Thursday, 7 Nov 2019

Written Answers Nos. 50-64

Central Bank of Ireland

Questions (50)

Michael McGrath

Question:

50. Deputy Michael McGrath asked the Minister for Finance the position regarding the printing of euro banknotes here; and if he will make a statement on the matter. [45844/19]

Written answers

Minister for Finance

The Central Bank of Ireland informs me that it ceased the inhouse printing of euro banknotes in April and is now sourcing euro banknotes from third parties in the euro area. The Central Bank has agreed to join the joint tendering group of euro Central Banks for the provision of its annual allocation of euro banknotes. I am informed that these matters have no impact on the supply of cash in Ireland.

Brexit Staff

Questions (51)

Lisa Chambers

Question:

51. Deputy Lisa Chambers asked the Minister for Finance the number of custom officials hired, trained and in place as of 31 October 2019 to prepare for Brexit; and if he will make a statement on the matter. [45874/19]

Written answers

Minister for Finance

In September 2018, the Government granted approval in principle for the phased recruitment of an additional 600 Revenue staff to meet the challenges posed by Brexit.

Following a Government decision in December 2018, Revenue’s recruitment programme was accelerated in preparation for a potential no-deal Brexit. I am advised by Revenue that by 31 October 2019 recruitment had been advanced to a level whereby 586 staff had been appointed to Brexit-related roles.

Brexit Data

Questions (52)

Lisa Chambers

Question:

52. Deputy Lisa Chambers asked the Minister for Finance the number of firms without an EORI number as of 31 October 2019; and if he will make a statement on the matter. [45875/19]

Written answers

Minister for Finance

I am advised by Revenue that currently 63,071 businesses have an EORI number. 23,026 of these businesses obtained an EORI number in 2019. I am further advised that Revenue’s analysis of the 2018 VAT Information Exchange System (VIES) returns, showed that some 94,000 businesses traded with the UK in 2018. Of these 94,000 businesses, approx. 55,500 do not currently have an EORI number. However, Revenue advise that 91.7% of the value of imports from the UK in 2018 and 97.5% of the value of exports to the UK in 2018 was carried out by businesses who now have an EORI number.

Of the businesses with import or export trade in 2018 of more than €50,000 on an annual basis, and therefore with a potentially significant supply chain exposure to trade with the UK, the number without an EORI number is approximately 3,000. This indicates that the businesses that are going to be significantly impacted by Brexit are responding to the call from Revenue to prepare for Brexit by acquiring a customs registration as a key component of their Brexit preparedness work.

Following on the extension in the deadline for the ratification of the Withdrawal Agreement to 31 January 2020 that was unanimously agreed by the EU 27 leaders, I strongly urge all businesses to use this time to ensure that they get and remain Brexit ready. Practical and important steps that they should address include:

- Registering for customs by getting an EORI number, if not already registered.

- Ensuring the capability to lodge customs declarations, by either getting customs software or engaging a customs agent.

- Undertaking supply chain and cash flow assessments.

-Understanding and making arrangements for paying import duties.

- Knowing the origin and commodity code(s) of the goods traded.

- Ensuring compliance with product certification requirements.

- Understanding the obligations involved if trading in animal or plant products.

- Considering what customs related simplifications or authorisations might be relevant and that would further ease the smooth and efficient flow of trade and goods at import or export.

Brexit Data

Questions (53)

Lisa Chambers

Question:

53. Deputy Lisa Chambers asked the Minister for Finance the latest data available for the impact that a hard Brexit, in particular a customs border between east and west, will have on Ireland; and if he will make a statement on the matter. [45876/19]

Written answers

Minister for Finance

It has always been clear from the published studies, including those by my Department, that Brexit, in whatever form it takes, will have a negative impact on our economy and our living standards, and that this impact is significantly greater in the ‘No-Deal’ Brexit scenario.

Budget 2020, including the macroeconomic and fiscal outlook which underpins it, was based on the prudent assumption that the UK would leave the EU on 31 October without an agreement. The Withdrawal Agreement endorsed by the European Council, will now require ratification by the European Parliament and the UK Parliament. Pending ratification of the deal, it is not possible to say if the outlook will be different to that set out in Budget 2020. The extension to the Brexit deadline, agreed on 28 October, means that there is likely to be some upside to the projections in Budget 2020.

The Macroeconomic Outlook and Projections published with Budget 2020 show that, compared to a no Brexit baseline, the level of GDP in Ireland 5 years after Brexit would be around 3.8 per cent lower in a no-deal Brexit scenario. Employment would be 2.1 per cent lower in a no-deal scenario, than would otherwise be the case. It is important to highlight that employment and output in Ireland are still forecast to continue growing – but at a slower pace than previously projected.

Trade is the main channel through which a disorderly UK exit would impact the Irish economy, with tariff and non-tariff barriers weighing on exports. A disorderly exit would also result in lower activity in the UK and elsewhere, further reducing the demand for Irish exports. The impact in the more traditional manufacturing sectors could be severe, especially if tariff and non-tariff measures on their UK-sourced intermediate inputs led to production shortages. In aggregate terms, export growth of less than one per cent is expected next year, a sharp slowdown from the projected 2019 outturn of around 10 per cent.

In 2017 my Department published a paper on trade exposures which shows that relative to other EU Member States, Irish exports are substantially more exposed to the UK in a number of goods sectors. The analysis reveals that eleven of the EU-27’s top fifteen proportionally most exposed products to the UK are Irish exports. The top five most exposed sectors included the Irish Agri-food sub-sectors Cereals, Vegetables and Fruit, and Live Animal products. In services, Ireland is in the upper range of the most exposed EU Member States, particularly in Financial Services.

Since the referendum result in 2016, Brexit has been embedded in all of the Government’s economic decision-making, and in the management of our economy. The Government will continue to work to strengthen the resilience of the economy, to maximise opportunities and to prepare our economy for the challenges of Brexit, including through the Ireland Connected Trade and Investment Strategy, the 10-year National Development Plan and Future Jobs Ireland.

Maintaining the closest possible trading relationship between the EU and the UK is therefore one of the Government’s key Brexit priorities. The Government will continue to work to improve the business environment – to make it more competitive, to assist exporters to diversify markets, and to provide better infrastructure.

VAT Rate Application

Questions (54)

Colm Brophy

Question:

54. Deputy Colm Brophy asked the Minister for Finance if rules apply selectively under European Union VAT to a reduction on the rate of VAT to specific categories of house purchases, namely those bought by first-time buyers; and if he will make a statement on the matter. [45915/19]

Written answers

Minister for Finance

I am advised by the Revenue Commissioners that the VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply.

Under the Directive it is not permissible to differentiate the supply of new residential property for different buyers, such as first-time buyers, for the purpose of applying VAT rates.

Insurance Industry Regulation

Questions (55)

Bernard Durkan

Question:

55. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which his Department or the Financial Regulator continues to monitor the activity of insurance companies offering motor insurance with a view to ensuring availability of adequate procedures to protect the insured party in compliance with competition and duty of care and that arbitrary decisions are not made that may reflect negatively on the insured party; and if he will make a statement on the matter. [45962/19]

Written answers

Minister for Finance

I understand that the Deputy is referring to the regulation of motor insurers in Ireland, in particular regarding the way that they conduct business and make decisions regarding consumers.

At the outset, it is important to note that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation in Ireland, including the regulatory environment for life and non-life insurance. This responsibility includes the negotiation of the relevant EU framework of Directives and Regulations, and their transposition into Irish law, including the Solvency II Directive and the Insurance Distributors Directive. I, as Minister, have no role in day to day supervision of the insurance industry, as this is the responsibility of the Central Bank of Ireland (CBI). Having said that, my Department monitors and advises on issues that arise with regard to the provision of insurance, including motor insurance, and the work of the Cost of Insurance Working Group (CIWG) has been feeding into a number of important reforms for consumers in this regard, as the Deputy will be aware.

With regard to the day to day supervision of motor insurance companies, the CBI is responsible for the authorisation and supervision of these undertakings in Ireland. The CBI has two specific mandates as regards insurance supervision. First, it is responsible for the prudential supervision of insurance companies authorised by the CBI. Second, it is responsible for the supervision of conduct of business in Ireland, also referred to as consumer protection. The CBI, like all European supervisory authorities, is explicitly prohibited from playing any role in the setting of premiums. It states therefore, that it does not have a role in relation to pricing considerations or competitiveness of the Irish insurance industry. It also states that provided firms treat customers fairly, the price of policies is a commercial decision for each insurance firm.

I am also advised that all motor insurance companies operating in Ireland, whether authorised by the Central Bank or a competent authority of another EU state, are subject to conduct of business supervision by the Central Bank of Ireland. They must follow the Central Bank’s Consumer Protection Code 2012 (CPC). The Central Bank has advised that the CPC provides that a regulated entity must act honestly, fairly and professionally in the best interests of its customers and the integrity of the market, and must make full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer. A regulated entity must ensure that all information it provides to a consumer is clear, accurate, up to date, and written in plain English. Key information must be brought to the attention of the consumer, and the method of presentation must not disguise, diminish or obscure important information. The Central Bank expects that companies’ practices are compliant with these principles and requirements. This is relevant to there being an adequate procedure in place to protect consumers against being treated unfairly.

In addition, there are also measures in the CBI's 2012 CPC that require all regulated financial services firms to have complaints handling procedures in place. With regard to the practices mentioned by the Deputy in the question, if, a person feels that they have been unfairly treated by an insurance company, and after following the firm’s complaints process, they are still not satisfied, they have the right to refer the complaint to the Financial Services and Pensions Ombudsman (FSPO). This is a statutory independent body that mediates unresolved disputes/complaints with regulated financial services providers. The Central Bank does not investigate individual consumer complaints.

Finally, with respect to empowering motor insurance consumers, I think it is important to also reference new measures introduced by the CBI on 1 November. These arose from recommendations of the Cost of Insurance Working Group. These are designed to increase consumer engagement and pricing transparency, and are as follows:

- For private motor insurance renewals, insurers will be required to provide the amount of the insurance premium paid in the previous year or, where any mid-term adjustments were made to the policy during the year, an annualised premium figure;

- Insurers will be required to provide the total premium for each policy option available for the customer in the renewal notices/quotations (i.e., comprehensive; third party, fire and theft cover; third party only, if offered by the insurer; and,

- The renewal notification period will be extended from 15 working days to 20 working days for all non-life insurance policies.

I believe that each of these measures should assist consumers in making decisions at renewal time, including encouraging them to shop around and, if favourable to them, switch insurance provider.

Tax Code

Questions (56, 57)

Michael McGrath

Question:

56. Deputy Michael McGrath asked the Minister for Finance the number of flat rate expenses in the income tax system; the number of persons that have claimed under each classification; the cost under each classification; and if he will make a statement on the matter. [45980/19]

Michael McGrath

Question:

57. Deputy Michael McGrath asked the Minister for Finance the status of the review of flat rate expenses; if it is being undertaken by the Revenue Commissioners; when he expects the review to conclude; and if he will make a statement on the matter. [45981/19]

Written answers

Minister for Finance

I propose to take Questions Nos. 56 and 57 together.

The FRE allowance regime is an administratively based practice operated by Revenue, where both specific commonality of expenditure exists across an employment category and the statutory requirement for a tax deduction for expenses as set out in section 114 of the Taxes Consolidation Act (TCA) 1997 is satisfied, namely, the expense must be wholly, exclusively and necessarily incurred in the performance of the duties of the relevant employment.

The FRE allowance regime eases the administrative burden on Revenue and on employees in certain sectors by facilitating the automatic granting of a fixed tax allowance to cover allowable employment-related expenses, without the need for annual claims by every employee concerned. It is important to note, however, that the regime does not preclude any employee from making an individual claim for a tax allowance in respect of employment-related expenses, where those expenses meet the statutory requirement for such an allowance.

I am advised by Revenue that an FRE allowance amount is decided following engagement between Revenue and the relevant representative body for the particular group of employees who incur the same expense. The regime has developed incrementally over the last 40 to 50 years and currently incorporates 53 employment categories, broadly covering some 134 individual FRE allowance amounts - see list attached.

I am also advised by Revenue that a breakdown of the cost of the relief and numbers of employees by reference to each employment classification in which the FRE regime currently operates is not readily available. For 2017, however, the estimated number of taxpayer units who availed of FRE allowances was 606,570 with gross claims of €163 million equating to a tax cost of some €48 million. Final figures for 2018 are not expected to be available until mid-2020, to allow for processing of the data from income tax returns and cross referencing across Revenue’s operational systems.

As the Deputy will be aware, over the past 18 months, Revenue has been conducting a comprehensive review of the FRE allowance regime. Revenue has advised me that the purpose of the FRE review, which involved engagement with relevant representative bodies, is to ensure that the expenses granted to each employment category remain justified and appropriate to modern day employments and work practices. Each category of FRE allowance is being examined separately in the light of the legislative requirements of section 114 TCA 1997.

Having regard to the Deputy's questions and to the fact that we are coming closer to the date on which any changes on foot of the review are due to be implemented, I will write to Revenue and request a factual update on the issue. I will also take the opportunity to enquire if Revenue can provide any further clarification on the numbers of employees by reference to each employment classification as well as the cost under each classification. I will revert to the Deputy in the matter as soon as possible.

Flat Rate

Central Bank of Ireland Data

Questions (58)

Michael McGrath

Question:

58. Deputy Michael McGrath asked the Minister for Finance the number of on-site inspections undertaken by the Central Bank of credit servicing firms since the commencement of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018; the number of enforcement actions undertaken; the number of enforcement findings made; and if he will make a statement on the matter. [45982/19]

Written answers

Minister for Finance

The Central Bank has advised that it does not comment on details of inspections. It carries out its supervision of regulated entities in a number of ways, which includes both desk based and on-site reviews of various activities in regulated entities and is currently undertaking such supervisory work at a sample of non-banks, including Credit Servicing Firms.

The Consumer Protection (Regulation of Credit Servicing Firms) Act 2018 was enacted on 24 December 2018. There have been no enforcement actions taken in the period since the enactment, however, the Central Bank uses a wide range of other tools to take action against regulated entities and/or individuals, which fall short of their expected standards of behaviour including Risk Mitigation Programmes, Fitness and Probity investigations and other enforcement tools.

Banking Sector Regulation

Questions (59)

Michael McGrath

Question:

59. Deputy Michael McGrath asked the Minister for Finance if the Central Bank is monitoring the operation of PSD2 in respect of online banking; if there are concerns that some online services have been disrupted based on the device used to access online banking; the list of devices that cannot be used for each bank; if he or the Central Bank has received assurances that access will be restored for customers; and if he will make a statement on the matter. [45983/19]

Written answers

Minister for Finance

The revised Payment Services Directive (PSD2) regulates new market players, enhances consumer protection, ensures competition and harmonises payments regulations across Europe.

In order to enhance consumer protection and to reduce the risk of fraud, PSD2 requires the use of identification methods known as strong customer authentication (SCA). Strong customer authentication, as provided for in PSD2 and in regulatory technical standards developed by the European Banking Authority, is currently being rolled out. The strong customer authentication provisions are technologically neutral and do not prohibit specific devices.

Any consumer experiencing difficulties with accessing their accounts through online banking should contact their bank to find an SCA compliant method of verification that works for them.

I am informed that the Central Bank continues to engage with industry to ensure that any obstacles that customers face in accessing their online payment accounts are promptly addressed, whilst also ensuring that banks continue to meet their strong customer authentication obligations.

Banking Sector Data

Questions (60)

Michael McGrath

Question:

60. Deputy Michael McGrath asked the Minister for Finance if the Central Bank has data on online banking usage; the number of individual customers that use online banking by bank; the number of businesses that use online banking by bank; and if he will make a statement on the matter. [45984/19]

Written answers

Minister for Finance

I am advised that the Central Bank does not specifically collect data on online banking usage, such as the requested. Many of the main banks offer online services as standard for current accounts. The Central Bank publishes data in respect of current accounts held by personal consumers and the latest publication, from June 2019, highlights that at the end of 2018 there were 5,345,752 customers with current accounts.

Insurance Data

Questions (61)

Michael McGrath

Question:

61. Deputy Michael McGrath asked the Minister for Finance the progress on a price index for public and employer liability insurance; when prices will begin to be tracked over time; and if he will make a statement on the matter. [45985/19]

Written answers

Minister for Finance

Increasing the availability of data in relation to Employer and Public Liability Insurance is a matter which was discussed by the Cost of Insurance Working Group in its Report on the Cost of Employer and Public Liability Insurance (2018). It recommended a number of actions to improve transparency in this area. Amongst these, Recommendation 1 requires the Central Statistics Office (CSO) to consider the feasibility of collecting price information on the cost of insurance to businesses, and if it considers such an index feasible to make appropriate proposals.

The Deputy will be aware that the CSO submitted a draft report to the Department of Finance in December 2018 on the work undertaken on the feasibility study to date. It subsequently provided a final report to the CIWG in January 2019. In this report, the CSO outlined the method that they would recommend for the compilation of a price index for public and employer liability insurance. At that time, the CSO outlined that it would pilot this method. Since then, the CSO has worked closely with a technology partner and its pilot project concluded at the end of September. While I understand that the results of the pilot project are encouraging overall, a small number of issues were identified and are currently being examined by the CSO.

As the Deputy knows, the CSO is an independent Office and it will ultimately be for the CSO to determine whether or not to proceed with such an index. Having said that, it is my understanding that the CSO is planning to make a presentation to the CIWG in early December in relation to a recommendation on a path forward. This should allow an opportunity for the views of the CIWG to be heard directly by the CSO.

Pharmaceutical Sector

Questions (62)

Michael McGrath

Question:

62. Deputy Michael McGrath asked the Minister for Finance if an analysis has been undertaken by his Department on the pharmaceutical industry; if patent expiration in the industry has been profiled; the potential impact of same on employment in particular regions; the potential of same to impact corporation tax receipts; and if he will make a statement on the matter. [45986/19]

Written answers

Minister for Finance

In 2013, due to the weight of the pharmaceutical sector in Irish GDP at the time, my Department produced a report seeking to assess the impact of a ‘patent cliff’ in the pharmaceutical sector on the Irish economy, arising from a clustering of patented drugs going off patent in quick succession.

The report, titled “The Impact of the Patent Cliff on Pharma-Chem Output in Ireland” is available here:

https://assets.gov.ie/5560/140119123817-b71a249b4ad24fc78ce5eb401e85a236.pdf

The research concluded that the ‘patent cliff’ led to a drop in both output and exports, from the mid-2012 peak, by late 2013, when the report was published. However, the impact on employment was expected to be less significant. This was expected to be the case as the pharma-chem sector was a relatively small contributor to total employment at the time, at less than 2 per cent, and those employed were highly skilled workers who, in the event of a demand shock, would be less likely to face skills mismatches compared to other sectors.

Tax receipts by sector are published by Revenue, and are available at: https://www.revenue.ie/en/corporate/documents/statistics/receipts/net-receipts-by-sector.pdf.

This includes information on employment taxes and Corporation Tax receipts. The pharmaceutical industry is included in the figures shown for ‘Manufacturing’ at the above link and accounts for the bulk of tax payments in this sector (over 75% in most years).

I am advised by Revenue that tax returns do not include information in respect of patents, therefore there is no information available to Revenue with which to estimate the effect of any potential future patent expirations.

I would note however that the figures indicate a substantial rise in corporation tax receipts received from the manufacturing sector, which increased by 54% from 2017 (€2.09 billion) to 2018 (€3.22 billion).

As the patent cliff research paper referred to above related to the expiry of specific patents in a certain time period, this particular piece of research has not been updated. That said, my Department monitors and analyses trends in the pharma-chem sector on an ongoing basis.

Pharma-chem exports have grown substantially over the last 18 months or so, increasing by 26 per cent to €86 billion in 2018. In the second quarter of this year, pharma exports grew a further 9 per cent year-on-year, with the sector now comprising 62 per cent of goods exports.

I am conscious of recent job losses in the broad pharma-chem sector, as well as in some other sectors of our economy. It is imperative that we continue to remain competitive, including by shifting resources into higher value added production.

Finally, the IDA will continue to work to secure new investment in key growth sectors of the economy, including the pharma-chem sector.

Pharmaceutical Sector

Questions (63)

Michael McGrath

Question:

63. Deputy Michael McGrath asked the Minister for Finance if the 2013 analysis undertaken on the impact of the patent cliff on pharma-chem output here has been updated; if the risks have been assessed for biological medicines; and if he will make a statement on the matter. [45987/19]

Written answers

Minister for Finance

Ireland has a well-established specialisation in the pharma-chem sector, which makes up a large proportion of total exports and contributes significantly to GDP.

As a result of the ‘patent cliff’ in 2013, my Department carried out research to assess its impact on pharma-chem output in Ireland. The research concluded that the ‘patent cliff’ caused a drop in both output and exports between the mid-2012 peak and the time of writing in late 2013, with the expected impacts on employment to be less dramatic. Pharma-chem was a relatively small contributor to total employment (less than 2 per cent), and those employed were highly skilled workers who, in the event of a demand shock, would be less likely to face skills mismatches compared to other sectors.

As the patent cliff related to the expiry of specific patents in a certain time period, this particular piece of research has not been updated. That said, my Department monitors and analyses trends in the pharma-chem sector on an ongoing basis, given the importance of this sector to the economy.

Pharma-chem exports have grown substantially over the last 18 months or so, increasing by 26 per cent to €86 billion in 2018. In the second quarter of this year, pharma exports grew a further 9 per cent year-on-year, with the sector now comprising 62 per cent of goods exports.

I am conscious of recent job losses in the broad pharma-chem sector, as well as in some other sectors of our economy. It is imperative that we continue to remain competitive, including by shifting resources into higher value added production.

Finally, the IDA will continue to work to secure new investment in key growth sectors of the economy, including the pharma-chem sector.

Apple Escrow Account

Questions (64)

Michael McGrath

Question:

64. Deputy Michael McGrath asked the Minister for Finance the mechanism by which a company (details supplied) removed €190 million from the escrow account; the reason for the withdrawal; the person or body that requested the withdrawal; if the European Commission has been consulted; and if he will make a statement on the matter. [45990/19]

Written answers

Minister for Finance

As the Deputy will be aware, the State has recovered the alleged State aid from Apple. The total amount recovered is c €14.3 billion (which is the principal amount and relevant EU interest). The final payment was made in early September 2018. These sums have been placed into an Escrow Fund with the proceeds being released only when there has been a final determination in the European Courts over the validity of the Commission’s Decision.

In its Decision on the Apple State aid case, the Commission provides that the profits subjected to tax in Ireland, for the period covered by the Decision, could be reduced if Apple was required to pay taxes in another jurisdiction in respect of the same profits for this period.

These are known as third country adjustments and are the basis of the €190m figure referred to in the Apple quarterly results. The payment was made based on a request from the company. The making of these adjustments are not dependent on the outcome of the legal proceedings in the European courts. The Commission was engaged in the process.