Written Answers Nos. 11-30
6. Deputy Dara Calleary asked the Minister for Finance his views on concerns expressed by the head of the Fiscal Advisory Council that standard variable rate mortgage customers are very vulnerable to increases in interest rates at a time when the ECB is reducing rates; and if he will make a statement on the matter. [16176/14]
View answerAt the outset, I must confirm to the Deputy that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and, as such, it is a commercial decision for each lender to decide what interest rates they charge customers in relation to standard variable mortgages.
Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of each lending institution, having due regard to their customers and the impact on profitability. This interest rate is determined taking into account a broad range of factors, including European Central Bank base rates, deposit rates, market funding costs, the competitive environment and an institution's overall funding arrangements.
The Central Bank has responsibility for the regulation and supervision of financial institutions in terms of consumer protection and prudential requirements and for ensuring ongoing compliance with applicable statutory obligations. The Central Bank has, however, no statutory role in the setting of interest rates by financial institutions, apart from the interest rate cap imposed on the credit union sector in accordance with the provisions of the Credit Union Act, 1997.
As I stated in a previous Parliamentary Question today, the Deputy Governor mentioned that, within its existing powers, and through the use of persuasion, the Central Bank would continue to engage with specific lenders which appear to have standard variable rates set disproportionate to their cost of funds and this is a course of action I expect the Central Bank to continually appraise.
I appreciate that an increase in interest rates which leads to higher standard variable mortgage interest rates would have a negative impact on the mortgage consumers but on the positive side there would be an increase on deposit rates for consumers also.
At the European Central Bank's press conference on 3 April 2014, the President of the ECB, Mr. Mario Draghi, confirmed that key ECB interest rates would remain unchanged at 0.25%. The ECB stated that incoming information confirms that the moderate recovery of the euro area economy is proceeding in line with its precious assessment. However, the ECB also expects that there will be a prolonged period of low inflation. The ECB is committed to doing anything that will keep this period of low inflation from dragging on too long. Therefore key ECB interest rates are expected to remain low for some time yet.
9. Deputy Thomas Pringle asked the Minister for Finance the discussion that took place recently between Finance Ministers in Athens; the decisions made; and if he will make a statement on the matter. [16183/14]
View answerEuropean Finance Ministers met recently in Athens as part of the Greek Presidency. The Eurogroup (a meeting of the Finance Ministers of the 18 Eurozone countries) met first on the morning of 1st April chaired by the President of the Eurogroup and Dutch Finance Minister, Mr Jeroen Dijsselbloem. The second meeting was an Informal Ecofin meeting of the 28 members of the EU represented by Finance Ministers and Central Bank Governors. This meeting took place on the afternoon of the 1st of April and the following day, 2nd April. Ireland was represented by Minister of State, Brian Hayes TD and Governor Patrick Honohan.
The President of the Eurogroup speaks on behalf of the Eurogroup and, as is normal, held a press conference after the meeting. His remarks are available on the Eurozone press website. In summary, the Eurogroup meeting discussed the situation in Greece and in Portugal and it was updated on the state of play in the Ukraine. In addition, the draft budgetary plan of Luxembourg and an update on Banking Union were also covered. The main decision taken at the meeting was on Greece. The fourth review mission under the second macroeconomic adjustment programme for Greece has been concluded. This now allows for approval of the next agreed tranche of aid of EUR 8.3 billion which is to be released in three tranches in the coming months. A statement by the Eurogroup on Greece was issued after the meeting.
Regarding the Ecofin as the meeting was an informal gathering no decisions were taken. The primary purpose of an informal meeting is to allow Ministers to exchange views on a variety of topics and challenges affecting the EU. A number of guests, for example, Central Bank Governors and European institutions, are also invited to participate. A statement, summarising the discussions, was released by the Greek Presidency post the meeting and is available on their website.
On the key question of Europe's social problems and the present economic situation a research and policy paper was presented by the Brussels based economic organisation, Bruegel, on the link between economic growth and poverty and unemployment. This gave rise to a debate on how to ameliorate the plight of directly affected EU citizens such as the long term unemployed.
There was also a discussion on the economic outlook, growth prospects and financial stability in the EU. The general consensus was that the economic situation was improving but difficult decisions still needed to be made if sustainable growth was to be achieved.
The meeting also discussed the key question of how to improve access to long term financing of the economy and a report by the High Level Experts Group on SME and Infrastructure Financing. This High Level Group is co-chaired by the Secretary General of the Department of Finance who made a joint presentation to the Informal Ecofin on this issue. This is a very important initiative, given that the SME sector is part of the life blood of an economy, and indeed this matter had its genesis under our EU Presidency term.
The Ministers endorsed the key messages that the EU would take to the IMF/World Bank Spring meetings and the G20 Finance Ministers meeting on 10/11 April in Washington. These cover a variety of areas from the economic outlook to financial regulation to specific IMF issues.
Finally, the meeting had discussions and presentations on a number of banking related matters. These ranged from various banking structural measures, arising from the Commission's recent proposals for a Regulation on possible reform options, as well as receiving an update on the implementation of the Single Supervisory Mechanism which is due to come into effect towards the end of 2014 and an update on the overall situation on Banking Union and the Single Resolution Mechanism.
Overall, these were very productive meetings with key issues being discussed, with the informal nature of the proceedings allowing Ministers and Central Bank Governors to exchange views on critical issues.
In addition, a meeting also took place of the Joint Ecofin/Facility Euro-Mediterranean Investment and Partnership Ministerial Meetings co-chaired by the Ecofin President and the EIB President to discuss matters of growth and job creation, especially for young people, and a new EIB strategy for the Mediterranean region.
11. Deputy Mick Wallace asked the Minister for Finance his views on figures from the Central Bank of Ireland which show that the total lending to Irish households fell back to €106 billion in February, the lowest level since July 2005; and if he will make a statement on the matter. [16061/14]
View answerTotal household 'on balance sheet' outstanding loan amounts fell to €106 billion in February 2014, comprising 78 per cent loans for house purchase with the remainder relating to consumer credit and other loans.
Aggregate household indebtedness has been declining in Ireland over the last number of years, both in nominal terms and as a share of household income. To a certain extent this is a necessary process given the high and ultimately unsustainable levels of lending to households in the years to 2008. Households are also reducing their indebtedness in response to the large reduction in the value of their assets, mainly due to the considerable decline in the value of housing wealth in the years to 2013.
Consumption by households in Ireland fell by 7 per cent between 2008 and 2013 according to the CSO. This was due to a number of factors, both the substantial decline in employment over the period but the reduction in lending to households is likely to have played a part. Over the medium term high levels of household indebtedness and the need to repair household balance sheets are likely to mean that the savings rate will remain relatively high, with implications for household consumption.
Nonetheless, recent developments in the domestic economy have been positive of late. Employment grew by 3.3 per cent year-on-year in the last quarter of last year. Unemployment has fallen by three percentage points over the last three years. The recent Exchequer statement showed positive tax revenue growth in line with these positive developments in the labour market. Retail sales have been strong in the first months of the year, and were up 5.0% year-on-year in February. Turning to the outlook, my Department forecast 1.8% private consumption growth this year at Budget time. My Department will set out a revised set of forecasts as part of the Stability Programme Update (SPU) later this month.
12. Deputy Michael McGrath asked the Minister for Finance if he is concerned by the sharp decline in revenue seizures of illicit tobacco products; if this reflects a reduction in resources available to the Revenue Commissioners; and if he will make a statement on the matter. [16173/14]
View answerI am advised by the Revenue Commissioners that almost 41 million cigarettes and over 4,200 kilograms of tobacco were seized by them in 2013 as a result of their extensive programme of action against the illicit tobacco trade.
The quantity of cigarettes seized in 2013 was lower than in 2012 and 2011, when seizures amounted to 95.6 million and 109.1 million respectively. It must, be borne in mind, however, that the quantity of cigarettes seized in a given year can be influenced significantly by the occurrence of a particularly large seizure or seizures, and the level of seizures in 2013 must be viewed against the background of a number of very large seizures in the preceding years. I understand also that the Revenue Commissioners participate actively in multilateral controlled deliveries of smuggled cigarettes and tobacco, resulting in the seizure of illicit products in other jurisdictions before they reach Ireland.
I am advised also that the quantity of cigarettes seized has declined in most EU Member States over the last number of years and that this reflects, in considerable part, a changed practice adopted by the organised crime gangs that are responsible for a large element of the illicit trade. There has been a movement from large consignments in containers to smaller consignments in deeper concealment within groupage loads, and these can be more difficult to detect. The Revenue Commissioners and their counterparts in other EU Member States are working together to combat this form of smuggling and to ensure that the disruptive effect of seizures on the illicit trade is maximised.
The Revenue Commissioners arrange for annual estimations of the extent of the illicit cigarette market, through surveys of smokers undertaken for them and the Health Service Executive. The survey for 2012 found that 13% of the cigarettes consumed in Ireland were illicit. The comparable figure for 2011 was 14%. This would suggest that the extent of the problem is being contained, as a result of the action being taken against the smuggling and sale of illicit product.
I am aware that some other surveys indicate a higher level of illicit tobacco consumption. However, I do not accept the validity of these other surveys, as they are not representative of the entire smoking population and do not take into account legal personal imports from other jurisdictions.
The action to combat the illicit trade will continue to be a high priority for the Revenue Commissioners and they will continue to operate an extensive range of measures designed to identify and target those who are engaged in the sale or supply of illicit products, with a view both to seizing the illicit products and prosecuting those responsible.
In relation to staff numbers, I am informed by the Revenue Commissioners that they are a fully integrated tax and customs administration and that it is not possible to disaggregate resources deployed exclusively at any given time on action against the illicit trade in tobacco products. Revenue currently has approximately 2,000 staff engaged on activities that are dedicated to targeting and confronting non-compliance. These front-line activities include anti-smuggling and anti-evasion, investigation and prosecution, audit, assurance checks, anti-avoidance, returns compliance and debt collection.
The Revenue Commissioners are subject to the Employment Control Framework staffing reductions imposed since 2009. Revenue's overall staffing levels have reduced from a total of 6,581 full-time equivalents at the end of 2008 to the current level of 5,757. Notwithstanding this reduction, Revenue staff resources assigned to compliance activities have been maintained at around 2,000. The Revenue Commissioners are committed to ensuring that, despite the staffing reductions, enforcement work generally, and action against the illicit tobacco trade specifically, will continue to be resourced to the maximum extent possible.
13. Deputy Éamon Ó Cuív asked the Minister for Finance his view on light touch regulation in the financial services industry; and if he will make a statement on the matter. [15986/14]
View answerThe experience of the financial crisis has discredited 'light touch' regulation. The response of the Government to the regulatory failures identified in the reports by Governor Patrick Honohan, Messrs. Regling and Watson and the Nyberg Commission has been to put in place a system of robust regulation, with assertive risk-based supervision underpinned by a credible threat of enforcement.
The Central Bank Reform Act 2010 created a single fully-integrated Central Bank of Ireland, with a more complete remit over prudential regulation and financial stability issues.
The 2010 Act also increased the transparency and accountability of the Central Bank. For example, the Central Bank will soon publish its annual performance statement, which will be laid before the Houses of the Oireachtas. The Act includes a requirement for the Governor and the Deputy Governors to appear before an Oireachtas Committees - if requested - to provide information regarding the annual regulatory performance statement. The Central Bank is also scheduled to undergo an International Peer Review of its regulatory performance later this year.
The Central Bank and Credit Institutions (Resolution) Act 2011 provides the necessary mechanisms to enable the Central Bank to intervene where a credit institution gets into serious difficulty and is in danger of becoming destabilised or otherwise failing.
The Central Bank (Supervision and Enforcement) Act 2013 further strengthens the ability of the Central Bank to impose and supervise compliance with regulatory requirements and to undertake timely regulatory interventions.
These legislative reforms have been supplemented by a significant increase in regulatory activity by the Central Bank, with a corresponding increase in staff numbers and skill levels.
I am satisfied that these reforms, in addition to the many reforms being introduced at European level, have brought our regulatory system into line with international best practice.
14. Deputy Clare Daly asked the Minister for Finance his estimate of the potential bank recapitalisation liabilities to the State should rate fixing allegations made in a US lawsuit prove to be accurate; if his attention has been drawn to any other foreign jurisdiction lawsuits which carry potential liabilities for the National Asset Management Agency and the State. [16179/14]
View answerI am advised by NAMA that it does not accept that it will incur any liabilities with respect to any foreign jurisdiction lawsuits and it will defend itself fully with respect to any such litigation. The management of litigation is a matter for the Board of NAMA.
I have been advised by the Special Liquidators of IBRC that the bank identified overcharging issues in the bank in June 2010. A steering committee was established to oversee a forensic investigation into the circumstances surrounding this overcharging issue and to ensure that affected customers were fully refunded the overcharge amount together with appropriate compensation. Project teams within IBRC calculated the amount of interest overcharge and compensation for every affected customer and refunds plus compensation cheques were made available to affected customers by the end of Q1, 2012. The Special Liquidators have further advised that in the Republic of Ireland any claims made in relation to the potential overcharging of interest would likely rank as unsecured creditors in the liquidation.
15. Deputy Pearse Doherty asked the Minister for Finance his views on the recent OECD paper the Tax Challenges of the Digital Economy on the taxation of multinational companies and its potential impact on Ireland; and the way he is seeking to influence the debate on global taxation. [16067/14]
View answerI would like to highlight that the OECD paper, to which the Deputy refers, is a consultation document, which was published to generate discussion and to seek the views of interested parties. The consultation period is open until the middle of this month. I would like to stress that the OECD working group which is examining this issue has still not made any decisions on the likely final outcome of their analysis. The paper is very clear in that regard and states, on page 62, "Although the Task Force has initially discussed the proposals, it has not yet reached any conclusions about any of these proposals, which are still in the process of being developed". The paper also discusses the so-called digital economy and examines whether special tax rules might be required. It concludes, on page 24, "the digital economy is increasingly becoming the economy itself, it would be difficult, if not impossible, to ring-fence the digital economy from the rest of the economy". The digital economy is not a specific sector of the economy anymore rather the whole economy is becoming digitalised. Furthermore the paper addresses the issue of electronic commerce and the long-standing taxation principles which apply. Page 6 of the paper concludes "The Task Force considers that these principles are still relevant today and, supplemented as necessary, can constitute the basis to evaluate options to address the tax challenges of the digital economy". Therefore the existing principles remain sound, although there might be a need for changes in certain areas.
I have seen the recent media comment on the potential dangers for Ireland if these proposals were adopted but, while we must always be vigilant, I am reasonably confident that the final proposals to be submitted for OECD approval, will differ from this discussion draft.
My officials as well as their colleagues in the Office of the Revenue Commissioners will continue to engage at the various working groups to ensure that Ireland's views are considered.
16. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which budgetary projections have remained on target since exit from the bailout; if particular issues have arisen which might need particular attention in the future; and if he will make a statement on the matter. [16185/14]
View answerAs the Deputy will be aware, this Government has met all of its targets to date and has achieved substantial progress in setting the public finances and the economy back on the road to good health and this has been acknowledged by the European Commission, the International Monetary Fund, the European Central Bank and most economic commentators.
The Exchequer statement for the first quarter of 2014 was published last Wednesday, 2nd April 2014 by my Department and the Department of Public Expenditure and Reform. The Exchequer Statement showed that the Exchequer deficit at end quarter 1 2014 stood at €2,316 million, which represented an improvement of €1,379 million compared to quarter 1 2013.
Budget 2014, forecasted tax revenues of €40,040 million in 2014, and our target for the first quarter of 2014 was €8,975 million. Tax revenues of €9,232 million were collected at the end of the quarter 1, an increase of €415 million or 4.7% on the same period last year and €257 million or 2.9% above profile.
Post publication of the Exchequer Returns, the Central Bank informed my Department of a discrepancy in the Exchequer returns. The overall level of tax collected is unchanged. For example, in March, €101 million of revenue was attributed to VAT that should have been attributed to income tax. The Department, the Revenue Commissioners and the Central Bank are currently examining the issue and a revised Exchequer statement will issue in due course.
While expenditure is primarily a matter for the Minister for Public Expenditure and Reform, it is also worth pointing out that at the end of quarter 1 2014, expenditure on public services is within Budget. Total net voted expenditure of €10,264 million was down €631 million or 5.8% in year-on-year terms and €261 million (2.5%) below profile.
As I stated in relation to the end-March Exchequer Statement, performance in the first quarter of 2014 highlights that the Government's plan to restore order to our public finances is working. Tax revenues continue to grow in line with profile and expenditure on public services is within Budget.
Notwithstanding this solid start to 2014, we have to continue to reduce our level of spending and increase the amount of revenue we collect in order to close that gap further and ensure the sustainability of the public finances.
Finally, my Department will produce updated macroeconomic and budgetary forecasts in the Stability Programme Update to be published later this month. These will take account of the latest economic and fiscal data and will give updated deficit projection over the forecast horizon.
17. Deputy Thomas P. Broughan asked the Minister for Finance his proposals for legislative reform of the manner in which the Financial Services Ombudsman operates, including an increased levy on industry to fund a more comprehensive FSO which can respond to consumer needs. [15983/14]
View answerFirstly, I must point out that the Financial Services Ombudsman is independent in the performance of his statutory functions. I have no role in the day to day workings of the office.
The Financial Services Ombudsman was set up to adjudicate on unresolved disputes between complainants and financial service providers in an independent and impartial manner.
The Central Bank and Financial Services Authority of Ireland Act 2004 provided for the establishment of the Financial Services Ombudsman Council. The main functions of the Council are:
- to appoint the Financial Services Ombudsman and each Deputy Financial Services Ombudsman,
- to prescribe guidelines under which the Ombudsman is to operate and
- to determine the levies and charges payable for the services provided by the Ombudsman.
One of the statutory functions of the Council is to keep under review the efficiency and effectiveness of the Bureau and advise the Minister for Finance, either at my request or on its own initiative, on any matter relevant to the operation of the Bureau.
Under section 57BE of the Central Bank Act 1942 (as amended), the Financial Services Ombudsman Council may impose levies and fees to enable the Financial Services Ombudsman to perform the functions assigned to him and to exercise the powers conferred on him by statute. Under section 57 BF, the regulations do not take effect until the Minister has consented to them in writing.
The Financial Survives Ombudsman Council has informed me that they are satisfied with resources at the moment. Any Legislative amendment necessary will be decided by the Steering Committee in the context of any legislative change necessary for the proposed merger with the Pension Ombudsman.
I have no plans to recommend to Government that legislation in relation to the Financial Services Ombudsman be introduced at this time.
18. Deputy Mattie McGrath asked the Minister for Finance the amount of money paid by his Department for consultancy or any other type of accounting or auditing work to PricewaterhouseCoopers and KPMG in the past two and a half years; the names of the reports received and the dates on which they were commissioned; and if he will make a statement on the matter. [16085/14]
View answerThe Department did not engage either firm (PwC, KPMG) for consultancy or any other type of accounting or audit work in the past two and a half years.
The Department did second a number of PwC staff. The staff concerned worked in the Financial Services Division where they provided specialist advice. The assignment did not involve the commissioning of any reports. From 1 October 2011 to date, the total costs of the secondment arrangement was €340,550.
19. Deputy Barry Cowen asked the Minister for Finance the steps he will take regarding the future of the windfall tax on rezoned land; and if he will make a statement on the matter. [11880/14]
View answerI assume the Deputy is referring to the windfall gains provisions in Sections 644AB and 649B of the Taxes Consolidation Act 1997, introduced by Section 240 National Asset Management Agency Act 2009 and amended by Section 25 Finance Act 2010, which apply an 80% rate of tax to the windfall profits or gains from land disposals where those profits or gains are attributable to a relevant planning decision by a planning authority rather than to any value attributable to the work of the landowner.
The operation of these provisions will be considered, in the same way as other relevant tax provisions, as part of the normal preparations for Budget 2015 and consequent Finance Bill.
20. Deputy Seán Kyne asked the Minister for Finance in the context of the review of the EU VAT directive and with regard to the campaign by MEPs, supported by national public representatives, if he will extend the favourable VAT terms which currently apply to marine-based rescue services to mountain rescue teams, and in consideration that the overall decision will be made by the relevant Council of Ministers, if he shares the view that predominantly voluntary mountain rescue teams here should be permitted an exemption from VAT for the procurement of equipment which is essential to their work; and if he will make a statement on the matter. [16180/14]
View answerVAT law is governed by the EU VAT Directive, with which Irish VAT law must comply. The EU VAT Directive makes specific provision under Articles 148 and 169 for a zero rate of VAT to apply to the supply of vessels for rescue or assistance at sea. Irish VAT law transposed this provision in 1978 by providing that the zero rate of VAT apply to the supply of large vessels used for sea rescue. In addition, a VAT Refund Order for the purchase of smaller sea rescue vessels was introduced from 1985, and extended in 2013 to apply to vessels for inland water rescue. Irish VAT law does not specifically provide a refund of VAT for mountain rescue teams purchasing mountain rescue equipment, as this is not provided for under the EU VAT Directive.
Where VAT law is amended at EU level to provide that VAT does not apply to mountain rescue equipment or for the introduction of a compensation for VAT incurred on mountain rescue equipment, I will then consider introducing such a reform, taking into consideration the wider Exchequer implications of such a provision.
21. Deputy Michael McGrath asked the Minister for Finance if he will request permission to repay Ireland’s IMF loans prior to the maturity dates without triggering the need to repay other loans under the EU-IMF programme; and if he will make a statement on the matter. [16171/14]
View answerAs I have previously outlined in my reply to PQ Reference No. 6839/14 of 11 February 2014, the question of early repayment of any one lender cannot be treated in isolation from other lenders and market expectations for when programme loans are due to be repaid. The early repayment of IMF funds would trigger automatic mandatory proportional early repayments to the EFSF, EFSM, United Kingdom, Kingdom of Sweden and Kingdom of Denmark. This would apply in respect of each of the programme funding partners.
The impact of early repayment of our IMF loans on our bond yields would need to be carefully considered were such a possibility to arise. Should that possibility arise, I would take the advice of the NTMA on this matter. If such a proposal were to be pursued, the agreement of the other lenders would of course be required. The matter of early repayment of our IMF loans, and thus requesting permission to repay Ireland's IMF loans prior to the maturity dates, does not arise at the moment but we will keep it under review. I should also point out that, as the IMF loans have a shorter average maturity, they will be repaid considerably in advance of the EFSF and EFSM loans for which we negotiated maturity extensions.
22. Deputy Michael McGrath asked the Minister for Finance if he has expressed concern to the European Commission at the delay in concluding an agreement on the restructuring plan for Permanent TSB; and if he will make a statement on the matter. [16170/14]
View answerA way forward for Permanent TSB was agreed with the Troika in April 2012 which envisaged it playing an important role in the future of Irish retail banking, being a more focused retail bank bringing an element of competition to the marketplace which has consolidated significantly since 2008. In this regard Permanent TSB prepared a Restructuring Plan, which the Department of Finance submitted to the European Commission ("the Commission") in June 2012. As requested by the Commission an updated version of the plan was submitted in August 2013 which is broadly in line with the June 2012 plan.
Discussions are ongoing at a technical level in relation to the plan, details of which are confidential between the parties and commercially sensitive. I do not intend to speculate on when that process might be concluded.
As the Deputy will be aware Permanent TSB is not alone in seeking such approval. I am also seeking approval from the European Commission for the Restructuring Plan submitted by AIB. While no plan has been approved, Permanent TSB has made significant progress in delivering key elements of the Restructuring Plan submitted over the last year and the business is being managed structurally in the way envisaged in the plan. Permanent TSB continues to work to enhance the value of our investments through the continued delivery of the Restructuring Plan, which will, if delivered, provide the State with more optionality regarding the future structure of Permanent TSB.
During 2013 Permanent TSB grew its presence and activity in the retail market in general and in the current account and deposit markets in particular, as well as in mortgages and term lending; and it launched several new products during the year. I am advised that Permanent TSB paid out over €200m in mortgage lending in 2013 and that it had a market share of retail deposits of circa 13%. As a result of the progress made during 2013 Permanent TSB is now a genuine and important competitor in the retail banking market.
Permanent TSB has also made progress in relation to managing its portfolio of mortgages in arrears and has created a dedicated team to deal with those customers and to roll out various solutions to them. I am advised by Permanent TSB that during 2013 it made approximately 18,000 offers of long term sustainable solutions to customers in arrears or having difficulty with their mortgage repayments.
The current strategy is for Permanent TSB to be an independent bank, competing within targeted segments of the retail banking market, and I will continue to support the board and management in the delivery of that strategy.
23. Deputy Clare Daly asked the Minister for Finance with respect to the revision of the EU anti-money laundering directive, if it remains Irish policy to resist this measure although it is believed that a public register of true or beneficial owners of companies, as contained in the directive, will stem the flow of illicit money around the world and help to defeat capital flight from the poorest nations in Africa, where some estimates of revenue losses to exploited nations are approximately twice the amount provided annually in aid; and if he will make a statement on the matter. [16178/14]
View answerThe proposed 4th Anti-Money Laundering Directive seeks to update the 3rd Directive to take account of the February 2012 revision of the international standards for anti-money laundering requirements - the recommendations of the Financial Action Task Force (FATF).
This is a very important piece of legislation and we continue to support transparency across all financial services files. The proposed 4th Anti-Money Laundering Directive covers a number of policy areas which come under the responsibility of a number of different Departments and the issue of beneficial ownership of companies falls under the remit of the Department of Jobs, Enterprise and Innovation.
Having consulted with the Minister for Jobs, Enterprise and Innovation, the national position is that Ireland supports the idea that beneficial ownership should be known, in fact there are already provisions in place which allow for enforcement authorities and other shareholders to identify beneficial owners of companies when required.
Ireland agrees that the need for accurate and up-to-date information on the beneficial owner is a key factor in tracing criminals who might otherwise hide their identity behind a corporate structure. At EU level Ireland has supported the Presidency approach which would require that Member States ensure that the beneficial ownership information on companies incorporated within their territory is held in a specified location, for example, in one or more registries, or by means of other suitable mechanisms.
However, negotiations are continuing on this directive at the Council of the EU and the final provisions on beneficial ownership will only be agreed as part of the overall agreed directive.
24. Deputy Richard Boyd Barrett asked the Minister for Finance the discussions that have taken place regarding potential income tax reductions and or changes to the USC in budget 2015; and if he will make a statement on the matter. [16154/14]
View answerThe Deputy will be aware that I have stated my belief that the income tax burden is currently too high in Ireland and that I believe it needs to be reduced. However, I have also said that although it is my intention to alleviate the burden I can only do so when the public finances allow it. Lest it has escaped anybody's attention, the general government debt at end 2013 is currently estimated to be just over €200 billion and each year where we incur an annual deficit that figure grows. It is imperative that we, at the very least, are able to meet the interest costs on this debt if this is not to spiral ever upwards. Interest payments are the least productive area of government expenditure and what we currently spend on interest could be put to better use elsewhere.
Although we have successfully exited the EU/IMF bailout this does not mean that we will ever allow a return to past practices where expenditure grew to unsustainable levels while the tax base was simultaneously hollowed out.
The Government remains committed to returning the public finances to sustainability. Under the terms of the Stability and Growth Pact, until Ireland has reached its objective of a balanced budget in structural terms, we may not introduce discretionary revenue reductions unless they are matched by other revenue increases or expenditure reductions. This means that Government must consider carefully any tax changes as any reductions will have to be offset elsewhere.
Having said this, it should be acknowledged that Ireland has a progressive taxation system which ensures that the burden of taxation falls most heavily on those with a higher ability to pay. The latest data from the OECD's 2013 Taxing Wages report shows that Ireland has one of the most progressive income tax systems in the developed world. It is in this context that the Government has committed in the Programme for Government not to increase the marginal rate of income tax.
The Programme for Government also contains a commitment not to change tax credits which at current levels ensure that an estimated 856,000 income earners are excluded from the charge to income tax entirely. The low effective tax rates for low income earners ensure that work pays and is a growth friendly aspect of Ireland's tax system. However against this Ireland has one of the highest top marginal tax rates in the OECD, whilst also having a very low entry point to the application of the top marginal rates. These aspects are less growth friendly due to their negative labour supply incentives.
Recent research from my Department has indicated that growth and employment prospects can be enhanced through a careful rebalancing of the tax system away from labour taxation towards greater use of capital and consumption taxes. Research by the OECD and the European Commission would also support such a rebalancing. These insights are useful given the fiscal constraints to which I have already referred.
It is a little early to consider, let alone set out, changes to the tax system in advance of the Budget, which is just over six months away. As is normal, my officials will model and examine potential options for changes to the tax system for my consideration as part of the overall Budget package.
25. Deputy Pearse Doherty asked the Minister for Finance the principles he will follow when deciding on the voting position on the issue of bankers’ remuneration at the annual general meetings of banks in which the State is a shareholder. [16064/14]
View answerAs the Deputy will be aware the Review of Remuneration Practices & Frameworks at the Covered Institutions (the "Mercer Report") was published by my Department on 12th March 2013. Following the publication I requested that the three banks in which the State is a shareholder make total remuneration cost savings of 6% to 10%. The three banks responded with their individual strategies, designed to achieve the required savings, by the due date of 30 April as requested. I was not prescriptive in how this was to be achieved respecting their differing State ownership and investment and paths to profitability. I reviewed the plans submitted and in light of the various industrial relations developments during 2013 I was satisfied that the banks' plans would meet my direction.
It is worth noting in this context that in their respective 2013 annual results, AIB reported a 16% year-on-year decline in costs while ptsb reported a 13% decline in staff costs. Including a one-off pension related gain of c€400m, Bank of Ireland's total costs reduced by 28% year-on-year. Despite this momentum it is imperative that all the banks make every effort to hold down costs in the coming years and particularly staff related costs which form the lion's share of total costs. As the Deputy will be aware I recently signalled that I will not approve of any return to bonus schemes at these banks as this would not be appropriate at this time.
With respect to the forthcoming shareholder meetings, only Bank of Ireland has issued the documentation for its Annual General Court to be held on April 25th. My Department will fully peruse all the documentation before deciding the appropriate vote for each of the resolutions and, as always, will vote in the best interest of the State and to maximise the return to the taxpayer. In the case of AIB and PTSB my department has yet to receive notification of the resolutions for their annual general meetings.
26. Deputy Joan Collins asked the Minister for Finance if the ECB seeking his Department to dispose the €25 billion of sovereign bonds to the open market in 2014. [15982/14]
View answerI assume the Deputy is referring to the bonds issued to the Central Bank of Ireland to replace the IBRC Promissory Notes in February 2013.
The Central Bank of Ireland is independent in the exercise of its functions and the management of its investment holdings are a matter for the bank themselves, neither I nor the Department of Finance have any role in the matter.
I have been advised by the Central Bank that the portfolio of Government bonds now held by the Central Bank following the liquidation of IBRC will be sold in accordance with the schedule listed below, taking conditions of financial stability into account.
The Central Bank has undertaken that a minimum amount of bonds will be sold in accordance with the following schedule: to end 2014 (€0.5bn), 2015-2018 (€0.5bn p.a.), 2019-2023 (€1bn p.a.), 2024 and after (€2bn p.a.). The Central Bank normally reports in detail on its balance sheet only at annual intervals although it also publishes a more aggregate balance sheet on a monthly basis. While the latter does not contain details of its investment holdings, it is my understanding that, in its Annual Report for 2013, the Central Bank will report on any progress towards the €0.5 billion minimum sales by end-2014.
27. Deputy Richard Boyd Barrett asked the Minister for Finance the latest developments in the Government's efforts to achieve retrospective recapitalisation of the Irish banks and to reduce Ireland's debt burden; and if he will make a statement on the matter. [16151/14]
View answerAs I have outlined in my replies to a number of previous Parliamentary Questions, the Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns", and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism could recapitalise banks directly.
The Eurogroup meeting on 20th June 2013 agreed on the main features of the European Stability Mechanism's Direct Recapitalisation Instrument or DRI. There is a specific provision included in those main features, which states that "The potential retroactive application of the instrument should be decided on a case-by-case basis and by mutual agreement." Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.
The operational framework of the DRI has been discussed at ministerial level and the aim is to complete this discussion as soon as possible in order to allow the ESM Member States sufficient time to complete any necessary national procedures before the SSM is in place and operational later this year.
Finally, both I and my Government colleagues will ensure that Ireland's case for retrospective direct recapitalisation is made at all levels as appropriate. I remain confident that the commitment made by the Euro-area Heads of State or Government in June 2012 to break the vicious circle between banks and sovereigns will be respected.
28. Deputy Pearse Doherty asked the Minister for Finance if he is satisfied with testimony given to the Joint Committee on Finance and Public Expenditure and reform by the special liquidators recently, when a person (details supplied) revealed that the legal firm advisers to Irish Nationwide Building Society since 2001, who advised against the suing of the firm's auditors KPMG in 2009, is the legal firm giving advice to the special liquidators now to not sue KPMG. [16065/14]
View answerI have been advised by the Special Liquidators that they have held discussions with McCann Fitzgerald who have confirmed that their work during the period concerned did not involve assessing the business strategy of Irish Nationwide Building Society ( INBS ), corporate governance and/or audit issues.
The Special Liquidators have informed me that McCann Fitzgerald confirmed that they would certainly have not considered themselves as standing Counsel to INBS and that they were only involved in one large project for INBS, namely the demutualisation process and the proposed sale of INBS, that subsequently did not go ahead.
In summary I have been advised therefore that no conflict exists in accordance with the views of KPMG, McCann Fitzgerald and/or the new board appointed to INBS.
29. Deputy Dessie Ellis asked the Minister for Finance the reason the Revenue Commissioners have seen only a 3% rate for deferrals and exemptions from the local property tax compared to the 15% rate predicted by his Department at the introduction of the tax. [16063/14]
View answerI am advised by the Revenue Commissioners that the most recent Local Property Tax (LPT) data published by them is available on the Commissioners' website at: http://www.revenue.ie/en/tax/lpt/lpt-stats-0214.pdf. This covers statistics for both 2013 and 2014 (to February 2014).
As indicated in the Revenue Commissioner's statistics, there are about 18,700 properties where deferrals have been claimed and around 28,300 claims for exemptions among the returns processed to date. These equate to about 1.2% and 1.8% of properties returned respectively. These figures are primarily based on claims submitted by property owners in their LPT returns.
As the Deputy notes, earlier forecasts predicted that the level of deferrals and exemptions could be substantially higher. These figures were estimated prior to the implementation of LPT. While considerable effort may have been put into initial estimates of possible levels of exemption and deferral, the impact of the actual exemption and deferral provisions could not be accurately determined until the returns process has been completed.
It should be noted that deferral is a personal choice issue for property owners and some, although they meet the conditions of deferral, may opt to pay the tax if their means allow it. Consequently, even if the number of potential eligible cases were known in advance with accuracy, it would not have been possible to estimate the number that would actually apply for a deferral.
Revenue estimates that the compliance rate for 2013 is currently at 93%. It may be the case that some property owners have not claimed an exemption on the misapprehension that they are automatically entitled to one. Indeed, these properties may well account for a significant share of the current non-compliant group. It is important for property owners to be aware that they must apply for exemption from LPT as it will not be granted automatically and the Revenue Commissioners advise that this has been a key part of their communications message since the introduction of the tax.
30. Deputy Mick Wallace asked the Minister for Finance his views on the need for a global tax on individual net worth; if he has had discussions at an EU level on the feasibility of a global wealth tax; and if he will make a statement on the matter. [16060/14]
View answerI have not been involved in any discussions at an EU level as regards the feasibility of a global wealth tax, nor am I aware of any work at a global level on a wealth tax.
A global wealth tax would interfere with the sovereign right of countries to set their own taxes, and given that there is no international framework for such a global tax it is not clear how it might work.
While all taxes and potential taxation options are constantly reviewed, the Government has no current plans to introduce a wealth tax.
