Written Answers Nos. 76-100
76. Deputy Éamon Ó Cuív asked the Minister for Finance the estimated cost of tax foregone that would arise if mortgage interest relief was to be introduced on house purchases and renovations for new mortgages and existing mortgages up to a value of €400,000; and if he will make a statement on the matter. [4637/20]
View answerMortgage Interest Relief (MIR) is currently available for mortgage loans taken out between 1 January 2004 and 31 December 2012, which were used for the purchase, repair or improvement of a principal private residence. The rate of relief depends on whether the loan was taken out by a first-time buyer, the date of purchase and the length of time the loan has been held. The rate of relief is also subject to a maximum annual cap. MIR was due to cease at the end of 2017 but was extended in Finance Act 2017 to 31 December 2020 on a tapered basis for the remaining recipients of the relief. The effect of the measure was to provide for 75% of the 2017 relief in 2018, 50% in 2019 and 25% in 2020, before expiring on 1 January 2021.
The cost of the introduction of a new scheme of MIR would depend on the uptake, as well as the eligibility criteria and rate(s) of relief involved. It is therefore not currently possible to estimate the cost of the Deputy’s proposal.
77. Deputy Frankie Feighan asked the Minister for Finance the estimated cost involved in providing all existing and new tenancies a month's rent back through a refundable tax credit; and if he will make a statement on the matter. [4669/20]
View answerThe rent relief tax credit was abolished in Budget 2011 and is no longer available to those that commenced renting for the first time from 8 December 2010. This followed a recommendation in the 2009 report by the Commission on Taxation that rent relief should be discontinued. The view of this independent commission was that, in the same manner in which mortgage interest relief increases the cost of housing, rent relief increases the cost of private rented accommodation.
The annual cost of such a tax credit, operating on a refundable basis, would depend on the number of those renting, other than those who are in receipt of rental support from the State, and the amount of rent paid by them each year.
I am advised that there is no reliable basis available on which to estimate the potential cost of the introduction of a tax relief as described by the Deputy. However, according to Census 2016 data, the private rented sector amounts to approximately 310,000 units. This figure includes those in receipt of rental support from the State. It is clear, therefore, that the costs involved would be likely to be very significant.
78. Deputy Frankie Feighan asked the Minister for Finance the estimated cost of making all income below €30,000 exempt from USC; and if he will make a statement on the matter. [4685/20]
View answerI am advised by Revenue that the estimated first and full year cost to the Exchequer of exempting all income below €30,000 from the Universal Social Charge (USC) is €1,056m and €1,219m respectively.
This estimate has been generated by reference to 2020 incomes, calculated on the basis of actual data for the year 2017, the latest year for which returns are available, adjusted as necessary for income, self-employment and employment trends in the interim. The estimates are provisional and may be revised.
79. Deputy Frankie Feighan asked the Minister for Finance the estimated cost of not allowing banks to write-off their past losses against future profits to reduce their corporation tax bill to zero; and if he will make a statement on the matter. [4686/20]
View answerThe Deputy may recall that my Department issued a Technical Note to the Committee on Finance, Public Expenditure & Reform and Taoiseach (FinPERT) in August 2018 which dealt with the potential consequences of changes to the treatment of Corporation Tax Loss relief in respect of banks. The Technical Note can be found at the following link:
https://assets.gov.ie/4003/071218113138-0ba1ccc1c89345388cbe4badabe7073a.pdf
In answering the Deputy’s current parliamentary question I have used content included in this note where relevant.
Under CRD IV rules, deferred tax assets (DTAs), which are substantially made up of tax losses in the case of the Irish banks, are being phased out over a 10-year period which commenced in 2014. Accordingly, tax losses still make up a material portion of the transitional CET1 ratios of the Irish banks. It should be noted that the transitional CET1 ratio is the ratio which the regulator uses when assessing compliance with the minimum ratio set for the bank.
In the Technical Note referred to above, it was estimated that the removal of DTAs from the banks’ balance sheets would have the following impact on the December 2017 CET1 ratios as follows:
|
Transitional CET1 |
AIB |
BOI |
PTSB |
|
Ratio as reported |
20.8% |
15.8% |
17.1% |
|
Pro-forma ratios with DTAs removed |
17.1% |
14.0% |
14.8% |
|
Reduction in CET1 ratios |
(3.7%) |
(1.8%) |
(2.3%) |
As fully loaded CET1 ratios are calculated with the DTAs deducted in their entirety from regulatory capital, the removal of DTAs would not impact on the reported ratio in the reporting period in which they were removed. However, for subsequent reporting periods, fully loaded ratios would be negatively impacted as they would not have benefited from the usage of the DTAs in the scenario where the banks continue to be profitable. This also applies beyond the transitional period.
The Deputy will be aware of the significant increase in regulatory capital which the banks are now required to hold since the financial crisis. It is not possible to estimate the potential reaction of the regulator should the DTAs be removed from the banks’ balance sheets in terms of addressing the impact of this on capital. However, as the impact would be significant, with the reported ratios at AIB, BOI and PTSB being reduced by an estimated 18%, 11% and 13% respectively using the same data, it would no doubt be a matter carefully considered.
In terms of valuation, it is important to highlight that the DTAs are a valuable asset on a bank’s balance sheet and the State benefits from this as it sells down its stakes in the banks. The original Technical Note estimated that the value of the DTAs, under current rules and on a discounted cash flow basis, was c. €2.28bn with the State’s share being c. €1.22bn (54%) reflecting its relative shareholdings in the banks.
As a separate matter, the removal of DTAs would likely have an impact on the pricing of retail customer products. Although its difficult to estimate the precise impact, one of the key criteria used by banks when pricing products is the return on equity (ROE). ROE is an important metric for a number of stakeholders including the regulator, when assessing the financial performance of a bank. Accordingly, should a bank be required to hold more capital arising from the removal of DTAs, this could put upward pressure on interest rates say, for example, in relation to loan products to ensure the bank is achieving an adequate ROE.
Finally, during the Committee Stage of Finance Bill 2019, I committed to providing the FinPERT Committee with updated figures on the Technical Note provided in August 2018. Although the figures had changed somewhat allowing for a further year’s data, the keys messages from the original Technical Note remain unchanged.
80. Deputy Joan Collins asked the Minister for Finance if he will address a matter regarding the rate of VAT (details supplied); and if he will make a statement on the matter. [4763/20]
View answerI am advised that information regarding the potential impact of possible rate changes on VAT receipts is available in Revenue’s Ready Reckoner at link:
https://www.revenue.ie/en/corporate/documents/statistics/ready-reckoner.pdf .
Increases or decreases in excess of the listed 1% change can be extrapolated on a straight-line basis.
Please note that the Ready Reckoner does not account for COVID-19.
Under the EU VAT Directive, with which Irish VAT law must comply, the lowest standard rate that can apply is 15%. In addition, further restrictions apply to the application of reduced rates; for example, while lower rates are permissible for some goods, the minimum rate that may be applied to certain goods and services cannot be less than 12%.
81. Deputy Michael McGrath asked the Minister for Finance if SSM rules will be reviewed as a result of the Covid-19 outbreak; the liquidity measures being considered by the ECB, EBA and the Central Bank; if the Central Bank is considering reviewing the countercyclical buffer; and if he will make a statement on the matter. [4800/20]
View answerThe spread of COVID-19 is a major shock to growth prospects across the globe. It is clear that the pandemic is disrupting economic activity, both internationally and in Ireland, with adverse impacts on households, businesses and the financial system in the near term. The necessary containment measures on public health grounds will have a significant impact on the euro area and Irish economies.
Monetary policy actions
The European Central Bank has taken a series of monetary policy measures, with the following measures announced at the Governing Council meeting of 12 March 2020:
1. Additional longer-term refinancing operations (LTROs);
2. More favourable terms on the targeted longer-term refinancing operations (TLTROs);
3. Additional net asset purchases under the Asset Purchase Programme (APP).
The ECB’s response to COVID-19 outbreak was further strengthened on 18 March by:
1. A new temporary asset purchase programme announced (Pandemic Emergency Purchase Programme or PEPP);
2. Eligible assets under the corporate sector purchase programme (CSPP) broadened to include non-financial commercial paper of sufficient credit quality;
3. Eligible collateral with respect to refinancing operations expanded to include claims related to the financing of the corporate sector under Additional Credit Claims (ACC).
The Central Bank recently published an Economic Letter that describes the above monetary policy actions taken to combat the crisis, in particular liquidity policies and asset purchases, and outlines what these measures mean for Ireland
(See Holton, Phelan and Stuart, 2020, https://www.centralbank.ie/docs/default-source/publications/economic-letters/vol-2020-no-2-covid-19-monetary-policy-and-the-irish-economy-(holton-phelan-and-stuart).pdf?sfvrsn=4).
Further to these measures, on 7 April the Governing Council of the ECB announced a number of temporary collateral easing measures. The goal of these measures is to facilitate the availability of eligible collateral for banks to allow the banks better access to liquidity operations.
On 30 April, the Governing Council announced further changes to the TLTRO programme with the entry interest rate being lowered to 50 basis points below the average Main Refinancing Operation (MRO) rate over the life of the operation. The Governing Council also announced a new series of non-targeted pandemic emergency longer-term refinancing operations (PELTROs). The goals of these operations are to support liquidity conditions in the euro area financial system.
Macroprudential and Supervisory policy actions
European and national policy on capital and liquidity buffers has also been designed to allow banks to withstand stressed situations like the current one.
On 18 March, the Central Bank of Ireland announced that the Countercyclical Capital Buffer, which had been set at 1 per cent effective from July 2019, would be fully released and reduced to 0 per cent. The release of this time-varying capital buffer is appropriate in the current circumstances in-line with its underlying rationale to support the sustainable flow of credit to the economy in both good times and bad. This action will support the continued provision of credit to households and business by the banking system during this challenging time.
The Supervisory Board of the ECB announced on 12 March that it will allow banks to operate temporarily below the level of capital defined by the Pillar 2 Guidance (P2G), the capital conservation buffer (CCB) and the liquidity coverage ratio (LCR).
Banks will also be allowed to partially use capital instruments that do not qualify as Common Equity Tier 1 (CET1) capital, for example Additional Tier 1 or Tier 2 instruments, to meet the Pillar 2 Requirements (P2R). This brings forward a measure that was initially scheduled to come into effect in January 2021, as part of the latest revision of the Capital Requirements Directive (CRD V).
In subsequent decisions, the Supervisory Board issued a recommendation that banks in the euro area not issue dividends with respect to 2019 or 2020 before October 2020 at the earliest, and there was further capital relief provided with respect to market risk.
The Central Bank recently published a Financial Stability Note outlining the rationale underlying the release of the Countercyclical Capital Buffer (CCyB) in Ireland in the light of the recent COVID-19 developments
(See De Nora, O'Brien and O'Brien, 2020, https://www.centralbank.ie/docs/default-source/publications/financial-stability-notes/no-1-releasing-the-ccyb-to-support-the-economy-in-a-time-of-stress-(denora-o'brien-and-o'brien).pdf?sfvrsn=7).
As Minister for Finance, I expect banks to use the positive effects of these measures to support the economy and I know that the Central Bank of Ireland shares this view. The Central Bank continues to monitor the evolving situation and to assess the impact on the economy and the financial system. Their focus is on ensuring monetary and financial stability and that the financial system operates in the best interests of consumers and the wider economy. The Central Bank is engaged with the financial sector to ensure that firms are responding effectively to the evolving situation.
82. Deputy Bernard J. Durkan asked the Minister for Finance if the current Irish Strategic Investment Fund mandate would allow for it to invest in projects with regard to the regeneration of town centres; and if he will make a statement on the matter. [4923/20]
View answerThe National Treasury Management Agency (NTMA) have informed me that the Ireland Strategic Investment Fund (“ISIF”) is already actively engaged across a range of investment initiatives relating to the regeneration of the core of many of our regional cities and major towns. Investment in support of Regional Development is one of ISIF’s priority themes under its refocused strategy – and within this, investments which can enable the regional cities and major towns are a key focus. ISIF has aligned its strategy with Project Ireland 2040 and its themes of balanced regional growth and compact growth, whereby regional cities and towns will grow within their existing footprint and thereby prevent further urban sprawl.
The Abbey Quarter development on the former Smithwicks brewery site in Kilkenny is a typical example of ISIF’s activities in this area. ISIF has been working in partnership with Kilkenny County Council and is providing commercial investment capital to drive the repurposing of this strategic site at the heart of Kilkenny city. The first office development is currently under construction and is expected to be fully constructed by the end of this year and will provide 47,000 sq. ft. of commercial space with capacity for over 300 workers.
ISIF has also signed a Memorandum of Understanding with the Port of Cork for the potential repurposing of its Tivoli Docks site, once it has moved its operations to Ringaskiddy. ISIF is also in early stage engagement on other potential opportunities in Limerick, Waterford and Galway.
ISIF is open to engagement with public and private stakeholders and potential partners on further strategic sites of scale in our regional cities and towns. ISIF’s legislative mandate requires each of its investments to seek to generate economic impact and also to be made on fully commercial terms. On this basis any project proposed to ISIF needs to have a robust commercial investment case.
83. Deputy Bernard J. Durkan asked the Minister for Finance the estimated revenue generated to date through the increase in carbon tax in Budget 2020 for each of the next five years; and if he will make a statement on the matter. [4931/20]
View answerI am advised by Revenue that the estimated additional receipts from the Budget 2020 increase of €6 per tonne in Carbon Tax are shown in the following table. These estimates are based on normal consumption levels and no allowance has been made for any change in consumption in future years.
|
Year |
€m |
|
2020 |
+93 |
|
2021 |
+130 |
|
2022 |
+130 |
|
2023 |
+130 |
|
2024 |
+130 |
I am further advised by Revenue that, in the first four months of 2020, provisional Carbon Tax receipts are approximately €183 million, which is some €34 million ahead of the same period in 2019, though €1.2 million behind forecast for 2020.
85. Deputy Pearse Doherty asked the Minister for Finance if he will consider banning all card transaction charges on contactless and chip-and-pin payments in order to encourage non-cash payments as a measure to reduce hand contact in the coming weeks and months; and if he will make a statement on the matter. [5014/20]
View answerAll credit institutions in Ireland are independent commercial entities and the imposition of bank fees and charges is a commercial decision for the bank involved. You will be aware that, as Minister for Finance, I have no statutory role in relation to the charges applied by credit institutions. Under Section 149 of the Consumer Credit Act 1995, as amended, the responsibility for the regulation of bank fees lies with the Central Bank of Ireland.
However, I do appreciate the concerns that you have raised and I welcome the measures that financial institutions have put in place to date to support customers for the duration of the COVID-19 outbreak.
These measures include:
- The limit on contactless payments has been increased from €30 to €50. The Banking and Payments Federation Ireland announced on 25th March that several parties including banks, retailers and technology companies were working closely together on completing the rollout of the increased contactless limit by April 1st,
- Several institutions have chosen not to proceed with planned increases in bank charges at this difficult time and I would call on any other banks or other financial institutions not to consider any increases in charges or fees, and
- Many institutions have announced that they will waive contactless fees to enable consumers to make more payments without the need for physical contact.
I am advised by the Central Bank that it is closely monitoring developments related to COVID-19 and that it continues to assess their impact on the economy, the financial system and consumers, as more information becomes available. The Central Bank is engaged with firms across the financial system to ensure that firms are responding effectively to the evolving situation and expect that regulated entities continue to comply with the various rules within the consumer protection framework.
86. Deputy Pearse Doherty asked the Minister for Finance if he will consider abolishing all card transaction charges on contactless and chip-and-pin payments recently introduced by a bank (details supplied) in order to encourage non-cash payments as a measure to reduce hand contact in the coming weeks and months; and if he will make a statement on the matter. [5015/20]
View answerAll credit institutions in Ireland are independent commercial entities and the imposition of bank fees and charges is a commercial decision for the bank involved. You will be aware that, as Minister for Finance, I have no statutory role in relation to the charges applied by credit institutions. Under Section 149 of the Consumer Credit Act 1995, as amended, the responsibility for the regulation of bank fees lies with the Central Bank of Ireland.
The Deputy will be aware that following my meeting with the banks on 18 March the limit for contactless payments has now increased from €30 to €50 in the majority of stores nationwide.
In a press release on 23 March, the bank referred to in your question announced that it was suspending previously announced changes to fees and charges. As a result, there will be no charges on euro contactless payments and no change to charges for Chip and PIN transactions.
The bank in question has also developed a solution to facilitate the deferral of the quarterly maintenance and transaction fees which were charged to SME business current accounts on 30 March. This allows SME’s to spread the quarter fees over three equal instalments payable in September, October and November this year. It should be noted that quarterly fees are also due to be charged on these accounts in June and September.
I am advised by the Central Bank that it is engaged with firms across the financial system to ensure they are responding effectively to the evolving situation. While entities regulated by the Central Bank must continue to comply with the various rules within the consumer protection framework, card transaction charges are a commercial decision for each regulated entity.
87. Deputy Pearse Doherty asked the Minister for Finance the projected impact on the public finances as a result of a loss of trade and economic activity due to the Covid-19 outbreak in 2020 and 2021 including impact to revenue, expenditure and the General Government Balance; and if he will make a statement on the matter. [5016/20]
View answerIn January the Medium Term Fiscal Strategy (MTFS) outlined, at a high level, the growth, revenue, expenditure and corresponding general government position over a five year horizon. The Stability Programme Update (SPU) 2020, published in April and formally submitted to the European Commission and European Council, incorporated the impact of the Covid-19 pandemic and the adopted policy responses to support households and employees.
The economic impact of Covid-19 and the implemented support measures mean that tax revenue will be significantly lower and Voted expenditure higher than the position in January. As a result a General Government Deficit of 7.4 per cent of GDP is likely this year. The following table sets out the impact on revenue, expenditure and the General Government Balance (GGB):
|
Difference between SPU and MTFS |
2020 |
2021 |
|
Tax revenue, € billion |
-14.0 |
-12.3 |
|
Voted expenditure, € billion |
+8.0 |
+1.5 |
|
General government balance, p.p. |
-8.1 |
-5.1 |
The projections outlined above are based on the assumption that economic activity bottoms out in the second quarter, with gradual recovery thereafter. In addition, Government will shortly bring forward an economic recovery plan, setting out its approach to repairing the damage caused by the pandemic. The costs of this are not included in the deficit projection outlined above, as decisions have not yet been taken.
The assumption of gradual economic recovery later this year and into next year should benefit general government revenues, notably through the taxation channel. General government expenditure looks set to fall next year as temporary policy support is unwound. The downward path for interest expenditure will continue, although at a slower pace: while the effective interest rate on public debt continues to decline, the State is carrying a larger burden of debt on foot of the very large deficits this year and next.
On 2nd May the Government adopted a further suite of measures focused on the business sector. Some of these measures will require legislation to be enacted, which will be a matter for the next Government. The total amount of these additional business support measures is €6.5 billion.
From a statistical perspective some of these measures will be subject to accrual and others will be financial transactions, therefore the impact on the GGB will differ. The Credit Guarantee Scheme, for example, will be a contingent liability rather than an actual liability.
Thanks to appropriate budgetary policy over recent years, we meet this challenge from a position of strength – a budget surplus, cash reserves and the establishment of the Rainy Day Fund.
88. Deputy Pearse Doherty asked the Minister for Finance the sources of revenue and or funding which will be utilised in the event of an economic shock to implement expenditure commitments as outlined in the Revised Estimates 2020 and the most recent stimulus package in response to the Covid-19 outbreak including but not limited to borrowing and utilising resources from the NAMA surplus and the social insurance fund; and if he will make a statement on the matter. [5017/20]
View answerThe Government published its Draft Stability Programme Update on 21 April. This set out an updated economic and fiscal scenario, for this year and next, incorporating the impact of the Covid-19 pandemic. The necessary fiscal cost of providing short-term support to the private sector will be significant. A general government deficit of €23 billion is currently projected for this year.
The cost of these measures was estimated at €6.8 billion, with the most important being the Pandemic Unemployment Payment and the Temporary Wage Subsidy Scheme. These are in place to support those who have lost their employment due to the restrictions and to help maintain the worker-employer relationship.
On 2 May, the Government adopted an additional suite of measures – targeted towards the business sector. Some of these measures will require legislation to be enacted, which is a matter for the next Government. The total amount of this additional business support is €6.5 billion.
From a statistical perspective not all of these measures are included in estimates of the general government balance – loan guarantees, for example, are contingent liabilities rather than actual liabilities.The Pandemic Stabilisation and Recovery Fund, within the Ireland Strategic Investment Fund (ISIF), will utilise up to €2 billion of ISIF’s readily available capital to invest in medium and large enterprises.
The starting position is favourable: a general government surplus was delivered last year; the Rainy Day Fund (RDF) was established; at end-April the NTMA had c.€20 billion of cash - pre-funding this year’s redemptions; and there are no bonds maturing next year.
In light of the updated fiscal position, including the Exchequer Borrowing Requirement of €15.6 billion, the National Treasury Management Agency (NTMA) has announced a revised bond funding range of €20 billion to €24 billion for the year.
The NTMA has issued over €11 billion in bonds so far this year. This includes two new bonds maturing in 2027 and 2035. There are further bond auctions scheduled this quarter. The NTMA also plans to increase Treasury Bill and Commercial Paper Issuance. Overall short term issuance is expected to increase by a further €5 billion by year end.
The first instalment of the National Asset Management Agency (NAMA) surplus of €2 billion was due to be made this year and had already been accounted for in the Budget 2020 fiscal projections.
Given the scale of the impact on the economy of Covid-19 it is envisaged that the RDF drawdown, when it happens, will be for the current value of the Fund i.e. €1.5 billion less expenses incurred by the NTMA in managing the Fund. Drawdown of the RDF means that the Exchequer Borrowing Requirement for 2020 is c. €1.5 billion less than would otherwise be the case. The rationale for having such a Fund – for use in exceptional circumstances such as these – has been strengthened by this crisis.
Due to recent successful debt issuances by the NTMA, there is no immediate need for drawdown and no specific date as to when drawdown will happen. Last month the NTMA successfully borrowed €6 billion in the bond market for 7 year at less than ¼ of 1 percent.
The interest rate environment remains accommodative owing to European Central Bank policy action and the introduction of its €750 billion Pandemic Emergency Purchase Programme.
Finally, last week I agreed with my fellow Euro–area finance Ministers the features and standardised terms of the European Stability Mechanism (ESM) Pandemic Crisis Support instrument. This ESM instrument has been tailored to meet the challenges of this crisis and will make c.€250 billion available to Euro-area Member States.
Ireland has a strong track record of market access and is well placed to increase its borrowing activity arising from the economic disruption relating to the pandemic.
89. Deputy Pearse Doherty asked the Minister for Finance when each section of the Consumer Insurance Contracts Act 2019 will be commenced; when it will be commenced in its entirety; and if he will make a statement on the matter. [5019/20]
View answerThe Consumer Insurance Contracts Act 2019 was signed into law by the President on the 26th of December 2019.
At the end of January I took the decision that the matter of when to commence the Act should be taken by the next Government. The background to this decision was a series of meetings with the major insurers where significant concerns were expressed about the early implementation of particular sections of the Act (Sections, 8 and 12), and a general view that they needed a number of months to prepare themselves for the implementation of the other provisions.
My decision was made on the premise that the majority of the Act could be made operational from an early date after the new Government was formed. This assumption was made on there being a “business as usual” approach in the broader economy. However, circumstances have changed very dramatically with the economic uncertainty caused by Covid-19. This change of circumstances, in my view, needs to feature in any decision in relation to the commencement of this Act by the new Government.
What I can say however is that in my meetings with insurers, they outlined their need for sufficient time in relation to the implementation of Sections 8 (Pre–contractual duties of consumer and insurer) and Section 12 (Renewal of contract of insurance). You should also note that, Sections 9 (Proportionate remedies for misrepresentation) and 14 (Duties of consumer and insurer at renewal) are sufficiently interrelated with Section 8 that their concerns also apply to these sections.
In summary, my officials have advised me that the sector has have indicated to them that if insurers are not provided with sufficient time to implement the requirements necessary to fulfil the obligations of the above mentioned sections, insurers may be forced to withdraw certain products from the market in order to prioritise others so as to ensure that they are fully compliant with the law. Such a withdrawal is most likely to impact the employer/public liability part of the market. Consequently, because of the broader uncertainty caused by the COVID-19 virus, and the fact that this matter is one for the next Government and Finance Minister, I cannot currently give any indication of a commencement date generally or for the specific sections referred to above.
90. Deputy Pearse Doherty asked the Minister for Finance the way in which the expected surplus to be transferred from NAMA to the Exchequer will be utilised in 2020; and if he will make a statement on the matter. [5020/20]
View answerAs part of its Annual Report for 2018, NAMA revised its projected surplus to be returned to the State upward to €4 billion, subject to favourable market conditions. The realisation of the surplus depends on the success of NAMA’s ongoing deleveraging and the completion of its Dublin Docklands and Poolbeg SDZs and residential funding programmes.
Following a direction by the Minister for Finance in 2019, NARPS, NAMA’s social housing vehicle, will now be retained in long term State ownership. NAMA will transfer NARPS to the State at the direction of the Minister for Finance and this comprises €300 million of the projected €4 billion surplus. Of the remaining €3.7 million, this will begin to transfer to the Exchequer following repayment of NAMA’s outstanding equity obligations. It is expected that the first €2 billion of the surplus will be transferred to the exchequer in the coming months.
In addition to the €2 billion to be transferred in 2020, it is currently estimated that the residual surplus of €1.7bn will be paid to the Exchequer during 2021 and 2022. Forecasts for payments in 2021 and beyond are contingent on the projected surplus of €4 billion remaining unchanged and favourable market conditions that may determine the timing and disposal proceeds of residual assets. It is likely that COVID-19 will have some impact on the timing and amount of forecasted payments beyond 2020 however it is too early to estimate what the overall impact may be.
Any NAMA surplus paid, while Exchequer positive, will not impact the general government balance, in line with Eurostat rules. It will be a decision for the Government as to how any surplus returned by NAMA will be utilised within the framework of the fiscal rules at that time. The intention has always been to use such receipts from the resolution of the financial sector crisis to reduce our national debt and debt servicing costs.
91. Deputy Michael McGrath asked the Minister for Finance his plans to make changes in the tax treatment of benefit-in-kind regarding company cars in view of the fact that under the benefit-in-kind tax bracket a company employee with a company vehicle falls into is dependent on mileage done and many such persons are now travelling considerably less as a result of Covid-19; and if he will make a statement on the matter. [5073/20]
View answerRevenue have issued guidance in relation to the circumstances and the manner in which it will amend vehicle benefit-in-kind charges to take account of the impact of the COVID-19 crises. This guidance can be accessed via the below link:
https://www.revenue.ie/en/corporate/communications/covid19/compliance-with-certain-reporting-and-filing-obligations.aspx
92. Deputy Michael McGrath asked the Minister for Finance the SSM rules regarding non-performing loans; the definition of a non-performing loan or exposure; the amount of capital that a bank must set aside for loans that turn non-performing; if the ECB or the EBA are reviewing the rules in view of the Covid-19 outbreak; and if he will make a statement on the matter. [5079/20]
View answerThere is a detailed regulatory framework in place for the banking sector which establishes how they classify non-performing loans and the capital they must set aside for loans that turn non-performing.
In general, a loan is defined as non-performing if a customer is assessed as unlikely to pay or repayments on a loan are more than 90 days past-due.
It is important to note that banks must adhere to the Code of Conduct on Mortgage Arrears (CCMA) which provides a strong consumer protection framework, aimed specifically at the process to be followed by lenders, to ensure borrowers in arrears on a mortgage loan are treated in a timely, transparent and fair manner.
The ECB and EBA have made a number of announcements recently, which set out welcome regulatory flexibility to ensure that the banking sector can support their customers who experience repayment difficulty due to the COVID-19 Pandemic.
In particular, the EBA has clarified that payment moratoria, such as the one adopted by the banking sector in Ireland, should not automatically result in the reclassification of the loan as non performing.
I understand that the Central Bank is engaging with the banking sector and expects banks to take a consumer-focused approach at this worrying time for their customers. 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 Bank has also announced that borrowers who receive a COVID-19 payment break will not have it recorded as missed payments on their record held by the Central Credit Register.
93. Deputy Brian Stanley asked the Minister for Finance if consideration will be given to altering the tax relief on third-level fees to enable teachers who undertake a third-level course to receive tax relief on the full amount of course fees and registration fees that they pay. [5101/20]
View answerSection 473A of the Taxes Consolidation Act 1997 provides for income tax relief in respect of qualifying tuition fees paid by an individual for a third level education course, subject to the terms and conditions set out in that section. The relief is granted at the standard rate of income tax (currently 20%), where an individual pays qualifying fees for an approved course, whether on his or her own behalf, or on behalf of another individual. Fees which are met from any other source, from a grant or scholarship for example, are not allowable. In addition, examination fees, administration fees and registration fees do not qualify for relief.
The maximum amount of fees that can qualify for the relief is €7,000 per course. “Qualifying fees” for the purposes of the relief mean tuition fees in respect of an approved course, at an approved college, reduced by the amount of the "student contribution". The disregarded "student contribution" amount is currently €3,000 in the case of a full-time course and €1,500 in the case of a part-time course, and it applies to all third level courses. This means the first €3,000 or €1,500, as appropriate, of all fees claimed by an individual taxpayer does not attract tax relief. As a claim may relate to one or more students, generally claimants will get full tax relief on the tuition fees for each of the second and subsequent students in their claim.
As the Deputy will appreciate, I must be mindful of the public finances and the many demands on the Exchequer; tax reliefs, no matter how worthwhile in themselves, lead to a narrowing of the tax base. I must also take into account that reliefs of this nature should, as far as is practicable, be equal as between different classes of tax-payers. In this regard, teachers receive the same level of relief as other postgraduate students.
Full details of the relief, including the terms and conditions that apply, are set out on the Revenue website at:
https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/education/tuition-fees-paid-for-third-level-education/index.aspx
94. Deputy Pauline Tully asked the Minister for Finance if his attention has been drawn to the concerns raised by the Social Finance Foundation that licensed high interest money lenders are aggressively targeting vulnerable persons whose financial circumstances may have been impacted by the Covid-19 crisis; his views on the concerns; if measures are being taken to protect persons from lending companies that charge 187% APR; and his plans to introduce a cap on companies that charge excessively high interest rates as is the case in 21 of the 27 EU countries. [5146/20]
View answerFirst of all, I would expect that all moneylenders would behave responsibly and respect the public health measures, including the social distancing measures, which have been put in place by the Government. Moneylenders should seek to implement alternative repayment methods, if possible, during this time.
The Central Bank of Ireland (Central Bank) is responsible for the licensing and supervision of licensed moneylenders under the provisions of the Consumer Credit Act, 1995 (CCA). I am advised by the Central Bank that there is a strong framework of protection in place for consumers who choose to avail of the services of licensed moneylenders. The provisions of the European Communities (Consumer Credit Agreements) Regulations, 2010 (the CCR) set out certain additional requirements in relation to advertising and the content of relevant documentation (contractual and pre-contractual) to accompany certain credit agreements including moneylending agreements. The Central Bank’s Consumer Protection Code for Licensed Moneylenders (ML Code) also applies to licensed moneylenders engaged in the business of moneylending.
The relevant statutory and regulatory provisions in relation to advertising by licensed moneylenders are set out in the CCR and the ML Code. Regulation 7 of the CCR sets out that where an advertisement contains a reference to an interest rate or any figure relating to the cost of credit to the consumer that other standard information shall be included in a clear, concise and prominent way by means of a representative example. As set out in the ML Code, licensed moneylenders are required to act honestly, fairly and professionally in the best interests of the consumer and the integrity of the market. The ML Code also requires all advertisements to be fair and not misleading. At all times advertising must be in the best interests of consumers and compliant with Codes and Regulations. The Central Bank is continuing to work towards the publication of the revised ML Code in the form of Statutory Regulations, which it expects to issue shortly.
In addition to the protections provided under the Central Bank’s ML Code, there are also important protections provided for in the relevant legislation whereby licensed moneylenders are prohibited from applying additional charges (other than a collection charge) to a moneylending agreement and are also prohibited from applying any additional charges in the event of a default in the payments due under the agreement (i.e., the total amount repayable by a consumer is limited to the amount specified in the moneylending agreement (the only exception being the awarding of legal costs by a Court of law)). Licensed moneylenders are also required to undertake a creditworthiness assessment before entering into a moneylending agreement with a consumer. The Central Bank has previously highlighted its expectation to all credit providers, including licensed moneylenders that they lend responsibly and act in the best interests of consumers.
Given the potentially increased vulnerability of the consumer base who typically engage with licensed moneylenders and the high cost nature of moneylending loans, the Central Bank expects licensed moneylenders to conduct their activities in a manner which reflects a culture of responsibility at all times. The Central Bank actively communicates to moneylenders in this regard.
Licensed moneylenders need to be sensitive to changes in consumers’ circumstances due to the public health measures taken to counter the spread of the COVID-19 virus, which have left many in a financially vulnerable situation. The Central Bank expects licensed moneylenders to take account of the difficult and challenging situation in which many consumers find themselves and to take a consumer-focused approach in providing reasonable arrangements and/or assistance to support consumers affected by the COVID-19 situation at this difficult time. Licensed moneylenders who continue to issue loans to consumers must ensure they carry out adequate affordability assessments, particularly taking into account any financial difficulties faced by consumers as a result of COVID-19.
People experiencing financial difficulties should explore all the options available to them before applying for a loan. The Money Advice and Budgeting Service (MABS) is available to anyone experiencing problems with budgeting and debt. Furthermore, Government has introduced a range of supports to help people where their employment or salary has been impacted by COVID-19, including the Pandemic Unemployment Payment and the Temporary COVID-19 Wage Subsidy Scheme. These measures should also assist those in difficulty and hopefully negate the need to borrow, particularly at high interest rates.
Finally, the issue of moneylender interest rates is currently being examined by the Department of Finance. The Department undertook a public consultation in 2019 seeking views on capping the cost of licensed moneylenders and other regulatory matters in relation to moneylending. Analysis of the submissions received during the consultation is being used in framing of policy proposals by my Department.
95. Deputy Cian O'Callaghan asked the Minister for Finance the position regarding levies on ESB pensions; if his attention has been drawn to the duration that this levy is applied to recipients and a surviving spouse; and if he will make a statement on the matter. [5212/20]
View answer96. Deputy Cian O'Callaghan asked the Minister for Finance his plans to review the pension levy introduced in 2008; and if he will make a statement on the matter. [5216/20]
View answerI propose to take Questions Nos. 95 and 96 together.
The pension fund levy was introduced in 2011 in the wake of the financial crash and at a time when the economy was in serious difficulties. Urgent action needed to be taken to preserve and boost jobs and it is an unavoidable fact that difficult economic situations require hard and very often unpopular decisions. All sectors of the economy had to contribute to the recovery plan and the levy was designed to claw back a small amount of the very generous tax reliefs that those contributing to pension arrangements had benefitted from over many years. The levy went to fund the tax reductions and expenditure measures introduced in the Jobs Initiative, including lowering the VAT rate for the tourism sector to 9%. The levy was successful and did its job as reflected in the increased activity and employment in that sector. The trustees of pension schemes affected by the levy had the option of adjusting current or prospective scheme benefits to take account of the levies, which included the possibility of reducing future retirement benefits.
For the years 2011, 2012 and 2013, the rate was 0.60% of the pension scheme assets. For the year 2014, the rate was 0.75% of the assets and for the year 2015, the final year of the levy, the rate was 0.15%. Under the legislation, the payment of the levy was treated as a necessary expense of a pension scheme and the trustees or insurer, as appropriate, were entitled where needed to adjust current or prospective benefits payable under a scheme to take account of the levy. It was up to the trustees or insurer to decide whether, when and how the levy should be passed on and to what extent, given the particular circumstances of the pension schemes for which they are responsible.
However, the legislation also included safeguards aimed at ensuring that, should the option of reducing scheme benefits be taken, it had to be applied in an equitable fashion across the different classes of scheme members that could include active, deferred and retired members. In no case could the reduction in an individual member's or class of member's benefits exceed the member's or class of member's share of the levy. Where pension scheme trustees or an insurer took the decision to treat the levy as an expense of the pension scheme, they would have adjusted current or prospective benefits payable to members under that scheme. The consequence of this treatment by the trustees or insurer could be a permanent reduction in members' benefits.
The value of the funds raised by way of the levies has been used to protect and create jobs and this helped to improve the financial and economic position of the State. Taxpayers to whom the impact of the levy may have been passed on by the chargeable persons responsible for the payment of the levy (the pension scheme trustees, etc.) will have since benefitted from tax reductions in the last number of Budgets.
97. Deputy Pearse Doherty asked the Minister for Finance the correspondence he has had with an organisation (details supplied) regarding the application of additional interest on mortgage loans by banks and non-banks in circumstances in which the mortgage holder has availed of a three month mortgage break as a result of Covid-19; and if he will make a statement on the matter. [5286/20]
View answer98. Deputy Pearse Doherty asked the Minister for Finance the correspondence he has had with the five retail banks regarding the application of additional interest on mortgage loans by banks and non-banks in circumstances in which the mortgage holder has availed of a three month mortgage break as a result of Covid-19; and if he will make a statement on the matter. [5287/20]
View answer99. Deputy Pearse Doherty asked the Minister for Finance the correspondence he has had with the Central Bank regarding the application of additional interest on mortgage loans by banks and non-banks in circumstances in which the mortgage-holder has availed of a three month mortgage break as a result of Covid-19; and if he will make a statement on the matter. [5288/20]
View answer100. Deputy Pearse Doherty asked the Minister for Finance the correspondence he has had with a bank (details supplied) regarding the application of additional interest on mortgage loans in circumstances in which the mortgage holder has availed of a three month mortgage break as a result of Covid-19; and if he will make a statement on the matter. [5289/20]
View answerI propose to take Questions Nos. 97 to 100, inclusive, together.
On 18 March last I met with Banking and Payments Federation Ireland (BPFI) and the CEOs of the five main retail banks, and following that meeting the banks outlined a coordinated approach, which included payment breaks on mortgages and other loans, to supporting their personal and business customers who have been impacted by the Covid-19 crisis. Since then, my Department has kept in contact with the BPFI and certain lenders in relation to the impact of Covid-19, and of course my Department always maintains close and regular contact with the Central Bank on all matters of mutual interest. As the Deputy will appreciate, the economic difficulties and issues associated with Covid-19 continue to evolve and the recent statement by the BPFI (on 30 April), which stated that the period of loan payment breaks will increase to six months, is testament to this.
The Central Bank has advised that it continues to work with lenders to ensure the fair treatment of customers who find themselves in financial difficulties due to the exceptional circumstances of Covid-19. Payment breaks give borrowers affected by Covid-19 the opportunity to postpone or substantially reduce their repayments at a time of stress. It is clear that these payment breaks are necessary for many borrowers to enable them to deal with the immediate shock that they are experiencing. The Central Bank expects lenders to clearly explain to their customers the implications of a payment break, for the term, payment schedule and costs of the loan. This includes clarity on how the term of the mortgage will extend, and / or whether the payment break will require increased monthly payments in the future once the break expires.
Across the European Union, non-performing loans are classified according to a common set of rules under the accounting and banking regulations. Changes to interest charging can, under these rules, result in forbearance implications and in loans becoming classified as in default under distressed restructuring, with consequences for both consumers and banks. The Central Bank has engaged extensively with its counterparts across the EU (in the European Banking Authority and as part of the Single Supervisory Mechanism) to ensure that the non-legislative payment breaks applied in Ireland avoid the classification of exposures under the definition of forbearance or as defaulted under distressed restructuring, where appropriate. In this context, the recently published EBA Guidelines (see https://eba.europa.eu/eba-publishes-guidelines-treatment-public-and-private-moratoria-light-covid-19-measures) provide clarity on the treatment of payment moratoria and in particular that payment moratoria do not trigger classification as forbearance or distressed restructuring if the measures taken meet certain conditions.
As you will be aware, An Taoiseach, Leo Varadkar, the Minister for Business, Enterprise and Innovation, Heather Humphreys and I met with the Chief Executives of the five Irish major retail banks earlier this week.
The Taoiseach emphasised the important role of the banking sector in supporting the gradual re-opening of the Irish economy by ensuring a flow of credit to businesses as they begin to trade again, in line with the government’s Roadmap for Re-opening Society and Business.
We welcomed the ongoing work of the banks in helping business customers and mortgage customers impacted by COVID-19, the initial three month payment-breaks, allowing households and businesses to defer some of their most significant outgoings and their intention to extend these payment breaks to six months for households and businesses.
Finally, we welcomed the commitment by the banks to continue to play their part by working positively with their customers, in as supportive a manner as possible, to ensure that the recovery can take place as quickly as possible.
We will continue to have ongoing engagement with the Central Bank of Ireland, the BPFI and the retail banks on a wide range of issues as we emerge from this crisis, in line with the Government’s Roadmap for Re-opening Society and Business.
