Written Answers Nos. 22-34
22. Deputy Richard Boyd Barrett asked the Minister for Finance if his attention has been drawn to the fact that a report (details supplied) shows that nine out of ten persons would favour a wealth tax; and if he will make a statement on the matter. [44721/17]
View answerI am aware of the Taxback.com survey as reported in a number of media articles. My officials have requested Taxback.com to share any underlying survey document and results.
The available information indicates that the survey was based on a sample of 800 people who were customers of Taxback.com. The question these customers were asked was “Would you agree with the implementation of a wealth tax?” Based on the available options that respondents could choose from in answering the question, Taxback.com customers appear to agree with a wealth tax under certain circumstances.
At the outset, it is important to understand where Ireland stands in relation to the distribution of wealth. In 2013, the Central Statistics Office conducted the Household Finance and Consumption Survey (HFCS) providing for the first comprehensive data on household wealth in Ireland. 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. The data indicate that wealth inequality in Ireland for 2013, as measured by the Gini Coefficient, is lower than the euro area average.
My officials examine all issues related to taxation, including wealth taxation, on an on-going basis. For instance 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 paper, “Scenarios and Distributional Implications of a Household Wealth Tax in Ireland” is available on the ESRI website
https://www.esri.ie/publications/scenarios-and-distributional-implications-of-a-household-wealth-tax-in-ireland/.
The paper presented results on the composition of net wealth (i.e. assets less liabilities) across both the wealth and income distributions in Ireland. A number of wealth tax scenarios, including regimes from other jurisdictions and hypothetical scenarios, were then applied to the Irish data. 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 were outlined.
It should be noted that Ireland already taxes wealth in a variety of ways, such as our Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) which are levied on an individual or company on the disposal of an asset in the case of CGT, or the acquisition of an asset through gift or inheritance, in the case of CAT.
Deposit Interest Retention Tax (DIRT) is charged at 39%, with limited exemptions, on interest earned on deposit accounts.
The Local Property Tax, which was introduced in 2013, is a tax based on the market value of residential properties.
My Department will monitor and consider any additional information and data that comes to light and will continue to examine potential taxation sources. I do not, however, have any plans to introduce tax measures along the lines indicated in the survey responses referred to by the Deputy.
23. Deputy Pearse Doherty asked the Minister for Finance if he will remove the dividend withholding tax exemption that international investors can benefit from if they hold property for five years or more. [44714/17]
View answerIrish Real Estate Funds(IREF's) are investment undertakings (excluding UCITS) where 25% of the value of that undertaking is made up of Irish real estate assets.
The legislation was introduced in Finance Act 2016 to address concerns raised regarding the use of collective investment vehicles to invest in Irish property. Investors had been using the structures to minimise their exposure to Irish tax on Irish property transactions.
IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors. The withholding tax will not apply to certain categories of investors such as pension funds, life assurance companies and other collective investment undertakings.
Capital gains will also be included in the calculation of profits unless the asset is held for five years or more. 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. 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 Finance Bill is being considered at Second Stage later this week, and this will provide an opportunity for the House to consider this issue.
24. Deputy Jonathan O'Brien asked the Minister for Finance the reason no changes have been made to the research and development credit in view of concerns regarding its runaway nature and its concentration among very few large companies. [44719/17]
View answerThe R&D Tax Credit is a very important feature of the Irish Corporation Tax system. The central purpose of the R&D tax credit is to encourage companies to undertake high-value added R&D activity in Ireland, thereby supporting jobs and investment here. Reflecting these considerations, the Government’s Innovation 2020 Strategy aims to achieve the EU 2020 target of increasing overall (i.e. public and private) R&D expenditure in Ireland to 2.5 per cent of GNP by 2020.
The cost of the R&D Tax Credit in 2015, which is the latest figure available, was €708 million.
A review of the R&D credit was carried out ahead of Budget 2017, and it concluded that:
- The R&D tax credit is responsible for 60% of the R&D being conducted. This is considered to be a reasonable level of additionality.
- The bang for buck ratio is estimated to be 2.4 (i.e. for every one euro in foregone tax revenue, €2.40 in additional R&D is being conducted). This is also considered a reasonable result.
Overall, the paper’s findings suggest that the rationale for the R&D tax credit is not in question. Firms clearly respond to it by increasing their R&D.
It important to note the changes that have occurred in the R&D tax credit since its inception, which have contributed to the increased cost of the tax credit. In particular, the removal of the base year threshold and the introduction of the refundable element of the R&D tax credit have contributed to an increased cost.
Between 2012 and 2015, the base year threshold of the R&D Tax Credit was phased out and ultimately removed. This entailed that all relevant expenditure could qualify for the R&D Tax Credit. Previously, qualifying R&D was only that in excess of the expenditure incurred in 2003. The concept of the base year threshold ignored the fact that the availability of the R&D tax credit can be an important factor in deciding whether to undertake a new project or not. It is important to recognise that the R&D tax credit is not just important for stimulating additional R&D investment, but also for maintaining the R&D operations currently undertaken in the State. It was anticipated that this change would lead to an increase in the cost of the tax credit.
My officials and I are conscious of the need for regularly evaluating the R&D tax credit. However, it is important to recognise that while this is a generous tax credit, it is one of the few corporation tax credits that we have in Ireland, when compared with other jurisdictions. My officials and I are mindful of the need to constantly monitor the cost of the R&D tax credit and will continue to do so in line with the Department's Tax Expenditure Guidelines.
25. Deputy Michael McGrath asked the Minister for Finance the status of the second phase of the cost of insurance working group on employer liability and public liability; the timeframe for the working group to come forward with recommendations; and if he will make a statement on the matter. [44693/17]
View answerFollowing the publication of the Report on the Cost of Motor Insurance in January 2017, the Cost of Insurance Working Group commenced its examination of the cost of business insurance, in particular employer liability (EL) and public liability (PL). This work is being done in parallel with the implementation of the motor report. The Working Group is chaired by Minister of State D'Arcy.
As part of its review, the Working Group has engaged in an extensive consultation process with a range of stakeholders including the Hotels Federation of Ireland, IBEC, ISME, the Vintners' Federation of Ireland, the Licensed Vintners' Association, the Retail Grocery Dairy & Allied Trades Association, Chambers Ireland, the Law Society of Ireland, the Health and Safety Authority and a number of insurers and brokers who cover this type of risk. In addition, submissions received from interested parties such as the Irish Farmers Association were considered as part of the process.
The issues that have been raised by stakeholders include:
- the significant increase in the cost of El and PL insurance
- the lack of competition in the EL and PL market
- frustration with inconsistency of awards and the Book of Quantum
- huge costs in challenging claims through the court process
- prevalence of fraudulent and exaggerated claims
- the need for the role of PIAB to be developed further
Following on from this consultation process, two sub-groups were formed to look in more detail at, respectively, legal-related matters and market-related issues.
It had been initially envisaged that the second phase recommendations would take the form of an addendum to the Report on the Cost of Motor Insurance and would be published by the end of September.
However, because of the complexity and the legal nature of some of the issues, it became clear that extra time would be required to properly examine the relevant issues and appropriately engage with other relevant Departments and Agencies before effective and achievable recommendations could be formulated. Therefore, the Working Group decided that a full 'stand-alone' report will instead be finalised by the end of the year.
It is expected that this report will follow a similar format to the Motor Report and include an action plan with associated actions and deadlines for implementation.
26. Deputy Joan Burton asked the Minister for Finance the detail of the additional €100 million he plans to raise in compliance activity in 2018 as per budget 2018 documentation; the reason this revenue was not previously collected; and if he will make a statement on the matter. [44706/17]
View answerIn 2016, the most recent year for which full information is available, Revenue collected €48 billion in net receipts, including €555 million from audit and compliance interventions. Revenue’s collection of receipts is essential to the Exchequer and the funding of public services for the State.
Budget 2018 includes an additional €100 million to be raised from three compliance measures, in relation to employer PAYE compliance (€50 million), eCommerce/online business compliance (€30 million) and tax avoidance and base erosion capacity (€20 million). To support delivery of these measures, Revenue has been allocated an additional €7m for extra staffing and ICT enhancements in the estimates for 2018. These extra resources will enable Revenue to target additional compliance activities in the areas specified and deliver the €100 million expected from increased audit and intervention yield as well as changes in taxpayer behaviour prompted by Revenue’s actions. This is also in line with the recent Review of Ireland's Corporation Tax Code which recommended that, to reduce uncertainty and ensure that Ireland protects its corporation tax base, Ireland should ensure an adequately resourced Competent Authority.
The additional funding allocation and expected yield estimates are based on analysis of historical data recording the compliance receipts generated by Revenue in recent years. They are also informed by work currently underway in these areas as part of Revenue’s national compliance imperatives, which indicate the yield that could be expected in 2018 from increasing resources in these areas.
Revenue’s Comprehensive Review of Expenditure 2014 noted that Revenue staffing levels had reduced by 13% since 2008 and that by increasing resources additional revenue yield could be achieved. In recognition of this, the 2015, 2016 and 2017 Budgets provided for an increase of 266 (126, 50 and 90 respectively) in additional staffing resources for Revenue to deal with a wide variety of requirements across audit and compliance functions, debt management functions, LPT, international tax and Brexit. I have again provided for additional staffing in Revenue in this year’s Budget.
Revenue received an additional funding allocation of €3 million in 2016 to increase staff resources and assist in the delivery of the compliance measures announced in the 2016 Budget. The compliance measures that were projected at the time of the Budget (October 2015) were expected to yield an additional €75 million to the Exchequer in 2016. Revenue has recently published an analysis that confirms the estimates of yield for the measures have been delivered and the target of €75 million exceeded. Conservative estimates show the measures in total yielded between €120 million and €150 million in the year.
Budget 2017 also specified a number of compliance measures: amendments in relation to Section 110 and fund changes (projected yield of €50 million), tackling offshore tax evasion (€30 million) and increased resources for Revenue to confront non-compliance (€50 million). It is too early to accurately assess the impact of, or collection under, these headings for 2017. This will not be possible until after the end of the year. However, the target will be exceeded as €79 million was collected from disclosures in relation to offshore assets. Revenue will undertake detailed analysis of the Budget 2017 measures when data are available.
27. Deputy Bernard J. Durkan asked the Minister for Finance if he is satisfied that the lending institutions are compliant with a code of conduct in respect of mortgage arrears that recognises the efforts made by borrowers who continue to make payments within their capacity now and over the period since the economic crash; if this is reflected in the manner in which they deal with customers, many of whom continue to make huge sacrifices to make repayments; his views on whether it is time to introduce specific guidelines governing the repossession of the family home in circumstances in which lending institutions tend to resort to measures more protective of their own interests often with tragic consequences; and if he will make a statement on the matter. [44727/17]
View answerThe Deputy will be aware that the Code of Conduct on Mortgage Arrears (CCMA) sets out statutory requirements for mortgage lenders and credit servicing firms dealing with borrowers in or facing arrears on the mortgage loan secured by their primary residence. Lenders may only commence legal proceedings for repossession of the borrower's primary residence after it follows a number of steps. The steps include:
- making every reasonable effort under the CCMA to agree an alternative restructure arrangement (ARA) with the borrower;
- time bound requirements to inform the borrower the regulated entity is not willing to offer an ARA and of his/her options;
- time bound requirements to inform a borrower, who is not willing to enter into an ARA, of his/her options; and
- a decision to classify the borrower as non-cooperating.
Lenders must ensure that the case of each borrower is individually assessed on its merits to ensure fairness. The Mortgage Arrears Resolution Process (MARP) framework sets out the steps which lenders must follow. A lender must carry out an affordability assessment by examining each case on its own merits and must base its assessment of the borrower's full circumstances including their ability to repay as determined by up to date information on a Standard Financial Statement (SFS). A lender must explore all options for alternative repayment arrangements (that they offer) in order to offer the most viable option to each borrower. The Code also requires lenders to review an alternative repayment arrangement at appropriate intervals for the type and duration of the arrangement. The lender is also obliged to carry out a review of an alternative repayment arrangement at any time, if requested by the borrower.
I am informed by the Central Bank that there is a broad range of available restructures offered and delivered by both bank and non-bank entities and there is strong evidence that both banks and non-banks look to exhaust available restructure options before moving to the legal process.
I would like to draw the Deputy's attention to the Mortgage Arrears and Restructures Data released by the Central Bank on 12 September, which shows that to end-Q2 2017, the number of mortgage accounts in arrears for principal dwelling houses (PDH) has declined for the last sixteen consecutive quarters. 120,398 PDH accounts were also classified as restructured, of which 87% were reported to be meeting the terms of their arrangement. A total of 340 Primary Dwelling Home properties were taken into possession during Q2 2017, down from 370 properties in Q1 2017. Of the properties taken into possession during the quarter, 109 were repossessed on foot of a Court Order, while the remaining 231 were voluntarily surrendered or abandoned.
The Deputy may also be aware of the Abhaile mortgage arrears resolution service, established to ensure that those either in mortgage arrears or at risk of going into mortgage arrears on their primary residence are able to access State-funded professional legal or financial advice on their resolution options.
The aim of Abhaile is to help mortgage holders in arrears to find the best solutions and keep them, wherever possible, in their own homes. The service is proving very successful in assisting distressed borrowers, particularly those in longer term mortgage arrears. A dedicated adviser will work with borrowers in mortgage arrears and their lender to find the best solution for their situation.
If those in mortgage arrears need financial advice, they can get a free face to face meeting with an expert financial adviser. The adviser can help them to work through their financial situation and explain the options available to them to help deal with their home mortgage arrears. The expert adviser could be a MABS Money Adviser, a MABS Dedicated Mortgage Arrears adviser, a Personal Insolvency Practitioner (PIP) or an accountant.
Distressed borrowers may also need legal advice on issues related to their mortgage arrears. Under Abhaile they can have a free face-to-face meeting with a solicitor, who will explain their legal situation and advise them how best to resolve it.
If they are called to court to face repossession proceedings on their home, they will be able to meet a Duty Solicitor at the court. The Duty Solicitor may be able to speak for them in court and explain the proceedings to them.
A MABS staff member will also be present at court to help them.
A Helpline is also available Monday to Friday, and a face-to-face service which is completely free, confidential and independent is also available in more than 60 locations nationwide.
It is worth mentioning as has been done here many times before that where a borrower actively engages with their lender it is more likely that an equitable arrangement will be to try to assist the borrower to remain in their family home. I would therefore urge borrowers in arrears, who have not already done so, to contact their lender or MABS for an independent assessment of their situation and professional advice on available resolution options.
28. Deputy Pearse Doherty asked the Minister for Finance the number of persons in mortgage arrears and negative equity who will be affected by the phasing out of mortgage interest relief; and the impact assessment that has been carried out regarding the way in which the phasing out of the relief will affect them. [44715/17]
View answerI announced in Budget 2018 that I would extend Mortgage Interest Relief (MIR) for the remaining recipients of the relief on a tapered basis for a further three years, through to 31st of December 2020.
It has been established since Budget 2010 that MIR would expire on the 31st of December 2017 for all remaining recipients, and the Deputy will be aware that no new mortgages taken out since January 2013 have qualified for the relief. However, without this extension of MIR provided for in Budget 2018, each remaining relief holder would have faced a ‘cliff’ where the relief would have ceased entirely in January 2018. The three year extension has been put in place in order to alleviate the potential financial difficulties of this ‘cliff’, and to give the relief holders a transition period to adjust to the cessation of the relief on a phased basis.
As the Revenue Commissioners would not have information on whether mortgages are in arrears or if relief holders are in negative equity, there is no data available to answer the Deputy’s question as to the number of such individuals who are in receipt of MIR.
However, the Deputy may be aware that data released in September by the Central Bank on Mortgage Arrears and Repossessions Statistics for Quarter 2 of 2017 provided further evidence that progress is being made in addressing mortgage arrears. The number of Private Dwelling House mortgage accounts in arrears continued to fall in Q2 2017, marking the 16th consecutive quarterly decline. A total of 73,706 (10%) of accounts were in arrears at end-Q2, a decline of 3.6% relative to Q1 and a decline of 48% since Q2 of 2013.
My decision in Budget 2018 to extend MIR on a tapered basis for three years balances the competing objectives of allowing relief holders a transition period to adjust to the withdrawal of relief, while also considering the fairness to mortgage holders who have never held a relief on their mortgage interest, who may also face similar financial challenges in meeting mortgage repayments.
29. Deputy Richard Boyd Barrett asked the Minister for Finance if he will correct the anomaly that sees pre-1995 public sector pensioners pay the universal social charge on all their income, while all other recipients of the State pension are exempt from USC on that portion of their income resulting in these persons being worse off than other persons who receive the State pension; and if he will make a statement on the matter. [44720/17]
View answerThe Universal Social Charge (USC) was introduced in Budget 2011 to replace the Income Levy and Health Levy. It was a necessary measure to widen the tax base, remove poverty traps and maintain revenue to reduce the budget deficit. It is a more sustainable charge than those it replaced and is applied at a low rate on a wide base. However, the base for USC does not include payments made by the Department of Social Protection, including the State pension.
As the Deputy may be aware, the USC was reviewed by my Department in 2011 and the issue of USC applying to occupational pensions of retired public service who entered the public service before April 1995 was examined as part of that review. Such individuals are (or were) liable to modified rate PRSI, which does not generate an entitlement to the State Pension. In retirement therefore they receive an occupational pension only, and do not receive a separate State Pension unless as a result of PRSI contributions made in another employment during their working life.
It was decided not to exempt the occupational pensions of these individuals from the USC charge as an exemption would be very costly and difficult to achieve, and it could involve all income earners with the equivalent income benefitting from the exemption. In addition, it would also undermine the principle of the USC being applied to income with few exceptions. However, as a result of the review of the USC, in Budget 2012 the entry threshold to USC was increased from €4,004 to €10,036 per annum, and the threshold was subsequently increased further in Budgets 2015 and 2016, to the current threshold of €13,000. This exemption threshold equalises the position for single individuals whose sole source of income is the State Contributory Pension with Public Service pensioners whose pension is at an equivalent level.
The Government has committed to continue the process of reducing the personal tax burden, with a particular focus on low and middle-income earners, subject to having the required fiscal space. Budget 2018 has continued the progress made in the three previous Budgets in reducing rates of USC at lower income levels. The combined effect of Budgets 2015 to 2018 will see a reduction in the three lowest rates of USC from 2%, 4% and 7% to 0.5%, 2% and 4.75% respectively.
I have also stated on a number of occasions that my long term view of the USC is to see its amalgamation with the existing PRSI system. This is a complex undertaking that will take time to plan and implement, and will require further consideration of all the distinct features of the USC and PRSI systems, including the taxation of pre-95 public servants. Over the next year, my officials will be working with their counterparts in the Department of Employment Affairs and Social Protection to plan, over the coming year, the process of amalgamating USC and PRSI over the medium term. The amalgamation of these charges will help to ensure that vital public services will be well-funded into the future, as well as supporting the improvement of our social insurance system, for the benefit of all our citizens.
30. Deputy Pearse Doherty asked the Minister for Finance if his attention has been drawn to the fact that there is a legal pause in cases related to a company (details supplied) due to the fact solicitors and barristers acting on behalf of the insurance compensation fund are seeking Government assurance on the position of uninsured defendants. [44713/17]
View answerThe Government is very conscious of the difficulties that the delays in the Setanta liquidation process is causing for claimants who are due compensation. The Government remains committed to progressing payments of the 65% portion of settled claims to third party Setanta claimants as quickly as possible.
As you are aware, the Supreme Court delivered its judgment on 25 May 2017 and overturned the previous decisions of the High Court and the Court of Appeal that the Motor Insurers’ Bureau of Ireland (MIBI) is liable in respect of third party motor insurance claims made against the policyholders of Setanta Insurance. The consequence of this is that the Insurance Compensation Fund (ICF) has been deemed responsible for the payment of such third party claims.
As the judgment has been delivered, the process of making payments in accordance with the provisions of the Insurance Act, 1964, as amended, has commenced. Under the current legislation payments can only be made out of the ICF, with the approval of the High Court and only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the ICF. If satisfied, the High Court can order payments out of the ICF up to 65% (or €825,000, whichever is the lesser) due to relevant claimants.
The Liquidator has informed my Department that, as of 30 September 2017, there are 1,576 active claims, of which 573 claimants have been paid compensation from the ICF subject to the 65%/€825,000 limits. The process of settling claims is still ongoing and are subject in some cases to complex negotiations between all relevant parties. The Liquidator is currently working on settled claims and preparing them for inclusion in the next application to the High Court, expected to be made in February 2018.
Over and above the 65% ICF payment, it is expected that a proportion of the balance of money due to third party claimants will be met from the proceeds of the distribution of Setanta’s assets on completion of the liquidation process. An actuarial report, commissioned by the liquidator, estimates the claims reserves at 30 June 2017 at between €105.9 million and €112.9 million. This is an increase from the first report in 2014, which estimated the claims reserves at between €87.7 million and €95.2 million.
A consequence of this is that based on this actuarial report, the liquidator now estimates that he will not be in a position to meet more than 22% of the claims out of the assets of the liquidation, rather than the not more than 30% of claims figure previously indicated.
I am aware of the issue referred to by the Deputy regarding the potential liability of Setanta policyholders to third party claimants in the event they do not receive full compensation. On the question of a Government assurance for such policyholders, I cannot make any commitment on this matter as there is a legal concern that any Government intervention could undermine the priority status of claimants in the liquidation. Consequently, the Department of Finance is seeking legal advice on the impact on the State's ability to recover from the liquidated company if it were to compensate third party claimants for the balance due to them. Once the Department has clarified this legal concern, the Government will be in a better position to consider its response to this issue.
31. Deputy Joan Burton asked the Minister for Finance his plans to launch a public inquiry into the tracker mortgage scandal; the actions he plans to take to ensure persons who lost their homes and paid too much in monthly payments are suitably compensated; and if he will make a statement on the matter. [44705/17]
View answerThe Central Bank’s Tracker Mortgage Examination is focused on ensuring that lenders provide fair outcomes for all customers impacted by their failings. Lenders’ reviews are required to be conducted in accordance with the Central Bank’s framework for completion of the Examination (the “Framework”) issued in December 2015. The Framework requires lenders to identify all impacted customers and to address customer detriment in line with the Central Bank’s Principles for Redress. Steps being taken by lenders to address customer detriment identified during the course of the Examination include putting customers on the correct interest rates (rate rectification) in order to stop the immediate harm caused to them and providing redress and compensation. In that regard, the Principles for Redress provide that the compensation must be fair, clear and reflect the specific circumstances of each impacted customer.
Three lenders have commenced payment of redress and compensation to impacted customers. The Central Bank expects that two of these lenders will have progressed the payment of redress and compensation to the majority of the customers they have identified as impacted by year-end. The Central Bank continues to engage with and challenge the remaining lenders in respect of their redress and compensation proposals and expects that they will be in a position to commence providing redress and compensation by year-end. To end September 2017, the aggregate figure for redress and compensation paid to customers arising from tracker issues is €163 million.
Arising from its tracker examination the Central Bank is pursuing enforcement action against lenders. One enforcement investigation has concluded and a monetary penalty of €4.5 million was imposed on Springboard Mortgages Ltd. The Bank is currently pursuing enforcement investigations in relation to permanent tsb plc and Ulster Bank Ireland DAC. Also two further enforcement investigations into other lenders are in train, and in its recent appearance before the Joint Oireachtas Committee on Finance, Public, Expenditure and Reform, and Taoiseach the Central Bank indicated that further enforcement investigations can be anticipated.
The Central Bank also has statutory reporting obligations to the Garda Síochána and other agencies where it suspects a criminal offence may have been committed by a supervised entity. The Central Bank takes these obligations very seriously and complies with them on an on-going basis as appropriate. However, decisions in relation to this would be solely a matter for the Central Bank and the independent criminal investigation and prosecution authorities.
32. Deputy Joan Burton asked the Minister for Finance the number of tax appeal cases worth more than €1 million in appeal or dispute; the amount outstanding; the amount expected to be realised in 2018; and if he will make a statement on the matter. [44709/17]
View answerI am advised by Revenue that there are currently 220 appeals to be determined where the amount of tax in dispute is greater than €1 million. The total amount in dispute in respect of these appeals is €1.4 billion. Revenue’s estimate of the outstanding liability in respect of these appeals is €817 million. This figure is lower than the disputed liability figure because some appellants make payments pending the determination of the appeal and some appeals relate to refunds or repayments denied by Revenue.
Revenue has also advised that it is not possible to estimate the amount expected to be realised from these appeals in 2018. Any tax that might be realised during 2018 will depend on whether these cases are heard during the year, the outcome of each appeal and whether any such outcome is subsequently appealed to the High Court. The scheduling of appeals for determination is a matter for the Tax Appeals Commission.
33. Deputy Pearse Doherty asked the Minister for Finance his plans to amend his proposal to cap the write-off of intangible assets to 80% to include all assets which claim annual write downs; and his views on whether his proposal as structured could allow large multinationals to pay minimal or no corporation tax. [44716/17]
View answerThe recent ‘Review of Ireland’s Corporation Tax Code’, recommended that in order to ensure some smoothing of corporation tax revenues over time, that the limitation on the quantum of relevant income against which capital allowances for intangible assets and any related interest expense may be deducted in a tax year be reduced to 80%.
Therefore, on foot of this recommendation, I introduced the cap in Budget 2018, effective from midnight, 11th October.
Notwithstanding that this is essentially a timing matter, this measure is expected to raise an additional €150 million next year.
There are also a number of provisions in relation to the use of capital allowances for intangible assets to ensure that the scheme operates as intended and is only used for bona fide purposes:
- Relief is only available where a company is carrying on bona-fide trading activities in relation to managing, developing or exploiting intangible assets.
- Relief is not available in respect of any expenditure incurred as part of a tax avoidance arrangement.
- Under the scheme, allowances can only be offset against income of the relevant trade in which the intangible assets are used and not against any other profits.
- Allowances and deductions for interest may not exceed 80% of income in any period, leaving a minimum 20% of income within the charge to tax.
- Relief under the scheme cannot therefore be used to generate a loss.
- An arm’s length rule applies ensuring that the correct amount of income and expenditure is attributed to the relevant trade and to prevent excessive relief being claimed.
- Provision is made for Revenue to engage an expert to assist in the determination of arm’s length values, where necessary.
34. Deputy Eugene Murphy asked the Minister for Finance the steps his Department is taking to protect a person (details supplied) who was fully insured when involved in a road traffic accident and is now accountable for 35% of a claim against their insurance due to the fact their insurance provider went into liquidation; and if he will make a statement on the matter. [44540/17]
View answerWhile I cannot comment on individual cases, you will be aware that the Supreme Court delivered its judgment on 25 May 2017 and overturned the previous decisions of the High Court and the Court of Appeal that the Motor Insurers’ Bureau of Ireland (MIBI) is liable in respect of third party motor insurance claims made against the policyholders of Setanta Insurance. The consequence of this is that the Insurance Compensation Fund (ICF) has been deemed responsible for the payment of such third party claims.
As the judgment has been delivered, the process of making payments in accordance with the provisions of the Insurance Act, 1964, as amended, has commenced. Under the current legislation payments can only be made out of the ICF, with the approval of the High Court and only if it appears to the High Court that it is unlikely that the claim can be met otherwise than from the ICF. If satisfied, the High Court can order payments out of the ICF up to 65% (or €825,000, whichever is the lesser) due to relevant claimants.
Over and above the 65% ICF payment, it is expected that a proportion of the balance of money due to third-party claimants will be met from the proceeds of the distribution of Setanta's assets on completion of the liquidation process. The liquidator commissioned actuarial consultants, Willis Towers Watson, to carry out an analysis of Setanta Insurance's claims reserves as at 30 June 2017 and this has now been completed. The report estimates the claims reserves at between €105.9 million and €112.9 million. This is an increase from the first report in 2014, which estimated the claims reserves at between €87.7 million and €95.2 million.
A consequence of this is that based on this actuarial report, the liquidator now estimates that he will not be in a position to meet more than 22% of the claims out of the assets of the liquidation once all matters in the liquidation have been concluded, rather than the not more than 30% of claims figure previously indicated.
On the question of what steps are being taken to protect Setanta policyholders against claims by third party claimants in the event they do not receive full compensation, the Government cannot make any commitment on this matter at this time as there is a legal concern that any intervention could undermine the priority status of claimants in the liquidation. Consequently, the Department of Finance is seeking legal advice on the impact on the State's ability to recover from the liquidated company if it were to compensate third party claimants for the balance due to them. Once the Department has clarified this legal concern, the Government will be in a better position to consider its response to this issue.
