Written Answers Nos. 19-30
19. Deputy Clare Daly asked the Minister for Finance his views on the serious allegations and revelations regarding NAMA's activities both North and South; the steps he has taken to address these matters; his plans to freeze all NAMA activity until such time as a full and thorough inquiry into all aspects of NAMA's work has concluded; and if he will make a statement on the matter. [27542/16]
View answer41. Deputy Paul Murphy asked the Minister for Finance if he will support a full investigation into all of NAMA's major portfolio sales in view of the recent concerns regarding the sale of NAMA's Northern Ireland portfolio; and if he will make a statement on the matter. [27619/16]
View answer50. Deputy Mick Barry asked the Minister for Finance if, in view of the ongoing investigations of the sale of NAMA's Northern Ireland portfolio, he favours halting any more sales of NAMA portfolios; and if he will make a statement on the matter. [27621/16]
View answerI propose to take Questions Nos. 19, 41 and 50 together.
I assume that the Deputy is referring to allegations of wrongdoing regarding conduct of certain individuals in relation to Project Eagle and in relation to unrelated allegations of disclosure of confidential information. In each case criminal investigations are being conducted by the appropriate authorities. Any such allegations are of course very concerning and I fully support the full investigation by the appropriate authorities of any alleged illegal behaviour. However, I am unaware of any allegations of wrongdoing against NAMA itself.
It is important to recognise that in no way have the integrity of NAMA or the NAMA Board or the integrity of its decisions been brought into question and so I have no intention of halting NAMA's activities. To do so would irreparably damage NAMA's positive contribution to our recovery and damage our reputation as a credible, open and transparent market. By extension, any such interference would be detrimental to the interests of Irish taxpayers. In particular, it would likely constitute the State taking direct control of NAMA and bringing NAMA debt onto the State's balance sheet; imply a u-turn for the Irish sovereign in the eyes of the rating agencies and the sovereign bond and broader investor community, potentially increasing the cost of government debt, damaging confidence in the recovery of our economy; raise competition concerns which may limit the State's flexibility in ultimately recovering value from NAMA's assets; reduce the surplus currently projected by NAMA to ultimately be returned to the exchequer; and negatively impact NAMA's ability to fund the delivery of residential and commercial units on a commercial basis.
As regards the recent value for money review of Project Eagle conducted by the C&AG, the public disagreement over the opinions expressed by the C&AG in his report are being examined by the Public Accounts Committee. Today, the C&AG and NAMA are appearing before the PAC regarding this report. The PAC is the appropriate forum for consideration of the C&AG report and for the exercise of public accountability in these matters.
It is also important to remember that this value for money report was effectively an accelerated module of the C&AG's normal Section 226 review of NAMA required under the NAMA Act. As already provided for in the NAMA Act, in 2015 the C&AG committed to reviewing a broad sample of NAMA's sales and investment decisions as the focus of his next Section 226 report.
The Government also recognises that it has its own responsibilities regarding all matters of public concern around the functions of an important public body such as NAMA. The Taoiseach has met with opposition party leaders with a view to seeking agreement on issues of public concern that may require further investigation and the most appropriate nature and terms of reference for such an investigation. Subject to the outcome of those discussions, the matter will then be the subject of a Dáil debate. The Government's objective is to ensure that all matters of public concern are addressed in a speedy and effective manner.
20. Deputy David Cullinane asked the Minister for Finance the discussion he has had with European partners with regard to a possible loosening of the fiscal rules in cases of public capital investment. [19806/16]
View answer26. Deputy Imelda Munster asked the Minister for Finance his plans to seek greater flexibility in the fiscal rules for expenditure on capital investment and to achieve change at an EU level so that these rules no longer constrain the State from investing in essential infrastructure and public services; and if he will make a statement on the matter. [27531/16]
View answerI propose to take Questions Nos. 20 and 26 together.
The fiscal rules - formally known as the Stability and Growth Pact (SGP) - have direct application through a number of EU regulations. Changes to these regulations would have to follow the normal EU approach starting with a proposal from the Commission before consideration by Member States and the European Parliament.
Having said that, it is important to note that there are existing provisions in the fiscal rules that are designed to promote public investment. For instance, within the expenditure benchmark pillar of the rules, public investment is granted favourable treatment - as a result of four-year capital smoothing, only one quarter of the increase in public investment must be funded in the first year from within the fiscal space. This provision means capital spending for housing and other purposes can be leveraged within the EU rules.
It should also be noted that there are also certain more explicit flexibility provisions within the rules, particularly with a view to encouraging public investment. These take the form of what is known as the investment clause and structural reform clause. Specifically, these provisions allow for temporary deviations from the required structural budgetary adjustment if spending on capital investment can be shown to qualify for either the investment clause or the structural reform clause. Both of these provisions are subject to strict conditions; and while Ireland has not yet been in a position to apply given where we are in the business cycle, the situation is kept under constant review by my officials.
The Government is very conscious of the need to boost the supply of critical infrastructure. Investment in public infrastructure is vital for the medium and long-term competitiveness of the economy as well as for underpinning social cohesion through the provision of vital services to people in the form of schools, public transport, housing, etc. The public capital plan provides for €42 billion of capital investment over the 2016-2021 period and the Government remains committed to this. Further to this the Government set out in the SES proposals an additional cumulative €5.1 billion in capital spending over the period 2017-2021. This additional capital spending is aimed at addressing infrastructural bottlenecks, particularly regional infrastructural shortages.
In addition, the Government has been exploring the objective to create 'off-balance' mechanisms that bring investment into social housing which is additional to the funding being provided directly by the State. There is ongoing engagement with a broad array of domestic actors and European authorities to explore achievable solutions.
Finally, I would point out that we are still running a deficit and our public debt remains high by international standards. The answer, therefore, is not simply about spending more; it is about getting more from each euro of taxpayers' money that is spent.
21. Deputy Thomas P. Broughan asked the Minister for Finance the estimated annual levels of tax expenditure overseen by his Department since 2008 and his priorities in closing off tax avoidance loopholes in the forthcoming finance Bill; and if he will make a statement on the matter. [27554/16]
View answerI am informed by Revenue that it publishes cost estimates and numbers claiming for a wide range of tax expenditures on the Revenue website, up to 2014 or 2015 (the most recent year available depends on the relief). Updates for later years will be published in due course as newer data becomes available. I am advised that there are some other tax expenditures, not included in the above, for which estimates of costs are not readily available.
I would also note that my Department, alongside the last two Budgets, has published reports on tax expenditures, including overall costings similar to the Revenue tables noted above, guidelines for the evaluation of tax expenditures and detailed evaluations of a number of different expenditures. These reports are available on the Budget website. The Deputy may also wish to be aware that the latest version this report will be published next month, probably on Budget Day.
In relation to tax avoidance, where information is brought to my attention I will not hesitate to close off abuses of the tax code. The Deputy will understand that it is not generally the practice to supply details of such measures in advance. However, he will be aware I have already published draft proposals in relation to abuses that have come to light concerning section 110 companies. Details of the proposed amendment to section 110 may be found in my press release on my Department's website. The amendment as published is not finalised and may be subject to further refinements to clarify certain aspects of the provision.
The rationale for publishing said proposal was to ensure appropriate feedback is received on a technical and complex section of the Taxes Acts. As is standard practice when a technically complex piece of legislation is being examined, officials from the Department of Finance and the Revenue Commissioners have held meetings with a broad range of stakeholders including meeting with members of the Irish Debt Securities Association, the body that represents the securitisation industry and other members of the accounting, law and tax professions. My officials are currently in consultation to clarify certain aspects of the provision and to ensure the proposal successfully carries out the intention for which it was created. This is an ongoing process and I would like to reiterate that we welcome input from all stakeholders, including Deputies.
22. Deputy Paul Murphy asked the Minister for Finance if, following the judgment from the European Commission concerning a company (details supplied), an analysis as to the extent to which other multinational corporations may be liable for taxes to the State or to other jurisdictions has been undertaken; if this amount has been quantified; and if he will make a statement on the matter. [27618/16]
View answerOn 30 August 2016, the European Commission issued a negative decision in the Apple State Aid case.
The Government profoundly disagrees with the Commission's analysis in the Apple case and will now challenge the decision before the European Courts. Dáil Éireann has also passed a motion supporting the Government's decision to appeal the European Commission's decision.
Ireland has a period of two months and 10 days to bring an appeal. The appeal process may take several years. Apple also has indicated that it will exercise its right of appeal. An appeal to the European Courts takes the form of an application to the General Court of the European Union, asking it to annul the decision of the Commission.
Ireland's position remains that the full amount of tax was paid in this case and no State aid was provided. Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers.
Notwithstanding the negative decision, no fine or penalty has been imposed on the State.
The European Commission has stated that "This decision does not call into question Ireland's general tax system or its corporate tax rate". No other companies are subject to this decision by the European Commission.
On foot of the Commission's decision, Ireland is required to recover up to €13bn of alleged state aid from the company covering a ten year period. Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim. Given that this money may ultimately have to be returned to the company in the event of a successful appeal, the money can be held in escrow until the case has concluded.
The Commission has stated that the amount of unpaid taxes to be recovered by the Irish authorities would be reduced if other countries were to require Apple to pay more taxes on the profits recorded by Apple Sales International and Apple Operations Europe for this period and the amount of unpaid taxes to be recovered by the Irish authorities would also be reduced if the US authorities were to require Apple to pay larger amounts of money to their US parent company for this period to finance research and development efforts.
This illustrates the contradiction at the heart of the European Commission's decision. While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.
23. Deputy David Cullinane asked the Minister for Finance the reason his Department is ready to oversee a reduction in Government income as a percentage of gross domestic product, as shown by the summer economic statement figures, given the serious issues facing public infrastructure. [19805/16]
View answerIn the Summer Economic Statement, estimates of tax revenues and appropriations-in-aid show a projected nominal increase of €13.1 billion from 2016 to 2021. When expressed as a percentage of GDP, there is a small decline to 24.4% from 25.9%. These forecasts take account of €2.54 billion of fiscal space allocated to proposed tax reductions to be implemented over this period.
It is worth noting that forecast tax revenues from 2016 to 2021 remain relatively flat as a share of GDP, whereas the forecast for appropriations-in-aid drops by over 1% of GDP over the same period.
Almost 80% of the current appropriations-in-aid for 2016 relate to the Social Insurance Fund and the National Training Fund. The Social Insurance Fund is funded by PRSI receipts. With both funds in surplus, the gross expenditure and appropriations-in-aid for the funds are assumed to net off in arriving at the Exchequer Balance. Additional revenue forecast for both funds for the period to 2021 is then reflected in the General Government Balance. If the surplus receipts in these funds were included in the forecast of receipts in table 3 of the Summer Economic Statement, the overall estimate of appropriations-in-aid, as a percentage of GDP, would have reduced only slightly from 2016 to 2021.
The allocation of fiscal space in the Summer Economic Statement is consistent with the Programme for Partnership Government (PfPG) which outlines a split of at least two-to-one in favour of expenditure. This reflects the priority the Government attaches to re-growing public expenditure in a sustainable way while also addressing the need to reward work and support enterprise and employment.
In the PfPG, there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.
In terms of public infrastructure, the Government is conscious of the need to increase capital expenditure in order to boost the supply of critical infrastructure. The public capital plan, published in September 2015, provided for €42 billion of capital investment out to 2021 and the PfPG contained a commitment not only to protect this level of investment, but to increase it by a further €4 billion.
The level of capital expenditure provided for in the Summer Economic Statement allows for an additional €5.14 billion over the 2017 to 2021 period in excess of the additional €4 billion commitment given in the Programme. This emphasises the importance the Government places on continued investment in the public infrastructure.
In summary, therefore, the Government is prioritising infrastructural investment in order to support and broaden the economic recovery.
24. Deputy Maureen O'Sullivan asked the Minister for Finance his views on whether the tax system would be fairer if self-employed persons were allowed to earn a modest income before registering for VAT, as the current threshold of €37,500 turnover does not equate to that sum in income, and that this threshold could be interpreted as problematic. [27555/16]
View answerThe registration thresholds is a special scheme for small enterprises. In general, there are two thresholds: the goods threshold, which is currently €75,000, and the services threshold, which is €37,500. 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.
In the absence of this special scheme very small enterprises would be required to register for VAT, charge VAT on supplies and make periodic VAT returns and payments. In many cases, the compliance burden on such small enterprises would exceed the VAT payments to the Exchequer. In general, a person or company who exceeds the thresholds must register and account for VAT where their annual income exceeds the services threshold of €37,500, or the goods threshold of €75,000. For income tax purposes the income earned by a self-employed person is treated in the same manner as income earned by any other taxpayer.
VAT is governed by the EU VAT Directive (Council Directive 2006/112/EC), with which Irish VAT law must comply. The EU VAT Directive provides that VAT registration thresholds may only be raised by Member States to maintain their value in real terms, that is, they may only be increased in line with inflation. The VAT thresholds were increased to their current values on 1 May 2008. As the Central Statistics Office figures show the consumer price index is below the level it reached in 2008, it is not possible to increase the thresholds. I would point out, however, that Ireland's VAT registration threshold for small enterprises supplying services is the seventh highest in the EU while the goods threshold is the third highest.
25. Deputy Bernard J. Durkan asked the Minister for Finance if, directly or through the Central Bank, it has been found possible to exert influence on lenders who have applied compound interest in respect of mortgages in arrears thereby shifting responsibility for excessive borrowing onto the borrower, notwithstanding the fact that the lenders themselves greatly contributed to the banking crisis; if efforts have been or can be made to discourage the imposition of compound interest especially where borrowers are making reasonable efforts to make payments within their means in respect of the family home; and if he will make a statement on the matter. [27622/16]
View answerThe Deputy will be aware that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and that relationship frameworks are in place with the State owned banks which provide that the State will not intervene in the day-to-day operations of the banks or their management decisions. These frameworks are required to ensure that the banks are run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset for the State. In addition, the Deputy will be aware that the Central Bank is independent in the carrying out of its supervisory functions of regulated financial institutions.
The Central Bank's Consumer Protection Code sets down the obligations that regulated entities must fulfil before an offer of a mortgage is made to a borrower, including inter alia, details of the associated interest rate and other costs. Under the same code, lenders are obliged to inform personal borrowers of any proposed changes to the interest rate on a loan. In the case of a mortgage where a revised repayment arrangement has been put in place in accordance with the Code of Conduct for Mortgage Arrears (CCMA), the notification must clearly indicate the revised repayment amount required. All regulated entities must comply with the Consumer Protection Code. However, the Central Bank does not regulate the rate of interest charged by lending institutions.
Generally, the terms governing the interest payable on a mortgage will be provided for in the loan contract. In respect of a mortgage on a primary residence, provision 11 of the CCMA places a restriction on regulated entities 'from imposing charges and/or surcharge interest on arrears arising on a mortgage account in arrears' to which the CCMA applies, unless the borrower is not co-operating. Therefore, I would encourage anyone who is experiencing difficulty in meeting the contractual repayment requirements of their mortgage to engage with their lender to address their difficulty and in turn, I would ask lenders to put in place sustainable repayment arrangements to deal with a mortgage repayment difficulty in the best interests of consumers.
In conclusion I would reassure the Deputy that the CCMA is designed to provide appropriate and effective consumer protection measures and to ensure that borrowers are treated in a fair and transparent manner. It applies to all regulated mortgage lenders operating in the State when dealing with borrowers facing or in mortgage arrears on their primary residence, including any mortgage lending activities outsourced by these lenders. Lenders are required to comply with all aspects of the CCMA and non-compliance with the CCMA is enforceable against regulated entities by the Central Bank.
27. Deputy Mick Barry asked the Minister for Finance if, in view of the European Commission's findings that the State breached EU rules regarding the tax treatment of a company (details supplied), he has identified any other corporations which are based here for tax purposes that may have a similar tax liability; if so, the number of corporations that have been identified and the amount of the liability involved; and if he will make a statement on the matter. [27620/16]
View answerOn 30 August 2016, the European Commission issued a negative decision in the Apple State Aid case.
The Government profoundly disagrees with the Commission's analysis in the Apple case and will now challenge the decision before the European Courts. Dáil Éireann has also passed a motion supporting the Government's decision to appeal the European Commission's decision.
Ireland has a period of two months and 10 days to bring an appeal. The appeal process may take several years. Apple also has indicated that it will exercise its right of appeal. An appeal to the European Courts takes the form of an application to the General Court of the European Union, asking it to annul the decision of the Commission.
Ireland's position remains that the full amount of tax was paid in this case and no State aid was provided. Ireland did not give favourable tax treatment to Apple. Ireland does not do deals with taxpayers.
Notwithstanding the negative decision, no fine or penalty has been imposed on the State.
The European Commission has stated that "This decision does not call into question Ireland's general tax system or its corporate tax rate". No other companies are subject to this decision by the European Commission.
On foot of the Commission's decision, Ireland is required to recover up to €13bn of alleged state aid from the company covering a ten year period. Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim. Given that this money may ultimately have to be returned to the company in the event of a successful appeal, the money can be held in escrow until the case has concluded.
28. Deputy Maurice Quinlivan asked the Minister for Finance the way in which the Government plans to deliver €1 billion per year to assist local business and new start-ups to access finance; and if he will make a statement on the matter. [22825/16]
View answerAs the Deputy is aware, small and medium sized businesses play a central role in the sustainable recovery of the Irish economy. To facilitate this, Government policy is 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 industry bodies to discuss issues around access to finance and to help inform the development of policy on SME credit.
The Programme for a Partnership Government sets out the Government's committment to the SME sector, which involves my Department working with other relevant Departments and Agencies. My Department is monitoring the availability of bank and non-bank credit on both a macro and sectoral basis to ensure SMEs can reach their full potential in terms of growth and employment generation.
Furthermore, the Action Plan for Jobs 2016 includes a dedicated chapter and an associated integrated set of actions to support financing for growth for SMEs. In addition, the State Bodies Group, chaired by the Department of Finance, provides a forum for the development and implementation of policy measures to enhance SMEs' access to a stable and appropriate supply of finance. The State Bodies Group is now considering finance for growth actions for the Action Plan for Jobs 2017.
Some of the main policies introduced to date on which progress can be built include the Supporting SMEs Online Tool, which lists the available Government supports for small businesses; the Strategic Banking Corporation of Ireland ensures that SMEs are provided with sufficient finance for growth at a lower cost and on more flexible terms; 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; the Microenterprise Loan Fund provides support in the form of loans for up to €25,000, available to start-up, newly established, or growing micro enterprises, with viable business propositions; the Irish Strategic Investment Fund has committed to a number of SME Fund investments in Ireland, including the SME Credit and Equity Funds; Enterprise Ireland's Seed and Venture Capital Scheme; and 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.
29. Deputy Clare Daly asked the Minister for Finance the steps he is taking to address spiralling insurance costs and the allegations that price signalling by insurance companies is leading them to increase insurance costs to a point that those costs are threatening the capacity of many small businesses to continue in operation. [27543/16]
View answerThe Cost of Insurance Working Group, which I chair, is undertaking a review of the factors which are influencing the increased cost of motor insurance.
The Working Group brings together all the relevant Departments and Offices involved with the process. Its objective is to identify immediate and longer term measures which can address increasing costs, while bearing in mind the need to maintain a stable insurance sector.
The core areas to be examined by the Working Group in this first phase are the motor insurance sector generally, at present and in recent years; the effects of legal costs and litigation processes on insurance costs; the current claims compensation arrangements and the cost of claims; insurance data and information; the impact of accident rates; the impact of unlawful activity on the insurance sector; other market issues.
Because the issue of the cost of insurance is complex and in order to get to the heart of these issues as soon as possible, I have established four subgroups to review them in detail. Chairs have been appointed to these sub-groups and work has commenced. The subgroups are meeting weekly and their outputs are feeding into the meetings of the Working Group.
Separate to the working of the Cost of Insurance Working Group, the Competition and Consumer Protection Commission (CCPC) has informed me that it has formally opened an investigation in August 2016 concerning suspected breaches of competition law in the motor insurance sector. The investigation relates to industry participants openly signalling upcoming increases in motor insurance premiums in the State.
The CCPC is the independent statutory body responsible for enforcement of competition and consumer protection legislation across the economy. Its investigation is separate from the issues being considered by the Cost of Insurance Working Group and does not interfere with the important work being undertaken there.
By the end of October the Working Group will provide the Minister for Finance with an update report which will set out the priority actions required. From November to December, the Working Group will then develop an action plan to enable the relevant Government Departments and Offices to commence the implementation of these priority actions. In this regard I will be consulting regularly with Government colleagues.
30. Deputy Richard Boyd Barrett asked the Minister for Finance if he will provide details of meetings held between his Department officials and vulture funds during his terms as Minister; if he or his officials suggested to these funds that they might benefit from tax loopholes such as section 110 of the Taxes Consolidation Act or any other tax loopholes for the purposes of minimising their tax contributions; and if he will make a statement on the matter. [27595/16]
View answerWhile the term vulture fund is not recognised in the Taxes Acts, a small number of structures that have been using section 110 TCA 1997 to avoid paying tax on Irish property transactions have been brought to my attention. To address these concerns, on 06 September, I published a proposed amendment which tackles any misuse of the current section 110 regime in relation to Irish property. Details may be found in my press release on my Department's website regarding Section 110s. The amendment as published is not finalised and may be subject to further refinements to clarify certain aspects of the provision.
In the context of the State's interests in NAMA, IBRC, the banks and other financial institutions, my officials would have met with representatives of companies that would have been involved in bidding for and purchasing loan books. However, at no stage would my officials have been in a position to suggest any mechanisms regarding the minimisation of tax.
The rationale for publishing said proposal was to ensure appropriate feedback is received on a technical and complex section of the Taxes Acts. As is standard practice when a technically complex piece of legislation is being examined, officials from the Department of Finance and the Revenue Commissioners have held meetings with a broad range of stakeholders including meeting with members of the Irish Debt Securities Association, the body that represents the securitisation industry and other members of the accounting, law and tax professions. My officials are currently in consultation to clarify certain aspects of the provision and to ensure the proposal successfully carries out the intention for which it was created. This is an ongoing process and I would like to reiterate that we welcome input from all stakeholders, including Deputies, on the matter.
