Insurance Industry Regulation

Questions (85)

Arthur Spring

Question:

85. Deputy Arthur Spring asked the Minister for Finance in view of the financial implications for Irish citizens of the collapse of PMPA in 1983 and of Quinn Insurance, the measures he has put in place to ensure the Irish consumer will be protected in future with proper and appropriate regulation in the insurance industry. [45177/13]

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Written answers (Question to Finance)

At the outset it should be noted that governance procedures within firms are of vital importance in managing insurance companies and protecting the Irish consumer. In this regard, the Acquisitions Directive (transposed into Irish law in June 2009); the Central Bank's Corporate Governance Code and the recently introduced Fitness and Probity regime act as important safeguards in that matter. To improve regulatory supervision and protect the Irish consumer, the Central Bank has, along with increased staffing levels, introduced a risk-based supervision framework, PRISM (Probability Risk and Impact SysteM). The framework establishes a new approach for supervisory engagement with regulated firms. The first phase covering banks and insurers was rolled out in late 2011. The system categorises all regulated firms into four separate impact categories, which are based on the level of damage a firm could cause to the financial system, economy and consumers were it to fail. Firms are categorised as high impact, medium-high impact, medium-low impact or low impact, which determines the number of supervisors assigned and level of interaction with each firm.

As part of the framework the Central Bank of Ireland engages with firms at a level that corresponds to their impact category; the higher the impact, the higher the level of engagement. Engagement involves reviews, inspections and meetings, and the frequency and level of engagement is associated with the firms' impact rating. Additionally, the Central Bank (Supervision and Enforcement) Act 2013, enacted on the 11th July, 2013, enhances the power of the Central Bank to regulate, supervise and take action against financial service providers. Some of the enhanced powers include: whistle blower protection and powers of inspection, investigation and information gathering for Central Bank authorised officers. Taken together this overall framework should ensure that the Irish consumer will be protected as far as possible.

Furthermore, the Deputy should note that at EU level a directive known as Solvency I places requirements on the amount of regulatory capital insurance companies must hold against unforeseen events. Following years of negotiations, on 1 January 2016 Solvency II will commence. The Solvency II EU Directive will set out new, stronger EU-wide requirements on capital adequacy and risk management for insurers with the key aim of increasing policyholder protection. This modern, risk-based system for the regulation and supervision of European insurance and reinsurance undertakings is necessary in order to ensure a safe and solid insurance sector that can provide sustainable insurance products and support the real economy through long-term investments and additional stability.

Negotiations on this directive are nearing the end in Brussels and preparations are already underway for this in Ireland.

Tax Residency Issues

Questions (86)

Arthur Spring

Question:

86. Deputy Arthur Spring asked the Minister for Finance if he will review the taxation regime as it applies to tax exiles where it is obvious that their primary residences and their main centres of operation are here and due to current legislation such persons avoid paying a fair share of income tax as is expected of all citizens. [45178/13]

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Written answers (Question to Finance)

The taxation of individuals in the State is broadly in line with that prevailing in most other OECD jurisdictions, that is to say —

(a) Individuals who are resident in the State for tax purposes (based on the number of days of presence in the State) are taxable here on their worldwide income; and

(b) Individuals who are not resident here for tax purposes pay tax here only on income arising in the State and on income derived from working here.

Residence status for tax purposes is determined by the number of days that an individual is present in Ireland in a tax year. An individual is tax resident in Ireland for a tax year if they are present in the State:

for 183 days or more in Ireland during a tax year or

for 280 days or more in Ireland between the current year and the previous year (although if an individual is present in the State for fewer than 30 days in either year, those days are not counted for the "280 day" test).

Individuals are treated as being present in the State on a day for tax residence purposes if they are present in the State at any time during that day.

The Programme for Government contains a specific commitment to ensure that "tax exiles" make a fair contribution to the Exchequer. A public consultation on tax residence rules was undertaken last year, to prepare for possible further changes in the area. In general, the submissions received considered the present residence rules are clear and workable, and the clarity, certainly and stability of our domestic tax regime enables us to compete effectively in the international economic context.

An Irish domiciled individual claiming to be non-resident for tax purposes and who is living abroad primarily for tax reasons may be subject to the Domicile Levy which is charged on an individual:

- who in any year is Irish domiciled,

- whose worldwide income in the year exceeds €1m,

- whose Irish located property in the year is greater than €5m, and

- whose liability to Irish income tax for the year is less than €200,000.

The amount of the levy is €200,000. Any Irish income tax paid is available as a credit against an individual's liability to the levy.

In Budget 2012 I abolished the "citizenship" condition for payment of the Domicile Levy to ensure that it cannot be avoided by renouncing citizenship. The first year for which the changes applied was the tax year 2012; the levy payment for that year is due by 31 October 2013. Measures in recent budgets to increase the tax take from high earners will also have an impact on so called "tax exiles".

Home Renovation Incentive

Questions (87)

Pearse Doherty

Question:

87. Deputy Pearse Doherty asked the Minister for Finance the target number of jobs and levels of investment generated by the home renovation incentive for each year up to and including 2016. [45290/13]

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Written answers (Question to Finance)

As the Deputy is aware, I announced the Home Renovation Incentive in the recent Budget. This scheme will run from 1 January 2014 to 31 December 2015 and provides for tax relief for homeowners by way of a tax credit at 13.5% of qualifying expenditure incurred on repair, renovation or improvement work carried out on a principal private residence. Qualifying expenditure is expenditure subject to the 13.5% VAT rate. The work must cost a minimum of €5,000 (exclusive of VAT) which would attract a credit of €675. Where the cost of the work exceeds €30,000 (exclusive of VAT) a maximum credit of €4,050 will apply. The credit is payable over the two years following the year in which the work is carried out. The work must commence on or after 1 January 2014 and be carried out during 2014 or 2015.

Homeowners must be Local Property Tax compliant in order to qualify under the Incentive, while building contractors must be tax compliant in order to carry out works. The scheme will be administered through Revenue's online systems. Contractors will be required to inform Revenue in advance of details of works to be carried and will also be required to notify Revenue in relation to any payments received in respect of the works. Homeowners will be able to view the information provided to Revenue by the contractor through the Revenue electronic systems and will also claim the relief through those systems.

It is not possible to say how many jobs will be created as a result of this incentive, as numbers will depend on the level of take-up. It is estimated that this incentive will cost approximately €62 million in a full year. This cost equates to an overall spend in the construction sector of approximately €459.3 million.

Departmental Meetings

Questions (88)

Pearse Doherty

Question:

88. Deputy Pearse Doherty asked the Minister for Finance the number of meetings that he, his advisers or senior members of the Department have had with representatives of a company (details supplied). [45291/13]

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Written answers (Question to Finance)

Since the formation of this Government, there have been no meetings between me or my advisors and the company referred to in the question. The Secretary General of my Department met with the Irish Managing Director of the company referred to on February 27th 2012 to discuss the broad technology sector and how best to use IT in running an organisation. As a result of that discussion, it was arranged that the Regional Sales Director for North Europe would have a follow-up meeting with the Secretary General on May 22nd 2012.

As part of the preparation for Budget 2014, which included the publication of the Ireland's International Tax Strategy, the Department of Finance consulted with a large number of the main multinational employers in Ireland to discuss international tax issues, in a process that was facilitated by the IDA. This included the company referred to in the question. In addition, as per the reply to PQ 25551 and PQ 25297 earlier this year, officials from the Department also had a phone conversation with the company in May 2013.

Tax Residency Issues

Questions (89)

Pearse Doherty

Question:

89. Deputy Pearse Doherty asked the Minister for Finance the number of Irish registered non-resident companies that have not declared any state of residence; the number resident in a recognised tax haven; the number that have been fined for failing to provide a country of residence; and the total number of Irish registered non-resident companies of which the Revenue Commissioners are aware. [45292/13]

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Written answers (Question to Finance)

I am advised by the Revenue Commissioners that there is no requirement in Irish tax law for a company to claim or obtain authorisation of non-resident status from Revenue and that statistics on the number of Irish registered non-resident companies are not separately compiled. Accordingly, it is not possible to identify from Revenue records the number of Irish registered non-resident companies, how many of such companies have not declared any state of residence or how many companies are resident in a tax haven. A company that fails to deliver a statement of particulars under section 882 is liable to a penalty of €4,000, with provision for a further penalty of €60 for each day on which the failure continues after a court judgement has been obtained.

However, there is no specific fine applicable where a non-resident company fails, or is unable, to provide a country of residence in the statement of particulars to be provided under section 882 of the Taxes Consolidation Act 1997. The primary purpose of this provision is to ensure that newly incorporated companies coming within the charge to Irish corporation tax are registered with Revenue for tax purposes.

Non-resident companies that are liable to Irish corporation tax because they are carrying on a trade in the State through a branch or agency are not required to provide a country of residence in their annual corporation tax return.

Small and Medium Enterprises Supports

Questions (90)

Pearse Doherty

Question:

90. Deputy Pearse Doherty asked the Minister for Finance if he will provide details of the trade finance initiative currently being discussed with the European Investment Bank. [45293/13]

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Written answers (Question to Finance)

As was highlighted in the Action Plan for Jobs 2013, accessing working capital to avail of increased export opportunities through the provision of a broader suite of financial products is an issue for growing Irish enterprises. For this reason one of the SME State Bodies Group's policy commitments under this plan was to review the availability of appropriate finance for international trade. In July the Board of Directors of the European Investment Bank, (EIB) approved a proposal to develop trade facilitation initiatives across Europe premised on the phased roll out of trade finance activities for SMEs and mid-caps. The EIB are beginning with countries such as Greece, Portugal and Ireland where funds may not be available from other sources on reasonable terms. The EIB have already helped Greece in this area and are now turning their focus to Ireland.

The EIB can lend money to Irish SMEs and exporters, usually through an intermediary such as a bank, at a lower cost than is currently accessible without their help. These favourable lending conditions provide an essential support to offset price differences in credit across European countries. This is particularly important for our exporting companies who have to compete with other companies who have access to cheaper credit and lower operating costs.

Since the Budget day announcement, my officials along with officials in the Department of Jobs, Enterprise and Innovation and with Enterprise Ireland have already met with the EIB on this subject. Working papers on the proposal have also been exchanged and the EIB are examining the feasibility of its support for such an initiative in an Irish context. The engagement with the EIB builds on the strong relationship that my Department has sought to build with the bank in seeking to identify and develop sustainable mechanisms to facilitate the provision of financing to SMEs.

The overall goal of this work is to address the specific challenges of funding international trade through a broader suite of financial products and leverage EIB funding to provide much needed finance to exporters and ensure that they have sufficient working capital to grow their exports. This will ultimately restore confidence, support trade and foster growth and employment. Working with the EIB to develop a tailored and customised trade finance initiative would support the growth of the SME sector in Ireland.

I can assure the Deputy that this is being given the highest priority by the relevant officials and I can update the House as progress is being made at each step in the process.

Small and Medium Enterprises Supports

Questions (91)

Pearse Doherty

Question:

91. Deputy Pearse Doherty asked the Minister for Finance if he will provide details of the budget for the subsidised financial training programme for small business as announced in budget 2014; and the target number of small and medium enterprises to take up the programme. [45294/13]

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Written answers (Question to Finance)

I am acutely aware of the importance of ensuring an adequate flow of credit to SMEs, both for working capital and investment purposes. One of the commitments contained in the Action Plan for Jobs 2013 was for the SME State Bodies Group to "examine the practical steps that can be taken in the short and medium term by the State to improve the financial literacy of our micro and small enterprises". To this end, in Budget 2014 I announced a new initiative aimed at enhancing the skill sets of SMEs to improve their financial capabilities. In conjunction with Skillnets' ManagementWorks programme, a subsidised financial training programme for SMEs is under development which will assist them in putting together robust credit applications to lenders. The programme, consisting of 2 days dedicated off-site training together with expert mentoring support, will launch on a pilot basis early next year. The costs of delivery for training, mentoring and facilities are all subject to the outcome of a public procurement process and therefore subject to some variation. However, the estimated cost of introducing the scheme in 2014 is in the order of €750,000. It is anticipated that Government support for the initiative will reduce the cost to participating SMEs considerably.

This programme will add to the existing frameworks of credit support available to SMEs, thereby ensuring that viable businesses are better equipped to access credit more freely as the economy continues to recover.