Micheál Martin
Question:32. Deputy Micheál Martin asked the Minister for Finance the position regarding the EU response to date on Ireland's retrospective debt; and if he will make a statement on the matter. [35636/14]
View answerDebt Restructuring
Questions (32)
Written answers
The Euro-area Heads of State or Government (HoSG) agreed in June 2012 that "it is imperative to break the vicious circle between banks and sovereigns." and that when a Single Supervisory Mechanism, involving the ECB, is in place and operational, the European Stability Mechanism, the ESM, could recapitalize banks directly.
On the 10th of June 2014 the euro area Member States reached a preliminary agreement on the operational framework for the ESM's Direct Recapitalisation Instrument (DRI). This includes a specific provision in relation to the retroactive application of the instrument. Therefore, the agreement, that we were active in negotiating, keeps open the possibility to apply to the European Stability Mechanism for a retrospective direct recapitalisation of the Irish banks, should we wish to avail of it.
What is now required is a decision by mutual agreement of the ESM Board of Governors to create a new ESM instrument in accordance with Article 19 of the ESM treaty. The aim is to have this process completed as soon as possible, subject to completion of national approval procedures. For Ireland the European Stability Mechanism (Amendment) Act 2014 (No. 32 of 2014), which was enacted last week following signature by the President, fulfils this purpose. The Single Supervisory Mechanism is, as of yesterday, 4th November, in place and operational. The latest available information is that the ESM Board of Governors will take a decision to implement the ESM DRI in early December.
In relation to retroactive recapitalisation, the draft guideline states that the potential application of the instrument for this purpose should be decided on a case-by-case basis and by mutual agreement. As I have stated previously, it will not be possible to make a formal application to the ESM for retroactive recapitalisation before the Instrument is in place.
However, I would remind the Deputy that unlike back in 2012, the ESM is no longer the only option open to us to recover the money provided to recapitalise our banks. Investors are now willing to support Irish banks again and the market value of our investments has improved accordingly.
The decision on any application once the instrument is in place is a matter of timing. I believe that in Europe a strategic approach tends to deliver the best results, which is why I intend to keep the option of a retroactive recapitalisation firmly on the table.
VAT Exemptions
Questions (33)
Ruth Coppinger
Question:33. Deputy Ruth Coppinger asked the Minister for Finance if VAT will be applied to water supplied by Irish Water in view of the fact that the company is not a local authority; and if he will report on any consultations with the EU Commission on the matter. [41764/14]
View answerWritten answers
The supply of water by local authorities and Irish Water is exempt from VAT. This VAT exemption applies to all supplies of water, including supplies to domestic households, businesses and others.
Ireland's long-standing VAT exemption for the supply of water is currently contained in paragraph 14(2) of Schedule 1 to the VAT Consolidation Act 2010. The exemption is based on a derogation from EU VAT law contained in Article 371 and Annex X of the EU VAT Directive.
There have been no consultations with the EU Commission on the matter.
VAT Rate Application
Questions (34)
Seán Kyne
Question:34. Deputy Seán Kyne asked the Minister for Finance the reason VAT is charged on personal safety equipment such as helmets here; if this is a requirement of EU VAT law and, if so, if his attention has been drawn to the fact that such safety products are exempt from VAT in the UK; and if he will make a statement on the matter. [41745/14]
View answerWritten 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 VAT Directive does not make specific provision for a reduced or zero rate, or an exemption from VAT, to apply to safety equipment, including helmets. As such, they are subject to the standard VAT rate, which is currently 23%.
However, for historic reasons the zero rate of VAT applies to safety clothing, helmets and visibility clothing, for children up to 10 years of age, while the supply of such clothing for adults and children older than 10 years is liable to VAT at the 23% rate. As Ireland applied the zero rate to clothing and protective clothing for children up to 10 years of age on 1 January 1991, we are entitled to retain that zero rated application. However, as the standard VAT rate applied to safety equipment and safety clothing for adults and older children on 1 January 1991, it is not possible to apply a reduced or zero rate to them, nor to exempt them from VAT.
In the case of the UK, they had a zero rate on safety products before 1 January 1991 so were able to continue exempting these products from VAT.
NAMA Operations
Questions (35)
Dara Calleary
Question:35. Deputy Dara Calleary asked the Minister for Finance his views on whether the National Asset Management Agency is maximising its economic value for the taxpayer through its current sales strategy; and if he will make a statement on the matter. [41759/14]
View answerWritten answers
Earlier this year, NAMA announced that, in line with its obligations under Section 10 of the NAMA Act, it considered that the best financial outcome for the State would be achieved through a managed process of accelerating disposals in an orderly way with the target of redeeming 80% of senior debt (a cumulative €24 billion) by end-2016.
Following on from the Section 227 review of NAMA which was conducted by my Department, I fully endorsed the view of the NAMA Board that it should take advantage, to the greatest extent possible, of favourable Irish market conditions by increasing the flow of assets to the market. NAMA's policy is that the sale of all loans and the sale of properties by debtors and receivers should be openly marketed to ensure that the best price available in the market is achieved in all instances.
In addition to ensuring that NAMA obtains the best achievable return for the State on its acquired bank assets, such deleveraging creates wider collateral benefits for Ireland. NAMA senior debt represents a contingent liability on taxpayers and its redemption yields benefits in terms of the creditworthiness of the sovereign. This was clearly demonstrated some months ago when the credit rating agencies stated that their upgraded ratings for Ireland reflected, in part, the positive impact they considered that NAMA's actual and planned accelerated disposal programme would have on Ireland's creditworthiness.
NAMA Staff Pensions Provision
Questions (36)
Clare Daly
Question:36. Deputy Clare Daly asked the Minister for Finance the reason a defined benefit pension scheme was established for staff in the National Asset Management Agency, in view of the undermining of such schemes in other places of employment and the failure to assist workers in these companies. [41719/14]
View answerWritten answers
I wish to advise that the defined pension scheme was not established for staff of NAMA. As the Deputy will be aware, NAMA staff are employees of the National Treasury Management Agency (NTMA) and assigned to NAMA under Section 42 of the National Asset Management Agency Act 2009.
Superannuation entitlements of NTMA staff are conferred under a defined benefit superannuation scheme set up under Section 8 of the National Treasury Management Agency Act 1990. Members of the Scheme from 1 January 2010 will receive benefits based on career average earnings. The Deputy will be aware that the NTMA started recruiting staff for NAMA after this date.
The arrangements set out above apply to NTMA employees assigned to NAMA in the same way as to other NTMA employees. The public service pension deduction is applied to NTMA employees.
Tax Code
Questions (37)
Richard Boyd Barrett
Question:37. Deputy Richard Boyd Barrett asked the Minister for Finance the reason his proposed income tax and universal social charge budget measures disproportionately favour those on higher incomes; and if he will make a statement on the matter. [41767/14]
View answerWritten answers
A fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it as soon as it was prudent to do so. The measures announced in the Budget are the first stage of a reform plan, to be undertaken over a number of years, to address this issue, particularly for middle-income earners who have borne the greater share of the cost of the economic downturn.
In Budget 2015 I announced a reduction in the top rate of income tax from 41% to 40%. I also extended the standard rate band on which income tax is chargeable at the lower 20% rate by €1,000.
In addition I have reduced the two lower rates of USC from 2% and 4% to 1.5% and 3.5%, respectively. Furthermore, I have also increased the threshold before which the 7% rate of USC becomes payable to €17,576, so that those on the minimum wage will now only be liable to a maximum 3.5% rate of USC.
The Budget also provides for the retention of the exemption from the top rates of USC for medical card holders with incomes that do not exceed €60,000. These individuals will now only be liable to pay a USC rate of 3.5%, down from 4%. This reduced rate will also apply to the over 70s, with incomes that do not exceed €60,000, again down from 4%.
Ireland already has one of the most progressive income tax systems in the developed world. To preserve that progressivity, the Budget also contains USC measures which have the effect of limiting the maximum benefit from this package of tax measures to approximately €14 per week for any individual taxpayer, which means that those with very high incomes will only benefit to the same extent, as those with more modest incomes.
While the benefits from the changes introduced in Budget 2015 are broadly proportionate to the level of income earned for those on low and middle incomes, the reality is that because of the highly progressive nature of the Irish tax system those on lower incomes pay very low levels of tax, particularly when compared to their counterparts in Europe.
Currently, a single individual employed on the standard minimum wage of €17,542 per annum pays income tax of €4.01 and USC of €10.51 per week. Furthermore, someone on the standard minimum wage is also exempt from paying PRSI. As a result of the changes introduced in Budget 2015 the weekly USC charge of €10.51 per week will fall to €7.19 per week. This means their tax bill will be reduced by just over 20%.
In contrast a single individual earning €70,000 per annum currently pays €25,531 per annum or €490.98 per week in income tax, USC and PRSI. After Budget 2015, this individual's tax bill will be reduced by about 3%. Contrasting these two examples, I cannot agree that the income tax budget measures disproportionately favour those on higher incomes. In fact, the highest proportionate benefit as a percentage of net income from the Budget tax changes occurs at an income level of just over €12,000. This is a result of my decision to extend the USC exemption threshold from €10,036 to €12,012, which also has the effect of removing 80,000 low earning individuals from the charge entirely.
The changes announced in the Budget will ensure that all those currently paying income tax and/or USC will see a reduction in their tax bill in 2015. I propose to continue this reform in future Budgets, subject to the required economic growth and the consequent fiscal space available to the Government.