Written Answers Nos. 87-107
87. Deputy Bríd Smith asked the Minister for Finance if married couples are facing added difficulties in applying for mortgages from the main pillar banks as a result of the criteria used to calculate couples income; if such criteria are the bank’s own or derives from the Central Bank guidelines; and if he will make a statement on the matter. [31804/21]
View answer125. Deputy Bríd Smith asked the Minister for Finance his plans to ensure that lending institutions take account of existing tenants' ability to meet current rental costs when assessing their mortgage applications given that couples are being denied mortgage applications for sums whose monthly repayments work out much lower than their current rents; and if he will make a statement on the matter. [31805/21]
View answerI propose to take Questions Nos. 87 and 125 together.
The Central Bank of Ireland, as part of its independent mandate to preserve and protect financial stability in Ireland, has statutory responsibility for the regulation of mortgage lending by banks and other regulated entities.
In line with this mandate, the Central Bank introduced macroprudential measures for residential mortgage lending in February 2015. The objective of these mortgage measures is to increase the resilience of the banking sector and households and to reduce the risk of credit driven house price spirals from developing.
The mortgage measures apply certain loan-to-value (LTV) and loan-to-income (LTI) restrictions to residential mortgage lending by financial institutions regulated by the Central Bank. For example, the LTI limit is 3.5 times the borrower’s income. For first-time buyers (FTBs), the LTV limit is 90% of the value of the residential property and for second and subsequent buyers (SSBs) the LTV limit is 80%. However, lenders also have a certain flexibility at their own discretion to provide a certain amount of mortgage lending in excess of these thresholds.
While regulated lenders must comply with the various rules within the macroprudential and consumer protection frameworks, the extension of credit by lenders to potential customers (including a joint mortgage application) is ultimately a commercial decision for the lender themselves and each lender will have its own individual credit lending policies.
Before providing a mortgage, lenders are required to undertake thorough creditworthiness assessments to ensure a borrower will be able to repay the mortgage. This assessment must take into account the individual circumstances of the borrower, including personal circumstances and financial situation. In this context, lenders can and do take into account rental payments when making their affordability assessment as part of regular credit worthiness assessment and underwriting process.
However it is also worth noting that a mortgage is the largest liability that most households will take on in their lifetime and that it comes with less flexibility than a rental contract, leaving borrowers more exposed to shocks to incomes, house prices and interest rates in the future. Therefore, the ability to make regular repayments – evidenced through rental payments – does not substitute for the protection for borrowers in having a down payment for the purchase of a residential property. A mortgage deposit acts as a cushion of housing equity, and can help households to absorb house price falls without the borrower falling into negative equity.
By way of additional information the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (CMCAR) provide that before concluding a mortgage credit agreement, a lender must make a thorough assessment of the consumer’s creditworthiness. The assessment must take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement. The CMCAR provide that a lender should only make credit available to a consumer where the result of the creditworthiness assessment indicates that the consumer’s obligations resulting from the credit agreement are likely to be met in the manner required under that agreement. The assessment of creditworthiness must be carried out on the basis of information on the consumer’s income and expenses including rent and other financial and economic circumstances which is necessary, sufficient and proportionate and lenders must be satisfied that mortgages are affordable for borrowers for the duration of the life of a loan.
In addition, the Central Bank’s Consumer Protection Code 2012 imposes ‘Knowing the Consumer and Suitability’ requirements on lenders. Under these requirements, lenders are required to assess affordability of credit and the suitability of a product or service based on the individual circumstances of each borrower. Where a lender refuses a mortgage application, the CMCAR requires that the lender must inform the consumer without delay of the refusal. In addition, the Code requires that the lender must clearly outline to the consumer the reasons why the credit was not approved, and provide these reasons on paper if requested.
If a mortgage applicant is not satisfied with how a regulated entity is dealing with them, or they believe that the regulated entity is not following the requirements of the Central Bank’s codes and regulations or other financial services law, they should make a complaint directly to the regulated entity. If they are still not satisfied with the response from the regulated entity, the response to their complaint from the regulated entity is required to include details for the borrower on how to refer their complaint to the Financial Services and Pensions Ombudsman.
90. Deputy Peadar Tóibín asked the Minister for Finance his views on the fact that while EU fiscal rules limit Government deficits to 3% of GDP and a debt of 60% of Ireland’s GDP, the 2020 budget deficit here was 6%; and if he will make a statement on the matter. [20479/21]
View answerAs the Deputy will be aware, in March 2020 the General Escape Clause (GEC) of the EU’s Stability and Growth Pact was activated for the first time. The clause’s activation temporarily suspends the regular application of the EU fiscal rules, to allow Member States to take all necessary expenditure and taxation measures to combat the spread of the virus.
While the activation of the GEC means the regular fiscal requirements have been temporarily suspended, it must be noted that the Pact itself has not been suspended or revoked but remains in place, providing an important anchor for fiscal policy over the medium-term. As part of the recent announcement by the European Commission of its 2021 Spring Package, the Commission confirmed that the General Escape Clause of the Pact will remain in force in 2022, and is expected to be de-activated in 2023.
As set out in the Stability Programme Update (SPU), published by my Department in April, Ireland recorded a General Government deficit of 5 per cent of GDP in 2020. This figure reflects the extraordinary nature of the fiscal measures put in place to support Ireland’s fight against the pandemic. Substantial additional expenditure has been allocated by Government to provide the necessary resources to our health service, and to support workers and businesses through the crisis with policies including the Pandemic Unemployment Payment and Employment Wage Subsidy Scheme.
A multi-annual path for the public finances will be set out in the forthcoming Summer Economic Statement, including a medium-term fiscal target. This reflects the priority which the Government places on ensuring that the public finances return to broad balance over the medium-term as economic activity recovers, tax revenues increase and the exceptional policy measures taken to combat the pandemic are unwound.
91. Deputy Ged Nash asked the Minister for Finance his views on a recent IFAC report (details supplied) which states that the Government has failed to deliver on its commitment to publish a credible medium-term strategy in terms of the SPU 2021; his further views on the view that the recent SPU is based on poorly founded medium-term spending forecasts and does not incorporate major policy commitments referenced in the Programme for Government; and if he will make a statement on the matter. [31608/21]
View answerI note the Fiscal Council’s view on the fiscal forecasts and always welcome the Council’s contribution.
As I have stated previously, the Government took the decision to draft the Stability Programme Update (SPU) on a ‘no policy change’ basis in view of the considerable uncertainty around both the trajectory of the pandemic and the pace at which restrictions could be lifted. There was simply too much epidemiological, economic and fiscal uncertainty in March to make policy decisions with significant budgetary implications. Accordingly, the medium-term forecasts in the SPU were undertaken on a purely technical basis and do not incorporate any new policies.
I note that the Council endorsed the SPU medium-term macroeconomic forecasts, and indeed view some potential upside to my Department’s projections. More broadly, I welcome the Council’s endorsement of the Government’s fiscal stance. The Council agrees that the unprecedented level of budgetary support that Government has provided has been the appropriate response to the pandemic. The Council is of the view that, as the situation evolves, supports should be more precisely targeted and reduced in a gradual and responsible manner. This is precisely what the Government announced in the Economic Recovery Plan.
Finally, I am in complete agreement with the Council that a credible medium term fiscal anchor is essential. Now that more certainty exists, the Government will set this out in the forthcoming Summer Economic Statement.
94. Deputy Mick Barry asked the Minister for Finance if he will report on the impact for households of the changes to the local property tax; and if he will make a statement on the matter. [31777/21]
View answerThe Programme for Government - “Our Shared Future” – includes a commitment to bring forward legislation in relation to the Local Property Tax on the basis of fairness and that most homeowners will face no increase in their LPT liability. In addition there is a commitment to bring new homes, which are currently exempt from the LPT, into the taxation system.
Accordingly, the Government recently gave its approval for the General Scheme of the Finance (Local Property Tax) (Amendment) Bill 2021 which has been published. The measures proposed for this Bill will fulfil the Programme for Government commitments in this area and will secure the future of the Local Property Tax. Properties that were previously exempt or fell outside the tax will now be brought into scope.
The Government has agreed that a modified version of scenario 5 of the 2019 Inter-Departmental Review of LPT should form the basis for the calculation of future LPT liabilities. As outlined in the 2019 Review, there are significant gains to progressivity from the adoption of a scenario 5 approach to a new method for liability calculation. The Review included a Distributional Impact Analysis using the ESRI SWITCH Model (Simulating Welfare and Income Tax Changes) tax and benefit micro-simulation model, which allow an assessment of how regressive or progressive the impact of the different policy scenarios would be for households.
It estimated that scenario 5 would result in average increases of 0.40 per cent to households’ equivalised disposable income as a result of the measures. There would be a broadly progressive trend, with households in the first two deciles gaining the most in relative terms at 0.46 per cent and 0.43 per cent respectively, while households in the top three income deciles experience below average gains of 0.37 per cent. The proposed approach provides for a new valuation band 1 from €0 to €200,000, with an LPT charge fixed at the current rates for bands 1 and 2, of €90 and €225 respectively. This results in the vast majority of current band 1 properties remaining in the new band 1 and continuing to pay the same amount as presently. The approach also provides for higher rates above €1.05million and above €1.75 million. Both of these measures are designed to further improve the progressivity of the tax.
The Government has decided to both cut the rate of the tax and widen the bands to make the changes affordable. This means that the majority of homeowners are likely to see either a decrease or no change. Where increases arise, the majority will be a single band (€90), notwithstanding the significant increases we have seen in property values since 2013. The overall structure of the tax, which is broadly understood and accepted, is being maintained.
I look forward to publication in due course of the Finance (Local Property Tax) (Amendment) Bill 2021.
96. Deputy Ged Nash asked the Minister for Finance his plans to address aggressive tax planning as part the Government’s priority reform commitments made under the National Recovery and Resilience Plan; the way this will impact on the bottom line of the Exchequer and on budget forecasts; his views on a recent IFAC report which states the loss to the Exchequer due to international changes in corporation tax rules could be €3.5 billion; if he plans to instruct his Department to provide an updated forecast report on the potential loss to the Exchequer due to international changes in corporation tax rules and the options for replacing these tax revenues; and if he will make a statement on the matter. [31607/21]
View answerIreland has committed to addressing issues highlighted in recent Country Specific Recommendations as part of Ireland’s National Recovery and Resilience Plan that has been submitted to the European Commission.
The draft Plan, involving projects with a value of almost €1 billion, will enable Ireland to access funding under the EU's Recovery and Resilience Facility which forms the centrepiece of NextGenerationEU, the Union’s response to the global pandemic. Ireland is expected to receive approximately €915m in grants under the RRF for the period 2021-2022. A further set of grants is to be allocated in 2023.
This builds on previous commitments to introduce a range of reform measures to continue efforts to tackle Aggressive Tax Planning, especially in relation to outbound payments.
As signalled in the Update to Ireland’s Corporation Tax Roadmap, which was published in January, we have committed to introduce a range of reform measures to continue efforts to tackle Aggressive Tax Planning.
In the draft recovery and resilience plan, from a tax perspective, commitments have been made to;
Apply enhanced Controlled Foreign Company rules apply to the list of non-cooperative jurisdictions.
Publish external independent economic research on the impact of recent legislative changes, both domestically and internationally, on outbound payments from Ireland.
Carry out a Public Consultation on the introduction of measures to ensure that Outbound Payments do not avail of double non-taxation.
Introduce legislation to safeguard against the possibility of double non-taxation in Finance Act 2023 at the latest.
Further detail and context can be accessed in the Update to Ireland's Corporation Tax Roadmap. The research and public consultation will be published on the Department of Finance website in due course.
At this point it is not anticipated that there will be a significant impact on Exchequer receipts as the above measures are behavioural are not expected to result in a reduction or increase in tax receipts.
It should first be noted that the Department cannot comment on the specific tax affairs or any identified individual or company due to the obligation to protect taxpayer confidentiality as provided for by section 851A of the Taxes Consolidation Act, 1997. It is an offence for a Revenue official to directly or indirectly disclose taxpayer information to third parties, including the Minister for Finance, unless this is specifically provided for in legislation.
My Department has pointed to the concentration risks associated with international tax proposals on many occasions. The Department’s SPU estimates assume a €2 billion revenue loss relative to baseline by 2025.
The IFAC report considers a scenario whereby five stylised large, foreign-owned multinational enterprises exit Ireland, which amounts to a revenue exposure of €3.25 billion. The corporation tax liability of these firms is based loosely on the average tax liability of the top multinationals in Ireland. This approach is obviously highly simplified and based on a number of very large assumptions but it appears that it is intended to be largely illustrative, rather than representing a projected outcome, which may reflect the fact that there is still a large degree of uncertainty as to the ultimate outcome of reform efforts.
97. Deputy Aindrias Moynihan asked the Minister for Finance the increases there have been in the purchase of State prize bonds in each of the past three years; the monetary amounts that have been invested in these bonds for each of the years; the interest the State generated with these funds in the period; the amount that was given in prize money in each of these years; if the number of prizes has changed during this timeline; and if he will make a statement on the matter. [31755/21]
View answerI am informed by the National Treasury Management Agency that the following information has been supplied by the Prize Bond Company:
|
Year |
Sales €M |
Prize Money €M |
Number of Prizes |
|
2018 |
574.3 |
16.4 |
224,474 |
|
2019 |
537.1 |
17.6 |
248,140 |
|
2020 |
735.7 |
19.2 |
280,333 |
The Sales column gives the purchase value of Prize Bonds in each of the past three years. This is equivalent to the monetary amounts invested in Prize Bonds.
The Prize Money column is the prize money that has been paid out in each of these years to Prize Bond customers. This is generated by the interest rate applied to the outstanding fund each year.
The Number of Prizes column shows the number of prizes awarded in each year.
98. Deputy Steven Matthews asked the Minister for Finance the steps he will take to engage with representatives of the major banks that are either pulling out of the Irish market or restructuring their high street presence with regard to the vacant units they are leaving in towns and villages; if he will support the repurposing of these units as community hubs; and if he will make a statement on the matter. [31734/21]
View answerThe withdrawal of Ulster Bank and the potential withdrawal of KBC Bank Ireland (KBC) from the market as well as the decision by Bank of Ireland to close 88 branches in the Republic of Ireland and the decision by AIB to close a smaller number, are regrettable, particularly for their customers and staff and they represent unfavourable developments for the Irish banking market.
As the Deputy will be aware, decisions in relation to the disposal of property are the sole responsibility of the board and management of the individual banks, which are run on an independent and commercial basis and as Minister for Finance, I have no role in such decisions. The independence of banks in which the State has a shareholding is protected by Relationship Frameworks which are legally binding documents that cannot be changed unilaterally.
Notwithstanding this, I would encourage any local or community groups with an interest in acquiring a particular property to express their interest to the relevant bank.
99. Deputy James O'Connor asked the Minister for Finance the position regarding making the save and spend scheme more dynamic to enable a greater level of take-up in order to stimulate the tourism industry; and if he will make a statement on the matter. [31630/21]
View answerThe purpose of the Stay and Spend Tax Credit scheme was to provide targeted support to businesses within the hospitality sector whose operations are likely to be most affected by continued restrictions on public health grounds. The scheme ended on 30 April.
Since 1 October 2020, a total of 66,058 receipts have been uploaded to the Revenue Receipts Tracker, as at 9 June 2021. The related expenditure recorded on these receipts amounts to €10,862,004, and the potential tax cost is €2,172,401, assuming all such expenditure is claimed and qualifies in full for tax relief. Subsequent to claims being made in respect of this scheme and any other relief or deduction, verification of such reliefs and deductions forms part of Revenue’s comprehensive risk assessment programme.
The scheme was developed at a time last year when there appeared to be a steady downward trend in infection rates and there was an expectation that the re-opening of the economy could be sustained uninterrupted. Unfortunately, this has not been the case and, with the exception of some short periods, public health restrictions had the effect of impeding the operation of the incentive as originally envisaged.
While I am very mindful of the significant difficulties that remain to be faced by the hospitality sector, I made the determination that the broad interests of taxpayers would not have been best served by extending the scheme over the summer months in circumstances where most will be staying at home and hopefully holidaying in Ireland. This is particularly the case when other very significant support measures will remain in place.
Currently, I do not have plans to re-introduce the Stay and Spend scheme. However, it may be useful to highlight and summarise the significant supports that remain available to support businesses in the hospitality sector:
In recognition of the unprecedented challenges facing the Hospitality and Tourism sector, the VAT rate was reduced from 13.5% to 9% from 1 November 2020. This is a temporary but important measure to provide support to the sector, where many businesses remain closed for now and those that are open are operating at significantly reduced capacity. It was originally to apply until 31 December 2021. However, as I announced recently, the reduced rate will be extended to 1 September 2022. The extension until the end of the 2022 summer season allows for a longer period of recovery for the sector. It should be noted that this VAT rate reduction came after the introduction of the Stay and Spend Tax Credit and reflects the fact that the latter was not intended to be the sole sector-specific support for hospitality.
In addition, the Employment Wage Subsidy Scheme (EWSS) (extended to 31 December 2021) continues to be a key component of the Government’s response to the COVID-19 crisis to support viable firms and encourage employment in the hospitality and tourism sector and beyond.
The Covid Restrictions Support Scheme (CRSS) is a targeted support for businesses significantly impacted by restrictions introduced by the Government under public health regulations to combat the effects of the COVID-19 pandemic. The support is available to companies, self-employed individuals and partnerships who carry on a trade or trading activities, the profits from which are chargeable to tax under Case I of Schedule D, from a business premises located in a region subject to restrictions introduced in line with the Living with COVID-19 Plan.
The extension of the tax debt warehousing scheme to allow the period where liabilities arising can be “warehoused” to be extended to the end of 2021 for all eligible taxpayers, with an interest free period during 2022, and to include overpayments of EWSS in the scheme.
101. Deputy Éamon Ó Cuív asked the Minister for Finance the estimated cost to the Exchequer of not charging any USC on the first €13,000 of assessable income; and if he will make a statement on the matter. [31514/21]
View answerIreland has one of the most progressive personal income tax systems in the world, which plays a crucial role in the process of income redistribution. Our redistributive tax system has been acknowledged by the IMF, the OECD and the ESRI. It is my view that a broad-based, progressive income tax system, where the majority of income earners make some contribution but according to their means, is the most fair and sustainable income tax system in the long term.
To answer the Deputy's specific question, I am advised by Revenue that the estimated costs associated with the first €13,000 of income being exempt from USC are €157m and €181m on a first and full year basis, respectively.
104. Deputy Pearse Doherty asked the Minister for Finance the number of developments in which all or a portion of units in that development are subject to forward purchase private rented sector sales that have been funded through Home Building Finance Ireland since it came into operation; the value of the funding; the number of units in each development that are subject to forward purchase PRS sales; the rental price of each or any of those units that will or have been subsequently made available to rent; the average rental price; and his views on whether these issues were not addressed in the recent Home Building Finance Ireland review published by his Department on 10 May 2021. [31811/21]
View answerSince inception, HBFI has provided funding to house builders for over 2,400 homes across 17 counties, comprising of approximately 56% houses and 44% apartments. To be clear, HBFI funds the construction of new homes and does not lend to the end buyers of these homes, whether they be institutional funds, Approved Housing Bodies (AHBs), local authorities or other categories of buyer.
Based on the information available to HBFI, these homes are broken down as follows:
1,359 houses, of which:
- 815 intended for sale to individual buyers
- 479 intended for sale to AHBs and local authorities for social housing
- 65 intended for private rental
1053 apartments, of which
- 202 intended for sale to AHBs and local authorities for social housing
- 851 intended for private rental
The figures above are based on information currently available. There may be some final variations on the figures at the conclusion of the construction process.
To date HBFI has approved funding for 5 developments as set out in the table below where part or all of the development is either sold (contract in place) or it is intended to be sold by the builder/developer (where no agreed sales or contract in place) to the private rental market.
|
Development No. |
Funding Approved by HBFI for Private Rental element of Project |
No. of Units in Each Development for Private Rental |
|
1 |
€84.36m |
307 |
|
2 |
€11.23m |
48 |
|
3 |
€94.00m |
287 |
|
4 |
€53.18m |
211 |
|
5 |
€21.27m |
63 |
In respect of the 916 units identified for private rental, 851 of these are apartments and 65 are houses, with institutions the likely primary category of buyer - although in a number of cases HBFI will have no visibility at this stage of the end buyer. The delivery of apartments through such advance purchases is in line with how apartment developments are funded more generally in the market and is designed to increase supply in this part of the market.
HBFI provides funding for the construction phase of a development on a commercial basis and has no role in the letting or renting of completed units in the same way as any other financial institution providing similar development funding.
HBFI has €730m of funding available for residential development, with an ability to raise a further €750m if required. The funding of large-scale developments has not and will not impact on its ability to fund small and medium sized developments. These smaller developments are the core of HBFI’s business and will continue to remain so.
106. Deputy Jim O'Callaghan asked the Minister for Finance if he will report on his attendance at the recent G7 finance ministers meeting in London; and if he will make a statement on the matter. [31705/21]
View answer313. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which deliberations and agreements at the G7 Summit are likely to impact on Ireland. [31786/21]
View answerI propose to take Questions Nos. 106 and 313 together.
The G7 meeting of Finance Ministers took place in London over two days, under strict Covid-19 guidelines, from Friday 4th to Saturday 5th June.
In my capacity as President of the Eurogroup, I was in attendance at the in-person meetings on both days where participants considered coordinated approaches to the key economic challenges facing economies emerging from the Covid crisis. The G7 is committed to working together to ensure a strong, sustainable, balanced and inclusive recovery. The meeting also discussed key global challenges, including climate and nature; health finance; and support for lower income countries. A communiqué outlining the outcomes of the G7 Finance Ministers’ deliberations over the previous few months was agreed at the meeting and published on 5th June.
I also took the opportunity to hold bilateral meetings with other participants including US Treasury Secretary Janet Yellen; Japanese Deputy Prime Minister and Finance Minister, Taro Aso; Canadian Finance Minister Chrystia Freeland; as well as the Chancellor of the Exchequer Rishi Sunak. I also met with the new Secretary General of the OECD, Mathias Cormann, who took up his new role on 1 June, and with the Managing Director of the IMF, Kristalina Georgieva.
In relation to deliberations and agreements arising from the G7 Summit which are likely to impact on Ireland, deputies will be aware that the ongoing discussions on international tax framework were discussed. I have noted the Communique from the G7 Finance Ministers includes a reference to a minimum effective tax rate of 15%.
The G7 communiqué is an important signpost towards an agreement but it is relevant also that there are 139 countries in the OECD's Inclusive Framework on BEPS, and any agreement needs to meet the needs of small and large countries, developed and developing.
107. Deputy Richard Boyd Barrett asked the Minister for Finance his plans with regard to changes to the local property tax; and if he will make a statement on the matter. [31407/21]
View answerThe Programme for Government - “Our Shared Future” – includes a commitment to bring forward legislation in relation to the Local Property Tax on the basis of fairness and that most homeowners will face no increase in their LPT liability. In addition there is a commitment to bring new homes, which are currently exempt from the LPT, into the taxation system.
Accordingly, the Government has given its approval for the General Scheme of the Finance (Local Property Tax) (Amendment) Bill 2021 which has been published. The Bill is being drafted to give effect to a package of measures addressing the Programme commitments and related matters.
The measures proposed for this Bill will fulfil the Programme for Government commitments in this area and will secure the future of the Local Property Tax. Properties that were previously exempt or falling outside the tax will now be brought into scope. The Government has decided to both cut the rate of the tax and widen the bands to make the changes affordable. This means that the majority of homeowners are likely to see either a decrease or no change. Where increases arise, the majority will be a single band (€90), notwithstanding the significant increases we have seen in property values since 2013. The overall structure of the tax, which is broadly understood and accepted, is being maintained.
I look forward to publication in due course of the Finance (Local Property Tax) (Amendment) Bill 2021.
