Vol. 883 No. 3
98. Deputy Michael McGrath asked the Minister for Finance the number of banks with which officials of his Department have met which have made a definitive commitment to reduce their standard variable mortgage rate, as distinct from offering new fixed rates to customers; his views on the outcome of these discussions; and if he will make a statement on the matter. [24812/15]
This priority question relates to the issue of standard variable rate mortgages and, in particular, the issue of the excessive variable interest rates being charged by banks in Ireland to approximately 300,000 variable rate customers. The Minister concluded a series of meetings with the banks about a month ago and they have until 1 July, which is another week or so, to come up with their response to that series of meetings. Is the Minister satisfied with the response so far and does he expect further movement in the next week or so that will result in a reduction in variable rates before 1 July?
I thank the Deputy for his question. As he knows, I met with senior management of Ireland's six main mortgage providers in May. The meetings focused on the mortgage market and specifically the comparatively high standard variable rates currently being charged by the banks. I outlined my view that standard variable rates being charged in the Irish market are too high. There was agreement from all lenders that customers should have access to more competitive mortgage products as per my recommendation.
The banks agreed to review their rates and products and, by the beginning of July, to have simple options to reduce monthly mortgage payments for standard variable rate customers. Some of the potential products include lower standard variable rates for existing and new customers, competitive fixed-rate products and lower variable rates based on loan-to-value ratios for new and existing customers. In addition to the issue of interest rates, I also outlined the need for greater competition in the market and the need for a more active and well-resourced advertising campaign by the individual banks, focusing on promoting awareness of their best offering and how easy it is for customers to take up new products and switch between institutions if they wish to avail of better rates.
The position of homeowners who are in negative equity was also discussed, and assurances were sought and received that these homeowners will be able to avail of options to reduce their monthly repayments.
Officials in my Department will review progress over the coming weeks, and a follow-up set of meetings with each of the six banks will take place in September in advance of the budget. Time should now be allowed for the banks to act on this matter. However, it should be noted that the banks have started to make some welcome changes on this issue which should result in real savings for mortgage holders.
I thank the Minister for his response. I am sure it will not have escaped him that, so far, not a single bank has reduced its variable interest rate as a result of the meeting held with him, although there is another week to go. AIB had pre-announced a rate cut before meeting with the Minister, while Bank of Ireland has announced a reduction in its fixed rates. To my knowledge, there has been no response from KBC, Permanent TSB, Ulster Bank or ACC.
Is the Minister going to be satisfied with a situation in which banks come out and announce a reduction in their fixed rates? The whole purpose of this exercise was to bring about reductions in the actual standard variable rates. A fixed-rate mortgage is a different product, as customers are locking in for a period. In the case of Bank of Ireland's existing variable rate customers, if they move to a fixed rate they have to lock in for two years. That comes at a price and has consequences. The purpose of this campaign is to bring down the actual variable rates themselves, which the Minister himself has acknowledged are too high. If the response remains as it is, with a number of the banks not responding at all, what steps will the Minister take to address the issue?
The purpose of the meetings was to ensure that persons with mortgages would get mortgages at cheaper rates. Whether they are variable-rate or fixed mortgages is a matter of choice with customers. A reduction in mortgage rates was the priority of those meetings. While AIB had announced a variable mortgage rate reduction before this series of meetings, I had previously met the incoming CEO of AIB at the end of the process of his appointment and discussed variable mortgage rates with him. At that stage, I got a commitment from him that he would make an announcement that variable mortgage rates would be reduced.
The other banks have responded in various ways. There is obviously an advantage for banks to move to fixed-rate mortgages, which are essentially lower rates than variable-rate mortgages. If the banks have fixed rates over time, they can fund against the fixed rate arrangement at a lower rate than they would fund for variable rates on the market. They have until 1 July and we will see at that stage. The Deputy should remember there is a series of follow-up meetings before the budget in September.
The Minister may not feel he is in a position to get a response because there is still a week to go. However, I can give a response, which is that, so far, the response from the banks has been deeply disappointing. The fact is a reduction in the fixed rate is not a substitute for a reduction in the standard variable rate. While some customers can make cash savings on their monthly repayments, it comes at a price in that they are locked in for a minimum two-year period. If a new entrant comes into the market and offers variable rates at 3%, they cannot switch because they would have to pay a penalty. This is the point that must be borne in mind. If standard variable rates fall below the fixed rate customers lock in at, then they lose out again.
I do not believe the Minister should accept anything less than reductions in the actual variable rates. The only banks that have responded to some degree so far are AIB in terms of the variable rate and Bank of Ireland with a fixed rate cut, but there is not a dicky-bird - not a word - from the four other banks as to what they are going to do, with just one week to go. We will see what happens in the course of the next week but, on the evidence so far, the response is underwhelming to say the least.
As I said, significant progress has been made. A number of banks have offered fixed rate products at much lower rates than the variable rate. I draw attention in particular to the new set of fixed rate offers Bank of Ireland has made and the other banks and mortgage lenders will be coming forward in due course with their proposals. I gave them time and space until 1 July and I also reminded them that I would have a second series of meetings in September. I intend to stick to that schedule.
99. Deputy Pearse Doherty asked the Minister for Finance his plans in Budget 2016 to cut the top rate of tax in view of the fact that the Economic and Social Research Institute has stated that cuts in the top rates of tax or in the universal social charge would have a strong impact on households with incomes in the top 10%, but little effect on households at low and middle income levels. [24786/15]
A recent Economic and Social Research Institute, ESRI, report was unambiguous in stating that cuts in the top rates of tax or in the universal social charge would have a strong impact on households with incomes in the top 10%, but little effect on households at low and middle income levels. Despite that, this is the Government's stated position in the run-up to this year's budget. It is hardly news and is simply a long-established fact that the ESRI analysis of last year's budget showed that the bottom 40% were poorer as a result of the Minister's measures. Will the Minister take a step back and, in his budget planning, will he instead target policy to reduce and not increase economic inequality?
I note the release of a number of publications by the ESRI as part of its annual "Budget Perspectives" series, which is a welcome part of the information base leading up to the budget each year. I assume the paper to which the Deputy is referring is "Exploring Tax and Welfare Options". The paper indicates that a reduction in the 8% rate of USC or a cut in the top income tax rate would result in the top decile of households having the largest gains in equalised disposable income. This is unsurprising as the households in lower deciles pay little or no USC or income tax at these marginal rates.
The ESRI points out that the estimates of the distributional impact of tax and welfare changes they provide are "static" impacts based on the technical assumption that behaviour does not change. Thus, the estimates only consider part of the benefit to those currently working and do not account for the effect that lower labour taxes can have in incentivising participation in the labour market and increasing employment. Increasing employment has been a key plank of this Government's policy.
As I have said on many occasions, a fair, efficient and competitive income tax system is essential for economic growth and job creation. I have long said that the burden of the income tax system in Ireland is too high and that I would seek to reduce it as soon as it was prudent to do so. Ireland already has one of the more progressive income tax systems in the developed world. As a result of the changes I introduced in budget 2015, all those who paid income tax or USC in 2014 will see a reduction in their tax bill for 2015, where incomes are equal. However, to preserve the progressivity of the income tax system, the budget measures were specifically designed to ensure that those with very high incomes would only benefit to the same extent as those with more modest incomes. This was achieved by the introduction of the 8% USC rate for income over €70,044, confining the benefit of the reduction in the marginal rate of tax from 41% to 40% to earnings below that ceiling only. The maximum benefit from the budget 2015 package of tax measures was, therefore, limited to approximately €14 per week for any individual taxpayer.
Additional information not given on the floor of the House
The reality is that, because of the highly progressive nature of the Irish tax system, those on lower incomes pay very low levels of tax, particularly when compared to their counterparts in Europe. It should also be noted that, as a result of increases to the entry point to the USC introduced by this Government in budget 2012 and budget 2015, raising the entry point from €4,004 to €12,012 per annum, it is estimated that approximately 417,000 individuals have been exempted from the charge altogether. This means that 28% of all income earners are not paying any universal social charge at all. Furthermore, I also reduced the two lower rates at which USC is charged and extended the threshold before the 7% rate becomes chargeable up to €17,576 per annum.
The changes announced in budget 2015 were steps in a process targeting low and middle income earners, which seeks to ensure that we continue to have a tax system that is progressive and which rewards employment. I intend to continue to reduce the tax burden on low and middle income earners in this manner, subject to having the required fiscal space.
The Minister said it is unsurprising that the ESRI report states the top 10% of earners in the country are the ones who will benefit most, not just from last year's package but from that which will be promised this year and yet he keeps on dressing the budget up as though it will support middle income earners. Let us call a spade a spade. The top 10% of earners are not middle income earners. Rather, they are high income earners and include people such as the Minister, the Minister of State and other people.
It includes Deputy Doherty.
Yes, it includes people who are above the average rate. Let us be clear and call it what it is. If the Minister wants to introduce a tax measure, he should nail his colours to the mast and be clear that the majority of the tax giveaway in next year's budget will benefit the richest in society. He had no problem doing that with Greece yesterday, when we saw an example of the Minister we have not seen since the days of the hepatitis C scandal. If this is the Minister's agenda, let us call it what it is. He should not dress up the measure as something different. The average personal income in this State in 2014 was €35,000 and the average household was €39,478. This measure will benefit the wealthiest dual income households in the State. Let us call this measure what it is and stop trying to pretend that it will mostly impact middle income earners.
Sinn Féin is a high tax party and all of the bombast, rhetoric and personal remarks in the world will not get away from the fact that it is involved in fantasy economics and its proposals on a series of budgets do not add up. It is a tax and spend party and is entitled to take that position. It wants to raise taxes on everybody. Our position is different. We want to reduce taxes, in particular personal taxes. I do not need an analysis from the ESRI to tell me that if somebody pays no tax or USC, he or she does not get relief if I reduce USC or income tax. I do not need someone with a PhD in economics to tell me that. If one does not pay tax, a tax reduction will not affect one. We have taken a lot of people out of USC and are committed to increasing the 400,000 people at work who do not pay it to 500,000 in the budget. If one falls within those levels of income, then a USC reduction does not affect one. It gives one no relief because one does not pay any USC.
The same applies to income tax. If one is not liable for income tax, one does not pay it. To ensure that there is a balanced and even distributional effect we have put a limit on the reductions in personal income taxes of €70,000. Anybody with an income above that is in the same position as someone earning €70,000. That worked out at about €14 a week last year. We will continue with somewhat similar measures on this occasion.
This Minister can come into the House until the cows come home and peddle his mistruths about Sinn Féin's economic policies. He referred to increasing tax on everybody. That is blatantly untrue and, as Minister for Finance, he knows that to be untrue. Unless he is not reading any of our submissions, he will know that we do not want to increase taxes on low and middle income earners and that we want to reduce the tax burden by scrapping property taxes and water charges. Can the Minister not deal with the debate in terms of facts and figures and what I proposed today, which is that the ESRI did not state that if one has no tax liability one will not pay any tax? It stated the measure benefits strongly the top 10% of earners in Irish society, namely, the richest of the rich.
In effect, it means that two earners in a household, each earning €70,000, a total of €140,000, will benefit more. An income of €140,000 is €100,000 more than the average income of households across the State. This is the type of measure the Minister wants to introduce. Even the IMF stated that putting money back into the pockets of those who need it most is the best way to achieve economic recovery. This is not just about economic recovery, rather, it is about economic inequality, something to which the Government is completely and utterly blind. The last number of budgets is testament to that fact.
The Deputy always forgets the difference between gross income and net income. A person with a gross income on PAYE at a salary or wage of €70,000 a year, which is using an example of someone who is very wealthy, pays more than €25,000 in personal income tax. Accordingly, the net income is less than €45,000. We are directing it from that level down. It is not from €70,000 down but €45,000 net down. That is where we are focusing in that category.
Above that, people still get reductions in their taxes arising from the measures in the last budget. They do so, however, at the same level as somebody on €70,000. The reason we adopted these policies is that if one taxes something, one tends to get less of it while if one relieves tax, one tends to get more of it. These taxes are taxes on employment. Our strategy has been successful. By reducing personal taxes and VAT from 13.5% to 9% in the hospitality industry, we have created in excess of 100,000 jobs since 2012. The object of our tax policy is to grow the economy and to create jobs. It is a macroeconomic instrument. It is not principally about giving money to certain people.
100. Deputy Ruth Coppinger asked the Minister for Finance if he will report on his discussions with other European Union Ministers for Finance regarding Greek debt, related agreements between Greece and the European Union and the latest situation in Greece; and if he will make a statement on the matter. [24698/15]
This question is unbelievably timely. The question on the lips of every working person in this country is why is the Minister reported today in the media as being the toughest negotiator, demanding the Greeks be brought to heel and not be given a just debt solution and a write-down on their debt. This is in total contrast to the ordinary people of this country who demand solidarity be shown to the Greek people who are in a similar situation to ours.
At a European level, discussions regarding Greece take place among euro area finance Ministers in the context of the Eurogroup. The procedure for dealing with all programme countries is as follows. The three institutions, namely the European Commission, the ECB, European Central Bank, and the IMF, International Monetary Fund, conduct technical discussions with the authorities. Where agreement is reached, this comes to the Eurogroup for endorsement. Alternatively, the Eurogroup can help provide political guidance and resolve outstanding issues.
On the current situation, discussions at a technical level have been difficult. At the beginning of June, progress at a technical level was made. At a subsequent meeting at political level between the Greek Prime Minister, Alexis Tsipras, the European Commission President, Jean-Claude Juncker, and the Eurogroup president, Jeroen Dijsselbloem, to discuss the proposal, it seemed like both sides were moving closer together. However, following the submission of Greek counter proposals on 12 June, it was clear there had been a complete rowing back on the Greek side and subsequent negotiations concluded with no agreement.
As a result, an additional Eurogroup meeting and informal European summit were called on 22 June 2015 in Brussels. The purpose of these meetings was to exchange views on Greece, as well as to clarify the positions and the situation in the ongoing talks between the Greek authorities and the institutions. A revised list of counter proposals was submitted by the Greek authorities yesterday. The Greek authorities will now work with the institutions to agree a comprehensive list of reforms and a list of prior actions by tomorrow that can be presented to the Eurogroup. The euro area has an obligation to Greece in these difficult times but Greece has an obligation to itself. It needs to reform its economy and return it to sustainable growth.
Ireland, together with other member states, understands and empathises with the difficult situation faced by the Greek people. This is why there has been a willingness to negotiate a way forward which takes account of the realities of the situation in Greece and the political priorities of its new government, while also respecting existing commitments. The situation of Greece's finances is challenging with immediate financing needs to be addressed. In addition, deposit outflows have continued from the banking system. Accordingly, urgent agreement on the necessary structural reforms is imperative to conclude the fifth review and release the associated disbursements.
Additional information not given on the floor of the House
On Greek debt, as I have repeatedly outlined, my view is that Greece should remain in the euro area and that sovereign debt should not be written off. However, there is, of course, some room for manoeuvre in terms of maturity extension and other ways to reduce the burden of debt. This is what we have done in Ireland, in co-operation with our European partners, with the extension of maturities on our EFSF, European financial stability facility, and EFSM, European financial stabilisation mechanism, loans, the replacement of the promissory notes with long-term bonds and the replacement of IMF loans with cheaper market-based funding.
Will the Minister confirm if it is true that he insisted that emergency funding and financial support for Greece would be reduced unless it retracted its demands for a sustainable debt write-down?
Is that true? Was the Minister on the side of the Germans in demanding that Greece not get a deal? Is the Minister aware there has been a 35% increase in suicides since 2010, directly linked to the ongoing austerity programme imposed on the people of Greece? The impression that he and other Ministers and Deputies speaking on the matter would like to give is that the Greeks have not done enough and have not brought in reforms. Ongoing IMF and troika austerity regimes have been imposed, which have led to a situation in which domestic violence has increased by 47% and 35% of people now live below the poverty line. The Minister is asking the Greek Government to foist even more so-called structural reforms on the ordinary working people and the unemployed of Greece.
I have great sympathy for the Greek people and I have expressed this view on several occasions in the House. I have also been quite helpful to the Greek authorities in moving to the present position whereby realistic negotiations are taking place. I do not have the strong personal relationship that the Deputy's group and Sinn Féin have with the party of government in Greece because I do not share the commitment to its economic policies which Sinn Féin and the socialist group seem to share. That being so, I have a good working relationship.
Emergency liquidity assistance, ELA, is entirely a matter for the European Central Bank, and at yesterday's meeting I sought clarification from Mr. Mario Draghi, president of the European Central Bank, about how long he thought it was feasible to continue to pay ELA to Greece. The Deputy will recall from newspaper reports that he is already on record as saying it must be reconsidered on a daily basis. The important point I was making is that the new round of negotiations has a very short timeframe in which to be concluded satisfactorily, or there is a risk that ELA will be cut off, because it is bound by legal arrangements in the European Central Bank. It is very important that an agreement with Greece is fully negotiated by Thursday at the latest. That is my position. Anything else is based on leaks, supposition and spin.
Is it not true that the most important thing for the Minister and the Government is to see that Greece does not get any deal they could not get and that no write-down of debt be given? The Minister stated that he had been helpful to the Greek authorities. I do not think it was very helpful to ask for the noose placed there by the ECB to be tightened around the necks of the Greek people and Government. The Minister obviously does not agree with left-wing politics, and that is fine, but how dare he lecture the Greek Government on what reforms it should implement? I do agree with the Minister on one or two things. I agree that the banks should be taken over and nationalised in the interests of the ordinary people of Greece, and that capital controls should be put in place to stop the attack on the Greek economy from the markets. Hefty wealth taxes should be imposed on the rich, such as the shipping magnates, who have escaped scot-free in the past six years and who are investing their money in property deals in Mayfair in London. Greece should appeal to the workers of Europe to support it in its demands for a change in policy at the top of the EU. On Saturday, at the anti-water charges protest, people showed solidarity with the ordinary people of Greece. They should refuse to take on this monstrous debt burden.
The Deputy is again ascribing views to me which I do not hold and which I have never held. My objective in negotiating on behalf of Ireland at the Eurogroup is to ensure the Eurogroup is preserved and there is no threat to the euro as the currency of the 19 countries in the group. I have stated on several occasions that I want Greece to remain as a constituent of the Eurogroup and continue with the euro as its currency. The present state of play, as I outlined, is that the Government has introduced proposals arising from the aide-mémoire presented after the meeting in Berlin, with which the Deputy is familiar. It has made a number of proposals, principally with regard to VAT increases, increased contributions for pensions, increases in corporation tax from 26% to 29%, and various structural measures.
It seems to me that there is a good basis now for a negotiation but an awful lot of detail must be gone into in the next 24 hours to 48 hours. I hope that will proceed. If an agreement is reached - if the negotiations conclude in an agreement - Greece will continue in the euro, and that is one of my primary objectives.
101. Deputy Michael McGrath asked the Minister for Finance his plans to review the way in which capital acquisitions tax is applied, in particular in respect of inheritance of the family home; if he will consider an annual indexation of thresholds, and a reduction in the rate on interest which applies to persons, who by virtue of their circumstances need to pay a capital acquisitions tax bill by instalments; and if he will make a statement on the matter. [24813/15]
This question relates to inheritance tax. From 2009, the thresholds for the different bands were reduced dramatically. The threshold for parent to child inheritance, for example, fell by almost 60% over the period. That has resulted in an increase of 34% in the number of people liable for inheritance tax. What plan does the Minister have to address the issue? I also touch on the issue of the interest rate that applies when people decide to pay by instalment and the issue of annual indexation of thresholds.
This issue has been raised with me by Deputies and others in recent months and I am conscious of the concerns involved. Capital acquisitions tax, CAT, applies to the beneficiary of a gift or inheritance rather than to the person making the gift or inheritance. Whereas the rate of CAT is 33%, each person has a number of lifetime thresholds for gifts and inheritances which they can receive tax-free. These are based on the relationship to the person who has made the gift or bequest.
The group A threshold of €225,000 applies primarily in cases where an asset passes from a parent to a child. The group B threshold of €30,150 applies primarily to transfers between other close relatives. The group C threshold of €15,075 applies between more distant relations and people who are not related. The 33% rate of CAT applies on assets received by a person above the relevant threshold. Gifts and inheritances between spouses and civil partners are exempt from CAT.
Over the past number of years, the CAT thresholds have been reduced a number of times, while the rate has increased. These changes were necessary in order to maintain the yield from capital taxes in a period of falling asset prices so that such taxes would continue to make a contribution to our efforts to consolidate the public finances. Moreover, the views of the OECD, supported by our own economic research, is that taxes on property and other fixed capital, such as CAT, are less harmful and distortionary to economic growth than taxes on work or consumption. As the economic recovery continues to take hold, I began this year to focus available resources on reducing the burden of taxation on earned income and take-home pay where high taxes impact on competitiveness, economic growth and job creation. That will continue to be my main focus. That said, I recognise that recent growth in property values has implications for the liabilities that can arise from capital acquisitions tax. It is for this reason that, as I have said in response to a number of other recent parliamentary questions on this matter, I am reviewing the various aspects of this tax in the context of the preparations for budget 2016 and the subsequent finance Bill.
Additional information not given on the floor of the House
I am not in a position, nor would I intend to say at this point, what specific changes I may or may not propose. With regard to the Deputy's specific concerns, however, I will make a few general comments.
When considering the inheritance of a family home, it is worth noting the existence of the CAT dwelling house exemption, which allows for a property to be inherited tax-free when the inheritor is already living in the home. While certain restrictions apply to ensure proper use, this exemption is designed to prevent cases of hardship or displacement for inheritors who are home sharers. The Deputy asks whether I would consider indexing the thresholds. The thresholds were previously indexed to inflation through the consumer price index. This link was broken following the financial crash as inflation was positive while property values were declining considerably. Fixed property makes up a large proportion of gifts and inheritances, especially inheritances. The question of whether it might be appropriate to index the thresholds in the future is a matter I will examine. A number of issues must be considered in this regard, including, for example, the availability of an appropriate index and the current functioning of the property market in general.
When a person who receives a gift or inheritance is not in a position to pay the CAT charge arising in one go it may be possible, in certain circumstances, to arrange to pay the tax by instalments. It is appropriate that in such circumstances interest be applied to the payments. However, tax legislation gives the Revenue Commissioners the discretion to allow payment of CAT by instalments, where this is not otherwise allowed, on a concessionary basis in exceptional circumstances where the tax cannot be paid without excessive hardship. In cases of hardship, the Revenue Commissioners also have the discretion to allow payment to be postponed for such a period and on such terms, including the waiver of interest, as they think fit. The Revenue Commissioners will consider each case on its merits, taking into account both the financial circumstances of the beneficiary and the nature of the gift or inheritance involved.
I welcome that the Minister is reviewing a number of aspects of the inheritance tax regime because we have been through a very fraught and difficult number of years. The fact that the threshold for gifts from parents to children has reduced by almost 60% since 2009 is quite stark. We now have a toxic combination of that drastic cut in the threshold, the increase in the rate from as low as 20% to 33% and, now, rising property values. That has resulted in 34% more people having to pay inheritance tax over the past four years. The yield has increased dramatically from €186 million in 2010 to an estimated €400 million in 2015.
This is an issue as people like to leave an inheritance if they can for a family but neither families nor the people leaving an inheritance like the idea of paying a big chunk of that to the Minister. I am sure he accepts that. The thresholds must be addressed and I would like to see the indexation of the thresholds revisited, along with the interest rate - at almost 8% - which applies when somebody decides to pay the inheritance tax liability over a number of years.
I am reviewing the whole ambit of the texts in the context of the forthcoming budget. The Deputy asked whether I would consider indexing the thresholds. The thresholds were previously indexed to inflation through the consumer price index, but this link was broken following the financial crash, as inflation was positive while property values were declining considerably. We want to be sure in what direction values are going before we index. The other thing that is not generally known is that there is a capital acquisitions tax dwelling house exemption, which allows for a property to be inherited tax-free where the inheritor is already living in the home. If a son or daughter is the carer, is living in the home and inherits the property, they have no tax liability, regardless of thresholds. The thresholds only apply to people who are not living in the home and who inherit.
I thank the Minister for his reply. Reading between the lines, we are likely to see some movement on this issue in the budget in October. I hope it is a significant move because the changes made over the last few years have been quite drastic. This situation has been created by the increase in the number of people who are liable for inheritance tax, the significant increase in the rate, the dramatic cut in the thresholds and the rise in property prices over the last couple of years. Elderly people who are in a position to do so like to leave an inheritance to their children and they do not want much of that inheritance to be paid to the State by way of capital acquisitions tax. The issue needs to be addressed. I hope the Minister makes a significant move and examines the issue of indexation and the situation facing people who inherit a home and want to keep it but who find a large inheritance tax liability has crystallised. Under the existing arrangements, they can pay by instalments, but the interest rate is in the region of 8% per annum, which is quite punitive for many people. As part of the Minister's review, we should investigate whether that situation can be eased.
I will review the situation and I will take into account what the Deputy has said for the review.
102. Deputy Ruth Coppinger asked the Minister for Finance noting the lower returns to the Revenue Commissioners in recent years, arising from an increase in sub-contracting and self-employment in the construction sector, and the resultant increased use of relevant contracts tax, his views on the measures the Revenue Commissioners and his Department have taken, or are taking, to ensure that relevant contracts tax is not used in a manner to deny workers in the sector the basic rights enjoyed by construction workers who are directly employed with registered employment agreement rates, sick pay and holiday pay; that the use of relevant contracts tax, rather than the prevalence of direct employment in the sector, does not result in the Exchequer foregoing revenues it would otherwise receive under the universal social charge, pay-related social insurance and pay as you earn. [24699/15]
Noting the low returns in recent years from relevant contracts tax, RCT, arising from an increase in sub-contracting and self-employment in the construction sector, will the Minister make a statement on what measures the Revenue Commissioners and the Department of Finance have taken or will take to ensure that RCTs are not used in a manner that denies workers in the sector the basic rights enjoyed by directly employed construction workers, such as REA rates of pay, sick pay and holiday pay, and also results in a significant loss of tax revenue - USC, PAYE and PRSI - compared to a situation where direct employment prevails in the construction sector?
I have not seen any evidence of a negative impact on Exchequer returns and a change to self-employment in the construction sector and I cannot, therefore, accept the Deputy's assertion in that regard. I assume that the Deputy's reference to ensuring that RCT is "not used in a manner to deny workers in the sector basic rights" relates to the RCT system which is a tax deduction at source system that applies to payments made under a relevant contract in the construction, meat-processing and forestry sectors. As with any contract of engagement in the construction sector, whether a person is engaged under either a contract of service and is, therefore, an employee; or a contract for service and is, therefore, a self-employed person, is determined by the facts and evidence of each case and not by the RCT system of tax deduction. Guidance on whether a person is engaged as an employee or as a self-employed contractor is provided in the code of practice for determining employment or self-employment status of individuals, which was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and relevant State agencies.
Both the electronic RCT, eRCT, system and the PAYE system of tax deduction at source are underpinned by tax legislation and not by employment legislation.
Neither such system determines whether a person in the construction sector, or, indeed, in any other sector, is engaged as an employee or as a self-employed contractor. On that basis, it is incorrect to attempt to link the RCT system of tax deduction with any denial of workers' statutory employment entitlements, such as rates of pay, holidays, holiday pay or sick leave.
As I have outlined in my responses to previous parliamentary questions in regard to the operation of the RCT system, monitoring of the construction sector for abuses of the tax and duty systems forms part of the Revenue Commissioners' ongoing compliance programmes. The Revenue Commissioners commit significant resources to compliance interventions in the construction sector. There were more than 15,000 tax compliance risk interventions in the sector in 2013 and nearly 17,000 such interventions in 2014. In addition, the Revenue Commissioners work closely with the Department of Social Protection and the National Employment Rights Agency, including by conducting joint operations in the construction sector.
Additional information not given on the floor of the House
If the Deputy has specific information relating to individuals or business groups in any sector who are involved in tax evasion, she should send that to the Revenue Commissioners, which has provided a tailored template on its website to facilitate reporting of tax evasion. The relevant links are provided for the Deputy's information:
http://www.revenue.ie/en/business/shadow-economy/index.html
https://www.ros.ie/online-enquiry-web/goodCitizen
Last year's J.J. Rhatigan dispute, which lasted over six months, brought to public attention the reality of life for construction workers under the so-called recovery. These skilled workers, thanks to a system of subcontracting and bogus self-employment, even if they do not want to be self-employed, are forced to live on an income that does not meet the rates provided for in the registered employment agreements, but, more importantly, does not even meet the minimum wage requirements.
It is not only the case that construction companies are profiting from exploiting workers; it is also the case that State is facilitating that, and, in so doing, depriving the Exchequer of funds that one would think we would be killing ourselves to bring in. We have seen it in the Department of Education and Skills, in particular, with many school contracts being awarded to construction companies that operate these systems. Thanks to the Construction Workers' Alliance, a number of questions have been tabled by Deputies, which revealed that workers earn so little that they are not liable to pay the RCT and receive rebates, resulting in negative returns for the Exchequer to the tune of €100 million from 2008 to 2014, inclusive.
As I stated already, guidance on whether a person is engaged as an employee or as a self-employed contractor is provided in the Code of Practice for Determining Employment or Self-Employment Status of Individuals, which document was prepared jointly by the Irish Congress of Trade Unions, business representative bodies and relevant State agencies. The guidance on the different conditions of work is provided not in tax law but in that document.
If the Deputy is aware of any particular abuses, the Revenue Commissioners would welcome any submission from her. The Deputy can contact the Revenue Commissioners through the webpage http://www.revenue.ie/en/business/shadow-economy/index.html. I can give the Deputy a copy of this if there are particular instances that she wants to pursue.
Cynicism about politics and this Chamber is at an all-time high, and it is unbelievably patronising of the Minister to come out with an answer in which he spent time telling me the address of the Revenue Commissioners' website.
If one examines what the State is losing in tax receipts for directly employed workers in the sector in the period I mentioned - 2008 to 2014, inclusive - it amounts to €2.5 billion. What is going on here is that the Government is encouraging a race to the bottom of a cheap-labour economy to back up the so-called recovery, because the Minister does not seem perturbed that the Revenue Commissioners are losing this money. What is most worrying for the workers involved who pay the price is that the Minister makes it sound as though they have a choice. They show up, and if they do not agree to go along with these conditions they are sacked. That is what happened in Rhatigan's last year, of which we spoke in the Dáil. One recruitment company, CLS Recruitment, which is only down the road, boasts that the advantages for employers of using this system include no PRSI, no holiday pay, no pension, no bank holiday pay and the ability to both hire and "off-hire" - that means sack - staff at one hour's notice throughout the country. They are encouraging the race to the bottom.
So, it seems, is the Government in order to have a so-called economic recovery.
The Deputy has made a series of unsubstantiated allegations again, none of which is true as far as I am concerned. I am not patronising her in any way whatsoever. The Leas-Cheann Comhairle cut me off before I had completed the answer, the end of which would have pointed out-----
Under Standing Orders.
I know. I am not objecting. I am completing the answer by giving the Deputy the e-mail reference.
I know.
Deputy Coppinger has made allegations of widespread abuse arising from the fact that persons who should be treated as employees-----
Not for the first time.
-----are being treated as self-employed to their disadvantage. Normally, the charge is that people who should be treated as employees want to be self-employed for tax purposes.
They do not.
The Deputy has reversed that, saying that they are being exploited. If she has facts to support that, she should go to Revenue. I am giving her the reference to do so.
Revenue is well aware of it.
