluate both the borrower’s actual and prospective affordability. Given this, it is affordability and sustainability that will help determine the most appropriate restructure type.

Banking Sector Regulation

Questions (83)

Andrew Doyle

Question:

83. Deputy Andrew Doyle asked the Minister for Finance if he has plans to consolidate the legislative basis for the Central Bank of Ireland and its operations; if officials from his Department have held discussions with the Central Bank in this regard; when he expects legislation to be brought forward; and if he will make a statement on the matter. [24731/13]

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Written answers

A range of reforms have been introduced to underpin a more effective and efficient financial regulatory regime including the Central Bank Reform Act 2010 which gave effect to significant structural changes in the operation of financial regulation. The Central Bank (Supervision and Enforcement) Bill, which is before the House at the moment, introduces further reform in strengthening the powers of the Central Bank to impose and supervise compliance with regulatory requirements. Further reforms to the legislative basis of the Central Bank will also be required in the transposition of a number of key EU financial services proposals which are under discussion at present. The consolidation of Central Bank legislative provisions is not an active project at present given the very extensive reform agenda still in progress. However, the Law Reform Commission has generated a restatement of the Central Bank Act, 1942 which sets out the current status of the Central Bank Act 1942 in its amended form.

Tax Reliefs Cost

Questions (84)

Michael McGrath

Question:

84. Deputy Michael McGrath asked the Minister for Finance the number of persons to date that have availed of the special assignee relief programme; the number of employers whose employees have availed of the programme; the amount of tax foregone as a result of the tax relief granted; the number of employees who have had education fees paid by their employer on a tax free basis under the programme; his views on the number of jobs that may have been created under the programme; and if he will make a statement on the matter. [24738/13]

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Written answers

Section 14 of Finance Act 2012 introduced the Special Assignee Relief Programme (SARP) which is designed to reduce the cost to employers of assigning key individuals in their companies from abroad to take up positions in the Irish based operations of their employer. Paragraph 10 of Section 14 provides that relevant employers must submit an annual return to the Revenue Commissioners detailing, inter alia, the number of employees and the amounts of exempt income claimed under the programme.

The first year of the programme was 2012 and employer returns received to date for 2012 have provided the following results:

Numbers of employees availing of the scheme: 6

Numbers of employers with employees availing: 5

Amount of tax forgone: €16,300 (tax free income of €39,767 by 41% for 2 individuals only)

Numbers of employees for whom education fees were paid: 1

Amount of education fees paid: €2,500

Number of jobs created: 26

Number of jobs retained: 2

Of the 6 individuals who qualified for the relief, 2 of them received an aggregate total tax-free remuneration of €39,767 and the amount of tax forgone is estimated assuming the top rate of income tax rate of 41%.

It is expected that the 4 individuals who are not reported in the employer returns as receiving tax-free remuneration are expected to claim it when they submit Form 11 tax returns for 2012 in late 2013.

It is possible that not all employers have submitted a SARP return yet. Also, the figures provided do not include the details for claims that are not included in employer returns received to date but will be made in the Form 11 tax returns for 2012 to be filed under the self-assessment system in October/November of 2013.

Tax Reliefs Cost

Questions (85)

Michael McGrath

Question:

85. Deputy Michael McGrath asked the Minister for Finance the number of persons who have to date availed of the foreign earnings deduction; if he will provide details of the countries in which persons availing of the deduction have worked; the number of employers whose employees have availed of the deduction; the amount of tax foregone as a result of the tax relief granted; if he intends to add any further countries to the list of qualifying countries; and if he will make a statement on the matter. [24739/13]

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Written answers

Section 12 of Finance Act 2012 provided for a limited tax deduction for individuals who temporarily carry out the duties of their office or employment in Brazil, Russia, India, China or South Africa. The provision applies as respects the years 2012, 2013 and 2014. I am informed by the Revenue Commissioners that the first year of the programme was 2012 and the relevant details of tax claims received to date from PAYE employees are as follows.

Numbers of employees availing of the scheme: 12

Relevant Countries: China, India, Russia and South Africa

Number of employers associated with employees availing of the scheme: 10

Amount of tax forgone: €61,000 (amount rounded to nearest €10)

It is possible that not all potential claimants have submitted their claims yet. Also, the figures provided do not include the details for claims that may yet be made in the Form 11 tax returns for 2012 to be filed under the self-assessment system in October/November of 2013.

The deduction was extended to include related travel to Egypt, Algeria, Senegal, Tanzania, Kenya, Nigeria, Ghana and the Democratic Republic of the Congo for the 2013 & 2014 tax years. Any further extension of the deduction for work related travel to other countries would be a matter for consideration as part of the Budget and Finance Bill process.

Mortgage Interest Relief Extension

Questions (86)

Seán Kyne

Question:

86. Deputy Seán Kyne asked the Minister for Finance if his attention has been drawn to the fact that the much-welcome benefits of the mortgage tax-relief at source for persons who first purchased homes between 2004 and 2008 as introduced in Budget 2012 are being negated by the continued existence of the stipulation which caps and reduces the tax relief at source after seven years and if he will strongly consider, owing to the difficult financial circumstances of mortgage-holder who purchased in the aforementioned years, extending the applicability of the full mortgage tax relief rate beyond seven years until 2017 when mortgage relief is schedule to end. [24752/13]

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Written answers

The position is that tax relief is available, at varying rates and subject to certain ceilings, in respect of interest paid by an individual on a loan used for the purchase, repair, development or improvement of his/her sole or main residence. The relief is available up to and including the tax year 2017 on the interest paid on qualifying home loans taken out in the period 2004 to 2012.

Where there is an entitlement to mortgage interest relief, it is available at varying rates and subject to certain ceilings. For example, individuals who are in the first seven tax years of their qualifying loan are entitled to a higher interest ceiling, known as the ‘first-time buyer’ ceiling, on which the rate of relief is applied. For such individuals, the interest ceilings are €10,000 per annum for a single individual and €20,000 per annum for married couples and civil partnerships. For individuals who have an entitlement to mortgage interest relief and who are in their eighth or subsequent years of their qualifying loan a lower interest ceiling applies, known as the ‘non-first-time buyer’ ceiling. For such individuals, the interest ceilings are €3,000 per annum for single and €6,000 per annum for married couples/civil partnerships. Therefore, some individuals will experience a reduction in the level of relief they receive as they enter into their eighth and subsequent years of their qualifying loans. However, they will continue to receive mortgage interest relief up until the end of 2017.

The system of mortgage interest relief is designed and targeted in such a way that the relief is of greater value in the early years of a qualifying loan where the interest represents a greater proportion of the repayment. Mortgage interest relief is of lesser value to individuals whose repayments are made up of a higher proportion of principal than interest, as would generally be the case for those who moved in to the eighth and subsequent years of their loans.

As the Deputy is aware the Programme for Government contained a very specific commitment to examine a proposal to increase mortgage interest relief to 30% for first time buyers who bought between 2004 and 2008. In Budget 2012, this commitment was fulfilled. It is not my intention to widen the parameters of the commitment contained in the Programme for Government. As you will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones, but I must be mindful of the public finances and the many demands on the Exchequer, given the significant budgetary constraints. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.

VAT Rate Application

Questions (87)

Seán Kyne

Question:

87. Deputy Seán Kyne asked the Minister for Finance if consideration will be given to the extension of the reduced VAT rate of 9%, which has had a significant positive effect on tourism industries, to coach passenger operators. [24753/13]

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Written answers

The transport of passengers and their accompanying baggage is exempt from VAT in Ireland under paragraph 14(3) of Schedule 1 to the VAT Consolidation Act 2010. In this respect, services provided by the coach passenger operators are exempt from VAT and as such there is no charge to VAT. This means that a person who provides a bus or coach service does not register for VAT and does not charge VAT on the supply of their services. This also includes the hiring of a bus or coach with a driver. Persons who are exempt from VAT cannot recover VAT incurred on goods and services incurred in relation to their business, such as fuel, tyres and mechanic charges, used for the purposes of the person’s coach and bus service. While persons who are VAT exempt cannot recover VAT incurred on goods and services incurred in relation to their business, I would point out that there is special provision within the VAT code to allow a refund of VAT incurred on the purchase of touring coaches. Under VAT Refund Order S.I. 266 of 2012 coach operators who are exempt from VAT may, subject to the conditions of the Order, be entitled to a refund of the VAT paid on touring coaches that are no more than 2 years old and are within specified dimensions.

Furthermore, while VAT exempt coach and bus operators are not entitled to claim the VAT incurred on their fuel costs, I would point out that Finance Act 2013 provides for relief from excise incurred on auto-diesel used in the course of business by qualifying bus and coach operators. The relief was originally intended to apply to licensed hauliers but, following consideration, it was decided to extend the relief to tax-compliant licensed passenger transport operators. The relief will operate on a sliding scale dependant on fuel prices generally but will not apply when the price of auto-diesel falls below €1.24 (including VAT). The maximum amount of the relief will be 7.5 cents per litre and will come into effect from 1 July 2013. It is estimated that the relief will cost in the region of €35 million gross in 2013 and €70 million gross in a full year.

With regard to introducing a charge to VAT at 9% on passenger transport services, I would point out that while it is possible under the EU VAT Directive to introduce such a charge, Ireland has traditionally exempted passenger transport services from VAT and this reduces the cost of those services for both the providers and the users of coach transport, including public transport. What must be remembered is that the cost of supplying goods and services that are exempt from VAT is always lower than if those goods and services were subject to VAT, despite the fact that VAT inputs cannot be claimed.

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