Written Answers Nos. 91-105
91. Deputy Richard Boyd Barrett asked the Minister for Finance if he will audit the recipients of the wage subsidy scheme to ensure that it is not being abused; and if he will make a statement on the matter. [39235/20]
View answerThe Deputy will be aware that responsibility for the administration of the Employment Wage Subsidy Scheme (EWSS), which itself operates on a self-assessment basis, rests with the Revenue Commissioners. I am advised by Revenue that it takes a multifaceted approach to ensuring compliance by employers with the terms of the scheme.
Revenue undertakes a risk focused real-time examination of EWSS submissions as they are made to Revenue. Revenue engages with employers where Revenue has grounds to believe that an employer may have made a genuine error in respect of a submission. In addition, the risk control systems operated by Revenue result in real time engagement with employers where certain data validation or confirmation rules are triggered by reference to the data submitted. Such triggers have to be resolved before Revenue will certify payment of a claim by an employer.
The EWSS legislation enacted by the Oireachtas contains a number of important safeguards, such as the requirement that immediately at the end of each month, from August 2020 onwards, each employer availing of the scheme must carry out a self-review of its business circumstances. Following such a review, if an employer no longer meets the eligibility test for qualification for the scheme, then the employer must immediately cease claiming wage subsidy payments.
Section 28B (6) of the Emergency Measures in the Public Interest (Covid-19) Act 2020 includes specific anti-abuse measures in relation to EWSS. These measures underpin the necessity for employers to operate the scheme as intended by the legislation. They serve as a disincentive for any employer to enter into contrived non bona fide arrangements with employees, which are purely designed to maximise the benefits from the scheme by way of subsidy payments and PRSI credits claimed from Revenue.
Serious sanctions may be imposed where Revenue determines that an employer incorrectly claimed and received a subsidy payment, by engaging in unacceptable behaviour constituting an abuse of the scheme. This includes applying inappropriate accounting practices to deliberately misrepresent the true financial situation of the business. Such sanctions include – total exclusion from the scheme, all subsidies paid and PRSI credit issued in respect of all employees having to be repaid, together with interest and penalties, and the business may also face criminal prosecution.
The Deputy will be aware that Revenue carried out a comprehensive review of compliance with the Temporary Wage Subsidy Scheme (TWSS). While this review is not finished, it found a very high level of compliance with the terms of the scheme. This is very important. Both wage subsidy schemes are emergency and unprecedented measures to support businesses through the economic challenges posed by the pandemic; the schemes have allowed businesses to keep going and have supported employment by helping businesses keep the link with their employees. It is critically important that employers abide by the terms and conditions and I am assured by Revenue that, in the vast majority of cases, this is the case. I am satisfied that Revenue’s approach represents an appropriate balance between supporting businesses in accordance with the terms of the EWSS scheme and ensuring that there is a compliance framework in place that identifies and sanctions any serious non-compliance or abuse.
92. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which economic fundamentals remain positive notwithstanding the ravages of Covid-19; and if he will make a statement on the matter. [39137/20]
View answerThe suspension of all ‘non-essential’ economic activity during the second quarter of the year resulted in the Irish economy suffering the largest contraction on record, with a contraction in GDP of over 6 per cent relative to the previous quarter. Modified domestic demand, perhaps the best indicator of domestic economic activity, declined by 16 per cent while the unemployment rate – including recipients of the Pandemic Unemployment Payment (PUP) – peaked at 30 per cent in April. However, as restrictions were eased over the summer the economy began to recover with the number of unemployed falling steadily and other indicators, including retail sales, showing a return to pre-pandemic levels of activity.
At the time of the Budget, my Department projected that GDP would decline by -2½ per cent this year. This was based on a number of assumptions, including that there would be no return to a national lockdown.
However, on the 22nd October the country entered Level 5 of the Plan for Living with Covid-19. My Department estimated that these restrictions would see GDP decline by 3½ per cent this year around 1 percentage point lower than the baseline scenario. While the impact of this move to increased restrictions is likely to be significant, I am optimistic that the economic fall-out will not be as severe as in this scenario, as construction, education and most manufacturing activity will remain open under these restrictions.
Next year, my Department are projecting that the economy grow by around 1¾ per cent. This projection is based on the assumption that the UK would leave the current transition period with the EU without a trade deal being agreed and that a widespread vaccine would not be available before the end of 2021. Of course, if these assumptions do not come to pass then there will be some upside to this projection.
As we chart our way forward through these uncertain times, careful management of the public finances is needed. Indeed, finding the correct balance between protecting the health of our population while also supporting the economy will be crucial.
93. Deputy Joe Carey asked the Minister for Finance if he will review the VAT rates for vaccines particularly those administrated by injection such as for flu, pneumonia and a possible Covid-19 vaccine, which are rated at 21% while all medicines that are administrated orally are zero rated; and if he will make a statement on the matter. [32809/20]
View answerThe VAT rates applying in Ireland are subject to the requirements of EU VAT law with which Irish VAT law must comply. In order for a zero rate of VAT to be applied to a good or service, that good or service must have applied at the zero rate on 1 January 1991 and have continued to apply at that rate since. No new items may be charged at the zero rate, where they had not been subject to the zero rate before 1991. In Ireland the zero VAT rate applies to oral medicines, including oral medicines for animals, as they were subject to the zero rate on and since 1 January 1991. However, non-oral medicines were not subject to the zero rate on 1 January 1991, so it is not legally possible to apply the zero rate to them now.
However, Ireland has been supportive of measures to respond to COVID-19 in the area of VAT. These measures include relief on VAT at import of goods to combat the outbreak, and the zero-rating to the supply and intra-community acquisition of PPE, hand sanitiser, thermometers, oxygen and the like, and were implemented by the Revenue Commissioners as part of Ireland's response to the public health emergency.
In addition to the above, the European Commission has recently presented a proposal to provide for relief from VAT for the supply of COVID-19 vaccines when available, as well as testing kits. Ireland supports the proposal and expects it to be finalised soon.
94. Deputy Alan Farrell asked the Minister for Finance the measures being taken by his Department to grow both the financial technology and asset management sectors here in the post-Brexit period; and if he will make a statement on the matter. [38074/20]
View answerFrom 1 January 2021, many aspects of our relationship with the UK will change fundamentally as we will no longer share EU membership. While the Government remains committed to protecting and strengthening the Ireland-UK relationship following the end of the transition period, I can advise the Deputy that the net impact of Brexit on the policy areas within my remit is anticipated to be strongly negative.
One area that Ireland has been growing for nearly four decades is the international financial services sector. ‘Ireland for Finance’, launched in 2019, is a whole of government strategy for the development of the international financial services sector to 2025. The Ireland for Finance strategy is the successor to the IFS2020 strategy and a succession of Government strategies for the development of the sector in Ireland. The IFS2020 Strategy had been in place long before the UK decision to leave the EU. The Ireland for Finance strategy provides a clear roadmap to maximise any opportunities that might arise.
The Ireland for Finance strategy was included in the recent Programme for Government and utilises annual action plans to progress the strategy, with measures built upon the 4 pillars of operating environment, technology and innovation, talent, and communications and promotion. Measures under each of these pillars will enable both the financial technology and asset management sectors.
One significant action measure for the asset management industry in 2020 was the progress of the Investment Limited Partnerships Bill which has passed all stages in the Seanad and is currently before Dáil Éireann. The Bill will enhance and modernise Ireland’s private equity offering.
Numerous measures under pillar two ‘technology and innovation’ will enhance the financial technology industry in Ireland and you can find full details on this in Action Plan 2020 on the Department's website.
Minister of State Fleming and officials have also started work on Ireland for Finance Action Plan 2021 including measures that may assist the national recovery. The draft Plan is due to be brought to Government at the end of the year for publication early in 2021.
Finally, my department is also currently engaging on the Digital Finance (‘fintech’) package published by the European Commission in September 2020 on the regulatory policy aspects which should also enable innovation in this important growth area for Ireland and the EU as a whole while addressing any associated risks.
95. Deputy Pearse Doherty asked the Minister for Finance his response to a letter written by the Central Bank on 17 November 2020 regarding thematic inspections of compliance by regulated financial service providers with their obligations under the fitness and probity regime; when he will publish legislation to implement the senior executive accountability regime; and if he will make a statement on the matter. [39227/20]
View answerI am aware of the letter issued by the Central Bank on 17 November setting out expectations for action by regulated firms to address their legal obligations under the Fitness and Probity (F&P) regime. This letter was issued by the Bank in the performance of its regulatory functions under current legislation. That letter was preceded by a letter issued by the Bank in 2019 on F&P issues which was followed by inspections across a sample of financial services firms.
The Fitness & Probity Regime was introduced under the Central Bank Reform Act 2010. It is a key part of the Central Bank’s regulatory powers to ensure that senior personnel in regulated financial service providers are competent, suitably qualified, financially sound and, most importantly, honest and ethical in their behaviour.
Inspections by the Central Bank found, in many cases, a number of issues, including a poor level of awareness by Board members of their fitness and probity obligations, and consistently weak due diligence. Where roles were outsourced, there was a failure to ensure that F&P standards were properly applied. Thus while the majority of firms had compliance frameworks, policies and procedures in place, given the findings of the inspections, it was clear that many firms were not undertaking robust compliance testing of their fitness and probity processes and procedures.
It is essential that financial services providers are compliant with all aspects of the F&P regime. I understand the Central Bank will continue to assess the robustness of firms’ application of the F&P Regime and will initiate supervisory responses to any weaknesses identified.
The Programme for Government includes a Senior Executive Accountability Regime (SEAR), which will be the centrepiece of the forthcoming Central Bank (Amendment) Bill.
The Bill will also contain a range of measures to strengthen and enhance the Fitness and Probity Regime, which will add to the Central Bank’s abilities to ensure effective compliance by regulated firms. These will include a requirement that firms certify annually that all staff performing Controlled Functions meet the required F&P standards. This will help address the issues of non-compliance that the Central Bank has highlighted.
Officials in my Department are currently 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 is struck between appropriate additional powers for the Central Bank and the protection of individuals' constitutional rights.
It is my intention that draft heads of Bill will be presented to Government for approval in the near future.
96. Deputy Paul Murphy asked the Minister for Finance if his Department has modelled the economic impacts of pursuing a zero-Covid policy compared to the current policy of intermittent lockdowns; and if he will make a statement on the matter. [39168/20]
View answerSince the emergence of COVID-19, the Government has been guided by the need to strike a balance between jobs, income and enterprise on one hand and keeping our people healthy and safe on the other.
The Government has been clear that a “zero covid” policy is not available to Ireland due to the border with Northern Ireland and the Common Travel Area. Our proximity to Europe and the nature of the supply chains we are part of, both as an exporter and importer of vital goods, are also relevant considerations.
I want to stress, however, that my Department has modelled many different scenarios and the analysis has been made public.
For instance, my Department's autumn forecasts, set out in the Economic and Fiscal Outlook which was published alongside Budget 2021, are based on the assumption that widespread vaccination will not be available before the end of 2021, meaning sporadic peaks-and-troughs in infection rates are likely and this will weigh on economic activity.
The Economic and Fiscal Outlook included a range of medium-term recovery scenarios for the economy and implicit virus paths, based on joint research carried out by my Department and the ESRI. It also included a downside scenario which drew on this research. This analysis is based on a severe epidemiological scenario that triggers the re-introduction of stringent restrictions over a prolonged period.
While the impact of the move to Level 5 restrictions in October is likely to be significant, I am optimistic that the economic fall-out will not be as severe as in the downside scenario presented with the Budget, as construction, education, childcare and most manufacturing activity have remained open under the current restrictions. While some of the real-time indicators that my Department monitors - such as payment card transactions and mobility data - have fallen since we introduced these additional restrictions, these falls have not been as large as those seen in the spring. We have published these real-time indicators on my Department’s website.
97. Deputy Denis Naughten asked the Minister for Finance the degree to which he expects to be in a position to incentivise alternatives to fossil fuels in the short and medium terms; and if he will make a statement on the matter. [38843/20]
View answerThe 2019 Climate Action Plan charts an ambitious pathway to reduced carbon emissions by 2030 which includes a series of measures to phase out fossil fuel usage across all sectors while the Programme for Government augments the Climate Action Plan by committing to reduce emissions by an average of 7 per cent per annum throughout the next 10 years.
As set out in the Programme for Government, energy will play a central role in the creation of a strong and sustainable economy over the next decade. The reliable supply of safe, secure and clean energy is essential in order to deliver a phase-out of fossil fuels. The Programme for Government details several initiatives which will promote development of alternative fuels and technologies which include :
- Supporting the clustering of regional and sectoral centres of excellence in the development of low-carbon technologies.
- Investing in research and development in ‘green’ hydrogen (generated using excess renewable energy) as a fuel for power generation, manufacturing, energy storage and transport.
The Programme for Government also aims to decarbonise road transport through a range of measures including:
- Incentivising use of electric vehicles (EVs) and encouraging a shift away from petrol/diesel vehicles. Some measures already in place include lower VRT and motor tax rates, VRT reliefs, a 0% BIK scheme, and a suite of SEAI grants.
- Legislating to ban the registration of new fossil-fuelled cars and light vehicles from 2030 onwards and phase out diesel and petrol cars from Irish cities from 2030.
Other fiscal based initiatives to incentivise the provision and uptake of renewable energy include:
- Relief from electricity tax for electricity generated from renewable energy sources and from environmentally friendly heat and power cogeneration
- Relief from the carbon component of mineral oil tax on the biofuel portion of auto diesel and petrol.
- A partial relief from Solid Fuel Carbon Tax (SFCT) applying to biomass products.
- Relief from SFCT for solid fuel used in environmentally friendly High Efficiency Combined Heat and Power Cogeneration (HE CHP)
- Relief from NGCT for natural gas used in environmentally friendly HE CHP.
Further detail on the application of specific reliefs is available from the website of the Office of the Revenue Commissioners (www.revenue.ie ).
99. Deputy Aindrias Moynihan asked the Minister for Finance if a tax relief or credit could be introduced for low-to-mid-income families that do not meet the criteria to avail of social housing or HAP to assist with their rental payments; and if he will make a statement on the matter. [39119/20]
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.
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.
Furthermore, I must be mindful of the public finances and the many demands on the Exchequer. Tax reliefs, no matter how worthwhile in themselves, reduce the tax base and make general reform of the tax system that much more difficult.
Finally, a tax credit of this nature would be of little benefit to lower-income workers, the unemployed and students, who may not receive the benefit of the relief as they may not be paying sufficient levels of income tax.
I have, therefore, no plans at present to propose the introduction of rent relief or a rent tax credit.
104. Deputy Louise O'Reilly asked the Minister for Finance the reason he did not push for the extension of loan and mortgage payment breaks of 12 months, as has been done in Germany, Italy, Spain and Portugal; and his views on whether this failure will have a damaging effect on SMEs and microbusinesses, as they now risk their loans falling into default and their credit rating being impaired. [30366/20]
View answerOn 18 March last the Banking and Payments Federation of Ireland (BPFI) announced a coordinated approach by banks and other lenders to help their customers who were economically impacted by the Covid-19 crisis. The measures included flexible loan repayment arrangements where needed, including loan payment breaks initially for a period up to three months and then subsequently extended for up to six months.
The European Banking Authority (EBA) also introduced COVID-19 guidelines in the spring with the objective of setting out the requirements for the public and private moratoria introduced across the European Union which, if fulfilled, would help avoid the classification of exposures as forborne or defaulted under distressed restructuring. Most EU Member States introduced payment breaks, some on a voluntary basis like Ireland, some on a legislative basis, and in several countries there was a mix with multiple schemes with varying eligibility requirements, conditions and timeframes. However, the overall key objective was to provide financial relief to borrowers by allowing a suspension or postponement of payments within a specified period. The moratorium introduced in Ireland complied with the EBA guidelines and was a welcome voluntary initiative that allowed necessary relief to be quickly and efficiently provided to borrowers.
While many borrowers who have finished a payment break have been able to return to full payments, it is also recognised that many borrowers, including mortgage borrowers, SMEs and microbusinesses, continue to be impacted by the economic consequences of Covid-19 and they may not be in a position to resume their loan repayment commitments when their payment break ends or may now be in difficulty for the first time. Borrowers have a suite of regulatory protections, such as the Central Bank's Code of Conduct on Mortgage Arrears, the Consumer Protection Code and the SME lending regulations, and lenders have specific obligations to support and work with borrowers who are continuing to experience loan difficulty because of Covid-19. These options could include additional flexibility, and this could be a short term arrangement such as additional periods without payments or interest-only repayments, or if appropriate more long term arrangements.
I will continue to work with the Central Bank, as regulator, to ensure that the Central Bank consumer protection and other applicable frameworks will be fully available to all borrowers that will still need support. The Central Bank has also confirmed that there is no regulatory impediment to lenders offering payment breaks to borrowers, providing they are appropriate for the individual borrower circumstance.
The Deputy may wish to note that the Central Bank recently wrote to all lenders indicating that lenders are to ensure that they have sufficient expert resources to assess individual borrower circumstances, and to offer appropriate and sustainable solutions to affected borrowers in a timely manner in line with regulatory requirements and Central Bank expectations. Regarding SMEs in particular, lenders are to provide appropriate supports to SME borrowers to help them to assess the longer-term effects on their businesses. While some enterprises will have had unsustainable business models notwithstanding COVID-19, measures which provide time for firms to adjust to COVID-19 conditions – or to assess whether their business models remain viable – are particularly useful during a period of substantial uncertainty and the Central Bank notes that they also allow lenders to make more informed decisions on a firm’s viability.
Regarding the Central Credit Register (CCR), it is important to note that the CCR does not produce credit ratings rather its purpose is to provide factual information to lenders and borrowers on a borrower’s credit record. The Central Bank has also advised lenders that in their reporting to the CCR, they will need to apply judgement around whether a restructure has been agreed in response to an identification of financial distress.
