Written Answers Nos 41-55
41. Deputy Thomas P. Broughan asked the Minister for Finance his plans with regard to a proposed rainy day fund and the debt-to-GDP short-term and medium-term targets; and if he will make a statement on the matter. [31350/17]
View answer65. Deputy Michael McGrath asked the Minister for Finance if he is committed to the 45% debt-to-GDP target outlined in budget 2017 by his predecessor; the way in which he plans to meet this target by 2025; and if he will make a statement on the matter. [31244/17]
View answer70. Deputy Michael McGrath asked the Minister for Finance his position regarding the setting up of a rainy day fund in 2019; if he is committed to it being set up; the way in which he sees it being implemented; and if he will make a statement on the matter. [31242/17]
View answerI propose to take Questions Nos. 41, 65 and 70 together.
As part of the 2016 Summer Economic Statement, the Government announced its intention to establish a contingency reserve/rainy day fund with effect from 2019. The crisis years clearly demonstrated that volatility in the economic cycle can be much more pronounced due to the open nature of the Irish economy. As such, the rainy day fund would provide a prudent counter-cyclical buffer, with annual transfers from the Exchequer to the rainy day fund expected following the achievement of the Medium Term Budgetary Objective, projected to be next year.
The rainy day fund is currently under review and further information will be provided in the Summer Economic Statement (SES) to be published in July.
Additionally, a revised lower debt target of 45 per cent of GDP was announced in Budget 2017, intended to help to provide an additional fiscal 'shock absorber' capacity to the public finances to help deal with future economic headwinds, including the impact of Brexit. Again, this target is under review and updated information will be included in the SES.
My Department published a report in June entitled the "Annual Report on Public Debt in Ireland”, and included an illustrative scenario for the debt path over the medium term. On the basis of reasonable assumptions, it is projected that the debt-to-GDP ratio of 60 per cent would be achieved in 2022, 55 per cent in 2023/2024 and 45 per cent in 2026. The analysis also suggests that, based on continued compliance with the fiscal rules, growth in the nominal GDP is expected to do the heavy lifting in reducing the debt-to-GDP ratio in the coming years.
This projected timing does not factor in proceeds from the sale of banking assets, which will be used to lower debt and thus could bring forward the achievement of the above ratios.
The report also contains an analysis of the debt path under different economic and other scenarios.
42. Deputy Mick Wallace asked the Minister for Finance the extent to which NAMA considered the tax structures of potential bidders for assets being sold by NAMA; the impact of these to the potential returns to the State; and if he will make a statement on the matter. [31469/17]
View answerI am advised by NAMA that the company structures set up by purchasers for purchasing or managing loans or assets are a matter for the bidder and/or purchaser acting on their own tax and legal advice.
NAMA has no role in examining or approving the tax affairs of market counterparties. NAMA operates in accordance with the National Asset Management Agency Act 2009 and has a mandate to maximise its commercial return. The responsibility for taxation matters rests with the Revenue Commissioners based on the application of relevant applicable and extant taxation legislation.
43. Deputy Pearse Doherty asked the Minister for Finance if the cost of the reduction of USC in budget 2017 was underestimated in view of the Exchequer figures; and if he will make a statement on the matter. [31452/17]
View answerCumulative Exchequer income tax receipts at end-June 2017, were slightly below profile, by 0.5% or €110 million. Specifically, in relation to Universal Social Charge receipts at end-June were approximately 4.8% or €83 million below expectations.
As the Deputy may be aware, officials from my Department and the Revenue Commissioners have been reviewing the USC performance. As part of the review, my Department and Revenue have re-examined the Budget 2017 USC costings, and are satisfied that the costings are as accurate as possible given the complexities involved in forecasting.
Furthermore, as part of the continuous efforts to improve the Department’s tax forecasting performance, the ESRI and my Department jointly examined the sensitivity of income tax and USC revenues to changes in income. As a result of this work, which was published in March 2017, the Department has revised the income tax and USC revenue elasticities used in the forecasting process. These new elasticities were used in the forecasts for 2018 and subsequent years in the 2017 Stability Programme Update published in April. However, it should be noted that a “back-casting” using the revised elasticities would imply a lower USC forecast for this year.
44. Deputy Michael McGrath asked the Minister for Finance if he has satisfied himself with the regulatory position surrounding personal contract plans used to purchase motor vehicles; if he has further satisfied himself with the current roles of the Central Bank and the Competition and Consumer Protection Commission in relation to PCPs; the complaints process for a customer in relation to PCPs; and if he will make a statement on the matter. [31246/17]
View answerPersonal Contract Plans (PCP) are a form of Hire Purchase and both the Central Bank and the Competition and Consumer Protection Commission (CCPC) have certain functions and legal powers in relation to the provision of hire-purchase agreements.
While hire-purchase providers are not required to be authorised by the Central Bank, they are subject to a number of legislative and regulatory requirements supervised by the Central Bank and listed in Schedule 2 to the Central Bank Act 1942. In addition, to the extent that an entity is a 'regulated financial service provider', the powers in the Central Bank (Supervision and Enforcement) Act 2013 and the administrative sanctions procedure will apply.
The CCPC is responsible under the Consumer Credit Act 1995, for the authorisation of credit intermediaries, some of whom may sell PCPs to consumers on behalf of a finance company. A "credit intermediary" is defined as "a person...who in the course of his business arranges or offers to arrange for a consumer the provision of credit or the letting of goods in return for a commission, payment or consideration of any kind from the provider of the credit or the owner, as the case may be".
The CCPC provides licences to credit intermediaries and keeps an online list of credit intermediaries holding a valid authorisation which is available on the CCPC website www.ccpc.ie. The CCPC also deals with complaints about the advertising of Credit Agreements and the advertising of car finance on credit intermediary websites and in the media.
The CCPC has a specific statutory remit to provide personal finance information and education to assist consumers. In this regard the CCPC has conducted research into the car market and car finance, and conducted numerous public awareness campaigns on the issue of car finance. Its current campaign, which commenced on 5 June, focuses on car finance and specifically aims to provide information to consumers on issues in relation to PCPs, such as the fact that the consumer does not become the legal owner of the car until they make the final payment. The CCPC plans to conduct further research into PCPs in the second half of this year.
If a consumer has concerns regarding the activities of credit intermediaries, they may wish to contact the CCPC. The Financial Services Ombudsman can also investigate complaints from individual consumers about credit intermediaries.
45. Deputy Mick Wallace asked the Minister for Finance the freedom of information procedures that operate within NAMA; the process followed from receiving a request to publication; if the procedures adhere fully to the Freedom of Information Act 2014; and if he will make a statement on the matter. [31471/17]
View answerThe Deputy will be aware that NAMA was one of a number of additional agencies designated as Freedom of Information bodies, when the Freedom of Information Act 2014 ("FOI" Act") was enacted on October 14, 2014. As set out in the FOI Act, NAMA became subject to the legislation on April 14, 2015.
I am advised by NAMA that the Agency complies fully with its obligations under the FOI Act. Freedom of Information requests received by NAMA are dealt with in accordance with the provisions of the FOI Act and the process is supported by guidance provided by the Department of Public Expenditure and Reform FOI Central Policy Unit.
I am advised that the standard process followed by NAMA as set out in the FOI Act, and as per the guidance notes issued by the Department of Public Expenditure and Reform, outlines that where a request is received, it is acknowledged within two weeks. A response to the request is issued within the statutory deadline of four weeks. In certain circumstances, an FOI body may extend the decision period by a further four weeks. In these instances, the requester is advised of the extension, as set out in the FOI Act.
Following receipt of a valid request, the records which fall under the scope of the request are collated and reviewed. Where a record contains information that falls to be withheld under the exemptions provided for in the Act, this information is not released.
Where a person is dissatisfied with the decision on a request, they have the right to seek an internal review of the decision by a more senior member of staff. This involves a fresh examination of the records which fall under the scope of the request and the internal reviewer has the authority to affirm or amend the original decision.
In addition, where a person is dissatisfied with the result of the internal review, they have the right under the Act to apply to the Office of the Information Commissioner to seek an external review.
As outlined above, I am advised that NAMA is complying fully with its obligations under the FOI Act and that the procedures that NAMA has adopted in processing and dealing with FOI requests are in compliance with the FOI Act and the guidelines produced by the Department of Public Expenditure and Reform.
46. Deputy Richard Boyd Barrett asked the Minister for Finance if he will consider a change to the remit of NAMA in view of the ongoing lack of supply in the housing market and the housing and homelessness crisis; and if he will make a statement on the matter. [31475/17]
View answerI do not propose to change NAMA’s mandate and I am satisfied that NAMA continues to make a significant contribution to housing provision, where such provision is compatible with NAMA’s overriding commercial objectives in line with the NAMA Act. It is important to recognise from the outset that NAMA does not own property, rather, NAMA owns loans secured by property which is owned by its debtors. More specifically, NAMA, as a lender, cannot force a borrower to take action which would reduce his/her repayment capacity, such as providing a property for social or private housing where that is not the financially optimal course of action for the debtor. To do so would compromise a borrower's capacity to repay his or her debts to NAMA and would constitute a direct breach of the borrower's property rights, protected under Article 43 of the Constitution. I am advised that directing NAMA to act counter to these obligations is not one lawfully open to me in all the current circumstances.
This being the case, Local Authorities are not precluded from purchasing or leasing properties for social purposes, including properties owned by NAMA debtors. In fact, NAMA has an established policy of identifying to Local Authorities, properties which may be suitable for their purposes. Through this initiative, NAMA has facilitated the sale or lease by its debtors and receivers of properties on commercial terms, to public bodies for a wide-range of purposes, including social housing; schools; healthcare facilities; and urban economic, environmental and cultural regeneration. All such transactions are executed at market value.
NAMA has also established National Asset Residential Property Services (“NARPS”) as an innovative model to expedite social housing delivery. NARPS purchases properties directly from NAMA debtors and receivers, at market value. NARPS then onward leases these properties to local authorities and approved housing bodies on long term (20 year 9 months) leases, which include an option for the local authorities or approved housing bodies to purchase the unit at market value towards the end of the lease term. NARPS has been in operation since 2013 and has purchased over 1,300 units from NAMA debtors and receivers, all of which have been leased for social housing. The establishment of NARPS has ensured the transfer of fully-furnished and compliant properties for immediate occupation by social housing tenants in a timely manner while also remaining faithful to NAMA’s commercial mandate.
NAMA is also seeking to facilitate the delivery of 20,000 homes over the period from 2016 to 2020, subject to commercial viability. Since 2014, NAMA has funded the construction of over 4,800 new residential units in Ireland on residential development land securing its loan portfolio.
NAMA also played a key role in the resolution of unfinished housing estates within the State. In 2010 NAMA had exposure to 332 unfinished housing estates. That has now reduced to 11 unfinished estates at this stage and all of NAMA's remaining exposure to such sites are expected to be resolved by end-2017.
Ultimately, NAMA’s principal contribution to social and economic development of the State has been the major progress that it has made in eliminating Irish taxpayers' contingent liability of €30 billion which arose from the Government Guaranteed senior debt issued in order to acquire bank loan portfolios. As of today, 98% of that senior debt has been redeemed and NAMA has indicated that it expects the residual €500m to be redeemed by the end of this year. NAMA also expects to redeem its subordinated debt by March 2020 and to produce a surplus – currently estimated at €3 billion – by the time it completes its work.
Finally, the long-term solution to the current homelessness issue is to increase the supply of homes and the Government is determined to see increases in the supply of high quality social and affordable homes, to buy or rent, as quickly as possible, particularly in the major urban areas where demand is greatest. This is one of the issues the Minister for Housing, Planning, Community and Local Government will be considering in the context of the recently announced review of Rebuilding Ireland, one year on from its publication, with an emphasis on building on the progress made, strengthening the measures already in place and identifying new initiatives that add value and raise ambition. In this context, the fourth edition of Rebuilding Ireland's Monthly Housing Activity Report shows that housing construction activity continues to gather momentum, with an appreciable rise in the level of housing commencements notified to local authorities during March 2017.
47. Deputy Catherine Murphy asked the Minister for Finance if he has considered the impact that potential income tax cuts will have on the ability to invest in vital public services in budget 2018; his views on the further erosion of the tax base; the way in which he plans to offset the potential exchequer losses from a proposed tax cut; and if he will make a statement on the matter. [31480/17]
View answerThe Programme for Partnership Government recognises the need to invest in public services and capital infrastructure to meet increasing demographic demands; to provide targeted expenditure increases for improvements focusing upon health, housing, education, disability, child care and development. It also recognises that capital investment in key physical and social infrastructure can support growth and continued job creation.
The programme therefore contains a commitment that budget measures will be introduced that will involve at least a 2:1 split between public spending and tax reductions. This commitment is also contained in the Confidence and Supply agreement with Fianna Fáil. The ratio of spending increases to tax reductions in Budget 2017 exceeded this target and was in fact over 3:1 in favour of expenditure.
The income tax base was broadened significantly in the crisis through the introduction of the broad-based USC but also through the curtailment or abolition of a range of income tax reliefs. In 2010 over 45% of income earners were exempt from income tax. At present it is estimated that circa 30% of income earners are exempt from USC with approximately 37% of earners exempt from Income Tax.
While the Programme for Government commits to maintaining the breadth of the tax base, it also recognises that high personal tax rates in Ireland discourage work and jobs and have a negative impact on our international competitiveness. Therefore, it contains a commitment for a medium-term income tax reform plan that keeps the tax base broad, while reducing excessive tax rates for middle income earners, and limiting the benefit for high earners. We must appreciate the value of retaining the incentive to work, to enable those who work hard to provide for their families and generate further economic growth through employment and expenditure in the domestic economy.
Furthermore, as the Deputy will be aware, changes to one particular tax, such as income tax, are not considered in isolation. They must be considered as part of the overall Budget process encompassing both revenue and expenditure measures and in the context of available resources. Any announcement in relation to changes to the income tax system would normally be made as part of the Budget and I am not inclined to diverge from this practice.
49. Deputy Catherine Murphy asked the Minister for Finance his plans to use his position to engage with EU officials regarding Ireland's debt burden; his further plans to seek a change to Ireland's debt schedule; his views on whether this is something that should be considered particularly in the context of Brexit; and if he will make a statement on the matter. [31479/17]
View answerMy Department, in conjunction with the National Treasury Management Agency (NTMA) are constantly looking to avail of any appropriate opportunity for savings on the cost of our EU-IMF Programme loans and the matter is kept under active review.
The debt-to-GDP ratio has declined significantly in recent years although we must recognise the limitations of GDP in an Irish context. For a more meaningful assessment of trends in public debt in Ireland, therefore, it is important to look beyond this simple measure.
Other debt sustainability measures such as the debt-to-revenue ratio and the interest-to-revenue ratio are also improving.
Our economy is growing strongly; our public finance deficit is declining, as are our debt service costs and we are now running a primary budget surplus. All of this is positive from a debt sustainability perspective. In addition, the proceeds from the recent sale of part of the Government’s share-holding in AIB will reduce the overall level of public debt.
In the context of Brexit, the best and most immediate policy under the Government's control to counter the likely negative economic impacts is to continue to prudently manage the public finances. As we cannot control the international environment, we will need to continue to improve our competitiveness, including by focussing on costs we can control, by boosting our productivity, and ensuring sustainable public finances.
It should be recognised that a number of improvements to the terms of our EU-IMF Programme loans have already been secured since they were initially agreed in late 2010.
As a result of two separate maturity extensions granted to loans from the European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF), Ireland’s debt repayment schedule is already quite favourable. These extensions mean that the next EFSF maturity is not until 2029 while it is not expected that Ireland will have to refinance any of its EFSM loans before 2027.
Reductions in the cost of the EFSM, EFSF and bilateral loans were also secured and these generate significant interest savings.
Furthermore, the early repayment of some 81 per cent of our IMF loans, completed in Quarter 1 2015, also generates significant interest savings and improves the debt repayment schedule as debt that was to mature over the period July 2015 – January 2021 was replaced with longer-term debt. This early repayment to the IMF required agreement from the other lenders to waive the mandatory proportional early repayment clause.
With regard to any potential further engagement, it is important to note that engagement with any one lender cannot be treated in isolation from other lenders and market expectations for when Programme loans are due to be repaid. The issue of Post-Programme Monitoring would also have to be addressed. Furthermore, any potential savings arising from possible future actions would depend on timing and prevailing market conditions.
50. Deputy Niamh Smyth asked the Minister for Finance the steps he is taking to assist persons faced with increases in the cost of motor insurance; and if he will make a statement on the matter. [31249/17]
View answerThe former Minister for Finance, Michael Noonan T.D., established the Cost of Insurance Working Group in 2016, in consultation with the Central Bank and other Departments and Agencies.
The initial focus of the Working Group was the issue of rising motor insurance and its Report on the Cost of Motor Insurance was published in January 2017. The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, which are clearly set out in an Action Plan. 45 of these action points are due to be implemented by the end of this year with the remainder scheduled for completion before the conclusion of 2018.
There is a commitment within the Report that the Working Group will prepare quarterly updates on its progress and the first such update was published in early May.
The Department of Finance will publish the second quarterly update in the next couple of weeks. This update will again show the progress to date on the overall implementation of the recommendations, with a particular focus on the 17 action points which are due for completion in the second quarter of 2017.
It should be noted that the most recent CSO data indicates that private car premiums have reduced by 8.5% year-on-year. I do, however, accept that while CSO statistics indicate a greater degree of stability on an overall basis, these figures only represent a broad average and that there are many people who are still seeing increases. I take the view that while the greater stability in pricing is a good thing, premiums are still at a very high level.
However, I do believe that the implementation of the Report on the Cost of Motor Insurance will make a difference to the pricing of insurance premiums over the next 18 months. I also believe that the Setanta judgment, by finding that MIBI is not liable to meet third party claims, removes a major uncertainty from industry, which I would expect to be reflected in pricing in the short to medium term.
51. Deputy Joan Burton asked the Minister for Finance if his attention has been drawn to the Democratic Unionist Party’s stance on adjusting VAT rates in Northern Ireland post-Brexit; the implications of the DUP-Conservative Party confidence and supply agreement at Westminster and the possibility of the UK introducing localised VAT rates in Northern Ireland; the impact of this on the retail and services sector in the Border region; and if he will make a statement on the matter. [31460/17]
View answerI understand that the Democratic Unionist Party Manifesto for the 2017 Westminster Election advocates a cut in the VAT rate for tourism services in Northern Ireland. The policy paper annexed to the Confidence and Supply Agreement between the Conservative Party and the DUP provides for a detailed consultative report to be commissioned into the impact of VAT and Air Passenger Duty on tourism in Northern Ireland and to recommend how best to build upon the growing success of that sector.
VAT on tourism activities has applied at the 9% VAT rate in Ireland since 1 July 2011. In the UK and Northern Ireland the UK standard VAT rate of 20% is applied to tourism services such as hotels and restaurants. Under current EU VAT rules the UK is entitled to introduce a VAT rate on hotel and restaurant services as low as 5%, but has not done so to date. Pricing, as you will be aware, is made up of many elements and VAT is only one such component, and any VAT changes in the north may not significantly affect changes in pricing as a whole.
The main aim of reducing VAT in Northern Ireland would be to incentivise growth in tourism and tourism jobs in Northern Ireland and this will not necessarily have a negative impact on tourism in the Republic. Ireland is marketed by Tourism Ireland as a single destination in overseas markets and the DUP proposal, if implemented, could make the island of Ireland a more attractive destination as many overseas visitors would visit both jurisdictions on a trip.
With regard to the impact of the DUP VAT commitments on the retail sector in the border region, there has been no suggestion or recommendation to reduce VAT on retail goods and services in the North.
52. Deputy Seán Haughey asked the Minister for Finance if his Department has recruited experts in custom affairs to prepare for Brexit. [27559/17]
View answerI wish to inform the Deputy that across Government, relevant Departments, agencies and overseas missions have been strengthened to deal with Brexit. The Irish Government has a team of Ministers who know the business of Europe well, as well as a team of diplomats and officials with extensive experience of challenging international negotiations, for example, the Good Friday Agreement, the European Constitution negotiations and a number of EU level treaty negotiations.
The considerable expertise of Government Departments and Agencies is augmented as required by partnering in, funding or commissioning studies and research relevant to Brexit. Examples include Scoping the Possible Economic implications of Brexit on Ireland (ESRI); Brexit: Potential Implications for the Agri-Food Sector (Teagasc). My Department has also published internal research including 'UK EU Exit - an Exposure Analysis of Sectors of the Irish Economy' in conjunction with Budget 2017.
As part of the whole-of-Government approach to Brexit, I am advised that the Revenue Commissioners, who are the competent Customs authority in the State, are actively engaged in examining a range of scenarios in order to support Ireland’s objectives in the context of Brexit, that they have redeployed additional staff to prepare for Brexit and are keeping resources required under review on an ongoing basis. I am further informed that they are engaging in ongoing contacts with business through the Customs Consultative Committee and other fora to understand the issues arising and provide guidance.
Full information on customs procedures is available on the Revenue website www.revenue.ie/en/customs/index.html .
54. Deputy Clare Daly asked the Minister for Finance further to Parliamentary Questions Nos. 218 to 222, inclusive, of 20 June 2017, if compliance is done on an ongoing basis by both the Revenue Commissioners and the lending institutions; the date of the last compliance check by the Revenue Commissioners on lenders to ensure that the correct operation of the mortgage interest relief scheme took place; the outcome of that check; and the frequency with which these compliance checks are done. [31425/17]
View answerRevenue carries out continuous compliance checks on lenders to ensure the correct operation of the mortgage interest relief scheme.
As part of the process, each main lender is required to submit a monthly electronic download to Revenue setting out the amount of qualifying interest paid by each borrower and the amount of mortgage interest relief allowed in respect of each qualifying loan in the previous month. The smaller lenders and local authorities are required to submit annual files setting out similar information.
Each month Revenue cross-checks all of the information provided by the lenders against its own databases and any discrepancies are very quickly queried with the particular lender. The most recent compliance checks to be completed related to May 2017 during which 283,158 TRS accounts were reviewed. Following the review 2,687 queries were raised with the various lenders of which only two still remain to be resolved.
In addition to the monthly cross-checking reviews, any queries or complaints received by Revenue from individual borrowers are fully investigated and followed up with the lender concerned.
55. Deputy Joan Burton asked the Minister for Finance if he or his predecessor met with an organisation (details supplied) to discuss its report highlighting the effective tax rate paid by 16 of the top 20 European banks here, as committed to in Dáil Éireann by his predecessor on 4 April 2017; and if he will make a statement on the matter. [31459/17]
View answerI am aware of the report which was published by Oxfam on 27 March. The report makes a number of comments about the level of tax paid by certain banks in respect of their operations in each country of operation, including Ireland.
I understand that the report relies on publicly available data published by banks under the capital requirements directive, CRD IV. The report takes this data and uses it to assert the effective tax rate suffered by banks in the countries in which they operate. While I am not at liberty to comment on individual taxpayers, there are a number of reasons that using this data to assert a company's effective tax rate has the potential to create a misleading picture.
Calculating a company's effective tax rate requires looking at a company's profits as calculated under Irish tax law and the amount of tax charged on those profits under Irish tax law. This information is not included in the public country-by-country reports. For this reason, caution is needed when using the country-by-country information when commenting on a company's tax affairs. For example, the profit figures filed in the CRD IV reports generally relate to profit calculated for accounting purposes. Companies, however, do not pay tax on their accounting profits, but rather on their taxable profits. There are a variety of legitimate differences in how these figures are calculated in each country.
Similarly, the tax on profit or loss figure in the publicly disclosed information may relate to tax actually paid over to Revenue rather than the tax charge suffered by the company. For example, where a company has losses carried forward from a previous year, this would reduce the amount of tax that must be paid over but does mean the company is not subject to a tax charge on its profits.
Neither I or the former Minister for Finance Michael Noonan have met Oxfam to discuss the details of the report. However, there was a productive meeting between officials from the Department of Finance and a representative from Oxfam to discuss the reports findings.
