Tuesday, 2 Dec 2014

EU Budget Contribution

Questions (192)

Micheál Martin

Question:

192. Deputy Micheál Martin asked the Minister for Finance if Ireland has to pay extra money to the EU budget after the upwards re-evaluation of GDP; and if he will make a statement on the matter. [41690/14]

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Written answers

Minister for Finance

Ireland's contribution to the EU Budget is an obligation of EU membership and is a charge on the Central Fund. The contribution formula for the EU Budget is comprised of Traditional Own Resources (customs duties), a VAT-based payment and a residual balancing component paid in accordance with each Member State's (MS) share of EU Gross National Income (GNI).

Annually, a technical rebalancing exercise is carried out which retrospectively adjusts MS preceding years' budget contributions. This exercise not only takes account of updated MS GNI, but also updated VAT data. These balancing payments are called up for automatic payment, in accordance with the relevant legislation, on 1st December each year.

In parallel with this, the Commission has proposed Draft Amending Budget 6 (DAB 6) which includes a technical redistribution of these balancing payments across MS and also takes account of updated Traditional Own Resources forecasts. The net impact of these two exercises is an estimated additional contribution of €6.5m for Ireland. (Separately, under DAB6, the forecast for Ireland's Traditional Own Resources has been updated by €6m.). It should be noted that, whereas the payment under the technical balancing exercise is automatic, DAB 6 must be agreed by both Council (QMV) and Parliament.

Since the publication of DAB 6, the Commission has proposed an amendment to the applicable EU legislation which if adopted would allow member states, under certain conditions, to defer making their balancing payments to 1st September 2015. The result would be that balancing payments received on December 1st would be redistributed this year. Where member states opt to make their balancing payments after this, a new draft amending budget would have to be proposed in 2015 to redistribute these monies.

Accordingly, the full net impact of the additional €6.5m contribution will accrue to Ireland only after all member states make their balancing payments, either this year or next.

Tax Credits

Questions (193)

Eoghan Murphy

Question:

193. Deputy Eoghan Murphy asked the Minister for Finance his views on a tax credit scheme for childcare (details supplied). [45991/14]

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Written answers

Minister for Finance

Tax relief is not available to parents in respect of crèche fees or childcare costs. However, I would like to assure the Deputy that the Government acknowledges the continuing cost pressures on parents, particularly those with young children. In recognition of these cost pressures, a number of support measures are in place to ease the burden on working parents. These include the Community Childcare Subvention (CCS) programme, which funds community childcare services to enable them to charge reduced childcare fees to qualifying parents, the Childcare Education and Training Support (CETS) programme which provides free childcare places to qualifying Solas and VEC trainees and the Early Childhood Care and Education (ECCE) programme which provides for a free pre-school year for children in the year before commencing primary school. Generous entitlements to paid and unpaid maternity leave as well as child benefit payments are also provided.

The Department of Social Protection provides financial support to families on low pay by way of the Family Income Supplement (FIS) and additionally to one-parent families through the one-parent family payment.

Furthermore, a Single Person Child Carer tax credit of €1,650 is available as well as an additional standard rate band of €4,000. This credit and band is payable to any single person with a child under 18 years of age or over 18 years of age if in full time education or permanently incapacitated.

A relief did exist in the form of a benefit-in-kind exemption, where childcare facilities were provided by an employer. However, this relief was abolished in Finance Act 2011. The Commission on Taxation recommended the abolition of this exemption, citing equity issues in relation to those parents whose employers did not provide such facilities.

I have no plans to introduce a tax relief for parents to assist with childcare costs. To provide such a tax relief could be seen to unfairly discriminate against those individuals who stay at home and look after their children. While wanting to encourage participation in the workforce, equally we cannot say to individuals who stay at home that they are making a less valuable contribution to society.

In addition, tax relief is only of benefit to those in the tax net and it is estimated that in 2014, 39% of income earners will be exempt from income tax altogether. It could also be argued that any tax relief would most likely be absorbed by childcare providers in the form of higher prices.

As the Deputy will appreciate, I receive numerous requests for the introduction of new tax reliefs and the extension of existing ones. In considering these, I must be mindful of the public finances and the many demands on the Exchequer given the current budgetary constraints. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.

VAT Rate Application

Questions (194)

Aengus Ó Snodaigh

Question:

194. Deputy Aengus Ó Snodaigh asked the Minister for Finance if his attention has been drawn to the fact that the Revenue Commissioners have begun to apply VAT to certain food supplements such as probiotics and glucosamine which had been supplied at the zero VAT rate; his views on the cost implications of this for consumers with dietary requirements and deficiencies; and his further views on amending legislation to enshrine the zero VAT rate that had always applied to food supplements that provide sustenance. [46030/14]

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Written answers

Minister for Finance

VAT is guided by 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 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 for "clearly defined social reasons" where the products were liable to VAT at the zero rate on and since 1 January 1991.

As set out in the Revenue Commissioners' eBrief 70/2011, 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 of VAT. The key consideration is whether the food supplement is one that forms part of a person's normal diet for the purposes of sustenance as opposed to enhancing a person's diet with a view to achieving a particular aim. 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 since such products are not food. The two supplements specified in the Parliamentary Question, probiotics and Glucosamine, could qualify as zero rated food supplements, or could be liable at the standard VAT rate, but there is insufficient information provided to make such a determination. If the Deputy could provide more information on the food supplements in question, the Revenue Commissioners can advise on their correct VAT treatment as appropriate.

I would also point out that food for the purposes of interpretation of the provisions of the VAT Consolidation Act 2010 has the ordinary and everyday meaning of food. Alternative definitions in other EU legislation are not relevant to the interpretation of food for VAT purposes.

VAT Rebates

Questions (195)

Charlie McConalogue

Question:

195. Deputy Charlie McConalogue asked the Minister for Finance if the VAT relief which is available on fuel for drivers and passengers with disabilities will be available in 2015; and if he will make a statement on the matter. [46043/14]

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Written answers

Minister for Finance

The Disabled Drivers and Disabled Passengers (Tax Concessions) Scheme provides relief from VAT and VRT (up to a certain limit) on the purchase of an adapted vehicle for transport of a person with specific severe and permanent physical disabilities, repayment of excise duty on fuel, and an exemption from motor tax. While the Scheme provides for the repayment of excise duty on fuel used in the adapted vehicle, it does not provide for the relief of VAT paid in respect of the fuel used.

I assume the Deputy is referring to the introduction of the new fuel grant scheme to replace the repayment of excise duty on fuel element of the Scheme. In April 2013 the Court of Justice of the European Union ruled that the excise relief element of the Disabled Drivers and Disabled Passengers (Tax Concessions) Scheme is incompatible with the EU Energy Tax Directive. My Department has informed the European Commission of my intention to remove the excise relief element of the Scheme at the end of 2014 and replace it with a fuel grant in 2015. The European Commission has raised no objections.

To give effect to this I signed a statutory instrument in March of this year (S.I. 139 of 2014) with the effect that Regulation 16 of the Disabled Drivers and Disabled Passengers (Tax Concessions) Regulations (S.I. 353 of 1994) would be revoked as of 1 January 2015. As such, members of the Scheme may claim excise relief on any fuel used up to 31 December 2014. From 1 January 2015, current and prospective members of the Scheme will be eligible for a fuel grant in respect of fuel used during the year.

At this time, I intend to maintain the current practice of paying the sum a year in arrears, so that the first payment of the fuel grant would take place on 1 January 2016. I have instructed my officials to design the new grant in such a way to provide as seamless a transition as possible between the excise relief on fuel element and the new fuel grant and, as I stated in March, members of the Scheme will not be at a loss in the transition.

Officials from my Department are continuing to engage with other Departments and the Revenue Commissioners in order to put in place the legislative, administrative and financing changes necessary for the operation of the fuel grant. I intend to notify members of the Scheme of the details of the new fuel grant as soon as all the details are finalised.

Strategic Banking Corporation of Ireland Funding

Questions (196)

199. Deputy John McGuinness asked the Minister for Finance if personal guarantees will be required by the Strategic Banking Corporation of Ireland. [46081/14]

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John McGuinness

Question:

200. Deputy John McGuinness asked the Minister for Finance the conditions required in order to access the finance provided by the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46082/14]

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John McGuinness

Question:

202. Deputy John McGuinness asked the Minister for Finance if applicants to the Strategic Banking Corporation of Ireland will be required to have a current tax clearance certificate in order to access finance; and if he will make a statement on the matter. [46084/14]

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Written answers

Minister for Finance

I propose to take Questions Nos. 198 to 200, inclusive, and 202 together.

As the Deputy will be aware, section 2 (b) (ii) of the Strategic Banking Corporation of Ireland Act 2014 lays out the purposes of the SBCI and empowers the SBCI to lend to SMEs through on-lending enterprises. It is the on-lenders who will assess the risk of the loan propositions from their customers.

The SBCI is based on a common and successful on-lending model that is used across Europe and further afield for example by Germany's KfW and Spain's ICO. The on-lending model has many advantages over direct lending and is designed to ensure that as much of the benefit of the SBCI's lower funding cost is passed onto SMEs. This helps the SBCI to maintain a lean operation and avoids as much operational overhead as possible. Also, the SBCI can better deliver on one of its key goals i.e. that of diversifying the SME finance market by operating as an wholesale lender rather than entering the SME finance market directly. The SBCI's focus is to facilitate the funding of new entrants to this market in order to expand the range and profile of SME lenders in Ireland. As a result, enhanced sustainable competition in the SME finance market is very likely to improve the terms and conditions offered by finance providers to SMEs.

As the Deputy will be aware, Section 8 of the Strategic Banking Corporation of Ireland (SBCI) Act 2014 mandates the SBCI to design credit facilities that meet the needs of SMEs. The SBCI will take account of market conditions for SME financing as part of its operations. If SMEs are having difficulty in particular sectors, the SBCI is mandated to design products which address any such difficulties. In this way the SBCI can facilitate the provision of sufficient prudent finance to fund the commercial activities of SMEs throughout the economy.

All funding to SMEs from the SBCI will have to adhere to EU State aid rules. SMEs in accepting an SBCI loan through a lending partner will be expected to confirm that the funding provided does not exceed its three year de minimis State Aid allowance.

Tax Clearance Certificates will not be required by the SBCI directly from SMEs and any possible conditions attaching to loans such as a loan-to-value ratio or personal guarantees are for the SBCI's lending partners to determine as part of their risk assessment criteria. It is important to note that the SBCI's lending partners' hold the risk of the individual SME loans.

Strategic Banking Corporation of Ireland Funding

Questions (201)

John McGuinness

Question:

201. Deputy John McGuinness asked the Minister for Finance if he will provide detailed guidelines on the way the funds of the Strategic Banking Corporation of Ireland will be provided; and if he will make a statement on the matter. [46083/14]

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Written answers

Minister for Finance

As the Deputy will be aware, in accordance with Section 5 of the Strategic Banking Corporation of Ireland (SBCI) Act, 2014, the SBCI has been established as an independent company, under the Companies Acts. The legislation provides a mandate to the SBCI and a framework from in which it will operate. Section 8 of the SBCI Act 2014 requires the SBCI to ensure that SMEs have sufficient prudent finance to fund their commercial activities and mandates the SBCI to design credit facilities that meet the needs of SMEs.

While the Minister for Finance is the sole shareholder of the SBCI, the board of the corporation will act independently in fulfilling its duties in ensuring that SBCI has the intended effect on SME financing. Therefore the Minister for Finance will not provide detailed guidelines on the way the funds of the SBCI will be provided.

This arrangement will enable the SBCI to grow its balance sheet to a greater size than it would be if it were to be classed as a part of the Government debt. Giving the SBCI its own independent mandate also makes it more likely can continue on a sustainable basis into the future and will be around to help SMEs both in the post crisis era and far into the future.

Question No. 202 answered with Question No. 198.

Strategic Banking Corporation of Ireland Expenditure

Questions (203)

John McGuinness

Question:

203. Deputy John McGuinness asked the Minister for Finance the targets the Strategic Banking Corporation of Ireland will have in 2014 and 2015 with regard to the number of companies it seeks to lend money to; the amount of employment expected to be generated from these loans; and if he will make a statement on the matter. [46085/14]

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Written answers

Minister for Finance

The SBCI has been established with specific functions such as ensuring that SMEs are provided with sufficient finance for growth and to facilitate competition in the SME finance market by facilitating new entrants in the provision of SME credit.

Consideration is currently underway on the extent of lending which the SBCI will undertake through the course of 2015 and beyond. This is being determined by a range of issues including the ability for traditional banks to act as onlenders in a manner consistent with the aims and objectives of the SBCI and the nature of new alternative non-bank finance providers coming forward to partner with the SBCI and provide new competitive alternatives to the domestic banks..

The purpose of the SBCI is to provide credit to SMEs in a manner not previously provided and by an institution that has not existed heretofore. This should provide increased confidence to the SME sector as it increases the certainty around the availability of funding to that sector even in adverse financial market conditions. As a consequence, the SME sector grows and jobs are created. Employment is a positive outcome of the SBCI fulfilling its functions as laid out in the enabling legislation facilitated by growth in the economy.

Strategic Banking Corporation of Ireland Remit

Questions (204)

John McGuinness

Question:

204. Deputy John McGuinness asked the Minister for Finance if there will be an appeals system in place for loan applicants who are refused support from the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46086/14]

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Written answers

Minister for Finance

As the Deputy will be aware, section 2 (b) (ii) of the Strategic Banking Corporation of Ireland Act 2014 lays out the purposes of the SBCI and empowers the SBCI to lend to SMEs through on-lending enterprises. It is the on-lenders who will assess the risk of the loan propositions from their customers.

The SBCI is based on a common and successful on-lending model that is used across Europe and further afield by national promotional banks for example by Germany's KfW and Spain's ICO. The on-lending model has many advantages over direct lending and is designed to ensure that as much of the benefit of the SBCI's lower funding cost is passed onto SMEs. This helps the SBCI to maintain a lean operation and avoids as much operational overhead as possible. Also, the SBCI can better deliver on one of its key goals i.e. that of diversifying the SME finance market, by operating as a wholesale lender rather than entering the SME finance market directly. The SBCI's focus is to facilitate the funding of new entrants to this market in order to expand the range and profile of SME lenders in Ireland. As a result, enhanced sustainable competition in the SME finance market has the very real potential to improve the terms and conditions offered by finance providers to SMEs.

Section 8 of the SBCI Act 2014 requires the SBCI to ensure that SMEs have sufficient prudent finance to fund their commercial activities and mandates the SBCI to design credit facilities that meet the needs of SMEs. As a result, part of the SBCI's operations will be to analyse whether or not the SME sector is receiving the optimum level of credit and service from the market and that may include examining lending conditions. The SBCI is mandated to design products which address any such problems arising.

On the issue of appeals, SMEs refused credit from AIB and Bank of Ireland can have their application reviewed by the Credit Review Office where either of these banks are SBCI onlenders. As announced in my Budget 2015 speech, Permanent tsb will shortly recommence actively lending to the SME sector, and has agreed to participate in the Credit Review Office process, with Ulster Bank actively considering making a similar commitment. Both would be subject to a similar CRO appeal mechanism where they operate as SBCI onlenders. It is important to note that the SBCI's lending partners hold the risk of the individual SME loans.

The Credit Review Office will provide the lending partner with an opinion on whether it agrees with a rejected lending proposal or not. The lending partner can then respond to this opinion and confirms the next steps in response to the recommendations set out by the Credit Review Office. Where the Credit Review Office has upheld a lending partner's decision not to lend, the opinion will always seek to provide alternatives and guidance to the borrower to help the business move forward.

Strategic Banking Corporation of Ireland Establishment

Questions (205)

John McGuinness

Question:

205. Deputy John McGuinness asked the Minister for Finance if he will provide a quarterly statement on the operation of the Strategic Banking Corporation of Ireland; and if he will make a statement on the matter. [46087/14]

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Written answers

Minister for Finance

As the Deputy will be aware, the Strategic Banking Corporation of Ireland (SBCI) Act, 2014 stipulates that the SBCI will present a copy of its annual audited accounts to the Minister. The Minister is required lay a copy of the audited accounts before each House of the Oireachtas. A senior member of the staff of the SBCI nominated by its chairperson shall give evidence to Oireachtas Committees on the accounts and reports of the Comptroller and Auditor.

The SBCI will also fulfil its obligations as set out in "The Code of Practice for the Governance of State Bodies". The Code of Practice requires that the Chairperson of the SBCI should provide, amongst a number of requirements, an interim report to the Minister for Finance on significant commercially sensitive developments during a financial year.

The SBCI will operate its own internal management accounts and reports and develop Key Performance Indicators (KPI) to ensure that it succeeds in fulfilling its mandate as laid out by legislation, the Code of Practice and its Memorandum of Association.

Nursing Homes Support Scheme Data

Questions (206)

Michelle Mulherin

Question:

206. Deputy Michelle Mulherin asked the Minister for Finance since the commencement of the nursing home support scheme, the percentage of nursing home loans that have become repayable and have been recouped by the Revenue Commissioners; the total amount recouped; the total amount outstanding; and if he will make a statement on the matter. [46090/14]

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Written answers

Minister for Finance

I am advised by Revenue that it acts as the collection agent for the Health Service Executive (HSE) in respect of the repayment of loan funding provided under the Ancillary State Support Scheme. Revenue's involvement in this regard is provided for under the Nursing Homes Support Scheme (Collection and Recovery of Repayable Amounts) Regulations 2009 and Statutory Instrument No. 436 of 2009.

Since the commencement of the scheme, Revenue has been instructed by the HSE to collect outstanding debts to the value of €22.94m in respect of 1,529 'repayable loan' cases. To date, €20.52m of this debt in respect of 1,410 cases has been successfully collected by Revenue while the remaining €2.42m in respect of 119 cases is under active pursuit.

Revenue has also confirmed to me that the scheme has a further outstanding amount of €9.98m in respect of 524 cases, which has not yet been sanctioned by the HSE for collection. This amount includes €7.54m in respect of 351 cases that are not yet due for repayment and €2.44m in respect of 173 cases that the HSE has confirmed to Revenue are being further deferred due to specific circumstances.

Bank Charges

Questions (207)

Michael McGrath

Question:

207. Deputy Michael McGrath asked the Minister for Finance if his attention has been drawn to the interest rate being charged by a financial institution (details supplied) in respect of feeder accounts used by landlords for properties, that is, the account to which the rent is lodged and the mortgage repayments are made from; and if he will make a statement on the matter. [46132/14]

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Written answers

Minister for Finance

I have been informed that the current overdraft interest rate for an authorised borrowing on personal current accounts at the institution in question is 11.85%. Surcharge interest (currently 12% per annum) applies to unscheduled or unauthorised borrowings by a customer on their account(s). It is charged on out of order accounts and is based on the amount by which the account is in excess. This interest rate is charged as a result of the increased costs associated with funding these unauthorised debit balances and associated credit management activities.

Bank customers can avoid incurring surcharge interest by ensuring their account operates in credit or within their sanctioned limit, if any. Further details on the institution's fees and charges and on how to avoid incurring surcharge interest can be found in the institution's Fees and Charges brochure available at any branch, on the institution's website or by contacting customer services by phone.

Tax Code

Questions (208)

Róisín Shortall

Question:

208. Deputy Róisín Shortall asked the Minister for Finance the position in relation to the tax treatment of a parent who loans €40,000 to their child for the purchase of a home and who receives the money back over time; if the loan is treated as a gift for capital acquisitions tax purposes; if repayments are counted as an income for income tax purposes or have other tax implications for the parent; and the way in which both the child and parents will be treated vis-a-vis their taxes, if the loan amount is officially gifted to the child for the purposes of satisfying the child's bank and paid back over time. [46142/14]

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Written answers

Minister for Finance

I am informed by the Revenue Commissioners that where a parent makes a loan interest free (whether described as a gift or not) to a child on the basis that the full loan will be repaid but without interest, there are no tax implications for the parent. The child is considered to be in receipt of an annual gift from the parent throughout the term of the loan. The value to the child of this gift is an amount equivalent to the income from the investment of an amount equal to the amount of the loan. In practice, this is taken to be the amount that would be earned if the amount of the loan was invested at the best bank deposit rate obtainable in the open market on such a sum.

If this annual value of the free use of a sum of cash (in effect the interest that would have been obtained had the money been placed on deposit) is below €3,000 per annum, the gift each year is exempt from CAT under section 69 CATCA 2003-small gifts exemption- provided the donee has received no other gifts in that year from the same donor.

If the annual value of the free use of cash exceeds €3,000 per annum then only the excess each year is treated as a taxable gift. However, it is important to note that no CAT becomes payable on any such gift until the total value of all taxable gifts and inheritances taken by the child from the parent exceeds €225,000.

To take an example, if the best bank deposit rate obtainable on a sum of €40,000 was, say, 2%, the donee would be deemed to take a gift each year of €800. That deemed annual gift of €800 is below the annual small gift exemption of €3,000 and is therefore completely outside the scope of CAT, assuming the donee has taken no other gifts in that year from the same donor.

If a parent makes a gift of €40,000 to a child then €37,000, being the amount in excess of the small gift exemption, is a taxable gift. However, as already indicated no CAT becomes payable on any such gift until the total value of all taxable gifts and inheritances taken by the child from the parent exceeds €225,000.

The Deputy's reference to a sum being "officially" gifted to a child is not understood. If there is some doubt about the true nature of a transaction, the Revenue Commissioners will have regard to all the relevant facts and circumstances in deciding the correct tax treatment of the transaction.