Written Answers Nos. 16-22
16. Deputy Denis Naughten asked the Minister for Finance if he will abolish the 23% VAT rate on fees charged to families by a personal insolvency practitioner; the estimated cost to the Exchequer in the current year and a full year if VAT was not charged on home insolvency proceedings; and if he will make a statement on the matter. [49224/13]
View answerI am informed by the Revenue Commissioners that the service provided by personal insolvency practitioners does not qualify for exemption in accordance with the EU VAT Directive, Irish VAT law, and relevant decisions of the European Court of Justice. Therefore, like other insolvency services, such as those provided by liquidators, receivers and examiners, the service provided by a personal insolvency practitioner is liable to VAT at the standard rate, currently 23%. I am also informed by the Revenue Commissioners that under a personal insolvency arrangement, the personal insolvency practitioner's fees are ultimately deducted from the dividend payments to the creditors under the arrangement rather than charged to the debtor. As the debtor is availing of a personal insolvency arrangement because of their insolvent position, it is the creditor who is bearing the ultimate cost of the fees and the VAT on the fees.
Since information is not available on the volume of personal insolvency practitioner activity or the fees charged by them, it is not possible to estimate the cost to the Exchequer of exempting the service from VAT were it possible to grant such an exemption.
17. Deputy Pearse Doherty asked the Minister for Finance if he regrets rushing through the Local Property Tax Act in view of the problems that have become evident in the legislation. [49197/13]
View answerThe Local Property Tax (LPT) was required to be introduced before the end of 2012 due to our Troika commitments, which meant it had to be passed by the Oireachtas before the end of the year. The introduction of the LPT was the largest extension of the self-assessment system in its history and represents a very great legislative, logistical and administrative challenge for all concerned. Any charge to tax has to be legislated for, and the legislation has to be in place in good time to give clarity and certainty to taxpayers and to allow for an effective administrative system to be put in place. The task was given to the Revenue Commissioners because the Government decided that, as the body with experience in administering a wide range of taxes, Revenue was best placed to ensure that the tax was introduced successfully in a short timeframe.
Although the tax was not payable until 1 July 2013, lead-in time was required to enable Revenue to develop new systems and processes, to enable taxpayers to file returns in good time and to select a payment method which suited their circumstances, and to enable phased payments to be implemented in time for a July 2013 start. The Government was anxious to ensure that taxpayers had the widest possible range of payment options, including phased payments, to assist them in meeting their LPT obligations. Stakeholders such as Government Departments, employers and payroll software companies who have a role in operating phased payments also needed certainty to develop their IT systems.
Since the State had no comprehensive register of residential properties, it was an absolute pre-requisite that legislation was in place early to ensure that Revenue could properly obtain data from various organisations including the Local Government Management Agency, utility companies, the Property Registration Authority and various Government departments
Once the legislation was in place, Revenue was able to begin in earnest the very important task of informing the public about LPT early in 2013, by explaining how the tax would operate and how it would impact on the various property owner types.
It was always a possibility that there would be some issues needing correction, and at the time of the introduction of the initial legislation I stated that I would take on board suggestions I heard during debates. The Finance (Local Property Tax) (Amendment) Act 2013 was enacted in early 2013 which incorporated a number of changes suggested by Deputies and Senators, as well as issues which officials of Revenue and my Department advised me of. These included more favourable treatment for certain disabled persons, for properties badly damaged by pyrite and for certain properties owned by charities, local authorities and social housing providers. Deferral of LPT was provided for additional categories of property owners – personal representatives of deceased persons, those covered by a formal insolvency arrangement and those suffering excessive financial hardship. In addition, the power of Revenue to enter on a person’s property was clarified
I feel the Amendment Bill gave Oireachtas Members time and opportunity to suggest changes to the legislation.
As the Deputy is fully aware, drafting errors in legislation do happen from time to time. In the case of the exemption which was intended only to benefit first time buyers who purchased in 2013, this error, although unintended, is beneficial to a clearly definable group of taxpayers which Revenue will be able to identify. When the error was made known to me, I decided to allow non-first time buyers to avail of the exemption, as I considered that the cost is not likely to be significant as part of the overall yield, and could provide an additional boost to the property market.
I do not believe that the legislation was unjustifiably rushed, and I am satisfied that, where issues have arisen, these can be taken care of administratively, in a cost effective manner, and in the main without the need for further legislation. Overall, I am satisfied that having the primary legislation in place as early as possible was a key factor in the successful implementation of the tax which the general public has responded to, and continues to respond to, with a remarkably high level of voluntary compliance.
18. Deputy Thomas Pringle asked the Minister for Finance the position regarding the future of credit unions; if he will provide an update on the 100 credit unions portfolios that are being assessed by the Central Bank; and if he will make a statement on the matter. [49250/13]
View answer32. Deputy Thomas Pringle asked the Minister for Finance if he will provide an update on the 20 credit unions in financial difficulty; if he foresees a similar situation to the takeover of Newbridge Credit Union occurring with any of these credit unions; and if he will make a statement on the matter. [49251/13]
View answerI propose to take Questions Nos. 18 and 32 together.
As I have previously stated, credit unions have a key role to play in providing access to credit and other important services in local communities throughout the country. The Government recognises this and has provided €500 million in funding to support the stability of credit unions through restructuring and resolution.
The Commission on Credit Unions provided its Report which makes recommendations on the strengthening of the regulatory framework of credit unions, including more effective governance and prudential requirements. These recommendations are currently being implemented in the Credit Union and Co-operation with Overseas Regulators Act 2012.
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 matters: levels of arrears, inadequate bad debt provisions, high fixed asset to total asset ratio and other supervisory concerns including weak lending practices. The Central Bank's statistics, based on data submitted by credit unions as at 30 September 2013 show that some 20 of these 100 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. Following engagement with these 100 credit unions the outcomes can include governance changes, risk mitigation programmes, lending and other business restrictions and/or requirements for credit unions to seek capital support.
In such cases capital support may be sought through a restructuring solution under ReBo or from resources available within the credit union sector itself.
19. Deputy Richard Boyd Barrett asked the Minister for Finance if he intends to ask the corporate sector to make any extra tax contribution to assist economic recovery, particularly in the area of funding, training, education and employment programmes for young persons; and if he will make a statement on the matter. [49255/13]
View answerThe corporate sector is already making an important contribution to the recovery of the Irish economy in terms of employment creation which has taken place over the past year. The contribution of this sector to Ireland's economic recovery is also apparent in the form of direct tax receipts which feed into the Exchequer and in turn are paid out again for the services highlighted by the Deputy, such as training, education and employment programmes. The use of State resources in this way is determined by my Ministerial colleagues from their annual budget allocation.
In 2012, the corporate sector directly contributed €4.2bn to the Exchequer in terms of corporation tax receipts. However, the Deputy will already be aware that the corporate sector is also subject to a number of other taxes, including VAT, PRSI and excise, and so the actual tax contribution made is larger than corporation tax alone.
To give an example of steps that this Government has taken to increase the tax contribution from the corporate sector, as I announced on Budget Day I am introducing a stamp duty levy on certain financial institutions, which will operate for a period of three years from 2014-2016 and is expected to yield an additional €150 million per annum.
20. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he is satisfied that the economy here can grow sufficiently in the coming year to meet or exceed the budgetary targets set in budget 2014; if any action is needed to address inflationary tendencies in the housing sector; and if he will make a statement on the matter. [49209/13]
View answerMy Department published updated macro-economic and fiscal forecasts with Budget 2014 on October 15th. These projections show that Ireland remains on track to meet its obligations under the Excessive Deficit Procedure (EDP), with an underlying general government deficit of 7.3 per cent forecast for 2013, improving to 4.8 per cent in 2014 – both figures within the deficit ceilings set by the ECOFIN Council in late 2010. Current projections show we remain firmly on track to bring our deficit below 3 per cent by 2015.
Nominal GDP – the metric used for calculation of both our debt and deficit ratios – is expected to increase by 1.2 per cent this year, with the rate of growth set to pick-up to 2.9 per cent next year and to 3.7 per cent in 2015. These growth forecasts are obviously subject to a number of risks, emanating from both external and internal sources. However, I have been encouraged by developments of late on both fronts. High-frequency data for the Irish economy over the third and fourth quarters so far are broadly positive and we are beginning to see increasing signs of recovery in key trading partners, with growth accelerating in both the US and UK in the third quarter.
Regarding house prices, it is worth remembering that residential property prices in Dublin fell by around 60 per cent from peak to trough and residential property prices in Dublin are still 51 per cent lower than at their highest level in February 2007. It is against this background that the recent appreciation in house prices in the capital must be assessed. Although strong growth has been seen in recent months, it is coming off a low base.
It should also be noted that the previous housing bubble was accompanied by a dramatic increase in mortgage lending. The same cannot be said of the recent appreciation in house prices, with a large percentage of transactions taking the form of cash purchases. Figures from the Irish Banking Federation show the value of mortgage lending for house purchase over the first three quarters of the year standing at just €1.5b, or just 7 per cent of the value of mortgage lending over the same period in 2006 for instance. The same figures also show that lending for house purchase is essentially flat over the first three quarters of this year, when compared with the same period in 2012.
However, as I said in my Budget Day speech, I am aware that there are some supply limitations in certain urban areas. In light of this I introduced several measures to help increase the supply of suitable residential housing stock as part of Budget 2014. These included – subject to State Aid approval – the extension of the Living City Initiative, to include Cork, Galway, Kilkenny and Dublin and the broadening of eligibility criteria to include all buildings built prior to 1915. I also introduced the home renovation incentive, which provides an income tax credit to homeowners who carry out renovation and improvement works on their principal private residences between October 25th 2013 and December 31st 2015.
Finally I would point out that it is NAMA's expectation, at this juncture, that its funding will contribute about 4,500 houses and apartments in terms of new supply in the Dublin market in the period to 2015. This is a significant output in the context of current house completion levels in Dublin. In 2012 just over 1,200 new houses and apartments were completed in Dublin. In addition, NAMA is overseeing the rental by debtors and receivers of close to 10,000 residential properties nationally – mainly apartments in Dublin. NAMA is also overseeing the sale of houses in Dublin by NAMA debtors and receivers and has made over 1,200 properties available to local authorities to meet demand for social housing in Dublin.
21. Deputy Ann Phelan asked the Minister for Finance in the view of efforts made to make Ireland tobacco free by 2025, if he will consider lowering the VAT rate on items such as nicotine replacement therapies, and other items which aid persons giving up smoking, to a new special rate, lower than the currently affixed 23% (details supplied). [49073/13]
View answerI am advised by the Revenue Commissioners that nicotine products, such as nicotine inhalers, tablets and chewing gum, which are categorised as oral medicines and are licensed by the Irish Medicines Board, are charged to VAT at the zero-rate. Nicotine replacement patches and electronic cigarettes, however, do not fall into this category of oral medicines and are therefore subject to the standard 23% rate of VAT.
While the UK apply a 5% reduced VAT rate to the supply of nicotine replacement patches, under the EU VAT Directive it is not possible for Ireland to apply a 5% rate to supply of nicotine patches.
22. Deputy Pearse Doherty asked the Minister for Finance the options that are available when Ireland leaves the formal troika programme; and if he will provide an evaluation of each option. [49198/13]
View answerAs the deputy will be aware, the Government decided on 14 November 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. There were essentially two options available.
i. to exit without a pre-arranged precautionary facility or backstop.
ii. to exit with a pre-arranged precautionary facility or backstop
Following a careful and thorough assessment of all of the available options, and broad consultation with the European Commission, the ECB, the IMF, the President and members of the Eurogroup, the Governor of the Central Bank of Ireland and the NTMA, the decision was taken to exit without a pre-arranged precautionary facility or backstop.
The Government decided that exiting without a pre-arranged precautionary facility or backstop is the right decision for Ireland. Market confidence in Ireland is high, the public finances are under control, we are reducing our deficit and debt levels and economic conditions and sentiment are improving.
In relation to options (ii) above, taking account of all of the views received during the consultative process, the Government concluded that this option was not appropriate to Ireland's circumstances as the option of exiting without a precautionary credit line was preferred in view of the favourable market conditions at present. There is no certainty that conditions would be as favourable in a year’s time when any precautionary facility would end, or at a later date, if the option for further six month renewals were exercised.
