Written Answers Nos. 190-208
190. Deputy Michael McGrath asked the Minister for Finance if the estimated €3 billion surplus due to be paid to the State by NAMA can be spent outside of fiscal rules; if it must be used to reduce the national debt; and if he will make a statement on the matter. [34258/17]
View answerThe fiscal rules are designed to promote budgetary discipline and underpin sustainable economic growth. While Ireland's economy is growing and debt is on a downward trajectory, the debt level is still comparably high and caution must be exercised due to the potential of roll-over risk should interest rates increase. We are a small and very open economy in a world that has more risks than usual. Compliance with the fiscal rules underpins the Government’s objective of maintaining sound public finances. Furthermore, any additional expenditure outside of the limits set by the expenditure benchmark could result in a deviation under the fiscal rules which, if the State does not take effective action within a relevant deadline, could result in the European Commission applying an interest bearing deposit. Additionally, aside from financial penalties there could be a potential for adverse debt market outcomes and reduced confidence in the Irish economy.
Currently NAMA expects to redeem 100% of its guaranteed senior debt by the end of 2017 and expects to redeem its subordinated debt in March 2020. NAMA will focus on completing its ongoing deleveraging, its Dublin Docklands SDZ and residential funding programmes in the interim period to 2020. NAMA's 2016 Annual Report which provides further insight into the Agency's expectations regarding these activities was laid before the Oireachtas on 1 June 2017 and is also available on NAMA's website via: https://www.nama.ie/about-us/publications/annual-reports/. As the Deputy will be aware, it is through the successful completion of these objectives that NAMA currently projects a surplus in the region of €3 bn to be returned to the State once it completes it work.
As per section 60(2) of the NAMA Act 2009, NAMA may use surplus funds to redeem and cancel its debt. Surplus funds may only be returned to the Central Fund once NAMA's debt has been redeemed in full.
As has been discussed with EUROSTAT, from an accounting perspective, once the senior debt, subordinated debt, and private investors have been repaid then NAMA (the Agency), which is in Government, would be the sole shareholder and, as such, NAMA (the SPV) would then become classified into the Government sector. This is expected to occur in 2020, no later than the time at which the private shareholders have been fully compensated. At this point in time NAMA will have no debt.
It will be a decision for the Government as to how any surplus returned by NAMA will be utilised within the fiscal rules. It should further be noted that at this point, according to most recent estimates, there will be in the order of €3.4 bn net fiscal space available to the Government.
It has always been the Government's intention to use such receipts from the resolution of the financial sector crisis to pay down our debt and help reduce our debt servicing costs. Given the uncertainty around the specific timing of or the amount that will be realised, such receipts have not been included in our debt forecasts. Debt reduction underpinned by the Government's lower gross general government debt target of 55 per cent of GDP, will increase the resilience of the public finances to deal with any potential shocks which may emerge.
191. Deputy Michael McGrath asked the Minister for Finance the policy initiative the Government plans to put forward to counter the volatility caused by Brexit and the subsequent exchange rate volatility; and if he will make a statement on the matter. [34260/17]
View answerIrish SMEs will require Government support to diversify and restructure their businesses in light of challenges posed by Brexit. It is a key Government strategy to support the growth of and investment in this important sector of the economy. As the Deputy will be aware, there are already significant Government measures to support the financing needs of SMEs; these will be available to assist SMEs deal with the short–medium term effects of Brexit. These supports include the SBCI, the Supporting SMEs Online Tool, the Credit Guarantee Scheme, the Microenterprise Loan Fund, Local Enterprise Offices and the Credit Review Office.
Advisory supports in relation to business planning, such as those provided by the Local Enterprise Offices and Enterprise Ireland, will be particularly important in assisting viable but vulnerable SMEs that may be adversely affected because of Brexit. These supports will help raise awareness of both private market financial supports and existing State supports.
The provision of State supported hedging products, or similar products aimed at subsidising an exchange rate, is prohibited under EU State Aid rules. However, there are multiple financial providers active in the Irish market that can provide a comprehensive and competitive range of hedging and foreign exchange products to SMEs who require them.
Viable Irish SMEs can access sustainable, flexible and appropriately priced finance through the Strategic Banking Corporation of Ireland (SBCI). The SBCI uses an on-lending model; this means it does not lend directly to SMEs, rather it channels its funds though partner financial institutions, known as on-lenders. The SBCI currently has eight on-lending partners, three bank and five non-bank. To the end March 2017, the SBCI has lent €657 million to over 15,000 SMEs supporting in excess of 67,000 jobs. The majority of SBCI loans are used for investment purposes. The SMEs who received SBCI finance are from a variety of business and economic sectors and are spread across every region of the country. The SBCI is currently seeking to broaden its distribution capability and market coverage by adding new on-lenders and working to develop innovative products, thereby serving to meet the needs of Irish SMEs and drive competition in the SME finance market.
Officials from my Department are working closely with the Strategic Banking Corporation of Ireland, the Department of Jobs, Enterprise and Innovation, the Department of Agriculture, Food and the Marine and Enterprise Ireland to examine Brexit mitigation policy measures to assist SMEs to deal with the effects of Brexit. Given the uncertainty concerning the post-Brexit relationship between the UK and the EU, the Deputy can rest assured that my Department will continue to monitor and address Brexit related issues facing Irish SMEs on an ongoing basis.
192. Deputy Michael McGrath asked the Minister for Finance the current rate of duty applicable to car imports from Japan; the way this will change following the EU Japanese trade deal; the impact of the deal for EU consumers; and if he will make a statement on the matter. [34261/17]
View answerIssues around the EU Japanese trade deal are a matter for the Minister for Jobs Enterprise and Innovation in the first instance.
In relation to customs duty, the current rate of duty on motor vehicles principally designed for the transport of up to 9 persons (cars) from Japan is 10%.
193. Deputy Róisín Shortall asked the Minister for Finance the actions his Department and bodies under the aegis of his Department have taken in response to each of the relevant recommendations of the report of the Joint Committee of Inquiry into the Banking Crisis. [34264/17]
View answerMy Department is in the process of preparing a Progress Report in relation to the specific recommendations of the Joint Oireachtas Committee of Inquiry into the Banking Crisis in Ireland. This Progress Report also takes into account the broader findings and recommendations of the Banking Inquiry and other inquiries into the Financial Crisis.
The Banking Inquiry report and other reports on the financial crisis highlighted the failure of key institutions to identify risks posed by the banking system which threatened the overall financial stability of the State. They found that no single authority possessed a full 360 degree view of what was happening in the economy at any point in time. This hindered a timely coordinated response which resulted in the banking crisis quickly escalating into a wider economic and fiscal crisis.
Since the crisis there have been a significant number of measures taken to address the failures highlighted by the crisis. These have been at an institutional, national, and EU level. Both the Department of Finance and the Central Bank of Ireland have undergone significant organisational change in terms of structure, culture and resources. There has also been a large volume of new legislation introduced at a national and EU level to address the weaknesses highlighted by the crisis.
The Banking Inquiry Report has twenty nine recommendations in total. There are twenty four recommendations that fall within the scope of the Progress Report. It should be noted that recommendations that relate to the Oireachtas are a matter for the Oireachtas and will not be addressed in the Progress Report, although they are listed for the information of Government and the Oireachtas.
This Progress Report is almost finalised and in general, it acknowledges significant progress in respect of the recommendations. Upon completion it is the intention to publish the report.
194. Deputy Michael McGrath asked the Minister for Finance the amount reported by insurance companies to the Central Bank as having been paid out on motor insurance claims for each of the years 2011 to 2016, inclusive; if the Central Bank has data on the number of claims the total payouts relate to; the value of premium receipts for the years in question; and if he will make a statement on the matter. [34282/17]
View answerThe Central Bank has advised me that under Solvency I it publishes Insurance Statistics annually and the latest data available is for 2015.
The Bank has provided me with the following information on Gross Written Premiums and Claims paid for total motor vehicle business for financial years 2011-2015 inclusive, which is detailed in Table 22 of the Insurance Statistics annual publication. This data covers all insurers established in Ireland and those writing business on a freedom of establishment basis i.e. branches.
|
Year |
Gross Written Premium €'m |
Gross Claims Paid €'m |
|
2015 |
1,359 |
1,103 |
|
2014 |
1,192 |
1,073 |
|
2013 |
1,135 |
1,051 |
|
2012 |
1,183 |
1,124 |
|
2011 |
1,194 |
1,623 |
It should be noted that Solvency II came into force from 1 January 2016 with the first annual reporting under Solvency II received on 20 May 2017. This data is currently being analysed and verified by the Central Bank.
You should also be aware that insurance undertakings have other sources of income and expenditure including investment income, operating expenses, commission payments etc. Further information on the other components of an insurance undertakings underwriting account is available in the Insurance Statistics annual publication (available at https://www.centralbank.ie/statistics/statistical-publications/insurance-statistics).
The Cost of Motor Insurance Working Group recommended that the Department of Finance publish key aggregated metrics on claims costs and trends within the market on a quarterly basis. The First Motor Insurance Key Information Report will be published in the coming days. This report will include aggregated metrics on the private motor insurance sector which may be of interest to the Deputy.
Finally, the Central Bank has indicated that they do not record information regarding the number of claims the total payouts referred to above relate to.
195. Deputy Róisín Shortall asked the Minister for Finance the action being taken to impose a limit on the rate of interest charged by moneylenders; and if he will make a statement on the matter. [34286/17]
View answerAs the Deputy will be aware, the Consumer Credit Act 1995, the legislation under which moneylenders are licensed, does not provide for an interest rate cap. Nor does the European Communities (Consumer Credit Agreements) Regulations 2010. Therefore, the Central Bank has no statutory power to impose a market wide cap on rates. Any legislative proposals in this regard would have to be careful to achieve an overall reduction in the cost of credit and ensure that it did not have unintended consequences in terms of financial exclusion.
Under the Consumer Credit Act 1995, the Central Bank may refuse to grant a moneylenders licence if it is of the opinion that the cost of credit to be charged is excessive. The rates currently charged by licensed moneylenders have remained largely unchanged since the Central Bank took over the regulation of the sector from the Office of the Director of Consumer Affairs in 2003. Since that time the Central Bank has not permitted any increase to the maximum APR charged within the sector nor has it licensed any moneylender to provide a ‘pay-day loan’ service such as exist in other jurisdictions.
The Central Bank’s public register of licensed moneylenders is available on its website at http://registers.centralbank.ie/DownloadsPage.aspx and lists the maximum permitted APR and associated cost of credit permitted for each licensed moneylender.
The Deputy will be aware of the Personal Microcredit Scheme, which is providing simple microloans to credit union members and helping to combat the use of moneylenders.
I understand that 103 credit unions are now in a position to offer the ‘It Makes Sense Loan’ as they are fully set up to use the Household Budget Scheme operated by An Post.
196. Deputy Michael McGrath asked the Minister for Finance the status of the special liquidation of IBRC; the portfolio that is remaining; the current estimate of the timeframe; the estimated financial outturn from the liquidation; and if he will make a statement on the matter. [34287/17]
View answerThe status of the Special Liquidation as at 31 December 2016 is set out in the progress update report published by the Special Liquidators on 5 May 2017 and which is available on the Department of Finance website(http://www.finance.gov.ie/sites/default/files/170505%20IBRC%20Progress%20update%20report%20report_31%20Dec%2016.pdf).
I am advised by the Special Liquidators that there are €3.54 billion of loans remaining to be sold. The main reason these loans have not been sold is primarily due to ongoing litigation. It is not possible to provide a timeframe for the completion of the sale of these loans at this time due to the aforementioned litigation.
The Special Liquidators further advise me that it is not possible to estimate the financial outturn from the liquidation at this time given that there remains a number of tasks in the liquidation to be completed including the on-going management of c.175 legal cases, the completion of the creditor adjudication process, the work with the Commission of Investigation, the management of the remaining loan book and the realisation of all remaining assets.
199. Deputy Róisín Shortall asked the Minister for Finance the actions his Department and bodies under the aegis of his Department have taken in response to each of the relevant recommendations of the interim report on the Committee of Public Account's examination of bank stabilisation measures. [34315/17]
View answerThe Interim Report on the Committee of Public Account's examination of bank stabilisation measures had nine recommendations. The Deputy will be aware that responsibility for addressing these recommendations is spread across the Central Bank and several Government Departments. Therefore, I will confine my response to the issues that come under my direct responsibility, as Minister for Finance and Public Expenditure and Reform. There have already been substantive legislative changes that directly address many of the recommendations and a number of them have been addressed through European changes in bank supervision and regulation, particularly through the introduction of Bank Recovery and Resolution powers.
Recommendation 3: The issue of whether the Central Bank should have the power to put financial services firms into administration was subject to extensive consideration as part of the Central Bank (Supervision and Enforcement) Bill 2013. At that time, the Department had a number of concerns, including around the constitutionality of State interference in property rights, the issue of funding of administrators, and the potential costs to the State of such interventions. The introduction of recovery and resolution regimes is a better approach to dealing with financial services firms in difficulties as they give a greater level of protection to taxpayers.
The 2013 Act also enhanced the Central Bank's regulatory powers, strengthening its ability to impose and supervise compliance with regulatory requirements and to undertake timely prudential interventions. The Act provided the Central Bank with greater access to information and analysis, and underpins the credible enforcement of Irish financial services legislation in line with international best practice. The 2013 Act also provided the Central Bank with powers to enable it to apply to the High Court for a restitution order against any person who has been unjustly enriched, or caused another person to suffer loss or detriment, as a result of committing a contravention of financial services legislation.
Recommendation 4: This recommendation was addressed through the Oireachtas Joint Committee of Inquiry into the Banking Crisis. The Report of the Joint Committee of Inquiry into the Banking Crisis is publicly available.
Recommendation 5: There have been a number of measures taken to address this recommendation including:
- The Central Bank introduced resolution targets for banks for the restructuring of SME loans, which have been worked through and are evident in the significant fall in non-performing loans.
- The Programme for Partnership Government places consumers at the centre of the Government’s banking sector policies by fostering greater competition in credit provision through supporting non-bank credit providers, such as the Strategic Banking Corporation of Ireland, and also reducing the State's ownership of the banking system.
- The recently published Competition and Consumer Protection Commission (CCPC) review of the residential mortgage market set out a number of short, medium and long term options to allow for greater competition from new entrants in the mortgage market, and could also encourage lenders to compete more vigorously on price, quality and innovation.
However, it is necessary to exercise caution in relation to the entirety of this recommendation, which proposed that the Central Bank should introduce measures whereby those banks that do not reach stipulated lending targets are subject to an appropriate sanction. The State has borne, and is still bearing, the cost of excessive credit growth and the introduction of Central Bank sanctions would be inadvisable in terms of the perception that the Central Bank is driving credit growth.
Recommendation 6: A comprehensive framework is in place to address mortgage arrears with the Central Bank reporting quarterly on the numbers of mortgages arrears and restructuring arrangements. Furthermore, my predecessor wrote last year to the Governor of the Central Bank to request that a further assessment be undertaken of the range of available sustainable restructure solutions offered by banks and non-bank entities. The subsequent report is published on the Department of Finance website. The assessment found a comprehensive range of available restructuring solutions being offered and noted considerable progress in addressing mortgage arrears since the peak. The Central Bank noted further that there is strong evidence that both banks and non-banks look to exhaust available restructure options before moving to the legal process. In addition, the Central Bank considered the range of restructures offered by banks to be broadly appropriate in balancing consumer protection imperatives, and maintaining a mortgage market for all borrowers, and a functioning banking system.
Recommendation 7: As evidenced by recent Central Bank departures, the Bank has ensured appropriate cooling-off periods for staff leaving the bank for other employments.
Recommendation 8: The issue of Oireachtas oversight on the Annual Performance Statement is addressed in Section 32(L)(6) of the Central Bank Act 1942, as amended, which requires the Governor of the Central Bank (or a Head of Function/Deputy Governor), if requested by a Committee of the Oireachtas, to attend before the Committee, and provide that Committee with information relating to the Bank's performance statement.
Recommendation 9: The peer reviews of the Central Bank are published on completion and as set out above, the Governor of the Central Bank (or a Head of Function/Deputy Governor), may be requested by a Committee of the Oireachtas, to attend before the Committee.
200. Deputy James Browne asked the Minister for Finance if his Department has produced a debt and mental health evidence form as recommended by the Mental Health Commission; and if he will make a statement on the matter. [34412/17]
View answerI understand that the recommendation to which the Deputy refers was directed to the Mental Health Commission and the Irish College of Psychiatrists and others. As such, I would recommend that the Deputy direct the question to my colleague the Minister for Health under whose aegis the Mental Health Commission operates.
201. Deputy James Browne asked the Minister for Finance his views on the protection of vulnerable consumers in the financial sector; the position regarding the production of good practice guidelines for the financial sector; and if he will make a statement on the matter. [34413/17]
View answerI have been advised by the Central Bank that the bank’s Consumer Protection Code 2012 (the Code) provides that a regulated entity must ensure that, in all its dealings with customers and within the context of its authorisation, it has and employs effectively the resources, policies and procedures, systems and control checks, including compliance checks, and staff training that are necessary for compliance with the Code.
Provision 3.1 of the Code provides that where a regulated entity has identified that a personal consumer is a vulnerable consumer, the regulated entity must ensure that the vulnerable consumer is provided with such reasonable arrangements and/or assistance to facilitate him or her in their dealings with the regulated entity. Identification of a consumer’s vulnerability or otherwise will require the exercise of judgment and common sense and should be based on a consumer’s ability to make a particular decision at a point in time.
In the context of this specific requirement, I would expect that regulated firms would have the necessary training in place in order to comply with Provision 3.1. of the Code.
The Banking and Payments Federation Ireland (BPFI) has a Vulnerable Customer Forum which was established at the behest of members. I understand that it is focused on helping banks in Ireland to positively embrace this issue and that a number of specific actions are currently underway.
202. Deputy Bernard J. Durkan asked the Minister for Finance if any bilateral arrangements exists with Australia whereby a refund of income tax paid could be made to a person (details supplied); and if he will make a statement on the matter. [34433/17]
View answerI am advised by Revenue that refunds of income tax for 2013 to 2015 inclusive were made to the person concerned and that a refund for 2016 will issue shortly.
I understand there is a double taxation agreement (DTA) between Ireland and Australia. Revenue has advised me that they have no information regarding any employment or tax paid in Australia by the person concerned. If the person concerned paid income tax in Australia, she may, as an Irish resident, be entitled to credit some or all of that tax against Irish tax in accordance with Article 25 of the agreement, which deals with relief for double taxation.
Revenue will make direct contact with the person concerned to clarify what tax if any she has paid in Australia and Revenue can then determine whether she is entitled to a credit for such tax paid, having regard to the DTA.
203. Deputy Aindrias Moynihan asked the Minister for Finance the State's shareholding in a bank (details supplied) prior to the banks rights issue in July 2011. [34503/17]
View answerI can confirm for the Deputy that the State's shareholding in BOI, prior to the rights issue in July 2011, was 36%.
204. Deputy Aindrias Moynihan asked the Minister for Finance the number of the State's shares in a bank (details supplied) which were sold to North American Investors in July 2011. [34504/17]
View answerI can confirm for the Deputy that, in July 2011, a group of North American investors agreed to buy up to 10,511m ordinary shares in Bank of Ireland from the State. The purchase was completed in two tranches:
July 2011 - an initial unconditional purchase of 2,382m shares.
October 2011 - following receipt of regulatory clearances by the investors, a second purchase of 8,129m shares.
The Deputy should note that these figures are not adjusted for the recent share consolidation which was effected at a ratio of 30:1.
205. Deputy Ruth Coppinger asked the Minister for Finance the estimated amount that could be raised by applying the standard rate of VAT of 23% to financial services. [34514/17]
View answerThe supply of financial services is VAT exempt across all EU Member States in accordance with Article 135 of the EU VAT Directive. Imposing VAT on financial services would require a change to the VAT Directive applicable to all Member States. Ireland could not make such a decision unilaterally.
The information provided to the Revenue Commissioners on tax returns does not require a customer to split their turnover across different economic sectors or provide information on the types of transactions or activities provided to different sectors. Therefore it is not possible at present to identify the supplies that would potentially be liable to VAT on financial services or to estimate the potential for a net yield from a change in the VAT Directive.
206. Deputy Ruth Coppinger asked the Minister for Finance the estimated amount that could be raised by imposing a 5% wealth tax on the top 1% wealthiest households. [34515/17]
View answer207. Deputy Ruth Coppinger asked the Minister for Finance the estimated amount that could be raised by imposing a 2% wealth tax on the top 5% wealthiest households; and if he will make a statement on the matter. [34516/17]
View answer208. Deputy Ruth Coppinger asked the Minister for Finance the estimated amount that could be raised by imposing a 2% millionaire's tax on net assets exceeding €1 million. [34517/17]
View answerI propose to take Questions Nos. 206 to 208, inclusive, together.
In order to estimate the potential revenue from a wealth tax, it is necessary to identify the wealth held by individuals. As there is currently no such wealth tax in operation in Ireland, the Department understands that the Revenue Commissioners have no basis or requirement to compile the data needed to produce estimates in relation to a potential wealth tax. Although an individual's assets and liabilities are declared to the Revenue in a number of specific circumstances (for example, after a death), this information is not a complete measure of assets and liabilities in the State, nor is it recorded in a manner that would allow analysis of the implications of an overarching wealth based tax.
However, in 2013 the Central Statistics Office conducted the first comprehensive survey of household wealth in Ireland (the Household Finance and Consumption Survey (HFCS)). The survey provides information on the ownership and values of different types of assets and liabilities along with more general information on income, employment and household composition. During 2016, my Department, jointly with the Economic and Social Research Institute (ESRI), conducted a research project into the distribution of wealth in Ireland and the potential implications of a wealth tax using the HFCS. The research formed part of an on-going joint-research programme with the ESRI on the Macro-Economy and Taxation. The research paper, available on the ESRI website (https://www.esri.ie/publications/scenarios-and-distributional-implications-of-a-household-wealth-tax-in-ireland/), presented results on the composition of wealth across both the wealth and income distributions in Ireland. A number of wealth tax scenarios were then applied to the Irish data (wealth tax regimes from other jurisdictions and hypothetical scenarios). In each case, the associated tax bases and revenue yields, the number of liable households across the income distribution, and the characteristics of the households affected are outlined.
The joint research paper noted that the revenue that could potentially be raised from any net wealth tax would depend crucially on the assets included and excluded from the base (e.g. household main residence, farms, businesses and pensions) and the threshold amount before which liability is incurred and the tax rate. As such, the 2% and 5% rates cannot simply be multiplied by the net assets held by the categories of household specified by the Deputy.
The wealth tax scenario in the joint research paper that is closest to the various wealth tax arrangements outlined by the Deputy in her questions is the high threshold-no exemptions scenario as outlined in Table 5 of the Department of Finance/ESRI study. This scenario has a personal threshold of €1.0 million (doubled if married and a €250,000 increase per child) and applies a 1% tax on net assets. Given it is not identical to the scenarios outlined in the Deputy's question, care should be taken in interpreting the revenue estimates. This scenario, given the distribution of household wealth in Ireland in 2013, is estimated to raise €248 million as outlined in Table 8 of the Department of Finance/ESRI study. The research notes that its tax revenue estimates are static; in other words, no behavioural response to the tax is modelled. The estimate of €248 million, therefore, is likely to be an upper estimate of the revenue that could be raised.
In order to estimate the yield from a tax with precise parameters, it would be necessary to seek the agreement of the CSO to revisit its original survey data for this specified purpose. This would be a significant undertaking that would take considerable time and resources to complete.
