Thursday, 22 Jun 2023

Written Answers Nos. 101-120

Tax Code

Questions (101)

Richard Boyd Barrett

Question:

101. Deputy Richard Boyd Barrett asked the Minister for Finance if he will introduce a windfall tax on banks and vulture funds; and if he will make a statement on the matter. [30200/23]

Written answers

Minister for Finance

As a small open economy, connected to Europe, the US and the wider world, Ireland is committed to a competitive, transparent and stable corporation tax system. As the Deputy will be aware, the trading profits of companies in Ireland are generally taxed at the standard corporation tax rate of 12.5%, and we are committed under the Pillar Two agreement to increasing to an effective rate of 15% for in-scope companies. Some of the main features of the current regime are its simplicity and that it applies to a broad base.

Imposing additional taxes on certain sectors would involve increased complexity and could change the attractiveness of Ireland's corporate tax regime. While it is possible that imposing such taxes could lead to theoretical gains, there is a risk of such taxes leading to lower levels of economic activity and to companies passing the additional tax burden onto their suppliers or consumers.

In relation to introducing a windfall tax on banks, there are a number factors would need to be considered, such as the potential for negative impacts on bank customers and employees, and further reduced appetite for competition in a sector that has recently seen the departure of two significant banks. These issues have been considered and discussed with Deputies in detail in debates on various proposals relating to the taxation of the banking sector.

Deputies will be aware that a banking sector specific measure has been in place since 2014, in the form of the bank levy. As the levy is due to expire this year, my Department is currently carrying out a review to help inform consideration of its future. I hope to be in a position to announce my decision on the levy’s future, based on the review’s findings and recommendations, as part of Budget 2024.

In the area of investment funds, the Deputy will be aware that I published the terms of reference for a review of the funds sector on 6 April.

Taking account of the size and the interconnected nature of the international financial sector, this will be a comprehensive and holistic review of our framework for asset management and fund servicing.  Specifically with regard to the taxation of funds, the review will examine the role of Real Estate Investment Trusts (REITs) and Irish Real Estate Funds (IREFs) in the property sector, including how they support housing policy objectives. There is a role for institutional investors in our housing market to provide the capital needed to meet critical housing needs, and the review will take an evidence-based approach to assessing this role.

The work of the Review has now commenced and a public consultation paper will be launched later this month. I would encourage all stakeholders with an interest in matters relating to the IREF and REIT regimes, including Deputies, to fully engage with the Review. The Review Team will present a draft Report to me by summer 2024.

Tax Reliefs

Questions (102, 115, 128, 137)

Alan Dillon

Question:

102. Deputy Alan Dillon asked the Minister for Finance to provide an update on the ongoing review of the disabled drivers and disabled passengers scheme; to confirm when he anticipates the commencement date for the Disabled Drivers Medical Board of Appeal; to disclose the current number of pending appeals before the board; and if he will make a statement on the matter. [30206/23]

Pearse Doherty

Question:

115. Deputy Pearse Doherty asked the Minister for Finance the current status of the disabled drivers and disabled passengers scheme; when the Disabled Drivers Medical Board of Appeal will recommence hearings; the number of appeals and request for appeal hearings that have been lodged since November 2021; and his response to the recent annual report of the Ombudsman with respect to same. [30180/23]

Violet-Anne Wynne

Question:

128. Deputy Violet-Anne Wynne asked the Minister for Finance if he will provide an update into the review of the primary medical certificate; and if he will make a statement on the matter. [30153/23]

Catherine Connolly

Question:

137. Deputy Catherine Connolly asked the Minister for Finance further to Parliamentary Question No. 70 of 9 May 2023, the status of the Disabled Drivers Medical Board of Appeal; when he expects a new board to be in place; the details of the body that will provide the facilities and secretarial service to the board; and if he will make a statement on the matter. [30011/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 102, 115, 128 and 137 together.

The National Disability Inclusion Strategy Transport Working Group (TWG), comprising members from a range of Departments, agencies and Disabled Persons Organisations, was tasked under Action 104 to review all Government-funded transport and mobility supports for those with a disability, including the Disabled Drivers and Disabled Passengers Scheme (DDS). The NDIS TWG final report was published on 24th February 2023 and welcomed the proposal put forward by my Department that the DDS should be replaced with a needs-based, grant-aided vehicular adaptation scheme, i.e. to provide direct financial assistance to individuals needing vehicle adaptations according to their needs, to meet their personal transport requirements and ultimately to facilitate independence and participation in society.

The NDIS TWG final report also noted both the outdated approach of the Disabled Drivers and Disabled Passengers Scheme and the fact that the scheme needed to be addressed as a matter of priority. The Working Group agreed that proposals in this regard was a clear deliverable on which work could begin in the relatively near future.

The NDIS TWG final report does not set out next steps with respect to the new scheme. This will be a matter for the Government  to decide.

In relation  to the Disabled Drivers Medical Board of Appeal (DDMBA)  whose members resigned in November 2021, I had hoped that a new DDMBA  would have been established by now and that the appeals process would have recommenced.

You should note that five members are legislatively required for a functional Board, however the recruitment of these members has proved to be challenging.  In this regard, four expressions of interest campaigns have been organised by the Department of Health – 3 of them in 2022, and one in April to replace a previously nominated person.  The necessary 5 members have been nominated by the Minister for Health, with Garda vetting currently being undertaken for the most recently nominated candidate – this process was completed for the other four candidates at the start of the year.  

An added complication to the recommencement of the appeals process is that in February 2023, the National Rehabilitation Hospital (NRH) (the body that has hosted the DDMBA since 2000) indicated their intention to withdraw their services with immediate effect. Finance and Health officials have been actively seeking to implement new arrangements since, including engaging with the NRH.  Some progress has been made on this matter insofar as the NRH has indicated a willingness to once again host the DDMBA once certain conditions are met.  It is important to note that requests for appeal hearings can still be sent to the DDMBA secretary based in the NRH.

Assessments for the primary medical certificate, by the HSE, are continuing to take place. In this regard, an important point to make is that even though there has been no appeal mechanism since the previous Board resigned, applicants who have been deemed not to have met one of the six eligibility criteria required for a PMC are entitled to request another PMC assessment six months after an unsuccessful PMC assessment.

I have no role in relation to the granting or refusal of PMCs and the HSE and the Medical Board of Appeal must be independent in their clinical determinations.

As of 24th April 2023, there were 912 people awaiting an appeal hearing.

Mortgage Interest Rates

Questions (103)

Paul Murphy

Question:

103. Deputy Paul Murphy asked the Minister for Finance if he will introduce a cap on mortgage interest rates to prevent families being forced into poverty and homelessness by rising interest rates; and if he will make a statement on the matter. [30164/23]

Written answers

Minister for Finance

The formulation and implementation of monetary policy is an independent matter for the European Central Bank (ECB) and, as the Deputy is aware, the ECB has increased official interest rates over recent months as it attempts to combat inflation. 

The level of official interest rates influences the overall level of interest rates throughout the economy.  However, the setting of retail lending rates by individual lenders is a commercial matter for that lender and I have no function or role in such decision making matters by financial institutions. 

Despite this, there are a number of measures are in place to support households facing rising interest rates.  In particular, the Central Bank has introduced a number of increased protections for variable rate mortgage holders which can which help mortgage holders identify lower cost mortgage options. 

Firstly it made changes to the Consumer Protection Code to require mortgage creditors to explain to borrowers how their non tracker variable interest rates have been set and to clearly identify the factors which may result in changes to variable interest rates. 

Secondly, it also increased the level of information lenders are required to provide their customers including where there is a possibility for the borrower to move to a lower ‘loan to value’ interest rate band and signpost the borrower to the Competition and Consumer Protection Commission's mortgage switching tool.

More recently, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers.  With respect to mortgages, the Central Bank is especially focused on ensuring that firms have the resources and arrangements in place to assess applications from existing and new or switching borrowers in a manner that is timely and based on prudent lending standards applied consistently across all applicants.

Further, as the Deputy is aware, Budget 2023 contained many measures to assist families with the increased cost of living. In addition on 21 Feb 2023, an extra €1.2 billion was provided to help households and businesses to meet cost of living increases.

I am nevertheless very aware that some borrowers will experience repayment difficulty due to the current interest rate environment and the cost of living more generally.  This is why the measures and protections contained in the Code of Conduct on Mortgage Arrears (CCMA) are important to highlight. 

The CCMA sets out the process that entities must follow when a borrower is in or facing difficulties with their mortgage payments and it states that all arrears cases must be handled sympathetically and positively by the regulated entity, with the objective at all times of assisting the borrower to meet his or her mortgage obligations. 

Also the other measures which are in place, such as the advice and supports available from MABS and other under the 'Abhaile' scheme and the personal insolvency frameworks which are delivering long term arrangements to insolvent borrowers are important and should be utilised by borrowers in mortgage difficulty. 

On the issue of capping interest rates, the Governor of the Central Bank has set out that the Bank has serious reservations at the prospect of policy interventions that seek to regulate the setting of interest rates by financial institutions.

This is grounded on the appropriate responsibility for the management of risk as a core function of the financial system; the need to ensure a competitive market for consumers; the risk of interfering with the transmission of the ECB's monetary policy transmission mechanism; and the importance of fair price formation in an open market. 

I believe that the consumer protection framework and supports available are the most appropriate means to support borrowers who are experiencing repayment difficulties due to rising interest rates. 

Whereas imposing caps on mortgage interest rates has the potential for unintended consequences for current and future mortgage holders.

Economic Growth

Questions (104, 105)

Willie O'Dea

Question:

104. Deputy Willie O'Dea asked the Minister for Finance his assessment of the performance of the domestic economy to date in 2023; and if he will make a statement on the matter. [30030/23]

James Lawless

Question:

105. Deputy James Lawless asked the Minister for Finance for a report on modified domestic demand to date in 2023; and if he will make a statement on the matter. [30031/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 104 and 105 together.

Despite facing substantial economic headwinds over the past year, the Irish economy has proven to be remarkably resilient. This has been reflected in strong domestic economic growth at the start of this year, with modified domestic demand (MDD) growing by 2.7 per cent in the first quarter. It is particularly encouraging to see the broad based nature of this growth with both consumer and investment spending contributing to the robust growth over the first quarter.

Despite facing substantial inflationary headwinds, personal consumption still grew strongly in the first quarter, increasing by 1.7 per cent on a quarterly basis. This resilience in consumer spending is reflective of the strong labour market conditions, with more people at work than ever before and an unemployment rate at historically low levels. Government supports have played key role in helping households to weather the recent economic shocks. Indeed, by responding swiftly and decisively to the cost of living pressures and providing €12bn cost of living supports, government has helped to mitigate the impact of inflationary pressures on both businesses and households.

Whilst inflation remains elevated, it is now clearly on a downward trajectory with wholesale energy prices returning towards more normal levels over recent months. Whilst non-energy or ‘core’ inflation is proving to be more persistent than headline inflation and is expected to decelerate more slowly, it is clear that inflation is loosening its grip with real incomes and consumer confidence on the rise.

Somewhat offsetting these positive tailwinds, has been the rapid tightening of monetary policy over recent months. Just last week the ECB announced a further 0.25-point rate increase, the eighth successive interest rate increase since last summer. Whilst necessary to tame inflation, the increase in interest rates will have knock on implications for the financing burden on both businesses and households.

Against this backdrop, the domestic economy is poised to grow at a robust pace this year, with the pace of growth expected to pick-up over the course of the summer as inflation continues to ease. That being said, we cannot become complacent given the challenges that remain on the horizon, including widespread capacity constraints, particularly in the labour and housing markets, persistently high ‘core’ inflation and the potential for a wage-price spiral to emerge.

Question No. 105 answered with Question No. 104.

Tax Yield

Questions (106, 125, 133)

Cormac Devlin

Question:

106. Deputy Cormac Devlin asked the Minister for Finance his assessment of Exchequer returns to date in 2023; and if he will make a statement on the matter. [30028/23]

Cormac Devlin

Question:

125. Deputy Cormac Devlin asked the Minister for Finance if he will report on corporation tax receipts to date in 2023; and if he will make a statement on the matter. [30027/23]

Seán Haughey

Question:

133. Deputy Seán Haughey asked the Minister for Finance if he will report on income tax receipts to date in 2023; and if he will make a statement on the matter. [30025/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 106, 125 and 133 together.

Overall, tax receipts to date have amounted to €33.1 billion. This has been driven by strong income tax, VAT and corporation tax.  Total tax revenue was up by €3.1 billion or over 10 per cent on the same period last year.

In relation to income tax, receipts of €13 billion to end-May were up by €1.1 billion or over 9 per cent on the same period last year driven by a robust labour market, with the unemployment rate now at its lowest level in decades.

Corporation tax receipts of €6.3 billion are ahead of the same period last year by €1.1 billion or over 20 per cent. However, it is worth noting that May is a major month for corporation tax and receipts of €2.7 billion fell compared to May 2022, by €0.2 billion or 6 per cent, reflecting weaker profitability and higher repayments. As I have said on many occasions, this is a volatile and potentially unreliable revenue stream. This decline highlights that, while headline figures may appear positive, there are real underlying vulnerabilities in our public finances.

In relation to the indirect taxes, VAT receipts to end-May totalled €10 billion, €1 billion or 12 per cent higher than in the same period last year driven by the continued resilience of consumption.  Excise receipts of €2.2 billion were broadly flat on last year, reflecting the impact of the policy measures the Government has taken to address the cost of living challenge.

On the expenditure side, total exchequer spending to end-May amounted to €42.5 billion. Within this, gross voted expenditure stood at €33.8 billion, €2 billion ahead of the same period last year, and non-voted expenditure accounted for €8.6 billion. 

Overall, an Exchequer deficit of €0.6 billion was recorded to end-May. This compares to a surplus of €1.4 billion in the same period last year. This deterioration was driven by the transfer of €4 billion to the National Reserve Fund (NRF) in February of this year.

On a 12-month rolling basis, the Exchequer recorded a surplus of €3 billion. However, excluding one-offs and, in particular, estimated ‘windfall’ corporation tax receipts, an underlying deficit of almost €4 billion was recorded on a 12-month rolling sum basis. This is a better picture of the underlying health of the public finances.

Defective Building Materials

Questions (107, 112, 145)

Rose Conway-Walsh

Question:

107. Deputy Rose Conway-Walsh asked the Minister for Finance if he has engaged with the retail banking sector regarding the provisions for forbearance measures and financing for mortgage holders whose homes are affected by defective blocks; and if he will make a statement on the matter. [30165/23]

Mairéad Farrell

Question:

112. Deputy Mairéad Farrell asked the Minister for Finance if he has engaged with mortgage lenders regarding forbearance measures and finance options for mortgage holders whose properties are affected by defective blocks; and if he will make a statement on the matter. [30157/23]

Pádraig Mac Lochlainn

Question:

145. Deputy Pádraig Mac Lochlainn asked the Minister for Finance if he has engaged with the retail banking sector and representative groups regarding the provision of financing and treatment of mortgage loans with respect to homeowners in Donegal impacted by defective blocks; and if he will make a statement on the matter. [30221/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 107, 112 and 145 together.

I met with the Banking and Insurance Defective Block Redress Focus Group yesterday to discuss their concerns, which included the issues raised by the Deputy. I understand the very difficult situation faced by homeowners whose houses are affected by defective concrete blocks, and the Government is determined to assist households impacted by this situation. 

As the Deputy is aware, the Government response on this issue is led by my colleague the Minister for Housing, Local Government and Heritage. I understand from his Department that, following the enactment of the Remediation of Dwellings Damaged by the Use of Defective Concrete Blocks Act 2022, the necessary regulations under that Act are now close to finalisation.

While I do not have a regulatory role in respect of banks and other mortgage creditors – that is an independent matter for the Central Bank - I believe that the existing consumer protection regulatory framework is strong and should be fully implemented to assist households impacted by defective concrete blocks. This regulatory framework seeks to ensure that mortgage creditors are transparent and fair in all their dealings with borrowers, and that borrowers are protected from the beginning to the end of the mortgage life cycle.

In particular the Central Bank Code of Conduct on Mortgage Arrears (CCMA) requires regulated entities to have fair and transparent processes in place for dealing with borrowers in, or facing, arrears on a mortgage secured on a primary residence and this applies irrespective of the particular issue which is giving rise to the mortgage difficulty. 

All CCMA cases must be handled in a sympathetic and positive manner by the regulated entity and the regulated entity must explore all of the options for an alternative repayment arrangement or any other relief method which may be offered by that mortgage creditor. 

In relation to any request for new credit, while the decision of such applications are a commercial matter for the individual lender within the regulatory framework governing the provision of credit to consumers, such applications should be processed and assessed in an efficient manner in line with the time frames as set out in the Consumer Protection Code.

Regulated entities must also ensure that their staff are adequately trained to deal with the type of arrears (and pre-arrears) cases presenting to them and with any mortgage application. This framework should enable all regulated entities to deal with mica households in an appropriate and supportive manner, having regard to the unique circumstances that they face.

I would call on all regulated mortgage entities to step up to the mark and ensure that all mortgaged households impacted by defective concrete blocks are supported in their difficult situation.

International Bodies

Questions (108)

David Stanton

Question:

108. Deputy David Stanton asked the Minister for Finance to outline his current engagement with the International Monetary Fund, in particular on the subject of its commitment to aid in developing countries; and if he will make a statement on the matter. [28857/23]

Written answers

Minister for Finance

The International Monetary Fund (IMF) promotes international monetary cooperation and provides policy advice, technical assistance and loans to help countries build and maintain strong economies. It also provides loans and helps countries design policy programmes. Ireland is one of a near-global membership of 190 countries and we continue to work proactively with the IMF in order to support them achieve their goals.

Ireland is permanently represented at the IMF in Washington where we engage extensively with the IMF on their work, including that of providing appropriate aid to developing countries. The provision of aid to developing countries is also a core focus of Multilateral Development Banks (MDBs) such as the World Bank which the IMF works closely with across the developing world.

In April of this year I attended the IMF-World Bank Spring Meetings in Washington during which I participated in a wide range of meetings. This provided a valuable opportunity to engage on an international basis, and allowed Irish representatives and senior management in both the IMF and World Bank to consider many of the complex challenges currently facing the world economy such as high inflation, rising debt levels and global fragmentation.

At the Spring Meetings, I was delighted to announce a €24 million contribution to the IMF's Poverty Reduction and Growth Trust (PRGT). The PRGT fund allows the IMF to make zero interest loans for PRGT-eligible African, Caribbean and Pacific countries facing balance of payments difficulties. It is important that Ireland continues to play its part in terms of helping vulnerable countries access affordable finance, which is key to assist in their response to economic and food crisis situation worsened by Russia's war of aggression against Ukraine.

In October this year, the Annual Meetings of the IMF and World Bank will take place in Africa (Morocco), further highlighting the overarching commitment to provide aid to developing areas. This will again provide an important opportunity for Ireland to engage with the IMF on their support for developing countries.

Tax Yield

Questions (109)

Seán Haughey

Question:

109. Deputy Seán Haughey asked the Minister for Finance if he will report on VAT receipts to date in 2023; and if he will make a statement on the matter. [30026/23]

Written answers

Minister for Finance

Details of the year to date VAT performance in Exchequer terms are set out in the Fiscal Monitor for May 2023. The link to that document is as follows: www.gov.ie/en/publication/e51b0-fiscal-monitor-may-2023/

As set out on page 11 of that document, the VAT receipts to the end of May 2023 total €10,018,576,000.

Tax Code

Questions (110)

Richard Boyd Barrett

Question:

110. Deputy Richard Boyd Barrett asked the Minister for Finance if he is aware that on 14 June 2023, the CEO of a charity (details supplied) outlined to the Oireachtas Committee on Budgetary Oversight, wealth tax measures the Government could take that could raise up to €8 billion; and if he will make a statement on the matter. [30199/23]

Written answers

Minister for Finance

I am aware that the CEO of Oxfam Ireland recently addressed the Oireachtas Committee on Budgetary Oversight, as part a discussion on the taxation of assets and wealth. During that hearing, Oxfam International's report of earlier this year regarding global wealth inequality which proposes new wealth taxes in jurisdictions around the globe, and which is entitled “Survival of the Richest”, was referenced.

While I understand the background to calls for a specific wealth tax in Ireland, it is not the case that wealth in Ireland is untaxed, as taxes on wealth are already in place here including Capital Gains Tax, Capital Acquisitions Tax and Local Property Tax. Revenue estimates that these taxes raised over €2.8 billion last year.

The Oxfam report notes that many countries do not have any form of tax on inheritance. As the Deputy is aware,  Ireland has a significant inheritance tax regime in place in the form of Capital Acquisitions Tax which is charged (with limited exemptions) at a rate of 33%.

Oxfam's report also notes that “Rates of tax on capital gains – in most countries the most important source of income for the top 1% – are only 18% on average across more than 100 countries.” In contrast to the 18% average cited in the report Ireland taxes capital gains at a rate of 33%.

Any revenue raised from a new wealth tax may not therefore be additional to the existing forms of wealth taxation, as revenues from those taxes could be affected by the introduction of such a new tax.

In addition to wealth taxes, the Government takes action against inequality through our tax and welfare system. For instance, the strong redistributive role of the Irish tax and welfare system is evident in the range of supports introduced to help mitigate the impact of the Covid-19 pandemic and the current cost of living pressures on vulnerable households and businesses. The overall distributional impact of Budget 2023 was strongly progressive, with the lowest three deciles experiencing the highest gains as a proportion of disposable income.

Ireland has one of the most progressive systems of taxes and social transfers of any EU or OECD country, which contributes to the redistribution of income and to the reduction of income inequality.

It is estimated that the top 1 per cent of income earners, those earning in excess of €263,000 will pay 23 per cent of the total income tax and USC collected in 2023. While those earning less than €65,000 which represents the bottom 80 per cent of income earners, will contribute only 21 per cent of total income tax and USC receipts.

In conclusion, I can assure you that all taxes and potential taxation options are kept under constant consideration and it remains a priority of mine to ensure that Ireland maintains its progressive taxation system.

Departmental Reviews

Questions (111)

Barry Cowen

Question:

111. Deputy Barry Cowen asked the Minister for Finance if he will report on the second review of Home Building Finance Ireland, which he published last month. [30033/23]

Written answers

Minister for Finance

Section 24 of the HBFI Act provides for a periodic review of HBFI to ensure that it is fulfilling its functions as set out in the Act and that its continuation remains necessary given prevailing market conditions.

To inform the Review, the Department of Finance undertook stakeholder engagement and also sought the views of both the HBFI Board and the Department of Housing, Local Government and Heritage.

A total of 19 responses were gathered from external organisations as part of the consultation process. This included 5 written responses, as well as direct engagement and discussion with a number of additional stakeholders. Responding external organisations included a mix of funding providers, developers, investors and industry representatives.

Through the consultation process, stakeholders provided feedback on the impact HBFI is having on the market for residential development finance, as well as feedback on the funding landscape for residential development more generally.

A clear consensus has emerged that HBFI has a key role to play in supporting access to finance for residential development finance. The review has concluded that evidence of funding gaps remain that necessitate the continued operation of HBFI at this time, with some segments of the market experiencing greater funding constraints than others.

Therefore, it is recommended that as HBFI assess future strategies and products, it remains cognisant of available alternative funding sources and continues to focus on those areas of the market that are underserved by existing providers of development finance.

Up to the end of April 2023, HBFI had approved over €1.3 billion of funding, supporting the delivery of 6,161 homes across 22 counties.

In addition to supporting current funding gaps, it is also important that HBFI remains agile and can respond to any emerging disruption in the market, which HBFI is in a position to support.

The consultation and stakeholder engagement process also considered whether concentration limits imposed by senior lenders are currently constraining access to finance for residential development.

This process found that, although concentration limits imposed by senior lenders were not found to be a systematic issue impeding supply at present, lenders and developers did indicate that concentration limits could become a potential barrier to scaling up in future, particularly as a consequence of unlocking capital-intensive apartment delivery.

As a result, one of the recommendations arising from this review, is that HBFI should develop a product which can be deployed to address this funding gap should it arise. This product should provide either standalone and/or syndicated facilities with pillar banks, or international lenders on terms similar to those offered from pillar banks.

Based on the submissions to the public consultation, stakeholder engagement and the assessment of input from the HBFI Board, I am satisfied that during the last two years of operation, HBFI has met its obligations and is having a positive impact on the availability of funding in the development finance market and I have concluded that HBFI should continue in operation at this time.

A further review of HBFI will take place in 2025.

Question No. 112 answered with Question No. 107.

Tax Code

Questions (113)

Paul Murphy

Question:

113. Deputy Paul Murphy asked the Minister for Finance if he agrees with the chief IMF representative to Ireland during the Troika bailout, Ashok Mody, that Ireland is a "well-established tax haven" and that "for much of the world, Ireland is regarded as a corporate tax haven" (details supplied); if not, what alternative explanation he would provide for the recent boom in corporate tax revenue; and if he will make a statement on the matter. [30163/23]

Written answers

Minister for Finance

Ireland’s corporate tax policy, and broader industrial strategy, has consistently focused on attracting real and substantive investment that brings jobs.  Measured by any objective international criterion, Ireland cannot be defined as a tax haven.

Our competitive but fair corporation tax rate is just one part of the Ireland's offering which is complemented by our highly educated young and English speaking workforce, along with a common law legal system and stable political environment making Ireland an attractive EU base for businesses. Ireland also utilises its strong history and network with the USA in attracting American businesses, which has proven successful over many decades now.

This success is evidenced by the substantial number of Multi-National Enterprises (MNEs) who have chosen Ireland as their home and the hundreds of thousands of both direct and indirect jobs they contribute to the economy.

I believe that small countries, and Ireland is one of them, need to be able to use tax policy as a legitimate lever to compensate for advantages of scale, location, resources, industrial heritage and the real, material and persistent advantage enjoyed by larger countries.

Ireland continues to take action to ensure the Irish tax code is in line with new and emerging international tax standards as agreed globally. The Update to Ireland’s Corporation Tax Roadmap, published in January 2021, highlights all of the actions that have been taken, and that will continue to be taken, by Ireland on corporation tax reform.

It is important to acknowledge the reforms we have undertaken and the positive role we continue to play at OECD and EU, and that today we have far more robust international tax rules and safeguards to prevent abuse, arbitrage, base erosion and profit shifting than existed a decade ago.

Ireland has in recent Finance Acts: fully completed the transposition of the Anti-Tax Avoidance Directives (ATAD); introduced legislative defensive measures against EU list of non-cooperative jurisdictions for tax purposes through enhanced Controlled Foreign Company Rules; updated transfer pricing rules; and introduced legislation for BEPS measures on mandatory disclosure rules.

This work continues at pace and legislation will be brought forward to transpose the EU Minimum Tax Directive and further defensive measures to apply to outbound payments as part of Finance Bill 2023.

Tax Code

Questions (114)

Marc Ó Cathasaigh

Question:

114. Deputy Marc Ó Cathasaigh asked the Minister for Finance if he will consider a reduction in VAT to zero on heat pumps, similar to the treatment of VAT on solar panels; and if he will make a statement on the matter. [29886/23]

Written answers

Minister for Finance

As previously noted to the Deputy, under the EU VAT Directive it is not possible to reduce the VAT on heat pumps to zero. However, following changes agreed last year in Annex III of the aforementioned Directive, there is scope to reduce the VAT rate in highly efficient low emissions heating systems to a reduced VAT rate. In Ireland that would mean a rate of 9% or 13.5%.

However, these systems have to comply with very specific technical requirements, meeting the emission benchmarks laid down in Annex V of Commission Regulation (EU) 2015/1189 and in Annex V of Commission Regulation (EU) 2015/1185 respectively and also have to be attributed an EU energy label to show that the criterion referred to in Article 7(2) of Regulation (EU) 2017/1369 is met.

Changes in VAT rates are considered as part of the normal annual Budget and Finance Bill process. It should be noted that while heat pumps have the standard rate of VAT applied they have an effective rate of 13.5% VAT due to the 'two-thirds rule' which applies to construction. This rule means that if the cost of the goods used in carrying out work does not exceed two-thirds of the total price, the rate which applies to the service then applies to the entire transaction.

Question No. 115 answered with Question No. 102.

Tax Reliefs

Questions (116)

Pádraig O'Sullivan

Question:

116. Deputy Pádraig O'Sullivan asked the Minister for Finance how many people in Cork have benefitted from the enhanced help-to-buy scheme launched in July 2020; and if he will make a statement on the matter. [30143/23]

Written answers

Minister for Finance

There are a number of relevant criteria that apply to both the Help to Buy (HTB) Scheme and the Enhanced HTB Scheme. In the case of the HTB Scheme the amount of relief available is the lesser of:

• €20,000,

• 5% of the purchase price or approved valuation, and

• the amount of Income Tax (IT) and Deposit Interest Retention Tax (DIRT) paid for the 4 years prior to when the application is made.

The Enhanced HTB scheme allows for relief to the lesser of:

• €30,000,

• 10% of the purchase price or approved valuation, and

• the amount of IT and DIRT paid for the 4 years prior to when the application is made.

I am advised by Revenue that where the actual relief allowed is less than €20,000 it is not possible in the available data to classify claims as being subject to the enhanced HTB scheme, as their relief allowed may have been limited by their IT and DIRT paid, rather than the percentage of the purchase price. However, it is possible to identify those claims where the cost to the Exchequer was impacted by the Enhanced HTB Scheme, that is, the relief allowed is greater than 5% of the purchase price/approved valuation.

I am further advised by Revenue that as of 16 June 2023, the number of approved and pending HTB claims eligible to benefit from the increased relief under the enhanced HTB scheme broken down for Cork is 2,710 with a claim value of €75.1m. These figures set out the number of claims and the amounts claimed for all claims where the relief exceeded €20,000 or exceeded more than 5% of the purchase price/approved valuation.

Economic Data

Questions (117)

Michael Moynihan

Question:

117. Deputy Michael Moynihan asked the Minister for Finance his response to the recent European Commission spring forecasts for the Irish economy in 2023 and 2024. [30035/23]

Written answers

Minister for Finance

I welcome the publication of the spring forecasts by the European Commission. While GDP growth for 2023 has been revised upwards for the euro area and European Union since the Commission’s winter forecasts, risks are once more tilted to the downside and these forecasts were made prior to the recent downward revision to GDP in the EU and euro area in the first quarter of 2023. In any case, Ireland’s key trading partners are projected to see historically low levels of growth in the year ahead. Euro area GDP is projected to grow by 1.1 and 1.6 per cent this year and next year. The UK economy is projected to contract by -0.2 per cent this year and to grow by 1 per cent next year. The German economy is projected to see very low growth of 0.2 per cent this year and 1.4 per cent in 2024.

The Commission assesses that this subdued external environment will mean that recent record performances in Irish exports will not be sustained in the coming years. In light of this, GDP growth is set to moderate to 5.5 and 5 per cent for 2023 and 2024, broadly in line with my Department’s spring forecasts published in the SPU. Of greater relevance to the domestic economy, Modified Domestic Demand (MDD) growth of 2 per cent and 2.3 per cent for this year and 2024 is projected by the Commission, generally in line with the Department’s spring forecasts. The Commission notes that private consumption supported by a very resilient labour market will be the main drivers of domestic growth. Indeed, unemployment reached a record low of 3.8 per cent in May, and consumption and investment outturns were stronger than had been expected in the first quarter of 2023. Headline inflation of 4.6 per cent and 2.6 is projected for 2023 and 2024. However, core inflation is projected to settle more gradually as food prices increase throughout the forecast horizon and wage pressures feed into services prices.

The Commission highlights a number of key external and internal risks, with the majority tilted to the downside. Inflation may remain persistent and further tightening of monetary policy in response could have knock-on implications for stability in the financial sector. Geopolitical risks and risks relating to potential for further fragmentation remain.

Overall, the Commission’s assessment of the Irish economy is broadly in line with my own Department’s assessment for 2023 and 2024 as published in the SPU in April. There may even be some upside to the Commission’s forecasts for MDD, as these forecasts were published prior to publication of the national accounts for the first quarter that showed a stronger start to the year than had been expected.

Mortgage Interest Rates

Questions (118, 142)

Rose Conway-Walsh

Question:

118. Deputy Rose Conway-Walsh asked the Minister for Finance if he has engaged with the retail banks to enable switching for mortgage loans held by vulture funds into the retail banking mortgage market. [30166/23]

Pearse Doherty

Question:

142. Deputy Pearse Doherty asked the Minister for Finance if he will detail any action he and his Department are considering, and engagements he has had with the retail banking sector and Central Bank, to promote switching and the reintegration of mortgage borrowers with loans held by vulture funds into the mainstream mortgage market. [30181/23]

Written answers

Minister for Finance

I propose to take Questions Nos. 118 and 142 together.

Research has indicated that there is potential for existing mortgage holders to make mortgage savings by switching their mortgage.  This is a particularly important consideration at a time of rising interest rates.

In this regard I have met with the CEOs of the retail banks and a number of non-bank lenders where I emphasised that they should take a consumer focused approach to encourage switching where possible. 

On behalf of my Department, the Economic and Social Research Institute (ESRI) is currently carrying out work which will inform the development of tools to promote switching. However, the ESRI’s work also serves to highlight consumer inertia as a critical issue which deserves further attention. 

The Competition and Consumer Protection Commission (CCPC) and Money Advice and Budgeting Service (MABS) also play an important role in informing consumers about the options available to them.

It is a priority for me to ensure that the regulatory framework supports borrowers in the mortgage switching process.  In the context of the review of the Consumer Protection Code, I have indicated that the Central Bank should review the existing regulatory provisions and consider whether more dedicated mortgage switching resources, such as a standalone mortgage switching code, could better encourage and facilitate switching in the mortgage market.    

In that context and the rise in the cost of living more generally, the Central Bank wrote to all regulated firms last November to set out its expectations on how regulated firms should support their customers. 

With respect to mortgages, the Central Bank is especially focused on ensuring that firms have the resources and arrangements in place to assess applications from existing and new or switching borrowers in a manner that is timely and based on prudent lending standards applied consistently across all applicants. 

The Central Bank is also scrutinizing the switching and lending activity of the retail banks to ensure there is no discrimination based on who a borrower's current creditor is and it has confirmed that the work identified no evidence to date of such discrimination. 

The Central Bank are of the view that there is more capacity in the system for borrowers to switch than is being availed of – including for borrowers at non-lending firms – although credit criteria will play a role in a borrower’s ability to switch. 

The Bank’s work includes following-up with firms to see that they use all the protections of the Code of Conduct on Mortgage Arrears to the fullest extent (including with respect to pre-arrears cases).  I have been informed by the Central Bank that it continues to believe that firms can go deeper into their suite of options to support borrowers in, or facing, arrears.

The Central Bank’s work includes both firm-specific and industry-wide engagement on how the system is responding to this challenge.  They are engaging with industry on areas where consumers could be better supported through greater coordination among participants (including with switching) and where the information or options available to affected consumers could also be enhanced.

I would also like to highlight that the Banking and Payments Federation of Ireland (aBPFI) has also launched a new online resource DealingWithDebt.ie, which provides information on the best action to take if customers are experiencing difficulties meeting their mortgage or other repayments, as well as key contacts for lenders and credit servicing firms and independent consumer support bodies.

Tax Yield

Questions (119)

Willie O'Dea

Question:

119. Deputy Willie O'Dea asked the Minister for Finance the action he is taking to address the risks around corporation tax windfall receipts; and if he will make a statement on the matter. [30029/23]

Written answers

Minister for Finance

My Department estimates that in 2022, windfall corporation tax receipts were in the region of €11 billion. Going forward, an annual average of between €11-12 billion of corporation tax receipts was identified in the Stability Programme Update 2023 as being potentially at risk. The level shift in corporate tax receipts, occurring over a very short timeframe, raises legitimate questions regarding the sustainability of this revenue steam.

The concentration of receipts within a small number of firms is an additional vulnerability – the latest data show that over half of corporate tax receipts is paid by just ten large payers. This means that €1 in every €7 of all tax collected by the State is directly sourced from just ten large corporate tax payers, a major concentration risk.

In this context, my Department recently published a scoping paper outlining a range of illustrative options to help to insulate the public finances from the risks associated with an overreliance on potentially transitory windfall corporation tax receipts, while also putting money aside to contribute to future ageing and other structural costs.

Work on proposals for establishing such a long-term savings vehicle is ongoing and will take into account the analysis contained in the Department’s paper ‘Future-proofing the Public Finances – the Next Steps’.

In addition, my Department has updated the fiscal metrics it publishes in order to increase transparency around the risks which corporation tax windfalls may present. In Budget 2023, a new metric was introduced called Underlying GGB, which strips out the estimated windfall receipts from the General Government Balance to give a better picture of the public finances. When these windfall receipts are stripped out, the headline budgetary surplus masks an underlying deficit somewhere in the region of €3 billion.

Banking Sector

Questions (120)

Holly Cairns

Question:

120. Deputy Holly Cairns asked the Minister for Finance the steps he is taking to address the rates charged to hospitality businesses by financial institutions for transactions carried out with cards. [29565/23]

Written answers

Minister for Finance

The merchant service charge is the fee charged by an acquirer to a business for processing card transactions. All acquirers in Ireland are independent commercial entities and the amount of the merchant service charge varies, often depending on the volume of card transactions the retailer accepts.

One aspect of the merchant service charge is the interchange fee, which is charged by card issuing banks to businesses for accepting card payments. Since 2015, interchange fees on consumer debit and credit cards have been capped. Under the Interchange Fee Regulation, Ireland set the maximum interchange fee at 0.1% of the value of transactions for domestic consumer debit cards and 0.3% of the value of transactions for consumer credit cards. However, the Interchange Fee Regulation does not cover commercial debit and credit cards.

In Ireland, there is no domestic card payment scheme. Irish card payments are primarily facilitated by international card payment schemes such as VISA and MasterCard. As part of its role as a national competent authority, the Central Bank seeks independently verified transaction and fee information from international card schemes operating in Ireland to ensure that they are operating in compliance with the Interchange Fee Regulations.  

While regulated entities must comply with the rules regarding interchange fees, the merchant service charge is a commercial decision for each service provider. Acquiring services is a competitive market and businesses in general, and smaller businesses in particular, could stand to benefit from lower rates by switching provider.