Written Answers Nos. 1-27
7. Deputy Thomas P. Broughan asked the Minister for Finance the current estimated tax expenditure costs of tax reliefs for the property and construction industry, and any further such expenditure resulting from budget 2016; and if he will make a statement on the matter. [40177/15]
View answerAll reliefs, including property- and construction-related reliefs, are a cost to the Exchequer and I have previously set out this Government's tax policy basis in relation to any future tax expenditures. It is our intention to:
- Support economic growth by ensuring that any increase in taxation be effected in the first instance by base broadening including through the elimination or curtailment of overly-generous, poorly targeted or otherwise unaffordable tax reliefs;
- Use tax reliefs only in limited circumstances where there are demonstrable market failures and where a tax-based incentive is more efficient than a direct expenditure intervention;
- Time-limit all tax expenditures and subject those with higher costs to ex-ante evaluation; and
- Conduct a regular programme of reviews of tax reliefs, engaging in public consultation as appropriate, and publish the results.
With reference to this last point I might draw the Deputy's attention to my Department's October 2015 "Report on Tax Expenditures", which was published on its website on Budget day, and which includes comprehensive tables setting out the fiscal impact of the range of tax expenditures in effect, or still having an effect, at the time. It also incorporates the outcomes of eight reviews, five in full and three in summary, completed by or on behalf of my Department in the previous twelve months. The Report includes data on both property and construction industry reliefs and addresses the whole issue much more comprehensively than I can do in the limited time available to me here: the Deputy will appreciate that an oral Parliamentary Question is perhaps not the best way of dealing with a question where the response is essentially tabular information.
As regards any additional expenditure resulting from the recent Budget I would mention the Home Renovation Incentive which will now run until 31 December 2016.
Since the introduction of the incentive, works on 28,911 properties have been notified to Revenue's HRI online system (as of 22 October 2015). This represents more than €624 million worth of works involving some 6,341 contractors. The potential total cost to the Exchequer in respect of these properties is approximately €42.5 m. As a claim for the HRI credit can only be made in the year after works have been paid for, there was no cost to the Exchequer in 2014 (works paid for in the period from 25 October 2013 to 31 December 2013 were deemed to have been paid for in 2014).
11. Deputy Michael McGrath asked the Minister for Finance the remaining assets the National Asset Management Agency has to dispose of, when it will conclude its mandate; the general strategy it will employ in its wind-down process; the expected overall outcome of its work; and if he will make a statement on the matter. [40353/15]
View answerThe carrying value of NAMA loans and receivables as at 30th June 2015 was €11.275 billion. This comprises gross loans and receivables of €14.7 billion and loan impairments of €3.47 billion. Further analysis on this is available in Note 14, p. 29, of NAMA's Quarterly Report and Accounts for the period to end June 2015. These accounts are available on the NAMA website, www.nama.ie.
I would also draw the Deputy's attention to NAMA's Annual Statement for 2016. Under Section 53 of the NAMA Act, NAMA is required to submit a statement which sets out NAMA's proposed financial objectives for the coming year; the nature and scope of its proposed activities; its proposed policies and objectives; and proposed application of resources. This statement was laid before the Houses of the Oireachtas in late October and is also available on NAMA's website.
As previously advised, NAMA is aiming to redeem a cumulative 80% (€24 billion) of its Senior Bonds by the end of 2016 and it hopes that it will have redeemed all of its Senior Bonds by the end of 2018. NAMA also aims to redeem its Subordinated Bonds (€1.593 billion) in 2020. These targets are predicated on conditions in the Irish market remaining favourable and on NAMA being in a position to retain specialist staff to enable it to generate the optimal financial return from the realisation of its residual portfolio.
NAMA has, to date, redeemed €22.1 billion of Senior Bonds, 73% of the €30.2 billion of Senior Bonds originally issued in 2010 and 2011 to acquire bank loans. Reflecting NAMA's continued progress it has redeemed €5.5 billion of Senior Bonds this year. NAMA has made major progress in reducing the State's contingent liability through the accelerated redemption of its Government guaranteed Senior Bonds. Since its inception, NAMA has reduced this contingent liability from €30.2 billion at its peak (over 18% of GDP) to €8.1 billion (4% of GDP) today. The NAMA Chief Executive has said that NAMA remains confident that this senior debt contingent liability will be eliminated in full by 2018, two years ahead of NAMA's original strategic plan.
NAMA is ahead of schedule because of its ability to take advantage of favourable Irish market conditions since the end of 2013 to increase the flow of assets to the market. In addition to ensuring, in accordance with Section 10 of the NAMA Act, that NAMA obtains the best achievable return for the State on its acquired bank assets, such deleveraging creates wider collateral benefits for Ireland. NAMA's actual and planned accelerated disposal programme has been a material factor in the decision of the credit rating agencies to upgrade credit ratings for Ireland.
NAMA will continue to take advantage of current favourable market conditions to the greatest extent possible.
In addition, NAMA is committed to providing substantial funding on a commercial basis to its debtors and receivers to maximise the return that NAMA can generate on behalf of taxpayers from development assets within its portfolio. The NAMA Board has undertaken to facilitate the timely and coherent delivery of key Grade A office, retail and residential space within the Dublin Docklands Strategic Development Zone (SDZ) and to facilitate increased residential delivery in the greater Dublin area and other locations where residential development may be commercially viable. The Deputy will be aware, in this respect, of the recent announcement by the NAMA Board that a residential delivery target by 20,000 units on a commercial basis by end-2020 is potentially achievable through NAMA funding. This is in addition to the 2,000 units delivered through NAMA funding to date.
NAMA is satisfied, based on current market conditions, that these commercial and residential delivery programmes can be funded without compromising its debt redemption targets and without impacting upon its upper-end projected terminal surplus of €1.75 billion.
It is too early to speculate as to what date in the future NAMA will have made sufficient progress on its objectives, including its SDZ and residential delivery funding programmes, as to warrant consideration of its dissolution. As outlined above, the timeline for full bond redemptions are not expected to be affected by these programmes.
12. Deputy Thomas P. Broughan asked the Minister for Finance the impact on Ireland's national debt and the debt to gross domestic product ratio of proposed payments from Allied Irish Banks in 2015; the likely impact of these and other money recouped from the bank in 2016 to 2018; and if he will make a statement on the matter. [40176/15]
View answerOnce finalised the proposed Capital Reorganisation of AIB will allow for the redemption of €1.36 billion of the State's Preference Shares for €1.7 billion in cash. The State will convert its remaining Preference Shares (€2.14 billion nominal) into €2.67 billion of ordinary shares at a price to be agreed with AIB. The cumulative effect of these measures, along with the expected issuance by the bank of Tier 2 and AT1 instruments, will provide AIB with a strong, market-facing capital structure and will facilitate the first significant return of capital to the State by AIB.
In relation to other moneys expected to be recouped in the coming years, the conversion of a portion of the Preference Shares fast tracks the bank's ability to remunerate and redeem State aid through the bank's own cashflow and also opens up the possibility of the State monetising some of its equity investment through a sale process in the future. While the conversion and redemption will bring to an end the annual payment of dividends on the Preference Shares it is important to note that the State will retain 99.8% ownership of AIB into the future. Following this capital reorganisation I am confident that the bank will be capable of resuming ordinary dividends in the future helping to replace this lost income. The future payment of these dividends is a matter for the Board of AIB and its regulator and given the fiduciary and regulatory obligations involved, I cannot be specific about the exact timing and quantum that might be involved.
As I stated in my Budget 2016 speech, the proceeds from the sale and redemption of the State's investments in the banks will be used to reduce the general government debt. However, any proceeds received beyond the lifetime of this Government, will be a matter for the next Government.
The receipt of these monies will benefit the Exchequer, reduce the Exchequer Borrowing Requirement and result in debt reduction. In this regard I would stress the importance of continuing to reduce Ireland's debt ratio over the medium term to ensure market confidence in Ireland and rebuild our fiscal capacity.
The State also holds €1.6 billion of contingent convertible capital notes (CoCos) in AIB which were issued on 26 July 2011 with a maturity date of 28 July 2016. It is expected that the full value of the notes will be returned to the State by the bank on the maturity date. This has been included in the baseline budgetary figures for Budget 2016.
It should be noted that National Debt is the net debt incurred by the Exchequer after taking account of cash and other financial assets, while general government debt (GGD) is a measure of the total gross consolidated debt of the State compiled by the Central Statistics Office (CSO). This is the measure used for comparative purposes across the European Union.
The redemption of €1.36 billion of the State's Preference Shares for €1.7 billion in cash, is expected to be received in the coming months. Assuming all other things being equal, the general government debt will reduce by the €1.7 billion in the year in which the cash is received. Ceteris paribus, this would reduce the debt to GDP ratio by c. 0.75% of GDP.
13. Deputy Richard Boyd Barrett asked the Minister for Finance for an explanation of the recent spike in corporate tax receipts; the extent to which it is linked to recent changes made in relation to the so-called double Irish and the knowledge box; and if he will make a statement on the matter. [40380/15]
View answerCorporation Tax receipts have been unexpectedly strong in 2015. At end-October receipts were just under 74% higher than expected and up by over 60% in year-on-year terms.
I am advised by the Revenue Commissioners that the over-performance is a result of a combination reasons and that the improvement is relatively broad based with improved receipts in other sectors and sized firms.
As the Deputy may be aware, CT receipts in Ireland are highly concentrated with a high proportion of receipts coming from the multinational sector. The Department of Finance published a paper (prepared by the Revenue Commissioners) last year on this point.
The Revenue Commissioners have advised that about half of the increase in CT receipts in 2015 is from a small number of large multinationals and is attributable to a variety of reasons including improved trading conditions, positive currency fluctuations, some timing factors and a number of one-off payments.
Although CT is concentrated in the multinationals sector, it is important to point out that the improvement is relatively broad based. In this regard, I am further advised by the Revenue Commissioners that there has been an increase in the number of companies paying between €100,000 and €5 million up to the end of October this year by 20% when compared with the same period last year. This is reflected in the receipts which were also up by over 20% from this category.
I was very clear last year that the change made to the company residence rules would not, of itself, raise any additional Irish Corporation Tax ('CT'). This change only materially affects companies that typically did not have any substantive Irish operations themselves as their only link with Ireland was the 'label of incorporation', and they therefore are not viewed as Irish for tax purposes. Such non-resident companies were already taxable in Ireland in respect of any activities undertaken in Ireland through a branch or agency and it was not expected that this would change.
The Knowledge Development Box (or 'KDB') is contained in the Finance Bill that is currently at Committee Stage in the Dáil. It will not come into effect until 1 January 2016, so the first impact on CT receipts would not be expected until 2016 and, as per the analysis published by my Department on Budget day, the KDB is expected to result in less CT being paid.
14. Deputy Michael McGrath asked the Minister for Finance when the regulations set out in the Central Bank of Ireland Consultation Paper 88 will be introduced; when the remaining sections of the Credit Union Act 2012 will be implemented; if he will delay the introduction of these measures, including the €100,000 cap on the savings of credit unions, pending a consultation with industry stakeholders on their impact; and if he will make a statement on the matter. [40352/15]
View answerThe Credit Union and Co-operation with Overseas Regulators Act 2012 (the "2012 Act") was signed into law by the President in December 2012.
It was agreed at that time that it would be neither practical nor feasible to commence the 2012 Act in its entirety in one fell swoop. Following on from that, an implementation timetable for the 2012 Act was devised in consultation with stakeholders, including credit union representative bodies.
Commencement of all sections of the 2012 Act has been aligned with the credit union financial year and the introduction of the underpinning Central Bank regulations, with a view to implementation of the 2012 Act in a coherent and cohesive manner. This has provided credit unions with the time necessary to ensure that the required processes and procedures are in place prior to implementation of each tranche.
I have met with the three credit union representative bodies and the perceived impact of the new regulations was discussed. It is my intention to commence the remaining sections of the 2012 Act on 31 December 2015 in line with the introduction of the regulations by the Registrar of Credit Unions. These sections of the 2012 Act, when commenced, will replace, amend or supplement existing sections of the 1997 Act.
As outlined in the Central Bank's feedback statement on CP88, as part of the consultation process I proposed that in the interests of clarity and fairness, credit unions are provided with details of the process of applying for a retention of savings above the limit amount. I have been informed by the Registry of Credit Unions that all credit unions have been contacted giving further information on its application criteria for the retention of savings in excess of €100,000. The Registry of Credit Unions intends to engage with the representative bodies and to invite comments from them prior to finalisation of the application process. When the application process is finalised, the Registry will provide an application form and explanatory notes in order to assist credit unions. It is anticipated that application forms will be available during December 2015. It is envisaged that applications will be accepted in the first quarter of 2016 and that applicant credit unions will be informed by the end of the second quarter of 2016 on the outcome of the process, which is well within the 12 month transitional period. Where a credit union has demonstrated that it meets the criteria, it will be in a position to retain members' savings in excess of €100,000 held at the commencement of the regulations.
I welcome the steps that have been taken to provide clarity for credit unions on the criteria for the retention of savings over €100,000 and also welcome the Central Bank proposed engagement with the representative bodies to seek their comments on the application process.
The Central Bank has also informed me that it is committed to undertaking a review of the continued appropriateness of the savings limit, once the impact of the restructuring process can be assessed. It is envisaged that this review will commence within three years of the introduction of the regulations. My officials have asked the Central Bank to consider accelerating this review and this is under consideration by the Central Bank. The Central Bank has agreed to provide regular updates to my Department on developments in this matter.
The Central Bank has further informed me that it has now contacted all credit unions inviting them to attend upcoming information seminars being held around the country from mid-November to end-November. These seminars will provide credit unions with the opportunity to engage with the Central Bank on the new regulations and to discuss development of the credit union business model, including any changes to the regulatory framework that might be required to facilitate those developments.
The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is absolutely determined to continue to support a strengthened and growing credit union movement.
15. Deputy Michael McGrath asked the Minister for Finance his views that the regulatory model has contributed to recent difficulties in the insurance sector; the actions he will take to deal with soaring motor insurance costs; if he will establish a task force to deal with insurance costs, given the success of this approach in the past; and if he will make a statement on the matter. [40354/15]
View answerAs Minister for Finance, I am concerned that there should be a stable insurance sector and to limit risks to policyholders and the wider financial system. I am aware of recent EU and IMF reports about the challenges facing the insurance sector at European level and, separately, of poor financial reports from some domestic insurance companies. Concerns about the increasing cost of motor insurance premiums have also been widely reported.
I have written to the Governor of the Central Bank on these matters. In his response, he has pointed to certain changes taking place that, in his view, are contributing to a volatile claims environment. He also made a number of suggestions for domestic policy which could bring greater stability to the operating environment for general insurance in Ireland. Neither the reports from the Governor nor from the international bodies referred to the regulatory model for insurance as a source of difficulty.
The question of the cost of insurance is a complex one involving a number of Government Departments, State Bodies and private sector organisations. The EU regulatory framework for insurance expressly prohibits Member States setting insurance premiums. However, this does not preclude the Government from introducing measures that may, in the longer term, lead to a better claims environment that would facilitate a reduction in claims costs.
I have asked officials in my Department to examine the issues being raised from multiple parties regarding the cost of insurance. This process has already resulted in engagement with a number of parties, both public and private, and it will continue over the coming months.
16. Deputy Michael McGrath asked the Minister for Finance how the State will maximise the proceeds from a future disposal of Allied Irish Banks; how these proceeds will be deployed; his views on the comments by the Governor of the Central Bank of Ireland, Mr. Patrick Honohan, on the lack of competition in the Irish banking sector; if this will influence the sale process for Allied Irish Banks; and if he will make a statement on the matter. [40356/15]
View answerAs the Deputy is aware, AIB recently announced that it had received approval from its regulator, the SSM (Single Supervisory Mechanism), for a significant reorganisation of its capital structure. The approved reorganisation involves a number of elements including a redemption of the State's Preference Shares to the value of €1.7 billion in cash, as well as converting the remaining Preference Shares into Ordinary equity. The reorganisation will generate a substantial return of capital for the taxpayer and starts the process of the bank repaying the State for its substantial support.
The reorganisation which involves the removal of non-standard instruments from the bank's balance sheet is a mutually beneficial arrangement. It allows the State to begin monetising its investment in the bank while allowing AIB make clear progress in its journey towards re-emerging as a competitive, investable bank.
Between 2009 and 2011 the State invested €20.8 billion in AIB, including investments in EBS which AIB acquired. I believe that, over the course of time, the State will be able to recoup all of that investment through interest, dividends, fees and, ultimately, the sale of our shares.
As I have previously indicated, all capital returned from the State's investments in the Irish banks, will be used to reduce the national debt. This is the prudent course of action, it reduces our ongoing borrowing costs and ensures the future strength and stability of our economy. I have also indicated that while the Capital Reorganisation begins the process of the bank repaying the State aid it was granted, any decision to sell shares in the bank is a matter for the next Government. Officials in my Department will however continue to work with the bank in the coming months to ensure that the next Government has optionality in this regard.
On the second part of the Deputy's question, I would broadly agree with the views expressed by the outgoing Governor of the Central Bank regarding the lack of competition. The Irish banking and financial services sector would benefit from increased competition, though we have made some progress in this regard through initiatives such as the Strategic Banking Corporation of Ireland (SBCI), which facilitates competitive loans for Irish industry. I would anticipate competition in the sector will continue to improve, driven by domestic or international institutions as the economy recovers, the housing sector normalises and demand for new business investment expands.
While the dynamics of competition naturally affect the performance and profitability of AIB, this is true of any business. The competitive environment is only one of many factors that influence the value of AIB and it will be up the next Government to decide on the appropriate timing of any sale of shares in the bank.
17. Deputy Anthony Lawlor asked the Minister for Finance if the proceeds from the sale of shares in Allied Irish Banks can be better utilised for capital projects rather than to reduce the State's debt; and if he will make a statement on the matter. [40180/15]
View answerAs outlined in previous parliamentary questions regarding the sale of financial assets, these type of transactions do not result in a beneficial impact to the General Government Balance (GGB) under EUROSTAT rules. This is due to the fact that is classified as a 'financial transaction' whereby it is essentially the exchange of one form of asset (shares, equities, loans) for another kind (cash). Consequently, the sale of any shareholding in Allied Irish Bank (AIB) would not count as general government revenue but any additional spending would be supplementary to existing expenditure projections. Therefore, there will not be increased capacity to spend on capital projects as a result of the sale of shares in AIB without affecting the general government balance.
It should be noted that as part of Budget 2016 a capital plan for the period 2016-2021 was prepared by the Department of Public Expenditure and Reform and published by the Government. Compliance with the fiscal rules that apply to Ireland under the preventive arm of the Stability and Growth Pact was taken into account in the formulation of the capital plan.
However, while not improving the deficit cash proceeds arising from the sale of AIB shares would result in a reduced requirement for Exchequer borrowing which ultimately results in lower debt. A lower debt level is not only beneficial in terms of the fiscal sustainability of the State but would also lead to reduced interest payments in future years. The strategy of reducing the National debt is consistent with the Government policy of repaying the borrowing previously undertaken to finance the bailout of the banking sector during the financial crisis.
In summary, therefore, my strong view is that public indebtedness rose partly due to the recapitalisation of the Banks; the appropriate way of treating one-off revenue from divesting the State of its banking assets is to use these proceeds towards debt reduction.
18. Deputy Mick Wallace asked the Minister for Finance if it is appropriate for the National Asset Management Agency Project Arrow to be completed, while investigations into the purchase of Project Eagle are ongoing; and if he will make a statement on the matter. [40307/15]
View answerThe Deputy is aware that all sales are conducted by NAMA in accordance with its statutory independent commercial mandate. Whilst I therefore have no role as Minister for Finance in such sales, I have full confidence in the transparent and competitive manner in which all NAMA sales are conducted.
Against that backdrop, the sale of the Project Arrow portfolio of loans by NAMA represents another significant deleveraging and risk mitigation milestone for NAMA. The cash proceeds raised from the sale will be applied towards redeeming NAMA's senior debt, which is guaranteed by the Irish State.
This sale is fully in line with NAMA's publicly stated policy, in accordance with its obligations under Section 10 of the NAMA Act, of taking advantage, to the greatest extent possible, of favourable Irish market conditions to accelerate disposals in an orderly way with the target of redeeming 80% of its senior debt, a cumulative €24 billion, by end 2016 and all of its senior debt by end 2018. Following on from the Section 227 review of NAMA which was conducted by my Department, I fully endorsed the NAMA Board's policy in this respect. In addition to ensuring, in accordance with Section 10 of the Act, that NAMA obtains the best achievable return for the State on its acquired bank assets, NAMA's accelerated deleveraging is creating wider collateral benefits for Ireland. This can be seen for example in terms of the creditworthiness of the sovereign. I welcome therefore the fact that, as signalled by this sale, NAMA will continue to take advantage of the current favourable market conditions to sell loans and assets at favourable pricing for the Irish State.
I am advised that the sale of Project Arrow was conducted fully in accordance with NAMA's policy that the sale of all loans and the sale of properties by debtors and receivers should, wherever feasible, be openly marketed to ensure that the best price available in the market at the time of the sale is achieved in all instances. As has been publicly outlined by NAMA, Project Arrow was launched onto the open market on 6 July 2015. Reflecting the continued strong investor interest in Irish property, 17 prospective bidders were provided with access to the Phase 1 data room by Cushman and Wakefield, the loan sale broker appointed by NAMA to execute the sale. Indicative Phase 1 bids were received from five bidders on 14 August 2015 and three bidders were shortlisted by the NAMA Board for Phase 2. Binding and valid bids were received from two bidders on 12 October 2015 and clarification on elements of the two bids was sought and received subsequently. On 23 October 2015, NAMA announced Promontoria Holding 176 B.V. an affiliate of Cerberus Global Investors ("Cerberus") as the preferred bidder, subject to contract. The NAMA Board decision was based on the strong and clear recommendation of Cushman & Wakefield.
Cerberus has therefore emerged as the preferred bidder for the Project Arrow portfolio following an open market, robust and highly competitive sales process. To my knowledge, there has been no suggestion of any wrongdoing on the part of NAMA or Cerberus in relation to any aspect of the Project Eagle sale transaction. Accordingly, I cannot see why NAMA should not proceed with its intention of completing the sale of the Project Arrow portfolio to Cerberus, which, I understand, has submitted the highest bid. I also note reports that Cerberus has been successful in their recent bid to acquire a major loan portfolio in the UK from a UK Government agency.
19. Deputy Thomas Pringle asked the Minister for Finance when a consultation with the Central Bank of Ireland will commence and conclude in relation to drafting a ministerial order pursuant to section 67 of the Post and Telecommunications Act 1983; and if he will make a statement on the matter. [40375/15]
View answerAs set out in my previous reply to your question on this matter, my Department has continued to engage with An Post in relation to their proposal to provide a payment account. My consultation with the Governor of the Central Bank around the drafting of a Ministerial Order under Section 67 of the Postal and Telecommunications Act 1983, commenced in July this year, and the consultation process is now at an advanced stage.
Notwithstanding this consultation, there are still a number of steps involved in the approval process which must be completed by An Post, including a statutory consultation with the Minister for Communication, Energy and Natural Resources. Once all necessary steps have been completed, a draft order pursuant to Section 67 of the Postal and Telecommunications Act 1983 will be prepared for my consideration. As I have set out, this process is now at an advanced stage.
20. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which consideration has been, or will be, given to utilising personal savings which are currently the subject of deposit interest retention tax for strategic infrastructural national development purposes; if this would deliver a better return on those savings, given the current low interest rates, and the much needed funding to facilitate various infrastructural projects such as the housing building programme, either directly or by way of a government bond; and if he will make a statement on the matter. [40347/15]
View answerUnless provided for by specific legislation, all revenues including the proceeds of Government borrowing are paid into the Exchequer's Central Fund. Revenues are not pledged/linked to specific projects but are used to fund Government expenditure generally, including capital expenditure. Liabilities under the State Savings products offered by the National Treasury Management Agency (NTMA) are a direct, unconditional obligation of the Government to link such investments to specific projects might have the consequence of reducing their security and their attractiveness to investors.
There are however a number of options available to individuals who wish to help support the Government's work in promoting economic growth and employment.
The National Solidarity Bonds were introduced by the Minister for Finance in 2010 to allow individuals to provide money to the State to stimulate economic recovery. The NTMA's other State Savings products such as Savings Bonds, Savings Certificates and Instalment Savings which are available in any Post Office also allow people to support the Exchequer.
The NTMA will continue to encourage personal savers to purchase NTMA State Savings products. The NTMA keeps the suite of State Savings products and the interest rates paid on them under constant review to ensure that the products remain competitive and attractive to savers. These products have been an important and dependable component of Government borrowing for many years and make a valuable contribution to the national finances.
There are also possibilities in place for people interested in investing in longer-term Government bonds. Irish sovereign bonds are available through Primary Dealers recognised by the NTMA. The NTMA has published information on its website (www.ntma.ie) which gives the names and contact details for institutions which sell bonds to the public, and the fees they charge.
It also important to remember that any funding available from using savings would not be 'off balance sheet' in General Government terms and there is no fiscal space for any additional expenditure/investment 'on-balance sheet' without equivalent spending cuts or tax increases.
In terms of 'off-balance sheet' investment, there is currently no shortage of available funding for good projects of a commercial nature - the ISIF/SIB, the Connectivity Fund, the Strategic Housing Fund, the EFSI, etc., are all available to support such projects on a commercial basis.
I would like to draw the Deputy's attention to the recently announced joint venture between the Ireland Strategic Infrastructure Fund (ISIF) and KKR Credit. The joint venture, named "Activate Capital" will invest in the development and construction of housing, with €500 million of financing, which will assist in normalising the sector and addressing the housing shortfall. The venture will be a €500 million vehicle and will be financed through a €325 million investment from the ISIF (its biggest single investment to date) and €175 million investment from KKR. This is good news for jobs, growth, potential house purchasers, and the construction sector. This joint venture will be an important source of funding for increasing the supply of medium to large housing developments.
The ISIF also recently announced an investment mandate with US-based Quadrant Real Estate Advisers which will provide €100 million in financing for high-quality office development and construction projects in Ireland. It is anticipated that the investment will accelerate the delivery of urgently required prime office space, thereby improving the attractiveness of Ireland for foreign direct investment (FDI). It also has the potential to create in excess of 1,500 full-time construction jobs.
21. Deputy Mick Wallace asked the Minister for Finance if he is satisfied with the real estate investment trusts, and their role in the Irish property market, to date; and if he will make a statement on the matter. [40308/15]
View answerThe function of the Real Estate Investment Trust (REIT) framework is to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply to property investment via a corporate vehicle. The REIT framework is designed to produce an after-tax result for shareholders similar to that from direct investment in property, while also providing the benefits of risk diversification and professional management associated with collective investment.
The acquisition and management of properties by professional REITs is part of a more sustainable, long-term property rental market for both investors and property tenants. While commercial property investment has been a key focus for some of the REITs launched to date in Ireland, residential property also forms part of the sector's interest and exposure. It is expected that the sector will continue to develop over time and in so doing to increase the supply of professionally managed, good quality, secure and affordable rented accommodation.
Historically the private rented sector in Ireland was characterised by small-scale landlords. The double layer of taxation had tended to result in individual investors holding individual, highly-mortgaged properties. This had exposed investors to significant risk in times of falling equity and falling rental returns. Attracting large-scale investment in professionally managed residential property has an important role to play in helping to deliver the professional high-standard sector that tenants deserve.
The success of REITs has resulted in benefits on a number of fronts. They have brought new capital into the Irish property market; new listings to the Irish Stock Exchange; and a new risk-diversified property investment option for investors.
22. Deputy Denis Naughten asked the Minister for Finance the reason for the anomaly between the value added tax registration thresholds for the sale of services and for the sale of goods; if he will review this anomaly; and if he will make a statement on the matter. [40350/15]
View answerI am advised by the Revenue Commissioners that the annual turnover threshold for VAT registration depends on the nature of the business carried on. In general, there are two thresholds: the goods threshold, which is currently €75,000, and the services threshold, which is €37,500. These thresholds were increased to their current values in the Finance Act 2008.
Different VAT registration thresholds for the supply of goods and services are a feature of the EU VAT Directive and Irish VAT legislation and reflect the profound difference between the two supplies; in general, the value added in relation to the supply of goods will be much smaller relative to turnover compared with a supply of services.
23. Deputy Clare Daly asked the Minister for Finance why the report of the review of the local property tax by Dr. Don Thornhill was not published until budget day 2016, given that it was dated July 2015; the timeframe he had sight of the report's recommendations before it was published; and when its recommendations will be implemented. [40179/15]
View answerI engaged Dr. Thornhill to consider the operation of the Local Property Tax, in particular, any impacts on LPT liabilities due to recent property price developments. The review was informed by the outcomes of a public consultation initiated in March 2015 in response to which fifty-one written submissions were received.
Dr. Thornhill presented the report of his review of the Local Property Tax to me under a letter dated 24th July 2015. I examined the report's findings and recommendations in conjunction with my officials in the run-up to the recent Budget. I published the report on Budget day and announced in my 2016 Budget statement that I would be making a proposal to Government to postpone the revaluation date for the Local Property Tax from 2016 to 2019. This is one of the recommendations in Dr. Thornhill's report. The postponement of the revaluation date means that home owners will not be faced with significant increases in their LPT in 2017 as a result of increased property values and it gives sufficient time for the other recommendations to be considered in full. Work on the necessary legislative amendments is under way and I hope to introduce them to the Oireachtas in the near future. These legislative provisions will also give effect to two of the recommendations in the report in relation to changed approaches to the implementation of the pyrite exemption from LPT, and reliefs from LPT in respect of properties occupied by persons with disabilities, both of which are being implemented on an administrative basis by the Revenue Commissioners at my request.
24. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied regarding future economic growth prospects, especially in comparison to other European Union euro and non-euro jurisdictions; and if he will make a statement on the matter. [40348/15]
View answerIn Budget 2016, my Department projected the Irish economy to grow by 6.2 per cent this year and by 4.3 per cent in 2016. This follows strong GDP growth of 5.2 per cent in 2014. To put this performance into perspective, as well as being the fastest growing economy in Europe in 2014, the European Commission expects Ireland to be the fastest growing economy in Europe again this year and also in 2016.
Importantly, economic growth is now better balanced with exports and domestic demand making a strong positive contribution to growth. Growing employment and rising household incomes are supporting an increase in private consumption the sacrifices made over recent years are now paying dividends.
Over the medium term, my Department expects that the Irish economy can grow by around 3 per cent per annum on a sustainable basis. Achieving these growth rates is contingent upon many factors including continued improvements in our cost competitiveness and trading partner growth.
In that regard, the gains in Irish competitiveness achieved since 2008 have been hard-won through productivity improvements, wage and price moderation.
It is vitally important that this competitiveness is preserved and continues to support growth. We must also be cognisant that recent favourable exchange rate movements and gains from the fall in oil prices may unwind in the future. Therefore, we need to stay focused on continuing to improve Ireland's competitiveness through other channels such as wage restraint and productivity improvements.
As a key market for Irish exports, it is in all our interests that economic growth in the euro area is revived and this will require a combination of monetary, fiscal and country specific structural reform policies.
On the domestic front, the Government is focused on sustainable public finances, improving access to credit and reforming the income tax system. Our capital investment plan will be used to alleviate supply-side bottlenecks and barriers to growth.
In summary, I am confident that significant economic progress can be made in the years ahead but, crucially, this is contingent upon implementing appropriate polices to ensure continued, balanced economic growth, maintaining our competitiveness and ensuring that Ireland's public finances remain on a stable footing. That is exactly what the Government intends to do.
25. Deputy Dara Calleary asked the Minister for Finance the measures that were announced in budget 2016 to support job creation in the retail sector; and if he will make a statement on the matter. [37994/15]
View answerIn the recent Budget I introduced a range of measures aimed at ensuring that, for the second Budget in a row, every income earner who currently pays tax or USC will see an increase in their net income as a result of the Budget package. These measures are aimed at instilling confidence among our citizens that the economic recovery is under way, which should in turn increase domestic demand and support job creation in the retail sector.
These measures include the increase in the entry threshold to the Universal Social Charge from €12,012 to €13,000. In addition, I am reducing the three lowest rates of USC from 1.5%, 3.5% and 7% to 1%, 3% and 5.5% respectively, with effect from 1 January 2016.
I am also introducing an Earned Income Credit to the value of €550, which will be available to those with earned income who do not have access to the PAYE credit. This will be a significant benefit to small business-owners right across the country including small retailers, publicans, farmers and tradesmen.
Budget 2016 also provided for a tapered PRSI credit, to be introduced with effect from January 2016, in order to alleviate the PRSI step effect across a range of incomes. This will bring individuals into the charge to PRSI on a more gradual basis and will ensure that many low income earners will see an improvement in their net incomes. This will remove a disincentive for employees to supply labour in the range of incomes affected by the PRSI step, which should be of benefit to employers in terms of employee availability for work.
The entry point to the top rate of employer's PRSI is also being increased by €20 per week to €376 per week with effect from January 2016. This will ensure that the increase in the minimum wage does not result in the weekly income of a full-time minimum-wage worker entering into the higher rate of employer's PRSI. This will ameliorate the cost of the minimum wage increase to retail employers. The PRSI changes are being brought forward by my colleague, the Minister for Social Protection, in the current Social Welfare Bill.
In my Budget speech, I referred to a number of measures which would support retailers and other merchants by reducing costs and incentivising electronic payments. At present, the fees retailers in Ireland face for accepting card payments are excessive. A new EU regulation is halving interchange fees to 30 basis points for credit cards, and the corresponding fee for domestic debit cards will be halved to 10 basis points. These changes significantly reduce the costs of accepting card payments and, combined, these reductions will save retailers an estimated €36 million in fees per year. These changes come into effect on 9 December this year. In addition, the transaction limit on contactless payment cards was raised from €15 to €30 on 31 of October.
To support these EU and industry changes, I decided to abolish the stamp duty charge on debit/cash machine cards and replace it with a 12c per transaction charge for withdrawing cash from an ATM, capped at an annual maximum of €2.50 or €5, depending on card type. There will be no charge for debit card transactions.
In Budget 2016 I also announced also a number of measures which, while not specifically targeted at the retail sector, would be applicable there.
The Employment and Investment Incentive (EII) is targeted at job creation and retention and provides tax relief for investment in qualifying SMEs. The scheme allows an individual investor to obtain income tax relief on investments, up to a maximum of €150,000 per annum. Relief is initially available to an individual up to a maximum of 30% of the amount invested. A further 10% tax relief is available where it has been proven that employment levels have increased at the company after 3 years or where evidence is provided that the company used the capital raised for expenditure on research and development. Following changes made in Budget 2016, the scheme is available to the majority of small and medium-sized trading companies trading for under 7 years. SMEs who have been operating longer than 7 years may also qualify, subject to certain conditions.
Also, the three-year corporation tax relief for start-up companies under section 486C of the Taxes Consolidation Act 1997 is being extended to start-up companies which commence a new trade in 2016, 2017 or 2018.
In addition, I announced the introduction of a new entrepreneur relief applying a lower 20% rate of capital gains tax to the disposal of qualifying business assets up to a lifetime limit of €1 million of qualifying gains. This policy is intended to encourage and reward entrepreneurial activity and associated job creation generally.
Finally, I would also advise the Deputy that the recent Finance Bill includes a measure by which an employer may provide an employee with a single annual non-cash benefit to a maximum of €500 without applying PAYE, PRSI and USC to that benefit. I would expect this measure also is likely to act as a stimulus to the retail sector.
26. Deputy Pearse Doherty asked the Minister for Finance the status of the Central Bank of Ireland’s investigation into tracker mortgage infringements by banks; the number of banks being investigated, and where issues have been found; and when the investigation will be completed. [40344/15]
View answerLast month the Central Bank announced publicly that it had commenced a broad examination of tracker mortgage related issues including, among other things, transparency of communications with, and contractual rights of, tracker mortgage borrowers. It is currently developing an appropriate methodology for this examination, which includes engaging with consumer groups as well as the Financial Services Ombudsman to ensure that the review addresses the Central Bank's concerns. The Central Bank also informed me that it had written to all mortgage lenders (i.e. both credit institutions and retail credit firms which are currently lending and those which have ceased lending) advising them that it has embarked on this broader review. However, the Central Bank made clear that it is not in a position at this stage to indicate how long it will take for the examination to be completed. The Central Bank will publicly update on progress in mid-December. In addition, the Central Bank also informed me that it continues to deal with lender-specific issues in relation to this matter.
27. Deputy Pearse Doherty asked the Minister for Finance his plans to exempt a complex (details supplied) and other residential complexes that are unsafe to live in from the local property tax. [40342/15]
View answerThe Finance (Local Property Tax) Act 2012 (as amended) provides that any property that is in use as, or that is suitable for use as, a dwelling house, is liable to the local property tax (LPT). Therefore, the condition of a property is not relevant where the property is actually occupied as a dwelling house.
Where a property is not occupied and is in such bad condition that it is not suitable for occupation as a dwelling house, it is not liable to LPT. I am advised by the Revenue Commissioners that it is not possible to provide a prescriptive set of criteria that a property must meet to be treated as not suitable for occupation as a dwelling house. As LPT is a self-assessment tax it is up to a property owner to assess whether a property is liable or not, and to assess the chargeable value of the property where it is liable. In cases where the property owner assesses a property as non-liable due to its being unsuitable for use as a dwelling or assesses a property at a reduced value because of fire safety or other structural issues, Revenue will consider the facts and circumstances of the particular case.
I have no plans to introduce an exemption along the lines suggested by the Deputy.
