Written Answers Nos. 144-162
145. Deputy Rose Conway-Walsh asked the Minister for Finance if his attention has been drawn to the fact that persons with eating disorders are currently unable to get a mortgage due to the fact that they are being turned down for life insurance, a requirement of all mortgage applications; the steps he is taking to address the issue; and if he will make a statement on the matter. [54313/21]
View answerWhen a person applies for a mortgage loan to buy a home, the person will generally be required to take out mortgage protection insurance. In most cases, a lender is legally required under section 126 of the Consumer Credit Act 1995 to make sure that a mortgage applicant has mortgage protection insurance in place before granting a mortgage loan. This is an important statutory provision which is designed to protect the borrower's dependants and their home should the borrower die before the mortgage has been repaid.
However, the Act also recognises that in certain cases, as a statutory measure, such protection is not necessary or would be inappropriate and it provides for a number of limited exemptions to this statutory obligation such as where the borrower belongs to a class of persons which would not be acceptable to a life insurer, or would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally. In such circumstances, there is no statutory requirement on a mortgage lender to arrange for mortgage protection insurance. Nevertheless, it may also be the case that, in circumstances where there is no specific statutory obligation on a mortgage lender to arrange for mortgage protection insurance in association with a housing loan, an individual mortgage lender may, as a matter of its own commercial policy, still require a mortgage borrower to put in place such an insurance policy as a condition for obtaining mortgage credit. That would be a commercial decision as opposed to a statutory requirement for an individual mortgage lender and it is not possible for me to instruct lenders on their commercial lending policies or their commercial decisions on any individual mortgage application, including the insurance and other security they require either in respect of the borrower or the secured property in relation to a mortgage loan. While I cannot involve myself in the commercial decisions lenders may make in respect of mortgage applications, I previously wrote to Banking and Payments Federation Ireland (BPFI) for its views and any information it can provide in relation to this particular issue. BPFI indicated in its reply that on an annual basis around 2% of primary home mortgages were provided without the requirement for mortgage protection insurance (utilising one of the exemptions as provided for in section 126 of the Consumer Credit Act) and that on an annual basis only 0.05% of mortgage applications were refused due to the fact that the applicant did not put in place an acceptable policy of mortgage insurance.
The Deputy should also note that if a person is not satisfied with the way a regulated mortgage provider has dealt with them in relation to an application for a mortgage, 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, including the requirement for the regulated entity to act with due skill, care and diligence in the best interest of its customers, the consumer can also complain directly to the regulated entity and, if they are 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.
146. Deputy Brendan Smith asked the Minister for Finance if he has had recent discussions with the Central Bank in relation to the need to ensure an adequate retailed banking system throughout all regions; and if he will make a statement on the matter. [54333/21]
View answerThe retail financial services sector is undergoing a major period of change. This year so far we have seen several major announcements including the withdrawal of Ulster Bank by NatWest and the potential withdrawal of KBC Bank Ireland, the closure of a large number of bank branches by Bank of Ireland and a smaller number by AIB. Decisions in this regard, including the management of branch networks, are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis.
While these recent announcements are regrettable, Ireland continues to have an extensive network for banking services, including post offices and credit unions. In addition, AIB and Bank of Ireland customers can now lodge and withdraw money and Ulster Bank customers can lodge money at 900 An Post offices across the country.
The changes currently taking place in the Irish retail banking sector are a reflection of the wider challenges banking is facing, not only in Ireland but also abroad. It is because of these changes that I announced in Dáil Éireann on 1 July 2021 that my Department will undertake a broad-ranging review of the retail banking sector to look at, inter alia, expectations of the sector, competition, consumer protection and consumer choice, the sector’s key role in the provision of sustainable credit to the economy, the availability of credit to SMEs from both banks and non-banks and options to further develop the mortgage market. The structure and delivery channels of the retail banking sector will also be assessed as part of this review.
The review will also look at the cost of doing business for the sector, including impacts on its sustainability and the forces for change at play or foreseen, be they related, for example, to COVID-19, Brexit, climate change, housing, regulation or technology.
I will bring a Memo for Information to Government in the coming weeks before publishing the Terms of Reference of the Review.
I, and my officials have regular engagement with the Central Bank on a variety of issues related to banking and the banking review will involve ongoing engagement with a wide range of stakeholders, including the Central Bank of Ireland, to develop a fuller analysis of future banking challenges.
147. Deputy Colm Burke asked the Minister for Finance the number of persons who have availed of tax relief and support for those working from home in Cork city and county in each of the years 2018 to 2020 and to date in 2021, in view of the expansion of support for remote workers in Budget 2022; and if he will make a statement on the matter. [54376/21]
View answerIt is presumed that the Deputy is referring to the tax relief available to those who are remotely working from home.
Remote workers will incur certain expenditure in the performance of their duties from home, such as additional heating and electricity costs. An employer may make payments up to €3.20 per day to employees in respect of such expenses and this amount is not subject to deduction of PAYE, PRSI or USC. Where employers avail of this facility, they are not required to advise Revenue and therefore the number of employees reimbursed in this manner is not available. Where employers choose to pay in excess of €3.20, any such excess is subject to deduction of PAYE, PRSI and USC.
Where an employee has qualifying expenses that are not reimbursed by the employer, or where such reimbursement is treated as taxable income (i.e., the above €3.20 per week) the employee may make a claim to Revenue for a deduction from their taxable income in respect of these amounts.
I am advised by Revenue that to-date there have been approximately 80,000 claims for such expenses in relation to 2020, with a tentative figure of 7,500 of these arising from claimants based in Cork City or County. Data are not available for prior years, and data for 2021 will be available once tax returns for 2021 are filed, commencing in early 2022.
151. Deputy Pearse Doherty asked the Minister for Finance the estimated revenue that would have been generated had the full rate of capital gains tax applied to the disposal of assets by IREFs and REITs in each of the years 2019, 2020 and 2021; and if he will apply the full rate of capital gains tax to such disposals in the future. [54428/21]
View answerFinance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland. REITs are collective investment vehicles designed to hold rental investment properties in a tax neutral manner. The purpose of the REIT regime is to allow for a collective investment vehicle which provides a comparable after-tax return to investors to direct investment in rental property, by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply. REITs are required to distribute 85% of all property income profits annually to investors.
A REIT is generally not chargeable to capital gains tax (CGT) accruing on the disposal of assets of its property rental business, subject to certain exceptions. However a REIT is subject to CGT if it realises a gain on:
- any asset that has been developed by the REIT to the extent that the development cost exceeds 30 per cent of the market value of the asset at the time the development commenced, where the asset is then disposed of within 3 years of completion of the development, and
- the disposal of any assets which are not held for the purposes of the property rental business.
While REITs are generally not chargeable to capital gains tax accruing on the disposal of its property rental assets, they are subject to restrictions not placed on other companies that invest in Irish property. These restrictions include a requirement to distribute 85% of all property income profits annually to investors and to maintain a property to financing costs ratio of 1.25:1.
An Irish Real Estate Fund (IREF) is an investment undertaking where 25% or more of the value of that undertaking is made up of Irish real estate assets. The legislation was introduced to address concerns raised regarding the use of collective investment vehicles by non-residents to invest in Irish property. Investors had been using the structures to minimise their exposure to Irish tax on Irish property transactions.
As IREFs are investment undertakings, investors are taxed in a similar manner to other investment undertakings. Irish residents investing in IREFs are subject to exit tax at 41% on income/gains from IREFs, just as they are taxed on income/gains from funds generally. USC and PRSI do not apply to this income. IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors. This is the standard rate of income tax and is deemed an appropriate rate to apply to non-resident investors. In some circumstances the withholding tax can be reduced by double taxation treaties.
In 2019, officials in my Department produced a report on REITs and IREFs as respects their investment in the Irish property market. The report was presented to the Tax Strategy Group and published in July 2019. It provided a basis for policy discussions and the amendments which were introduced in Finance Act 2019.
In relation to REITs, Finance Act 2019 extended the obligation to deduct DWT to include distributions of the proceeds of capital disposals. In addition, the deemed disposal provisions upon cessation of REIT status were restricted to REITs that have been in operation for at least 15 years, in line with the regime's stated objective of encouraging long-term, stable investment in rental property. In relation to IREFs, amendments were made in Finance Act 2019 to prevent the use of excessive debt and other payments to reduce distributable profits, and to prevent the avoidance of tax on gains on the redemption of IREF units. These amendments were made to ensure appropriate levels of tax are paid by investors in Irish property.
I am advised by Revenue that it is not possible to provide the estimates sought by the Deputy, as the underlying information in respect of the gains made on disposal of assets by IREFs or REITs is not available from tax returns or other sources available to Revenue.
In addition, there are no plans to make further changes to either the REIT or IREF regimes at this point.
152. Deputy Willie O'Dea asked the Minister for Finance his projections for the inflation rate in the coming year and its likely impact on the economy, consumers and the public finances. [54379/21]
View answerWhile Covid-19 had a deflationary impact both in Ireland and internationally last year, inflation has picked up since the beginning of this year. According to the ECB ‘flash estimate’, the annual rate of HICP inflation is expected to reach 5.1 per cent in October – the highest rate since February 2003. The emergence of inflationary pressures is not unique to Ireland however, with euro area inflation expected to reach 4.1 per cent in October.
The increase in inflation since the beginning of this year is partly explained by temporary factors, which are expected to fade over time. These include ‘base effects’ associated with the ‘normalisation’ of oil prices following their collapse last spring and the imbalance between supply and demand that has emerged following the re-opening of the economy. This has been compounded by global supply chain disruptions, including transport bottlenecks, input shortages (e.g. semi-conductors) as well as labour supply shortages in some sectors. More recently, increases in the wholesale price of oil and gas have put additional upward pressure on prices, with energy inflation of around 18½ per cent recorded in September.
Looking ahead, inflation is expected to continue to rise over the rest of the fourth quarter and average 2¼ per cent for 2021 as whole. The most likely scenario is that inflation will moderate over the course of next year however as some of these temporary factors fade, demand stabilises and supply catches up. At the time of the Budget, inflation of 2¼ per cent was projected for 2022. However, the spike in international wholesale energy prices since the Budget 2022 macroeconomic forecasts were finalised means there could already be some upside to these projections. Indeed, a scenario analysis outlining the macroeconomic implications of higher than expected inflation is set out in the Economic and Fiscal Outlook published with the Budget.
Needless to say, significantly higher inflation than already projected for next year would have significant impacts on the wider economy and public finances. At the household level real incomes could be squeezed, while at the firm level higher input costs would affect competitiveness. Meanwhile persistently higher inflation could trigger higher interest rates (including a policy response by the ECB), which would have implications for Government financing costs as well as for mortgage interest costs. In light of these risks, my Department will continue to closely monitor and analyse inflationary developments over the coming months.
153. Deputy Mark Ward asked the Minister for Finance the discussions he and his officials have had with a bank (details supplied) regarding the decision by the bank to close branches across the country; and if he will make a statement on the matter. [54414/21]
View answer250. Deputy Mark Ward asked the Minister for Finance the discussions he and his officials have had with a bank (details supplied) regarding the decision by the bank to close branches across the country; and if he will make a statement on the matter. [54386/21]
View answerI propose to take Questions Nos. 153 and 250 together.
As the Deputy may be aware, as Minister for Finance, I have no role in the commercial decisions made by any bank in the State. This includes banks in which the State has a shareholding.
Decisions in this regard, including the management of branch networks, are the sole responsibility of the board and management of the banks, which must be run on an independent and commercial basis. 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. These frameworks, which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
Notwithstanding this, Bank of Ireland provided me with a briefing in advance of its original announcement to close branches which issued on 1st March of this year. The briefing the bank provided me with was consistent with its announcement.
Some of the key points contained in the announcement were:
- The decision to close these branches was in response to changing customer behaviour with a significant acceleration in digital banking.
- The branches closing were predominately self-service locations which did not offer a counter service.
- To preserve local access to physical banking for those who want it, the bank has agreed a new partnership with An Post which will allow personal and business customers use their local post office for a range of banking services – including to withdraw cash and make cash and cheque lodgements – at no additional cost. The closing Bank of Ireland branches all have a post office within, on average, less than 500 meters.
- The bank confirmed that the new partnership with An Post would be available to all Bank of Ireland customers before any branch closes.
155. Deputy Denis Naughten asked the Minister for Finance the steps taken to date to divest from fossil fuel investments; and if he will make a statement on the matter. [54322/21]
View answerIreland was one of the first countries to divest public money from fossil fuel investments. The Fossil Fuel Divestment Act 2018 was signed into law by the President of Ireland in December 2018.
The Act imposes certain prohibitions and restrictions with respect to the investment by the National Treasury Management Agency of assets of the Ireland Strategic Investment Fund (ISIF) in certain fossil fuel undertakings. It prohibits the ISIF from directly investing in any undertaking that generates 20% or more of its turnover from the exploration for or extraction or refinement of a fossil fuel such as oil, natural gas, peat, coal or any derivative thereof intended for use in the production of energy by combustion.
Where the Agency becomes aware that an undertaking in which such assets have been so invested by it is, or has become, a fossil fuel undertaking, the Act requires the Agency to divest the assets of the ISIF from such investment.
The Act also makes provision for a restriction on such investment when the investment is of an indirect nature. That is, investment of the assets of the Fund in an investment product or in a collective investment undertaking. Under the Act, the Agency shall endeavour to ensure that the assets of the Fund are not invested in an indirect investment unless it is satisfied on reasonable grounds that such indirect investment is unlikely to have in excess of 15% of its assets invested in a fossil fuel undertaking.
ISIF has developed a list of 246 fossil fuel companies in which it will not invest, as determined by criteria within the Act. This list is updated on a semi-annual basis in line with methodology which is aligned to the legislation and is available on ISIF’s website.
This legislation has been utilised to divest the State from fossil fuel undertakings in a manner which is consistent with the achievement of the national transition objectives, the implementation of the State’s climate change obligations, and Government policy. To date, ISIF remains one of a select few sovereign wealth funds globally to implement a fossil fuel divestment strategy.
160. Deputy Ged Nash asked the Minister for Finance the status of the sale of a portion of the State’s shareholding in a bank (details supplied); the brokerage costs of the sale to date; if he plans to reconsider plans to divest the State of its remaining shareholding in the bank in view of the recent profits posted by the institution; and if he will make a statement on the matter. [54315/21]
View answerThe Deputy may be aware that my Department issued a press release last Friday, 5th November which provided an update on progress in relation to the Bank of Ireland share trading plan.
Proceeds generated from the share trading plan since its launch amount to c. €249m. The Government has now recovered almost €6.2bn in cash from its €4.7bn investment in and support for Bank of Ireland over the 2009-2011 period.
Shares have been sold through the share trading plan at an average price of €4.96 and the State’s directed shareholding in the bank has been reduced from 13.9% to 9.3%.
As part of this release, I confirmed my intention to renew the plan for a further period in light of its success to date. I believe that this is in the best interest of the taxpayer.
161. Deputy Peadar Tóibín asked the Minister for Finance the number of commissions of investigation currently ongoing; the duration of each commission of investigation; the deadline for each commission of investigation; and the actual and projected cost of each commission of investigation. [54098/21]
View answerI wish to inform the Deputy that there are currently no commissions of investigation under my Department. My Department is a stakeholder in two commissions of investigation, however these are set up under the Department of the Taoiseach.
