Strategic Banking Corporation of Ireland

Questions (51)

Catherine Murphy

Question:

51. Deputy Catherine Murphy asked the Minister for Finance the reason a company (details supplied) was awarded a €120,000 contract in May 2019 to carry out an external review of the SBCI operation in view of the fact over €300 million of SBCI funding facilities were awarded to clients of the company; and if he will make a statement on the matter. [4133/20]

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Written answers (Question to Finance)

Ernst and Young (EY) was appointed to undertake the external review of the SBCI following a competitive tender process. A request for tender was published on 08/01/2019 on eTenders, the Irish Government’s electronic tendering platform, inviting tenderers to submit a tender for the provision of these services. EY was the successful tenderer following a robust tender process which included a requirement for the successful tenderer to confirm they had no actual or potential conflicts of interest.

Strategic Banking Corporation of Ireland

Questions (52)

Catherine Murphy

Question:

52. Deputy Catherine Murphy asked the Minister for Finance the reason a company (details supplied) was selected as a second auditor of the SBCI and excluded from having to go through the procurement process as per the SBCI board minutes of 23 February 2017 in view of the fact that clients of the company also received €615 million out of the €1.24 billion SBCI fund; and if he will make a statement on the matter. [4134/20]

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Written answers (Question to Finance)

The SBCI Board made the decision to appoint Deloitte in the event that a second auditor was required, pending legal advice on whether the Comptroller & Auditor General could perform the role of statutory auditor. Following receipt of legal advice, a second auditor was deemed unnecessary and Deloitte were not appointed

Strategic Banking Corporation of Ireland

Questions (53)

Catherine Murphy

Question:

53. Deputy Catherine Murphy asked the Minister for Finance the reason the SBCI does not request and-or obtain aged debtor analysis from its clients; and if he will make a statement on the matter. [4135/20]

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Written answers (Question to Finance)

The SBCI does not lend directly to SMEs. The SBCI’s borrower is the approved financial provider(s) who in turn lend directly to SMEs. On that basis the SBCI obtains quarterly information for monitoring purposes on the on-lenders and does not receive information containing any aged debtor analysis on the SMEs.

Strategic Banking Corporation of Ireland

Questions (54)

Catherine Murphy

Question:

54. Deputy Catherine Murphy asked the Minister for Finance the reason no financial penalties were incurred by a company (details supplied) for early settlement of its facility when it received a six year facility of €40 million in May 2016 and cleared same in October 2018; and if he will make a statement on the matter. [4136/20]

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Written answers (Question to Finance)

The SBCI does not charge penalties and its facility agreements do not provide for these. If an on-lender wished to repay all or part of a facility, it is SBCI’s practice to agree a payment date with such on-lender as well as agreeing the amount of interest, principal and break-cost funding payable on the prepayment date agreed.

Help-To-Buy Scheme

Questions (55)

Bríd Smith

Question:

55. Deputy Bríd Smith asked the Minister for Finance if persons that had previously a history of having purchased a home but that have since relinquished a holding in the property with no financial gain will be considered for the help-to-buy scheme; and if he will make a statement on the matter. [4165/20]

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Written answers (Question to Finance)

The Help-to-Buy incentive, introduced with effect from 1 January 2017, is a scheme to assist first-time purchasers with the deposit they need to buy or build a new house or apartment. The incentive gives a refund of Income Tax and Deposit Interest Retention Tax (DIRT) paid in Ireland over the previous four years, subject to limits outlined in the legislation.

Section 477C Taxes Consolidation Act 1997 outlines the definitions and conditions that apply to the help to buy scheme. A claimant under the scheme must make an application confirming he or she meets various conditions specified in the section, including that he or she is a first-time purchaser and that he or she has completed a tax return form and is tax compliant for each of the tax years for which a claim is being made. The obligations apply to each party, where there is more than one party to a claim.

The definition of “first-time purchaser” for the purposes of the scheme is an individual who, at the time of making a claim under the scheme, has not, either individually or jointly with any other person, previously purchased or previously built, directly or indirectly, on his or her own behalf a dwelling. The “qualifying residence” must be occupied as the sole or main residence of the first-time purchaser.

I am advised by Revenue that In the circumstances outlined by the Deputy, where a person has previously legally purchased a home as a “first-time purchaser”, but has since relinquished a holding in the property with no financial gain, he or she will no longer be considered for the help-to-buy scheme given that it is a prerequisite for qualification for the relief that the taxpayer be a first-time purchaser.

As the Deputy will appreciate, Revenue does not have discretion to vary the conditions set down by the Oireachtas for qualification for relief under the Help-to-Buy scheme.

Tax Credits

Questions (56)

Peter Burke

Question:

56. Deputy Peter Burke asked the Minister for Finance the estimated number of persons that would be impacted by the removal of tax credits from individual incomes above €140,000 tapered at a rate of 2.5% for every €1,000 above €100,000; and if he will make a statement on the matter. [4179/20]

View answer

Written answers (Question to Finance)

I am advised by Revenue that the number of individuals earning above the €100,000 threshold, where credits would begin to taper as outlined by the Deputy, can be found in the ‘Individualised Gross Incomes’ document published on Revenue’s website at the following link: https://www.revenue.ie/en/corporate/documents/statistics/income-distributors/individualised-gross-income.pdf. 2017 is the most recent tax year for which data are currently available.

As this document shows, 92,397 individuals had gross income of over €100,000 in 2017.

Electric Vehicles

Questions (57)

Paul Kehoe

Question:

57. Deputy Paul Kehoe asked the Minister for Finance if he will address a matter regarding benefit-in-kind for electric vehicles (details supplied); and if he will make a statement on the matter. [4282/20]

View answer

Written answers (Question to Finance)

In Finance Act 2017, I introduced an exemption from benefit-in-kind for employer-provided electric vehicles (cars and vans). An electric vehicle is one that derives its motive power exclusively from an electric motor. As such, hybrid vehicles do not qualify for this treatment. The benefit-in-kind exemption applied in respect of an electric car or electric van made available for an employee’s private use for the period 1 January 2018 to 31 December 2018 and applied to both new and used vehicles.

In Finance Act 2018, I extended this favourable tax treatment until 31 December 2021. However, with some exceptions, a cap of €50,000 now applies on the market value of the electric car that qualifies for the full exemption for the years 2019 - 2021. In effect, an electric car with a market value in excess of €50,000 is subject to the normal benefit-in-kind regime on the excess amount. In Finance Act 2019, I further extended this measure to 31 December 2022.

Benefit-in-kind is applied to 30% of the original market value of a car. The original market value of a car is the price which it might reasonably have been expected to fetch if sold in the State singly in a retail sale in the open market, immediately before the date of its first registration (in the State or elsewhere). In other words, the original market value is the Irish open market price for a single retail sale immediately before the date on which the car was first registered. For a second-hand car, the original market value is the price of the car when purchased new for the first time.

In the case of an electric car with an original market value in excess of €50,000, the amount subject to benefit-in-kind for the years 2019 – 2022 is broadly calculated as follows: amount subject to tax = (original market value of the electric car - €50,000) x 30%.

As is the case for all employer-provided cars, if the annual business kilometres travelled exceed 24,000 kilometres, the 30% may be reduced to 24%, 18%, 12% or 6% depending on the amount of business kilometres travelled. If the car is only made available for part of the tax year, an adjustment to the business mileage is required for the purposes of determining the appropriate percentage. Detailed information and worked examples on the taxation of employer-provided electric cars are available on https://www.revenue.ie/en/employing-people/benefit-in-kind-for-employers/valuation-of-benefits/goods-and-assets-provided-to-employees.aspx.

For the period of the Covid-19 crisis, some concessions in relation to the application of benefit-in-kind to employer-provided vehicles apply as follows:

(a) Employer Takes Back Possession of the Vehicle

Where an employer takes back possession of the vehicle and an employee has no access to the vehicle, no benefit-in-kind shall apply for the period.

(b) Employer Prohibits Use

Where an employee retains possession of a vehicle, but the employer prohibits the use of the vehicle, no benefit-in-kind shall apply if the vehicle is not used for private use. Records should be maintained to show that the employer has prohibited its use and no such use has occurred, for example communication from employer, photographic evidence of odometer etc.

(c) Employer Allows Private Use

Where an employee has a car provided by his or her employer and

- the circumstances in the previous example don’t apply

- limited or reduced business mileage (if any) is undertaken during the period of the COVID-19 crisis

and

- personal use is limited

the amount of business mileage travelled in January 2020 may be used as a base month for the purposes of calculating the amount of benefit-in-kind due. Thus, the percentage applied in the calculation of the cash equivalent, which is based on annualised business mileage, may have regard to the actual business mileage for January 2020, for the period of the COVID-19 restrictions. Appropriate records should be kept, for example business mileage travelled in January, amount of private use, photographic evidence of odometer etc.

Employee Continues Working

Where an employee continues to undertake business travel as usual in an employer-provided vehicle, the usual benefit-in-kind rules will apply.

Land Issues

Questions (58)

Paul Kehoe

Question:

58. Deputy Paul Kehoe asked the Minister for Finance if he will address a matter (details supplied) regarding land leasing exemptions; and if he will make a statement on the matter. [4283/20]

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Written answers (Question to Finance)

Section 664 of the Taxes Consolidation Act 1997 provides for an income tax exemption for certain income arising from the leasing of farm land. This relief was introduced in Finance Act 1985 to encourage landowners to lease out land on a long-term basis to active farmers, thereby encouraging more productive use of the land. Subject to an upper limit, individuals who qualify for the relief are entitled to take a deduction in determining their total income for income tax purposes.

To qualify for this relief, a number of conditions must be met. One of these conditions is that there is a lease of “land in the State wholly or mainly occupied for the purposes of husbandry and includes a building (other than a building or part of a building used as a dwelling) situated on the land and used for the purposes of farming that land”.

In this context, husbandry includes normal farming, market gardening, horse breeding, cattle dealing, fruit growing and any other form of husbandry, intensive or otherwise, which involves the use of the land or its produce. Therefore, if a farmer leases out a farm building to another farmer and the building is used for the purpose of husbandry, which would include the housing of farm animal stock, then the farmer will be entitled to the leasing exemption. This is assuming that all other conditions are met.

I am advised by Revenue that they have published a Tax & Duty Manual (Part 23-01-23) which sets out all of the relevant conditions of the relief and may be of assistance.

VAT Payments

Questions (59, 84)

Michael McGrath

Question:

59. Deputy Michael McGrath asked the Minister for Finance if it is possible to implement a temporary suspension of VAT in which payments can be temporarily deferred in view of the Covid-19 outbreak; if so, the estimated cost of implementing such a scheme; and if he will make a statement on the matter. [4288/20]

View answer

Pearse Doherty

Question:

84. Deputy Pearse Doherty asked the Minister for Finance if he will consider VAT deferrals for a prescribed period of time for SMEs and certain sectors affected by a loss of trade as a result of the Covid-19 outbreak in the coming weeks and months; and if he will make a statement on the matter. [5012/20]

View answer

Written answers (Question to Finance)

I propose to take Questions Nos. 59 and 84 together.

On 8 April, I announced a major expansion of supports for all businesses impacted by COVID-19. The package of business supports is now worth €1 billion in liquidity measures. The measures were developed to meet the varying needs of Irish enterprise and they are very specifically targeted by size, sector and need.

The key measures I announced are set out as follows.

An expansion of the SBCI Covid-19 Working Capital Scheme :

I announced the SBCI Covid-19 Working Capital Scheme on 11 March and it opened for eligibility applications on 23 March. The Covid-19 Working Capital Scheme is offered by my Department in cooperation with the Department of Agriculture, Food and the Marine, and is supported by the InnovFin SME Guarantee facility. The scheme is operated by the SBCI. It currently makes available a fund of up to €200 m to eligible businesses that have been negatively affected by impacts arising from the outbreak of Covid-19 to enable those businesses to innovate, change or adapt in response to the current business environment. Following my announcement on April 8, this scheme is now being expanded to bring the total amount of lending available to €450 million.

An expansion of the Future Growth Loan Scheme:

The Future Growth Loan Scheme makes up to €300 million of loans available with a term of 8-10 years and is operated by the SBCI though participating lenders. We have seen strong demand for the scheme since its launch in April 2019 across all sectors and regions including in exporting businesses and family businesses. On 8 April, I announced a €200 million expansion of this scheme and my Department is now working through the details of a significant expansion to bring this funding to market as soon as possible.

For Microenterprises (under 10 employees) and businesses with over 10 employees:

- I am providing Microfinance Ireland (MFI), which is administering special COVID-19 Loans, with an additional €13m in capital support bringing its total lending capacity up to €20m for the coming period. There is also a substantial reduction in interest rates on these loans from 7.8% to 4.5%. Loans can be made up to €50,000 with no repayments required and no interest charged in the first six months.

- The €2,500 Trading Online Voucher Scheme for microenterprises is being expanded - an additional €3.3m is being provided to the scheme bringing the total available to €5.6m. The scheme is also being made more flexible - allowing businesses to apply for a second voucher of up to €2,500 where they have successfully utilised their first one; and allowing subscriptions to low-cost online retailing platform solutions to quickly establish a retailing presence online.

€180m Sustaining Enterprise Fund:

- This is specifically aimed at all firms with 10 or more employees in the manufacturing and international services sectors impacted by COVID-19 that are vulnerable but viable.

- The Fund will be operated by Enterprise Ireland, providing repayable advances of up to €800,000 as agreed with the EU under new State Aid rules and, together with leveraged lending from the financial markets, should see up to €500m of additional investment in vulnerable but viable firms. These grants will only be repayable if and when a business returns to financial good health.

New €2,500 Business Continuity Voucher:

This Voucher is available through Local Enterprise Offices and is designed for businesses across every sector that employ up to 50 people. It can be used by companies to develop short-term and long-term strategies to respond to the Covid-19 pandemic.

Business Financial Planning Grant:

Business Financial Planning Grant from Enterprise Ireland to the value of €5,000 to assist companies to develop a Business Sustainment Plan and to engage the services of an approved Financial Consultant

Lean Business Improvement Grant:

A €2,500 LEAN Business Improvement Grant from Enterprise Ireland and IDA Ireland to help companies quickly access expertise to review and optimise operations at a time of crisis and identify the key measures needed to ensure continued viability.

Online Retail Scheme:

A new €2m Online Retail Scheme from Enterprise Ireland will be open to retailers employing over 10 people. The objective of the Scheme is to support companies in the indigenous retail sector with a pre-existing online presence to respond to both the domestic and international consumer demand for a competitive online offer. Grants ranging from €10,000 to €40,000 will be awarded under the competitive scheme.

These measures are in addition to the €150m of funding capacity in the Government’s Credit Guarantee Scheme.

On Saturday 2 May , I also announced a further suite of measures to support small, medium and larger business that are negatively impacted by Covid-19 with Minister Paschal Donohoe, T.D., Minister for Finance and Public Expenditure and Reform and Minister Eoghan Murphy, T.D., Minister for Housing, Planning and Local Government. This package of support followed the publication of the Government’s Roadmap for Reopening Society & Business, which sets out a five-stage plan to ease the Covid-19 restrictions and reopen Ireland’s economy and society. The new measures we announced included:

- A €10,000 restart grant for micro and small businesses based on a rates/waiver rebate from 2019;

- A three-month commercial rates waiver for impacted businesses;

- A €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises on commercial terms;

- A €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates;

- The ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue and no interest charge accruing in respect of the warehoused debt; and,

- A commitment to local authorities to make up the rates shortfall, so that local authorities can continue provide full services to the public.

In addition to the measures I have recently announced, the full range of Enterprise Ireland, IDA, Local Enterprise Office (LEO) and Údarás na Gaeltachta grant and advisory supports continue to be available to eligible firms to help with strategies to access finance, commence or ramp-up online trading activity, reconfigure business models, cut costs, innovate, diversify markets and supply chains and to improve competitiveness.

I can assure the Deputy that I continue to work with my colleagues across Government to examine further appropriate supports to assist businesses impacted by Covid-19, including through any mechanisms allowable through the EU’s state aid framework.

My Department’s has also added a Covid-19 Supports page to its website, which outlines the available Government supports, which you can find at the link below: https://dbei.gov.ie/en/What-We-Do/Supports-for-SMEs/COVID-19-supports/.

Fuel Prices

Questions (60)

Michael McGrath

Question:

60. Deputy Michael McGrath asked the Minister for Finance the potential positive and negative impact of the decision by Saudi Arabia to increase oil supply and as a result reduce oil prices on the economy; and if he will make a statement on the matter. [4290/20]

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Written answers (Question to Finance)

Ireland relies on importing fuel to meet its energy needs and this leaves the Irish economy particularly exposed to the uncertainty of international oil price movements. However, as an energy importer Ireland has benefitted from the steep fall in oil prices since 2014, from approximately $100 in 2014 to $64 in 2019.

Nonetheless, in recent months, there has been considerable volatility in oil prices, largely arising from geopolitical tensions and the uncertainty surrounding the global economic impact of Covid-19. To date in May 2020, the price of Brent crude oil had decreased by around 60 per cent, to c. $29, since May 2019. Oil prices were expected to fall this year and the current levels are broadly in-line with my Department’s most recent economic forecasts published in Stability Programme Update 2020.

Generally speaking, decreases in oil prices should have a positive impact on economy’s growth prospects through improving consumer spending power and corporate profitability. All things equal, falling oil prices reduce consumer price inflation resulting in higher real wage growth and higher disposable incomes. My Department is currently forecasting HICP consumer price inflation of -0.6 per cent on the back of falling oil prices and suppressed demand due to Covid-19. Falling oil prices should also result in lower petrol and diesel prices for motoring purposes. However, given the recent developments regarding the spread of coronavirus and the resulting uncertainty surrounding both the domestic and global economy, it is uncertain whether the usual upsides resulting from the fall in oil prices, such as higher consumer spending, will materialise.

Of course, the decision to increase oil supply could easily be reversed resulting in an increase in oil prices. This in turn could result in negative terms of trade effects, with higher import costs reducing purchasing power and in turn weighing on domestic demand. The terms of trade deterioration can also result in a loss of competitiveness for the economy, particularly relative to those trading partners with less reliance on oil.

While the economy faces the greatest challenge since the financial crisis, the prudent economic and fiscal policies implemented over recent years have placed Ireland in a stronger position to weather any shock which may materialise including an oil price shock.

State Banking Sector

Questions (61, 68)

Michael McGrath

Question:

61. Deputy Michael McGrath asked the Minister for Finance the risks facing the economy as a result of the recent falls in stock prices on the Stock Exchange here and globally; the potential impacts on banks here including the capitalisation of the banks and the value of the shareholding of the State in each; and if he will make a statement on the matter. [4291/20]

View answer

Michael McGrath

Question:

68. Deputy Michael McGrath asked the Minister for Finance the relationship, direct or otherwise, between the share price of a bank and the capitalisation of that bank; and if he will make a statement on the matter. [4322/20]

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Written answers (Question to Finance)

I propose to take Questions Nos. 61 and 68 together.

As the Deputy will know, we are now in the midst of a severe recession, both globally and domestically. Jobs and our people, have borne the brunt of the unprecedented economic decline. But we can and we will recover. Our economy can grow again next year, employment can grow, unemployment can fall, and our public finances can improve. This is because, as the experience of the last financial crisis and Great Recession shows, our economy and labour market are very resilient and have real underlying strengths that this crisis will not have altered.

In fact, none of the imbalances that characterised our economy before the last recession – unsustainable credit growth, borrowing from abroad through a balance of payments deficit – are evident at present.

Similarly, the three banks in which the state has a shareholding (AIB, Bank of Ireland and PTSB) entered this crisis in a good position with strong capital and liquidity positions – a stark contrast to the previous recession. There are now significant capital and liquidity buffers in place in Irish banks which puts them in a strong position to continue to lend to the economy and to aid the recovery.

Both myself and my officials have engaged and will continue to engage extensively with the Banking and Payments Federation (BPFI) and the banks directly in relation to supports for personal and business customers affected by the COVID-19 crisis. Officials in the department are alert to issues raised directly by the public and these inform the department’s ongoing engagement process and policy formation.

All the banks have continued to evolve and expand the supports they have available and I would expect that this process continues. Consequently given the size of the economic shock and the uncertainty around the short to medium term outlook, management teams across every bank in Europe are withdrawing previously issued guidance on earnings for the year and setting out new plans. Our banks are no different.

In regard to the value of the State's shareholdings, we have obviously seen a large drop as share prices everywhere have fallen. However it should also be noted that Irish bank share prices have been under-performing for at least 18 months i.e. before the onset of the current COVID-19 health and economic crisis.

It is therefore clear that in these challenging times, recovering all of the €29bn that the state invested in the three remaining banks is not realistic in the short term and perhaps not the medium term either.

AIB

AIB

Bank of Ireland

Bank of Ireland

PTSB

PTSB

Date

Share Price

Value of Shareholding €M (c. 71% of total shares following IPO)

Share Price

Value of Shareholding €M (C. 14% of total shares)

Share Price

Value of Shareholding €M (c. 75% of total shares)

08/05/2020

1.085

2094.52

1.644

247.28

0.48

163.52

With regard to the factors influencing the shares since the current crisis began, I have been informed that feedback from investors and analysts identifies a few likely contributing factors:

1. The large state shareholding: Feedback from investors and advisory firms indicates market concern that banks across Europe with a large state shareholding could be subject to political pressures. Therefore there is some correlation between share price performance and state shareholdings. In Ireland's case we have legally binding Relationship Frameworks which ensure that commercial decisions are matters for the board and management of the banks in which we have a shareholding.

2. A low level of trading volumes: in the current turbulent environment investors have a preference for highly liquid stocks that they can trade in and out of rapidly.

These factors likely explain why there is such an apparent lack of correlation between the share price of Irish banks and their strong capital positions relative to their peers around Europe.

As regards the fall in the Irish and international stock markets more generally, aside from the knock on wealth and confidence effects, it will likely be more difficult and expensive for some companies to raise equity finance in the months ahead. This is why it is so important that our banking system support its customers appropriately so we can all navigate the current crisis successfully.

State Banking Sector

Questions (62)

Michael McGrath

Question:

62. Deputy Michael McGrath asked the Minister for Finance the value of the shareholding of the State in each of the State-supported banks since 2016 in six month intervals and in the case of a bank (details supplied) including the last sale of shares to the market in tabular form; and if he will make a statement on the matter. [4292/20]

View answer

Written answers (Question to Finance)

The information requested by the Deputy is set out in the following table.

AIB

AIB

Bank of Ireland

Bank of Ireland

PTSB

PTSB

Date

Share Price

Value of Shareholding €M (c. 71% of total shares following IPO)

Share Price

Value of Shareholding €M (C. 14% of total shares)

Share Price

Value of Shareholding €M (c. 75% of total shares)

08/05/2020

1.085

2094

1.64

247

0.48

163.5

02/01/2020

3.216

6208

5.01

754

1.12

381.5

03/06/2019

3.664

7073

4.74

713

1.35

459.9

02/01/2019

3.644

7034

4.87

733

1.66

565.5

01/06/2018

4.85

9362

7.26

1092

1.79

609.8

02/01/2018

5.46

10540

7.19

1082

2.28

776.7

01/06/2017

n/a*

n/a*

7.20

1083

2.80

953.8

03/01/2017

n/a*

n/a*

7.50

1128

2.81

959.3

01/06/2016

n/a*

n/a*

7.83

1177

2.09

712.3

* AIB only returned to the Dublin and London stock exchanges on 23 June 2017 following IPO.

The last sale of shares in AIB took place during the IPO in late June, 2017. It resulted in the sale of 28.75% of the banks ordinary shares and recouped €3.4 billion for the Irish exchequer. The State now retains c. 71% of the bank’s Ordinary Shares.

State Banking Sector

Questions (63)

Michael McGrath

Question:

63. Deputy Michael McGrath asked the Minister for Finance his views on the recent results published by banks (details supplied) and the prospect for the shareholding of the State in those banks; and if he will make a statement on the matter. [4293/20]

View answer

Written answers (Question to Finance)

The annual 2019 results for AIB and Bank of Ireland which were announced in March showed two profitable banks that were supporting our economic growth with strong and sustainable lending. Both banks made additional large strides in reducing NPEs further last year and continuing on their paths of digital transformation.

However, as the Deputy will be aware, the economic landscape has since been transformed and these results no longer reflect the true picture on the ground for the banks and their customers. Bank of Ireland published its Q1 2020 update on 11 May which showed them recording a loss in the quarter and my officials are currently evaluating and analysing all the information released by the bank. AIB will publish its Q1 2020 on 12 May.

Clearly there are tough times ahead for both the banks and particularly their customers but fortunately the banks are in strong position in terms of liquidity and capital to weather the storm and support the economy. With bank share prices having dropped dramatically all around Europe, our investments are worth a fraction of what they were worth only 12 to 18 months ago and any plans to sell more of the State's shares in the banks are now on hold.

Public Procurement Contracts

Questions (64, 65)

Michael Fitzmaurice

Question:

64. Deputy Michael Fitzmaurice asked the Minister for Finance if his attention has been drawn to alleged breaches of procurement law by a Department, body or agency in respect of public contracts in 2019; and if so, the details of same. [4307/20]

View answer

Michael Fitzmaurice

Question:

65. Deputy Michael Fitzmaurice asked the Minister for Finance if his Department carried out investigations in 2019 in respect of alleged breaches of European procurement law which was highlighted to his Department in reference to a Department, body or agency; and if so, the investigations carried out and the outcome of such investigations. [4308/20]

View answer

Written answers (Question to Finance)

I propose to take Questions Nos. 64 and 65 together.

As the Deputy is aware, European Union law sets out minimum harmonised public procurement rules. These rules govern the way public authorities and certain utility operators purchase goods, works and services. The rules are set out in three principal EU Directives which are transposed into national legislation and apply to tenders for public contracts whose monetary value exceeds a certain threshold. For tenders of lower value, national guidelines apply. Nevertheless, these national guidelines also have to respect the general principles of EU law.

The Department is obliged to abide by both EU procurement rules and national procurement guidelines. Any instances where goods or services with a value in excess of €25,000 (excluding VAT) are procured without a competitive tendering process must be reported to the Comptroller and Auditor General by the Accounting Officer for the Department in accordance with Circular 40/02: Public Procurement Guidelines – revision of existing procedures for approval of certain contracts in the Central Government sector. The Department of Finance has provided such reports to the C&AG as required.

I am not aware of any instances where proper procurement procedures have not been followed other than those already accounted for in the Department’s return under Circular 40/02. Neither am I aware of any instances related to the bodies under the aegis of this Department.

If the Deputy would like to provide information in relation to these alleged breaches of procurement law this will be examined.

Public Procurement Contracts

Question No. 68 answered with Question No. 61.

Questions (66, 67)

Michael Fitzmaurice

Question:

66. Deputy Michael Fitzmaurice asked the Minister for Finance if the Office for Government Procurement or another Department, agency or body using public procurement have processed payments for valid supplier invoices after 30 days of receipt; and if so, the scale of such payments in terms of value and number of invoices involved. [4309/20]

View answer

Michael Fitzmaurice

Question:

67. Deputy Michael Fitzmaurice asked the Minister for Finance if the Office for Government Procurement or another Department, agency or body using public procurement have processed payments for valid supplier invoices after 90 days of receipt; and if so, the scale of such payments in terms of value and number of invoices involved. [4310/20]

View answer

Written answers (Question to Finance)

I propose to take Questions Nos. 66 and 67 together.

Details of payments for valid supplier invoices processed by my Department and the bodies under its aegis during 2019; after 30 days of receipt, and 90 days of receipt, are contained in the following tables (the various tables have been compiled based on the accounts as at the time the PQ was first received).

It should also be noted that many of the below payments would not have been subject to penalty interest. An invoice can be paid after more than 30 days for a number of valid reasons, such as a dispute, to allow time for information contained on the invoice to be clarified, it may contain an error or there could be an omission.

30 Days

Number

Value

Department of Finance

3

1,487.44

90 Days

Number

Value

Department of Finance

2

590.20

There are 17 bodies under the aegis of my Department, 6 of which have provided content for inclusion. These are the Office of the Comptroller and Auditor General, Central Bank, Financial Services and Pensions Ombudsman, National Asset Management Agency, Office of the Revenue Commissioners and the Tax Appeals Commission.

It was not possible for 4 of the bodies, Credit Union Advisory Committee, Credit Union Restructuring Board, National Treasury Management Agency and Home building Finance to respond in full to this information request in the time available and therefore I will make arrangements to provide a response in line with Standing Orders.

6 bodies did not have any payments that were processed after 30 or 90 days. These are the Credit Review Office, Disabled Drivers Medical Board of Appeal, Investor Compensation Company Limited, Irish Financial Services Appeal Tribunal, Irish Fiscal Advisory Council and the Strategic Banking Corporation of Ireland.

The Irish Bank Resolution Corporation is not subject to procurement rules and therefore, does not fall under the scope of this PQ.

The remaining bodies under the aegis have provided the following information:

Body (30 Days)

Number

Value, €

Office of the Comptroller and Auditor General

13

11,945

Central Bank

546

5,125,238

Financial Services & Pensions Ombudsman

22

125,308

National Asset Management Agency

6

54,935

Office of the Revenue Commissioners

28

53,048

Tax Appeals Commission

8

2,920

Body (90 Days)

Number

Value, €

Office of the Comptroller and Auditor General

7

6,645

Central Bank

0

0

Financial Services & Pensions Ombudsman

2

9,077

National Asset Management Agency

1

7,380

Office of the Revenue Commissioners

2

2,970

Tax Appeals Commission

0

0

Question No. 68 answered with Question No. 61.

Tax Reliefs Eligibility

Questions (69)

Michael McGrath

Question:

69. Deputy Michael McGrath asked the Minister for Finance if there is relief for medical expenses incurred by persons which would normally qualify under a Med1 claim in circumstances in which the person did not have a tax liability for the year in question; and if he will make a statement on the matter. [4408/20]

View answer

Written answers (Question to Finance)

Section 469 of the Taxes Consolidation Act 1997 provides for tax relief in respect of qualifying expenses incurred in the provision of health care in a tax year. Examples of qualifying expenses include GP fees, prescribed medicines, non-routine dental and optical care and nursing home fees.

Detailed guidance on health expenses is available on Revenue’s website at the following link: https://www.revenue.ie/en/tax-professionals/tdm/income-tax-capital-gains-tax-corporation-tax/part-15/15-01-12.pdf

The rule is that tax relief in the form of health expenses relief is given by way of repayment of tax paid. In order for a person to avail of tax relief, sufficient tax must have been paid in the tax year concerned. Where this is not the case, any portion of the claim that is not covered by tax paid is not refunded to the person making the claim.

Tax Code

Questions (70)

Aengus Ó Snodaigh

Question:

70. Deputy Aengus Ó Snodaigh asked the Minister for Finance his views on the introduction of an 80% windfall tax on land rezoned from industrial to residential use; the estimated impact of such a tax on land value capture, land hoarding, land development and residential house prices; his further views on the best way to capture the increased land values from such rezoning from both land sales and from property sales; and if measures such as windfall taxes can be geographically specific, that is, parcels of land rezoned from industrial to residential as proposed by Dublin City Council and South Dublin County Council. [4451/20]

View answer

Written answers (Question to Finance)

As the Deputy is probably aware, the National Asset Management Agency Act 2009 amended the Taxes Consolidation Act 1997 by providing for an 80% windfall tax on profits or gains arising from disposals of development land, to the extent that those gains were attributable to a relevant planning decision. Profits or gains from these activities that were not attributable to a relevant planning decision were taxed in the normal way. Section 31 of Finance Act 2014 repealed the 80% tax rate on these profits or gains with effect from 1 January 2015.

I have signalled in the past my concerns regarding the re-introduction of a windfall tax. These were on the basis that the re-introduction of a windfall tax on a similar basis is likely to act as a disincentive to landowners to dispose of such property. In addition, the existence of the levy may discourage landowners from seeking planning permission for specific sites. Currently most sales of land or property are subject to CGT at 33 per cent.

1) The extent to which any windfall tax may affect land hoarding, land development or indeed residential house prices is likely to be determined by its design, its scale, scope and the rate applied. In the absence of such detail it would be difficult to comment on its potential impact. Indeed if such a tax was introduced it would be some time before it would be possible to consider its effectiveness or impact.

(1) As regards capturing any increased land value from rezoning, it is understood that such measures can be a combination of either specific taxes or fees, levies or charges which could be used for specific development purposes. There are also forms of development based land value capture, which aims to capture revenues from the development of the land and return the benefit to state or local authorities. As with any consideration of windfall levies if such or indeed other measures were to be implemented to capture increased land value from rezoning they would need careful analysis in their development, design and implementation.

It is not clear as to the policy basis a windfall tax would be introduced only for industrial sites identified in Dublin City Council and South Dublin City Counsel. The advice of the Attorney General on the constitutionality of a windfall tax based on geographic location would be necessary.

(1) The introduction of any tax changes by themselves such as a windfall tax would not be the solution to resolving issues with the housing market and the supply of new homes. There is significant past experience, which suggests that tax changes by themselves have the potential to create distortions, create perverse incentives and may not lead to a desired outcome of increasing the supply of residential property.

Finally I would point to the operation of the Land Development Agency (LDA). One of the key aims of the agency is to drive strategic land assembly for the long-term by introducing new mechanisms for working with both public and private sector land owners, by stabilizing land values, flattening extreme peaks and troughs and driving increased affordability through better land availability. The LDA will, in effect, be the State’s tool for actively managing development land.

Tax Code

Questions (71)

Michael Healy-Rae

Question:

71. Deputy Michael Healy-Rae asked the Minister for Finance if he will address a matter regarding the taxes levied on the pension of a person (details supplied); and if he will make a statement on the matter. [4470/20]

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Written answers (Question to Finance)

I am advised by Revenue that it was informed by the Department of Employment Affairs and Social Protection (DEASP) that the person’s State Contributory Pension payment increased by €5 per week with effect from 6 January 2020.

In situations where a person has both a private pension and a State Contributory Pension from DEASP, the tax due on the latter (DEASP payment) is achieved by reducing the annual tax credits on the former (private pension) by the value of the DEASP payment.

For example, an increase of €5 per week in a DEASP payment means that tax on an additional €260 is to be collected over the course of the year by reducing a person’s tax credits. €260 extra income at the standard rate of tax of 20% gives rise to a reduction in tax credits of €52 for the year or €4.34 per month.

The person’s private pension provider applied the revised tax credits and rate band to the private pension payment of 1 March 2020 and, consequently, additional income tax was deducted on a cumulative basis back to the beginning of 2020.

While reviewing the person’s overall tax position, it was noted by Revenue, based on available information, that the person had not received his full credit entitlements. Revenue has adjusted his tax record to take account of additional tax credit and rate band entitlements and this has been reflected in his subsequent private pension payments. Revenue is satisfied that the correct tax is now being deducted from the person’s private pension.

Financial Services Regulation

Questions (72)

Michael McGrath

Question:

72. Deputy Michael McGrath asked the Minister for Finance the rules and regulations surrounding mortgage and loan repayments in the event a lender gives leeway or a holiday for workers impacted by the Covid-19 outbreak; if such mortgages or loans will be deemed by the Central Bank to be in arrears; if they will be considered as non-performing under ECB and EBA regulations; if the loans or mortgages will be recorded on the Central Credit Register; the views of the Central Bank in relation to the matter; and if he will make a statement on the matter. [4504/20]

View answer

Written answers (Question to Finance)

As the Deputy will be aware, regulated entities have introduced three-month payment moratoria on mortgages, and personal and business loans for business and personal customers affected by COVID-19. Regulated entities will now make available a further three-month extension to the current payment moratoria to customers that continue to be directly impacted by the fallout from the Covid-19 pandemic. I have been advised by the Central Bank of Ireland (the Central Bank) that it continues to engage with the Banking and Payments Federation Ireland (BPFI) and with firms themselves to ensure the effective implementation of these payment breaks. Credit unions are also supporting requests from their members, on a case-by-case basis.

The Central Bank expects all regulated entities to take a consumer-focused approach and to act in their customers’ best interests. Any customer facing potential difficulties in making loan repayments as a result of COVID-19, is advised to contact their bank, credit union or credit servicer as early as possible. The existing protections of the consumer protection framework continue to apply as appropriate.

The Central Bank’s consumer protection framework seeks to ensure that regulated entities are transparent and fair in all their dealings with borrowers and that borrowers are protected from the beginning to the end of the mortgage life cycle. Provision 3.1 of the Consumer Protection Code 2012 (the CPC) requires that where a regulated entity has identified that a personal consumer is a vulnerable consumer, the regulated entity must ensure that the vulnerable consumer is provided with such reasonable arrangements and/or assistance that may be necessary to facilitate him or her in his or her dealings with the regulated entity. This includes particular vulnerabilities that may arise as a result of the impact of COVID-19, for example, illness or loss of income.

Provision 2.6 of the CPC requires that regulated entities must make full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer. As such, where a payment moratorium is offered in respect of the Covid-19 situation, the Central Bank expects that firms will make clear to the borrower how the moratorium works, the impact of the moratorium on the overall cost of the mortgage and future repayments, as well as how the borrower will be treated when the arrangement ends.

If a payment moratorium has been mutually agreed between the borrower and the lender, then the loan will not be considered to be in arrears in respect of payments not made over the duration of the agreed payment moratorium.

The Central Bank is acutely aware that dealing with the challenges of COVID-19 will require a co-ordinated effort across the public and private sectors. First and foremost, COVID-19 is a global public health emergency, so the front line of Ireland’s response comprises of the exceptional efforts of Ireland’s health professionals. But it is also clear that COVID-19 is disrupting economic activity, both internationally and in Ireland, with adverse implications for the financial position of households and businesses in the near term.

In line with the Central Bank's mission to serve the public interest by safeguarding stability and ensuring that the financial system is operating in the best interests of consumers and the wider economy, the Central Bank expects firms to take a consumer-focused approach at this worrying time for some of its customers.

European Central Bank (ECB) and European Banking Authority (EBA) guidelines prescribe the conditions under which a loan is considered to be non-performing for banks. Lenders are also obliged to comply with relevant accounting standards. A number of recent statements from the ECB and the EBA clarifies a number of aspects of the prudential framework to provide clarity to the EU Banking sector. Where flexibility is provided for within the various obligations, the Central Bank will consider the application of this within the broader European framework.

The Central Banks has stated that where the Central Credit Register (CCR) is concerned, lenders obligations continue under the Credit Reporting Act 2013 to submit accurate information, and to enquire on the CCR when considering loan applications for €2,000 or more. Lenders may also enquire on the CCR when considering a loan for less than €2,000; if a borrower has requested a restructure on an existing loan; if there are arrears on an existing loan or if there has been a breach of the limit of a credit card or overdraft. Borrowers can request their credit report at any time, free of charge (subject to fair usage), at centralcreditregister.ie.

The CCR produces credit reports for lenders and borrowers on request. The CCR does not produce a credit score; it simply records the information that is submitted by lenders on a monthly basis. It is factual impartial information. The CCR does not decide if a loan is approved, the lender does.

Any payment arrangements (including payment breaks agreed between a borrower and their lender) are a matter for discussion between these two parties. Lenders must ensure that they accurately reflect changes to a borrower’s repayment terms, in the data submitted to the CCR in accordance with the guidance issued by the Central Bank. When a lender agrees a payment break with a borrower, the lender should not report this to the CCR as being “missed” or “past due” or the loan as being “restructured” during the period of the payment break.

Borrowers may also avail of the option to place an explanatory statement on their credit report in connection with any of their information on their credit report. So for example, if a borrower found themselves in arrears on a loan, they could use this option to explain the circumstances, if they wish.

Insurance Coverage

Questions (73)

Joan Collins

Question:

73. Deputy Joan Collins asked the Minister for Finance the steps he will take to prevent the closure of a project (details supplied) in Dublin 24. [4524/20]

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Written answers (Question to Finance)

Let me say at the outset that I am very aware of the affordability and availability of insurance cover issues facing local community groups and projects, such as the one outlined in the Deputy’s question. I have much sympathy for the position such groups find themselves in, however as the Deputy is aware, there are significant constraints on what the Government can do to immediately resolve this issue.

In this regard, neither I, nor the Central Bank of Ireland, have any influence over the pricing of insurance products, and neither can we compel any insurer operating in the Irish market to provide cover to community groups, as this is a commercial matter for insurers. This position is reinforced by the EU Single Market framework for insurance (the Solvency II Directive) which expressly prohibits Member States from adopting rules, which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. A further constraint is the fact that for constitutional reasons, the Government cannot direct the courts as to the award levels that should be applied.

Notwithstanding these constraints, insurance reform remains a priority. The Cost of Insurance Working Group (CIWG) was established in July 2016 and undertook an examination of the factors contributing to the increasing cost of insurance in order to identify what short, medium and long-term measures could be introduced to help reduce the cost of insurance for consumers, businesses and the voluntary/community and arts sectors. The CIWG has produced two reports: the Report on the Cost of Motor Insurance and the Report on the Cost of Employer and Public Liability Insurance .

Many reforms have been made already, including amendments to the Civil Liability and Courts Act 2004, the Personal Injuries Assessment Board Act 2003 , and the establishment of the National Claims Information Database in the Central Bank of Ireland. It is clear however that the single biggest challenge that still needs to be addressed and which is having the most impact on the community group sector is the level of awards that exist in Ireland, for relatively minor injuries, as compared to other jurisdictions.

I believe the key recommendation arising from both of the CIWG’s reports was the establishment of the Personal Injuries Commission (PIC) and the publication of its two reports. The PIC conducted a benchmarking of award levels between Ireland and other jurisdictions for the first time and this has been very helpful in identifying the scale of the problem that is faced. This research showed that award levels for soft tissue injuries in Ireland were 4.4 times higher than in England and Wales. On foot of the PIC recommendations, the Government with the support of all parties in the Oireachtas prioritised the passing of the Judicial Council Act 2019 .

This Act provides that the Judicial Council nominate a date for establishment of the Personal Injuries Guidelines Committee at its first meeting in accordance with Section 18 of the Judicial Council Act 2019. At that meeting on 7 February 2020, the Council nominated 28 April 2020 for the establishment of the Committee. This Committee is tasked with introducing new guidelines to replace the Book of Quantum. Pursuant to the provisions of the Act, the first meeting of the Committee will take place within one month of establishment and the draft guidelines will be prepared within six months of establishment for submission to the Judicial Council. It should be noted that adherence to this timeline is a responsibility for the Judicial Council itself and my Department has no role in the matter. Further, while the Government cannot interfere in the Judicial Council’s deliberations due to the constitutional separation of powers, I would hope that the Guidelines will take into account the PIC’s benchmarking report, and can come into operation as soon as possible following their submission to the Judicial Council. In return for lower and more consistent award levels, I believe insurers should significantly reduce their premium levels and broaden their risk horizons.

In summary, the key outstanding challenge to satisfactorily resolve the cost and availability of insurance issue is a recalibration of award levels downwards. I believe if this is done and these awards are applied consistently by the courts, the current problems being experienced by impacted community groups and projects, as well as other businesses and organisations more generally, will recede.

VAT Rate Increases

Questions (74)

Carol Nolan

Question:

74. Deputy Carol Nolan asked the Minister for Finance if he will consider overturning the decision made by the Revenue Commissioners to introduce VAT increases on food supplements, particularly those which are used by persons to slow down the deterioration of their sight; and if he will make a statement on the matter. [4533/20]

View answer

Written answers (Question to Finance)

Shortly after the introduction of VAT, Revenue allowed the zero rate to be applied to certain food supplement products (vitamins, minerals and fish oils). This concessionary approach expanded as the market developed over the years and resulted in the zero rating by Revenue of further similar products, including products other than vitamins, minerals and fish oils.

Revenue has acknowledged that the scope of its concessionary approach broadened progressively over time to the point that it had become increasingly difficult to maintain an effective distinction between food supplement products that could benefit from the zero rate and those that were standard rated.

Following a review by Revenue, who commissioned an expert report, it was concluded that the status quo was no longer sustainable. Revenue engaged with my Department, which subsequently conducted a public consultation. The public consultation ran from 18 April to 24 May 2019 and sought input from a wide range of interested parties, including from health and nutrition experts and the Minister for Health. The results of the consultation were included in the 2019 Tax Strategy Group paper on VAT.

I subsequently made provision in Finance Bill 2019 to apply the 13.5% rate of VAT to all food supplement products, which took effect from 1 January 2020. Foods for specific groups such as infant follow-on formulae and infant foods, foods for special medical purposes and specially formulated foods (e.g. total diet replacement for weight control) remain zero rated. These are well established and defined categories of food that are essential for vulnerable groups of the population. Fortified foods, such as yoghurts and cereals fortified with vitamins and minerals, will also remain zero rated as they are food.

Folic acid, vitamin and mineral products for human oral use which are licenced or authorised as medicines by the Health Products Regulatory Authority (‘HPRA’) will remain zero rated under a different VAT provision.

Revenue Commissioners

Questions (75)

Éamon Ó Cuív

Question:

75. Deputy Éamon Ó Cuív asked the Minister for Finance when a reply will issue to correspondence sent to the Revenue Commissioners on 11 of December 2019 (details supplied); the reason for the delay in replying to this Deputy; and if he will make a statement on the matter. [4636/20]

View answer

Written answers (Question to Finance)

Revenue has advised me that it reviewed the tax position of the person in question on 29 January 2020 and I am assured that their record is now fully up to date.

Revenue has also advised me that it confirmed the correct tax position to the person on the same date via its ‘MyEnquiries’ system. Unfortunately, Revenue omitted to provide an update to the Deputy and apologises for this oversight.

Revenue has informed me that it has now written to the Deputy.