Written Answers Nos. 68-86
73. Deputy Willie O'Dea asked the Minister for Finance if he will report on the implementation of Pillar Two of the OECD Base Erosion and Profit Shifting Project; his assessment of the impact of this on the Irish economy; and if he will make a statement on the matter. [54380/21]
View answerOn 8 October, Ireland was among 136 jurisdictions who joined a two pillar international agreement in October to reform the international tax rules to address the challenges of digitalisation. Pillar One of the agreement will see a reallocation of a proportion of profits to the jurisdiction of the consumer, while Pillar Two will see the adoption of a new global minimum effective tax rate of 15% applying to multinationals with global revenues in excess of €750m. The agreement on Pillar Two allows for the retention of our domestic 12.5% corporation tax rate for the 95% of the companies in Ireland that are out of scope of the agreement.
I have long signalled that there will be a cost to Ireland signing up to this agreement. My Department and Revenue have estimated that the cost to the Exchequer in terms of tax receipts foregone could be up to €2 billion in the medium term. This costing will be kept under review as the critical technical discussions proceed.
However, it is also important to consider the very real risks associated with staying outside the Agreement. As a small open economy, we have strong ties with EU member States, with the US, and other G20 countries. I believe it is essential for our long term competitiveness that we are in line with key international accords such as this agreement.
This has been a difficult and complex decision but I believe it is the right one, and I am confident that Ireland will remain competitive into the future, and we will continue to be an attractive location and ‘best in class’ when multi-nationals look to investment locations.
In respect to implementation, the detailed technical work is continuing at the OECD through the preparation of Model Rules which are due to be finalised by the end of this month. The intention is that the Commission will bring forward a Directive to transpose these Model Rules on 22 December which will then be discussed in the Council Working party early next year. The expected implementation date in the OECD agreement for both pillars is 2023.
81. Deputy Paul McAuliffe asked the Minister for Finance his plans to amend the National Asset Management Agency Act 2009 to complement the recently published Housing for All plan to deliver more affordable and social housing; and if he will make a statement on the matter. [54416/21]
View answerNAMA was established in December 2009 as part of the State’s response to the 2008 banking crisis with a very specific legal mandate, which was approved by the European Commission in 2010, to deal expeditiously with its acquired loan portfolio and to extract best value from that portfolio. NAMA has been successful in achieving this mandate and has now entered into the final phase of its work.
Within the context of its overriding commercial mandate, NAMA has already made a significant contribution to social housing. The agency continuously reviews the assets of its debtors and receivers to establish if vacant and available residential properties securing their loans could potentially be made available for social housing. In this context, NAMA engages with the Housing Agency and the Department of Housing in order to facilitate the delivery of social housing from its secured portfolio.
To date, NAMA has delivered over 2,640 homes from its secured portfolio for social housing. These figures exclude social housing delivered on NAMA-funded residential developments in compliance with Part V planning obligations.
As part of its social housing programme, in 2012, NAMA established National Asset Residential Property Services DAC (NARPS) as a means of expediting the delivery of social housing. NARPS operated by purchasing suitable houses and apartments from NAMA debtors and receivers and leased them to Local Authorities and Approved Housing Bodies. Many of the properties acquired by NARPS had been incomplete vacant units in unfinished housing estates. The purchase of the properties by NARPS has often had the effect of triggering a wider programme of completion and remediation for these estates.
1,370 social housing units have been delivered via NARPS. It is intended that this entity and its social housing units will be transferred to the Land Development Agency as part of the Housing for All plan.
It is important that NAMA’s core role is preserved and that it completes its work in line with its original mandate. NAMA has made considerable progress toward the achievement of its objectives and a key part of NAMA's remaining mandate will be to continue to make a significant contribution to the supply of housing within the State where it is in a position to do so.
Accordingly, at this late stage in NAMA’s lifecycle, it is not my intention to amend its legislation.
83. Deputy Mairéad Farrell asked the Minister for Finance the measures he is taking to improve regulation in relation to tax fraud schemes and to ensure that scandals such as in a recent case (details supplied) do not reoccur in view of Ireland’s role in same; and if he will make a statement on the matter. [54359/21]
View answerI am aware of the matter that the Deputy has raised as this has been a widely published scandal within the EU. I also note that the Deputy raised this issue last week at a meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach at which representatives from the Central Bank of Ireland provided some details on the topic.
On the specific case mentioned by the Deputy in relation to dividend arbitrage schemes, my officials have been informed by the Central Bank of Ireland that they cannot comment on individual cases but that they can confirm all of the funds referenced in the recent media reports have been revoked and are no longer in existence.
In terms of the broader regulatory environment, the Central Bank of Ireland, as the independent regulator of financial services providers and financial markets in Ireland, is committed to effective supervision in keeping with their mandate to both protect investors and the integrity of the market, as well as safeguarding financial stability.
At the authorisation stage of an investment fund, the Central Bank assesses a number of areas when considering whether the asset composition of a proposed fund is appropriate. Since 2019, all funds seeking to undertake atypical strategies, must make a pre-submission to the Central Bank and receive pre-clearance.
In terms of ongoing supervision, the Central Bank is rigorous in its assessment of risks having regard to the evolving market and risk landscape. Ensuring that funds can clearly demonstrate their compliance with their legislative and regulatory obligations is integral to this process.
Another important development are the steps that we are taking to ensure the introduction of a Senior Executive Accountability Regime (SEAR), which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies. Legislation is required and drafting is advancing. Such developments will lead to the further development of a resilient and trustworthy sector, in which firms and individuals adhere to a culture of fairness and high standards.
With regard to taxation, the European Securities Markets Authority (“ESMA”), launched a formal inquiry concerning dividend withholding tax reclaim schemes in July 2019. The Central Bank of Ireland, in consultation with the Revenue Commissioners, contributed to this process. ESMA’s main conclusion was that Withholding Tax (WHT) schemes are to be primarily considered as a tax related issue and that a legislative and supervisory response should be sought within the boundaries of the tax legislative and supervisory framework. The key recommendation in the report, within the remit of financial services legislation, is that EU National Competent Authorities (NCAs) for securities markets should be empowered - through amendments to EU legislation - to share information received from other NCAs with national tax authorities, to assist in the detection and prosecution of illegal withholding tax reclaim schemes.
84. Deputy Paul Murphy asked the Minister for Finance if he will ensure that those who avail of the new digital gaming relief are subject to ensuring quality employment and training; and if he will make a statement on the matter. [54403/21]
View answerAs I announced during my Budget speech, I am introducing a new tax credit for the digital gaming sector. Digital gaming is a sector that has seen exponential global growth in the past decade, however this growth has not been reflected in industry growth here in Ireland. Ireland has the potential to utilise the synergies with our established film and animation sectors, to support employment in creative and digital arts in the State.
It is important to note that European Commission State aid approval will be required prior to the introduction of the tax credit. Therefore the Finance Bill 2021 legislation is being introduced subject to a commencement order, pending completion of the State aid approval process.
As the relief is a cultural one, in order to avail of the credit, a digital game development company must first apply to the Minster for Tourism, Culture, Arts, Gaeltacht, Sports and Media for a cultural certificate. As part of this certification process, a digital game development company will be required to complete an “Undertaking in respect of quality employment” in order to qualify for the relief. This undertaking is similar to the requirements in place under the Section 481 Film Tax Credit. It commits applicants to compliance with all relevant employment legislation. It is crucial that employee rights are upheld in all industries and the inclusion of this provision reinforces the importance of adhering to employment legislation in the digital gaming sector.
Should a digital game development company fail to adhere to a condition or obligation specified in the undertaking, the conditions of certification will not have been met, which means that any credit claimed pursuant to an interim certificate may be subject to recoupment by Revenue and an application for a final certificate may be refused.
It is important to note that the monitoring of compliance with employment rights legislation is primarily a matter for the Department of Enterprise, Trade and Employment, through the Workplace Relations Commission. While the importance of employment rights will be reflected in the tax credit for digital game, the WRC remains the appropriate avenue to address non-compliance with employment rights legislation.
85. Deputy Jackie Cahill asked the Minister for Finance if he will report on the implementation of the Programme for Government commitments relating to credit unions; and if he will make a statement on the matter. [54372/21]
View answer92. Deputy Holly Cairns asked the Minister for Finance the steps he is taking to enable the credit union movement to grow as a key provider of community banking in the country. [54422/21]
View answer148. Deputy Aindrias Moynihan asked the Minister for Finance if he will report on his recent engagements with the credit union sector. [54381/21]
View answerI propose to take Questions Nos. 85, 92 and 148 together.
The Programme for Government includes a number of commitments in relation to the credit union sector that the Government is progressing.
The Review of the Policy Framework is now at an advanced stage.
Stakeholder Engagement
Since September 2020, the Department has held extensive engagement with credit union representative bodies to seek their feedback.
In total, Minister Fleming has held 23 meetings with credit union stakeholders this year including representative bodies, collaborative ventures, service providers, the Credit Union Advisory Committee and the Registrar of Credit Unions to gather further information to help inform the next steps of the review.
We intend to issue proposals emanating from the review for consultation with stakeholders shortly. This consultation will involve meeting with representative bodies and other stakeholders, a commitment made in my recent engagements.
In terms of supporting and enabling the sector to grow and expand, the following are some recent developments in relation to lending and investment regulations, SME lending, access to finance for retrofit, additional services and investment in Approved Housing Bodies (AHBs). These developments highlight the potential of the sector to fulfil a role in relation to community banking.
Review of Lending and Investment Regulations
The Central Bank has in recent years completed reviews of both the lending and investment frameworks. Following introduction of the new lending regulations on 1 January 2020, credit unions now have a combined capacity to provide up to approximately €1.1 billion in additional SME and mortgage loans, with further lending capacity available to credit unions who can comply with certain conditions or on approval by the Central Bank. The Central Bank has informed me that two credit unions have been approved to avail of the 15% combined lending limit for house and business loans.
As at June 2021, credit unions had a combined mortgage and SME loan book of circa €372 million, an increase of 18% year-on-year.
The revised investment regulations took effect on 1 March 2018. Under these regulations, credit unions are permitted to place their surplus funds that have not been lent to members in a range of investments including Tier 3 Approved Housing Bodies (AHBs).
I am pleased to share with the Deputy that two credit union backed funds have received approval from the Central Bank. Credit unions will be able to invest up to €900 million in these regulated funds, which will subsequently lend to Approved Housing Bodies (AHBs). This will provide an additional funding channel for AHBs who have a large role to play in the recently announced Housing for All Action Plan.
SME Lending
Nineteen credit unions, supported by ILCU, CUDA and Metamo, were approved in early 2021 by the Department of Enterprise, Trade and Employment for participation in the Covid-19 Credit Guarantee Scheme. Further development of SME lending in a controlled manner could also assist credit unions in growing and diversifying their loan book.
SME lending has grown 5.6% year on year to end June 2021.
Access to Finance for Retrofit
The Government significantly increased the funding available to support retrofit in Budget 2021. My officials have been engaging with the Department of Environment, Climate and Communication, the Department of Public Expenditure and Reform, and the Sustainable Energy Authority of Ireland to support increased credit union participation in green retrofit loan schemes.
Additional Services
The Deputy may also wish to note that under the additional services regime set out in the 2016 regulations credit unions can seek approval from the Central Bank to offer additional services such as current accounts and debit cards. 62 credit unions have been approved to provide current accounts.
Other than member savings and lending, in order to provide “additional services”, a credit union must be approved by the Central Bank to provide the additional services. The Central Bank has prescribed a list of exempt services which may be provided without approval. It is undertaking a technical review of the Exempt Services Schedule to ensure that the services listed reflect the current financial services landscape. The Central Bank will commence a public consultation process during Q4 2021 – seeking views from interested stakeholders on the proposed changes arising from this review.
86. Deputy John Lahart asked the Minister for Finance the plans he has to address the process of price walking in insurance; and if he will make a statement on the matter. [54353/21]
View answer99. Deputy Cormac Devlin asked the Minister for Finance the action he is taking to address differential pricing in which insurance customers are charged higher premiums relative to the expected costs the longer they remain with a provider; and if he will make a statement on the matter. [54362/21]
View answerI propose to take Questions Nos. 86 and 99 together.
Price walking is a form of differential pricing where consumers are gradually charged higher premiums, relative to the cost of providing the service, the longer they remain with a provider. This represents a de facto loyalty penalty on long-serving customers. In the context of this specific question this is an important issue for consumers of insurance services, and the Government’s Action Plan for Insurance Reform sets out a number of actions to address it.
The Central Bank’s Review of Differential Pricing in the Motor and Home Insurance Markets, is an important element of this and I am pleased that it published its Final Report and Public Consultation last July – some two months ahead of schedule. The Report showed that the majority of motor and home insurance firms apply some form of differential pricing and that some of the pricing practices identified, including price walking, could result in unfair outcomes for some consumers. Accordingly, the Central Bank has made a number of proposals, including to ban price walking in the motor and home insurance markets for personal customers.
These proposals represent a balanced approach that will protect customers who prefer to stay with their current insurer, while still allowing those who prefer to switch provider to receive discounts for doing so. As I have consistently stated on this issue, it is important to protect the ability of consumers to get a good deal, and to ensure that any proposals are tailored to the Irish market. I believe the proposed ban achieves this, and recognises that price-sensitive Irish customers value promotions for shopping around. This considered approach will also help facilitate any new market entrants who wish to offer discounts to attract business.
Following its public consultation, the Central Bank intends to finalise its proposals and to introduce them from July next year. The Department of Finance has been examining the Bank’s Final Report and considering ways to support this work. In order to ensure timely oversight of any new measures, the Insurance (Miscellaneous Provisions) Bill will therefore require the Central Bank to report to the Minister for Finance about any steps taken to address price walking, and whether any further action may be needed.
