Written Answers Nos. 214-30
214. Deputy Michael McGrath asked the Minister for Finance his views on recent statements from the European Commission on dealing with losses being incurred by banks relating to holdings of tracker mortgages; and if he will make a statement on the matter. [13204/14]
View answerAs the Deputy will be aware tracker mortgages were a particular feature of the Irish mortgage market in the recent past with many tracker mortgages originated during the property market boom in 2004 to 2008.
During recent Review Missions of the Troika, the Irish authorities discussed the issues associated with these assets which were again highlighted in the recent European Commission's report on Ireland. Although these interactions did not yield any viable solution to the problem, we naturally remain interested in examining any sensible ideas that could help lower the funding cost associated with these assets.
I would point out to the Deputy that although these assets continue to be loss-making and represent a drag on the Banks' profitability the situation is improving and is not preventing the banks returning to viability as evidenced by the recent encouraging results published by AIB and BOI. Both Banks have signalled a return to profitability this year and over time it is expected that they will trade their way into sustainable profitability. This will place them in a better position to absorb the impact of the Tracker mortgages.
Furthermore, as recent capital market transactions have demonstrated the Irish banks have been able to access both secured and unsecured funding at competitive rates across a range of maturities. In addition, the deposit base has stabilised resulting in reduced reliance on central bank funding. Taken together this has helped to reduce the impact of the negative carry associated with tracker mortgages.
The Deputy will also be aware that in recent times the Banks have pursued self-help measures to address this issue by introducing innovative solutions such as offering negative equity type mortgages and allowing borrowers to retain tracker facilities when moving house for a fixed period. These initiatives together with the recovery in the property market and an associated rise in housing transactions will also help to alleviate the issue.
215. Deputy Stephen S. Donnelly asked the Minister for Finance if the planned survey of demand for small and medium enterprise credit, as outlined in action 206 of the Action Plan for Jobs, will be brought forward as a result of the recent comments by Professor Morgan Kelly on the precarious situation facing these entities over the coming period; and if he will make a statement on the matter. [13173/14]
View answerThe 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. Government policy is focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources.
As the Deputy is aware, one of the commitments contained in the "Access to Finance" chapter of the Action Plan for Jobs 2014 is to undertake a survey of the demand for SME credit in Q2 and Q4 2014. My Department has commissioned biannual independent reports on the demand for credit by SMEs since 2011. These are the most comprehensive surveys of SME credit demand in Ireland and cover over 1,500 respondents. The next survey will cover the period October 2013 - March 2014 and is due for publication in May. I will not be bringing forward the survey as it is important to ensure consistency in terms of the periods in which the surveys take place.
As regards the issue of SME debt it should be noted in the first instance that the Central Bank does not publish figures on arrears or non-performing loans specific to the SME Sector. In June 2013 the Central Bank did set quarterly institution-specific performance targets for covered banks to move distressed SME borrowers onto longer-term forbearance solutions. The targets set reflect the banks' capacity, processes and systems. The Central Bank has informed the officials in my Department that the banks have reported that they have met their required targets to date. This perspective has been reaffirmed by both the IMF and the European Commission who report that the workout of SME arrears is progressing and that imposed targets are being met.
Recently published results from the covered Irish banks indicate that both banks are well advanced in restructuring their SME loan books. Bank of Ireland's most recent published results indicate that they had reached resolution in 90% of distressed SME cases. Similarly the AIB's results indicate a resolution level of approximately 65%. It is also worth noting that defaulted loans for both banks have reduced year-on-year.
The Central Bank's process of assessing financial institutions in their efforts to move distressed SME borrowers onto longer term sustainable solutions is an important element in assisting SMEs to potentially transition from a distressed to a more sustainable state and will continue in 2014. Additionally, the Government's decision to fast track legislation to allow small companies (as defined by the Companies Acts) to apply to the Circuit Court for examinership and the on going work of the Credit Review Office, which has been given an expanded remit, are all initiatives that will assist viable SMEs in adressing their debt situation. 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.
The remarks by the UCD academic Morgan Kelly relate to the forthcoming stress testing by the ECB and in this context the Governor of the Central Bank indicated recently that the purpose of the forthcoming ECB stress tests on 128 European banks, which includes Irish banks, was to remove market and government doubts about the ability of banks to absorb losses with their own shareholders funds. I would again suggest that Professor Kelly would liaise with the Central Bank and share his analysis and findings in relation to his expectations on the potential impact that the forthcoming stress tests may have on the domestic SME sector.
216. Deputy Stephen S. Donnelly asked the Minister for Finance if the planned collaboration with KfW and the German Ministry of Finance to develop an initiative that will improve funding mechanisms for small and medium enterprises as per action 212 of the Action Plan for Jobs, will be brought forward as a result of the recent comments by Professor Morgan Kelly on the precarious situation facing these entities over the coming period; and if he will make a statement on the matter. [13174/14]
View answerThe Government recognises that SMEs are the lifeblood of the economy and play a vital role in the continuing recovery of employment growth in our country. Government policy since 2011 has focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources.
While I note Professor Kelly's recent statements on SMEs, it does not change the Government's assessment that SME financing is a priority concern and one which is a clear focus of efforts to restore the economy to health.
Progress on the initiative with KfW is being made as quickly as possible with dedicated project teams in place on both sides in order to expedite the discussions. My officials have exchanged working papers with KfW and the German Ministry of Finance over recent weeks and there have been meetings on this matter in Berlin, Frankfurt and Dublin as well as numerous teleconferences, most recently in the last week.
The aim of this project is to find ways to reinforce Ireland's economic recovery by improving funding mechanisms for the real economy. The intention is to ensure that the funding provided through this initiative will provide viable SMEs in Ireland with access to a long-term and appropriately-priced supply of finance in a manner that supports productive investment, encourages growth and increases employment in the SME sector, including where the market appetite remains constrained. In this regard, the KfW project would have the dual and complementary roles of providing funding to SMEs in general and also targeting investment in a manner that supports key strategic sectors and alleviates financing constraints.
217. Deputy Stephen S. Donnelly asked the Minister for Finance the position regarding the implementation of the cross-governmental small and medium enterprise access to finance online tool, as per action 221 of the Action Plan for Jobs; and if he will make a statement on the matter. [13175/14]
View answerAs the Deputy is aware, I announced in Budget 2014 that the Government is developing a comprehensive communication strategy to increase awareness of the full suite of developmental business supports, totalling approximately €2bn, which is available from State bodies and agencies.
To date, a number of initiatives have been undertaken to make information available to SMEs on the part of Government Departments and State agencies, including
- Engagement with industry and representative bodies through the SME Funding Consultation Committee;
- The Department of Finance's quarterly SME newsletter;
- Publication on my Department's website of a 'SME funding matrix';
- Targeted communication strategies by individual agencies directly to their clients;
- Various guidance documents and support material.
In spite of the work done by relevant Government Departments and agencies, all parties accept that a challenge remains around SMEs' awareness and understanding of Government supports. The most recent SME credit demand survey found that there was a low level of awareness of certain initiatives. It was against this background that the SME State Bodies Group was tasked with drafting a communication strategy.
As per Action 221 of the Action Plan for Jobs 2014, an online tool is currently being developed which will help small businesses to navigate through the range of Government supports available to them. Set to be launched in Q2 2014, upon answering a short number of questions an Irish business will be able to access a list of potential supports for their company and relevant contact information. The guide will be available on the new Local Enterprise Office website when that goes live. Government officials are currently showcasing the online guide in test mode with small businesses at a series of "Taking Care of Business" roadshows in Limerick, Galway and Cork.
218. Deputy Finian McGrath asked the Minister for Finance if he will support the IBOA members in the Irish Bank Resolution Corporation in respect of their redundancy terms (details supplied). [13216/14]
View answer225. Deputy Clare Daly asked the Minister for Finance if he will intervene to assist a person (details supplied) in their efforts to mediate at Irish Bank Resolution Corporation to resolve outstanding issues of compensation for staff who will be made redundant, particularly in view of the fact that they previously indicated that the staff would be able to transfer to the National Asset Management Agency but this will not now happen. [13358/14]
View answer258. Deputy Ciarán Lynch asked the Minister for Finance the progress that has been made in reaching agreement regarding redundancy terms for the Irish Bank Resolution Corporation employees (details supplied); and if he will make a statement on the matter. [13947/14]
View answerI propose to take Questions Nos. 218, 225 and 258 together.
I can confirm that senior officials from the Department have met with the person named and are continuing to engage with all parties in relation to staff concerns in IBRC.
The Special Liquidators have indicated that they remain highly cognisant of the issues that the IBOA have been highlighting and that significant steps have already been taken to address those concerns to date including the extension of all staff contracts out to the end of March 2014 and in many cases out to the end of 2014 almost two years following the commencement of the liquidation. This should provide some reassurance to IBRC staff relative to the common position in liquidations where staff contracts are terminated immediately. It remains the position that some staff may, in time, be re-hired by NAMA, its service providers or other purchasers of the IBRC assets as the sale processes are completed.
In relation to the improved redundancy terms being sought I am advised by the Special Liquidators that the voluntary severance scheme, that was in place prior to liquidation, is no longer operational and that IBRC employee contracts were terminated in the Republic of Ireland in February 2013 on the appointment of the Special Liquidators. As a result of the termination of the employment contracts, employees were entitled to apply for a statutory redundancy payment and a statutory notice payment, subject to the limits prescribed by statute.
While my officials will continue to engage on this matter, I am not in a position to interfere directly. There are standard rules which apply to the distribution of the assets of companies in liquidation and it would not be appropriate for me to interfere with these rules. Such interference could have the impact of diverting the assets of IBRC from one category of creditor to another outside the normal Companies Acts priorities. Any such interference would be open to challenges in the Irish Courts by unsecured creditors.
219. Deputy Pearse Doherty asked the Minister for Finance the forecast for inflation in Ireland for the years 2014, 2015 and 2016; if he will provide a model showing how a lower level of inflation and how a higher level of inflation would affect Ireland's economic forecast as per the medium term economic strategy's baseline economic assumptions. [13249/14]
View answerInflation as measured by the Harmonised Index of Consumer Prices (HICP), the comparable measure of inflation across the euro area, was forecast for Ireland at 1.2 per cent in 2014 and 2.0 per cent respectively for 2015 and 2016 at Budget time.
There are a number of channels through which price developments impact on the economy. For instance, higher inflation could lead to a decrease in the real level of private consumption due to the decrease in real wages in the short term, all else being equal. Higher inflation may also effect competitiveness and thus decrease exports and inward investment. Lower inflation would have the opposite impact.
My Department will publish a revised set of macroeconomic forecasts in the Stability Programme Update in April.
220. Deputy Joe McHugh asked the Minister for Finance the reason the export repayment scheme is only available on M1 passenger vehicles, and not on commercially registered vehicles even though they have paid 13.3% VRT rate; if he will consider an exemption specifically for small and medium enterprise owners, where the business is more greatly impacted by this VRT rate than a larger business which is better positioned to absorb the financial impact (details supplied); and if he will make a statement on the matter. [13252/14]
View answerI am informed by the Revenue Commissioners that the export repayment scheme is provided for in section 135D, Finance Act 1992 and was commenced on 8 April 2013.
It is first of all necessary to look at the background to the scheme. In 2010 the European Commission initiated infringement proceedings against Ireland on the basis that "the effect of the Irish provisions relating to Vehicle Registration Tax is a disproportionate obstacle to the freedom to provide services for leasing companies in other Member States who wish to offer their services to Irish residents." The Commission's case was that by charging VRT on the full value of a vehicle leased to an Irish citizen by a foreign leasing company the vehicle then has a residual, "trapped" VRT element that makes them less competitive for subsequent leasing outside of the State on completion of the original lease term. Following a careful analysis, the export repayment scheme was provided for in the 2012 Finance Act to address the particular concern in relation to freedom of services for leasing companies. In line with the proceedings initiated the scheme is for passenger vehicles and is open to both members of the motor trade and private individuals.
In relation to the specific case, I am informed by the Revenue Commissioners that a number of vehicle models straddle both categories M1 (passenger) and N1 (commercial). It is common to have a vehicle make, model and version that, because of the final specification, could have an M1 categorisation or an N1 categorisation. Notwithstanding this, it should be clear from the documentation and the vehicle that it is a category N1 and does not qualify under the scheme. I am informed by the Revenue Commissioners that they have arranged to have the examination fee refunded in this case. I am also informed by the Revenue Commissioners that the administration charge (the €500 mentioned in the details supplied) applies only to cases where a vehicle has gone through the export repayment scheme and a repayment is due. It does not apply to exports of vehicles outside of the scheme.
221. Deputy Pearse Doherty asked the Minister for Finance the estimated tax loss to the State in the years 2014, 2015 and 2016 as a result of section 396C of the Finance Act 2013, which has been provided to his Department in tables by Bank of Ireland and AIB, the only two banks to benefit from the clause. [13125/14]
View answerIn terms of the impact for fiscal year 2014 we have not assumed any direct fiscal cost of this measure. The banks have yet to report a return to pre-tax profitability and while the latest market forecasts suggest one of the banks will indeed make a profit this year, these are projections. One also needs to remember that the banks earn profits from many sources, and it is the Irish profits that matter in this context.
The net effect of the measure in terms of tax receipts is largely one of timing and ultimately it should not impact on the State's total corporation tax take over the long-term. This will be offset by an improvement in the valuation of the State's equity stakes in the banks as well as its debt investments.
222. Deputy Michael McGrath asked the Minister for Finance if his Department or the Central Bank of Ireland has an estimate of the number of mortgage holders whose life assurance or mortgage protection policy might have lapsed since the mortgage was taken out; and if he will make a statement on the matter. [13298/14]
View answerThe Central Bank has informed me that it does not publish the figures requested by the Deputy. The Central Bank has advised that if a consumer does not pay the premium on their life assurance or mortgage protection policy, the cover will lapse. The insurance company then informs the relevant bank of this fact. However, if the bank is collecting the premium for the insurer, the bank would be aware that the premium has not been paid.
223. Deputy John Browne asked the Minister for Finance if non-first-time buyers in the 2004 to 2008 period can expect to have assistance similar to the increased interest relief for first-time buyers; if the concentration of relief on first-time buyers is discriminatory against non-first-time buyers who traded down or up in the period; and if he will make a statement on the matter. [13352/14]
View answerThe position is that in Finance Act 2010, mortgage interest relief was extended up to end of 2017 for those whose entitlement to relief was due to end in 2010 or after. Therefore, tax relief will continue to be available in respect of interest paid by an individual on qualifying home loans taken out on or after 1 January 2004 and on or before 31 December 2012, regardless of whether they are considered first-time buyers or non-first-time buyers
In Budget 2012, I fulfilled the commitment in the Programme for Government to increase the rate of mortgage interest relief to 30 per cent for first-time buyers who took out their first mortgage in that period. This was the period during which house prices peaked.
A mortgage holder qualifies for the increased rate if they made their first mortgage interest payment in the period 2004 to 2008 or if they drew down their mortgage in that period. In addition, the increased rate of tax relief for first-time buyers who took out their first mortgage in that period will continue up to and including the 2017 tax year.
A lower rate of relief is provided for non-first time buyers in view of the fact that such individuals would have already received the first-time buyers rate of relief for the first seven years on their qualifying home loans and that the proportion of interest on their subsequent repayments would be significantly lower. Those individuals trading up or down in the period 2004 to 2008, would also be likely to have an element of capital to utilise towards the purchase of their second or subsequent dwelling, which should have led to a reduced borrowing requirement on the relevant property.
Given that mortgage interest relief has now been abolished for mortgages taken out since 1 January 2013, I do not propose to revisit the legislation with a view to introducing further changes.
224. Deputy John Browne asked the Minister for Finance the status of owners of buy-to-let properties who bought during the 2004 to 2008 period in regard to heavy mortgage repayments which are not covered by rental payments; if he will consider restoring 100% tax relief on interest for buy-to-let owners who bought during the period in question as a first step in restoring full relief for all buy-to-lets; and if he will make a statement on the matter. [13353/14]
View answerThis question relates to the interest restriction applying to residential lettings, whereby the deductibility of interest in computing taxable rental income from residential property (insofar as it would otherwise be allowable) is limited to 75% of such interest.
I am informed by the Revenue Commissioners that, regardless of when a buy to let property is purchased, rental income for tax purposes from such property is the gross rental income less allowable expenses incurred in earning that rent, as specified in section 97(2) of the Taxes Consolidation Act 1997. The main deductible expenses are:
- any rent payable by the landlord in the case of a sub-lease;
- the cost to the landlord of any goods provided or services rendered to a tenant;
- the cost of maintenance, repairs, insurance and management of the property;
- the interest paid on borrowed money used to purchase, improve or repair the property (which, in the case of residential property, is restricted to 75% of the interest and is subject to compliance with PRTB registration requirements for all tenancies that existed in relation to the property in the relevant year); and
- payment of local authority rates.
In addition, wear and tear capital allowances are available in respect of the capital expenditure incurred on fixtures and fittings provided by a landlord for the purposes of furnishing rented residential accommodation. These allowances are granted at the rate of 12.5% per annum of the actual cost of the fixtures and fittings over a period of 8 years.
Where the aggregate of deductible expenses in any year exceed the gross rental income, the amount of the deficit is set against rental profits of the same year from other property. Where there are no other rental profits in the same year, the deficit is carried forward as a rental loss for offset against rental profits in future years.
The 75% restriction on interest on borrowed money used to purchase, improve or repair residential property was introduced in the April 2009 supplementary budget as part of an urgent revenue-raising package aimed at stabilising the public finances.
226. Deputy Barry Cowen asked the Minister for Finance the number of times his Department received requests by Philanthropy Ireland to meet in 2011, 2012 and 2013; the number of times his Department met Philanthropy Ireland in those years; and if he will make a statement on the matter. [13388/14]
View answerI can confirm that there while there were three meeting requests received on behalf of Philanthropy Ireland in the years 2011, 2012 and 2013, neither I nor officials of my Department met with same due to conflicting diary and schedule committments.
227. Deputy Andrew Doyle asked the Minister for Finance if the new single child carer tax credit will be transferred to a parent (details supplied) who is not the principle carer in circumstances where the principle carer is married and in work and cannot claim this credit; and if he will make a statement on the matter. [13400/14]
View answerThe Deputy will be aware that the One-Parent Family Credit has been replaced with a new Single Person Child Carer Credit from 1 January 2014. The restructured credit is of the same value i.e. €1,650 per annum as the one-parent family credit and also includes the same entitlement to the additional €4,000 extended standard rate band, which increases it to €36,800 per annum, before liability to higher rate of income tax arises. However, the credit and the band are more targeted in that they are, in the first instance, only available to the principal carer of the child.
The person who receives the child benefit payment is being used as the initial indicator by the Revenue Commissioners to identify the individuals who are likely to qualify for the new credit. However, the credit will in the first place go to the person who cares for the child for most of the year. Agreement as to who will be the principal carer of a child is a matter for the parents or guardians.
The Commission on Taxation acknowledged that the One-Parent Family Tax Credit played a role in supporting and incentivising the labour market participation of single and widowed parents. However, in its recommendations it concluded that the credit should be retained but that it should be allocated to the principal carer only. The restructuring of the credit will achieve such an outcome.
Notwithstanding the above, as a result of an amendment which I brought forward at Committee Stage of the Finance Bill, a principal carer who is entitled to the credit and who does not wish to avail of it can choose to surrender it. A secondary carer may then make a claim for the credit, provided that the qualifying child resides with him or her for not less than 100 days in the tax year.
It should be noted that where a primary carer is married, in a civil partnership or cohabiting they would not be entitled to the new credit (or indeed the former one), on the basis that the relevant child is not, in the main, being cared for by a single person. In such circumstances the primary carer cannot relinquish the credit to a secondary carer. In addition, a secondary carer who is married, in a civil partnership or cohabiting, would not be entitled to the new credit (or indeed the former one) regardless of the marital status of the primary carer.
228. Deputy Dan Neville asked the Minister for Finance if he will consider the request from agricultural contractors to be allowed to claim VAT back as other road haulage firms are able to do so. [13407/14]
View answerVAT registered traders, such as agricultural contractors and road haulage operators, have an entitlement to deduct the VAT charged to them on diesel used for business purposes. However, I am advised by the Revenue Commissioners that, following confirmation from the Deputy, the question is intended to apply to the diesel rebate scheme. Under this scheme, qualifying road transport operators are entitled to claim a rebate of part of the duty paid on auto diesel used by them in qualifying road vehicles. The value of the rebate for the quarter ended 31 December 2013 is 6.2 cent per litre.
The Deputy queries whether the rebate scheme should be extended to diesel used by agricultural contractors in agricultural machinery designed for off-road work. However, such an extension is precluded under the terms of Council Directive 2003/96/EC of 27 October 2003 which limits the rebate to auto diesel used in defined categories of road vehicles. It should be noted, however, that contractors using agricultural machinery in the course of farming work are entitled to use marked gas oil which, at €102.28 per 1,000 litres, is taxed at a much lower rate than auto diesel at €479.02 per 1,000 litres.
229. Deputy Stephen S. Donnelly asked the Minister for Finance following the recent publication of mortgage approval data by the Irish Banking Federation which showed that there were 1,587 approvals in January 2014, and following the publication on 3 March 2014 by the Bank of England in the UK of its monthly money and credit report which showed that there were 76,947 approvals in the UK in the same month, his views on whether the Irish banking system, over which he operates significant direct control via his stakes in the banks and his Department’s banking unit, is failing to provide a mortgage loans service to meet the needs of citizens in the State; and if he will make a statement on the matter. [13413/14]
View answerAs the Deputy may be aware, lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and I do not interfere in the specific decisions of banks regarding their lending decisions.
Mortgage lending decisions must be undertaken on a sustainable and prudential basis by financial institutions and conform fully with the regulatory requirements, both in relation to the financial institution itself, and also with regard to the safeguarding of the borrower's interests.
I have been informed by the Irish Banking Federation that the figure of 1,587 approvals represents an increase of 10.8% compared to the same time period last year. However, it should be noted that even though the new mortgage lending market continues to improve, this improvement is coming off a low base. Government policy in this area is to promote competition in banking as this provides choice to the consumer and business while reducing concentration of risk.
230. Deputy Stephen S. Donnelly asked the Minister for Finance the total number of new mortgages advanced by KBC, Ulster Bank and Investec in 2013; if he will provide an overall anonymised total of volume and value of new mortgages issued; and if he will make a statement on the matter. [13414/14]
View answerThe Deputy himself has highlighted the need to protect the privacy of individual lenders.
I too would be concerned that providing anonymised information in relation to a subset of lenders could be commercially sensitive because of how the information could be manipulated.
However, I can advise the Deputy that the most recent IBF figures show that the total number of mortgage loans issued in the Irish market in 2013 was 14,985.
