Other Questions
73. Deputy Maureen O'Sullivan asked the Minister for Finance the reason Ireland will not support an international tax body under the auspices of the United Nations which has been identified as the better procedure in the interests of tax justice. [4140/18]
View answerMy question relates to the reason the Government will not support an international tax body under the auspices of the United Nations which has been identified as the better procedure in the interests of tax justice.
Ireland is a strong supporter of international tax reform. In recent years the OECD has played the leading role in developing new, globally accepted international tax standards. To ensure all countries participate on an equal footing, the BEPS inclusive framework was established to lead global tax reform efforts. The framework has over 110 members from all over the world, including developing and developed countries. We expect the number to grow and it is a true global tax body. We are an active participant in its work.
As a result of the inclusive framework, the establishment of a new or replacement international tax body under the auspices of the United Nations is not necessary. While I note that there have been calls from civil society for a UN tax body, I believe such a body would take a significant amount of time to begin operations and lose the benefit of the huge experience and expertise of the OECD secretariat which facilitates the inclusive framework. It is unclear what benefit would be added by the replacement of the inclusive framework which has been remarkably successful with an entirely new body with identical aims and membership.
Separately, the platform for collaboration on tax has been established as a joint effort between the United Nations, the OECD, the IMF and the World Bank to provide an opportunity to build on progress made to date and further enhance co-operation between countries on tax matters. The platform has a particular focus on developing countries and taxation.
The United Nations does play a role in tax, both in these international bodies and developing its version of OECD standards which may be more suitable for developing countries in some circumstances. One example is the UN model tax convention. When negotiating with developing countries on tax treaties, Ireland is always willing to include elements from the UN model that are requested by a treaty partner country.
I thank the Minister. This question follows on from my contribution during Leaders' Questions last week which the Minister attended on the issue of tax justice. I asked about the way in which tax injustice was contributing to inequality in our society and other countries. The Minister was at Davos at the summit which was about the fractured world in which we were living. Central to the process is getting the tax justice piece right. Does the Minister take on board what some of the reputable organisations such as Oxfam, Christian Aid and Trócaire have stated in their reports about Ireland and its role as part of Tax Justice Network Ireland. Following the OECD model, it appears that the voices of developing countries are not given the same credence and credibility as those of developed countries because the bias certainly appears to be in favour of developed countries, whereas the UN model gives them a much more equal and credible role to play. Will the Minister consider the exchange of information treaties rather than what we have seen?
I do not accept the analysis put forward by some organisations which described Ireland as a tax haven. Ireland does not meet any of the criteria as laid down by the OECD to be described as a haven. I have said I will meet Christian Aid to have a discussion with it because while I disagree with it, I am in favour of debate and dialogue. I intend to meet it in the coming week.
On the second question on the exchange of information, we have signed up to the legal framework for the exchange of information between tax authorities on who is paying what in tax and where and a new multilateral body through the auspices of the United Nations. As I said, I do not support it being set up. In the current geopolitical environment trying to set up a new multilateral body or develop the role of the United Nations in this area could prove very challenging. The OECD, with over 110 members, offers the best way of addressing the issue to which the Deputy referred.
It is very good to be open to discussion with organisations. I imagine they will want to continue on the work from the spillover analysis because, as I said last week, there is evidence that international tax advisers are advising their clients on opportunities to use Ireland as a conduit in precisely the ways in which the spillover analysis of two years ago stated could not possibly be used. It is linked with the point on fairness. Our reputation is considerable when it comes to our relationship with developing countries. We are very much respected. Unless we get the position on tax right, we will undermine that reputation. The national plan for human rights and business has finally arrived and it is all about policy coherence. It is welcome that the Minister is to meet Christian Aid to have a frank discussion on these matters.
As I said, I disagree with the assessment the organisations have offered, but I still think it is a good idea to meet to have a discussion and I intend to do so some time in February. I have outlined the reasons I think the chances of the United Nations expanding its power in this area are low. I certainly do not think we should put our efforts into setting up a new multilateral body on a global basis to deal with taxation, given that it could take years to do so and that we have the OECD in place.
My final point concerns the balancing act I have to perform. I have to deliver tax reform in areas where it is needed, but if I were to put forward any change in corporate tax policy which undermined the predictability of corporate tax, then, given the contribution it makes to the retention of jobs in this country, I would be castigated.
74. Deputy Bernard J. Durkan asked the Minister for Finance if his attention has been drawn to the increasing aggressive policies being pursued by third parties that have purchased distressed debt from the main banks (details supplied); if he has consulted the Governor of the Central Bank on the issue; and if he will make a statement on the matter. [4302/18]
View answerThis question relates to the extreme pressure being brought upon borrowers whose distressed debt was purchased by third party, unregulated entities which are now squeezing every single cent they can get from the borrowers, using all kinds of measures to intimidate them to extract the maximum moneys.
Most loan agreements include a clause that allows the original lender to sell the loan on to another firm. Under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015, if a firm which bought loans from an original lender is unregulated, then the loans must be serviced by a credit servicing firm which is authorised and regulated by the Central Bank. The legislation ensures that relevant borrowers whose loans are sold to unregulated third parties maintain the regulatory protections they had prior to the sale. Credit servicing firms must comply with all relevant requirements of financial services legislation, including the regulatory requirements set out in the Central Bank's statutory codes of conduct and regulations, including the consumer protection code 2012, the code of conduct on mortgage arrears 2013, the Central Bank (Supervision and Enforcement) Act 2013, the minimum competency code 2017 and other important legislation.
Provision 3.11 of the Central Bank's consumer protection code 2012 requires that, where a regulated lender intends to transfer all or part of its regulated activities to another regulated entity, it must provide advance notification to both the Central Bank and affected consumers. Specifically, a lender must provide a consumer with at least two months' notice before transferring all or part of its loan book covered by the code to another person, including where the transferee is an unregulated entity. Where the transferee is an unregulated entity, the code requires that the regulated lender also notify the consumer of the regulated entity that will be servicing the loan for the unregulated entity. In the event that there is a change in the credit servicing firm, the existing credit servicing firm must also notify the Central Bank and the consumer in advance, in accordance with the timelines set out under provision 3.11 of the code.
I appreciate the position as outlined by the Minister. Unfortunately, things have taken on a life of their own and even where borrowers entered into commitments during the bad times and are making payments in line with what was advised to them, thereby doing their utmost to discharge their debts, this is being dismissed by the new operators. Borrowers are now being asked how much they can pay up front and for amounts that represent a sizeable part of their debt. This is an attempt by these firms to make their profit before they start, notwithstanding the fact that they bought the debt for a fraction of what it was.
People who are already under financial pressure are being subjected to continued mental pressure as a result of the activities of these operators, which is worrying. What action can be taken to interrupt the momentum of these companies?
Two Deputies have indicated on this issue. I ask them to be brief.
Would the Minister consider revising the mortgage arrears resolution process, MARP? If an individual or couple have completed one year of the process, a number of banks come knocking on their door and they are back to square one. If people successfully complete their commitments in year one, can the MARP be extended for another two or three years? That would take a lot of people out of the eviction range and would de-stress their lives enormously as they would otherwise face a repeat of what they had already gone through.
I am not sure if the Minister is aware that unregulated loan owners, so-called vulture funds, have refused to engage with the Oireachtas Committee on Finance, Public Expenditure and Reform, and Taoiseach. The committee will write to the Minister shortly and we will put a motion before the House on the matter. Is the Minister satisfied with the situation where the loan owners remain beyond regulatory reach? They are the parties which make all the key decisions around loans, such as on the interest rate or whether to take legal proceedings, enforcement action or appoint a receiver. It is not the credit servicing agency that does this as that is just a call centre. It is the loan owner which makes all the big calls but they are beyond the reach of the regulator and, it would seem, the Oireachtas too.
I am not in a position to give Deputy Burton an answer to her question on the MARP but I will look into the matter. It is overseen by both my Department and the Department of Justice and Equality and I will write to the Deputy with an answer in the coming days.
Deputies Durkan and McGrath asked about the roles of the different entities. If companies are active in Ireland, they should answer questions the Oireachtas puts to them. I am in a different committee every week and I do not see why financial entitles should not be able to answer questions the Oireachtas wants answered. Deputy McGrath asked about the entities in question being outside regulatory reach and I am looking at the code we have in place at the moment. The code was successful in averting some of the darker predictions made at different points in our recent history, and if we need to make further changes to ensure the objectives of the code are delivered on, I will make those changes.
I am glad the Minister referred to the code because that is one of the keys. These institutions are ignoring all the codes and imposing their own. A typical reaction they have to a submission by a borrower to discharge his or her debt is to say something does not comply with their code of conduct but it is their own code and they are the arbiters of it. Nobody else has any say in the matter and they are bringing a huge amount of pressure to bear on householders and small businesses at the moment. If this is allowed to go unchecked, it will have disastrous consequences.
As I said in my reply to the Deputy, a code of conduct is in place and there is a very clear set of laws which I expect to be complied with. I believe the code of practice has made a contribution to dealing with the great pressure people have been under in recent years. I have asked my Department to give me an assessment as to whether the code will continue to have the effect I want it to have. Discussions that take place between lenders and borrowers on high and potentially unsustainable debts are always very difficult and that is why we need to have a code of practice in place. It will make sure the discussions happen in the most appropriate way and I will continue to monitor the matter.
75. Deputy Richard Boyd Barrett asked the Minister for Finance his plans to review the impact of the local property tax on the funding of local authorities in the course of the review of the local property tax; when the report on this review will be brought to Dáil Éireann; and if he will make a statement on the matter. [4286/18]
View answer80. Deputy Thomas P. Broughan asked the Minister for Finance his plans with regard to a proposed revaluation of the local property tax; and if he will make a statement on the matter. [3945/18]
View answerTo paraphrase Marx, a spectre is haunting Fine Gael - the spectre of the unfair property tax.
Is that Karl or Groucho?
Karl. The spectre I refer to is the unfair property tax and the dramatic hikes because of property prices increasing by 71%.
The Minister has acknowledged the folly of this unfair property tax by deferring the initial revaluation and is now talking about a cross-departmental review. Does he not think it is time to acknowledge that there is no way of tweaking the property tax that will make it fair because by its nature, it is regressive and will hit low and middle-income families?
Of course, I am aware of the status of the local property tax, LPT, the proposed changes and the debate that is ensuing regarding it. This is why I recently announced a review of the LPT which will look in particular at the impact on LPT liabilities of property price developments. It will include an examination of the outstanding recommendations of the 2015 Thornhill review of the LPT. It is expected that the review will be completed at the end of August and that the review report will provide a number of policy choices for consideration. The review will be informed by the desirability of achieving relative stability, both over the short and longer terms, in LPT payments of liable persons. It will also include a consultation process to enable all interested parties and individuals to submit their views on the future of the LPT.
My Department will advance work on this matter in conjunction with the Departments of Housing, Planning and Local Government and Public Expenditure and Reform and the Revenue Commissioners. The purpose of the review will be to inform me with regard to any actions I may recommend to Government concerning the overall yield from LPT and its contribution to total tax revenue. This will enable me to revert to Government with proposals for change to the LPT in a timely way. Any such change would need to be legislated for in the first quarter of 2019 so that the Revenue Commissioners can be in a position to have the necessary administrative and technical arrangements in place in time in respect of the 2020 LPT year.
Distribution of LPT revenues to local authorities is the responsibility of the Minister for Housing, Planning and Local Government. LPT is an important source of funding to local authorities accounting for approximately one-tenth of their revenue income. LPT supplements local authority income from commercial rates, from the provision of goods and services and from other Government grants. The LPT was introduced to provide an alternative, stable and sustainable funding base for the local government sector providing greater levels of connection between local revenue raising and associated expenditure decisions. Local retention of LPT has helped to strengthen financial autonomy at local authority level. I expect that the current review will look at ways to ensure this continues.
I have not deferred any revaluation. What I have done is reminded the House of the timetable as currently laid out in the legislation passed by this House, which is a revaluation in 2019 to affect bills after that.
It must be said that this Fine Gael tax is grossly fair. I am looking at figures from the statistics and economics research branch of the Revenue Commissioners which lists the percentages of homes with a valuation of over €300,000 based on returns five or six years ago. Dublin city comes in at 22%, Dún Laoghaire comes in at nearly 60%, Fingal comes in at 21%, south Dublin comes in at 19% while Wicklow and Kildare are also in the teens. In most other counties, it is down 0.1% or 0.2% so it is a grossly unfair tax. Its attachment to Revenue and social protection payments made it impossible for people to challenge it in the way they challenged the water tax. Many people would feel that local government should be properly funded but it should be funded on a fair basis across the whole country, which was one of Don Thornhill's four recommendations. At the moment, it is grossly unfair. The Minister is being very unfair to his city and constituents and it is time he did something about it.
In our area, people are already being crucified in many cases but they will be absolutely nailed to the wall if anything even approaching the increase in property values is translated into an increase in property tax. The point about this tax is that it does not take into account ability to pay. Even with the existing tax, there are 46,000 people who have been forced to defer because their income is not sufficient to pay the tax. That will jump through the roof. Already, there is a cohort of people who just cannot pay. Why is the Minister imposing a tax on people who just cannot pay? The pension, social welfare payment or low income of someone on social welfare or a pensioner who happens to own their house in an area like Dún Laoghaire or south Dublin will not be any greater because they live in an area with high property values. What is the Minister going to do to recognise that fundamental injustice?
The Deputy opened up by quoting Karl Marx. I think it was Marx who said that history repeats itself first as tragedy and then as farce. It is a relevant point in the debate we are having here regarding tax policy. In the last Dáil, many of the inquiries that were put in place to look at how we ended up in a place of multiple economic crises - all at the same time - pointed to the fact that previous Governments had narrowed the tax base again and again while increasing expenditure exponentially across that period. Every country against which we look to compare ourselves has a form of property taxation. It is vital in the coming years that our tax base includes a local property tax. I have heard what the Deputy has said about people's fear about the future of the LPT, which I well understand given that the bills for everyone would have come in over the past number of weeks. That is why I will take the opportunity to say now what I have said before, which is that my intention is that any future changes in the LPT will be moderate, fair and predictable. I am confident that the process I have outlined, which is well in advance of any change in the revaluation metric, will be able to deal with it.
Let me remind the Minister that at the time the property tax was brought in, the Minister justified it by saying there would be more money available for local services. Actually there has not been a cent more. The 25% cut in local government funding that preceded it was never replaced. We then had a property tax that reduced central Government funding on a euro-for-euro basis. We got no extra services for this but what we did get was an unfair tax. The Minister has simply not addressed the issue of unaffordability and the regressive nature of the tax.
My proposal to the Minister is what we proposed in our pre-budget submission that the local property tax should be abolished for principal private dwellings and replaced with a landlord's tax. In other words, we should tax second, third, fourth or fifth properties and people who own property that is simply wealth and not the roof over their head. The Government could replace one with the other. That would be a genuine wealth tax which would not hit people on low incomes.
People are very nervous about this as we approach 2019 and 2020 to see what the review will hold. Will the review not be published until August? When will we have it? Could the Minister give us his view on the propositions put forward by the Parliamentary Budget Office, which looked at various ways where we could reach a stable and fair local government tax across the country? There has effectively been a 5% increase in the tax in Fingal and people living in very modest houses might be paying €500, €600, €700 or €800 early next month. This extra 5% is significant. The county manager said that he will do such and such with that money but at the same time, while local government needs to be funded, as Deputy Boyd Barrett said, we have had no additional funding for it and the Minister has not achieved the fundamental constitutional basis of a fair tax. This tax is not one of those.
Deputy Boyd Barrett proposes that we introduce some form of landlord's tax. Let us play that out. Let us play out what would happen if we were to increase taxation on landlords to find the additional revenue to offset the elimination of the local property tax, as Deputy Boyd Barrett proposes.
In order to do that we would need to find an additional €500 million of tax revenue from the landlord sector. How many landlords does the Deputy think would stay in that business?
It is a good idea.
I am glad the Deputy thinks it is a good idea. However, he has failed to acknowledge that his definition of wealth is somebody else's roof under which they are sleeping at the moment. I will not put in place any kind of tax measure as the Deputy is proposing that has the risk of incentivising further landlords to leave the rental sector and exacerbating the kinds of difficulties to which the Deputy regularly and correctly points.
They are making a fortune.
That risk would be there if we took such action.
In response to Deputy Broughan, I am aware of the work of the parliamentary body on the future of LPT. I am also aware of the debate in the Committee on Budgetary Oversight afterwards where it proved very difficult to find consensus on what the new tax model should be. Some members of the committee said we should move to floor-area basis where the tax yield is determined by the size of the property; other members disagreed. Some members said we should continue to have it based on value and other members of the committee disagreed with that. A debate is under way in the committee on that very point.
76. Deputy Michael McGrath asked the Minister for Finance if progress has been made with the European Commission in securing some flexibility on the way in which one-off proceeds such as a NAMA surplus and the sale of bank shares may be used; and if he will make a statement on the matter. [4283/18]
View answerThis question relates to the application of the fiscal rules to one-off receipts, whether it be the sale of a stake in banks that the State might hold or a NAMA surplus which will materialise in the coming years. Has the Minister for Finance raised or made any progress with the Commission on getting additional flexibility on how such proceeds can be used as opposed to being bound by the rules, certainly when it comes to a financial transaction, that the Government must use the proceeds to pay down debt?
NAMA was established in December 2009 and its debts of nearly €32 billion represented a substantial contingent liability to the State.
The State recapitalised the domestic banking system at a gross cost of €64 billion, adding around 40% of national income to national debt. As a result of this, as well as the mismanagement of the public finances, total Government debt now stands at over €200 billion, which is the equivalent of €40,000 for every man, woman and child in the State.
My priority, therefore, has been to use one-off revenue gains to reduce the debt incurred by public support for the banking system.
Moreover, I am also very conscious that the economy is approaching full employment and it is important that it reflects this at this stage of budgetary policy. I do not want to put in place pro-cyclical policies that could endanger our recovery.
NAMA's role in the funding of residential development is a key priority for Government. In this regard, NAMA is expected to fund the completion of 20,000 units over the period from 2016 to 2020.
I have said on the record a number of times that there is nothing wrong with paying down debt. Many of our citizens, who could afford to do so, did it throughout the economic crisis. Many businesses have also taken the opportunity to deleverage. This issue came up last year when the State sold a stake in AIB. The Minister for Finance should at least have some flexibility such that the Government of the day could decide that a better use of the proceeds, or some of the proceeds, would be to put them towards investment in the economy. A new ten-year investment plan will be published shortly. If a Government were to make that decision and wished to use at least some of the proceeds, would it have the discretion and flexibility to do so without being in breach of the fiscal rules? That is my central question. I am looking to establish whether the Government has opened up any channel with the European Commission on how one-off proceeds may be used without breaching the fiscal rules.
We are in constant engagement with the European Commission on how we define a structural reform. To date it has been my view that such gains should be used to reduce our debt. However, if we look at where we are in the economic cycle, our national debt is now far higher than it was before we entered the last crisis, which means that were we to find ourselves facing similar difficulties again - God forbid - we would be approaching that crisis point with a far higher level of debt than we had in the past.
The Deputy asked about the definition of the structural reform. We are engaging with the European Commission on that. Up to this point a structural reform has been defined as what would happen within a market or, indeed, a labour reform. We are looking at what is under way, for example, in Latvia where a structural reform now potentially could form a part of how it would respond to a country-specific recommendation on health care reform.
I acknowledge the level of the national debt. I also acknowledge the most important measure is its size relative to the size of the economy. Thankfully the national debt is falling relative to the size of the economy. I also acknowledge that we are at a time of very low interest rates which certainly will not continue indefinitely. Therefore the cost of servicing the national debt could well rise over time.
When it comes to how we measure capital investment relative to the fiscal rules, the smoothing effect under the European Union rules, spreading it out over four years, is not adequate. Companies that make investments do not account for it just over a four-year period. If we make an investment in infrastructure we derive the benefits from that investment over a longer period of time. The Government should raise that issue with the European Commission to account more properly for capital investment and to match how we account for it with how the economy benefits from that investment.
I call Deputy Pearse Doherty on the same issue.
The issue of the treatment of one-off proceeds is crucial, particularly with the decision to wind down NAMA. As the Government in recent years has scrambled for off-balance vehicles, NAMA can create some of the solutions. A social clause was built into the NAMA legislation but never really utilised. The idea that any NAMA surplus would be used to pay down debt at a time of severe crisis, particularly in housing, is just not acceptable. There are other imaginative ways. Instead of looking at a cash surplus, we should be looking at a housing stock surplus. There should be a bit of imagination within the Department of Finance to look at using the expected surplus from NAMA and ensure it delivers a social benefit to the people. I ask the Minister to come with proposed solutions to ensure that the expected surplus can be used in that form.
There is ample imagination in the Department of Finance when it comes to dealing with these kinds of matters. That is why this morning the Cabinet agreed to move forward with the concept of House Building Finance Ireland, which will have personnel from NAMA but will not be of NAMA because we have to avoid any potential conflicts of interest. We will fund that through money that is currently residing in ISIF. We will look to ways in which we can provide good loans in good investments to underpin in turn the release of more homes in the country.
Deputy McGrath asked about the smoothing effect. We will make full use of that smoothing effect in the capital plan. I want to see us increase capital expenditure to deal with the issues we are facing. To put into context what we are doing, last year we increased capital expenditure by 9%, which is a really significant increase compared with the previous year. Over the coming years, I plan to continue with strong rates of increase to deal with all the pressures we have in our homes, schools and universities and to do that in an affordable way and without setting off a further reaction of price levels within the economy.
77. Deputy Pearse Doherty asked the Minister for Finance the way in which he is defending Irish interests in matters of taxation in view of the move by some in the EU to harmonise and federalise tax policies; and if he will make a statement on the matter. [4313/18]
View answerLast week the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach heard two MEPs discuss the proposed CCTB and CCCTB. Given what they said and given what we know the European Commission is proposing which goes beyond the CCCTB, it seems the Government is failing miserably to have any positive impact or influence on the EU or any other party to protect Ireland's interests.
Do the Government and Minister believe that the Apple case and other instances which have been amplified in the media, both domestically and internationally, have blackened our name and reduced our chances of getting a fair hearing about tax sovereignty?
No. The Deputy points to miserable failure. I point to the fact that, over recent years, we have been successful in protecting our corporate tax policy. As the Deputy will know, the level of corporation tax receipts that we collect has moved from €4 billion to €8 billion which does not meet any definition of miserable failure. More broadly, any tax directive at EU level leads to convergence of some aspect of tax.
Ireland has supported the EU anti-tax avoidance directives which standardise anti-avoidance measures across the EU in line with the OECD base erosion and profit shifting, BEPS, recommendations. However, taxation remains within the competence of individual member states. Unanimity is needed before any tax changes can be agreed at EU level. Proposals for tax harmonisation at EU level are not new. The common consolidated corporate tax base, CCCTB, has been discussed for years and was first formally proposed in 2011. Ireland's position has always been clear. We do not support tax harmonisation that undermines a member state's ability to set its own tax rate and to determine its own tax base. We have shown, however, that we are willing to engage with and agree EU tax directives that seek to implement agreed international best practice in a consistent manner across the EU. This remains Ireland's position.
As always, in line with A Programme for a Partnership Government, Ireland is constructively engaging in the debate on the CCCTB proposal while critically analysing the extent to which the proposal impacts Ireland's interests. We are by no means alone in having such concerns. These views are shared by many other member states across the EU.
As much as the two MEPs who came before the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach did not want to acknowledge it, they had to acknowledge that Ireland has a veto on this issue. Even if President Juncker got his way and tried to implement qualified majority voting, we would still have a veto on the decision about whether we move to that point. Will the Minister confirm to the Dáil this evening that he will use the veto on the issue of CCCTB if necessary if a proposal is tabled? We also have a French-led proposal on digital taxation which is coming down the road in the future. It all points to a concentrated campaign that we need to mount. There is no doubt, whatever the Minister wants to say, that he has left himself wide open with the way that he treats multinationals. The issue he introduced in the Finance Act about not dealing with intangible assets that have been onshored and that will be claimed in future years is another example of that. People are not stupid anymore. As I told the Minister, the winds of change are blowing hard. The Minister has left Ireland in a vulnerable position. We also hear that officials in the Department have been instructed by the Taoiseach to say nothing at the meetings. These are the meetings where much of the horse-trading and wheeling and dealing takes place. Is it the case that this is the direction the Minister, his Department or indeed the Taoiseach has given to the officials representing our countries at those meetings?
The only instruction I give to our officials is to participate fully in all discussions about issues that affect Ireland and to represent our national interest, which they do. I will not agree to any proposals that undermine our decision-making rights on the future of taxation in Ireland or undermine the legitimate use of corporate tax policy to retain and attract jobs to our country.
We are on the same page as the Minister on the issue of tax sovereignty. I fundamentally disagree with the way he and his predecessor provide loophole after loophole to allow multinationals to avoid paying their appropriate tax rate, which is 12.5%. We agree with the Minister on the issue of tax sovereignty. We need to have a concentrated campaign. We had two rapporteurs, people in senior positions in the European Parliament, before the committee. Neither knew that Ireland had three corporation tax rates. There was complete ignorance. They have written reports without knowing it. We are not informing the people who are in the middle of making decisions. I understand that the Minister of State, Deputy D'Arcy, met them. If I am misinformed, maybe the Minister of State can correct the record. They put on the record of the committee that the Minister of State told their members that the instruction given to the officials was not to engage. They have never requested the floor of the meeting. It is important to clear that up. We are on the same hymn sheet on this issue and we now have to have a proper campaign. The Minister needs to clean up his backyard for us to mount that campaign properly.
I thank the Ceann Comhairle for the opportunity to correct the record. I was told that the two MEPs went to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach and said that I said something. I want to be clear that what was said by the MEP was advice that he offered to me for the Taoiseach to take, which is a very different thing. I said to the MEP that that was not a matter for me to decide but for other people to decide. I thanked him for his advice. I, under no circumstances, said any such thing that he put on the record of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach. I want to clarify that for the committee and thank the Ceann Comhairle for the opportunity to do so.
78. Deputy Willie Penrose asked the Minister for Finance if his attention has been drawn to a report (details supplied); his plans to address the problems highlighted in the report; his further plans to ensure the sustainability of future growth of the credit union movement here; and if he will make a statement on the matter. [4301/18]
View answerI ask the Minister if he has read the recent report by the Centre for Community Finance Europe regarding the fitness for purpose of the Irish credit union model reported in the Irish Independent and many other newspapers and how upset many credit union volunteers and managers are about the nature of the report and what they see as its unfairness to them and to credit unions as institutions.
I can advise the Deputy that my Department is aware of the paper from the Centre for Community Finance Europe Limited, CFCFE, on Irish credit union business models which was commissioned by the credit unions that helped found the CFCFE, including a number of Irish credit unions. The paper argues that the traditional, simple business model of credit unions in Ireland needs to change if they wish to succeed into the future. It is fair to say that there is significant diversity in many aspects of the business model for credit unions which can be large or small, rural or urban, industrial or regional, and can have business models adapted to their particular membership base. The Government understands the challenges this raises and that flexibility and proportionality is required both in policy and regulation.
Credit unions have a unique role as a grassroots, not-for-profit, volunteer-based movement in our communities. They have a key role to play in providing access to credit and other important services in local communities. Indeed, the CFCFE paper acknowledges the strength of the credit union brand in Ireland. The paper's findings build on previous reports for Government by the Commission on Credit Unions in 2012 and the credit union advisory committee, CUAC, in 2016 and a recent report from the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach.
Business model development is one of the key issues that the implementation group which was set up to oversee the implementation of the CUAC’s recommendations is looking at and work is ongoing. The CUAC will also focus on this issue in 2018 and recently invited the CFCFE to meet it to discuss its paper. My Department continues to support credit union initiatives to develop services. In certain circumstances, the provision of new services must be approved, prior to their introduction, by the registrar of credit unions at the Central Bank, which acts as the independent regulator for credit unions.
The Government's priorities remain the protection of members' savings and the financial stability of credit unions and the sector overall, and I am determined to continue to support a strengthened and growing credit union movement into the future.
Can a coalition of willing credit unions establish a body or work collectively to provide mortgages or significant loans relating to, for example, refurbishing houses and making them fit in the context of climate change challenges and lack of insulation? Could a coalition of willing credit unions provide small and medium enterprise, SME, finance? Approximately just 26% of credit union members' funds are loaned out productively.
This is a financial scandal at a time when local financial institutions, bank branches and so on are closing. The report raises some important questions about the services offered by Irish credit unions and structures to underpin them. We need to rejuvenate credit unions and provide diversified financial services in Ireland. As referenced by the Minister, the Central Bank seems to be able to regulate but not able to engender activity.
I will allow a brief supplementary question from Deputies Michael McGrath and Pearse Doherty.
I am glad to hear that the credit union advisory committee, CUAC, will focus on business model development for credit unions in 2018, which the Minister will be aware is a clause of the confidence and supply agreement which we have not seen thus far. We need this to happen. There is no tiered regulation. One of the central recommendations of the commission in 2012 was tiered regulation. Instead, we have a one size fits all approach to regulation. The lending restrictions need to be reviewed, particularly around long-term lending. There are serious issues with communications between the registrar and the credit union sector. In regard to levies, the Minister's predecessor said in the Seanad in October 2011 that the cost of bailing out credit unions could reach €1 billion but there has been no net contribution by the State to rescue the credit union sector thus far because it paid for it itself through levies and that needs to be reviewed.
I am on record in regard to the lack of understanding on the part of the Department of Finance and, in particular, the Central Bank, in regard to the potential role of credit unions. Deputy McGrath spoke about the core issues, about which we have been talking for a number of years, including tiered regulation, fees and the credit union sector's desire to get involved in delivering the solution to the social housing crisis. The finance committee produced a report, which I assume the Minister has read. Does the Minister intend to respond to that report, in which his Department is tasked with carrying out certain actions, including to provide a roadmap for the future of credit unions in this State; the introduction of the necessary legislation; and oversight of various issues that have been identified. The Department is also tasked with interacting with the Central Bank because there are serious challenges identified in that report in relation to the Central Bank. Does the Minister, on behalf of the Government, intend to respond to the report and does he intend to carry out any of the actions of that report or is it just another credit union report that will gather dust on the shelves?
As I said in my initial response to the question, the credit union advisory committee, CUAC, will focus on this issue in 2018. I believe that is the appropriate way in which this happens. In regard to the various points put to me, it is not the role of the Central Bank to engender activity. Rather, it is the role of the Central Bank to regulate.
And to enable.
I want to see a credit union movement in Ireland that is sustainable, vibrant and meets the level of social and economic need that I know exists within this country. I have met the representative bodies of the credit union movement and I emphasised that point to them. While I am not a decision maker in regard to communication between the Central Bank and the credit union movement, I am aware of what is going on because I am notified of contact between them. I am eager to work with everybody on how we can create the foundations for the credit union movement in Ireland to be even more successful in the future.
