Written Answers Nos. 76-81
76. Deputy Bernard J. Durkan asked the Minister for Finance the current level of personal savings after which deposit interest retention tax is chargeable; and if he will make a statement on the matter. [40895/15]
View answerI am advised by the Revenue Commissioners that all deposit takers (e.g. banks, building societies, credit unions, Post Office Savings Bank, etc.) are obliged to deduct Deposit Interest Retention Tax (DIRT) from all payments of interest made to an account, irrespective of the balance of the account, unless the account qualifies as an exempt account. There is no de minimis amount below which DIRT is not operated. The information that deposit takers are required to return to Revenue in relation to DIRT relates only to aggregate information. There is no requirement to distinguish in the returns between DIRT from personal deposits and other sources. Revenue is therefore not in a position to estimate the personal savings element of the DIRT returns.
As and from the 1 January 2014, DIRT is deducted at a rate of 41% on interest earned. There are a limited number of exceptions to this rule. Interest is exempted from DIRT mainly in the following circumstances:
Individuals aged 65 or older
An account held by an individual where the individual or his or her spouse or civil partner is aged 65 or older, and his or her total income in a year (including interest earned) is below the annual exemption limit, is exempt from DIRT. The annual exemption limits are €18,000 in the case of a single person and €36,000 in the case of a married couple or civil partnership.
Permanently Incapacitated Individuals
An account held by an individual where that individual or his or her spouse or civil partner is permanently incapacitated by reason of physical or mental infirmity from maintaining himself or herself and is not liable to pay income tax because of the level of his or her income, is exempt from DIRT.
Companies, Pension Funds and Charities
DIRT is not deducted from interest paid on deposits held by companies, approved pension funds or exempt charities.
Non-Resident Account Holders
Deposit accounts where all of the interest on the deposit is beneficially owned by a person or persons resident outside the State are exempt from the application of DIRT. However a joint account owned by an Irish resident and a foreign resident would be subject to the retention tax system.
77. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which adequate banking facilities continue to be made available to the hotel and catering sector, thereby providing the necessary facilities for tourism; if any examination has been completed as to the full extent of the requirements, as set out by the sector; and if he will make a statement on the matter. [40896/15]
View answerAs the Deputy is aware, the Government recognises that small businesses, including those in the hotel sector, play a central role in the sustainable recovery of the Irish economy. To facilitate this, Government policy since 2011 has been focused on ensuring that all viable SMEs have access to an appropriate supply of credit from a diverse range of bank and non-bank sources. Officials from my Department regularly meet representatives from the SFA, ISME and Chambers Ireland, whose membership encompasses the hotel sector, to discuss issues around access to finance.
The Central Statistics Office release "Overseas Travel July-September 2015" (http://www.cso.ie/en/releasesandpublications/er/ot/overseastraveljuly-september2015/ ) shows that in the period January to September 2015, there were over 6.64 million visits to Ireland. Overall trips to Ireland were up 12.5% in the first nine months of 2015 compared to the same period in 2014. For the three-month period from July to September 2015, overseas trips to Ireland increased by 13.5%.
Tourism delivers income and jobs in every town and city in the country. The reduction in VAT to 9% in the tourism sector and the abolition of the air travel tax improved Ireland's competitiveness. The 9% VAT rate is a major benefit to the tourism sector and is much sought after by other sectors in the economy. I announced changes to the Employment and Investment Incentive scheme last year subject to compliance with European State Aid provisions. With specific regard to the hospitality sector, I extended the inclusion of hotels, guest houses and self-catering accommodation in the scheme by a further 3 years. The benefit of these policies can be seen in tourist numbers, new businesses, the survival of established businesses and, most of all, in employment.
Turning to the banking sector, AIB and Bank of Ireland are concentrating on growing their balance sheets. In this context, both banks recognise the need to increase business lending and have put on record their commitment to the SME sector.
My Department has been involved in a range of initiatives to encourage access to credit for small and medium sized businesses. The SME State Bodies Group provides a forum for the development and implementation of policy measures to enhance SMEs' access to a stable and appropriate supply of finance, and includes representation from Fáilte Ireland.
Some of the main policies introduced by this Government to encourage access to credit for small and medium businesses include:
- The Supporting SMEs Online Tool, a cross-government initiative, was launched in May 2014. On answering 8 simple questions, the small business will receive a list of available Government supports.
- The Supporting SMEs Online Tool is available at www.supportingsmes.ie.
- The Strategic Banking Corporation of Ireland has been established as a means of ensuring that SMEs are provided with sufficient finance for growth. In the last number of weeks the SBCI announced the first non-bank finance partnership with Finance Ireland worth €50 million and the second non-bank partnership with Merrion Fleet providing an additional €25 million in funding to SMEs. Non-bank finance is a vital source of funding to a growing economy. The SBCI has reached a significant milestone as €110 million has now been drawn down by 3,200 SMEs. More information on the SBCI can be found on www.sbci.gov.ie.
- The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial Government guarantee to banks against losses on qualifying loans to eligible SMEs. My colleague, the Minister for Jobs, Enterprise and Innovation, has recently brought legislation to the Oireachtas which will enable the development of a more flexible Credit Guarantee Scheme with longer duration and more products and providers included.
- The Microenterprise Loan Fund, administered by Microfinance Ireland, provides support in the form of loans for up to €25,000, available to start-up, newly established, or growing micro enterprises employing less than 10 people, with viable business propositions. Microfinance Ireland works in partnership with the Local Enterprise Offices nationally to administer this fund (www.microfinanceireland.ie).
- The Credit Review Office helps SME or Farm borrowers who have had an application for credit of up to €3 million declined or reduced by the main banks, and who feel that they have a viable business proposition. They also examine cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment. This is a strictly confidential process between the business, the Credit Review Office and the bank. The Credit Reviewer John Trethowan and his team have overturned 55% of the refusals that have been appealed to the Office. Further details are available at www.creditreview.ie.
My Department has not carried out a specific examination of the credit requirements of the tourism sector. However, my Department and the Credit Review Office, working with the other relevant Departments and Agencies, will continue to monitor the availability of both bank and non-bank credit on both a macro and sectoral basis in order to ensure that sufficient access to finance is available to facilitate participants in the SME sector to reach their full potential in terms of growth and employment generation. In this context, the Action Plan for Jobs 2015 includes a dedicated chapter and associated integrated set of actions to support the financing for growth in the SME sector.
79. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he continues to monitor the levels of bank charges being imposed by various banks; the basis for such charges, nationally and internationally; and if he will make a statement on the matter. [40898/15]
View answerAs I stated in my reply to the Deputy in previous Parliamentary Questions (13599/15 and 25134/15) on this subject on 1 April and 23 June 2015, all credit institutions in Ireland are independent commercial entities. I have no statutory role in relation to the charges applied by credit institutions. Section 149 of the Consumer Credit Act 1995 requires that credit institutions, prescribed credit institutions and bureaux de change must make a submission to the Central Bank if they wish to introduce any new customer charges or increase any existing customer charges in respect of certain services. Section 149 does not cover interest rates rather it applies to fees and commissions only. The Central Bank may direct the institution not to impose the new or increased charge or it may approve the charge, or approve it at a lower level than requested by the institution. Once approved, the bank is entitled to impose the charge.
My Department published a report on the review of the regulation of bank fees and charges in December 2013. This contains a detailed description of the process by which the Central Bank makes decisions on whether or not to approve proposed charges. It is available on my Department's website at www.finance.gov.ie . Among the key findings of the review was that while fee and commission income has become a more important source of income to the banks in recent years, net fee and commission income in Irish banks was well below the average of their European peers.
The European Communities (Payment Services) Regulations 2009 (the Payment Services Regulations) include requirements for banks and other payment institutions to provide information to the consumer about charges, interest and exchange rates on the accounts and these are reflected in the Central Bank's Consumer Protection Code 2012, which contains requirements in relation to the provision of information on charges to consumers. The website of the Competition and Consumer Protection Commission (CCPC) also lists the various charges imposed by the various financial institutions in Ireland for different types of transactions www.ccpc.ie.
Irish financial institutions have varying models for charges and have different regimes and conditions under which they are willing to grant transaction free banking. Individuals' use of their bank account will be specific to each individual and I would strongly encourage people to look at this comparison site with their specific circumstances in mind in order to decide which institution offers the best product for their pattern of account usage.
80. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which mortgage lending rates are likely to converge with the rates applicable in other European jurisdictions; and if he will make a statement on the matter. [40899/15]
View answerAs the Deputy is aware, I have acknowledged that high mortgage repayments cause difficulties to families and I invited the Governor of the Central Bank to meet me in April to discuss the issue. Following this meeting, a report by the Central Bank on the factors influencing standard variable mortgage rates in Ireland was submitted to my Department and published shortly thereafter. The report found that the current interest rates in Ireland are determined by a large number of factors including nationally specific features such as increased credit risk resulting from high levels of non-performing loans and lengthy and uncertain processes of collateral recovery, limited competition, and the constraints on bank profitability arising from legacy issues of the financial crisis, such as an increased regulatory requirement for capital.
The Central Bank data in the report show that the average interest rate on outstanding loans in Ireland was close to the median across a sample of twelve euro area countries. However, this largely reflects the composition of interest rate types in the Irish mortgage market where low interest rate tracker mortgages represent a large proportion of outstanding loans bringing down the average.
The most recent data covering rates at end September 2015 was published in a Statistical Release by the Central Bank on 13 November. They show that the rate for new floating rate loan agreements for house purchase in Ireland was 3.24% and the equivalent euro rate was 2.07%.
I held meetings with senior management of the six principal mortgage lenders in May and September to discuss the issue and the banks were asked to review their rates and to provide options by which mortgage holders might be able to reduce their repayments. Over recent months, the main lenders have announced a number of new products and initiatives that have reduced the cost of borrowing. While nationally specific features may inhibit full convergence with European rates, a more competitive mortgage provision market will create greater consumer-focused dynamics around pricing and other terms of credit.
81. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he continues to monitor the potential economic fallout in the event of a partial or total exit from the European Union by the United Kingdom; if the full implications continue to be examined; and if he will make a statement on the matter. [40900/15]
View answerThe Government's position on developments in relation to British membership of the EU has been clearly articulated, in particular by the Taoiseach and the Minister of Foreign Affairs and Trade: we very much want the UK to remain an integral member of the Union. This is important for both our economy and the ongoing development of the excellent bilateral relations Ireland and the UK now enjoy; Ireland is perhaps the Member State which would be most affected by any change in the EU/UK relationship. We also believe that the EU itself is stronger and more effective with the UK as a member.
The UK's continued membership of the Union is therefore a matter of strategic importance for the Government. In this regard, Government Departments, including my own, have been working on this matter for some time. Under the Department of Finance/Economic and Social Research Institute (ESRI) research programme agreement, my Department commissioned research to be undertaken on scoping the potential economic implications on Ireland of a change in the EU/UK relationship. The research was published on 5 November and is an important contribution in deepening our understanding of the potential issues arising. Although the research was commissioned under the Department of Finance/ESRI research programme agreement, it is important to underline that the ESRI is an independent institution.
My Department, and other Government Departments, are continuing our assessment of all the issues involved in protecting Ireland's economic interests. However, I want to emphasise that the main focus of our work is now on examining how to support UK membership of the Union, rather than planning for its withdrawal. In this context, the Deputy will be aware of the publication of Prime Minister Cameron's letter to the President of the European Council on 10 November 2015 in which he sets out in broad terms the changes that the UK intends seeking in the renegotiation of its membership of the EU. We are now entering a phase of discussions at EU level, leading up to the December European Council. Ireland will be very engaged both at political and official level.
Given the very preliminary stage of the discussions, and with details of the UK's proposals still to be clarified, it is too early to be definitive on specific Irish positions or to comment on what changes in the EU/UK relationship might materialise. Our focus, for now, must be on contributing constructively to negotiations, working with EU partners to reach pragmatic solutions, while also of course protecting the economic interests of Ireland.
