Written Answers Nos. 1 - 13
10. Deputy Robert Troy asked the Minister for Finance the current status of the European Commission examination of Ireland's and other EU countries' corporation tax arrangements; and if he will make a statement on the matter. [41447/13]
View answerThe Competition Directorate of the European Commission is currently conducting a review of corporate tax ruling procedures in various EU Member States in order to assess such practice under EU State Aid rules. What is involved at this stage is a preliminary gathering and examination of information on the part of the Commission for the purposes of getting an overview of the different tax ruling procedures in various Member States. I should add that this is not a formal EU State Aid investigation nor is it an enquiry that is specific to any one Member State.
Ireland is fully co-operating with the Commission in this exercise. The Commission has requested information on Revenue’s administrative practice in relation to the provision of advance opinions, as well as details of the type of opinions provided to companies. Revenue has provided the information sought by the Commission as required under EU law. Advance opinions are provided by Revenue to clarify the tax treatment of a proposed transaction or business activity under existing legislation so that companies can file a correct tax return and comply fully with their tax obligations. Revenue opinions are non-binding and seek to provide a considered and consistent interpretation of the applicable tax rules as set down in the legislation.
11. Deputy Michael Colreavy asked the Minister for Finance his plans to ensure all companies incorporated in Ireland but not tax resident anywhere pay corporation tax here. [41514/13]
View answerAll companies that are tax resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%. Companies that are not tax resident in Ireland and which do not carry on a trade in Ireland have no liability to Irish corporation tax and have no obligation to file an Irish corporation tax return. However, a company that is not tax resident in Ireland will be liable to Irish corporation tax tax, if they carry on a trade through a branch or agency in Ireland, in respect of the profits arising to the branch or agency.
Specifically in relation to the Deputy’s question, I think it is important to be clear that an Irish incorporated company, that is not tax resident anywhere, is taxable in Ireland in respect of any profits that accrue to that company from activities or operations that take place in Ireland under the existing rules that I have just described. The ability of a company to be tax resident nowhere appears to be the result of mismatches between the domestic rules of different countries with regard to determining the place of tax residence of a company. Some countries, such as Ireland, rely primarily on the use of a management and control test to determine whether or not a company is tax resident in Ireland. Some other countries rely primarily on an incorporation test to determine place of tax residence.
Such mismatches can be exploited by companies to allow them to be tax resident nowhere. The most effective way to deal with such arrangements is for countries to work together to examine these structures and to consider how international rules can be amended to ensure fair levels of taxation. Ireland remains fully committed to this approach to ensure coherence in international taxation. In this regard, Ireland is participating in projects at EU and OECD level which aim to address international tax issues.
12. Deputy Joe Higgins asked the Minister for Finance the payments made to date to pay for the capitalisation of the banks and all other supports given to the banks. [41478/13]
View answerAs the Deputy will be aware, before this government entered office, taxpayers’ money amounting to €46.3bn was injected into the banks, in the form of capital support, most of which went into the former Anglo Irish Bank. Subsequent to the formation of the current government the banks were required to raise a total of €24bn as a result of the Central Bank’s 2011 Prudential Capital Assessment Review (PCAR). However, primarily as a result of successful private equity contributions, asset sales and burden sharing with bondholders, the Government only had to inject €16.5bn into the relevant institutions. In addition, the State acquired Irish Life for €1.3bn to complete the recapitalisation of Irish Life & Permanent, giving a total commitment of €17.8bn. In all the State’s Total Capital Investment in the Banks amounted to €64.1bn at its peak. This figure represents the gross capital or money committed to recapitalising these institutions and does not take account of revenues received directly or indirectly from the banks in return for State support, or indeed from disposals. The State has now started the process of exiting its bank investments and to date, successful disposals by the State of its bank investments include:
- The entire €1 billion holding of Contingent Capital Notes (CCN’s) in Bank of Ireland. The State disposed of its holding in the bonds at a price of 101% of their par value plus accrued interest. The transaction settled on Tuesday the 15th of January and the State was paid proceeds of €1,056 million comprising principal of €1,000 million, interest accrued of over €46 million and a profit of €10 million.
- The sale of Irish Life earlier this year for a consideration of €1.3 billion which was approximately a 30% premium to the price that was achievable when the previous bid process was suspended in November 2011. The consideration received resulted in the State recouping the full investment made by the taxpayer in Irish Life. In addition a €40 million dividend was paid to the State on completion.
Of course the State still has a sizable portfolio of banking investments which it has yet to monetise. The National Pension Reserve Fund’s (NPRF) directed portfolio in Allied Irish Bank and Bank of Ireland was valued at €8.8bn at 30 June 2013. The State also holds contingent capital investments of €2bn in AIB and PTSB and an equity position in PTSB. The NPRF to date has also received a total of €2.2 billion in cash from its Bank of Ireland investments – comprising preference share dividends, the repurchase of warrants by the Bank and the sale of ordinary shares to a consortium of private investors.
Finally, in addition to the cost of capitalisation, the State has supported the banks’ deposit and funding activities as follows:
- The Credit Institutions Financial Support Scheme (CIFS) which operated from 30 September 2008 to 29 September 2010; and,
- The Eligible Liabilities Guarantee Scheme (ELG) which operated until March 2013.
The CIFS and ELG schemes provided guarantees from the State in return for the payment of a percentage fee of the covered liabilities. A total of €4,106.6 million has been received into the Exchequer to date in fees and interest accrued from the covered banks in payment for these schemes. This is made up of €763.7 million in respect of the CIFS scheme and €3,342.9 million in respect of the Eligible Liabilities Guarantee Scheme (ELG). These amounts are expected to be offset by claims under the Eligible Liabilities Guarantee (“ELG”) scheme in relation to the liquidation of IBRC which could cost the State circa €1bn in 2013 based on best estimates. (These costs would have been incurred by IBRC at some point regardless of the transaction.)
It is the Government’s stated intention to break the link between the Sovereign and the Banks which is a desire shared by our European partners. Should an opportunity arise to sell any further investments, this will be considered having assessed the best interests of the State.
13. Deputy Michael Moynihan asked the Minister for Finance if he will address the concerns of former Irish Nationwide Building Society customers, who have been advised that their mortgage is being sold, that they may be adversely impacted by the sale; and if he will make a statement on the matter. [41467/13]
View answerI am advised that the contractual terms and conditions of customer mortgages and other borrowings have not changed as a result of the appointment of the Special Liquidators nor will they change as a result of the ultimate sale of these obligations to a third party. The Special Liquidators are still in the process taking professional advice on the appropriate method of disposing of loan assets and on the appropriate criteria for determining who should qualify to bid for loan assets. As part of this process the Special Liquidators have written to all IBRC borrowers to update them on the sale of their IBRC Loans and Collateral Obligations and providing them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets.
I am advised that the Special Liquidators of IBRC are maintaining contact with its mortgage holders and with the Central Bank (as part of its overall Mortgage Arrears Resolution Strategy (MARS) process) with a view to appropriately dealing with INBS mortgage holders in arrears on their mortgage. The Special Liquidators also confirm 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 Central Bank’s Code of Conduct on Mortgage Arrears, which applies to all mortgage lending activities of all regulated entities, except Credit Unions, operating in the State, remains a key protection for those cooperating INBS/IBRC mortgage holders who are in difficulty in meeting their mortgage commitments. The Code provides, inter alia, that mortgage lenders should allow for a flexible approach in the handling of arrears and pre-arrears cases and that they should aim, as far as possible, at assisting the borrower who is in genuine difficulty having regard to the specific circumstances in individual cases.
The continued applicability of the Central Bank Code of Conduct on Mortgage Arrears and Mortgage Arrears Targets Programme will depend on the regulatory status of the ultimate acquirer of the portfolio which we will not know until the sales process has concluded. In the event that NAMA ultimately acquires this portfolio, the NAMA Board will determine its strategy at that stage. In doing so, NAMA will be mindful of its legal obligations and general market norms. The Special Liquidators are under instruction to ensure that the valuation of all IBRC assets is completed by 30 November 2013 and that the sale of all IBRC assets is agreed or completed by no later than 31 December 2013 or as soon as practicable thereafter.
