Thursday, 11 Dec 2014

Written Answers Nos. 67-73

Insurance Coverage

Questions (67)

Robert Troy

Question:

67. Deputy Robert Troy asked the Minister for Finance the mechanism in place where a person has been refused home insurance by a number of brokers. [47555/14]

Written answers

Minister for Finance

In my role as Minister for Finance I have responsibility for the development of the legal framework governing financial regulation. Neither I nor the Central Bank of Ireland, as regulator, interfere in the pricing of insurance products.  The provision of insurance cover and the price at which it is offered is a commercial matter for insurance companies and is based on an assessment of the risks they are accepting and adequate provisioning to meet these risks. These are considered on a case by case basis and it is important to be clear that neither the Government nor the Central Bank has any influence over this matter.  Consequently I am not in a position to direct insurance companies to provide home insurance cover to specific individuals.

Insurance Ireland operates a free Insurance Information Service for those who have queries, complaints or difficulties in relation to obtaining insurance. Their service can be contacted at [phone] or by email at [e-mail].##

Universal Social Charge Exemptions

Questions (68)

Michael McGrath

Question:

68. Deputy Michael McGrath asked the Minister for Finance if there is an exemption from the universal social charge in respect of an occupational pension which goes directly to a State hospital for the long-term care for a terminally ill patient; and if he will make a statement on the matter. [47558/14]

Written answers

Minister for Finance

The Universal Social Charge (USC) was introduced from 1 January 2011 and replaced the Income and Health Levies.  The USC is an annual tax payable on an individual's total income in a year, subject to a small number of exemptions and reliefs.  In particular, an individual is not liable to pay USC where his or her total income in the current tax year does not exceed €10,036.  For 2015, it is proposed in the current Finance Bill, which is before the Oireachtas, to raise this exemption figure to €12,012.  In addition, individuals aged 70 and over benefit from a lower rate of USC provided their total income does not exceed €60,000.

The precise circumstances in which a pension is going directly to a State hospital are not clear from the Deputy's question.  If the funds are being paid into a Personal Private Property Account (PPPA) operated by the HSE, then they belong to the individual and to no other person or body including the HSE.  If it is the case that some of the pension is being paid over as part of an individual's contribution under the Fair Deal Scheme, then this is a disbursement of income after tax.  Indeed, the income part of the calculation of an individual's contribution under the Fair Deal Scheme is based on after-tax income.  In any case, there is no exemption from USC where income from any source including an occupational pension is used to meet the costs of long term care in a hospital. 

However, the Deputy will be aware of the income tax relief available on expenditure on the provision of health care.  This includes maintenance or treatment in a hospital for which relief at the standard rate of tax is provided, and maintenance or treatment in a nursing home where on-site 24-hour nursing care is available, for which relief is available at the marginal rate of tax.

Further information in relation to relief for medical expenses is available on the Revenue website at http://www.revenue.ie/en/tax/it/leaflets/it6.html. 

Bank Guarantee Scheme Bond Repayments

Questions (69, 73)

Michael McGrath

Question:

69. Deputy Michael McGrath asked the Minister for Finance if he is categorically ruling out the possibility of payments being made to junior bondholders in Irish Bank Resolution Corporation as a result of the special liquidation process; if he is prepared to issue a direction order that they would not be paid; and if he will make a statement on the matter. [47619/14]

Michael McGrath

Question:

73. Deputy Michael McGrath asked the Minister for Finance the status in the ranking of preferred creditors of the payment he made the bank guarantee to senior bondholders of IBRC following its liquidation in 2013; and if he will make a statement on the matter. [47682/14]

Written answers

Minister for Finance

I propose to take Questions Nos. 69 and 73 together.

The Special Liquidators continue to implement the orderly and efficient wind down of Irish Bank Resolution Corporation Limited (in Special Liquidation) in accordance with the provisions of the IBRC Act and the instructions issued by me under the IBRC Act .

 In April 2014, the Special Liquidators announced that the loan sales process had concluded. The sales process of the IBRC loan assets, including their segmentation to meet demand from international buyers, delivered a very positive result with over 90% of the loan assets (with a par value of €21.7bn) sold.

Following instructions issued by me, NAMA were no longer obliged to purchase the unsold IBRC assets at their independent valuation as previously envisaged, as it became clear that the expected proceeds to be raised from the sale of the IBRC loan assets would be sufficient to fully repay the IBRC debt to NAMA.

The Special Liquidators have therefore devised a further sales process in respect of the unsold loan assets so as to maximise the return to all remaining creditors of IBRC, including the State. This sales process is currently underway and the Special Liquidators are unable to quantify at this stage the total sales proceeds that will be achieved from this process.

As the Special Liquidators maximise the proceeds of the liquidation, it is important that they have a comprehensive view of the creditors who ultimately may be entitled to these proceeds. To this end, the Special Liquidators have published advertisements and written to those known creditors in order to finalise their claims in the liquidation. Creditors in the UK and Ireland have until 31 March 2015 to submit their claims and those creditors in the US have until 31 May 2015.  

Once all claims have been submitted, they will be reviewed in detail and adjudicated on by the Special Liquidators. In order to finalise this process, further information may be sought from some creditors in order to validate their claim. Should the junior bondholders submit a claim and it is found to be valid by the Special Liquidators, then they will be legally entitled to a payment from the proceeds of the liquidation provided there are sufficient funds available for distribution in line with their position in the hierarchy of creditor claims .

The Special Liquidators are unable to comment at this stage both on the level of proceeds that will ultimately be generated from the liquidation and on the level of valid creditor claims that will ultimately be received in respect of the liquidation. It is balance between the proceeds generated and level of valid claims that will ultimately determine the dividend to which each creditor may be entitled. The ultimate level of dividend paid to each creditor cannot be known until such time as the sales processes are complete, the total level of adjudicated creditors is finalised and the other contingent creditor claims which may crystallise, including those from litigation, are known.

It is understood that for the payment of proceeds from the liquidation, unsecured creditors will rank in priority to the holders of subordinated debt. The priority for the distribution of assets under the Companies Acts is generally:

i. costs and expenses of the ongoing liquidation;

ii. preferential creditors, including certain taxes and employee and pension claims arising prior to the date of liquidation (these claims are certain to be paid in full)

iii. amounts owing to NAMA under the Facility Deed acquired from the Central Bank which were secured by a floating charge over the bank s assets (this debt is now fully repaid and so the floating charge is now released)

iv. unsecured creditors, including:

- Debts owing to the Minister/NTMA under ELG and to DGS

- Unguaranteed debt/depositors (including holders of tracker bonds etc.)

- Unknown, including:

- Local authority development bonds

- Suppliers / other normal unsecured creditors

- Employees that are not preferential creditors

- Contingent creditors and other potential costs principally relating to litigation etc.

v. subordinated creditors

vi. Members of the company - the Minister currently holds 100% of all shares and preference shares in the company. 

Banks Recapitalisation

Questions (70)

Michael McGrath

Question:

70. Deputy Michael McGrath asked the Minister for Finance if he will provide for each financial institution the amount of losses imposed on subordinated/junior bondholders since the banking crisis of 2008 by the previous Government and, separately, by the present Government; and if he will make a statement on the matter. [47621/14]

Written answers

Minister for Finance

In  the period since 2008, significant burden-sharing has been achieved through Liability Management Exercise (LME) transactions completed by the Covered Banks. The purpose of the LMEs was to create additional core tier 1 capital and to strength en the quality of the capital base of the Banks.

Prior to the Central Bank's PCAR, burden sharing with subordinated bondholders raised c. €10 billion of capital gains across the Covered Institutions.  In the period since this Government came into power, burden sharing with subordinated bondholders has realised an additional c. €5.2 billion greatly reducing the cost of recapitalising the banks and bringing the total to more than €15 billion.

The following table sets out the amount of capital raised by the Covered Banks via LME's since the banking crisis began.

-	Burden Sharing pre March 2011 €'m	Burden Sharing since March 2011€'m	Total€'m
AIB	3,121	2,053	5,174
BOI	2,469	2,163	4,632
EBS	227	-	227
ILP	-	982	982
IBRC	4,092	-	4,092
Total	9,909	5,198	15,107

Tax Code

Questions (71)

Terence Flanagan

Question:

71. Deputy Terence Flanagan asked the Minister for Finance the position regarding PRSI for a sole trader (details supplied); and if he will make a statement on the matter. [47677/14]

Written answers

Minister for Finance

I am advised by the Revenue Commissioners that the general rule that applies to sole traders is that income tax is charged on the full amount of the profits of the person's trade or profession arising in the tax year in question.  The exact calculation of the income tax that a sole trader may be liable for in any tax year is based on the total amount of income received for the year in question, and the amount of tax credits and reliefs due to the person.  In this regard, Revenue records indicate that the person concerned is in receipt of a pension. Should he also have an additional income by way of profits from sole trading, that additional income would appear to be liable to income tax.

The Universal Social Charge (USC) is a tax payable on gross income, including notional pay, after any relief for certain capital allowances, but before pension contributions are deducted. Self-assessed taxpayers, including sole traders, have responsibility for operating the charge in respect of all income sources. USC is not payable where an individual's combined income does not exceed €10,036 for a tax year. This threshold will increase to €12,012 from next year.  However, where this amount is exceeded, USC is payable on the full amount.  Full details in relation to the rates and operation of USC are available in a series of Frequently Asked Questions on USC from the Revenue website at www.revenue.ie.

Pay Related Social Insurance (PRSI) is collected by the Revenue Commissioners on behalf of the Department of Social Protection. All self-assessed taxpayers, including sole traders, aged 16 or over and under pensionable age (currently 66), with reckonable income or emoluments of €5,000 or more per year, are liable for PRSI at the Class S rate of 4%. For the purposes of determining whether an individual exceeds the €5,000 threshold, the rules which apply to income for taxation purposes also apply to income for PRSI purposes, before deduction of "capital allowances", as defined in the Income Tax Act of 1997. Full details in relation to the operation of PRSI are available in a series of Frequently Asked Questions on PRSI from the Department of Social Protection website at www.welfare.ie.

Should the person concerned require further clarification on these issues he may contact Mr Kevin Midleton, at his local Tax District: North City/City Centre Revenue District, 14/15 Upper O'Connell St. Dublin 2. telephone [phone], who will be happy to assist him.

IBRC Liquidation

Questions (72)

Michael McGrath

Question:

72. Deputy Michael McGrath asked the Minister for Finance the way a terminal payment from the IBRC liquidator to the State would be treated in the Government's accounts; and if he will make a statement on the matter. [47681/14]

Written answers

Minister for Finance

As a result of The European System of National and Regional Accounts (ESA 2010), IBRC is classified in government. Any payment from the Special Liquidators of IBRC to the State would be considered an intra-government payment with no impact on the deficit. It would however improve the exchequer borrowing requirement as the cash received would increase the cash balances in the Central Fund and thereby reduce the required level of borrowing.

Question No. 73 answered with Question No. 69.