Written Answers Nos. 39 - 47
39. Deputy Terence Flanagan asked the Minister for Finance his plans to change the current threshold for VAT which is pricing new small businesses out of the market; and if he will make a statement on the matter. [26502/14]
View answerVAT registration thresholds provide a mechanism for exempting business with a low turnover from having to register for VAT. This reduces the administrative burden on both small businesses often at the developmental stage and on the Revenue Commissioners. The VAT registration thresholds for small businesses are currently €37,500 in the case of a person supplying services and €75,000 in the case of person supplying goods. These thresholds were last increased in Budget 2008 from €35,500 and €70,000 with effect from the 1 May 2008.
With regard to increasing the thresholds, I would point out that Ireland already operates the third highest registration threshold for goods and the fourth highest threshold for services in the EU. Indeed, some Member States do not operate any VAT registration threshold, requiring all businesses to register for VAT irrespective of their level of turnover. While the registration thresholds are designed to reduce the administrative burden on businesses and Revenue, registration thresholds are not intended as a means of keeping small businesses permanently outside the VAT system. Therefore in setting registration thresholds levels, the objective is to strike an appropriate balance between the desirability of reducing the administrative burden on small businesses and the need to avoid undermining tax compliance or causing competitive distortions relative to registered firms.
40. Deputy Ciarán Lynch asked the Minister for Finance the taxation implications of the widespread practice, especially in the pharmaceutical industry, of persons being engaged on a self-employed basis to perform duties similar to their company employee colleagues; and if he will make a statement on the matter. [26377/14]
View answerThere are a number of differences between the tax treatment of a self-employed individual and an employee. The main ones are:
- self employed individuals are required to account to the Revenue Commissioners for income tax, USC and PRSI through the self assessment system whereas, in the case of an employee, the employer is required to account to the Revenue Commissioners for income tax, USC and PRSI through the PAYE system,
- self employed individuals who earn income in excess of €100,000 are liable to USC at a rate of 10% on income over that amount whereas the maximum rate for employees is 7%, and
- the PAYE income tax credit does not apply to self employed individuals.
In addition, an employer must pay employer's PRSI in respect of remuneration paid to employees. This does not arise in the case of payments made to a self employed individual.
I am informed by the Revenue Commissioners that, in recent years, they have become increasingly aware of instances where companies purport to engage individuals as independent self employed contractors when, in practice, they perform duties in a similar manner to employees. The Revenue Commissioners examine such arrangements on a case by case basis, taking account of the facts and circumstances of each case, to determine if such individuals are genuinely self employed. In arriving at a determination, the Revenue Commissioners have regard to the criteria set out in the Code of Practice for determining Employment or Self-employment Status of Individuals, and also relevant case law. If the Deputy has concerns in particular cases that individuals are not genuinely self employed, the Revenue Commissioners would be happy to examine any such cases.
I am also advised by the Revenue Commissioners that there is a national audit project (known as the "contractors project") under way since July 2013, concerned with service professionals who provide services through a company under contract to third-party clients, including clients in the pharmaceutical industry referred to by the Deputy.
In 2011, through normal audit activity, Revenue identified a potential issue in situations where professionals providing engineering services formed companies (of which they were both directors and employees) which then contracted with client companies, often multinationals, for the provision of the services of the individual. A characteristic of these companies was that they typically had no other business, and no non-director employees. In a number of such cases examined, the level of expenses reimbursed tax free to the director/contractor was found to be excessive and in several cases included expenses which either had not been incurred at all, or were personal rather than business-related.
A pilot project operated in Revenue's South West Region in 2012 and 2013 which audited 119 companies with additional liability in 107 cases, and a further 24 directors of contractor companies have also agreed settlements. The total additional tax liability was €2,801,977. Penalties of €906,433 (32%) and interest of €857,216 were imposed. By this time it was clear that there was a pattern of behaviour which warranted a national audit project. A list of companies was compiled from the business sectors identified in previous audits, where there were few or no employees apart from the directors, and which exhibited one of the following characteristics: (a) travel and subsistence expenses amounting to more than 20% of turnover; (b) other expenses amounting to more than 20% of turnover, or (c) the combination of both amounting to more than 25% of turnover. The cases fell into the categories of professional, scientific and technical services (60%), information and communication services (38%) and certain administrative and support services (2%). In addition to cases from this list, audits which remained open in the South West Region at 1 July 2013 were subsumed into the national project.
Since 1 July 2013, a total of 385 company audit cases have been closed, with additional liability in 299 cases, and a further 49 directors of contractor companies have also agreed settlements. Additional tax of €5,969,630 has been identified, with penalties of €1,765,995 (30%), and interest of €1,639,623. At the moment 368 companies remain under audit, and Revenue is now moving to bring these cases to finality. Most of the audits now open indicated their intention to make a disclosure to Revenue some months ago and availed of a concession whereby Revenue agreed to allow additional time and to provide guidance in compiling disclosures. Revenue has now written to those taxpayers advising that the process of preparing disclosures must be completed urgently if the benefits of voluntary disclosure (which encompass lesser penalty and non-publication provided certain specific conditions are met) are to be preserved.
In the course of the contractors project it has become clear that the provision of services under contract is a large and growing practice with many thousands of contractors involved in a range of professional services sectors. Many of these professional contractors operate companies in a traditional mode, where they employ staff, operate from an established place of business, and provide a range of specialised services on the open market. For such companies, Revenue's project has generally found little or no additional tax liability arising from travel expenses. Another, quite different type of contracting also exists in considerable numbers, where an individual's services are obtained, often through the facilitation of a recruitment agency, and a contract is concluded with the individual's company. In some cases, a company may be provided to the individual for this purpose. Typically, the work is done at the client's premises and the contractor's company has no other business. Between these two types of contractor there are a huge number of individual variations.
Revenue published two tax briefing articles in 2013 which made it clear that, where the services of an individual are being provided through an intermediary, as opposed to the traditional provision of goods or services to the market generally, the expenses which may be claimed against tax liability are similar to those that may be claimed by an employee. Thus for example an individual going to work abroad under a contract must bear the cost of doing so him/herself regardless of whether the contract is with the person or with his/her company.
As the current phase of the contractors project comes to a conclusion, Revenue will review the outcomes in detail and decide how best to reflect them in future audit activity. At the same time, Revenue will examine the impact of emerging practices in other areas, for example in the use of contractors operating abroad, to ensure that they pose no risks of loss to the Exchequer.
41. Deputy Brendan Ryan asked the Minister for Finance if the owners of apartments in Priory Hall have had their credit ratings amended in respect of the mortgage loans on those properties as per the resolution framework for Priory Hall agreed in October 2013; if he will examine the case of a person (details supplied); and if he will make a statement on the matter. [26393/14]
View answerAn Implementation Oversight Group, under the aegis of the Department of the Taoiseach, is in place to oversee the overall implementation of the October 2013 Priory Hall Resolution Framework. The Framework provides, inter alia, that the credit rating of the residents of Priory Hall apartments, in respect of the mortgage loans on those properties, be restored to the position it would have been in prior to evacuation of the complex. I understand from the Department of the Taoiseach that the vast majority of residents have had their credit ratings restored. However, regarding the particular case raised by the Deputy, my Department will follow up on the matter and will revert to the Deputy as soon as possible.
42. Deputy Pearse Doherty asked the Minister for Finance the number of vacant residential properties the National Asset Management Agency is exposed to in Dublin by postcode; and the number by county outside Dublin. [26407/14]
View answerI would like to advise the Deputy that a detailed breakdown of the property securing NAMA's remaining loans by region and by sector is outlined on page 42 of its Annual Report and Financial Statements for 2013, which is available on the Agency's website, www.nama.ie. In evidence to the Dáil Committee of Public Accounts on 29 May, NAMA indicated that it has an interest as a secured lender in about 16,000 residential units, mainly apartments, which are mainly located in Dublin, Cork, Limerick and Galway. The vast majority of these properties are currently let by their owners/receivers in the private rental market. NAMA does not generally have an exposure to vacant property in that as residential properties within its portfolio are brought to a completed state, they are placed on the market by debtors or receivers for rent or sale or made available for social housing.
43. Deputy Clare Daly asked the Minister for Finance the reason a person with a building condition assessment pyrite damage rating of 2 is not exempt from the property tax this year as the assessment was carried out this year, even though the property clearly has no value in that condition. [26462/14]
View answerTo be eligible for an exemption from the charge to Local Property Tax (LPT), a liable person must obtain a certificate from a competent person, such as an engineer or a geologist, confirming the presence of significant pyritic damage and, I am informed, a liable person cannot claim the exemption until the relevant certificate has been issued in respect of the residential property concerned. In the absence of this certificate, LPT must be paid in full or by means of one of the approved phased payment arrangements.
It is not clear from the Deputy's question whether the necessary sampling and testing of the sub-floor hardcore material has been carried out on foot of the results of the Building Condition Assessment and whether the relevant certificate has issued to the property owner. Section 10A of the Finance (Local Property Tax) Act 2012 (as amended) provides that a temporary exemption from the charge to Local Property Tax (LPT) will apply for a period of at least three consecutive years for residential properties that have been certified under Regulations made by the Minister for the Environment, Community and Local Government as having "significant pyritic damage".
The Finance (Local Property Tax) (Pyrite Exemption) Regulations 2013 (S.I. No. 147 of 2013) require that residential property owners demonstrate significant pyritic damage in accordance with I.S. 398 Reactive Pyrite in sub-floor hardcore material Part 1, which was published in 2013 by the National Standards Authority of Ireland. This standard provides guidance on the Building Condition Assessment, as well as on the sampling and testing to be carried out, to establish the presence of significant pyritic damage.
As regards the period from which the exemption can be claimed, the standard procedure is for property owners to start the period of exemption from the liability date following the issue of the certificate. The exemption is linked to the three year valuation period and, depending on when in a 3-year valuation cycle the certificate is issued, the exemption may last for up to five years. For example, where a property owner received the relevant certificate in June 2014 then on 1 November 2014 (liability date for 2015) he/she can claim the exemption for the five year period of 2015 to 2019. Where a property qualifies for the exemption, it continues to apply even where the property is subsequently remediated before the end of the exemption period.
As the Deputy can appreciate the rules governing when, and for how long, the exemption applies are complex and are best explained by the use of examples. I am advised that further detailed information and examples on how the exemption for residential properties with significant pyrite damage operates are provided by the Department of Environment, Community & Local Government, www.environ.ie, or they can be accessed from the LPT pages of the Revenue website www.revenue.ie.
44. Deputy Seamus Healy asked the Minister for Finance further to Parliamentary Question No. 177 of 18 April 2012, details supplied, and in view of the statement made by him in the reply that €1.2 billion was put into Bank of Ireland by the National Pensions Reserve Fund on behalf of the State, following the Central Bank's 2011 prudential capital assessment review, the portion of ownership of Bank of Ireland that passed into the hands of the State as a result of NPRF putting the €1.2 billion into the bank; the type of shares in Bank of Ireland purchased by the NPRF in this transaction; when the transaction was completed; the portion of Bank of Ireland owned by the State on each of the following dates, 1 January 2011 and the day following the date of completion of the €1.2 billion transaction; and if he will make a statement on the matter. [26474/14]
View answerThe table referred to in PQ 18719/12 issued on April 18th 2012 showed a total investment by the State of €1.2bn in Bank of Ireland as a result of the 2011 PCAR exercise. This figure was shown coming from the NPRF and a note to the table indicated that the contribution from the Exchequer was put at zero as the figure was calculated net of the proceeds from the share sale to private investors.
In order to understand the background to this presentation, the relevant transactions need to be broken down into their component parts. First the NPRF subscribed for its pro-rata share of the 2011 rights issue i.e. approximately €1.2bn of ordinary shares and that is the figure shown in the table. Second there was a contractual agreement to sell approximately €1bn of these rights issue shares to a North American investor consortium at the same price. Third there was the investment of €1bn in Contingent Capital Notes ("cocos") made by the Minister directly i.e. from Exchequer funds. Fourth in order to mitigate the impact of this outlay on the Exchequer, the Minister subsequently directed the NPRF to transfer the funds from the ordinary share disposal to the Exchequer and this transfer is disclosed in the 2011 NPRF Annual Report. The coco investment and the disposal proceeds effectively offset each other and explain why the Exchequer contribution in the table is shown as zero.
The State's equity holding in Bank of Ireland was 36% on 1 January 2011 and post the NPRF's net €0.2bn investment in the ordinary equity of the bank, the State's shareholding fell to 15.1%, if one includes approximately 0.1% held separately by the NPRF in a discretionary fund.
The disposal to the North American consortium completed in two tranches, with the first shares transferring on July 29th 2011 and the second on October 12th 2011. If the State had not agreed to sell a portion of the shares it was entitled to as part of the bank's rights issue, it would have maintained its stake at 36% but at a significant additional cost to the taxpayer during what was a very difficult period for the country. Moreover as I have said in recent days, the announcement that private investors were prepared to put money into Bank of Ireland at the time had significant knock on benefits for both the bank and the State itself.
45. Deputy Michael McGrath asked the Minister for Finance if the Central Bank of Ireland is conducting an inquiry into certain matters at a credit union (details supplied) in Dublin 3; and if he will make a statement on the matter. [26494/14]
View answerI have been informed by the Central Bank of Ireland that while the Central Bank does not comment on any specific institution, they have confirmed that they are engaged with the credit union in relation to certain irregularities and there is an on-going Garda investigation into these matters.
It has been brought to my attention that a number of anomalies were discovered in the accounts of the credit union and that an independent forensic review is now under way. This review will determine the financial loss to each affected member and will ascertain the true financial position of these accounts. I understand that the credit union concerned has stated that any member whose account has been affected will have their account amended to reflect the correct position and no member will be at a financial loss. In relation to those accounts where payments are alleged to have been made, specific steps will also be taken to determine the true position in relation to these accounts.
While the net loss to the credit union is estimated to be between €400,000 and €450,000, I have been informed that the credit union expects indemnification of this amount under its insurance policy.
47. Deputy Terence Flanagan asked the Minister for Finance if he has considered publishing at budget time a forecast income and expenditure account for the next ten years and a forecast national balance sheet projecting the next ten years; and if he will make a statement on the matter. [26510/14]
View answer49. Deputy Terence Flanagan asked the Minister for Finance his plans to make budget information more user friendly and understandable for the general public; and if he will make a statement on the matter. [26512/14]
View answerI propose to take Questions Nos. 47 and 49 together.
My Department is always considering how to present Budgetary information more clearly. In recent times, we have, for example, published alternative presentations of Exchequer returns, provided presentations and infographics along with the Budgetary material, published monthly revenues and expenditures of all sectors of general government and published working papers on selected issues. Consistent with the requirements of the two-pack, in October, alongside other euro area member states we will be publishing a draft budgetary plan for the first time, and the CSO will be publishing new data on contingent liabilities with potentially large impacts on public budgets, government guarantees, non-performing loans, and liabilities stemming from the operation of public corporations. Under the two-pack our economic forecasts are provided for endorsement to the Irish Fiscal Advisory Council. The Department of Public Expenditure and Reform, under my colleague Minister Brendan Howlin TD has expanded the information provided in the Expenditure Report to include performance budgeting information, comprehensive reviews of expenditure and a new public spending code.
We have also taken part in an IMF Fiscal Transparency Assessment, and the recommendations from that report have been referred to a steering group for consideration and implementation as appropriate. This report includes recommendations relating to a public sector balance sheet and incorporating more information on revenue and expenditure flows in budget documentation.
However, it is important to recognise that the provision of additional information adds a burden to my officials. Adding extra material must be considered carefully so as not to hamper the core forecasting and monitoring requirements that we are legally bound to provide and, which, as a consequence, is our priority. We will continue to improve the budgetary and financial information in all relevant documents, taking care to ensure that it is useful to stakeholders.
