61. Deputy Michael McGrath asked the Minister for Finance the status of preparations for a no-deal Brexit; and if he will make a statement on the matter. [25493/19]View answer
Written Answers Nos. 61-80
61. Deputy Michael McGrath asked the Minister for Finance the status of preparations for a no-deal Brexit; and if he will make a statement on the matter. [25493/19]View answer
The European Council in April 2019 agreed to an extension of the Article 50 process until 31 October 2019, following a request by Prime Minister May. The extension includes giving the UK flexibility to leave before that date should the Withdrawal Agreement be ratified. The European Council decision made clear that the Withdrawal Agreement, including the backstop, cannot be re-negotiated and that any unilateral commitments by the UK Government should be compatible with the letter and the spirit of the Withdrawal Agreement. We welcome these important assertions. The European Council also agreed that should the UK’s position on the EU-UK future relationship evolve, the EU is prepared to reconsider the political declaration on the future relationship.
The Government remains focused on the ratification of the Withdrawal Agreement as the best way to ensure an orderly withdrawal of the UK from the EU and to fully protect the Good Friday Agreement. The decision of the European Council provides the UK with more time, until 31 October, to ensure an orderly withdrawal. However, the risk of a no deal Brexit remains. The preparations for all possible scenarios, that have been taking place since before the Brexit referendum, are therefore continuing. Brexit in all scenarios will have negative consequences and as a Government we are determined to be as ready as we can be.
The Government’s Contingency Action Plan, published on 19 December 2018, sets out comprehensive, cross-Government preparations that have been taking place over the last three years. This work continues at both a national and EU level. Last week, on 12th June, the Commission issued its fifth Contingency Communication which updates and reinforces the necessary no deal Brexit preparedness measures at EU level.
The Government has been taking key decisions to advance the implementation of our Brexit preparations. The Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act, was signed into law by the President on 17 March 2019. The Act complements legal measures at EU level and focuses on measures protecting our citizens and supporting the economy, enterprise and jobs, particularly in key economic sectors. The Act is primarily intended for a no deal scenario, and most of the Act will not be commenced should the Withdrawal agreement be ratified. The legislation which I proposed in the areas of Taxation and Financial Services is an important part of the whole of Government response to Brexit, as it will ensure continuity of access for business and citizens in relation to certain taxation reliefs and allowances, as well as enabling insurance undertakings to continue to fulfil contractual obligations to their Irish customers, in a no deal scenario.
The Government has also taken important steps to prepare our economy, including through dedicated measures announced in Budgets 2017, 2018 and 2019, supported by long-term planning through the National Development Plan and the National Planning Framework which will provide significant investment in Ireland’s public capital infrastructure.
As Minister for Finance, my objective is to protect the economic and financial interests of the State and to support the work of the Revenue Commissioners so as to minimise the Brexit disruption to trade, to the greatest extent possible. My Department is working within the whole-of-Government approach and is coordinating closely with its agencies who are developing and implementing plans and measures to protect our economy.
The Central Bank has statutory responsibility for financial stability and has been focused on Brexit since before the UK referendum. The Central Bank has been working closely with financial services firms to ensure that they have contingency plans in place for end March 2019, and they are now using the extended deadline to further prepare to cope with the possible effects of Brexit, with as little disruption for consumers as possible. In relation to funding the State, the NTMA’s strategy continues to take account of the market dislocation risks posed by Brexit. The Exchequer’s funding position is strong.
Within Revenue, there is a very significant program of work that has been ongoing in terms of ICT, staffing, and trader engagement. Additional physical capacity is in place at ports and airports to apply checks and controls, in a no deal scenario. This work will ensure that the Revenue Commissioners are prepared to facilitate the efficient movement of legitimate trade to the maximum extent possible in a no deal scenario.
I am satisfied that my Department and its relevant agencies are continuing to work to ensure that they are as prepared as possible to limit the inevitable disruption to consumers and trade, post Brexit.
As a Government we will continue to strongly encourage businesses and citizens to do the same. For instance, businesses that trade with the UK should apply now to the Revenue Commissioners for their customs number (EORI). The Government website gov.ie/Brexit is an important resource in this regard and contains information on a range of Brexit supports and advice, as well as an overview of the institutions offering financial assistance to businesses such as the SBCI, Microfinance Ireland, Intertrade Ireland and Enterprise Ireland.
62. Deputy Barry Cowen asked the Minister for Finance the tangible steps his Department has taken to provide flood insurance to those properties located in areas with demountable flood defences; and if he will make a statement on the matter. [17987/19]View answer
I am conscious of the difficulties that the absence of flood insurance cover can cause to homeowners and businesses, and that is one of the reasons the Government has been prioritising investment in flood defences over the last number of years.
However, the provision of insurance cover and the price at which it is offered is a commercial matter for insurance companies and is based on an assessment of the risks they are willing to accept Consequently neither the Government, nor the Central Bank can interfere in the provision or pricing of insurance. This position is reinforced by the EU framework for insurance (Solvency II directive).
The core strategy for addressing areas at risk from flooding is the OPW Catchment Flood Risk Assessment and Management ("CFRAM") Programme which focusses on 300 Areas for Further Assessment identified as being at potentially significant risk of flooding. The proposed feasible measures are outlined in Flood Risk Management Plans which sets out current flood relief schemes, including 118 proposed schemes that can protect a further 11,500 properties.
The Government believes that its existing policy in relation to flooding, which is focused on the development of a sustainable, planned and risk-based approach, is the best way forward. This commitment is underpinned by the OPW and Local Authorities capital investment programme, and complemented by a Memorandum of Understanding between the OPW and Insurance Ireland which provides for the exchange of data in relation to completed flood defence schemes.
This arrangement has led to a greater availability of flood cover in previously higher risk areas. For instance, the Insurance Ireland survey in March 2019 of approximately 87% of the property insurance market in Ireland, indicates that of the completed defence schemes, 95% of policies in areas benefitting from permanent flood defences include flood cover, while 74% of policies in areas benefitting from demountable defences include flood cover. In addition, it should be noted that an Insurance Ireland/OPW working group shares relevant data on completed flood defence schemes and a sub-group has been established to explore the technical arrangements that may allow for the further sharing of data.
In relation to demountable defences my Department is continuing to examine how to increase the level of cover in areas with demountable defences. One of the outcomes of these discussions is that the insurance industry has now acknowledged that they accept that the demountable defences meet the desired ‘1:100 year’ standard. However, while demountable defences are effective when correctly deployed they are dependent on human intervention which increases the risk of failure. This is a difficult and complex issue to resolve but every effort being made to get a more responsive approach from the insurance industry on this matter.
63. Deputy Aindrias Moynihan asked the Minister for Finance the progress in developing legislation that would oblige insurance companies to inform motor insurance policyholders of claims made against them; and if he will make a statement on the matter. [25567/19]View answer
My Department is currently working on developing legislative changes that would oblige insurance companies to inform policyholders of claims made against them. The objective of the proposal is to ensure that policyholders are informed as soon as possible after a claim against their policy is lodged and informed after a claim is settled. In addition, the proposal will seek to require insurers to engage with the policyholder to ensure that the policyholder’s views can be taken into consideration.
This proposal originates from Recommendation 8 of the Report on the Cost of Motor Insurance. A corresponding recommendation was then included in the Report on the Cost of Employer and Public Liability Insurance (Rec 10) as this issue is generally far more pertinent to businesses and other liability insurance policyholders rather than individual motorists.
The Department engaged with Insurance Ireland to seek voluntary agreement of this proposal through a protocol. Unfortunately, no such agreement could be reached on a non-legislative basis.
As a result, it is proposed to include this legislative proposal within the Consumer Insurance Contracts Bill 2017, a Private Members’ Bill introduced by Sinn Féin which is based on a 2015 Law Reform Commission Report. The Government provided support in principle for the objectives of this Bill at Second Stage and noted the intention of the Minister for Finance to submit substantive amendments should the Bill reach Committee Stage.
On 27 May 2019 Government approval was given to enable the drafting of committee stage amendments. As part of this approval process the Office of the Attorney General expressed the view that they wish to obtain specialist independent legal advice on this Bill to avoid any unforeseen consequences.
I understand that the Clerk of the Joint Committee on Finance, Public Expenditure and Reform and Taoiseach has written to my Department to signal that the Committee has decided to consider the Bill at Committee Stage the week beginning 8th July. The Office of the Attorney General is currently working on the Government's Committee Stage amendments. However as this is a Private Members’ Bill, the timing of the legislative steps are not within the control of the Government.
64. Deputy Joan Burton asked the Minister for Finance his views on the recent communiqué by G20 finance leaders on digital services taxes; his further views on plans for a new tax policy based on the amount of business a digital company does in a state and not the location it is headquartered; and if he will make a statement on the matter. [25319/19]View answer
I have been very clear that further change to the international tax framework is necessary to ensure that we reach a stable global consensus for how and where companies should be taxed. A certain, stable, and globally agreed international tax framework is vital to facilitate cross border trade and investment.
In this regard I welcome the G20 Finance Ministers’ commitment to achieving a consensus based solution to addressing the tax challenges arising from digitalisation, and their endorsement of the OECD BEPS Inclusive Framework as the correct forum for this work to be carried out.
When I look at the proposals currently being discussed at OECD I believe that proposals examining the issue of where companies generate their value, and whether new concepts of value creation need to be recognised, might provide a basis upon which a sustainable agreement could be found at the OECD.
It is my belief that any such solution should be grounded in the principle that corporate tax should be paid where value is created in accordance with the well established arm’s length principle. However, there is scope for a possible broadening of the concept of value creation that recognises that some value may arise from scale, from brands or from access to markets.
Any change should be moderate and based, to the greatest extent possible, on existing transfer pricing rules which are deeply embedded in the international tax framework. The bulk of profits must remain taxable in exporting countries under the existing corporate tax framework. This can help to ensure that such countries are not disproportionately impacted. Any proposal which would disproportionately benefit large countries at the expense of smaller ones is not sustainable. Proposals which are focused on providing certainty into the medium term for governments and for business are much more likely to be acceptable to the international community.
Ireland will continue to engage positively in the discussions at OECD and remains open to solutions which respect our right to compete fairly and which respect the legitimacy of Ireland’s longstanding 12.5% corporate tax rate.
65. Deputy Michael McGrath asked the Minister for Finance the impact on Ireland’s corporation tax base and level of receipts from the proposed changes to international taxation under the umbrella of the OECD BEPS process; and if he will make a statement on the matter. [25492/19]View answer
On 28 May, the OECD Inclusive Framework on BEPS agreed a programme of work aimed at developing a consensus solution to the tax challenges arising from the digitalisation of the economy. The work will be undertaken under the auspices of the OECD over the coming months, on a "without prejudice" basis. The work programme was published by the OECD on 31 May last and endorsed by G20 Finance Ministers at their meeting in early June.
The programme is structured under two broad pillars, known as Pillar One and Pillar Two. In very broad terms, Pillar One is examining where profits of multinationals are allocated and examining mechanisms for potentially amending existing approaches. Pillar Two is examining the concept of minimum effective taxation.
The work on both Pillars is at a very early stage and the OECD work programme provides a framework for detailed work to begin in the OECD's technical working parties. The discussions on both Pillars are not yet formulated as draft proposals which can be fully analysed by countries at this stage.
The proposals on the table under Pillar One are, as yet, quite diverse and there is no clarity on what might ultimately be agreed. While clearly a change in how profits are taxed in different jurisdictions would result in a shift in profits being allocated from one location to another, upward and downward adjustments in revenue won’t become clear until technical work advances.
As regards Pillar Two, the work programme will detail some of the potential mechanics of how a minimum taxation proposal may operate but there is not sufficient detail at this stage to estimate the impact of any eventual proposal on corporation tax receipts.
In the circumstances, it is not possible to calculate the impact on corporation tax receipts of implementing the proposals as they are currently drafted. Officials in my Department and Revenue will be actively engaged in the work at OECD, including the estimation of the impact of the options as they emerge in more detail.
The Deputy will be aware that on 23 May, I delivered a speech on this important topic at the Harvard Kennedy School and Irish Tax Institute Global Tax Policy Conference where I signalled that change is coming in the international tax rules as a result of the work now underway at the OECD to find a globally agreed solution to the challenges in relation to the taxation of an increasingly digitalised international economy.
In that speech, I outlined my belief that it might be possible to find a globally acceptable agreement within the broad Pillar One proposals that provides certainty. I also set out the principles that would need to be observed in order for the OECD process to result in an agreed outcome. Those principles include aligning taxing rights with value creation, respecting the long established international corporate tax framework as well as the primary taxing rights of exporting countries and not disproportionately benefitting large countries at the expense of smaller ones.
As I have outlined, a minimum effective tax proposal had not, until recently, been part of the discussions at the OECD on addressing the tax challenges of digitalisation and I remain to be convinced of the validity and appropriateness of this aspect of the work.
Nevertheless, Ireland is positively engaged in the discussions at the OECD and I remain open to solutions which respect our right to compete fairly and which respect the legitimacy of Ireland’s longstanding 12.5% corporate tax rate. In all of these discussions my key priority will be to ensure that as this important work advances, Ireland’s interests are central to the process of forming that globally agreed consensus.
Within those parameters, if the outcome of this work can, in these changing times, provide tax certainty for governments and for business, it will be very worthwhile.
66. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he remains satisfied that the State finances remain on course and that the economy continues to compete effectively with all other economies throughout Europe and outside; and if he will make a statement on the matter. [25572/19]View answer
The public finances continue to perform well. In 2018, the General Government balance returned to a surplus for the first time in over a decade – a significant achievement. This followed a number of years of primary budget surpluses. Furthermore, the European Commission have stated that Ireland continues to be compliant with the fiscal rules. For this year and 2020, further surpluses of 0.2 and 0.4 per cent (of GDP) are anticipated.
However, while very substantial progress has been made in recent years, we cannot become complacent. The headline debt ratio continues to improve but it remains flattered by developments in nominal GDP. Partly for these reasons, my officials will shortly publish two related pieces of work on fiscal vulnerabilities and public debt. These reports confirm that more needs to be done to bring the debt burden down to lower levels.
It is imperative that we continue to implement prudent budgetary policy in ‘good times’ so that policy can deliver counter-cyclical support in the event of a downturn. Such policies are also warranted by the unusually elevated set of international risks facing the Irish economy at present, particularly relating to Brexit. The external environment has also weakened in recent months with a less benign economic outlook.
Taking recent fiscal and macroeconomic data together, the overall performance of the economy remains robust, best encapsulated by exceptional labour market data. The unemployment rate is well below 5 per cent (down from 16 per cent in 2012) helped by strong and broad based employment gains, which are transforming income and living standards in Ireland. Significant progress has also been made in recent years in improving Ireland's competitiveness. The 2019 IMD World Competitiveness Yearbook ranked Ireland as the 2nd most competitive country in the EU and the 7th most competitive in the world.
Question No. 68 answered with Question No. 51.
67. Deputy Brendan Smith asked the Minister for Finance the additional measures that will be implemented to deal with cross-Border smuggling and illicit trade in products such as fuel and tobacco; and if he will make a statement on the matter. [25502/19]View answer
The threat that fuel fraud and the illicit tobacco trade pose to legitimate business, to consumers and the Exchequer is clear and I am assured by Revenue that combatting such criminality continues to be a priority for them.
Steps taken by Revenue to combat the illegal fuel trade include the introduction of stringent supply chain controls and reporting requirements, and a rigorous programme of enforcement action. In addition, Revenue and the UK Revenue and Customs undertook a joint initiative to introduce a new marker for use in marked fuels, which came into operation from April 2015. Revenue have also conducted random National Sampling Programmes in the years 2016 to 2019, to assess the extent of fuel laundering. The industry view is that the actions taken have been successful in curtailing fuel fraud and the results of Revenue’s sampling programmes support this view.
Revenue acts against all aspects of the illegal tobacco trade, and uses a combination of risk analysis, profiling and intelligence, and risk-based screening of cargo, vehicles, baggage and postal packages to intercept illicit products. Action after importation includes checks at retail outlets, markets and private and commercial premises.
Revenue and An Garda Síochána collaborate closely in acting against fuel and tobacco crime, and also cooperate closely with their counterparts in Northern Ireland, in the framework of the North-South Joint Agency Task Force. This cooperation plays a key role in targeting the organised crime groups responsible for much of this criminality, who operate across jurisdictions. Recent successes include the detection of an illegal cigarette factory in Jenkinstown, Co. Louth, in March 2018, as well as the detection of a second cigarette factory in Knockbridge, Co. Louth, in March 2019.
I am satisfied that Revenue’s work against fuel fraud and the illicit tobacco trade has achieved a considerable level of success. For my part, I will fully consider any additional proposals for legislative change that may be brought forward by Revenue which would enhance its capacity to deal effectively with fraud and criminality in these areas.
Question No. 70 answered with Question No. 47.
Question No. 71 answered with Question No. 51.
Question No. 72 answered with Question No. 57.
69. Deputy Pearse Doherty asked the Minister for Finance if he is satisfied that REITs and IREFs are paying a fair share of tax; and if he will make a statement on the matter. [25527/19]View answer
Institutional investors represent one aspect of the property market and have an important role in increasing supply, particularly the supply of urban apartments.
Notwithstanding this fact, the Government monitors the actions of investors in the market and has taken action when abuses have been identified. The Deputy will be aware that action was taken in 2016 to address concerns about the use of section 110 and fund vehicles by foreign investors to take profits derived from Irish real estate without paying Irish tax.
This resulted in the introduction of the IREF (Irish Real Estate Fund) framework in 2016. IREFs are investment undertakings, excluding UCITS, where at least 25% of the value of that undertaking is made up of Irish real estate assets. Where the main purpose of the fund is to invest in Irish property, this also falls into the regime regardless of the level of property held. Where an IREF makes an actual distribution or on the redemption of units in the IREF, non-resident investors will be subject to a withholding tax of 20%. Certain investors such as pension funds, life assurance companies, charities and credit unions are exempt from the withholding tax as this is the norm for such bodies across the tax acts.
The Real Estate Investment Trust (REIT) framework was introduced in 2013, to facilitate long-term, risk-diversified, collective investment in rental property. The rules relating to REITs in Ireland are found in Part 25A of the Taxes Consolidation Act 1997. In order to be a REIT, a company must be listed on the main market of an EU stock exchange within three years of forming, and it must be widely held. Irish REITs are collective investment vehicles which invest in Irish property. As such, their income and gains from Irish property are not taxed within the REIT but are instead taxed in the hands of the investor when distributed. REITs must distribute at least 85% of their property profits to their shareholders each year. A REIT is subject to corporation tax on any income or gains arising from any other business (i.e. non-property business) that it carries on.
Dividend withholding tax at 20% must be applied to all distributions from REITs, other than distributions to certain limited classes of investors such as pension funds and charities as they are more generally exempt from tax.
I am satisfied with the tax regimes applicable to REITs and IREFs, however given the important implications which developments in the property market can have for the economy, my Department actively monitors developments in this sector on an ongoing basis. As part of the 2018 Finance Act process I committed to conduct a review of REITs, IREFs and section 110 companies as they invest in the Irish property market. Officials in my Department are currently preparing this report, which is to be presented to the Tax Strategy Group in July.
73. Deputy Thomas P. Broughan asked the Minister for Finance his views on a key conclusion of the recent fiscal assessment report of June 2019 from the Irish Fiscal Advisory Council that the primary balance as a share of GNI has flat-lined since 2015 and that this suggests that there are underlying structural problems and the underlying fiscal position of Ireland is disimproving; and if he will make a statement on the matter. [25414/19]View answer
I have noted the assessment of the Stability Programme Update 2019 in the Irish Fiscal Advisory Council’s Fiscal Assessment Report. In keeping with established practice, I will issue a formal response to the Report in due course.
The Council’s assessment of the primary budget balance highlights concerns over the risks of reliance on elevated corporation tax receipts and unplanned increases in Government expenditure.
As I have stated on numerous occasions, the Government is acutely aware of the importance of not committing to unsustainable permanent expenditure increases financed by transient revenue increases. To that end, we have committed to putting aside some of the excess corporation tax receipts for the Rainy Day Fund, to build up our fiscal buffers for the uncertain economic times ahead.
Furthermore, my Department has prepared a Fiscal Vulnerabilities Scoping Paper, to be published shortly, which outlines a number of possible policy approaches to countering the risks of reliance on volatile tax revenues. These proposals, among others, will be considered by Government as we begin preparations for Budget 2020.
In terms of unplanned increases in expenditure, additional expenditure reporting requirements by Departments can be introduced when expenditure has exceeded departmental budgets in the previous year. After the significant budget overrun by the Department of Health last year, a new oversight board has been established to continuously monitor and report on departmental expenditure, in order to address potential issues as they arise.
My Department will publish the Summer Economic Statement 2019 next week. This will set out the parameters for economic growth, the risks facing the economy over the medium-term, and the Government's strategy for addressing these challenges. The Statement will guide Government in formulating budgetary policy based on the principles of steady and sustainable improvements in the public finances and living standards.
74. Deputy Joan Burton asked the Minister for Finance his views on the country-by-country report of the European Commission recommending the State to address features of the tax system that may facilitate aggressive tax planning and to focus in particular on outbound payments and reference to the tech giants using Irish corporate tax structures here to repatriate EU wide revenues back to the United States of America; and if he will make a statement on the matter. [25323/19]View answer
The European Commission Country Specific Recommendations for EU Member States form an integral part of the European Semester cycle of economic governance. The overall objective is to encourage the Member States to increase their growth potential by continuing to improve their economies and further strengthening their economic resilience.
In this regard I welcome the publication of the European Commission’s Country Specific Recommendations for Ireland. While one of these recommendations calls on Ireland to continue to take action on addressing aggressive tax planning, it is notable that Commissioner Moscovici has publicly acknowledged that we are on the right track and encouraged us to continue in this direction.
Ireland’s actions in recent years have demonstrated our clear commitment to taking action to address aggressive tax planning. Ireland’s Corporation Tax Roadmap, which was published last September, set out a clear range of actions which Ireland is taking on corporate tax reform. Significant actions have already been taken on foot on the Roadmap including the introduction of Controlled Foreign Company rules, amendments to Ireland’s exit tax rules, and the prompt ratification of the BEPS Multilateral Instrument. Further actions will be taken in Finance Bill 2019 including the amendment of Ireland’s transfer pricing rules and the introduction of anti-hybrid rules.
As a very open economy which serves as a key European base for a significant number of non-EU headquartered multinational companies, it is to be fully expected that Ireland would have a higher percentage of outbound royalty payments than other Member States. Concerns about outbound payments are justified in circumstances where the relevant profits should in fact be taxed in the EU or where the profits are ultimately being untaxed (either in the recipient or parent jurisdiction). It is my belief that neither of these concerns should arise in respect of outbound payments from Ireland.
The international consensus is that profits should be taxed where the ‘DEMPE’ functions occur. In this regard, Member States have the ability to tax the profits attributable to those functions within their jurisdiction under the international corporation tax framework.
Furthermore, the overwhelming majority of the outbound payments made from Ireland are made by companies which are ultimately owned by companies resident and taxable in the United States. It is my understanding that reforms introduced by the US in the Tax Cuts and Jobs Act in 2017 should make it impossible for any such royalties to avoid tax in the US even if they are not paid to the US directly and are not taxed in the recipient jurisdiction.
For these reasons I believe that the actions set out in the Roadmap are appropriate with regard to addressing aggressive tax planning but, as always, I will continue to keep the situation under review and shall act accordingly as circumstances demand.
75. Deputy Michael Moynihan asked the Minister for Finance if he or his officials have been monitoring the developments in New Zealand regarding the outgoing Governor of the Central Bank there. [24049/19]View answer
77. Deputy Michael Moynihan asked the Minister for Finance if his attention has been drawn to the inquiry into the leak of the New Zealand Government budget recently. [24324/19]View answer
79. Deputy Michael McGrath asked the Minister for Finance the status of the appointment of the new Governor of the Central Bank; if he has been in contact with his counterpart in New Zealand; the timeline for the completion of the investigation there; and if he will make a statement on the matter. [25495/19]View answer
I propose to take Questions Nos. 75, 77 and 79 together.
The New Zealand State Services Commissioner is carrying out an investigation into the unauthorised access of New Zealand Budget material and the events surrounding it. I am not going to be drawn into speculating on a matter on which the New Zealand State Services Commissioner is currently compiling a report.
The State Services Commissioner, Peter Hughes, has stated that his office will not be making any comment on the matter until his investigation is concluded and all of the facts have been ascertained. The investigation aims to conclude by 27 June.
Consequently, it would not be appropriate for me or the Government to comment on the matter, particularly given we are not in possession of the facts. The Government and others must await the facts to emerge.
Mr. Makhlouf has agreed to the ongoing review as the best approach to establishing the facts of the matter.
He is continuing to work as usual in his role as CEO of the New Zealand Treasury.
I would caution against making claims about an individual who is not in a position to defend themselves.
The Government recommended the appointment of Mr. Makhlouf as Central Bank Governor to the President following a comprehensive, open, and international process.
Mr. Makhlouf was the recommendation of the independent interview panel. The process included a public call for expressions of interest, a comprehensive search using an independent executive search firm, a rigorous shortlisting of applicants, psychometric testing of final interview candidates, and a final interview of five candidates.
The President signed the warrant appointing Mr. Makhlouf to the role of Governor of the Central Bank of Ireland on 14th May 2019.
Deputy Governor, Sharon Donnery, is acting Governor of the Central Bank from 1 June to 31 August.
My officials have been in contact with our Embassy in New Zealand to obtain updates on the matter.
However, given the definitive statement by the New Zealand State Services Commissioner that his office will not be making any comment on the matter until his investigation is concluded and all of the facts have been ascertained, it would not be appropriate to contact his office at this time.
Question No. 77 answered with Question No. 75.
76. Deputy Éamon Ó Cuív asked the Minister for Finance if he has commissioned a study on the effect of the current carbon taxes in reducing the use of fossil fuels; and if he will make a statement on the matter. [25234/19]View answer
In advance of Budget 2019, my Department commissioned the Economic and Social Research Institute to examine the environmental and economic impacts of increasing the Carbon Tax. This research examined how producers and consumers may react to increases in the Carbon Tax. The study estimated that increasing the Carbon Tax by €10 would lead to overall emissions reductions of 2.4% in the non-ETS sector. A more recent ESRI study estimated that CO2 emissions could reduce by 10.2% following an increase in the carbon tax from €20 to €100 per tonne.
The Department of Finance is continuing to work with the ESRI to build an improved evidential base for assessing the environmental, economic and social impacts of putting in place a long term carbon tax trajectory.
This ongoing research will contribute to Carbon Tax policy options which will be examined by the Tax Strategy Group prior to Budget 2020.
Question No. 79 answered with Question No. 75.
78. Deputy Willie Penrose asked the Minister for Finance his plans to keep the Central Bank industry funding levy at current levels for credit unions up to, including and post-2021 in view of the fact that credit unions continue to encounter financial difficulties particularly in relation to income generation and return on assets resultant from low interest rates, low loan to asset ratios and high cost income metrics; and if he will make a statement on the matter. [25321/19]View answer
103. Deputy Brendan Smith asked the Minister for Finance if urgent consideration will be given to concerns on the proposed increase in the industry funding levy for credit unions (details supplied) in view of the fact this will impact most severely on smaller credit unions; and if he will make a statement on the matter. [25806/19]View answer
I propose to take Questions Nos. 78 and 103 together.
As the Deputy is aware, credit unions are regulated and supervised by the Registrar of Credit Unions at the Central Bank who is the independent regulator for credit unions. Within his independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability, and to protect the savings of credit union members.
Since 2004 the amount of the Industry funding levy payable by each credit union has been capped at a rate of 0.01% of total assets.
Consultation Paper 95 ‘Joint Public Consultation Paper - Department of Finance and the Central Bank of Ireland - Funding the Cost of Financial Regulation’ (CP95) was published in 2015 and set out proposals to move from partial industry funding of financial regulation towards full industry funding, noting the proposal set out in an earlier consultation conducted by the Central Bank (CP61 ‘Consultation on Impact Based Levies and Other Levy Related Matters’) to move credit unions to fund 50% of the cost of regulating the credit union sector.
The Central Bank indicated, in its Funding Strategy and 2018 Guide to the Industry Funding Levy, that it intended to seek my approval to increase the proportion of financial regulation costs to be recovered from credit unions on a phased basis setting out an initial target of 50% to be reached by 2021.
In response to the Central Bank's request I recommended that credit union contributions should not increase beyond the 50% target until:
1. The levy trajectory has reached the planned 50% rate, at which time the impact on the viability of the sector will be better understood
2. A public consultation regarding increasing the levy rate for credit unions beyond 50% is undertaken, which would include a regulatory impact assessment of such a change on the sector.
In contrast to this recovery rates in 2018 for all other industry categories ranged from 65% to 100% and the Central Bank intends to increase all to 100% funding over the next number of years.
The Deputy might also wish to note, that the Department of Finance, in collaboration with the Central Bank, is currently preparing a public consultation paper on potential changes to the Credit Institutions Resolution Fund Levy, which is expected to reduce materially from 2020. This consultation, which will be published on the Department of Finance website very shortly, will be open to all persons and I would strongly encourage all stakeholders to submit feedback.
It is also important to note that as Minister for Finance I have reduced the Stabilisation Scheme Levy materially and that since 2017 no further levies have been charged by the Credit Union Restructuring Board (ReBo).
80. Deputy Michael McGrath asked the Minister for Finance when the summer economic statement will be published; the level of detail the statement will have in terms of fiscal and macroeconomic projections; the impact of different Brexit scenarios; and if he will make a statement on the matter. [25494/19]View answer
I can confirm for the Deputy that the Summer Economic Statement (SES) 2019 will shortly be published and presented before the Oireachtas. The SES will set out the broad parameters for macroeconomic growth and the fiscal outlook as well as the constraints facing the economy over the medium term.
The Government is currently targeting a headline surplus of 0.4 per cent of GDP next year. Since the publication of the Stability Programme Update (SPU) 2019 in April, risks to the economy have intensified, most obviously the increasing possibility of a disorderly Brexit in October. As such, the SES is being prepared on a two-track basis; one scenario assuming an orderly exit, and one assuming a disorderly exit.
The impact of the two scenarios on the public finances will be set out in the SES.
However, I would also point out that, leaving aside Brexit, the economy is on the verge of overheating. Budgetary policy must, therefore, be framed in the context of potential overheating on the one hand, and the possibility of a disorderly exit of the UK from the EU on the other hand.