Written Answers Nos. 280-299
280. Deputy Noel Rock asked the Minister for Finance the gross income figure of workers and self-employed ##persons for 2015 and 2016 as compared to 2007, specifically detailing the top 10% of earners and bottom 10% of earners on a percentage change of income basis as per a document (details supplied) from 2014; and if he will make a statement on the matter. [1313/17]
View answerI understand that the data used in the document provided comes from the OECD Income Distribution Database (IDD) which is compiled using the EU-SILC survey and shows the change in gross labour income for the top and bottom 10% of the household, rather than the individual, income distribution from 2007 to 2014.
The income distribution is calculated for each year by ranking households based on their equivalised disposable income and then dividing them into ten equally sized groups, or deciles. Disposable income refers to the sum of market income received by all household members - gross earnings, self-employment income, capital income - , plus the current cash transfers received, less direct taxes paid, social security contributions and transfers to other households. Disposable household income is then adjusted for household size.
The income distribution is calculated for each year. As such the households in the top or bottom 10% of the distribution in 2007 are not necessarily the same households who are in the top or bottom 10% of the distribution in 2014.
Updated data that includes the gross labour income of workers and self-employed persons for 2015 will be made available as part of the 2015 EU SILC release which is expected in the first quarter of this year, while data for 2016 is expected to be available with the 2016 release, due in the first quarter of 2018.
The gross labour income data referenced by the Deputy does not take account of the impact of the tax or transfer system or other components of disposable income. The OECD IDD database also presents data on household disposable income which is arguably a more appropriate metric for comparing movements in income over time. For Ireland, this data shows a more modest decline of 14% in household disposable income for the bottom 10% of households and a decrease of 9% for the top 10% of households between 2007 and 2014.
The OECD data shows a significant decrease in the gross labour income earned by households in the bottom 10% of the household income distribution in Ireland between 2007 and 2014. This reflects, in part, the increase in the number of households with low or very low work intensity - so called "jobless households" - between 2007 and 2014.
A number of other countries also experienced significant reductions in the gross labour income earned by households in the bottom 10% of the household income distribution. Although not shown in the chart supplied by the Deputy, larger decreases are seen in data for Spain (69%), Greece (67%) and Portugal (57%), although again this does not take account of taxes and transfers in these countries.
281. Deputy Richard Boyd Barrett asked the Minister for Finance the reason VAT is charged on the PSO levy on utility bills; and if he will make a statement on the matter. [1390/17]
View answerWith regard to the application of VAT on electricity bills supplied by utility companies, in accordance with section 37(1) of the Value-Added Tax Consolidation Act 2010, the amount on which VAT is chargeable is the total consideration receivable by the supplier, "including all taxes, commissions, costs and charges whatsoever", but not including the VAT itself. This reflects EU VAT law, with which Irish tax law must comply. In this regard, Article 78 of the EU VAT Directive provides that the taxable amount shall include "taxes, duties, levies and charges, excluding the VAT itself".
In this respect, where the charge for a supply of service, such as an electricity bill, includes the Public Service Obligation levy, VAT law dictates that VAT should be calculated on the PSO levy element of the charge as well as the charge for the service. The same situation applies in the case of other excises, including for example excises on petrol, auto-diesel, tobacco and alcohol products.
282. Deputy Michael Healy-Rae asked the Minister for Finance if he will examine the case of a person (details supplied) and implement a review; and if he will make a statement on the matter. [1411/17]
View answerI am advised by Revenue that they have issued a new tax credit certificate to continue the 2016 mutually satisfactory arrangement to deal with the matter. The person's employer will receive the new tax credit certificate in the coming days to reflect this.
283. Deputy Niamh Smyth asked the Minister for Finance the number of persons in counties Cavan and Monaghan who availed of the option to have their property tax deferred until 2018; the reason stated for this deferral; and if he will make a statement on the matter. [1450/17]
View answerPart 12 of the Finance (Local Property Tax) Act 2012 (as amended) provides for a deferral or partial deferral (50%) of LPT where certain specified circumstances exist. These circumstances include 'Income Level', 'Hardship', 'Personal Insolvency' and 'Personal Representative of a Deceased Person'.
Once granted, a deferral normally remains in place for the duration of the 'valuation period', which is currently 1 May 2013 to 31 October 2019. However property owners can opt to pay the outstanding liability at any time and discontinue with the deferral. Where a deferral is in place, the outstanding liability remains as a charge on the property and must be paid before a sale or transfer can be completed. Interest is also charged on the deferred amount at a rate of 4% per annum.
The table sets out the numbers of deferrals that are currently in place in Counties Cavan and Monaghan.
|
Local Authority |
Income Levels/Hardship |
Personal Insolvency |
Rep. Deceased Person |
Total |
|
Cavan |
821 |
15 |
13 |
849 |
|
Monaghan |
656 |
10 |
15 |
681 |
Finally, Revenue has recently published detailed LPT statistics in respect of 2016, which may be of interest to the Deputy. The information can be accessed via the following link. http://www.revenue.ie/en/about/statistics/local-property-tax-2016.pdf.
284. Deputy Niamh Smyth asked the Minister for Finance the Government's position in relation to an issue (details supplied); and if he will make a statement on the matter. [1462/17]
View answerAs the Deputy will be aware from my reply to Parliamentary Question No. 98, reference no. 32579/16 on 2 November last, I have no statutory role in relation to banking decisions made by financial institutions to provide, alter or amend the range of services which they provide. This is ultimately a commercial decision for the management team and board of each lending institution, having due regard to their customers.
In addition, the 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.
285. Deputy Brendan Griffin asked the Minister for Finance his views on whether banks and other lending institutions are prioritising motor finance over business and residential loans; and if he will make a statement on the matter. [1517/17]
View answerThe lending decisions of the banks and other lending institutions are commercial decisions for the management team and board of each institution, having due regard to their customers. In addition, the 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.
A breakdown of the purpose and maturity of loans to Irish households is available in Table A.5.1 in the Statistics section of the Central Bank website at http://www.centralbank.ie/polstats/stats/cmab/Pages/Money%20and%20Banking.aspx. The most recent data covers the period to November 2016. This divides loans into those for house purchase, consumer credit and other loans but does not provide specific details on the purpose of the consumer credit loans.
286. Deputy Niamh Smyth asked the Minister for Finance if he will review a matter (details supplied); his plans in relation to this matter; his further plans to ease the pressure on this type of business; and if he will make a statement on the matter. [1631/17]
View answerThis issue is a matter for my colleague the Minister for Transport, Tourism and Sport, in the first instance.
287. Deputy Noel Grealish asked the Minister for Finance when a property has been taken over by a receiver and the receiver is taking all the rental income for the said property, the person responsible for the payment of property tax; if it is the original owner or the receiver (details supplied); and if he will make a statement on the matter. [1644/17]
View answerThe Finance (Local Property Tax) Act 2012 (as amended) provides that the owner of a residential property on the 'liability date' is responsible for the payment of LPT for that year. With the exception of the 2013 half year the 'liability date' is always 1 November in the preceding year. For example the 'liability date' for 2017 was 1 November 2016.
Where a financial institution enforces its security over a property by taking legal ownership as a mortgagee in possession (receiver), it becomes liable for LPT from the next 'liability date' and the owner is displaced as the liable person. However where the legal transfer of ownership is not fully complete, responsibility for payment of LPT remains with the transferor (owner). However it can be the case that a receiver may agree with the owner to assume responsibility for payment of LPT in advance of the transfer of the property depending on the particular circumstances.
In regard to the specific case to which the Deputy is referring, Revenue has advised me that it is already in discussions with the new Receiver to ascertain the exact date that it secured ownership of the properties in question so that the correct 'liable person' can be determined.
288. Deputy Richard Boyd Barrett asked the Minister for Finance his views on the fall in corporate tax revenue in December 2016 as a result of a particularly large rebate reported at €150 million to a single company; and if he will make a statement on the matter. [1609/17]
View answerDecember 2016 corporation tax receipts came in below expectations by just over €250 million. However, it is important to view these receipts in conjunction with the overall corporation tax receipts for 2016, which were very strong. Corporation tax receipts closed 2016 €737 million or 11.1 per cent above target, representing an annual increase of 7.0 per cent. In relation to the under-performance in December, a contributing factor was a large repayment of c. €150 million, scheduled for October 2016, which was delayed and subsequently paid in December.
As the Deputy will appreciate, corporation tax refunds and one-off payments are a normal feature of our tax system, which subsequently increases the difficulty in forecasting this tax-head. While my Department liaises very closely with Revenue's Large Cases Division, which plays a key role in formulating forecasts, corporation tax remains difficult to forecast, due to various company specific and other idiosyncratic reasons.
There are a number of reasons why a company may be entitled to a refund of corporation tax paid. For example, large companies are required to make preliminary tax payments in the sixth and eleventh months of their accounting period. The preliminary tax payments are determined either with reference to the company's liability in the previous accounting period, or based on the anticipated liability of the current accounting period. The actual liability, determined after the end of the accounting period, may be lower than the preliminary tax payments thus resulting in an overpayment of tax. This could occur where a company's profits are lower than initially forecast.
Secondly, sections 766 and 766A of the Taxes Consolidation Act 1997 provide for a tax credit in respect of qualifying expenditure on Research & Development (R&D). The R&D tax credit must be initially used to reduce the corporation tax liability of the company for the accounting period in which the relevant expenditure is incurred. Any unused amount may be carried forward and used to reduce the corporation tax liability of subsequent accounting periods. However, where an excess remains, instead of carrying forward that excess, a company may claim to use it to reduce the corporation tax liability of the preceding accounting period. If any excess still remains it may still be carried forward and used to reduce the corporation tax liability of succeeding accounting periods. In the event that there is no corporation tax liability in the current year, the company may claim to have the amount of that excess paid to them by the Revenue Commissioners in 3 instalments over a period of 33 months from the end of the accounting period in which the expenditure was incurred.
Thirdly, where a company incurs a trading loss, section 396A of the Taxes Consolidation Act 1997, allows for this loss to be carried back to the previous accounting period. As the company would have already paid its liability for the earlier accounting period, such a situation would result in the company being entitled to a refund in respect of that loss.
Finally, circumstances such as company restructurings, mergers and acquisitions, as well disposals of subsidies, amongst others, can result in changes to corporation tax liabilities.
I am advised by the Revenue Commissioners that higher-than-profiled repayments in December contributed to the shortfall in corporation tax receipts in that month. For reasons of taxpayer confidentiality, Revenue is unable to provide further details. However, it should be noted that, as outlined above, repayments are a normal part of the functioning of the tax system and occur throughout the year. As indicated in their report on Corporation Tax receipts in 2015, http://www.revenue.ie/en/about/publications/corporation-tax-receipts-2014-2015.pdf, repayments of Corporation Tax totalled around €800 million in 2015 and levels are expected to be similar in 2016. Revenue will publish a detailed 2016 analysis in due course.
289. Deputy Joan Burton asked the Minister for Finance the work his Department has carried out in ensuring that a minimum effective tax rate is paid by companies offsetting substantial losses accrued against their tax liabilities during the crash; and if he will make a statement on the matter. [1664/17]
View answerLoss relief provisions are an essential part of corporate tax systems. Under the Irish corporate tax system, losses incurred in the course of a business are allowed to be taken into account in calculating the appropriate amount of tax due by companies. Loss relief recognises the fact that business cycles run over a longer period than just a single year and that it would be inequitable to tax profits in one year and not allow loss relief in the next.
Under existing loss relief provisions in the Tax Acts, any unrelieved trading losses of a company for an accounting period may be carried forward for offset against trading income of the same trade in future accounting periods. Alternatively, a company may claim to have the loss set off against profits of any description for the same accounting period in which the loss was incurred or of an immediately preceding accounting period of the same length.
The provision of relief for such losses is a standard feature of our tax code and of all other OECD countries.
290. Deputy Joan Burton asked the Minister for Finance if his Department has finalised plans for the recruitment of temporary commissioners to the Tax Appeals Commission; and if he will make a statement on the matter. [1665/17]
View answerThe decision to recruit a number of temporary Appeal Commissioners arose from a review conducted by the Revenue Commissioners which indicated that there would be a significant number of open appeal cases to be transferred from Revenue to the Tax Appeals Commission.
In the circumstances, and as provided for in section 9 of the Finance (Tax Appeals) Act 2015, I gave my approval for the appointment of a number of temporary Appeal Commissioners to deal with these legacy appeal cases. These appointments will be made through an open recruitment process conducted by the Public Appointments Service. I understand that preparations for the recruitment process are well advanced and that it should commence shortly.
291. Deputy Joan Burton asked the Minister for Finance the status of the work of the technical delegation from his Department to Brazil regarding the decision by the Brazilian authorities to add the Republic of Ireland to its taxation blacklist; and if he will make a statement on the matter. [1666/17]
View answerThe Brazilian Federal Revenue Service have agreed to meet a technical delegation from the Department of Finance and the Revenue Commissioners to discuss Brazil's inclusion of Ireland on their tax list. Our Ambassador in Brazil is working on finalising the scheduling of this technical delegation.
Brazilian Federal Revenue Service have made clear that Ireland has been included on the list because our statutory rate of corporation tax is below 17% which is the benchmark set under Brazilian law. In our formal submission to Brazil we highlighted that Ireland also has a 25% corporation tax rate on passive income and a 33% rate on chargeable gains. We also stressed that the 12.5% rate has been settled policy in Ireland since 2003. Ireland's corporation tax take has also typically been very close to the EU and OECD averages both in terms of corporate tax as a percentage of GDP and in terms corporate tax as a percentage of total tax revenue. We believe it is inappropriate to include Ireland on a black list simply because we apply a low tax rate to a wide tax base which is fully in line with recommended OECD best practice.
Our technical delegation will outline this view to the Brazilian Federal Revenue Service and seek to fully explain our corporate tax system. We remain hopeful that we can persuade Brazil that Ireland should be removed from the Brazilian list.
292. Deputy Joan Burton asked the Minister for Finance if he and the Minister for Transport, Tourism and Sport have received initial recommendations following a review of rising motor insurance compensation; the status of the review of policy in the insurance sector, which his Department is currently undertaking in consultation with the Central Bank; the reforms he is considering to tackle the problem of motor insurance premiums that are rising at an annual rate of as much as 35%; if he will urgently update the book of quantum; and if he will make a statement on the matter. [1667/17]
View answerThe Working Group on the Cost of Motor Insurance, chaired by Minister of State Eoghan Murphy, completed its Report in December 2016. The Report was approved by the Government on 10 January 2017 and subsequently published. The Report contains 33 recommendations and 71 actions are detailed in an action plan with agreed timelines for implementation, covering six main themes:
- Protecting the consumer
- Improving data availability
- Improving the personal injuries claims environment
- Reducing the costs in the claims process
- Reducing insurance fraud and uninsured driving, and
- Promoting road safety and reducing collisions.
The recommendations include actions to:
- address the lack of transparency in the claims environment, through the establishment of a national claims information database which will be located in the Central Bank;
- provide enhanced guidance in how to determine compensation for personal injuries claims, through the establishment of a Personal Injuries Commission;
- address the increasing level of uninsured driving, through the establishment of a fully functioning database which will allow the Gardaí to check insurance compliance through the use of technology such as Automatic Number Plate Recognition; and
- address the issue of suspected fraud, through the establishment of a database that will be funded by industry but held by an independent body and that will take into account data protection concerns.
A number of the actions are already underway and I am confident that the report's 71 actions will be implemented by the end of 2018, with 45 due for completion this year.
While there is no silver bullet to reduce the cost of insurance, cooperation and commitment between all parties can deliver fairer premiums for consumers without unnecessary delay. This will lead to greater stability in the pricing of motor insurance and will help prevent the volatility that we have seen in the market in the past. It should also better facilitate potential new entrants to the market.
The Working Group will continue to meet in 2017 as the project enters its implementation phase.
The Deputy should note that the Book of Quantum was most recently revised and published in 2016. In addition, and as part of the implementation of the Report, the Department of Jobs, Enterprise and Innovation are tasked with exploring with the Judiciary how future reviews of the Book of Quantum might involve appropriate judicial involvement in its compilation or adoption, introducing more granularity into the Book of Quantum and updating it every 3 years at a minimum.
294. Deputy Joan Burton asked the Minister for Finance the amount of funding which has been made available through the Ireland Strategic Investment Fund for social and affordable housing provision; if he has satisfied himself with the current rates of interest being charged to borrowers through the fund; if he is reviewing the operation of the mechanisms through which credit is accessed from the fund; and if he will make a statement on the matter. [1669/17]
View answerAs the Deputy will be aware policy initiatives in the area of housing must seek to address the challenges faced by the various sectors of the market, including the private owner occupier market, the rental market, and the social housing sector. In line with its statutory mandate, the Ireland Strategic Investment Fund (ISIF) is examining opportunities to make, on a commercial basis, strategic investments that have the potential to support increased social housing output.
In the private market, the Fund is already involved in a number of important initiatives which cumulatively can make a contribution to increased housing output. This includes its investments in:
- Activate Capital - which is an innovative non-bank financing platform that has the potential to provide funding for substantial numbers of new homes in Dublin and the other major urban centres in which demand is most pronounced;
- Ardstone Residential Partnership - which is a residential equity investment fund that is focused on delivering residential units to the market over the short-to medium-term; and
- Wilbur Ross Cardinal Commercial Real Estate Mezzanine Debt Fund - which has funded a number of residential developments in recent months.
Activate Capital, which has the potential to fund the delivery of up to 11,000 new housing units over the medium term, has already advanced funding for the construction of 1,200 new houses in the greater Dublin area. The Ardstone Fund has to date acquired sites with the potential to deliver up to 1,800 new housing units which will be delivered over a 5-7 year time frame and is targeting a total delivery of up to 3,000 new units. The Wilbur Ross Cardinal Fund, which has a focus on multiple real estate sectors, providing both pure finance and development capital, has already advanced funding for 1,700 new residential units.
In the social housing market, in line with the commitment contained in "Rebuilding Ireland" the NTMA and the key Government Departments are examining the feasibility of establishing a funding vehicle in conjunction with the private sector, which could facilitate investment in social housing. Key factors which must be addressed to facilitate ISIF involvement in such projects include:
1. the commercial viability of the vehicle; and
2. the off-balance sheet structure of the vehicle.
ISIF informs me that whilst it has made progress in conjunction with other stakeholders in the State and private sectors in respect of potential social housing investment opportunities, there are still considerable hurdles to be overcome before any such proposals can be brought to a successful conclusion. The Deputy will appreciate that whilst ISIF is working closely with all relevant stakeholders to help overcome hurdles to investment in social housing, many of these hurdles are outside the control of ISIF and require strong inputs from other stakeholders.
In relation to interest rates charged by ISIF, ISIF invests on a risk adjusted basis. In this context, the interest rates applied by ISIF to any given investment relates to the level of risk and other investment criteria, including pricing, and reflects its mandate to act commercially and in a way that contributes to the local economy.
A review of ISIF's investment strategy is due to be finalised shortly. The review includes an appraisal of the success of ISIF's mandate to date. The NTMA (Amendment) Act 2014 provides that ownership of the Fund vests with the Minister for Finance. It also provides that the Fund shall, in reviewing its investment strategy, consult the Minister for Finance and the Minister for Public Expenditure and Reform. The review of the ISIF will be conducted in accordance with these provisions. In addition, the legislation provides that the Minister for Finance may consult with other Government Ministers as appropriate.
295. Deputy Joan Burton asked the Minister for Finance his views on the recently expressed view by the Dutch Minister for Finance and the chairman of the eurozone finance ministers, Mr. Jeroen Dijsselbloem, that European Union finance ministers are worried that the European Commission is not applying budget laws in the same way to large and small countries and is undermining confidence in the rules; and if he will make a statement on the matter. [1670/17]
View answerAt the outset I would like to reassert my belief in the importance of the principle of the fiscal rules, which are designed to promote budgetary discipline and underpin sustainable economic growth. Fiscal rules are all-the-more important in a monetary union, given the scope for spillovers among participating Member States.
Compliance with the fiscal rules underpins and facilitates the goals of sustainability and economic growth. Ireland's recent and continued economic recovery is testament to this.
It is evidently important that rules are implemented in a fair and consistent manner and that all Member States are treated equally concerning the application of the Stability and Growth Pact. This is essential for the continued credibility of these rules. Any perception that the rules are not being applied in an equitable manner could result in the undermining of the Stability and Growth Pact.
In Ireland we have defended and complied with the fiscal rules through difficult times. This defence becomes progressively more difficult if there is any suggestion that the rules are not being applied consistently, particularly when there are perceived differences between the treatment of small and large Member States. So I would have some sympathy with the view of Chairman Dijsselbloem that unequal application could undermine confidence in the rules and, in this regard, I would reiterate that the fiscal rules must be applied in a transparent, consistent and fair manner.
296. Deputy Joan Burton asked the Minister for Finance the way in which he is addressing the concern raised by his officials in a briefing note prepared by his Department on his re-appointment to the finance portfolio that Ireland is at risk of breaching EU rules which constrain the rate at which spending can increase in 2017; the impact of the recent revised Estimates for health and justice on this potential breach; and if he will make a statement on the matter. [1671/17]
View answerThe briefing the Deputy is referring to was prepared following the general election last year and, as a result, it was drafted prior to the reclassification by EUROSTAT of the 2015 conversion of the AIB preference shares to ordinary shares as general Government expenditure. This increased expenditure for 2015 on a one-off basis by circa €2.1 billion, which built a significant buffer into the calculation of Ireland's compliance with the expenditure benchmark in 2016, thereby significantly reducing the risk of breaching the benchmark. There is no carry-through impact from this one-off transaction on the calculation 2017 expenditure benchmark.
The briefing does not raise issues in relation to potential rule breaches in 2017. Indeed in its assessment of Ireland's Draft Budgetary Plan for 2017, the European Commission in October last year found Ireland to be broadly compliant with the provisions of the Stability and Growth pact (SGP).
297. Deputy Joan Burton asked the Minister for Finance if he will provide a full report on the way in which the annual €150 million banking levy will be calculated as it extends to 2021; and if he will make a statement on the matter. [1672/17]
View answerIn accordance with Section 126AA of the Stamp Duties Consolidation Act 1999, an annual levy was imposed on certain financial institutions for each of the years 2014, 2015 and 2016. The levy was charged at 35% of the Deposit Interest Retention Tax (DIRT) paid by a financial institution in 2011 and raises approximately €150 million annually for the Exchequer. In the case of a financial institution where the amount of DIRT in the base year does not exceed €100,000, the levy is not payable.
In the budget statement two years ago, I announced that I intended to extend the levy for a further five years to 2021. I indicated that the overall yield from the levy would be maintained at €150 million annually but that I would undertake a review of the DIRT based methodology for calculating the levy.
That review, which included a public consultation on the issue, was undertaken by my Department in early 2016. Following that review, I decided that the DIRT based formula should be retained but that the base year for calculating the levy in 2017 and 2018 would be changed from 2011 to 2015. I have also decided to introduce a rolling two-year series of base years which will introduce a new base year of 2017 for calculating the levy in 2019 and 2020 and a new base year of 2019 for calculating the levy in 2021.
The introduction of the rolling two-year series of base years has a twofold effect. Firstly, it ensures that financial institutions entering the market over the five further years for which the levy will apply will be subject to the levy and financial institutions exiting the market will cease to be subject to the levy. Secondly, it will help to correct, on an ongoing basis, any anomalies for individual institutions thrown up by prevailing market conditions, such as the interest rate offering, in any one year.
In order to maintain the annual yield from the levy at €150 million, I have to increase the rate at which the levy is charged from 35% to 59% for 2017. This is because the assessable amount, DIRT payments in 2015, have reduced significantly since 2011. This new rate, combined with the new 2015 base year, will preserve the existing contribution of €150 million paid by the affected financial institutions. That rate will be subject to review to ensure that the yield from the levy is not impacted from changes in interest rates and/or DIRT rates.
299. Deputy Joan Burton asked the Minister for Finance if the State will still move to sell off all or part of a bank (details supplied); the estimated timeframe for this; the expected yield to the Exchequer; if this yield will be ring-fenced for a particular purpose; and if he will make a statement on the matter. [1674/17]
View answerThe State's shareholding in AIB is a valuable asset and it is the Government's intention that the State will exit this and our other banking investments in a measured and careful manner. My primary objective in the disposal of any AIB shares will be to maximise the return for the State in a manner that is consistent with recovering our full €20.7 bn investment.
The advice I have received confirms that an IPO is the optimal route to recouping value from this investment. Officials in my Department along with our Independent Financial Advisor, Rothschild, have done considerable preparatory work in this regard. In December of last year, following a competitive procurement process, three investment banks were appointed to act as Global Coordinators on a potential selling syndicate, in preparation for a possible IPO. These banks have been appointed for an 18 month period and additional banks will be appointed to fill out the syndicate at an appropriate future date.
I cannot predict what market conditions will be like for bank shares over the coming year, however it is our intention to be ready to execute a transaction if conditions allow. Given the improved state of the national accounts, progress made in reducing our national debt and positive market sentiment towards Ireland, we are not under any pressure to monetise our banking investments. As a result we have some flexibility around when we time our disposals in the market.
It would not be possible or prudent for me to estimate the amount which might be received from any future sale of shares in AIB at this time. This will depend both on the quantum of shares sold and the price arrived at in the market during the IPO process.
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. That is the prudent course of action as it reduces our ongoing borrowing costs and ensures the future strength and stability of the economy.
