Thursday, 12 Mar 2015

Written Answers Nos. 97 to 105

EU-IMF Programme of Support

Questions (97)

Catherine Murphy

Question:

97. Deputy Catherine Murphy asked the Minister for Finance when the European Commission advised his Department on the necessity to have in place a relationship framework and operational protocol to govern interactions between him, as Minister, and the Irish Bank Resolution Corporation; if that advice indicated that a set figure would be advisable to trigger consultation where a transaction would have an adverse impact on the capital of the corporation; if so, the reason there was a delay in implementing this advice; if he will make available copies of all correspondence between his Department and the European Commission relating to this matter; and if he will make a statement on the matter. [10965/15]

Written answers

Minister for Finance

As part of Ireland's third review under the EU-IMF Programme of Financial Support, a report on which was published in September 2011 and is available on the Department of Finance website, there were a number of conditions/actions which Ireland committed to. One of which was to develop a framework to govern the exercise of the State's ownership rights in the banks resulting from the capital injections, including to put in place relationship frameworks with the banks to protect the commercial basis for the banks' operations while under government ownership.

This matter was again discussed during the fourth review under the EU-IMF Programme of Financial Support, the report on which is also available on the Department of Finance website. It was noted in this report that the recently formed banking division in the Department of Finance were "currently developing relationship frameworks with the banks, to ensure that their core businesses will be run on a commercial basis". The fifth review, the report to which was published in March 2012 noted that "The authorities are finalising relationship frameworks with the covered banks consistent with their commitment that their core business will operate on a commercial basis".

The relationship frameworks were in place with each of the banks under State ownership before the report on the sixth review under the EU-IMF Programme of Financial Support was published in June 2012.  Between each of these aforementioned reviews, officials in my Department were progressing the introduction of relationship frameworks with each of the banks through ongoing discussions and negotiation. Each of the Relationship Frameworks were prepared following significant legal and competition law input from the State's legal advisors, which included, among other advice, the inclusion of financial thresholds which would trigger consultation with the Minister for Finance. Before the Relationship Frameworks for each of the banks were introduced, it was required that they be reviewed by the Directorate-General for Competition and the Irish Competition Authority.

On 30 March 2012, Relationship Frameworks were put in place by my Department with each of the banks in which the State acquired an interest in the context of the financial crisis to govern the relationship between the State, as shareholder, and each bank.  They were designed to recognise the separation of each bank from the State, to ensure their businesses would be run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset to the State, and to limit the State's intervention to the extent necessary to protect the public interest.

Under the Relationship Frameworks each bank was to remain a separate economic unit with independent power of decision with its board of directors and management team retaining responsibility for determining the bank's strategies and commercial policies and conducting its day-to-day operations.

As the Deputy is aware, IBRC had a Relationship Framework in place from July 2009 pursuant to the Anglo Irish Bank Corporation Act 2009. My officials will review the files surrounding the implementation of this original Relationship Framework for Anglo Irish Bank Corporation and will revert to the Deputy on this matter.

A revised Relationship Framework with IBRC was published on March 30, 2012 in line with the introduction of similar agreements for each of the other banks. That followed considerable interaction with the management and Board of IBRC.

IBRC Operations

Questions (98)

Catherine Murphy

Question:

98. Deputy Catherine Murphy asked the Minister for Finance relating to the sale of a company by the former Irish Bank Resolution Corporation (details supplied), if his attention was drawn, in advance of the sale, that a portion of the agreed sale price was to be diverted to shareholders of the entity being sold, which resulted in significant sums being accrued to several persons on the board of the entity; if the board of the corporation similarly was aware of this information; and if he will make a statement on the matter. [10967/15]

Written answers

Minister for Finance

I refer to my response to Question No. 67 answered on 11 March 2015 from which I have drawn in responding to this question.

As set out in the response to Question No. 67 answered on 11 March 2015, under the then existing relationship framework the bank was not obligated to consult with me before approving the sale of the company referred to by the Deputy.

Upon the receipt of critical representations following the transaction in question, Department of Finance officials inquired about the transaction with IBRC management as part of their regular engagement.  Following initial discussions, they agreed with IBRC's Chairman and CEO that they would review the transaction involving the company referred to in the question in greater detail to better understand the decisions taken and the impact these decisions had on the process and the final recovery for the bank.

As part of the review, senior management of IBRC made Department of Finance officials aware of the details of the transaction process and the sale in meetings held between both parties.  This review raised concerns with the quality of some of the decisions taken in respect of this transaction, including, among others, that a payment had been paid to the shareholders of the company referred to in the question.

In light of these concerns, I subsequently met with IBRC's Chairman and CEO to discuss concerns regarding this transaction. The Chairman and CEO confirmed to me that the transaction process and its terms, including the shareholder payment, had been thoroughly assessed by the IBRC Board and that the transaction was managed in the best manner possible to achieve the best result for the State.

Tax Yield

Questions (99, 100, 101, 102, 103, 104, 105)

Eoghan Murphy

Question:

99. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if the standard rate of tax was decreased to 19% and the entry point to the higher rate was increased by €1,000 to €34,800 for a single person and by a similar amount for one-parent families, married couples with one income and married couples with two incomes. [10968/15]

Eoghan Murphy

Question:

100. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if the standard rate of tax was decreased to 18% and the entry point to the higher rate was increased by €1,000 to €34,800 for a single person and by a similar amount for one-parent families, married couples with one income and married couples with two incomes. [10969/15]

Eoghan Murphy

Question:

101. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if PAYE workers and self-employed persons were treated equally for tax purposes on incomes up to €15,000, €20,000, €25,000 and €30,000, all for a single person. [10970/15]

Eoghan Murphy

Question:

102. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if PAYE workers and self-employed persons were treated equally for tax purposes up to an income of €34,800, for a single person. [10971/15]

Eoghan Murphy

Question:

103. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if 80,000 fewer persons were paying universal social charge at the lower rates. [10972/15]

Eoghan Murphy

Question:

104. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if the top rate of universal social charge for self-employed persons was abolished. [10973/15]

Eoghan Murphy

Question:

105. Deputy Eoghan Murphy asked the Minister for Finance the cost to the Exchequer in terms of revenue foregone if changes were introduced, that is, the standard rate of tax was decreased to 19% and the higher rate of tax was decreased to 39%; the entry point to the higher rate was increased by €1,000 to €34,800 for a single person and by a similar amount for one-parent families, married couples with one income and married couples with two incomes; the bottom 80,000 payers of universal social charge were removed from the charge and income tax liabilities were calculated at the same rate for PAYE and self-employed persons up to a value of €25,000 in terms of income earned. [10974/15]

Written answers

Minister for Finance

I proposed to take Questions Nos. 99 to 105, inclusive, together.

In relation to the questions regarding the cost of reducing the standard rate of income tax and increasing the entry point to the higher rate, I am informed by the Revenue Commissioners that the estimated first and full year cost to the Exchequer of decreasing the standard rate of income tax to 19% and increasing the standard rate band by €1,000 is €493 million and €667 million respectively. The estimated first and full year cost to the Exchequer of decreasing the standard rate of income tax from 20% to 18% and increasing the standard rate band by €1,000 is €894 million and €1.2 billion respectively.

In relation to the questions on the cost of equalising the tax treatment of PAYE and self-employed taxpayers at certain specified income levels, I assume that the Deputy wishes to ascertain the cost of extending the equivalent of the PAYE Credit to single self-employed individuals. The estimated cost to the Exchequer of extending the PAYE credit to such individuals on incomes of up to €15,000, €20,000, €25,000, €30,000 and €34,800 is €3 million, €13.5 million, €26.5 million, €38 million and €48 million respectively. It is important to point out that these estimates assume that the Deputy's proposal specifically excludes the extension of the PAYE credit to self-assessed individuals that are married or civil partners.

The estimated first and full year cost of exempting 80,000 income earners from liability to the Universal Social Charge (USC) is €16 million and €22 million respectively. This is costed on the basis of removing the 80,000 cases with the lowest incomes currently paying USC from the charge.

The estimated first and full year cost to the Exchequer of removing the 3% USC surcharge on self-employed income in excess of €100,000 is €54 million and €125 million respectively.

In relation to the question regarding reducing both income tax rates by 1%, increasing the standard rate band by €1,000, removing a further 80,000 income earners from USC and extending the equivalent of the PAYE credit to self-employed persons with incomes up to €25,000, I am informed by the Revenue Commissioners that the first and full year cost to the Exchequer is estimated to be in the order of €695 million and €971 million respectively.

All figures above are estimates for 2015, using the actual data for the year 2012 (the latest year for which data are available) adjusted as necessary for income, self-employment and employment trends in the interim.  They are provisional and may be revised. A married couple or civil partners who have elected or have been deemed to have elected for joint assessment are counted as one tax unit.