Written Answers Nos 56-71
56. Deputy Pearse Doherty asked the Minister for Finance if he will end the dividend withholding tax exemption for non-resident shareholders in Irish real estate funds related to capital gains distributions from the fund when the fund holds the property for five years prior to sale; and if he will make a statement on the matter. [31448/17]
View answerFinance Act 2016 provided for the introduction of a tax regime for Irish Real Estate Funds or IREFs. The section was introduced to address the use of certain collective investment vehicles to invest in Irish property by non-resident investors. The IREF regime provides for taxation of investment undertakings, where 25% of the value of that undertaking is made up of Irish real estate assets.
The key features of the regime are:
- Any rental income or development profits earned by the IREF will be included in the calculation of the IREF's profits.
- Capital gains will also be included in the calculation of profits unless the asset is held for five years or more. The five year time period was provided for to encourage longer-term investment in the market. Where the asset is held for five years or more but the investor has the ability to control or influence the selection of property in the fund, they will not qualify for the capital gains tax exemption.
- Where an IREF makes an actual distribution or on the redemption of units in the IREF, non-resident investors will be subject to a withholding tax of 20%.
The exemption from capital gains tax for IREFs was legislated for to encourage sustainable investment focussed on the long-term holding and management of income-producing rental property.
This will, in the longer term, lead to a more sustainable, secure, property market for both investors and property tenants whilst generating regular and reliable tax revenues for the Exchequer, from the taxation of the rental profits.
Although a gain may be exempt where the property is held for more than five years, tax will still be payable on the rental income that is being generated.
By way of comparison, there is a full exemption for non-residents from UK capital gains tax on all commercial property gains in the UK no matter what type of structure is used for investment purposes (i.e. a fund, a normal company, partnership etc).
The IREF legislation is not a tax incentive for non-residents investing in Irish property. All rental income and development profits earned by the IREF is included in the calculation of the IREF's profits. Where an IREF makes a distribution of these profits, non-resident investors will be subject to a withholding tax of 20%.
57. Deputy Mick Wallace asked the Minister for Finance further to Parliamentary Question No. 271 of 2 May 2017, if he has satisfied himself that NAMA achieved maximum return under section 10 of the National Asset Management Agency Act 2009 with regard to the debt refinancing transaction Project Nantes; and if he will make a statement on the matter. [31467/17]
View answerThe Deputy will be aware that Section 9 of the NAMA Act 2009 provides that NAMA is independent in the performance of its functions and that I, as Minister for Finance, have no role in relation to its commercial decisions. I am advised by NAMA that it is satisfied that it obtained the best achievable financial return from this transaction.
The Deputy will also be aware that, under sections 99 and 202 of the NAMA Act, NAMA is legally prohibited from disclosing information relating to its debtors or the assets securing their loans and, accordingly, NAMA is not in a position to disclose any additional information in relation to this transaction.
58. Deputy Catherine Murphy asked the Minister for Finance the position regarding the schedule relating to the extinguishing of the floating rate treasury bond; and if he will make a statement on the matter. [31477/17]
View answerThe Central Bank publishes information in this regard in its Annual Report. In 2013, the Bank acquired eight Floating Rate Notes amounting to €25 billion as part of the exchange of assets on the liquidation of IBRC. The Floating Rate Notes form part of the Bank’s Special Portfolio. The disposal policy for this portfolio remains unchanged, with the intention being to dispose of holdings as soon as possible, provided conditions of financial stability permit. The Bank has indicated that it will sell a minimum of these securities in accordance with the following schedule:
- 2016-2018 €0.5 billion per annum;
- 2019-2023 €1 billion per annum; and
- from 2024 onwards €2 billion per annum until all bonds are sold.
The eight Floating Rate Notes acquired range in maturity dates from 2038 to 2053. The Bank has so far disposed of €7.5 billion nominal of the Floating Rate Notes; €0.5 billion in 2014, €2 billion in 2015, €3 billion in 2016 and €2 billion so far this year. On each occasion the National Treasury Management Agency (NTMA) purchased and subsequently cancelled the Floating Rate Notes. All holdings of the 2038, 2041 and 2043 Floating Rate Notes have now been disposed of. The outstanding balance of Floating Rate Notes is now €17.5 billion.
59. Deputy Thomas P. Broughan asked the Minister for Finance his Department's objective of a balanced budget in structural terms in 2018; his Department's current appraisal of the strength of tax receipts in achieving that balance; if his Department is holding discussions with the EU Commission regarding the application of the fiscal rules and the maximising of the fiscal space available for budget 2018; and if he will make a statement on the matter. [31351/17]
View answerAt the outset, I want to highlight that the Government is responsible for policy and, as such, it is the Government's objective (and not that of my Department) to balance the budget in structural terms in 2018.
My Department, however, is responsible for the technical analysis, including the production of economic and fiscal forecasts. On the basis of my Department’s latest forecasts, which were published in the April 2017 Stability Programme Update, we remain on track to achieving a balanced budget in structural terms next year. It is also worth pointing out that the economic forecasts were endorsed by the Irish Fiscal Advisory Council at the time.
Tax receipts in the first six months of the year are up by around 4 per cent relative to the same period last year, but are marginally behind profile by 0.5 per cent.
My Department is currently discussing with the European Commission its (i.e. the Commission's) assessment of budgetary implementation in Ireland this year and last year, as the Commission has indicated a risk of deviation from the adjustment path towards a balanced budget in structural terms.
In relation to 2018, estimates of fiscal space will be set out in the Summer Economic Statement which will be published in July.
On a more general note, I want to stress that the Government will implement prudent budgetary policies, designed not to overheat the economy and targeted towards addressing the most pressing issues facing the economy and our society.
Finally, when it comes to the concept of fiscal space, it is crucially important that we look at the quantum of existing expenditure - rather than simply the incremental changes at the time of the budget - in order to ensure maximum value for money and efficiency. The review of expenditure which is currently underway is being undertaken with this in mind.
61. Deputy Martin Heydon asked the Minister for Finance the position regarding the work of the tax strategy group in 2017 with particular reference to a review of the system of betting tax; when it is expected this work will be finalised and published; and if he will make a statement on the matter. [31447/17]
View answerAs the Deputy is aware, during the 2016 Finance Bill Committee Stage Debates in both the Dáil and the Seanad, a commitment was given that betting duty would be examined as part of the 2017 Tax Strategy Group process. I can inform you that officials in my Department have been examining the area with a view to including the Review for inclusion in the Excise TSG Paper 2017.
As part of the Review my Department undertook a consultation process which sought the views of industry, stakeholders and the general public. The consultation process closed on 19 June 2017.
The Review will form part of the Excise TSG Paper 2017, which is expected to be presented to the forthcoming TSG and, as in the case with the TSG 2016 papers, published very shortly afterwards.
62. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which he expects the economy to grow in the context of this and subsequent years notwithstanding the potential threat of Brexit or other external factors; and if he will make a statement on the matter. [31445/17]
View answerMy Department's most recent economic forecasts were published in the 2017 Stability Programme Update. Real GDP growth of 4.3 per cent was projected for this year while growth is forecast to average 3 per cent over the period 2018 – 2021. These forecasts have been endorsed by the Irish Fiscal Advisory Council.
The information flow since the publication of the SPU broadly confirms my Department’s assessment. As a result, the forthcoming Summer Economic Statement will present an unchanged macro-economic outlook.
However, we do face considerable economic challenges, notably Brexit, the change in policy direction by the new US administration and high levels of uncertainty in the global economy. This was explicitly recognised in the Stability Programme Update, which detailed risks to the outlook and noted that these are firmly tilted to the downside.
In conclusion, I should emphasise that the best way to deal with the challenges we face, and to support continued growth, is through continued implementation of competitiveness oriented policies along with prudent management of the public finances. That is what this Government will continue to do.
64. Deputy Peadar Tóibín asked the Minister for Finance the cost of reducing the marginal rate of tax to under half of taxpayers; and if he will make a statement on the matter. [31454/17]
View answerFollowing clarification with the Deputy’s office, I understand that the question concerns the cost of reducing the marginal rate of tax to under 50% for all taxpayers.
Following the changes announced in Budget 2017, the top marginal tax rate for incomes up to €70,044 is 49%, comprised of 40% income tax, 5% USC and 4% PRSI. It should be remembered that as recently as December 2014, the top marginal rate of tax for a single individual on all income over €32,800 was 52%.
There are a number of ways in which the marginal tax rate for all taxpayers could be reduced to under 50%. Given its structure of rates and bands, changes to USC would be the most cost effective way of achieving this objective.
This could be done by:
(i) abolishing the 3% USC surcharge that applies to self-employed income in excess of €100,000, and
(ii) Reducing the 8% USC rate that applies to all incomes over €70,044 to 5%, to merge it with the existing 5% USC rate which applies on all income between €18,773 and €70,044
These changes would mean that the highest USC rate would be 5%, and it would apply on all income from €18,773. This would give a top marginal tax rate of 49% for all taxpayers, comprised of 40% income tax, 5% USC and 4% PRSI.
I am advised by Revenue that the estimated first and full year cost to the Exchequer of these changes is in the order of €411 million and €563 million respectively.
These figures are estimates from the Revenue tax forecasting model using latest actual data for the year 2014, adjusted as necessary for income, self-employment and employment trends in the interim. They are estimated by reference to projected 2017 incomes. They are provisional and may be revised. The Deputy may wish to note that a Ready Reckoner available on the Revenue website offers a range of scenarios and their costs for changes in Income Tax and USC rates.
66. Deputy Bríd Smith asked the Minister for Finance the number of companies availing of section 481 tax relief in the film industry; and the number of full-time jobs in the film industry here. [27638/17]
View answerI am advised by Revenue that prior to 2015, the Film Relief scheme, provided for by Section 481 Taxes Consolidation Act (TCA) 1997, operated by giving relief to individuals and companies investing in the film industry.
With effect from 2015, the scheme provides direct support to film producer companies in the form of a tax credit. The provisional number of claimants of the tax credit in 2015 is 1,102 with a cost to the Exchequer of €69.7 million. The figures for 2016 are not currently available.
The following numbers of companies were granted relief during 2015, 2016 and 2017:
- 2015: 32 companies in respect of 43 films
- 2016: 54 companies in respect of 74 films
- 2017: 15 companies in respect of 21 films (to end Quarter 1 2017)
Revenue analysis of applications made in respect of section 481 TCA 1997 indicate that 3,415 full-time equivalent jobs were created over 184 projects in 2015 and 2016. However, it should be noted that jobs created in the film industry are predominately of a short term nature.
71. Deputy Eamon Ryan asked the Minister for Finance if he will report on proposed changes to the governance structure of the European Investment Bank that would allow the bank to lend to the armaments industries; and his views on the matter. [31483/17]
View answerI am aware that, during the recent appearance of Mr. Andrew McDowell, Vice President of the EIB, before the Select Committee on Budgetary Oversight, the Deputy raised the issue of the European Council's request to the EIB that it examine ways of stepping-up its contribution in support of the EU's Security and Defence Agenda. As Mr McDowell indicated in his response, the issue is currently being assessed within the EIB.
The current eligibility for lending criteria of the EIB preclude lending to the armaments industry unless the technologies being supported are dual-use, that is they must also have consumer or commercial applications. Any change to those lending criteria would be a matter for the EIB. Were any changes being considered, I would fully expect that Ireland's views would be taken into account during consideration at Board of Director or Board of Governor levels within the Bank. Finally, and in relation to any proposed changes to the governance structure of the EIB in relation to lending to the armaments industry, I am not aware of any such proposals.
