Wednesday, 8 Oct 2014

Written Answers Nos. 51 - 60

IBRC Bonds

Questions (51, 52, 53, 54, 55)

Joan Collins

Question:

51. Deputy Joan Collins asked the Minister for Finance the number of bonds, from the €25 billion in bonds created in February 2013 for the special liquidation of Irish Bank Resolution Corporation, and of the €3 billion in bonds created in 2012 to fund the payment of the IBRC promissory note redemption, that have been sold by the Central Bank of Ireland in 2012, 2013 and to date in 2014; and the predicted additional quantum to be sold by the end of 2014. [38315/14]

Joan Collins

Question:

52. Deputy Joan Collins asked the Minister for Finance the position of the European Central Bank on the €25 billion in bonds created in February 2013 for the special liquidation of Irish Bank Resolution Corporation, and of the €3 billion in bonds created in 2012 to fund the payment of the IBRC promissory note redemption; if he or his Department has had recent discussions with the ECB regarding these bonds and if the ECB has expressed the view that its concerns about these bonds would be somewhat mitigated if the bonds were sold into the sovereign bond market; and if he will make a statement on the matter. [38316/14]

Joan Collins

Question:

53. Deputy Joan Collins asked the Minister for Finance if there is no net benefit to the Exchequer if the Central Bank of Ireland disposes into the sovereign bond market the €25 billion of bonds created in February 2013 for the special liquidation of Irish Bank Resolution Corporation, and the €3 billion in bonds created in 2012; if he will fund the payment of the IBRC promissory note redemption, in view of the net surplus at the CBI remitted to the State, and that the interest paid by the CBI to the European Central Bank on these bonds is nugatory. [38323/14]

Joan Collins

Question:

54. Deputy Joan Collins asked the Minister for Finance further to the ongoing legal challenge to the lawfulness of the promissory notes used to capitalise the former Anglo Irish Bank, the Irish Nationwide Building Society and the Educational Building Society the risks of the Central Bank of Ireland disposing, in advance of the conclusion of this court case, of the €25 billion in bonds created in February 2013 for the special liquidation of Irish Bank Resolution Corporation, and the €3 billion in bonds created in 2012 to fund the payment of the IBRC promissory note redemption, his views on whether it is prudent to copperfasten the legitimacy of these bonds by disposing of them in the sovereign bond market when the sole lender is the European Central Bank; and if he will make a statement on the matter. [38324/14]

Joan Collins

Question:

55. Deputy Joan Collins asked the Minister for Finance the contact he and his Department has had with the Central Bank of Ireland regarding the disposal and in particular, the accelerated disposal, of the €25 billion in bonds created in February 2013 for the special liquidation of Irish Bank Resolution Corporation, and the €3 billion in bonds created in 2012 to fund the payment of the IBRC promissory note redemption; and if he will make a statement on the matter. [38325/14]

Written answers

Minister for Finance

I propose to take Questions Nos. 51 to 55, inclusive, together.

Subsequent to the liquidation of IBRC the Central Bank acquired €25bn of Floating Rate Notes (FRNs) and €3.46bn of Government Fixed Coupon 2025 Government bonds. The Bank undertook to sell the combined portfolio of the FRNs and the fixed rate bond as soon as possible provided the conditions of financial stability permit.

The Bank also indicated that, as a minimum, it will make sales in accordance with the following schedule: to end 2014 (€0.5 billion), 2015-2018 (€0.5 billion per annum), 2019-2023 (€1 billion per annum), and 2024 on (€2 billion per annum until all bonds are sold). The current schedule would see all of the bonds held by the CBI sold by c.2034. The Bank's recent Annual Report notes that sales have been made from this combined portfolio, with the Bank selling €350mn of its holdings of the Government 2025 Fixed Rate Bond in 2013. The Central Bank does not provide updates on bond sales outside of their annual report.

Under the original Promissory Note arrangement, the Government was scheduled to make annual payments of €3.1 billion thereby putting significant upward pressure on the amounts to be funded from the market. Following a long period of negotiation the notes were replaced in February 2013 with a portfolio of Irish Government bonds (as outlined above). The provision of these long-term non-amortising Government bonds to replace the amortising Promissory Notes has therefore had significant benefits from a market perspective as it ensures that there will be much less issuance of Irish Government bonds into the market over the next decade and beyond than would otherwise have been the case.

The market continues to react positively to the restructuring and we have recently seen further reduction of the 10 year bond yields to 1.65%, far lower than had been the case before the State entered the EU/IMF programme and thus enabling the State to substantially reduce its cost of borrowings.

The Central Bank is independent in respect of its decisions to sell the bonds held by them as a consequence of the promissory note exchange, however, as outlined above, the current schedule would see all of the bonds held by the CBI sold by c.2034.

In summary, the timing of the sales and the management of its investment holdings are matters for the Central Bank and it is independent in the exercise of its functions and therefore, neither I nor the Department of Finance have any role in the matter.

Commissions of Investigation

Questions (56)

Eoghan Murphy

Question:

56. Deputy Eoghan Murphy asked the Minister for Finance if he will provide a list of the commissions of investigation, inquiries and similar investigations established under his Department during the past 12 months or being considered for establishment during the next 12 months, and in each case the person or persons conducting the inquiry and the timeframe, including start and end date envisaged. [38334/14]

Written answers

Minister for Finance

I would like to advise the Deputy that no commissions of investigation, inquiries and similar investigations have been established under my Department during the past 12 months. At this time my Department is not considering the establishment of any commissions of investigation, inquiries and similar investigations during the next 12 months.

VAT Rate Application

Questions (57)

Clare Daly

Question:

57. Deputy Clare Daly asked the Minister for Finance further to Parliamentary Question No. 177 of 23 September 2014, if he will reconsider the position of taxing e-books at the standard 23% rate as of January 2015 (details supplied). [38364/14]

Written answers

Minister for Finance

As you will be aware, the VAT rating of goods and services is subject to the requirements of EU VAT law with which Irish VAT law must comply. In this regard, EU VAT law specifically provides that all digitised publications, including e-books, are treated as the supply of a service liable at the standard rate of VAT, which in Ireland is 23%.

The VAT charged on electronically supplied services was always the standard VAT rate, and is not related to the changes being made on 1 January 2015. The 2015 changes relate to the country in which tax is to be charged, and not the rate of VAT that is to be charged. From 1 January 2015, electronically supplied services, including e-books, will be liable to VAT in the country of the consumer and not the country of the supplier, as is currently the case. This means that an e-book purchased by a person in Ireland will be charged at the Irish standard VAT rate, and not the standard VAT rate of the Member State of the supplier. This is known as the destination principle, and it is designed to remove the competitive advantage gained by Member States charging lower rates of VAT; as under the destination principle a customer in Ireland purchasing an e-book from any EU Member State will be charged Irish VAT on that service.

As stated previously, while Ireland applies a zero VAT rate to printed books including atlases, children's picture, drawing and colouring books and books of music, by virtue of a derogation under the VAT Directive for such exceptional treatment, there is no option under EU VAT Law to either exempt e-books from VAT or to apply the zero VAT rate or a reduced VAT rate to such products.  The different VAT treatment of printed books and e-books reflects the nature of these products, the latter being a richer product often providing content beyond simple text to include embedded digital music, software, film and internet links.

In 2012, France and Luxembourg unilaterally made the decision to defy the well-established and recognised EU VAT position in relation to the VAT rate charged on electronic supplies of e-books, by applying a reduced VAT rate to these services. The EU Commission took both Member States to the European Court of Justice in 2013 because of this breach of law. A judgement in the case has not yet been made.  This is separate from the K Oy European Court of Justice Case C-219/13 which dealt specifically with the VAT treatment of printed and audio books, but did not deal with e-books.

Question No. 58 answered with Question No. 48.

EU Regulations

Questions (59)

Clare Daly

Question:

59. Deputy Clare Daly asked the Minister for Finance the steps he will take to defend Ireland from the imposition of fines and other sanctions for failing to implement EU Council Regulation (EC) 2271/96. [38370/14]

Written answers

Minister for Finance

EU Council Regulation (EC) 2271/96 provides protection against and counteracts extra-territorial effects of certain US laws and regulations specified in the Annex to the Regulation.  In the main, the Regulation takes direct effect across the EU through the activities of the Commission, while the Regulation may also entitle EU persons and entities to take action to recover damages and costs where they have been negatively impacted by the application of laws whose effects are intended to be neutralised by the Regulation.

Currently I have no indication that fines or sanctions are contemplated in relation to the Regulation.

Member States have taken varying approaches to implementing this regulation and these different approaches are currently under examination. My officials consult with the Department of Foreign Affairs and Trade to ensure that the regulation is implemented fully and comprehensively.

Fuel Laundering

Questions (60)

Peadar Tóibín

Question:

60. Deputy Peadar Tóibín asked the Minister for Finance the role Customs and Excise have in the stretched fuel crisis that is currently affecting the midlands and western part of the country; if there is an investigation being carried out by his Department; if Customs and Excise are accepting evidence from garages with regard to this crime; and his views on the creation of a fund to help those who have had their vehicles damaged. [38371/14]

Written answers

Minister for Finance

I am advised by the Revenue Commissioners, who are responsible for tackling fuel fraud, that they are very aware of the risks posed to consumers' vehicles, legitimate businesses and the exchequer by all forms of such fraud. Revenue has made great progress in tackling the problem of diesel laundering over the past three years, and reports now indicate the emergence of another form of fuel fraud, commonly referred to as petrol stretching. This involves the illegal addition of a low tax commodity to petrol to defraud the exchequer and the motorist.

Petrol stretching is an offence under section 102 (IA) of the Finance Act 1999. It carries a penalty on summary conviction of a fine of €5,000 or a term of imprisonment not exceeding 12 months, or both a fine and imprisonment. Where conviction occurs on indictment, a fine of up to €126,970, or a term of imprisonment of up to 5 years, or both a fine and imprisonment, may be imposed.

I am advised by Revenue that they are investigating the recent reports concerning petrol stretching and that they have been in contact with the motor and oil trades. I understand also that they have taken samples from a number of filling stations that it has been claimed may have been sources of adulterated fuel, and that they will undertake any further enquiries that are required as a result of reports or information that they receive. These enquiries will seek to establish if there is evidence that petrol stretching has occurred, and whether there is evidence to support a prosecution. The analysis of petrol samples is time consuming and results for the samples recently taken is awaited.

Revenue and the oil sector have cooperated very successfully to tackle diesel laundering and I am confident that, with this cooperation and with the supply chain information available to Revenue, the problem of petrol stretching can also be tackled successfully. It is essential that petrol distributors report any reduction in the pattern of legitimate supplies of fuel to the retail trade which may indicate that specific retailers are shifting some of their sourcing to laundered or "stretched" fuel.

Motorists themselves should take care about where they source their petrol and report to Revenue any suspicions concerning the source of adulterated petrol that may have damaged their engines. Revenue will investigate such reports and pursue prosecutions where possible. In that regard, Revenue has recently launched a dedicated section of its website specifically on the black economy and this includes an electronic reporting facility for anyone who has information about shadow economy practices including  petrol stretching.

I would also like to advise the Deputy that the first point of contact for motorists whose vehicles have been affected should be the insurance companies they hold their policies with.   Further to that, those affected should also contact the point of purchase and seek redress through them.  If they remain unsatisfied they may have recourse to civil remedies and as such could seek legal advice.