Written Answers Nos. 1-30
7. Deputy Denis Naughten asked the Minister for Finance the actions being taken to obtain EU approval for economic incentives which have been announced by Government; and if he will make a statement on the matter. [22175/14]
View answerThe Living City Initiative, outlined in the Finance Act 2013, is a pilot project which provides certain tax incentives to make it more attractive for people to live in historic and culturally significant city centre houses. The initiative also offers incentives for retailers and small businesses in those areas. This Initiative is subject to EU State Aid approval and a commencement order. An ex ante cost benefit analysis was conducted in the summer of 2013 and published alongside Budget 2014. An application for EU State Aid approval was submitted in March 2013 and officials have been in communication with the Commission since then.
The Film relief scheme has been in place since 1987. The Finance Act 2013 introduced new provisions to ensure that Film tax reliefs will accrue to the producers rather than investors and result in tax savings for the Exchequer. Budget 2014 extended the definition of 'eligible individual' to include non-EU talent, in conjunction with the introduction of a withholding tax. It is intended to commence these provisions once EU State Aid approval has been given. The Department of Arts, Heritage and the Gaeltacht are progressing this State Aid approval with the EU Commission.
A capital gains tax relief for entrepreneurs who reinvest the proceeds from the disposal of assets made on or after 1 January 2010 in certain chargeable business assets was announced in Budget 2014 and provided for in Section 45 of Finance (No 2) Act of 2013. The section requires a Commencement Order, which has not been made. Commencement of the legislative provisions is subject to EU state-aid approval. A pre-notification of state aid was made to the Commission on 20 February last. The purpose of the pre-notification is to facilitate the easier passage of the measure through any formal State-aid notification. Officials from my Department and the Revenue Commissioners discussed the pre-notification details with the Commission recently. Further consultation is due to take place shortly in order to advance this matter.
A tax scheme for the construction or refurbishment of certain aviation services facilities, as provided for in Finance Act 2013, is subject to EU approval. This measure was announced as part of Budget 2013 and an application was made to the EU Commission on 18 June 2013. Since then discussions have been ongoing with the Commission with a view to securing the necessary approval. A meeting was held with officials in the Commission on 6 March 2014 in relation to issues they had with the scheme and discussions continue with a view to resolving those issues and receiving approval as soon as possible.
An exemption from Stamp Duty on the transfer of shares of companies listed on the Enterprise Securities Market of the Irish Stock Exchange was announced as part of Budget 2014. This measure is subject to EU approval. A pre-notification of state aid was made to the EU Commission on 4 February 2014. Further information was furnished to the Commission, at its request, on 7 March 2014. A reply from the European Commission on 14th May last (in response to follow up from my officials) indicated that certain issues required further clarification. My officials are in the process of responding to the Commission and progressing the matter. The estimated Exchequer cost is €5m and the proposed measure aims to encourage entrepreneurs and growing businesses to use public equity markets as a source of funding for growth and the creation of jobs.
10. Deputy Lucinda Creighton asked the Minister for Finance the reporting mechanisms and training received by Central Bank of Ireland officials for reporting matters to An Garda Síochána under section 33AK of the 1942 Act, as required in the past five years; and if he will make a statement on the matter. [22174/14]
View answer41. Deputy Lucinda Creighton asked the Minister for Finance the total number of cases where suspicions of a criminal offence arose and the Central Bank of Ireland reported the matter to An Garda Síochána, as required under section 33AK of the 1942 Act, in the past five years; the nature of the complaints reported; and if he will make a statement on the matter. [22173/14]
View answerI propose to take Questions Nos. 10 and 41 together.
I have been informed by the Central Bank that supervisors employed at the Central Bank are informed of their obligations under Section 33AK of the Central Bank Act 1942 as part of their training. In terms of the reporting mechanism in place at the Central Bank, I have been further informed that each supervisory area has a mechanism for reporting matters to An Garda Síochána. Where issues arise, qualified legal experts from the Legal and Enforcement Divisions of the Central Bank are available to Central Bank staff for consultation.
Section 33AK of the Central Bank Act 1942 requires inter alia that Central Bank staff report to the appropriate specified bodies (including amongst others An Garda Síochána) any information that leads them to suspect that a criminal offence may have been committed by an entity supervised by the Central Bank. The Central Bank regularly submits such reports to the specified bodies. The total number of reports made in each calendar year to the appropriate specified bodies are included, in aggregate, in the Central Bank's Annual Reports.
As per the figures included in the Annual Reports 2009 to 2013 inclusive, the Central Bank has submitted 689 such reports in that period. The vast majority of these reports were made to An Garda Síochána, however, the figures are not broken down by agency over the full five year period. While the nature of the reports varies, the majority are under the Central Bank Acts and Criminal Justice Acts 1994 and 2010, with a smaller number of reports under, amongst others, the Insurance Mediation Regulations, MiFID and Building Society Act.
12. Deputy Michael McGrath asked the Minister for Finance his views on the rate at which the banks are dealing with mortgage arrears, in view of his Department's recent figures which show that three quarters of residential mortgages in arrears over 90 days are yet to have a long-term restructuring arrangement put in place; and if he will make a statement on the matter. [23031/14]
View answer16. Deputy Pearse Doherty asked the Minister for Finance when and the way in which he expressed the view to each of Ulster Bank, Bank of Ireland, AIB and Permanent TSB that letters threatening repossession or legal action will not be considered a sustainable solution under the mortgage arrears targets and should only ever be considered after every possible avenue for solution has been exhausted. [23023/14]
View answerI propose to take Questions Nos. 12 and 16 together.
As statutory regulator of credit institutions, the Central Bank has the power to require banks to meaningfully address mortgage arrears cases on their books. The Central Bank has set specific targets, which the six main banks are required to meet on a quarterly basis, in terms of offering and concluding sustainable solutions for those in mortgage arrears of greater than 90 days.
The Central Bank has advised that the purpose of setting the targets is to:
- Return as many loans as possible to performing status;
- Where necessary to make such modifications to loans as are necessary to ensure a sustainable outcome, or
- If a sustainable alternative repayment arrangement is not appropriate or possible, to put another arrangement or process in place to resolve the matter.
As well as imposing the Mortgage Arrears Resolution Targets (MART), the Central Bank has had ongoing frequent engagement with the banks. It is the Central Bank's view, based on the feedback generated, that the MART as designed and implemented has supported an increased focus on long term solutions. The Deputies will be aware that the Governor of the Central Bank confirmed to the Oireachtas Committee on Finance, Public Expenditure and Reform on 30 April that, based on the information submitted for end-December 2013, the banks have proposed sufficient numbers of solutions to meet the targets of proposing solutions to 50% and concluding solutions for 15% of accounts in arrears greater than 90 days.
The monthly mortgage restructures and arrears data published by my Department also provides an impetus for the six MART banks to increase the pace of provision of mortgage restructures. The latest publication, in respect of the end of March, shows that some progress has been made in putting permanent mortgage restructures in place. For example, the total number of permanent restructures of principal dwelling houses (PDH) mortgages has risen from around 51,000 in December to around 62,000 in March 2014. This data, as well as the Central Bank quarterly mortgage arrears publications, would appear to demonstrate some success by the lenders in addressing the accounts in arrears as well as measures to prevent borrowers from going into arrears.
The Central Bank has advised that its MART publication of March 2013 clearly indicates that where a lender relies on legal action to address an arrears situation it must be able to demonstrate that an alternative arrangement could not be reached or is not appropriate. It is important to point out that in respect of co-operating borrowers under the Mortgage Arrears Resolution Process, the strong view of Government is that repossession of a person's primary home should only be considered as a last resort and that every effort should be made to agree a sustainable arrangement as an alternative to repossession. My officials in their regular meetings with the lenders have expressed the clear view of Government that the lenders should make every effort to agree a sustainable arrangement as an alternative to repossession.
It will now be necessary to build on the measures implemented by Government such as the reform of the insolvency service process, the mortgage advisory service and the mortgage to rent scheme. The issue of mortgage arrears is a major problem that needs to be resolved, not only for an individual borrower, but also for the long term economic and social health of the country.
13. Deputy Michael McGrath asked the Minister for Finance his views on the length of time it takes the European Commission to approve budget day announcements which are subject to state aid rules; and if he will make a statement on the matter. [23034/14]
View answerThe EU's State Aid rules are in place to protect the Single Market and to ensure that the resources of a Member State cannot be used in a way which would create distortions in the market, either domestically or throughout the EU, and provide certain market sectors with a competitive advantage. As a small, open, export-led economy, Ireland is a keen supporter of the Single Market and we fully support the European Commission's approach to protect the integrity of the Single Market.
Occasionally, Member States will wish to use their resources, either by way of direct grants or tax reliefs, to encourage a particular activity. The EU's State Aid rules preclude such measures except in very specific defined circumstances, such as promoting culture or heritage conservation or to promote economic development in deprived areas. The Commission have very strict criteria against which they assess any proposals from Member States in this area.
It is reasonable to assume that the European Commission receives a large number of this type of proposals from Member States, all of which have to be thoroughly examined. While the process might seem lengthy, it is an important safeguard in the context of a Single Market which Ireland strongly supports. I am sure that we would all like to see the process move a lot faster but equally there is a need to get it right.
14. Deputy Maureen O'Sullivan asked the Minister for Finance the rationale behind the suggestion of increasing the universal social charge by 7% when assurances were given that the USC was only a temporary measure; his view on whether the taxpayer can afford this increase on top of the upcoming water charges; and if he will make a statement on the matter. [23045/14]
View answerThe Universal Social Charge (USC) was introduced in Budget 2011 to replace the Income Levy and the Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and raise revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced. It is applied at a low rate on a wide base. I should point out that it was never intended that the USC would be a temporary measure. It was designed and incorporated in to the Irish taxation system as part of its permanent structure and the revenues collected play a vital part in meeting the many expenditure demands placed on the Exchequer.
As you may be aware, delivering on a commitment in the Programme for Government, the USC was reviewed by my Department in the lead up to Budget 2012 and the report of that review is available on the Department's website. As a result of the review, the Government decided in Budget 2012 to increase the entry point to the Universal Social Charge from €4,004 to €10,036 per annum. It is estimated that this removed almost 330,000 individuals from the charge.
Regarding any increase in the rate of USC, I assume that the Deputy is referring to the fact that the previous Government, when they introduced the USC, legislated for an exemption from the top rate of USC for those on medical cards and for those aged over 70. That which applies to medical card holders is due to expire at the end of this year. These individuals are subject to USC at a reduced rate of 4% on their income above €16,016, compared to the general taxpayer who pays at 7% on income over €16,016. In Finance Act 2013, this exemption from the top rate of USC was restricted to those on medical cards and those over 70 who had aggregate income of less than €60,000 per annum. In the absence of legislative change in the next Finance Bill, the exemption from the top rate of USC for qualifying medical card holders would expire. However, individuals who are over 70 and whose aggregate income does not exceed €60,000 would continue to be exempt from the top rate of USC.
I can assure the Deputy that the USC provisions that are due to expire at the end of this year will be subject to a full examination, as part of preparations for the Budget and Finance Bill and will not be allowed to lapse without significant consideration of the matters involved.
15. Deputy Maureen O'Sullivan asked the Minister for Finance if he will act in support of a range of countries around the world that are experiencing debt distress by raising their cases through Ireland's membership of the World Bank and IMF and through relevant regional banks which lend to those countries; if he will pay particular attention to the Caribbean region where this month the Caribbean Community, CARICOM, called for debt cancellation and wider economic justice measures for the region, which experienced an average debt-to-GDP ratio of 70% in 2012, increasing to more than 90% for the Eastern Caribbean Currency Union; and if he will make a statement on the matter. [23046/14]
View answerIreland is recognised internationally for its contribution to the fight against global poverty and hunger and its leading role in making international aid more effective. We have played a strong role in the development of an international consensus on the issue of debt cancellation for the least-developed countries.
Through its participation in the International Monetary Fund (IMF) and World Bank, Ireland is supportive of efforts to help countries suffering debt distress. For example, in 2006, Ireland demonstrated its commitment and leadership in the area of debt relief by contributing its full financial share of over €116 million to the two main multilateral initiatives to address debt relief, the Heavily Indebted Poor Countries Initiative and the Multilateral Debt Relief Initiative, while other States opted to pay for this debt cancellation over a much longer period and in smaller instalments. Furthermore, Ireland has pledged its share of the profits from recent IMF gold sales, totalling 12.94 million SDR (Special Drawing Rights), the asset reserve used by the IMF, which equates to some €15 million. This will subsidise lending to low-income countries, which may currently borrow at zero interest from the Poverty Reduction and Growth Trust (PRGT), the IMF's concessional lending vehicle.
As more and more countries graduate from the multilateral debt relief initiatives, the question of how they can maintain their debt at sustainable levels has become more relevant. It is for this reason that Ireland contributes €100,000 annually to the Debt Management and Financial Analysis System programme operated by the United Nations Conference on Trade and Development (UNCTAD) and which provides software solutions and technical assistance to developing countries to manage their debt sustainably.
As the Caribbean countries are not priority countries for Irish Aid - which supports the world's poorest countries, focusing in particular on sub-Saharan Africa - there is not a specific focus on the Caribbean region. However, Ireland has been supportive of the Caribbean countries, particularly those dealing with emergencies, and has contributed to a number of funds established for these humanitarian causes. I understand that the Caribbean countries are already engaged directly with the IMF and the World Bank regarding issues specific to their needs. As a member of the World Bank and the IMF, Ireland has played a strong role in the development of a consensus regarding the debt position of the least-developed countries. This has involved initiatives such as the Poverty Reduction and Growth Trust, the Heavily Indebted Poor Countries and the Multilateral Debt Relief Initiative, for which several Caribbean countries are eligible. Ireland will continue to support these countries by ensuring that debt sustainability remains a priority on the international agenda.
17. Deputy Richard Boyd Barrett asked the Minister for Finance in view of the varying approaches of different banks to dealing with mortgage distress, and particularly the stated intention of some banks to pursue mortgage holders for the full amount of their mortgage, even after they have been required to give up their family home, in cases of voluntary surrender, the measures he is considering to ensure greater fairness and consistency for mortgage holders; and if he will make a statement on the matter. [22281/14]
View answerThe Central Bank Code of Conduct on Mortgage Arrears, or CCMA, applies to the mortgage loan of a borrower which is secured by his/her primary residence. The CCMA sets out a common framework - the Mortgage Arrears Resolution Process, or MARP, - which all lenders must use for mortgage borrowers in or facing arrears. The steps in this MARP process are:
Step 1 - communication with borrowers,
Step 2 - financial information
Step 3 - assessment and
Step 4 - resolution.
In seeking to resolve a mortgage difficulty, the CCMA also requires lenders to explore all of the options for alternative repayment arrangements offered by that lender and provision 39 of the CCMA sets out a schedule of possible alternative repayment arrangements. The Central Bank, however, does not have the power to compel lenders to offer specific products. It is at the discretion of each lender as to which alternative repayment arrangements it offers to borrowers in arrears. Nevertheless, in this context, the CCMA requires lenders to handle cases in a sympathetic and positive manner, with the objective at all times of assisting the borrower to meet his/her mortgage obligations. It also requires a lender to document its considerations of each option examined, including the reasons why the options(s) offered to the borrower is/are appropriate and sustainable for his/her individual circumstances and why the option(s) considered and not offered to the borrower is/are not appropriate and not sustainable for the borrower's individual circumstances.
If a lender does not offer a borrower an alternative repayment arrangement, for example, where it is concluded that the mortgage is not sustainable and an alternative repayment arrangement is unlikely to be appropriate, the lender must provide the reasons, on paper or another durable medium, to the borrower. In these circumstances, the lender must inform the borrower of the following:
- other options available to the borrower, such as voluntary surrender, trading down, mortgage to rent or voluntary sale and the implications of each option for the borrower and the importance of seeking independent advice in relation to these offers;
- the borrower's right to appeal the decision of the lender not to offer an alternative repayment arrangement to the lender's Appeals Board;
- that legal proceedings may commence three months from the date the letter is issued or eight months from the date the arrears arose, whichever date is later, and that, irrespective of how the property is repossessed and disposed of, the borrower will remain liable for the outstanding debt, including any accrued interest, charges, legal, selling and other related costs, if this is the case;
- that the borrower should notify the lender if his/her circumstances improve;
- the importance of seeking independent legal and/or financial advice;
- the borrower's right to consult with a Personal Insolvency Practitioner;
- the address of any website operated by the Insolvency Service of Ireland which provides information to borrowers on the processes under the Personal Insolvency Act 2012; and
- that a copy of the most recent standard financial statement completed by the borrower is available on request.
18. Deputy Catherine Murphy asked the Minister for Finance the amount of revenue that has accrued to date from the levy on financial institutions that was introduced in budget 2014, broken down in tabular form by each liable institution; his future plans for the introduction of a financial transactions tax in the State; and if he will make a statement on the matter. [22279/14]
View answerThe Financial Institutions Levy, announced in Budget 2014, is based on an institution's DIRT liability in 2011, and will be in place for three years with an anticipated annual yield of €150 million. As the first payments under the levy are not due until 20th October 2014, the yield to date is nil.
As regards a financial transaction tax, the Government's position is that such a tax would be best applied on a wide international basis to include the major financial centres to prevent the danger of activities gravitating to jurisdictions where taxes are not levied on financial transactions. Notwithstanding this, the Government is not prepared to stand in the way of EU Member States that wish to work together to implement a Financial Transactions Tax and in this regard adoption of a decision formally authorising enhanced cooperation took place during the Irish Presidency of the EU in January 2013.
The proposal for a Directive from the European Commission in the area of financial transaction tax was published in February 2013. Ireland had many concerns about the proposal as drafted, not least of which were the potential impacts on, and the trading of, Irish Sovereign debt in the secondary market and in total, the potential negative impact on the liquidity of the financial sector as a whole. Members of the Economic and Financial Sub-Committee on EU Sovereign Debt Markets have stated that the introduction of the FTT would have a significantly negative effect on Sovereign Debt Markets and may impair the good-functioning of secondary markets for sovereign debt resulting in reduced liquidity, reduced investor demand and therefore higher financing costs for States.
Our concerns are widely shared amongst the Member States, including some of the participating countries. These concerns have led to the issuing of a communique by the participating Member States last week, announcing that they have agreed to implement a financial transaction tax in a progressive manner, with the first step being a charge on shares and some derivatives. However, significant technical and legal discussions will continue to be required at the Council Working Party before the text of the proposed Directive can be finalised. With this in mind, the targeted implementation date for the FTT has been rescheduled to 1 January 2016.
As the Deputy will be aware, Ireland already has a tax on certain financial transactions, a Stamp Duty on transfers of shares in Irish incorporated companies, which currently stands at 1%. It now appears that this will be the form of the initial tax measure that is being considered by the participating countries. This means that in effect these countries, some of which do not apply any financial transactions tax currently, are now considering a tax along the lines of that which already applies in Ireland, the UK and certain other countries. The rate at which such transactions would be charged remains to be finalised but it was proposed in the draft Directive that transactions in shares would be subject to a charge of 0.1%, which is lower than that which currently applies in Ireland.
19. Deputy Clare Daly asked the Minister for Finance if he will revise tax reliefs for pensions in order to encourage the investment of funds here. [22225/14]
View answerI assume that the intention behind the question is that Irish pension funds should be encouraged through the tax system to invest in assets in the State. The position from a tax perspective is that the investment income and gains of pension schemes and pension saving arrangements approved by the Revenue Commissioners are generally exempt from taxation while they remain in the scheme or arrangement. This tax exempt treatment of investment growth together with the exemption from tax on ongoing contributions paid into pension funds are intended to encourage individuals to provide themselves with an adequate income in retirement.
It is not clear from the question what changes to the current tax relief arrangements the Deputy has in mind. She might note, however, that trustees of pension schemes have a duty under trust law, the Pensions Act 1990, as amended, and Investment Regulations made under that Act to be prudent in the management of pension scheme assets having regard to the liabilities that must be met by the schemes and to structure the investment of those assets, accordingly. In essence, this means that pension trustees, in particular, and those to whom they may delegate the responsibility for managing pension scheme assets or pension savings, generally, must invest solely in the best interests of the beneficiaries of the scheme. Moreover, the general tax exemption for pension fund investment returns which I have described does not distort or influence decisions as between investments and I have no plans to change the tax relief system in a manner that would. In addition, changes to tax relief arrangements that would favour pension fund investment in Ireland over such investment in other EU States could give rise to compliance issues under EU law.
20. Deputy Sean Fleming asked the Minister for Finance his views on whether revenue to the State from the sale of solid fuel products is being put at risk from the significant cross-Border price differential that exists since the recent increase in the rate of carbon tax which applies to such products; and if he will make a statement on the matter. [23037/14]
View answerAlthough Carbon Tax was introduced in Budget 2010 for fossil fuels, its application to solid fuels was delayed to allow for the development of a robust mechanism to counter the large scale sourcing of coal from Northern Ireland where lower sulphur standards apply. The Department of the Environment undertook to provide such a robust mechanism in conjunction with the National Standards Authority of Ireland (NSAI). Such a mechanism is in place since June 2011 and the Air Pollution Act (Marketing, Sale, Distribution and Burning of Specified Fuels) Regulations 2012 specify the environmental standards for coal placed on the market and provide the regulatory framework in relation to the distribution and sale of coal in the State.
In particular, the Regulations require that all bituminous coal sold and used outside smoky coal ban areas for residential use outside those areas must have a sulphur content of no more than 0.7%, which is lower than that in Northern Ireland and therefore bituminous coal supplied to Northern Ireland standards for sale on that market may not be sold in the State. Compliance with the Regulations is being enforced by local authorities. A verification mechanism, SWiFT 7, has been developed by the National Standards Authority of Ireland (NSAI) for the verification of sulphur content in coal. This provides for a robust mechanism to verify the sulphur content of coal to national standards. Suppliers who produce and supply solid fuels in contravention of the Regulations are subject to investigation and prosecution under the Air Pollution Act by local authorities charged with enforcing the regulations and preventing such supply.
The application of the carbon tax to solid fuels was further postponed in 2012 given the overall tax increases in Budget 2012 including in the standard rate of VAT. Budget 2013 commenced the application of carbon tax to solid fuels but I chose not to introduce the carbon tax on solid fuels until after the 2012/2103 winter period and opted to introduce the tax in two phases i.e. €10 per tonne of CO2 from 1st May 2013 and a further €10 per tonne of CO2 from 1st May 2014 thus bringing the carbon tax on solid fuels in line with that on all other fossil fuels i.e. at €20 per tonne of CO2.
The introduction of Carbon Tax was about sending a price signal that there is a cost associated with the consumption of fossil fuels to the detriment of the environment. It should also be noted that solid fuels have the highest carbon content of all fossil fuels. As a result they are considered the dirtiest fuels and given the environmental impact it is important that they are taxed. While tax increases are unpopular, where Member States are under fiscal pressure, it makes sense to increase taxes in areas where some benefits can arise, in this instance a carbon tax promotes energy efficiency, reduces emissions and reduces our dependence on imported fossil fuels.
It should be noted that the provisional yield returned for SFCT from 1st May 2013 to 31 December 2013 was €7.3 million, ahead of the forecast yield for that period of €6 million. Accordingly I do not intend to reverse the further increase of €10 per tonne of CO2 emissions applicable from 1 May 2014.
21. Deputy Finian McGrath asked the Minister for Finance if he will support small business in their need for access to finance (details supplied); and if he will make a statement on the matter. [17572/14]
View answerAs the Deputy is aware, as part of the 2011 recapitalisation exercise, the Government imposed SME lending targets on AIB and Bank of Ireland for the three calendar years, 2011 to 2013. Each bank was required to sanction lending of at least €3 billion in 2011, €3.5 billion last year and €4 billion in 2013 for new or increased credit facilities to SMEs. Both banks have achieved their 2011 and 2012 targets. I am informed that both banks sanctioned circa €4bn in lending in 2013.
Having completed a process of deleveraging, both AIB and Bank of Ireland are now concentrating on growing their balance sheets. In this context, both banks recognise the need to increase business lending in the period up to 2016, including lending to the SME sector. Although the targets were a useful policy intervention, the focus now needs to shift towards the collation and examination, on a monthly basis, of more granular data on the funding of the activities of SMEs from both AIB and Bank of Ireland, the wider banking sector and increasingly the non-bank funding sector. This focus is further underpinned by the commitments contained in the "Access to Finance" chapter in Action Plan for Jobs 2014. I recently wrote to the banks with a view to ensuring their continued commitment to work closely with my Department in facilitating a positive business environment in which SMEs can prosper and contribute to economic growth, in addition to maintaining and increasing jobs in this vital sector.
Last week the Taoiseach announced the establishment of the Strategic Investment Banking Corporation (SBCI). The Government will be prioritising the passage of the enabling legislation through the Houses of the Oireachtas with a view to completion by the summer recess. In the initial phase of its existence the objective of the SBCI will be to improve the availability of credit to the SME sector. To achieve this, the SBCI will operate as a higher tier lender, providing funds to on-lending institutions. On-lending institutions will include Irish commercial banks and could also include foreign banks, specialist funds and other finance houses engaged in lending activities. Credit is the lifeblood of all businesses and SMEs will now be able to access loans of greater duration, with enhanced terms and potentially at a lower cost facilitated by the SBCI and its on-lending partners. This will promote greater competition in the SME lending sector, will drive economic growth and job creation in this key sector of our economy. I expect the SBCI to be facilitating lending before the end of the year.
22. Deputy Pearse Doherty asked the Minister for Finance the communication he or the Financial Regulator has had with the Maltese Financial Services Authority or other regulatory bodies regarding Setanta Insurance; and the reason policy holders were not informed of problems at the company in good time. [23019/14]
View answerAt the outset it should be noted that in my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation. The day-to-day responsibility for the supervision of financial supervision is a matter for the Central Bank, which is statutorily independent in the exercise of its regulatory functions.
Setanta Insurance Company Limited (Setanta) is a Maltese incorporated company subject to prudential supervision in Malta by the Malta Financial Services Authority (MFSA). Its financial position is not supervised by the Central Bank of Ireland. The Central Bank has been in discussions with the MFSA in relation to Setanta since November 2013 when it identified issues during a consumer protection themed inspection and immediately referred the matter to the MFSA for further investigation. There was regular contact in the following months on additional issues which led to the announcement in January that the firm would cease writing new business and issuing further renewals.
The Central Bank wrote on the 21st January 2014 to advise my Department of their concerns with Setanta's solvency margin and I was subsequently informed of this. A widely reported press release was issued by Setanta Insurance on January 27th 2014 which stated that the insurer had resolved to cease carrying on the business of insurance, including the renewal of existing business, with effect from close of business of 24 January 2014. Setanta then appointed Heritage Insurance Management (Malta) Limited to undertake the run-off process and the insurer advised the MFSA accordingly.
Contact continued between the Central Bank and the MFSA and, on 11 April 2014, the MFSA advised the Central Bank that the directors of Setanta were considering the potential liquidation of the company. There was ongoing contact on the following days. Setanta announced that the shareholders had recommended the appointment of a liquidator on 16 April 2014 subject to approval of the MFSA. On April 16th I was advised that the shareholders of Setanta had resolved to wind up the company and a liquidator had been provisionally appointed.
The Central Bank continues to have ongoing contact with the MFSA and with the liquidator of Setanta Insurance Company Limited as well as the various industry representative bodies. It is also engaging with the brokers who sold the policies to ensure they assist policyholders and keep them informed. In addition, it has contacted all brokers to instruct them to write to policyholders that hold a current Setanta motor insurance policy and inform them of the urgency of making alternative motor insurance arrangements. It should also be noted that my Department has met the Liquidators of Setanta to highlight the need for an orderly wind-down of the company. They emphasised the importance of a smooth transfer of policy holders to new providers and also the need for an orderly process for claimants to get what is due to them under Setanta policies.
On 9 May, the Liquidator of Setanta Insurance placed notices in national media informing policyholders of his intention to cancel all policies issued by Setanta Insurance by way of a 7 or 10 day cancellation notice. The Liquidator confirmed that all policy holders, that have not already done so, should arrange alternative cover without delay as claims are unlikely to be paid in full and once the notice period has expired all policies will be cancelled by the Liquidator. The Liquidator has since formally commenced its operations and has written to policyholders confirming the above position. The Central Bank strongly recommends that policyholders who receive these letters immediately contact either an insurance broker or an insurer directly to seek alternative insurance cover.
23. Deputy Richard Boyd Barrett asked the Minister for Finance the specific measures he is considering or tools he has at his disposal for preventing the emergence of another property bubble, in view of the dramatic rise in rents and property prices in Dublin and other urban centres and given the macroeconomic threat potentially constituted by such developments; and if he will make a statement on the matter. [22280/14]
View answerBy way of background, I note that private rents - as measured by the Consumer Price Index - rose nationally by just over 9 per cent in the 12 months to April of this year. However, this follows a fall of over 25 per cent between 2008 and late 2010. The Private Residential Tenancies Board's rental index, which provides a geographical breakdown of trends in the residential rental market, shows that monthly rent levels were up by 7.6 per cent on a mix-adjusted basis in Dublin in the year to Q4 2013. However, rents in Dublin still remain more than 15 per cent below their level in Q4 2007 (the peak in Dublin), with rents outside Dublin down 25 per cent over the same period.
In the year to March, residential property prices, at a national level, increased by 7.8 per cent according to the latest available residential property price index from the Central Statistics Office. When assessing the recent pick-up in house prices it should be remembered that residential property prices fell by just over 50 per cent from peak-to-trough and that residential property prices nationally are still 46 per cent lower than their highest level in September 2007. In Dublin, residential property prices as measured by the index remained unchanged in March and were 14.3 per cent higher than a year earlier. As a result, Dublin residential property prices are currently approximately 50 per cent below their peak in early 2007. This is the background against which any appreciation in house prices must be assessed.
The Deputy will also be aware that the property bubble up to 2007 was concurrent with a dramatic and unsustainable increase in mortgage lending. As indicated in the recently published Construction 2020 Strategy: A Strategy for A Renewed Construction Sector, mortgage lending decisions must be undertaken on a sustainable and prudential basis by financial institutions and conform fully to regulatory requirements, both in relation to the financial institution itself, and also with regard to the safeguarding of the borrower's interests. My Department is party to a range of actions in the Strategy which addresses among other issues: housing supply, with a particular focus on planning issues; appropriate and sustainable development financing; transparent and sustainable mortgage lending; the application of the tax code to the construction and property sectors; as well as addressing legacy issues associated with the property bubble. The Deputy will find these actions detailed in the Construction 2020 Strategy publication.
In summary, I wish to assure the Deputy that my Department will continue to closely monitor developments in the property and rental markets. I am also satisfied that actions set out in the Government's Construction 2020 strategy represent a comprehensive response to the challenges facing the property and construction sectors.
24. Deputy Michael McGrath asked the Minister for Finance his views on the increasing divergence between tracker mortgage rates and standard variable rates; his views on whether banks are using increased standard variable rates to subsidise loss-making tracker loans; and if he will make a statement on the matter. [23035/14]
View answerI, as Minister for Finance, have no statutory role in relation to the mortgage interest rates charged by regulated financial institutions with regard to tracker mortgages or standard variable rates mortgages. It is a commercial matter for the banks concerned.
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.
The mortgage interest rates that financial institutions operating in Ireland charge to customers are determined as a result of a commercial decision by the institutions concerned. 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.
25. Deputy Dara Calleary asked the Minister for Finance his plans to review capital acquisition tax thresholds in view of the impact of rising property prices on the amount of inheritance tax many persons now face; and if he will make a statement on the matter. [23038/14]
View answerCapital Acquisitions Tax (CAT) is the overall title for both Gift and Inheritance Tax. The tax is charged on the amount gifted to, or inherited by, the beneficiary of the gift or inheritance. I assume the Deputy is referring to the "Group thresholds" for CAT. For the purposes of CAT, the relationship between the person who provides the gift or inheritance (i.e. the disponer) and the person who receives the gift or inheritance (i.e. the beneficiary), determines the maximum life-time tax-free threshold, known as the "Group threshold" below which gift or inheritance tax does not arise.
There are, in all, three separate Group thresholds based on the relationship of the beneficiary to the disponer.
Group A: tax free threshold €225,000 applies where the beneficiary is a child (including adopted child, stepchild and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.
Group B: tax free threshold €30,150 applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.
Group C: tax free threshold €15,075 applies in all other cases.
Where a person receives gifts or inheritances in excess of their relevant tax free threshold, CAT at a rate of 33% applies on the excess over the tax free threshold. These thresholds have been reduced in recent years as part of the effort to restore the public finances as taxes on capital are less harmful from an economic perspective than taxes on employment.
The property market continues to show signs of improvement with positive developments which had been restricted to the Dublin area now manifesting in other areas of the country though not to the same extent in terms of price rises. I recognise, of course, that there are supply issues in certain areas of the Dublin property market. The Group thresholds 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.
26. Deputy Dara Calleary asked the Minister for Finance his views on whether the current penal tax regime that applies to deposit and pension savings is discouraging persons from making provision for future financial needs; and if he will make a statement on the matter. [23039/14]
View answerThe Government decided to increase the rate of Deposit Interest Retention Tax (DIRT), which was previously 33%, to 41% in Budget 2014. The higher rate of DIRT (previously 36%) for interest paid less frequently than annually was abolished, and all deposit interest is now liable to DIRT at the same rate (41%). Up to 2009, individuals may have been taxable on other income at the higher rate of income tax but were only liable to pay tax on interest income at 20%. Previous DIRT rates were below the higher rate of income tax, and this, in effect, incentivised saving. The decision to raise the rate of DIRT was taken to encourage spending in the economy with a view to stimulating growth and employment and to raise additional revenues.
Exemptions from DIRT may apply for the following persons in certain circumstances:
- Individuals aged over 65 (subject to income limits)
- Permanently Incapacitated Individuals
- Companies, Pension Funds and Charities (Irish resident companies pay tax on investment income at 25%
- Non-Resident Account Holders.
There are alternative savings products available which are tax free (Savings Bonds, Saving Certificates, Instalment Savings and the National Solidarity Bonds).
A considerable number of individuals in the State are not making sufficient provision for their retirement through pension savings. This is not a recent problem and various reasons have been advanced to explain it but I do not believe that a view of the tax treatment of pension savings as penal can have been a factor in this area. Pension savings over the long-term are encouraged by the exemption from taxation at the marginal income tax rate of ongoing contributions by individuals (subject to annual limits which increase with age). Investment growth of pension savings are also tax exempt while pension benefits are taxed on drawdown at marginal rates subject to a tax-free retirement lump sum up to a life-time maximum of €200,000. Improving supplementary pension coverage is one focus of the recommendations included in the OECD's Review of the Irish Pension system which was commissioned by my colleague the Minister for Social Protection, Ms Joan Burton TD, and published last year. The Minister for Social Protection is developing a policy response to this and other recommendations in the Review.
27. Deputy Thomas P. Broughan asked the Minister for Finance his strategy to fill the upcoming vacant post of Secretary General at his Department. [22320/14]
View answerConsideration is currently being given to the process of filling the post of Secretary General. Mr. John Moran will remain in the post of Secretary General until his successor is appointed which we expect to take place in the next couple of months.
28. Deputy Mick Wallace asked the Minister for Finance if he will introduce a help-to-buy scheme, similar to that operating in the UK; his views on whether such a scheme could drive up house prices; and if he will make a statement on the matter. [23048/14]
View answerThe Government recently launched 'Construction 2020: A strategy for a renewed construction sector'. The purpose of the strategy is to underpin the future competitiveness of the country, ensuring that we continue to be well-positioned to attract the inward investment that has been so important to our economic development. The strategy includes the Government's desire for a return to sustainable levels of mortgage lending, as part of a healthy market. This involves the consideration of measures to stimulate the development of housing. In order for developers to be supported, they need confidence that customers will be capable of accessing finance to purchase new builds. This means mortgage products being available to potential purchasers with an ability to support repayments.
In Ireland's recent abnormal housing market, we have seen lending volumes decline dramatically. The banks are highlighting the lack of supply of houses in particular urban areas as a contributing factor for the lack of drawdown of approved mortgage facilities. I would look upon the development of this initiative as being an aid to encouraging and facilitating the supply of new homes particularly for young families. In other jurisdictions, such as the UK and Canada, "mortgage insurance" markets have been developed to support bank mortgage lending, particularly to 'First Time Buyers'. Mortgage insurance allows banks to share the risk of mortgage lending, either with the public sector or with private sector insurance companies with the aim of increasing bank lending in general or to target groups.
My Department is committed, under this strategy, to examine the concept of a mortgage insurance scheme and how it might benefit new housing completions in the Irish market. The objective of any scheme would be to ensure adequate availability of mortgage finance on affordable terms for new completions, particularly for 'First Time Buyers', as the economy recovers. In doing so we would aim to provide the certainty needed to support greater levels of investment in new housing, with the associated benefits for the construction sector and ultimately for the consumer.
As the Construction Strategy mentions, my Department is undertaking an economic impact analysis which will assess the impact such a scheme would have on the Irish housing market, taking into consideration time limits, targeting 'First Time Buyers' or owner occupiers and focussing on new housing. As the Deputy has raised the issue of house price increases, I would like to assure him that issue will form part of the analysis process. The analysis will draw lessons from mortgage insurance initiatives undertaken in other countries and will include questions as to the appropriateness of a price cap as well as regional or geographic restrictions. Once this analysis has been completed and presented to me I will consider next steps.
29. Deputy Bernard J. Durkan asked the Minister for Finance if, in the context of the emerging economic improvements, it might be possible to establish a Government development bond to meet urgent requirements in terms of economic and social infrastructure, with particular reference to identifying a structure whereby adequate affordable or local authority housing might be provided, thereby ensuring an adequate supply of houses on the market without contributing to housing inflation allied with economic benefit accruing in terms of construction; and if he will make a statement on the matter. [23025/14]
View answer181. Deputy Bernard J. Durkan asked the Minister for Finance if, in view of the ongoing need to retain expenditure within the guidelines set down by the troika, in view of the existence of serious infrastructural deficits in terms of housing and other critical infrastructure, it is possible to launch a Government bond competitively priced to attract savings from the private sector thereby generating employment, economic activity and meeting critical infrastructural deficits without jeopardising expenditure guidelines; if any consideration will be given to such a proposal in the short term context; and if he will make a statement on the matter. [23409/14]
View answerI propose to take Questions Nos. 29 and 181 together.
The primary role of the National Treasury Management Agency (NTMA) is to ensure that sufficient funding is available at all times to meet the day-to-day requirements of the Exchequer. It is a matter for the Agency to decide when and how much to borrow in the light of those needs, commercial considerations surrounding the raising of debt on the markets and the need to maintain an appropriate level of liquidity. All monies raised through Government debt borrowing are paid into the Central Fund and used to fund Government spending as approved by the Oireachtas.
That said, there are a number of options available to individuals who wish to help support the Government's work in promoting economic growth and employment. The National Solidarity Bonds were introduced to provide a wider range of options for retail investors. The Minister for Finance in announcing Budget 2010 launched the ten-year National Solidarity Bond, the purpose of which was to allow citizens an opportunity to invest and provide money to the State to stimulate economic recovery and to assist in the maintenance and creation of employment. Following the success of the launch of the ten-year National Solidarity Bond a four-year National Solidarity Bond was launched in 2011.
The NTMA's other State Savings products, available through any Post Office, allow people to support the Exchequer through Savings Bonds, Savings Certificates and Instalment Savings. There are also possibilities in place for people interested in investing in longer-term Government bonds. Irish sovereign bonds are available through seventeen Primary Dealers recognised by the National Treasury Management Agency (NTMA). The NTMA has published information on their website (www.ntma.ie) which gives the names and contact details for institutions which sell bonds to the public, and the fees they charge.
The NTMA will continue to encourage personal savers to purchase the National Solidarity Bonds and all the other NTMA State Savings products. The NTMA keeps the suite of State Savings products and the interest rates paid on them under constant review to ensure that the products remain competitive and attractive to retail investors. These products have been an important and dependable component of Government borrowing for many years and make a valuable contribution to the national finances.
I am happy to confirm that the Government remains committed to exploring alternative means of financing capital projects. The recently published Construction Strategy includes a commitment that a High Level Working Group chaired by my Department will be established to explore the issue of sustainable bank and non-bank financing options for the construction sector. In addition the Government has announced the creation of the Ireland Strategic Investment Fund (ISIF) to channel investment from the National Pensions Reserve Fund (NPRF) towards productive investment in sectors of strategic importance to the Irish economy. Within its existing statutory investment policy and in line with the ISIF announcement, the NPRF has undertaken a number of investments and initiatives under which NPRF capital will be invested on a commercial basis in Ireland. The NPRF has in particular committed to invest in infrastructure (€250 million) and Public-Private Partnership (PPP) projects (€118 million).
30. Deputy Denis Naughten asked the Minister for Finance his plans to review capital gains tax reliefs; and if he will make a statement on the matter. [22176/14]
View answerI have no plans at this time to carry out a general review of existing capital gains tax reliefs. In recognition of the economic climate in recent years I and previous Ministers for Finance have sought to obtain an additional contribution from capital gains tax by increasing the rate as outlined in the following table.
Disposals Made
|
Date |
Percentage |
|
on or before 14 October 2008 |
20% |
|
from 15 October 2008 to 7 April 2009 |
22% |
|
from 8 April 2009 to 6 December 2011 |
25% |
|
from 7 December 2011 to 5 December 2012 |
30% |
|
from 6 December 2012 onwards |
33% |
Capital gains tax is one of a suite of taxes that plays an important role in the overall taxation system in place in Ireland. In terms of equity, it is appropriate that those who make capital gains should make a contribution in tax terms so that the entire tax burden does not only significantly fall on those who pay income taxes. Capital gains tax also plays a role in mitigating opportunities for tax avoidance by discouraging the conversion of income into capital gains to reduce tax liability.
Reliefs play an important role in relation to most taxes and capital gains tax is no different in this regard. Targeted business related capital gains tax reliefs are provided principally to ensure that business, while paying its share of capital gains tax, is not unduly hampered in terms of developing and growing its business or in passing on businesses to the next generation of business people. The following capital gains tax reliefs are all geared towards assisting business:
- Appropriation to and from stock in trade (section 596 Taxes Consolidation Act (TCA) 1997)
- Entrepreneur relief (section 597A TCA 1997) (subject to a commencement order due to requirement for EU State Aid approval)
- Retirement relief (sections 598/599 TCA 1997)
- Transfer of business to a company (section 600 TCA 1997)
- Replacement of Qualifying Premises (certain rented residential premises (section 600A, TCA 1997) [now only available in limited circumstances]
- Relief for farm restructuring (section 604B TCA 1997)
- Disposals to authority possessing compulsory powers (section 605 TCA 1997)
- Transfer of assets on company reconstructions or amalgamation (section 615 TCA 1997
- Reliefs in relation to inter-group company transactions (sections 617 et seq.).
All reliefs are reviewed periodically and maintained, adjusted or abolished by reference to the circumstances that exist at the time relative to those that gave rise to their introduction. Take Roll-over relief (Section 597), for example. Roll-over relief was introduced in 1975 when capital gains tax was first enacted. It allowed chargeable gains on disposals of business assets to be deferred provided the proceeds of disposal were reinvested in new business assets. This relief was reviewed and was removed in Finance Act 2003 from 4 December 2002 onwards, except in the case of eligible taxpayers who had rolled-over assets prior to that date. The abolition of rollover relief in late 2002 must be seen in the context of the introduction at that time of the single 12.5% rate of corporation tax on trading profits.Another example of a business relief that was reviewed and amended is the capital gains tax farm retirement relief which was amended in Finance (No 2) Act 2013. This was extended to allow relief to a farmer who farmed for 10 years, has no children to whom to pass on the land, and who lets the farm for a period following retirement from active farming before ultimately disposing of the land. Prior to this such a farmer would not have been entitled to retirement relief.
Certain reliefs are introduced from time to time with a view to achieving a particular objective in particular circumstances. Examples of such reliefs include:
- relief for certain disposals of land and buildings (section 604A TCA 1997 -introduced by section 64, Finance Act 2012). This short-term relief was introduced to provide a stimulus to the property market at a time when there was virtually no activity in it. The intention being that the impact would be both direct (on estate agents, surveyors, etc) and indirect (on construction related activities) as well as encouraging the sale of commercial premises and long term investment in productive assets, thereby assisting in the creation of longer term employment. This is a targeted relief which only applies to certain land and buildings acquired during the period 7 December 2011 to 31 December 2014. Any such property acquired must be held for 7 years in order to qualify for full relief. Any disposal within the 7 year period gets no relief.
- Relief for farm restructuring (section 604B TCA 1997 introduced by section 48, Finance Act 2013). This relief was identified as desirable to assist farmers to become more viable by enabling them to restructure their land holdings without incurring a capital gains tax. This relief is a more focused form of relief than the more general roll-over relief that was in the main abolished from 4 December 2002.
- Entrepreneur relief (section 597A TCA 1997,introduced by section 45 Finance (No. 2) Act 2013). This is a CGT relief for individuals who reinvest the proceeds of previous asset disposals into new business ventures. The commencement of this relief is subject to EU State Aid approval.
Lastly, I announced in my Budget 2014 speech, in conjunction with the Minister for Agriculture, Food and the Marine, that I would commission a review of tax reliefs available to farming. This review will include CGT reliefs available to farming. Any recommendations of the review will be considered in the context of Budget 2015.
