Written Answers Nos. 201-220
201. Deputy Ged Nash asked the Minister for Finance his plans for a national recovery fund; if he plans to use windfall gains as identified in the programme for Government to reduce borrowing requirements; his views on whether such windfall gains would be more appropriately utilised as part of a national recovery fund; and if he will make a statement on the matter. [14597/20]
View answerIt is intended that, beginning in 2020, the Recovery Fund will be available for three years and will consist of three primary elements:
- Infrastructure development - focussing on areas such as housing, retrofitting and transport to maintain employment and lay the foundation for future employment.
- Reskilling and retraining - for those who have lost their jobs as a result of the pandemic and are unable to return to their previous employment, so that they can receive the skills they need to attain new opportunities.
- Support investment - measures to help Irish companies access credit and capital to support the retention and creation of jobs.
Measures such as these will have a significant fiscal cost and will be additional to the cost of the wide range of measures introduced to-date. As a consequence of this support, as well as the fall-off in taxation receipts, the general government deficit is expected to be in the region of €23-€30 billion this year. As I have said previously, it is entirely appropriate that Government runs a deficit and increases borrowing to support the economy in these unprecedented circumstances. However, borrowing at this scale cannot go on indefinitely and once circumstances allow, we must return the public finances to a sustainable path.
a As the Programme for Government sets out, windfall gains - such as they may arise - will be used to reduce the overall level of borrowing. For example, the first tranche of the NAMA surplus, some €2 billion, was returned to the Exchequer last month. The NAMA transfer means that we will borrow €2 billion less this year than would otherwise be the case. Similar transfers, such as the proceeds from the liquidation of the Irish Banking Resolution Corporation or the sale of the state shareholdings in the banks, will also be used to reduce our borrowing requirements. Given the likelihood of continued fiscal deficits over the medium-term, and the level of our existing stock of debt, such an approach is the most effective strategy for use of such receipts.
203. Deputy Ged Nash asked the Minister for Finance his plans to focus tax rises on behavioural taxes with negative externalities such as carbon tax, sugar tax and plastics as outlined in the programme for Government; his views on whether the cited behavioural taxes are not a sustainable source of revenue in view of the fact the stated objective of the tax is to reduce consumption of the good producing the negative externality; his further views on whether these taxation measures match the broader aim to achieve a sustainable tax environment as outlined in the programme for Government; and if he will make a statement on the matter. [14599/20]
View answerThe Programme for Government sets out the Government’s intention to utilise taxation measures, as well as expenditure measures, to close the deficit and fund public services, if required. It is further stated in the Programme that governmental policy will aim to focus any tax rises on those taxes which tax behaviours with negative externalities, such as carbon tax, sugar tax, and plastics.
Excise taxes seek to reflect the negative externalities caused by the consumption of an excisable commodity. These externalities are the costs to society that without the tax would not otherwise be reflected in the price of the excisable commodity and for which the consumer would not otherwise have to pay. The carbon tax and sugar tax are taxes are reviewed on an ongoing basis throughout the year and analysis of yields and trends forms part of the examination of budgetary options.
The impact of COVID-19 domestically and internationally will have a bearing on any budgetary policy decision and we will have greater clarity on this prior to Budget 2021 when, as outlined in the Programme for Government, we will set out a medium-term roadmap detailing how Ireland will reduce the deficit and return to a broadly balanced budget.
204. Deputy Ged Nash asked the Minister for Finance his plans to review capital gains tax in each budget over the next five years; his views on the matter (details supplied) by the tax strategy group 2020 relating to the tax; and if he will make a statement on the matter. [14600/20]
View answerThe Programme for Government states that there will be a review Capital Gains Tax (CGT) in each Budget over the next five-years, in particular with the objective of supporting innovation driven enterprises that will help transition to a low carbon economy.
CGT is subject to ongoing review, which involves the consideration and assessment of the rate of CGT and the reliefs and exemptions from the tax. CGT policy and legislation is subject to consideration in the Taxation Strategy Group, as part of the annual Budget and Finance Bill process, is considered as part of a wider set of policy analyses (e.g. examination of revised CGT Entrepreneurs Relief as part of the 2020 Budget process) and in tax expenditure evaluation work. The requirements of the Programme for Government will become part of this ongoing work.
Ireland taxes wealth in a variety of ways, such as CGT and Capital Acquisitions Tax (CAT). These are levied on an individual or company on the disposal of an asset in the case of CGT, or the acquisition of an asset through gift or inheritance, in the case of CAT. Deposit Interest Retention Tax (DIRT) is charged at 33%, with limited exemptions, on interest earned on deposit accounts; and the Local Property Tax (LPT), which was introduced in 2013, is a tax based on the market value of residential properties. Capital taxes can help improve equity and tax fairness in the overall taxation system. However, the CGT yield in Ireland, while significant, is small relative to the other tax heads. Changes to CGT are likely to have a reduced overall impact on income and wealth inequality.
Against any revenue raising and equality arguments must be balanced the need to have a CGT system which supports economic activity and employment creation. Considerations such as the rate of CGT, relative international tax competitiveness and indeed the potential impact on investment activity is essential for a full view of the operation of the CGT system.
The Deputy may be interested to know that the most recent OECD Economic Survey of Ireland, published earlier this year, stated that the highly redistributive tax and transfer system has contained income inequality in Ireland.
205. Deputy Ged Nash asked the Minister for Finance his plans to increase the self-employed earned income tax credit with the employee tax credit as outlined in the Programme for Government; and if he will make a statement on the matter. [14601/20]
View answer207. Deputy Ged Nash asked the Minister for Finance his plans to ameliorate the USC surcharge applied to self-employed income; and if he will make a statement on the matter. [14603/20]
View answer208. Deputy Ged Nash asked the Minister for Finance his plans for income tax credits and bands to be indexed linked to earnings as outlined in the programme for Government; and if he will make a statement on the matter. [14604/20]
View answer209. Deputy Ged Nash asked the Minister for Finance his views on the programme for Government plan for no income tax or USC rates over the lifetime of the Government; if he is committed to no increase in income tax or USC rates for the top 5% of earners; and if he will make a statement on the matter. [14605/20]
View answer211. Deputy Ged Nash asked the Minister for Finance his plans to increase the home carer tax credit as outlined in the programme for Government; and if he will make a statement on the matter. [14607/20]
View answerI propose to take Questions Nos. 205, 207 to 209, inclusive, and 211 together.
The Programme for Government ‘Our Shared Future’ contains a number of commitments relating to taxation, including in relation to the tax credit referred to by the Deputy.
The intention is to deliver these commitments within the duration of the life of the Government, noting the need to provide a stable and sustainable enterprise environment alongside sound management of the public finances.
Decisions on how these commitments are met, including the timing, will be made in due course.
206. Deputy Ged Nash asked the Minister for Finance his plans to review the rate and threshold of capital acquisition taxation; and if he will make a statement on the matter. [14602/20]
View answerAs the Deputy will be aware, consideration of possible changes to CAT rates and thresholds generally takes place as part of the annual Tax Strategy Group, Budget and Finance Bill process. Together, these processes consider options for changes across the wider tax system. As is normal, the Deputy will appreciate that I cannot comment on any possible changes in advance of the 2021 Budget.
210. Deputy Ged Nash asked the Minister for Finance his views on a recent European Commission report (details supplied); his views on whether the programme for Government reflects the recommendation of the European Commission; and if he will make a statement on the matter. [14606/20]
View answerAs the Deputy will be aware, I am supportive and have repeatedly spoken on the need to broaden the tax base. A number of measures have been taken in this regard in recent years and include the introduction of the Universal Social Charge, the Local Property Tax and the Sugar Sweetened Drinks Tax. More recently changes to the VAT rate and carbon tax changes were introduced to broaden the tax base and to counteract the effect of negative externalities. In addition, I have also taken steps to broaden and enhance the stability of our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets in Budget 2018 and the introduction of a broader Exit Tax regime in Budget 2019.
The Programme for Government recognises that we need to remain cognisant of avoiding the mistakes of the past and being overly reliant on a narrow set of taxes. The carbon tax is set to increase throughout the lifetime of this government with an annual increase of €7.50 per annum to 2029 and €6.50 in 2030. To the extent that taxation measures are required to close the deficit in the medium term, the Programme for Government notes that we will focus any tax measures on behaviour with negative externalities such as carbon tax, sugar tax and plastics. This can be seen as a further step in broadening the tax base.
More generally in relation to the automatic stabilisers, as the Deputy is aware, these refer to the counter-cyclical support that the public finances automatically provide to the economy through spending and taxation channels - for example through higher social protection payments, and on the revenue side, lower tax collections in economic downturns. These stabilisers help to smooth the economic cycle. It is imperative that we allow these mechanisms to work and this will be facilitated by measures to broaden the tax base such as those outlined. This will make our economy more resilient to cyclical fluctuations and shocks.
212. Deputy Ged Nash asked the Minister for Finance the status of the national register of beneficial owners; his views on the European Commission recommendation in a recent report (details supplied); the way in which he plans to monitor the quality of the information provided and the effectiveness of the register; and if he will make a statement on the matter. [14608/20]
View answerStatutory Instrument 110 of 2019, the European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2019, was signed into law on 22 March 2019. These Regulations transpose Article 30 of the Fourth Anti-Money Laundering Directive (as amended by the Fifth Anti-Money Laundering Directive) and maintain the obligation, first established in 2016, for corporate entities to obtain and hold information on their beneficial ownership.
The Regulations also provide for the establishment of a Central Register of Beneficial Ownership of Companies and Industrial and Provident Societies (RBO), an office of the Department of Enterprise, Trade and Employment. This central register began accepting filings in July 2019. While the relevant legislation was signed by myself as Minister for Finance, the register is maintained by a “Registrar of Beneficial Ownership of Companies and Industrial and Provident Societies”, as provided under Regulation 18 of SI 110/2019, who was appointed by the Minister for Enterprise, Trade and Employment.
To date, 81% of companies and 63% of societies have registered their beneficial ownership details with the RBO. I understand that the Registrar plans to issue further reminders to those companies and societies who have not yet filed with the RBO in the coming months.
Regarding the quality of the information and the effectiveness of the Register, the very purpose of the Register is to maintain an accurate record of beneficial ownership for all relevant entities and this is facilitated by the use of Personal Public Service Numbers (PPSNs) to validate and verify a beneficial owner’s identity. There is a legal obligation to provide accurate information to the register and to update this when changes occur.
The Regulations also require that if a designated person forms the opinion that there is a discrepancy between the information in the central register (RBO) and the information the entity is required to hold in its internal register of beneficial ownership, he/she/it must inform the Registrar of that opinion, specifying the particulars about which the discrepancy exists. Designated persons are persons who carry out customer due diligence on an entity, or otherwise, under the Regulations and include credit institutions, financial institutions, auditors, external accountants, tax advisors and property service providers among others. A designated person who fails to comply with the requirement to report a discrepancy commits an offence and shall be liable on summary conviction to a Class A fine.
The Regulations also state that where a relevant person, namely a competent authority, the Garda Síochána, the Revenue Commissioners or the Criminal Assets Bureau, forms the opinion that there is a discrepancy between the information relating to a relevant entity in RBO and the beneficial ownership information available to the relevant person, relating to the same entity (to the extent that it does not interfere unnecessarily with the performance of its functions), the relevant person shall deliver, in a timely manner, to the Registrar, notice of that opinion specifying the particulars of the discrepancy.
Under the Regulations, a relevant entity that fails to comply with a notice served by the Registrar in relation to a discrepancy, shall be liable (a) on summary conviction, to a Class A fine; or (b) on conviction on indictment, to a fine not exceeding €500,000.
The Regulations further state that a body corporate, or natural person, who knowingly files false information with the RBO commits an offence and shall be liable (a) on summary conviction, to a Class A fine, or imprisonment for a term not exceeding 12 months or both; or (b) on conviction on indictment, to a fine not exceeding €500,000, or imprisonment for a term not exceeding 12 months, or both.
I also understand that the RBO maintains statistics on compliance levels, website usage and requests for beneficial ownership information.
The combination of these provisions will help ensure that the information held in the Register of beneficial ownership is accurate and will enhance its overall effectiveness.
214. Deputy Ged Nash asked the Minister for Finance his plans to increase the take-up of the research and development tax credit by small domestic companies; the take-up rate for micro, small, medium and large companies, respectively in tabular form; and if he will make a statement on the matter. [14610/20]
View answerThe Research and Development (R&D) tax credit allows companies to claim a 25% tax credit in respect of expenditure incurred on qualifying R&D activities. In making a claim for the R&D tax credit, companies must satisfy two tests: the activity must be a qualifying activity (a science test); and the amount of the claim must be based on R&D expenditure incurred (an accounting test). A claim for the R&D tax credit is made on a self-assessment basis.
Revenue have taken a number of steps in recent years to assist companies with making claims for the R&D tax credit, particularly small and micro companies. In February 2017 Revenue issued guidance aimed at reducing the administrative burden for small and micro companies in relation to claiming the R&D tax credit. The aim of this guidance is to give smaller companies greater clarity on how they can demonstrate to Revenue that their R&D tax credit claim satisfies the science test. Where a company spends up to €200,000 on activities which Enterprise Ireland or other such bodies have reviewed and confirmed as R&D, then in most cases Revenue will accept that those activities pass the science test. Revenue may still review the claim to ensure that the accounting test has been satisfied.
To further assist companies in making R&D credit claims, in 2019, Revenue published updated guidance on the operation of the R&D tax credit and the expected level of records to support a research and development tax credit claim. Revenue has also presented at conferences around the country, which are attended by companies, advisors and educators, to build awareness of the R&D tax credit.
I am advised by Revenue that statistical information on the research and development credit is published at: www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/r-and-d-tax-credits.aspx.
This includes a breakdown by size of the claimant company on pages 7 and 8.
The Government is conscious of the importance of SMEs to the economy, and also recognises the unprecedented impact that the Covid-19 pandemic is having, placing strain in particular on small and micro businesses. The Government has put in place a suite of measures to assist SMEs during these difficult times, including a major expansion of supports in liquidity measures to help viable businesses affected by Covid-19 pandemic.
The Government has further committed to a series of immediate actions to support the economy to return to capacity – the ‘July Stimulus’. The main tool for this will be the Recovery Fund and further details will be announced in the coming weeks.
215. Deputy Ged Nash asked the Minister for Finance his plans to assess the code of conduct on mortgage arrears, including the available suite of alternative repayment arrangements and ensure that it has full legal effect as outlined in the programme for Government; and if he will make a statement on the matter. [14612/20]
View answerI have been advised by the Central Bank of Ireland (the Central Bank) that it is committed to regularly reviewing its statutory Codes and ensuring they remain effective.
The Central Bank first introduced the Code of Conduct on Mortgage Arrears (CCMA) in 2009 in the midst of an economic and employment crisis to provide statutory safeguards for vulnerable, financially-distressed borrowers in arrears or at risk of falling into arrears. Further strengthened in subsequent years, the CCMA, and within it, the Mortgage Arrears Resolution Process (MARP), is just one part of the national policy framework of supports and protections to assist people with mortgage arrears difficulties.
The CCMA is a statutory code issued under Section 117 of the Central Bank Act 1989, which gives the Central Bank the power to draw up, amend or revoke codes of practice and such codes must be complied with by regulated entities. The provisions of the CCMA are legally binding on regulated entities, and the Central Bank has the power to administer sanctions on regulated entities for a contravention of the CCMA under Part IIIC of the Central Bank Act 1942.
The objective of this statutory Code is to ensure that regulated entities have fair and transparent processes in place for dealing with borrowers in or facing mortgage arrears. Due regard must be given to the fact that each case is unique and needs to be considered on its own merits. All cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations.
An alternative repayment arrangement (ARA) is a contract that is entered into between the regulated entity and the borrower, and the process for arriving at the ARA is stipulated in the CCMA. Provision 39 of the CCMA requires that in order to determine which options for ARAs are viable for each particular case, a regulated entity must explore all of the options for ARAs offered by that regulated entity. A non-exhaustive list of ARA options which may be included in a regulated entity’s suite is set out within this provision. It is a commercial decision for each regulated entity to determine the suite of ARAs it considers putting in place for borrowers. Any ARA offered to a borrower must be appropriate and sustainable for his/her individual circumstances. The Central Bank cannot interfere in the contractual rights between regulated entities and borrowers such that it could require a regulated entity to consider or put in place specific ARAs for borrowers.
Rather, in regulating conduct of business, the Central Bank seeks to ensure that regulated entities comply with relevant conduct of business rules, including providing consumers with all relevant information, putting in place a process for the management of customers’ financial difficulties and not exerting undue pressure or influences on customers.
The CCMA also requires regulated entities to have an appeals process in place to enable a borrower appeal a decision by a regulated entity, including where the borrower is not willing to enter into an ARA or where the regulated entity declines to offer an ARA. The appeals procedure must inform the borrower of his/her right to refer the matter to the Financial Services and Pensions Ombudsman.
The protection of borrowers in mortgage arrears continues to be a key priority for the Government and the Central Bank. The consumer protection framework provides a significant number of protections and supports for borrowers in or facing mortgage arrears, in recognition of the distress and, in the case of mortgages secured on a borrower’s primary residence, the vulnerability of borrowers at risk of losing their home.
As outlined in the Programme for Government, my Department is committed to assessing the CCMA, including the available suite of alternative repayment arrangements, and ensuring that it has full legal effect.
216. Deputy Ged Nash asked the Minister for Finance the timeline for the introduction of the senior executive accountability regime to deliver heightened accountability with the banking system as outlined in the programme for Government; and if he will make a statement on the matter. [14613/20]
View answerThe Programme for Government has committed to introduce a Senior Executive Accountability Regime (SEAR). SEAR will drive positive changes in terms of culture, greater delegation of responsibilities, and enhanced accountability while simplifying the taking of sanctions against individuals who fail in their financial sector roles.
Officials in my Department are engaging with the Attorney General's Office in advance of submitting draft heads of Bill to Government so as to ensure that the correct balance between additional powers for the Central Bank and the protection of individuals' constitutional rights is struck and that the provisions of the Bill are constitutionally sound in the event of legal challenge.
Subject to potential delays related to Brexit and COVID-19, it is intended that draft heads of Bill will be presented to Government for approval in the coming months.
217. Deputy Ged Nash asked the Minister for Finance his plans to work with the banking industry and non-bank lenders to support customers during and after the Covid-19 crisis as outlined in the programme for Government; his plans to support customers by working with banks to reduce the high rates of interest compared to the eurozone average for personal and commercial loans; and if he will make a statement on the matter. [14614/20]
View answerThe Government is very much aware of the economic difficulties and challenges the Covid-19 pandemic is causing for very many people and businesses. Therefore, in the Programme for Government - Our Shared Future - this new Government commits itself to make every effort to get people back to work, to re-open businesses while developing the strategies and the policies to drive this forward. The first major step in this will be the development of an economic and jobs initiative to be published this month.
However, the Programme for Government also contains a further range of measures which are designed to renew economic activity, including measures which will encourage and support the provision of credit to businesses and households. To that end, my Department will continue to maintain close contact with the Central Bank and the banking industry, through the Banking and Payments Federation Ireland (BPFI) as the industry's representative body, as the lending industry works to address the difficulties the Covid-19 situation is causing for both borrowers and lenders and as it seeks to support the regeneration of the economy. Measures which will support new lending to businesses, such as the proposed new Credit Guarantee Scheme, will be very important in that regard.
It will also be important, consistent with the need to protect financial stability and to ensure that banks lend on a prudent and sustainable basis, to try ensure that the level of interest charged on loans will be competitive and economic for both borrowers and lenders. However, it will be important to recognise that there are many factors which influence and determine the level of interest charged on mortgages, business and other loans. These include the fact that the pricing of loans needs to reflect credit risks, funding costs, capital requirements (which in Ireland are elevated due to historical loss experience) and operating costs. Structural factors also play a role, including the duration of fixation of interest rates, the offering of cashback and other incentives in the Irish market, and the mix of deposit and non-deposit funding, which can bring interest rate risk when lending over long durations. In this regard, it should be borne in mind that the under-pricing of credit risks by Irish banks would itself bring financial stability concerns in the event of widespread default events following an economic shock, suggesting that calls for further interest rate reductions for borrowers must be carefully weighed up against such systemic risk concerns.
While interest rates in Ireland remain higher than in many other European countries, it should nevertheless also be noted that there has been significant reduction in interest rates on new mortgage lending over the last few years. For example, the new business interest rate, excluding negotiations, on mortgage loans with fixations over one year, was 4.02% at Jan 2015 and is now 2.70%. These are significant reductions that benefit borrowers greatly over loan lifetimes. Many borrowers currently paying more on their mortgages could benefit from switching onto these lower new business rates.
It is nevertheless the case that the interest rates charged by lenders for their mortgage, business and other loans (and indeed also the decisions they make on the interest they pay for their deposits and other funds) are ultimately commercial matters for individual lenders having regard to cost and competitive considerations, and neither the Central Bank of Ireland, nor I as Minister for Finance, has the power to prescribe the lending interest rates charged banks or other commercial lenders; and neither is it appropriate that I should have such a power. However, I will continue to work with the Central Bank as regulator, and with the banking industry to see if any there are further regulatory or other appropriate measures can be deployed to, in a sustainable way, further support the credit environment for business and personal borrowers.
218. Deputy Ged Nash asked the Minister for Finance his plans to review the motor taxation regime to ensure that it adequately captures the harm caused by nitrogen oxide and sulphur oxide emissions; and if he will make a statement on the matter. [14615/20]
View answerProgramme for Government measures such as this are being considered by my officials in the context of the upcoming Budget and future Budgets.
219. Deputy Ged Nash asked the Minister for Finance his plans to increase and hypothecate all additional carbon tax revenue as outlined in the programme for Government; and if he will make a statement on the matter. [14616/20]
View answerAs stated in the Programme for Government, it is the Government’s intention to increase the carbon tax to 100 euro per tonne by 2030. This increase is to be achieved by an annual increase of €7.50 per annum to 2029 and €6.50 in 2030.
The Programme for Government also plans to legislate for the hypothecation of all additional carbon tax revenue into a Climate Action Fund, raising an estimated €9.5 billion over the next ten years. This Fund will be utilised over that period to:
1. Ensure that the increases in the carbon tax are progressive by spending €3 billion on targeted social welfare and other initiatives to prevent fuel poverty and ensure a just transition
2. Provide €5 billion to part fund a socially progressive national retrofitting programme targeting all homes but with a particular emphasis on the Midlands region and on social and low-income tenancies.
3. Allocate €1.5 billion to a REPS-2 (Rural Environment Protection Scheme) programme to encourage and incentivise farmers to farm in a greener and more sustainable way. This funding will be additional to funding from the Common Agriculture Policy. It will include incentives to plant native forestry and to enhance and support biodiversity.
220. Deputy Ged Nash asked the Minister for Finance his plans to introduce a set of well-being indices to create a well-rounded holistic view of the way in which society here is faring as outlined in the programme for Government; and if he will make a statement on the matter. [14617/20]
View answerWell-being is a multidimensional concept which spans economic, social, health, and environmental concerns, amongst others. One of the responsibilities of Government entails monitoring and improving the living standards, or well-being, of the Irish people through a variety of channels.
The limitations of standard economic statistics such as GDP in reflecting the welfare of citizens have been recognised. Indeed in Ireland alternative economic statistics more reflective of the domestic economic situation and how it affects the income of residents have been developed and are published regularly by the CSO. These statistics, such as Modified Gross National Income (GNI*), are forefront in the macroeconomic analysis performed by my Department, and the set of indicators we monitor has been continually expanding.
In addition, policies are currently evaluated in terms of their impacts on the environment, on distributional outcomes, and on gender inequality. Similar factors compose a significant fraction of the well-being metrics of other countries. Through initiatives such as Equality Budgeting and Green Budgeting, the government is working towards making the well-being analysis involved in policy-making more explicit and transparent.
The Programme for Government commits to the development of a cohesive and comprehensive set of well-being measures, and my Department will provide input and support to this process.
As the development of new and better measurements of Irish living standards goes forward, we will continue to monitor and analyse those factors relevant for the well-being of the Irish people and to account for those factors in our decision-making.
