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Tuesday, 24 Jun 2014

Written Answers Nos. 136-157

Insurance Industry Regulation

Questions (136)

John Browne

Question:

136. Deputy John Browne asked the Minister for Finance if his attention has been drawn to the fact of the Maltese regulator in the Setanta Insurance case being unable to have a meaningful engagement with the Central Bank of Ireland for over a year in regard to Setanta; and if he will make a statement on the matter. [26661/14]

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Written answers

The current legal and regulatory framework for the provision of insurance in the European Economic Area (EEA), and the supervision of that activity, is prescribed by European Union Law in the Life and Non-Life Insurance Directives.  The Insurance Directives specify particular roles for both the home Member State supervisory authority (i.e. the supervisory authority that grants an authorisation) and the host Member State supervisory authority (i.e. the supervisory authority of a Member State where an insurance undertaking conducts business of a freedom of services or freedom of establishment basis) of an insurance undertaking.

Insurance undertakings authorised under the Insurance Directives are subject to solvency and financial reserving requirements, the supervision of these requirements is the sole responsibility of the home Member State supervisory authority.  In the case of Setanta Insurance Company Limited (Setanta), this was the Malta Financial Services Authority (MFSA). The primary objective of these requirements is to ensure that claims made in respect of policies issued will be adequately provided for by an insurance undertaking.

Under Article 20 of the Third Non-Life Directive the Home Regulator is required to notify the Host Regulator (in this case the Central Bank of Ireland) if the solvency margin of an undertaking falls below the statutory requirement. In such instances the Home Regulator, i.e. the MFSA should inform the Host Regulator, i.e. the Central Bank of Ireland, of the measures it has taken to address the solvency deficit. EEA insurance regulators are also members of EIOPA (European Insurance & Occupational Pensions Authority) and are required to comply with the General Protocol relating to the collaboration of the insurance supervisory authorities of the Member States of the European Union.  This general protocol statement was issued in 2008 and is currently under review by EIOPA.

In my role as the 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 institutions is a matter for the Central Bank of Ireland, which is statutorily independent in the exercise of its regulatory functions. I have consulted with the the Central Bank on this matter and they have informed me that the Central Bank co-operates on an ongoing basis with peer regulators on matters of mutual interest. This includes the MFSA.

In response to the Deputy's specific question, neither I nor my officals have at any time been advised that the MFSA was unable to have a meaningful engagement with the Central Bank of Ireland in regard to Setanta. The Central Bank had Regulator to Regulator contact with the MFSA in September 2013 and in October 2013 the Central Bank undertook a consumer protection inspection of Setanta. The Central Bank became aware of prudential issues in the course of this investigation and subsequently shared these with the MFSA in November 2013. At this point the Central Bank entered into a phase of heightened contact with the MFSA in relation to these issues. Regular contact was maintained in the following months, and in January 2014 an announcement was made that the firm would cease writing new business and issuing further renewals.

Insurance Industry Regulation

Questions (137)

John Browne

Question:

137. Deputy John Browne asked the Minister for Finance if Setanta Insurance, or any directly or indirectly related body, ever applied for a licence in Ireland or was ever turned down by the Central Bank of Ireland; and if he will make a statement on the matter. [26662/14]

View answer

Written answers

In my role as the 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 institutions is a matter for the Central Bank of Ireland, which is statutorily independent in the exercise of its regulatory functions.

I have contacted the Central Bank and they have informed me that they do not provide information on firms which apply for authorisation.  Once a firm is authorised, it is added to the Central Bank's public registers, which are available on the Registers page of the Central Bank's website at http://registers.centralbank.ie/.  If it withdraws its application for one reason or another, or if it is not authorised the Bank does not provide any information. Additionally, section 33AK of the Central Bank Act 1942 restricts the ability to disclose certain information which the Central Bank becomes aware of while exercising its functions.

Tax Code

Questions (138)

Michelle Mulherin

Question:

138. Deputy Michelle Mulherin asked the Minister for Finance if payments made under the rental accommodation scheme or rent supplement are regarded as income for tax purposes. [26712/14]

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Written answers

I am advised by the Revenue Commissioners that payments of rent by local authorities to landlords on behalf of tenants under the terms of the rental accommodation scheme are charged to tax in the hands of the landlord in the same manner as any other rent they might receive.

Rent supplement is paid where an individual living in private rented accommodation cannot afford to pay the rent payable under the terms of the letting arrangement from their own resources. The fact that the rent payable to the landlord might be partially funded out of rent supplement does not impact on the landlord's tax position, which is that the rent payable under the letting arrangement is also charged to tax in the same manner as any other rent they might receive.

Finally, I would add that from the perspective of a tenant for whom a local authority pays rent under the rental accommodation scheme or who is in receipt of rent supplement from the Department of Social Protection, such payments are not regarded as taxable in their hands.

Tax Collection

Questions (139)

Bernard Durkan

Question:

139. Deputy Bernard J. Durkan asked the Minister for Finance the correct level of income tax deductible in the case of a person (details supplied) in County Kildare; and if he will make a statement on the matter. [26746/14]

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Written answers

I have been advised by the Revenue Commissioners that an amended Tax Credit Certificate for 2014 issued to the person concerned on 19 June 2014, which will allow for the deduction of the correct tax for this year. Three matters were raised by the tax adviser acting on behalf of the person concerned:

- Requests for P21 Balancing Statements for years 2010, 2011, 2012 and 2013

- An explanation regarding PAYE Credits in 2014 Tax Credit Certificate

- A query regarding Tax Relief at Source in respect of interest paid on a bank loan that was used to purchase a principal private residence.

Revenue wrote to the tax adviser on 19 June outlining the position concerning the PAYE Credits granted for 2014 and the query regarding Tax Relief at Source. A copy of the letter was also issued to the person concerned on 20 June 2014.

With regard to the P21 Balancing Statements for earlier years, these have been issued for each of the years 2010, 2012 and 2013. However, Revenue is not currently in a position to issue a Balancing Statement for 2011 as it does not have sufficient information regarding the pay and tax details of the person concerned for that year. Moreover the person concerned is querying the figures provided to Revenue on the Forms P35 submitted by their employer for years 2012 and 2013, and further P21s for those years may have to be issued when this matter is resolved.

Revenue wrote to the employer of the person concerned on 19 June seeking additional information. When this information is received the tax liabilities for years 2010, 2011, 2012 and 2013 will be reviewed in their entirety and further P21 PAYE Balancing Statements will issue to the person in question as required.

Tax Yield

Questions (140)

Maureen O'Sullivan

Question:

140. Deputy Maureen O'Sullivan asked the Minister for Finance the amount of revenue that would be gathered in the current year from the imposition of a 70% wealth tax on all income above €150,000; and if he will make a statement on the matter. [26807/14]

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Written answers

It is assumed that the Deputy is referring to the introduction of a third rate of Income Tax of 70% to be applied on the portion of taxable incomes in excess of €150,000 per annum. In addition, it is assumed that the threshold for the proposed new Income Tax rates mentioned by the Deputy would not alter the existing standard rate band structure applying to single and widowed persons, to lone parents, married couples and civil partnerships. In addition, it is assumed that the Universal Social Charge continues to apply at the relevant rates.

I am advised by the Revenue Commissioners that, given the current band structures, major issues would need to be resolved as to how in practice such a new rate could be integrated into the current system and how this would affect the relative position of different types of income earners. Notwithstanding these issues, I am advised by the Commissioners that the full year yield to the Exchequer, estimated by reference to 2014 incomes, of the introduction of the new rate would be of the order of €1,015 million.

These figures are estimates from the Revenue tax forecasting model using latest actual data for the year 2011, adjusted as necessary for income self-employment and employment trends in the interim. They are provisional and may be revised. Married persons or civil partners who have elected or have been deemed to have elected for joint assessment are counted as one tax unit.

IBRC Liquidation

Questions (141)

Pearse Doherty

Question:

141. Deputy Pearse Doherty asked the Minister for Finance further to Parliamentary Question No. 111 of 27 May 2014 if, in view of the transcript of the hearing in the Delaware bankruptcy court on 13 May 2014, when Judge Sontchi stated in his summing up, which led to the order for IBRC to set aside US$36 million, there is money being set aside to make sure that, in the event the recognition order is overturned, there are funds available in the event he was ultimately successful in prosecuting litigation; if he will change or correct his response on 27 May 2014. [26817/14]

View answer

Written answers

I am not aware of any need to change or correct my previous response on this matter. I have been informed by the Special Liquidators that Counsel for John Flynn confirmed that the amount set aside is not connected to an alleged racketeering claim. The Special Liquidators have re-iterated that the US Bankruptcy Court has requested that they set aside an amount of $36 million for a period of 60 days to allow the Flynn parties an opportunity to seek a stay on the order for recognition granted to the Special Liquidators by the US Courts pending an appeal. The Special Liquidators are happy to comply with the Court's request.

Defined Benefit Pension Schemes

Questions (142)

Michael McGrath

Question:

142. Deputy Michael McGrath asked the Minister for Finance the current status of the AIB defined benefit pension scheme; his plans to deal with the deficit in the scheme; and if he will make a statement on the matter. [26843/14]

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Written answers

As the Deputy will be aware all defined benefit schemes in AIB closed to future accrual on 31st December 2013 and all AIB staff now receive defined contribution pension benefits for future service.  This applies to AIB Ireland, AIB UK, EBS and any other AIB staff in other jurisdictions. The closure of the defined benefit pension schemes resulted in a one off curtailment gain of in excess of €200m to the bank.

I have been informed that funding plans have been agreed with each defined benefit scheme and the schemes are in the process of de-risking their investment strategies. The Pension Scheme deficit has declined from €0.8 billion at June 2013 to circa €0.1 billion at December 2013. This is due to a number of factors including changes to the discount rate, an increase in the value of market assets and the curtailment gain on closure.

Further details in respect of AIB's pension schemes can be found in the AIB Annual Report which is available at www.aibgroup.com/investorrelations. An update on the performance of the schemes will be provided as part of AIB's half year results announcement scheduled for 30 July 2014.

Defined Benefit Pension Schemes

Questions (143)

Michael McGrath

Question:

143. Deputy Michael McGrath asked the Minister for Finance the current status of Permanent TSB’s defined benefit pension scheme; his plans to deal with the deficit in the scheme; and if he will make a statement on the matter. [26844/14]

View answer

Written answers

I have been advised by Permanent TSB that contributions to the Defined Benefit pension schemes have been discontinued. Following the discontinuance of the contributions the Trustees of the Defined Benefit Schemes proceeded to wind up the Schemes and the trustees are currently arranging for the assets of the schemes to be allocated among the pensioners, deferred employees and current employees. This process is still ongoing and details of benefits provided are not available.

Permanent TSB have advised that they have no further legal liability to the Defined Benefit Schemes. Further detailed information on the Permenant TSB pension schemes can be found on page 111 of 2013 Annual Report which is available on the bank's website.

Pension Provisions

Questions (144)

Michael McGrath

Question:

144. Deputy Michael McGrath asked the Minister for Finance further to Parliamentary Question No. 13 of 26 February 2013, the status of communication between AIB and retired former executives in respect of pension entitlements; if any former director is currently foregoing pension entitlements; and if he will make a statement on the matter. [26845/14]

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Written answers

As the Deputy will be aware  AIB has written to former senior executives of both AIB and EBS requesting a voluntary reduction in their pension levels. In some cases the Bank has written more than once. I have been informed by AIB that the bank is not in a position to reveal the status of discussions with the individuals on confidentiality grounds unless the individuals give their consent to do so. Ultimately any reduction taken by an individual is purely on a voluntary basis, as the bank has no legal power to alter the pensions in payment.

Fiscal Policy

Questions (145)

Michael McGrath

Question:

145. Deputy Michael McGrath asked the Minister for Finance the reason he has decided to achieve the medium-term budgetary objective of a balanced budget in structural terms by 2018, which is sooner than the requirements under the European fiscal rules; and if he will make a statement on the matter. [26846/14]

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Written answers

The corrective arm of the Stability and Growth Pact (SGP) requires that we bring the headline deficit below 3 per cent of GDP by 2015.  This remains the immediate priority. Once the excessive deficit is corrected, Ireland will be subject to the requirements of the preventive arm of the SGP.  The rules specify the need to make progress towards the medium term objective (MTO) of a balanced budget after taking into account the impact of the economic cycle (i.e. in structural terms).  In particular, the preventive arm sets out the requirement for an annual correction in the level of the structural balance (an improvement of 0.5 per cent per annum as a benchmark), without specifying when this position should be achieved.

In contrast, the Treaty on Stability, Coordination and Governance in the EMU (sometimes referred to as the 'fiscal compact') tasked the European Commission with producing an actual timetable for participating Member States to achieve their MTOs.  Last summer, the Commission outlined that Ireland should achieve its MTO by 2018.  On this basis, the April 2014 Stability Programme Update set out a path for achieving a balanced budget by 2018.  Until the 2014 Country Specific Recommendations (CSRs) are formally adopted by the European Council (early July), Ireland remains subject to the requirement of meeting the 2018 deadline.

Following discussions on the necessary consistency between the fiscal compact and the SGP, and ahead of the formal adoption of the 2014 CSRs, the European Commission has clarified that the deadline for MTO achievement is not fixed but the required annual improvement in the structural balance is.  Consistent with SGP rules, Member States not at their MTOs must improve their structural balance by at least 0.5 per cent of GDP per annum.

So, in summary, last year the requirements of the fiscal compact set out a deadline for MTO achievement, whereas from this year onwards, the focus will be on the required fiscal effort.  Therefore, once the 2014 CSRs are formally adopted, we will no longer need to reach a balanced budget by 2018; instead, we will have to deliver the required annual improvement in the structural balance.

Fuel Rebate Scheme

Questions (146)

Pat Deering

Question:

146. Deputy Pat Deering asked the Minister for Finance if he will consider introducing a diesel rebate scheme for agricultural contractors similar to the hauliers scheme, in next October's budget. [26939/14]

View answer

Written answers

Contractors using machinery in the course of farming work are entitled to use Marked Gas Oil (MGO). The current excise duty including the carbon charge on MGO is 10.23 cents per litre, this compares to 47.9 cents per litre in respect of auto-diesel. In terms of VAT, the reduced VAT rate of 13.5% applies to MGO and the standard VAT rate of 23% applies to auto-diesel. MGO is therefore taxed more favourably compared to auto-diesel. Accordingly, I have no plans to introduce a tax rebate for users of MGO.

Banking Sector Regulation

Questions (147)

Seán Fleming

Question:

147. Deputy Sean Fleming asked the Minister for Finance his views on the withdrawal from the Irish banking market by Rabo Bank's ACC division in view of the fact that it has taken over many loans that had been originally issued by ACC Bank; if he is satisfied this is being conducted in an orderly manner and will not cause unnecessary disruption to customers' clients; and if he will make a statement on the matter. [26940/14]

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Written answers

I have been informed by the Central Bank that ACC Bank continues to be regulated by the Central Bank while it still holds a banking licence. Since ACC Bank's original announcement of its commercial decision to withdraw existing day to day personal customer products, services and also to discontinue the provision of personal and business banking products to new customers, the Central Bank has been in communication with ACC Bank. Under the Central Bank's Consumer Protection Code, banks are required to give a minimum of 2 months' notice before they close a consumer's account. It is important that consumers are given adequate notice to allow them to take the required steps to close or transfer their accounts. I am not aware of particular difficulties being experienced by the bank's customers in relation to the withdrawal.

In March 2014 the Government affirmed its commitment to bringing forward legislation to protect consumers whose mortgages are sold to unregulated entities.  My officials have been in constant contact with the Central Bank and the Office of the Attorney General to develop the draft heads of this  legislation.  I can assure the House that the Government remains committed to bringing forward this legislation at the earliest possible date.

Central Bank of Ireland Investigations

Questions (148)

Michael McGrath

Question:

148. Deputy Michael McGrath asked the Minister for Finance if an investigation is being undertaken by the Central Bank of Ireland into a matter (details supplied); and if he will make a statement on the matter. [26954/14]

View answer

Written answers

I am informed by the Central Bank that it is precluded from commenting on any ongoing investigations.

Financial Services Sector

Questions (149)

Pearse Doherty

Question:

149. Deputy Pearse Doherty asked the Minister for Finance if he will provide in tabular form for each of Bank of Ireland, Allied Irish Banks, Permanent TSB, National Treasury Management Agency and the National Asset Management Agency, the number of employees currently on a total remuneration package between €100,000 to €200,000; €200,001 and €300,000; €300,001 and €400,000; €400,001 and €500,000 and in excess of €500,000 based on the latest figures from the banks as opposed to the Mercer report. [26993/14]

View answer

Written answers

Following my request, the State owned banks have recently put this information on their websites. It can be found at the following addresses:

AIB:

http://www.aib.ie/servlet/BlobServer/document.pdf?blobkey=id&blobwhere=1391512598815&blobcol=urlfile&blobtable=AIB_Download&blobheader=application/pdf&blobheadername1=Content-Disposition&blobheadervalue1=document.pdf

ptsb:

http://www.permanenttsbgroup.ie/~/media/Files/I/Irish-Life-And-Permanent/Attachments/pdf/2014/salary-remuneration-data-as-at-311213.pdf

 For your convenience the details are as follows:

Total Remuneration at 31 December 2013

AIB

ptsb

€100,000 - €200,000

942

148

€200,001 - €300,000

73

14

€300,001 - €400,000

11

4

Greater than €400,001

7

3

  In relation to Bank of Ireland I have been informed that the publicly available information in relation to remuneration is contained within the Bank of Ireland annual report for the year ended 31 December 2013.

http://www.bankofireland.com/fs/doc/wysiwyg/bank-of-ireland-annual-report-for-the-year-ended-31-december-2013.pdf

Remuneration of NTMA employees (including taxable benefits) as at end December 2013 is set out below. All NAMA staff are employees of the NTMA and under Section 42 of the National Asset Management Agency Act 2009, the NTMA assigns staff to NAMA. NAMA reimburses the NTMA the costs of staff assigned to NAMA.

NTMA Remuneration as at 31 December 2013 (post FEMPI reductions)

NTMA (ex NAMA)

NAMA

Total

Up to €100,000

258

223

481

€100,001 to €200,000

57

105

162

€200,001 to €300,000

8

2

10

€300,001 to €400,000

1

2

3

€400,001 to €450,000

1

0

1

Total

325

332

657

VAT Rate Application

Questions (150)

Brendan Griffin

Question:

150. Deputy Brendan Griffin asked the Minister for Finance further to Parliamentary Question No. 181 of 18 February 2014 (details supplied), the reason a reduced rate of 9% VAT applying to the construction of residential properties only would be difficult to administer; his views that the online revenue service would in fact easily facilitate the administration of such a system; and if he will make a statement on the matter. [27014/14]

View answer

Written answers

As you are aware, under EU and Irish VAT law it is not possible to apply the 9% VAT rate to construction of property other than housing. However, historically the same VAT rate applies to all construction in Ireland. I have no plans to apply different VAT rates to different construction services as this would lead to administrative complications and could lead to tax abuse. In addition, any reduction in the rate would come at a cost to the Exchequer.

Property Tax Collection

Questions (151)

Dan Neville

Question:

151. Deputy Dan Neville asked the Minister for Finance if he will investigate the alleged non-payment of the household charge in respect of a person (details supplied) in County Limerick. [27025/14]

View answer

Written answers

I am advised by Revenue, that with effect from 1 July 2013, Section 156 of the Finance (Local Property Tax) Act 2012 (as amended) converted arrears of Household Charge (HHC) to Local Property Tax (LPT), increased all outstanding liabilities from €100 to €200 and made Revenue responsible for the collection of those outstanding amounts. As part of the handover process, Revenue received the HHC Register from the Local Government Management Agency (LGMA) and cross-referenced it with its own LPT Register to identify a list of properties for which the HHC was still outstanding. Once the list of properties was compiled, Revenue wrote to the property owners concerned advising them to either pay within a specified period of time or confirm the reasons as to why the liability was not due, for example if a property was exempt from HHC.

In regard to the specific case to which the Deputy refers, Revenue has confirmed to me that the person in question is fully compliant with his LPT obligations for both 2013 and 2014. However, according to Revenue's records, payment was not received in respect of the arrears of HHC and a liability of €200 remains outstanding.

Revenue has confirmed to me that a member of the LPT team has already been in contact with the daughter of the person in question and it has been clarified that the credit transfer payment of 3 February to which the Deputy refers related to a different liability and was not connected to either HHC or LPT.  On foot of the conversation between the person's daughter and the LPT tem member, arrangements are now in place for the person to pay the €200 HHC liability through one of the approved Payment Service Providers.

Bonds Redemption

Questions (152)

Michael McGrath

Question:

152. Deputy Michael McGrath asked the Minister for Finance the amount of outstanding bonds that are due to be redeemed by Permanent TSB in 2014 and 2015; and if he will make a statement on the matter. [27129/14]

View answer

Written answers

I have been advised that Permanent TSB has c €2.1bn of debt securities maturing over the remainder of 2014 and 2015, details of which are laid out in Note 25 in the annual report which is available on the bank's website.

Banking Sector

Questions (153)

Michael McGrath

Question:

153. Deputy Michael McGrath asked the Minister for Finance if consideration has been given to merging Permanent TSB with another entity in the Irish banking sector; when he expects the future business model for Permanent TSB to be known; and if he will make a statement on the matter. [27130/14]

View answer

Written answers

The Deputy will recall that a way forward 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. 

While no plan has been approved, Permanent TSB has made significant progress in delivering key elements of the Restructuring Plan 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.  Permanent TSB has also made progress in relation to managing its portfolio of mortgages in arrears. 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 strategy for Permanent TSB is 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. While I am strongly supportive of Permanent TSB in the delivery of their strategy I cannot discount the possibility that a strategic transaction could arise opportunistically at any time involving Permanent TSB which could be in the best interests of the State.  As part of their day-to-day role my officials will consider all credible proposals and strategic options relating to our banking investments. 

As I have stated previously in addition to the many initiatives the Government is undertaking relating to non-bank credit I would like to see more competition in the domestic banking system to provide the lending required for our growing economy and that as part of that process I would welcome the participation of foreign banks in Ireland, possibly by way of  partnership with some of our domestic banks.

Public Sector Staff

Questions (154)

Robert Troy

Question:

154. Deputy Robert Troy asked the Minister for Finance his views on the recent media reports regarding the flawed system in place within the Revenue Commissioners for allocating promotions; the measures that have been taken to rectify the situation; the ramification for the company involved; and the actions he has taken to ensure that all promotions within the public service are carried out in a fair and transparent manner. [27153/14]

View answer

Written answers

I previously advised the House that this is a matter for the Revenue Commissioners.  I am advised that stage 1 of a recent internal competition for Executive Officers involved online testing of numerical and verbal reasoning.  This is a common approach availed in recruitment generally, for example by the Public Appointments Service, where there are very large numbers of candidates.  This stage was used to produce a shortlist for interviews, which are currently underway. The competency based interview process will assess suitability for promotion to the next grade.

An issue was raised with Revenue of a potential isolated incident of advance unauthorised access to the test site in Stage 1. This matter is currently being fully investigated by Revenue.  An additional verification procedure for the stage 1 test has been put in place. I am advised that the stage 1 tests, which were conducted by an outside independent provider, were run in accordance with the Codes of Practice of the Commission for Public Service Appointments (CPSA). Revenue has also requested the CPSA to undertake an audit of the competition once it is completed.

VAT Rate Application

Questions (155, 157)

Martin Heydon

Question:

155. Deputy Martin Heydon asked the Minister for Finance if he will provide clarification on the VAT treatment of herbal teas; and if he will make a statement on the matter. [27158/14]

View answer

Michael McCarthy

Question:

157. Deputy Michael McCarthy asked the Minister for Finance if consideration is being given to proposals to apply a VAT rate of 23% to herbal teas, vitamins and health supplements; if so, the reason this is being considered in view of the beneficial health effects of these products and the negative impact this proposal will have on employment in these industries; and if he will make a statement on the matter. [27194/14]

View answer

Written answers

I propose to take Questions Nos. 155 and 157 together.

I am advised by the Revenue Commissioners that the EU VAT Directive (Council Directive 2006/112/EC) generally provides that supplies of goods and services are chargeable to VAT at the standard rate but that lower rates are permitted in very limited circumstances.  Food products can only benefit from the zero rating in accordance with Article 110 of the VAT Directive which permits the retention of the zero rate where the products were liable to VAT at the zero rate on and from 1 January 1991.

A range of food supplements and vitamins that encourage the maintenance of health, through the sustenance derived from a normal, healthy diet, benefit from the zero rate.  However, a food supplement taken for the purposes of muscle growth or body mass increase, or for the purposes of weight reduction or bodily sculpture, cannot benefit from the zero rate.  I would draw the Deputy's attention to Revenue eBrief 70/2011 which contains additional detail in relation to the VAT rates of vitamins and food supplements. 

I am further advised by the Revenue Commissioners that paragraph 8 of Schedule 2 of the Value-Added Tax Consolidation Act 2010 provides that that the supply of tea and preparations derived from the crushed leaves of the tea plant when supplied in non-drinkable form is liable to VAT at the zero rate.  The VAT applicable to herbal teas derived from plants other than the tea plant has been raised with me by the industry and the matter is subject to ongoing analysis.

VAT Rate Application

Questions (156)

Martin Heydon

Question:

156. Deputy Martin Heydon asked the Minister for Finance if the health benefits of foods and drinks are considered when VAT rates on these items are being considered; the impact this consideration can have on the eventual VAT rate applied; and if he will make a statement on the matter. [27159/14]

View answer

Written answers

The VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply.  The EU VAT Directive generally provides that supplies of goods and services be chargeable to VAT at the standard rate, but that a reduced rate of 5% or higher can apply to food and drink in certain circumstances. Ireland applies the 13.5% reduced VAT rate to bakery goods and catered food, while the standard VAT rate of 23% applies to alcohol, soft drinks, confectionary and snacks.

In addition, Member States can retain historical zero-rated VAT treatment under Article 110 of the EU VAT Directive, where a good or service was zero rated on and from 1 January 1991.  Ireland applies the zero rate to most food. In this context, it is not possible to apply the zero rate to any new food and drink items that have not already applied at the zero rate, and where a decision is made to apply a positive VAT rate to food that is currently zero rated, it would not be possible to reintroduce the zero rate to that food.

The VAT rate applying to food and drink in Ireland was set many years ago and the historic VAT treatment places a limitation on the VAT policy options regarding food and drink.   Nonetheless, the health benefits of food and drink is reflected in the historic VAT rating of food and drink. The 23% standard VAT rate in general applies to less healthy food and drink such as alcohol, soft drinks, confectionary and snacks, while the zero rate applies to fruit, vegetables, meat and dairy products.

Question No. 157 answered with Question No. 155.
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