Written Answers Nos. 1-19
9. Deputy Ruth Coppinger asked the Minister for Finance the purpose and function of the income tax exemption for non-resident holders of Irish Government securities and the reason the cost of this tax expenditure has increased from €240.8 million in 2007 to €619 million in 2012; if he will provide a breakdown of the number of beneficiaries each year and the benefit per person; and if the latter information is not available, the reason why. [41765/14]
View answerUnder section 43 of the Taxes Consolidation Act 1997 the Minister for Finance may issue certain Government securities with a condition that both the capital of and the interest on any such security is exempt from income tax or corporation tax. This exemption applies only where the security is in the beneficial ownership of a person or persons who is, or are, not resident in the State. Up to 3 February 2010, this exemption applied where the security was held in the beneficial ownership of a person or persons who were not ordinarily resident in the State.
The functions of the Minister for Finance relating to borrowing and debt management were delegated to the NTMA by order of the Government made under the NTMA Act 1990.
The exemption does not apply to securities acquired by a company after 29 January, 1992, regardless of when such securities were issued, where the securities are held by or for an Irish branch or agency of the company and the trade or business being carried on through that branch or agency is a financial trade or business. The securities must be held by or for the Irish branch or agency. If they are held by the foreign company separately from its Irish branch or agency, the exemption continues.
The provision is meant to incentivise persons abroad to invest in Irish securities. If the bonds were taxed at source, non-resident investors would almost certainly make it more expensive and adjust the price they are willing to pay to reflect the tax, so the tax gained would largely be offset by higher funding costs for the State. The exemption avoids persons who are not resident in this State and holding a beneficial ownership in securities issued by the NTMA on behalf of the Minister for Finance, being liable to taxation in both their home State and in Ireland. In the absence of the provision - which has been on the statute book in one form or another almost since the foundation of the State - such persons would be liable to be taxed in their own jurisdiction and in Ireland on the capital and/or the interest.
While the percentage of Irish Bonds held by non-residents declined during the financial crisis, the fact that the State's sovereign borrowings increased substantially in the period resulted in an increase in the tax foregone figure from €240.8 million in 2007 to an estimated €615.9 million in 2012. This is borne out by the CSO published figures on national debt interest payments to non-residents which increased from €1,347 million in 2007 to €4,635 million in 2013, an increase of 244% over 2007. It is of course important to remember the benefits of this exemption in terms of incentivising foreign investors to invest in Irish securities.
The register of holders of Irish Government bonds is maintained at the Central Bank of Ireland. The register is almost entirely made up of Euroclear Bank, the clearing and settlement platform. Due to the nominee account structure in Euroclear Bank it is not possible to identify the number of beneficiaries under the exemption provided for by section 43 of the Taxes Consolidation Act 1997.
10. Deputy Michael McGrath asked the Minister for Finance when he expects a knowledge development box to be in place; if he is concerned that delays in its introduction will disadvantage Ireland in seeking mobile investment; and if he will make a statement on the matter. [41753/14]
View answerIn recognition of the fact that investment and growth in OECD economies is increasingly driven by knowledge-based investment which is related to research and development and intellectual property, putting in place an attractive tax offering for intangible assets is key for Ireland's success in attracting foreign direct investment (FDI). This is why as part of my Budget announcement I made a clear statement of my intention to introduce a competitive income-based regime for intangible assets in Ireland, in what will be known as a "Knowledge Development Box" or "KDB".
I view this as a positive measure for Ireland and I will ensure the Irish KDB will be among the best in class on offer internationally. The design of this measure will be along the lines of patent boxes which have existed for many years in countries that compete with us for FDI.
At present, the measures that are in place in our competitor locations are the subject of on-going discussions at the OECD and EU level, as regards to their compatibility with the international rules around fair tax competition. Until these discussions have been concluded, it is clear that it is not possible to guarantee that any of the measures in our competitor jurisdictions are sustainable and that they won't be changed in the very near future.
In Ireland, we have always been clear on the need for certainty in the Irish corporation tax offering. For this reason, we will await the outcome of these international discussions before we will legislate for the KDB and therefore make sure that the Irish provisions will be sustainable in the long-term. The timeline for this process is not set in stone, but I intend to legislate for implementation in Finance Bill 2015.
In the meantime, later this year, I will launch a public consultation on how the Irish KDB should operate. This will gather views from as broad a spectrum as possible on what this measure should entail, and ensure that the process of introducing and implementing the KDB will be well advanced by the time the international negotiations are concluded.
As a small country with a stable annual Budget and Finance Bill process, Ireland has a strong track record for being a fast-follower and for implementing timely tax legislation once international rules have been agreed. This will also be the case for the Knowledge Development Box and along with the recent enhancements to Ireland's existing regime for intangible assets, it should give confidence to companies who wish to put their knowledge-based capital in Ireland.
11. Deputy Pearse Doherty asked the Minister for Finance his plans to ensure all workers receive equality under any tax credit-relief for water charges. [41740/14]
View answerAs the Deputy will be aware, a number of measures were announced on Budget day to improve the overall affordability of water charges. The objective of these supports is to assist households in the country who pay their Water bills.
Following on from the announcement on Budget day, officials from my Department are working closely with their colleagues in the other relevant Departments and Agencies, in the development of the processes that will be employed to deliver the relief.
As I stated on Budget day and subsequently, we will design the measure as broadly and efficiently as possible, to ensure that the relief reaches all households who pay their charges.
12. Deputy Pearse Doherty asked the Minister for Finance the reason he is proposing to extend tax breaks to very high earners through an extension of the SARP scheme. [41744/14]
View answerAs the Deputy will be aware, my officials conducted a review of the Special Assignee Relief Programme in advance of this year's Budget. The review analysed aspects of the scheme such as the background and rationale for the programme and data available from the Revenue Commissioners including the cost and take-up of the programme. In addition, a public consultation was held. A report was written on the review and this has been published on the Budget website.
Having considered the outcome of the review and Ireland's need to attract FDI, I have decided to:
- extend and enhance SARP for a further three years until the end of 2017;
- The upper salary threshold is being removed to encourage senior decision makers to come to Ireland;
- The residency requirement has been amended to only Irish residency. This was proving to be a barrier to individuals in their year of arrival into Ireland, and also for individuals from countries where they are deemed to be permanently tax resident; and
- The requirement to have been employed abroad by the same employer for 12 months prior to being assigned to Ireland has been reduced to 6 months in order to align with recent changes to employment permit legislation.
I believe these measures are a positive step forward as part of a range of measures, forming the Roadmap to secure Ireland's place as a destination for the best and most successful companies in the world.
The Deputy will be aware that this Government is committed to job creation. A key part of this focus is to attract FDI into Ireland, and in order to support and drive this job creation, it is important that Ireland can attract and retain the decision makers and senior executives who make such investment decisions. I believe that this measure will help to create jobs and support the export led recovery in the economy by maintaining Ireland's competitiveness for attracting FDI and the subsequent job creation that follows investments of this type.
13. Deputy Michael McGrath asked the Minister for Finance the last occasion on which his Department carried out a valuation exercise in respect of Permanent TSB; the way the value of the State’s current holding may best be protected during the capital-raising stage; the impact not having an agreed restructuring plan has had on the bank’s performance in the stress tests; and if he will make a statement on the matter. [41755/14]
View answerI have not had a formal valuation carried out as none is required for the Government accounts, though my officials regularly appraise me of the financial and operating performance of Permanent TSB.
In relation to the upcoming capital raising exercise I am of the view that the best way to protect the value of the State's shareholding is to ensure Permanent TSB is well prepared, that it conducts a comprehensive and competitive exercise with appropriate legal and financial advice, and that the State has meaningful oversight and involvement in the process. Officials from my Shareholding Management Unit and our financial advisors, JP Morgan Cazenove, are well placed to fulfil this role and achieve the optimum outcome for the taxpayer as part of this process.
In line with the rules set out for the SSM comprehensive assessment and stress tests, Permanent TSB's performance, and that of some other banks, was negatively impacted as a result of not having a Restructuring Plan approved before 31 December 2013.
14. Deputy Michael McGrath asked the Minister for Finance the action he will take to ensure persons with third party claims against Setanta Insurance are not left facing significant shortfalls in compensation particularly in the case of persons who suffered catastrophic injuries; and if he will make a statement on the matter. [41752/14]
View answerAt the outset I would like to say that I am aware of the difficulties that the liquidation of Setanta Insurance Company Limited has caused for Setanta policyholders and those claiming compensation under Setanta insurance policies.
You will appreciate that a liquidation of an insurance company is a legally complex and time consuming process. The Setanta Liquidator is currently examining a range of factors in order to estimate the cost of claims and the extent to which claims can be met in the Setanta liquidation.
The Liquidator has advised that settlements can only be paid out after all of the company's liabilities are quantified, including claims.
The Insurance Compensation Fund (ICF) provides for payments to meet the liabilities of insolvent insurers in certain cases where it is unlikely that claims can be met otherwise than from the ICF. Under the Insurance Act 1964 claims by bodies' corporate or unincorporated bodies are not covered by the ICF, except where there is a liability to or by an individual. In addition, all ICF payments are subject to a limit of 65% of the amount due or €825,000, whichever is the lesser. Management and administration of the ICF is under the control of the President of the High Court acting through the Office of the Accountant of the Courts of Justice.
I am pleased to say that I have been informed that having sought legal advice on the operation of the legalisation, the Accountant is now satisfied that it is appropriate to make applications to the ICF for compensation prior to the completion of the liquidation of Setanta.
Every effort is being made to ensure that claims can be dealt with as expeditiously as possible. The Accountant of the Courts of Justice is in ongoing discussions with both the Setanta Liquidator and his legal advisors to put in place appropriate mechanisms to commence making applications to the High Court in accordance with the Insurance Act 1964. In tandem with this he is also working to acquire the necessary skilled resources to enable applications to the ICF to be processed effectively and efficiently. Due to the unprecedented nature and scale of the Setanta insolvency the Accountant is not yet in a position to provide a timetable for applications to be made to the Fund, but it is hoped that applications by the Accountant to the High Court can begin sooner rather than later.
Current estimates indicate that the shortfall for most Setanta claimants will be relatively small once they have received the 65% compensation available from the ICF as well as their distribution from the Liquidation. I understand that there is the very small number of large claims where the maximum ICF payment of €825,000 will apply. However it is important to note that this estimate is based on an evaluation of claims reserves by the Liquidator. Actual claims experience may decrease the amount available for distribution by the Liquidator.
I appreciate that the current uncertainty regarding the timing of compensation payments is causing difficulty for the former customers of Setanta Insurance and I have asked that information on ICF procedures is made available publicly as soon as possible. The Accountant of the Courts of Justice can only deal with claims which are submitted by the Liquidator, so the advice to all claimants continues to be that they should contact the Liquidator of Setanta.
15. Deputy Michael McGrath asked the Minister for Finance the actions being taken to combat the black market sale of tobacco products; his plans to allocate additional resources to this; and if he will make a statement on the matter. [41754/14]
View answerI am advised by the Revenue Commissioners that combating the illegal tobacco trade is, and will continue to be, a high priority for Revenue. Their work against this illegal activity includes a range of measures designed to identify and target those who are engaged in the supply or sale of illicit products, with a view to seizing the illicit products and prosecuting those responsible. This multi-faceted strategy includes on-going analysis of the nature and extent of the problem, developing and sharing intelligence on a national, EU and international basis, the use of analytics and detection technologies and ensuring the optimum deployment of resources at points of importation and within the country.
Interception of illicit tobacco products is achieved by Revenue through a combination of risk analysis, profiling and intelligence and the screening of cargo, vehicles, baggage and postal packages. Revenue officers also target the illicit trade at the post-importation level by carrying out intelligence-based operations and random checks at retail outlets, markets and private and commercial premises.
Revenue cooperates extensively with An Garda Síochána in combating the illicit trade, and the relevant agencies in the State also work closely with their counterparts in Northern Ireland, through a cross-border group on tobacco enforcement, to target the organised crime groups that are responsible for a large proportion of the illegal tobacco market. In addition, cooperation takes place with other revenue administrations and with the European Anti-Fraud Office, OLAF, in the on-going programmes at international level to tackle the illicit trade.
Revenue's action against the illegal trade has resulted in significant seizures of illicit products, and in a large number of convictions of persons involved in the smuggling or sale of illicit products. To the end of September 2014 49.6 million cigarettes were seized in 4,535 separate seizures, while 9,320 kilogrammes of tobacco were seized in 760 separate seizures. This includes a major seizure in Drogheda in June 2014 in which officers from Revenue's Customs Service, supported by An Garda Síochána, seized over 32 million cigarettes and 4,500 kilogrammes of water pipe tobacco.
I have taken legislative action over recent years to further strengthen the Revenue Commissioner's powers to respond to the problem of the illegal tobacco trade.
- The Finance Act 2012 clarified the legal basis for Revenue officers to open and examine the contents of postal and courier packets that are reasonably believed to contain untaxed excise products.
- The Finance Act 2013 introduced new offences and forfeiture measures relating to the illicit production of tobacco, including offences of involvement with illicit tobacco production, knowingly dealing in or delivering any illicit tobacco product and keeping materials and equipment for the purposes of illicit production. Provision was made also for the forfeiture of any equipment or materials, including unmanufactured tobacco, used for illicit production. That Act also strengthened the offence provisions relating to the sale or delivery of unstamped tobacco products.
- The Finance (No. 2) Act 2013 provided that a person suspected of an offence of dealing in, or with, unstamped tobacco products must provide information to a Revenue Officer or a Garda and may be required to present any tobacco product concerned for examination, and makes provision for search by a Revenue Officer or Garda of any bag or other receptacle that he or she reasonably believes to contain tobacco products that are concerned in the offence.
In relation to the allocation of human resources, I am informed by the Revenue Commissioners that they are a fully integrated tax and customs administration and that it is not possible to disaggregate resources deployed exclusively at any given time on action against the illicit trade in tobacco products. Revenue currently has approximately 2,000 staff engaged on activities that are dedicated to targeting and confronting non-compliance. There front-line activities include anti-smuggling and anti-evasion investigation and prosecution, audit, assurance checks, anti-avoidance, returns compliance and debt collection.
The Revenue Commissioners are subject to the Employment Control Framework staffing reductions imposed since 2009. Revenues overall staff levels have decreased from a total of 6,581 full-time equivalents at the end of 2008 to the current level of 5,680. Notwithstanding this reduction, Revenue staff resources assigned to compliance activities have been maintained at around 2,000, so that they now represent a larger proportion of Revenue's staff. The Revenue Commissioners have accorded a very high priority to the tackling of the illicit tobacco trade and they are committed to ensuring that, despite the staffing reductions, this enforcement work will continue to be resourced to the maximum extent possible.
Finally, I would point out that the annual survey conducted for the Health Services Executive and the Revenue Commissioners by Ipsos MRBI indicates that 11% of cigarettes consumed in Ireland in 2013 were illicit. The survey results for 2009, 2010, 2011, and 2012 indicate a level of illicit cigarettes of 15%, 14%, 14% and 13% respectively. I can assure the House that the Revenue Commissioners will continue to make tackling the trade in illicit tobacco products a key objective, and Government will ensure that all legislative action necessary to combat the illicit tobacco trade is taken.
16. Deputy Lucinda Creighton asked the Minister for Finance in view of the increase in property prices in many parts of the country, his views that capital acquisitions tax thresholds should be reviewed; and if he will make a statement on the matter. [41747/14]
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.
The Group A tax free threshold of €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.
The Group B tax free threshold of €30,150, applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer, other than one covered by Group A.
The 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 improve 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 tax-free thresholds are kept under review, in the same way as other relevant tax provisions, and in this regard I will bear the Deputy's comments in mind for the future.
17. Deputy Joan Collins asked the Minister for Finance his plans to abolish relevant contract tax in relation to private building contracts, particularly on Government funded projects. [39262/14]
View answerIt is not the function of the Tax Code or the Oireachtas to determine the employment relationship between parties. If the true relationship between parties is that of an employer/employee then the employer is required, under the Tax Code, to operate PAYE on payments made to the employee. If, however, the true relationship is not that of an employer/employee then, where the relationship relates to construction operations, as defined within the Tax Code, there is a requirement to operate the relevant RCT provisions. These provisions were placed on an electronic platform with effect from 1 January 2012. I am informed by the Revenue Commissioners that the eRCT system is working efficiently and that it has removed substantially the vulnerabilities for fraud, mainly from bogus documentation, that attached to the previous paper based relevant contracts tax system. It is not proposed to abolish Relevant Contracts Tax.
I wish to advise the Deputy that the 'Code of Practice for Determining Employment or Self-Employment Status of Individuals', which is available of my Department's website, was created to assist both parties to an engagement including an engagement in the construction sector - in determining if a contract of engagement is, by its nature, either a 'contract of service' (that is, an employer and employee arrangement) or a 'contract for service' (that is, not an employer and employee arrangement). The Code of Practice for Determining Employment or Self-Employment Status of Individuals' is not a Revenue Code but rather was compiled with the assistance of the Irish Congress of Trade Unions / Department of Jobs, Enterprise and Innovation / National Employment Rights Authority / Department of Social Protection / Department of Finance / Small Firms Association / Irish Business and Employers Confederation / Construction Industry Federation / Revenue Commissioners.
I am further informed by the Revenue Commissioners that they are committed to tackling all forms of shadow economy activity including that which is described as 'bogus self-employment status'. Their staff carry-out visits to a wide range of businesses, including temporary places of business such as building sites, as part of their on-going compliance operations. In some instances, such visits are undertaken jointly with other State agencies such as the Department of Social Protection and the National Employment Rights Authority.
18. Deputy Jonathan O'Brien asked the Minister for Finance his views on reducing VAT on school e-books in order to reduce back-to-school costs for parents. [37922/14]
View answerThe 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%.
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.
19. Deputy Seán Kyne asked the Minister for Finance in the event of a new stipulation being introduced that persons purchasing homes to act as their primary residence are required to have 20% of the purchase price as a deposit, his plans, while being mindful of the great need to promote sensible, sustainable lending practices, to introduce measures to assist persons in securing finance to purchase a home; and if he will make a statement on the matter. [41746/14]
View answerAs the Deputy is aware, the Central Bank of Ireland has published a consultation paper regarding macro-prudential measures for residential mortgage lending in Ireland. The Central Bank measures, as set out in the consultation document, would place restrictions on the loan to value (LTV) and loan to income (LTI) ratios banks can apply when lending for house purchase. They would apply to all mortgage lending in Ireland by regulated firms. The Central Bank has indicated that the primary objective of these measures is to increase the resilience of the banking and household sectors to the property market and to try to reduce the risk of bank credit and housing price spirals from developing in future.
The specific measures proposed for principal dwelling houses are to:
- restrict new lending to a limit of 80% of the value of the property;
- restrict new lending to a maximum of 3.5 times gross income.
However, the Central Bank has also stated that banks will be able to lend, in some instances, above these threshold limits. However, any lending in excess of the loan to value ratio must be limited to no more than 15% of the value of new loans issued and, in respect of exceeding the loan to income ratio, to no more that 20% of the value of new loans. Other exemptions will also be available in certain circumstances.
As the Deputy will be aware, Budget 2015 contains a number of measures to support a functioning housing market. In particular, in order to support first time buyers to save towards a deposit for their first home, DIRT will be refunded in respect of savings up to a maximum of 20% of the purchase price. This measure will run until the end of 2017.
My Department is also committed, under the Construction 2020 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 such scheme would be to help ensure the adequate availability of mortgage finance on affordable terms for new completions, particularly for 'First Time Buyers', as the economy recovers. Of particular interest would be the means by which such schemes can support greater levels of investment in new housing, with the associated benefits for the construction sector and ultimately for the consumer. To further assist the evaluation and consideration of such a measure, I have recently written to the Chairperson of the Joint Oireachtas Committee on Finance and Public Expenditure & Reform. I have asked the committee to consider the matter of mortgage insurance in an Irish context and, drawing on the experiences of other countries, to prepare a report on the issue.
