Written Answers Nos. 42-49
42. Deputy Finian McGrath asked the Minister for Finance if his attention has been drawn to the fact that Allied Irish Banks has changed the way its staff can purchase annual travel tickets and that the staff are now required to pay an external private company a commission on top of the face value of the tickets; if this commission attracts tax and PRSI relief; his views on this change; and if he will make a statement on the matter. [48708/13]
View answerI have been informed by AIB that the bank does not publicly disclose the details of contracts with individual external service providers. AIB utilises the expertise of a number of different third party firms on a case by case basis, subject to an evaluation of the bank's requirements, costs and the relevant external parties. AIB is focused on a significant cost reduction programme and, as part of this process, has policies and procedures in place in respect of the appointment of external third parties. I understand that as part of the cost cutting process, the staff are being charged commission to cover the cost of the administration of the annual travel pass scheme. All external service provider contracts entered into by AIB comply with AIB's policy in relation to engaging external service providers.
I have also been informed by the Revenue Commissioners that a benefit in kind charge under the provisions of Section 118 TCA 1997 arises where an employer incurs expense in the provision of living or other accommodation, entertainment, domestic or other services, or other benefits or facilities of whatever nature. The charge is based on the amount of the expense that is not made good to the employer by the employee.
However, section 118(5A) of the Taxes Consolidation Act 1997 provides that a benefit-in-kind charge shall not apply to the expense incurred by a body corporate in or in connection with the provision for a director or employee of an annual bus, railway or ferry travel pass issued by or on behalf of one or more approved transport providers. Accordingly, the director or employee receives the benefit of the travel pass free of income tax, PRSI and USC.
If the employer incurred any incidental expenses such as commission in the provision of a travel pass, these expenses would also be covered by the BIK exemption.
Where an employer facilitates a salary sacrifice scheme whereby the employer incurs the expense initially in providing the travel pass and the employee forgoes the right to receive part of his or her remuneration to make good that expense to the employer, the amount of the remuneration forgone is exempt from income tax, PRSI and USC in accordance with section 118B(2)(a).
43. Deputy Michael McGrath asked the Minister for Finance if the Central Bank was aware of any issues of concern at Irish operations of Royal and Sun Alliance prior to the company's announcement of the suspension of three senior executives after issues regarding Irish claims and finance functions were identified during an internal audit within the company itself; if the Central Bank had been or is now planning to undertake an investigation into the issues involved; and if he will make a statement on the matter. [48716/13]
View answerAt the outset, the Deputy should note that in my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation, including insurance. The day to day responsibility for the supervision of financial institutions is a matter for the Central Bank which is statutorily independent in the exercise of its regulatory functions.
The Central Bank of Ireland has had an on-going programme of engagement with RSA Insurance Ireland (RSAII) since the implementation of the Central Bank's Probability Risk and Impact System – PRISM, as it does with all high impact companies. This programme includes eight on-site inspections over a two year period and on-going meetings with key role holders such as the Chief Executive Officer, Chief Finance Officer, Chief Risk Officer, etc. The Central Bank carried out an onsite review of claims cases in RSAII in August 2013. The Central Bank identified an issue with regard to delays in increasing case reserves on large claims in a timely manner and this informed the terms of an internal audit that RSAII had already scheduled in relation to the same area.
RSAII brought the findings of the internal audit report to the attention of the Central Bank as soon as they became known. The terms of reference for a further multi-stranded investigation and review were outlined to the Central Bank as were the interim measures that the company planned in relation to the executive team. Further additional measures felt necessary by the Central Bank were incorporated by RSA into its actions. PWC have been onsite in the RSAII since the week before last as part of this investigation.
The RSA Group provided an injection of €100m in capital last week after discussions with the Central Bank. The RSA Group has assured the Central Bank that it will provide any further capital required should it be necessary at the end of the current investigation. The Central Bank has not had to take direct supervisory measures due to the swift and prompt action by RSA and its on-going engagement with the Central Bank. The Central Bank will continue to liaise with RSA Ireland, PWC and other stakeholders to ensure that all matters identified are resolved to the Central Bank's satisfaction.
44. Deputy Michael McGrath asked the Minister for Finance if he will provide the background to the decision of the Central Bank to seek High Court approval for the transfer of Newbridge Credit Union to Permanent TSB; the consultations held with the bank prior to the application to the High Court; and if he will make a statement on the matter. [48717/13]
View answerThe decision to transfer Newbridge Credit Union’s assets and liabilities to permanent tsb bank was taken following the withdrawal of Naas Credit Union from the process. It was in the context of a possible liquidation which would have seen unprotected savings of €1.1m lost, that the Department of Finance, with the support of the Central Bank, requested permanent tsb bank to undertake this transaction. The participation of permanent tsb, for which I would like to express my thanks, has brought stability and certainty to the situation and specifically to the members and staff of Newbridge Credit Union and has provided an alternative to liquidation. This transfer means that Newbridge Credit Union members can be assured that they can continue to operate their loan and deposit accounts as normal. The Central Bank has published extensive information on its website* setting out the details of the transfer, including the relevant background material and financial details.
*http://www.centralbank.ie/press-area/press-releases/Pages/CentralBankconfirmstransferofNewbridgeCreditUniontopermanenttsb.aspx
45. Deputy Michael McGrath asked the Minister for Finance the number of credit unions the Central Bank believes will require remedial action; if he will specify the work that is ongoing in that regard; and if he will make a statement on the matter. [48718/13]
View answerThe Central Bank has informed me that, based on data submitted by credit unions as at 30 September 2013, some 20 credit unions have reported regulatory reserves below the minimum requirement of 10 per cent of assets. This gives rise to a capital shortfall in the region of €11 million in total. The Central Bank is continuing to work through a portfolio of approximately 100 credit unions on a case by case basis. The programme of work to engage with such credit unions is informed by the following:
- levels of arrears;
- Inadequate bad debt provisions;
- High fixed asset to total asset ratio and
- Other supervisory concerns including weak lending practices.
The outcomes of these engagements can include some or all of the following:
- Governance changes;
- Risk mitigation programmes;
- Lending and other business restrictions;
- Requirements for credit unions to seek capital support.
46. Deputy Michael McGrath asked the Minister for Finance the amount of fees charged to date by the special manager of Newbridge Credit Union since his appointment; the person who pays the bill; and if he will make a statement on the matter. [48719/13]
View answerI have been informed by the Central Bank that from 13 January 2012 to 26 April 2013 a total of €1,252,142 was approved for payment to the Special Manager by the High Court. The Special Manager rates were reduced after one month from €423 to €375 with the approval of the High Court. This included a corresponding fee reduction for staff working for the Special Manager. The fees concerned were paid by Newbridge Credit Union Limited. I have also been informed that the Special Manager has not been paid any fees since 26 April 2013. As part of the transfer order to PTSB, approved by the High Court on 10 November 2013, a further accrual for Special Manager fees from 27 April 2013 to 10 November 2013 of €537,000 formed part of the liabilities transferred to PTSB. The financial incentive paid to PTSB as part of the transfer reflects this amount. However, fees to be paid to the Special Manager during that period have not been agreed at this point. In that regard, the fees payable cannot be greater than €537,000.
47. Deputy Róisín Shortall asked the Minister for Finance further to Parliamentary Question No. 99 of 20 December 2012, if he will provide the corresponding figures in respect of 2011 and, if available, 2012. [48724/13]
View answerLandlords cannot claim mortgage interest relief which is only available for owner occupiers in respect of their principal private residence. I am informed by the Revenue Commissioners that landlords may deduct 75% of the interest on money borrowed to purchase, improve or repair commercial property from the gross rent when computing their rental profits for tax purposes on that property. Interest incurred before the first occupation of the property by a tenant for the purposes of a trade or undertaking, or between lettings, is not deductible. Based on personal income tax returns filed by non-PAYE taxpayers for the tax year 2011, the latest year available, the amount of tax foregone by allowing a deduction for interest on borrowings to be offset against domestic rental income assessable under Case V, Schedule D for both residential and commercial property was in the region of €690 million and the number of claims by individual taxpayers was 124,021. It is not possible to break down these costs between commercial and residential property.
In relation to interest claimed as a deduction against foreign rental income, based on personal income tax returns filed by non-PAYE taxpayers for the tax year 2011, the latest year available, the estimated tax cost is estimated at €66 million in respect of and the number of 14,501 claims by individual taxpayers.
New claims cannot be separately identified from ongoing claims in the data source and accordingly the relevant details of these cannot be shown separately.
These estimates are based on assuming that tax relief was allowed at the top income tax rate of 41% and the figures provided could, therefore, be regarded as the maximum Exchequer costs in respect of those taxpayers. I am advised by the Revenue Commissioners that they are not in a position to provide data for 2012 as the tax returns for that year are not yet fully filed or processed. The figures shown are 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 chargeable to tax is required to complete an income tax return form 11. This return is the source of the figures provided in this reply. As rental income of companies is returned as net of interest on borrowings, the figures for interest are not separately distinguishable and there is, therefore, no basis on which an estimate of the cost in respect of companies can be given.
I am also advised by the Commissioners that the legislative provision which allows a deduction for interest on borrowings used for the purchase, improvement or repair of rental property outside the State (section 71(4) of the Taxes Consolidation Act 1997 (TCA 1997)) was introduced by Finance Act 1974, and provides a similar deduction in respect of interest for the owners of such property as applies in respect of owners of rental property in the State (section 97(2)(e) TCA 1997).
Any change or discontinuance of the existing interest deduction for properties outside the State could fall foul of EU law on grounds of discrimination in that different tax treatments would apply here for some residents of the State as compared with other residents of the State. In addition, it would likely fall foul of EU law in terms of restricting the free movement of capital within the Union.
48. Deputy Róisín Shortall asked the Minister for Finance further to Parliamentary Question No. 250 of 29 January 2013, the changes, if any, that have been made to capture data on the location of foreign property that avail of this tax break, especially non-EEA located property; and if no changes have been made the reason for same. [48725/13]
View answerI am informed by the Revenue Commissioners that the current version of the annual Income Tax return form distinguishes between Irish rental properties and foreign rental properties. The return form also seeks details, inter alia, of rental income received and allowable interest regardless of whether the property in question is Irish or foreign. The return form, however, does not currently require details of the location of any foreign rental property and there are no plans to amend the next version of the return to capture such details. Section 71(4) Taxes Consolidation Act 1997 provides for a deduction for interest on borrowings used for the purchase, improvement or repair of rental property outside the State and there is no requirement to identify the precise location of non-Irish rental properties for the purposes of such claims. In the circumstances, seeking such additional information from owners of foreign properties would add to the administrative burden on these taxpayers for no specific legislative purpose.
49. Deputy Michael McGrath asked the Minister for Finance when a final decision will be made on whether the Government will apply for a precautionary credit line as part of Ireland's exit from the troika programme; and if he will make a statement on the matter. [48726/13]
View answerThe Government decided this morning that Ireland is now in the best position to exit the EU-IMF programme of financial assistance on December 15 without the need to pre-arrange a new precautionary credit line from our EU and IMF partners.
