Written Answers Nos. 149-173
156. Deputy Catherine Connolly asked the Minister for Finance if he will provide an updated version of table 3 from the summer economic statement 2018 taking account of measures in budget 2019 and changes to other economic indicators in particular the figure for net fiscal space in budget 2020; and if he will make a statement on the matter. [19399/19]
View answerI have outlined previously that a disproportionate focus on the concept of fiscal space risks encouraging a profligate fiscal policy that could jeopardise the sustainability of our public finances. In formulating budgetary policy the Government must be guided by what is right for the economy at this point in the cycle, not by what is technically permissible within the limits of the fiscal rules.
The Summer Economic Statement 2019 will include projections for fiscal space, which will take into account the most up to date information. As I stated in my recent appearance before the Budget Oversight Committee, I am considering how best to present this information in order that it be useful and informative.
157. Deputy Catherine Connolly asked the Minister for Finance the estimated additional revenue that would be raised in budget 2020 from the non-indexation of the income tax system; and if he will make a statement on the matter. [19400/19]
View answerThe estimated yield from non-indexation for Budget 2020, will not be finalised until the Office of the Revenue Commissioners has completed and published its Pre-Budget 2020 Income Tax Ready Reckoner, which is expected to be published in Quarter 3 2019. This sets out the cost to the Exchequer of indexing various income tax components by 1%.
In addition, the updated Budget 2020 macro-economic drivers used in preparing these calculations will need to be endorsed by the Irish Fiscal Advisory Council in early October 2019.
158. Deputy Sean Sherlock asked the Minister for Finance the reason a joint account is frozen in the event of one of the named persons on the account dying when the account is for use in a marital situation between two spouses. [19464/19]
View answerI am not aware of any reason why a joint account between two spouses would be frozen in the event of one of the spouses dying. I assume that the Deputy has a particular case in mind.
I would advise such a person who clearly is not satisfied with the actions of the particular bank to make a complaint to the bank's internal complaint resolution process. If they are not satisfied with the outcome of the complaint, they can make a complaint to the independent Financial Services and Pensions Ombudsman. Investigations by the Ombudsman are free of charge to the complainant.
I should clarify that an inheritance taken by a successor who is, at the date of inheritance, the spouse or civil partner of the disponer is exempt from inheritance tax. Section 109 of the Capital Acquisitions Tax Consolidation Act does provide that in the case of a death, where a sum of money in excess of €50,000 was lodged or deposited (other than in a current account) in the joint names of two or more persons, the financial institution concerned cannot make payments from the account to the survivor(s) until it is furnished with a certificate by Revenue that there is no outstanding claim for inheritance tax in connection with the deceased person or a consent in writing from Revenue to such payments pending the ascertainment and payment of inheritance tax. However, section 109 does not apply where, in the case of a joint account held by two persons, one person dies and, at the time of that person’s death, he or she is the spouse or civil partner of the other person.
159. Deputy Darragh O'Brien asked the Minister for Finance the rate of VAT payable by sports and leisure clubs seeking to purchase and install emergency defibrillator devices at their facilities; and if there is provision for such clubs to claim this VAT back. [19488/19]
View answerThe VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with the EU VAT Directive, defibrillators, other than implantable defibrillators, are liable to VAT at the 23% standard VAT rate. The installation of defibrillators is also liable to VAT at the standard rate.
Generally, businesses that are registered for VAT, including businesses in the leisure sector, are entitled to reclaim the VAT borne on the input costs associated with their taxable business activities including the cost of purchasing and installing defibrillators. Where a sport or leisure club, for example a gym, is engaged in taxable economic activity and registered for VAT, they are entitled to reclaim VAT on defibrillators. Sports or leisure clubs who are not registered for VAT, or are not engaged in taxable activities are not entitled to reclaim the VAT they incur on their purchases. Admissions to sporting activities are exempt from VAT in Ireland and as such persons who's main income derives from sporting admissions would not be entitled to claim input VAT deductibility. In addition, sports clubs who are exempt from VAT and not engaged in economic activity would likewise not be entitled to claim input VAT deductibility.
160. Deputy Sean Fleming asked the Minister for Finance his plans to reintroduce the home renovation incentive scheme; and if he will make a statement on the matter. [19498/19]
View answerThe Home Renovation Incentive (HRI) was introduced by Section 477B of the Taxes Consolidation Act 1997 in 2014. I currently have no plans to re-open the scheme which terminated in accordance with its sunset clause on 31 December 2018.
Under my Department's Tax Expenditure Guidelines, the introduction of new tax incentive measures should only be considered in circumstances where there is a demonstrable market failure and where a tax based incentive is more efficient than a direct expenditure intervention.
The HRI was introduced at a time when there was considerable loss of employment within the construction sector, with the aim of addressing this market failure by stimulating increased activity in the sector. In the current context of a growing economy and construction sector, the initial objectives of the scheme have been fulfilled, and this support is no longer needed in the terms in which it was originally envisaged.
Furthermore, in light of the current housing supply shortage, and the need to deliver 25,000 additional housing units per annum over the period 2017-2021, there is a risk that the HRI could lead to increased competition for scarce resources within the construction sector, leading to upward pressure on construction costs and house prices. The potential for displacement of labour from work on new builds to work on home renovations would create a high opportunity cost of labour associated with HRI which was not present at the inception of the scheme.
Revenue advise me that, as of 2 January 2019, the cost to the Exchequer of the HRI was c. €105 million, with a further €65 million worth of credits yet to be claimed in respect of the incentive. As the Deputy will appreciate, I must be mindful of the public finances and the many demands on the Exchequer. Tax reliefs, no matter how worthwhile in themselves, lead to a narrowing of the tax base.
161. Deputy Pearse Doherty asked the Minister for Finance the estimated receipts due to be received from the IBRC by each year until these receipts are expected to end in tabular form. [19503/19]
View answerThe Joint Special Liquidators of IBRC announced in December 2018 that they would pay all outstanding amounts owed to admitted unsecured creditors of IBRC. As part of this final 50% dividend payment to admitted unsecured creditors the State received c. €593 million from its claims. This brings to c.€1.19 billion that has been returned to the State to date.
The Joint Special Liquidators of IBRC also confirmed that, given the success of the liquidation to date, it is their expectation that there will be further funds recoverable to the State following repayment of other creditors, including subordinated bondholders. The Joint Special Liquidators have not yet given a specific timeframe in relation to the commencement of any further payments from the liquidation.
As such it is not currently forecasted that any further receipts will be returned to the State from the liquidation in 2019 and an preliminary estimate of €100 million has been included in budgetary forecasts for 2020. It is important to note that these are indicative forecasts and are subject to change as the remaining tasks in the liquidation are completed, remaining residual assets are sold and the c. 93 outstanding legal proceedings are concluded.
162. Deputy Pearse Doherty asked the Minister for Finance the estimated amount of the €3.5 billion NAMA surplus due to be received in each year until all the payments are made in tabular form. [19504/19]
View answerI wish to advise the Deputy that NAMA’s currently projected surplus of €3.5 billion is expected to be available for return to the State when the Agency substantially completes its work in 2020/2021. NAMA is on track to have repaid all its subordinated debt and to have reimbursed the private shareholders in the NAMA Investment DAC by that time.
It is important to note that this surplus has yet to fully crystallise. Realisation of this surplus depends on prevailing market conditions and on the success of NAMA's ongoing deleveraging, its Dublin Docklands SDZ programme and its residential delivery programme. These activities must be completed for the expected surplus to be earned.
It is currently envisaged that the available surplus will be transferred to the Exchequer in 2020 and 2021. It is currently estimated that €2 billion will be transferred in 2020 with a further €1.5 billion being transferred in 2021. This timeline is contingent on NAMA’s projected surplus of €3.5 billion remaining unchanged. NAMA reviews its estimate of the projected terminal surplus every year as part of the process of preparing its Annual Report and Financial Statements. The Agency’s Annual Report for 2018 will be published on 30 May 2019. If any revision to the current projected surplus is announced at that stage, the timing of transfers, as indicated above, may also need to be revised.
Any NAMA surplus paid, while Exchequer positive, will not impact the general government balance, in line with EUROSTAT rules. It will be a decision for the Government as to how any surplus returned by NAMA will be utilised within the framework of the fiscal rules. However, the intention has always been to use such receipts from the resolution of the financial sector crisis to pay down our national debt and reduce our debt servicing costs.
163. Deputy Pearse Doherty asked the Minister for Finance his policy on the sale of State-owned bank shares in the short and medium term; if this policy differs between the banks concerned; if changes in the value of these shares create a change in policy; and if he will make a statement on the matter. [19505/19]
View answerThe Deputy is aware that the Government does not see itself as a long-term investor in the banking sector. The funds used to make these investments are a diversion of taxpayer resources that could be put to better use. Equity investments are also risky and this particularly applies to bank shares as this country knows to its cost. Accordingly, the Government’s policy is to return fully each of the banks in which the State has a shareholding to private ownership.
Officials in my Department monitor the performance of AIB, Permanent TSB and Bank of Ireland, their share prices and equity markets more generally on an ongoing basis to determine the next sensible opportunity to realise value from these investments.
It is important to point out that exiting our investments in these banks in a sensible measured way which will optimise value for our citizens will take a number of years. I do not propose to set out a rigid timeline for disposal as this would not be in the country's interests.
Our policy is consistent across all three banks. There are no defined or planned changes in policy related to share price movements other than the requirement to realise value from these investments. All three banks in which the State holds shares are performing well but investor appetite for bank shares has waned over the past year, due in large part to a change in interest rate expectations as growth in the Eurozone has slowed.
Any decision to sell further shares will be made having taken the best advice both internal and external.
164. Deputy Pearse Doherty asked the Minister for Finance the evidence to support the claims made in the stability programme update 2019 that there is a threat of an overshooting of housing supply; and if he will make a statement on the matter. [19506/19]
View answerMy Department estimates that the medium-term demand for housing is around 35,000 units per annum. Over the period 2008 - 2018, an average of less than 15,000 units were built each year, resulting in a considerable level of ‘pent-up’ demand. In order to satisfy this pent-up demand, housing output will need to be higher than the level of annual underlying demand for a number of years.
The risk of overshooting housing supply identified in the Stability Programme Update (SPU) is a more medium-term to long-term risk. It relates to the possibility that housing output would remain at elevated levels for a period after all unmet demand has been satisfied. The Deputy will be aware of the over-reliance on the construction sector in the first decade of this century, and the disastrous consequences of this.
Finally, I would stress that the SPU highlights - as a more immediate risk - the potential for supply constraints to arise in meeting this level of supply and the impact that may have on competitiveness.
165. Deputy Pearse Doherty asked the Minister for Finance his preferred method of measuring the structural balance in view of the inclusion of two methodologies in the stability programme update 2019; and if he will make a statement on the matter. [19507/19]
View answer166. Deputy Pearse Doherty asked the Minister for Finance his views on whether the European Commission will accept the methodology for calculating the structural balance as included in the stability programme update 2019; and if he will make a statement on the matter. [19508/19]
View answer167. Deputy Pearse Doherty asked the Minister for Finance his views on the most accurate methodology for measuring the output gap in the economy between his Department and the commonly agreed methodology of the European Commission; and if he will make a statement on the matter. [19510/19]
View answerI propose to take Questions Nos. 165 to 167, inclusive, together.
The Department of Finance has developed a number of alternative statistical models to assist in its assessment of the medium term growth potential of Ireland’s economy and its cyclical position over the short term. These results, along with other economic indicators (including the modified current account, labour market developments and credit developments) are considered by the Department when assessing the cyclical position of the economy. The development of the Department of Finance’s own approach is seen as providing more intuitive estimates of the cyclical position than the Commission’s harmonised methodology, thereby helping to better inform fiscal policy-making.
This work was undertaken as a response to the under performance of the Commission’s harmonised methodology in estimating Ireland’s output gap. The harmonised methodology has often produced counter-intuitive results for Ireland’s cyclical position. This is largely due to the “one-size fits all” nature of the approach which fails to accurately account for the specific characteristics of the Irish economy. The Irish Fiscal Advisory Council (IFAC) has welcomed the use of the Department’s alternative approach.
Assessment of the Medium Term Objective (MTO), the cornerstone of the preventive arm of the Stability and Growth Pact (SGP), requires an estimate of the structural budget balance. This is the cyclically adjusted general government balance less one-offs or temporary measures. An estimate of Ireland’s output gap is necessary to calculate the cyclical component of the budgetary balance. This is used in turn to derive the structural balance. As a result, using estimates of the output gap based on the Commission’s methodology can lead to counter-intuitive estimates for the structural balance.
Considering this, an alternative Department of Finance structural balance was included in Table 1 of the Stability Programme Update (SPU) 2019, alongside an estimate of the structural balance based on the Commission’s approach (referred to respectively in Table 1 as the 'DOF' and ‘SGP’ approaches ). This methodology makes use of the Department’s alternative assessment of the cyclical position of the economy and therefore produces estimates for the structural balance that are more representative of the underlying performance of the economy.
The Department will continue to use the harmonised approach to estimate the level of potential output as it is the legally binding reference method used by the Commission for assessment of Member States’ compliance with the SGP. Moreover, when issues with the methodology manifest themselves the Department will continue to engage with the Commission bilaterally and through the Output Gap Working Group to devise solutions that help to improve the plausibility of potential output estimates.
168. Deputy Sean Fleming asked the Minister for Finance the number and amount of payments made in each year under the home renovation scheme since it was introduced; the amounts paid out under the scheme; and if he will make a statement on the matter. [19518/19]
View answerI am informed by Revenue that monthly statistics on the Home Renovation Incentive (HRI) are published at www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/hri/hri-quarterly.aspx.
The number of HRI works, by year commenced, and the value of associated tax credits available under the Incentive is provided below. The tax credits can be availed of in the two (or more) years subsequent to the year in which the works have been paid for.
|
Year Commenced |
Number of Works |
Value of Tax Credits (€m) |
|
2013 |
3,633 |
4.3 |
|
2014 |
24,238 |
26.3 |
|
2015 |
31,573 |
30.4 |
|
2016 |
31,497 |
28.0 |
|
2017 |
28,573 |
21.5 |
|
2018 |
32,609 |
16.4 |
|
2019* |
312 |
0.02 |
*To 1 May 2019
169. Deputy Thomas P. Broughan asked the Minister for Finance when the competition to fill the position of Governor of the Central Bank will be completed; and if he will make a statement on the matter. [19529/19]
View answerSubsequent to the Deputy submitting his question, the Government agreed at the Government meeting on 1 May last to nominate Mr. Gabriel Makhlouf for appointment by the President as the new Governor of the Central Bank of Ireland. Mr. Makhlouf is the Treasury Secretary and Chief Executive of the New Zealand Treasury, and the New Zealand Government’s chief economic and financial adviser.
As I stated previously, I am delighted to nominate a person of Mr. Makhlouf’s international calibre for appointment as Governor of our Central Bank. He has demonstrated his broad and detailed knowledge, of economics, financial markets, monetary policy, and fiscal policy, and has the experience of leading a large and complex public service organisation. Previously he was Chair of the world’s main tax rule-making body – the Committee on Fiscal Affairs – at the OECD in Paris and was also responsible for the UK’s Government Banking Service.
As Treasury Secretary and Chief Executive of the New Zealand Treasury, he is currently responsible for overseeing reforms of New Zealand’s three macro-economic pillars (monetary policy, financial stability and fiscal policy). He is a leader of the diversity and inclusion agenda in New Zealand’s public and private sectors. He will bring with him this wealth of experience to the role of Governor.
Mr. Makhlouf’s nomination followed a rigorous and comprehensive international process, which included a public call for expressions of interest, online and media advertising, and an extensive executive search by an external firm who were appointed to manage both expressions of interest from the public call and directly approach potential candidates on a global scale throughout Europe, America, and Australasia.
There was a high level of interest in the competition. A short-listing exercise by the interview panel produced 5 candidates (3 male and 2 female), who were chosen to undergo psychometric testing followed by a rigorous final competitive interview.
170. Deputy Clare Daly asked the Minister for Finance the extent to which his attention has been drawn to the programme of local branch closures of a bank (details supplied); if this is being carried out in order to increase the attractiveness of a potential sale; and if he will make a statement on the matter. [19544/19]
View answer171. Deputy Clare Daly asked the Minister for Finance the action he is prepared to take to renegotiate the relationship framework agreement between a bank (details supplied) and the State on strategic and day-to-day management decisions in order to protect local communities from the impact of branch closures; and if he will make a statement on the matter. [19545/19]
View answerI propose to take Questions Nos. 170 and 171 together.
As the Deputy will be aware, AIB is an independent company with listings on the Irish and London Stock Exchanges. Decisions in regard to branches are the sole responsibility of the board and management of AIB which must be run on an independent and commercial basis. The bank's independence is protected by a Relationship Framework which is a legally binding document that cannot be changed unilaterally. This framework which is publicly available, was insisted upon by the European Commission to protect competition in the Irish market. The AIB Relationship Framework can be found here:
https://www.gov.ie/en/publication/597d15-aib-relationship-framework-agreement-june-2017/
Notwithstanding this my Department does not hold the information that is being sought. However officials from my department contacted AIB and was provided with the following response:
"AIB Bank does not have any plans to undertake a programme of local branch closures. The bank remains deeply committed to its branch network all over Ireland. AIB has 200 branches and there are more than 70 EBS branches, all of which form a very important part of the Group’s sustainability strategy, including its presence in communities across the country."
172. Deputy Clare Daly asked the Minister for Finance his plans to support the objectives in local communities of the InvestEU programme of the European Commission in respect of the key policy areas of social capacity building and the growth of SMEs in order to move banking towards a sustainable accountable future. [19546/19]
View answerThe proposed InvestEU programme will replace the Investment Plan for Europe (Juncker Plan) under the multiannual financial framework (MFF). The programme will run from 2021-2027. When it comes into effect, it will streamline 14 financial instruments, currently under 8 different programmes, into one overarching instrument.
Preliminary agreement on the InvestEU programme has been reached between the European Parliament, the European Commission and the European Council , with a number of matters still outstanding, including the budgetary aspects of the programme which are subject to the overall agreement of the next MFF. InvestEU should be finalised with the next Parliament. Once adopted there will be a great deal of work to complete before implementation can begin.
The programme consists of the InvestEU Fund, the InvestEU Advisory Hub and the InvestEU Portal. The InvestEU Fund will have four policy windows namely (i) sustainable infrastructure; (ii) research, innovation and digitisation,(iii)SMEs; and (iv) social investment and skills. These policy windows are of relevance to a number of line Departments. It will be a matter for each relevant line Department to support initiatives that fall under these policy windows.
Of relevance to SMEs are financial instruments that are currently provided under the European Programme for Employment and Social Innovation (EaSI), the European Programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises (COSME) and Horizon 2020 (Innovfin- Finance for EU Innovators).
Once the InvestEU programme is in place, the Department of Business, Enterprise and Innovation and the Department of Agriculture, Food and the Marine will, in conjunction with my Department, continue to build on and extend utilisation of available supports and funding for SMEs.
The Strategic Banking Corporation of Ireland (SBCI), is committed to supporting enhanced competition in the provision of finance and solving market failure and access to finance issues for SMES in the Irish economy. It continues to explore and utilise the opportunities presented under the existing European budgetary framework and Fund for Strategic Investments (EFSI) through working with the EIB Group to bring to market financing measures that increase the competitiveness and resilience of Irish SMEs and grow and protect jobs in the Irish economy. It plans to be fully ready to continue to do so under the InvestEU programme from 2021.
173. Deputy Clare Daly asked the Minister for Finance the way in which he plans to monitor the recently announced intentions of a bank (details supplied) to promote a sustainable banking future by incorporating social values into its business model; and the way in which he will hold the bank to account for measurable concrete actions to empower small business and personal banking in local communities nationally. [19547/19]
View answerAs the Deputy will be aware, AIB is an independent company with listings on the Irish and London Stock Exchanges. The decisions around lending operations are the sole responsibility of the board and management of AIB which must be run on an independent and commercial basis. The bank's independence is protected by a Relationship Framework which is a legally binding document that cannot be changed unilaterally. This framework which is publicly available, was insisted upon by the European Commission to protect competition in the Irish market. The AIB Relationship Framework can be found at the following link.
Saying this I have spoken at length about my objective in legislating for expanded Central Bank powers. We want to cultivate a sustainable financial services industry with rewards reaped over the long-term for customers, staff, and shareholders and where consideration of the impact on individuals, the economy and society as a whole is firmly embedded in organisational culture. Furthermore the recently established Irish Banking Culture Board is an independently led entity created to ensure that the industry is focused on the best interests of the customer and leads to a sustainable banking industry that promotes the highest standards of behaviour and professionalism.
My officials contacted AIB and received the following response:
"AIB is working to rebuild its social licence to operate with all its stakeholders. As previously outlined by the Bank’s CEO, three critical factors underpin the Bank’s approach:
- The primacy of the customer (including enhanced openness in how the Bank engages with all its stakeholders).
- Accountability (supporting the CBI’s introduction of a Senior Executive accountability regime, underpinned by legislation).
- Sustainability (including decarbonisation of the economy; supporting renewable energy development; economic support for communities by maintaining a strong branch network as well as providing best-in-class digital access to products; supporting organisations with strong community links – sporting and cultural – and staff involvement in the fabric of local communities, including bank-backed volunteerism.
Under EU legislation (European Union, disclosure of non-financial and diversity information by certain large undertakings and Groups, Regulations 2017), AIB is required to publicly report on the approach, management and progress of the above matters as part of its annual Non-financial disclosures statements.
This is in addition to the voluntary annual AIB Group plc Sustainability Report that the Bank publishes which is independently assured by Deloitte and which adheres to the Global Reporting Index (GRI) – an internationally recognised standard."
