Seán Fleming
Question:50. Deputy Sean Fleming asked the Minister for Finance the efforts being made to secure a revision of Ireland’s credit rating with bond rating agencies; and if he will make a statement on the matter. [41456/13]
View answerCredit Ratings
Questions (50)
Written answers
The National Treasury Management Agency (NTMA) has responsibility for maintaining a relationship with each of the rating agencies, in connection with Ireland's sovereign credit rating. I am informed by the NTMA that each rating agency visits Ireland at least once a year as part of their formal rating review processes. Meetings are scheduled with all relevant authorities during these visits, including the Department of Finance, NTMA, Central Bank and other public and private sector bodies. The NTMA also makes a detailed presentation to the agencies during its overseas investor visits whenever possible and updates them on a monthly basis (through email and conference calls) on developments in the public finances and the broader economy. Outside these structures, any important information that may influence the credit rating is communicated directly to the agencies by the NTMA. Complementing the NTMA’s activities vis-à-vis the credit rating agencies, myself and officials of my Department avail of any opportunities that present themselves to put Ireland's case to the agencies.
The authorities aim to be as transparent as possible with the agencies in order to ensure that all relevant information is provided to them and that Ireland's positive steps towards improving its creditworthiness are highlighted. As the Deputy may be aware, Ireland's rating has not been downgraded since mid-2011 and over the last 12 months Ireland has been lifted to positive outlook (from stable) by Standard and Poor's and to stable outlook (from negative) by Moody’s, Fitch and R&I. For information, detailed below is a list of Ireland’s current credit rating assigned by all major rating agencies:
Fitch: BBB+, stable outlook
Standard and Poor's: BBB+, positive outlook
Moody's: Ba1, stable outlook
DBRS: A (low), negative trend
R&I: BBB+, stable outlook.
Question No. 51 answered with Question No. 16.
Credit Availability
Questions (52)
Bernard Durkan
Question:52. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he has become aware of the difficulties faced by small to medium sized enterprises that have been affected by the downturn in the economy and have a negative credit rating registered against them by the Irish Credit Bureau even where they have discharged their debts; that this negative rating affects them for a five year period thereby restricting their access to borrowing facilities which in turn makes it impossible for them to continue in business; the action he will take to address these issues; and if he will make a statement on the matter. [41332/13]
View answerWritten answers
The Government recognises that SMEs are the lifeblood of the economy and will play a vital role in the recovery of employment growth in our country. It also recognises that businesses with legacy debts may be viable. One of the key priorities of the Programme for Government is to ensure that an adequate pool of credit is available to fund SMEs in the real economy during the restructuring and downsizing programme. The Irish Credit Bureau is a private entity and I have no direct function in the day-to-day operational decisions. In relation to the credit ratings provided to SMEs my department recognised the need to reorganise the government reporting system and established an inter-agency working group at the end of 2010 to develop a strategy to put in place an effective credit reporting system in Ireland. The working group's report formed the basis of the Credit Reporting Bill 2012.
The Deputy will be aware that the Credit Reporting Bill, 2012 is currently passing through the Houses of the Oireachtas which provides for the creation of an effective statutory based credit reporting system. The Bill includes the following provisions:
- The database will be owned by the Central Bank and the Bank will be responsible for the operation of the Central Credit Register.
- There will be mandatory reporting of a comprehensive range of credit information by credit providers.
- The Bill provides for controls with regard to access to information on the Register. By including provisions relating to access to data and security measures as well as provisions to help to deal with identity theft, this legislation should inspire confidence in businesses and in the consumer.
- The legislation proposes to extend the role of the Data Protection Commissioner to deal with complaints from micro enterprises and SMEs (with a turnover of less than €3m) in respect of their data held on the Credit Register. This initiative may provide some comfort to enterprises where they have a concern in relation to the potential storing of inaccurate data and where they do not have the resources to take legal action through the Courts to seek to have the data corrected. Inaccurate data on the Central Credit Register could result in the refusal of credit to a small company.
- In line with International practice, it provides for a retention period of 5 years in relation to credit information with respect to debts from the day on which it is entered on the Register. The Bill provides for the retention of information for a period of 6 months in relation to credit applications from the day it is entered on the Register. Anonymised information may be retained indefinitely.
In addition, the Government is fully engaged in supporting the SME sector and has imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion in 2012 and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks achieved the targets for 2011 and 2012. I have met the Boards of each of the banks in which the State has a shareholding three times since the start of this year. At these meetings, I have emphasised the importance of access to credit for SMEs and the need for an adequate flow of finance to be available to viable small businesses in Ireland.
In June 2013 the Central Bank set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers onto longer-term solutions. The targets set reflect the banks' capacity, processes and systems. I should stress that the Credit Review process remains available to any SMEs whose credit has been reduced or withdrawn by AIB or Bank of Ireland as well as when credit is refused by them. I would strongly advise any SME whose credit is reduced or withdrawn to avail of the services of the Credit Review Office.
Question No. 53 answered with Question No. 15.
Bank Debt Restructuring
Questions (54)
Peter Mathews
Question:54. Deputy Peter Mathews asked the Minister for Finance the reason bank debt negotiated restructuring or bank debt negotiated write off was never sought or requested by the Government from the ECB, the euro system authorities and the EU; and if he will make a statement on the matter. [41486/13]
View answerWritten answers
As the Deputy is aware the Government is committed to delivering a return to a successful vibrant economy. In this context it was decided that there would be no private sector involvement for senior bank paper or Irish Sovereign debt without the agreement of our external partners. The Deputy will be aware that there were discussions with our external partners on the issue of payment to bondholders. I have advised the House on a number of occasions that our European partners expressed strong reservations about burden sharing with senior bondholders and the rationale for this position. This commitment was agreed with our external partners and was the basis on which Ireland's financing strategy was built.
This strategy is working well as evidenced by the reduction in pricing of Irish Sovereign debt in the secondary markets and the significant steps being taken towards regaining full market access by the NTMA. It should also be noted that significant burden-sharing has been achieved through Liability Management Exercise (LME) transactions completed by the covered banks. The purpose of the LMEs was to create additional core tier 1 capital and to strengthen the quality of the capital base of the Banks. Since this Government came to into power, we reduced the cash required from the State by €5.8bn, from burden-sharing with subordinated bondholders. The contribution from burden-sharing with subordinated bondholders amounts to approximately €15bn since the banking crisis began.
VAT Payments
Questions (55)
Clare Daly
Question:55. Deputy Clare Daly asked the Minister for Finance the reason a taxi company (details supplied) was levied with a bill for almost €500,000 for VAT on radios supplied to taxi drivers, despite the fact that no such payments have been sought from other taxi companies. [41300/13]
View answerWritten answers
I am informed by the Revenue Commissioners that a Revenue audit was conducted on the firm in question. The audit identified a number of liabilities, including interest and penalties. These additional liabilities were accepted and agreed, in writing, by the proprietors. The principal component of the additional liabilities arose from the non-operation of VAT on the supplies of goods and services made by the firm. The particular goods and services as supplied by the firm in question are subject to VAT, and this applies to any operator that provides the same goods and service in the industry in question.
Tax Code
Questions (56)
Gerry Adams
Question:56. Deputy Gerry Adams asked the Minister for Finance the communications and correspondence his Department has had with the European Commission in the past six months regarding state aid and tax paid by multinationals. [41513/13]
View answerWritten answers
The 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. In the past few months, 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.
Question No. 57 answered with Question No. 42.
Economic Growth Rate
Questions (58)
Bernard Durkan
Question:58. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects the economy to grow in the coming year, having regard to the need to maintain the highest possible level of economic activity throughout the economy within the objective of best economic practice, meeting the targets laid down by the troika and encouraging a level of economic growth commensurate with the future requirements of the economy in the aftermath of Ireland’s exit from the bailout programme; and if he will make a statement on the matter. [41331/13]
View answerWritten answers
As Ireland's EU-IMF Programme of Financial Support comes to an end this year the Government’s focus is now firmly fixed on achieving a successful and durable exit from our programme, and a full and sustainable return to the financial markets, and we are doing all we can to this end. Macroeconomic developments thus far are supportive of the projected reduction in debt and deficit in the post-programme environment. Quarterly National Accounts data for the second quarter show that real GDP increased by 0.4 per cent in the quarter. Encouragingly high frequency data suggest a continuation of the positive momentum into the third quarter. Of particular note were the tentative signs of a modest recovery in domestic demand. Personal consumption increased by 0.7 per cent in the second quarter and strong retail sales in recent months are indicative of further growth in the third quarter. We have also seen a return to growth in 'core' (excluding planes) investment, with both construction and machinery and equipment now growing.
Labour market conditions have also improved markedly over the last year, with employment having increased in each of the last four quarters. Employment was up by 1.8 per cent in year-on-year terms in the second quarter, representing an additional 33,800 jobs over the year. The improvement in labour market conditions has also been reflected in the unemployment rate, with a standardised unemployment rate falling to 13.3 per cent in September, having peaked at 15.1 per cent in February 2012.
These indicators point to a modest recovery in the Irish economy. My Department will be publishing updated forecasts for 2013 and 2014 along with the Budget on October 15th which will take account of developments in the interim and which must be independently endorsed by the Irish Fiscal Advisory Council, in line with the European regulation on common provisions for monitoring and assessing draft budgetary plans. Also of note are the forecasts published by the Central Bank yesterday, pointing to moderate growth this year, as weaker export growth drags on the headline figure, with the rate of expansion set to pick up in 2014.
On the fiscal side, we continue to meet and exceed our budget deficit targets. It should however be noted that part of our current deficit is structural; in other words, economic recovery alone will not be sufficient to correct the deficit. However, we have made significant progress in reducing the structural deficit in recent years and most of this correction has already been done.
Ireland's considerable efforts in restoring our public finances to a sound footing has not only been reflected in the deficit figures but has also had significant confidence effects. Ireland’s 10 year bond yield has fallen by over 10 percentage points since peaking in July 2011, facilitating Ireland’s return to the market for long-term financing earlier this year.