Vol. 957 No. 1
22. Deputy Richard Boyd Barrett asked the Minister for Finance the reason for the lower than expected tax returns in view of the rising employment figures over the past number of years; and if he will make a statement on the matter. [31472/17]
60. Deputy Richard Boyd Barrett asked the Minister for Finance the reason for the lower than expected tax returns in view of the rise of employment over the past number of years; and if he will make a statement on the matter. [31476/17]
There is much speculation on the mystery of why income tax returns are coming in lower than projected. I put it to the Minister that the reason for this is because of the extent of precarious work, low-paid work and, something that has not been mentioned enough in this regard, bogus self-employment, particularly in the construction industry.
I propose to take Questions Nos. 22 and 60 together.
Given overall tax performance, I assume the Deputy is referring to income tax, which has performed steadily in the first six months of 2017. It is up 3.1% or €274 million on the same period last year. However, income tax receipts of €9,045 million, or just over €9 billion, were slightly behind profile, down 2.3% or €214 million. Those are the year-to-date figures. This shortfall against target is across a range of income tax components.
Income tax encompasses a broad range of elements, some of which are not directly impacted by employment or wage developments. Some of these components are having a drag on overall income tax receipts in the first half of this year.
The key component, PAYE income tax, which accounts for around 65% of total income tax receipts, was broadly in line with profile at the end of June. It is down 0.8%, which is €51 million. This indicates an annual growth of 7.7%, or €462 million, versus a year ago.
Notwithstanding this, the performance of USC was lower than originally expected at the end of June, with receipts down 4.8%, or €83 million below target, and officials from my Department and the Revenue Commissioners have been looking into this. As part of my review, my Department and Revenue have re-examined the budget 2017 USC costings and we are satisfied that they are as accurate as possible given the complexities involved in forecasting.
Furthermore, as part of the continuous efforts to improve the Department's tax forecasting performance, the ESRI and my Department jointly examined the sensitivity of income tax and USC revenues to changes in income. As a result of this work, which was published in March of this year, the Department has revised the income tax and USC revenue elasticities used in the forecasting process. These new elasticities were and will be used in the forecasts for 2018 and subsequent years in the 2017 stability programme update, which is published in April. However, it should be noted that a back-casting using the revised elasticities would obviously imply a lower USC forecast for this year.
Nonetheless, €214 million is a significant shortfall, with €51 million of that from income tax. I particularly want to concentrate on the issue of precarious working conditions and, specifically bogus self-employment. There are now approximately 140,000 people working in construction. There is talk about how construction work is gathering momentum. I got another call in a series of phone calls I have had over recent years from building workers about the regeneration of Dolphin House and Fatima Mansions. Purcell Construction is the main developer down there. Rapid Developments is the bricklaying subcontractor. This is a firm that has had a lot of State contracts. It built St. Patrick's College in Maynooth and there were similar issues there. It is very similar to Rhatigans in that it has men taken on seven or eight weeks beforehand who are employed on PAYE but have not heard a word from Revenue. When they telephone Revenue to ask if they are in the system, Revenue states that it has not heard a thing about it. This is still rampant in the construction sector. If it was done properly and if they were on PAYE, the State would be getting very significant extra income tax revenues.
I had hoped that in the Deputy's supplementary question to me there would be an acknowledgement that in the figures produced yesterday, which looked at the half year, we have seen an improvement in many of the tax heads versus where we were last year and versus the targets that we have for this year. In particular, in June we saw a number of the tax heads that are particularly important in paying for our public services this year post a better performance.
With regard to the specific matters and companies the Deputy has raised with me, I am sure that the Revenue Commissioners get back promptly to queries that are raised with them. I am sure that upon the Deputy raising these points in the Dáil, these matters will gain further public attention. We have bodies whose job it is to enforce employment standards in construction and elsewhere. To answer the Deputy's question very broadly, if we look at the number of people who are classified as part-time and under employment, that has actually fallen by 6.4% in the first three months of this year. We are seeing increases in employment across the economy and increases in average earnings per hour and per week in all of the figures that we have available for 2017. The CSO is indicating a different overall picture to what the Deputy is indicating.
There are 220,000 to 230,000 people who are classified as self-employed with no paid employees. I put it to the Minister, as construction workers and others in this House have been putting it to him for a long time, that the reason for that, particularly in construction, is bogus self-employment. One of the workers I mentioned is a labourer. When he telephoned Revenue to ask if he was down on the PAYE system, because his employer said he was taken on as a PAYE worker, he was told that he had probably been classified as self-employed. He is a labourer. How could he be self-employed? It is ridiculous. This is rampant in construction. From a tax point of view, if we look at 2008, for example, when there were 126,000 self-employed relevant contracts tax, RCT, workers, there was a minus figure in tax revenue of €67 million. This tax head loses money in many cases or gives no tax revenue compared to similar numbers of PAYE workers who brought in €700 million in tax revenue in that year. Is the same thing going on now? Is the Minister looking into it seriously to investigate these kinds of abuses?
Over the last number of weeks that I have been in this role, the Revenue Commissioners have not raised the matter with me to date. However, I will be meeting them directly in the coming days and will raise the matter with them to see if there is a cause for concern in the way the Deputy has outlined. As we know, the Revenue Commissioners impartially implement all the laws that we have around taxation. Alongside the Deputy's view regarding that issue, on which I will come back to the Deputy when I raise it with the Revenue Commissioners, let us also acknowledge that we are now at a point at which we have more than 2 million people back at work within our economy. I made the point to the Deputy earlier that if we look at all of the figures that are available from the CSO for 2017, they show an increase in earnings by week and by hour versus where we were a year ago.
It has shown that those increases are broad-based and that if one looks at the 13 sectors in our economy, one will see that earnings per hour have increased in nine of those sectors and earnings per week have increased in 11. It is a matter that I will raise directly with the Revenue Commissioners and if there is a point of concern on it, I will revert to Deputy Boyd Barrett.
23. Deputy Richard Boyd Barrett asked the Minister for Finance if he will review the tax breaks for real estate investment trusts and vulture funds in view of the fact that they are in many cases sitting on properties and the desired affect of increasing supply is not being realised; and if he will make a statement on the matter. [31473/17]
53. Deputy Peadar Tóibín asked the Minister for Finance his plans to reform the favourable tax treatment provided to property investment funds operating here in view of the negative effect this treatment is having on the market in terms of them purchasing huge chunks of residential housing and commercial property, clogging the supply of residential housing and hoarding land banks. [31455/17]
Not for the first time, it was reported in the newspapers at the weekend in respect of REITS and vulture funds, which are co-investors with the Ireland Strategic Investment Fund, ISIF, which is the State investment fund, and which are involved in real estate and the SME sector, that two of them, Cardinal Capital and BlueBay, paid €250 in tax each in 2015. Does the Minister not think this is a scandalous indication of tax evasion by a very profitable sector?
I propose to take Questions Nos. 23 and 53 together.
A real estate investment trust or REIT is a quoted company used as a collective investment vehicle to hold rental property. A REIT is exempt from corporation tax on qualifying income and gains from rental property subject to a high profit distribution requirement. A REIT provides the same after-tax returns to investors as direct investment in rental property by eliminating the double layer of taxation at corporate and shareholder level which would otherwise apply.
In the Finance Act 2016, the former Minister for Finance, Deputy Noonan, introduced measures to address concerns about the use of certain vehicles by non-resident investors in the Irish property market. Section 22 of the Finance Act 2016, which amended section 110 of the Taxes Consolidation Act 1997, was introduced to address concerns about the use of the section 110 regime by non-resident investors for the distressed debt that they had purchased from financial institutions. In response to concerns that section 110 was being used to erode the State's taxing rights on Irish property, the Finance Act 2016 restricted the use of the section 110 regime to remove the ability of section 110 companies to use what are known as profit participating notes to extract Irish property or distressed debt profits out of the company in a way that ensured little or no Irish tax liability arises. The Finance Act 2016 also introduced a new regime for the taxation of Irish funds holding Irish real estate known as the Irish real estate fund or IREF. The legislation was introduced to address concerns raised regarding the use of collective investment vehicles by non-resident investors to invest in Irish property. IREFs must deduct a 20% withholding tax on certain property distributions to non-resident investors.
Additional information not given on the floor of the House.
I am of the view that the taxation regimes remain appropriate for these entities. As the REIT regime is designed to prevent a double layer of taxation and the amendments in the Finance Act 2016 were designed to protect the State's taxing rights over property, these are not favourable tax regimes nor is there an evidential link between these tax regimes and property supply issues.
One of the central justifications for these extraordinary tax breaks for REITs and vulture funds - the section 110 structure allowing these companies to benefit from it and the REIT tax breaks introduced by various Finance Acts - was encouraging investment in property in Ireland and resuscitating the property sector, presumably to do something basic like provide housing for people. To this day, the Government cannot even tell us how much tax has been forgone via section 110 and will still be forgone in terms of capital gains and rental income under these schemes. Incredibly, ISIF is working with these people who have sucked vast amounts of profits out of the country. What has it delivered in terms of housing? It has delivered nothing. In all of the years in which these things have been in operation, according to the CSO, we have had a 0.4% increase in housing stock and, of course, a disastrous situation in social housing. Can the Minister tell us how many billions we have wasted in forgone tax revenue to get that failed result in terms of a thoroughly dysfunctional housing sector, which is dysfunctional precisely because the Government gave them tax breaks instead of using the State's resources to invest in social housing?
Deputy Pearse Doherty has a supplementary in the name of Deputy Tóibín. I also have two requests from Deputy Michael McGrath and Deputy Wallace.
I am taking this question on behalf of Deputy Tóibín. If an individual or company resident or non-resident makes a gain on the disposal of Irish property, it is standard practice for them to pay capital gains tax at 33%. If an individual resident or non-resident has Irish rental income, they pay Irish personal tax. Likewise, companies, both resident and non-resident, pay corporation tax at 25% on their rental income with dividend withholding tax applied for non-residents. The big question is why the Government throws out the rule book when it comes to these funds. What is happening in this State is ridiculous. This State is being bought up inch by inch and foot by foot by these multinational, large investment and multi-billion euro funds and they are doing so under the noses of the Irish authorities. Inserted into the tax code is a provision stating that they must pay a minimum amount of tax. There is a number of elements to this. We are dealing with REITs, Irish collective asset-management vehicles or ICAVs and qualifying investor alternative investment funds or QIAIFs- each with a different tax structure. Let us look at 2015. The accounts of the three REITs in this State all recorded a profit of €238 million. How much did they pay in tax? They paid €5.27 million. The Minister's internal documents, which I obtained through freedom of information, show that the capital gains tax exemption for the qualifying investor funds is clogging up the housing market. It is more profitable for these funds to leave their apartments empty and their lands undeveloped and to hold them for five years than actually to sell or develop them and get tenants into those properties. That is because of the Government's policy.
I will not begin a practice here of commenting on the tax affairs of any individual company. That is a matter for the company. What I will comment on is the overall tax treatment of REITs and similar entities. What neither Deputy pointed out in their analysis of the issue is the fact that because of how they are structured, REITs are required to return 85% of their yield or profit to investors. Look at how investors are taxed. If an Irish investor resident here is an individual, they pay income tax on that and if the investor is a corporation, it pays a rate of 25% on it. An institutional portfolio investor pays a rate of tax on it of 12.5%. In respect of an investor outside our jurisdiction, there is a tax code relating to payment abroad, which means the investor will pay tax on that of between 15% and 20%. As both Deputies know, the reason these REITs were put together was to avoid being in a situation where any form of economic activity is taxed twice but as neither Deputy pointed out in their analyses, those taxation regimes apply to the income that comes from the REIT and there is a different taxation regime for an Irish investor compared to an investor abroad. In addition to a tax rate of between 15% and 20%, an investor abroad is required to declare their income in the jurisdiction in which they are resident and pay tax on that as well.
I thank the Acting Chairman for allowing me in. I know a working group is examining the taxation of rental income by various recipients. Could the Minister clarify whether this working group will report by the end of July, as envisaged, and whether it will feed into budgetary considerations for October? I acknowledge that the overarching issue is one of supply and that this is what underpins all of this.
In respect of the various ways in which rental income is taxed - for an individual private landlord, it is up to 55% at the marginal rate, while for companies, it is 25%, plus a further 20% where there is a close company surcharge - while I can understand some of the logic behind incentivising professional institutional landlords, if the Minister is trying to encourage private individuals to purchase one-off houses in estates here and there, they simply will not do so. When will the report be completed and will it feed into budgetary considerations prior to October?
The Minister appears to tell us about the changes to section 110 and the fact that some of the investors will actually pay some tax, but he is ignoring the fact that the REITs, provided they share 85% of the dividends with their investors, pay no tax on their rental income, nor do they pay any capital gains tax if they stay for at least five years. In January 2014 I challenged the then Minister for Finance on the fact that these organisations and entities were going to cause serious problems in the rental market. He said they only held €400 million worth of assets and that we should worry about them when they got bigger. Now they hold billions of euro worth of assets and we do not yet seem to be worrying about them. The truth of the matter is that they have seriously unbalanced the rental market. They are about to launch a scheme of apartments on the south side and are looking for €1,900 a month or more for one-bedroom apartments. It has gone off the Richter scale and the Minister is not controlling them. He has ignored his responsibility in that regard.
The Minister can answer those questions. I will then take the supplementary questions of Deputies Richard Boyd Barrett and Pearse Doherty.
In his first priority question the Deputy made the point that I should not make any comment that might have consequences for the housing market in how it was structured for those who participated in it. I will abide by that principle in any comment I make on the taxation of rental income in the future, apart from confirming for the Deputy that there is a report on the way on all tax support in the rental market. I expect it to be available to me either before or during the summer. I am discussing the matter with the Minister, Deputy Eoghan Murphy. On what the Deputy said, I make the point that in the analysis offered on REITs to date on the floor of the House the indication is that there is no tax involved in any way. The funds were set up in such a way that they required 85% of the profit is returned to the investor. The investor pays tax. Furthermore, there is a dividend withholding tax, something I did not hear either Deputy Richard Boyd Barrett or Deputy Pearse Doherty acknowledge.
We argued for it.
I outlined the way in which tax was paid by those who benefited from the funds, depending on where they were resident.
It amazes that the Minister does not acknowledge the scale of the damage and distortion the movement of these funds into the property market has caused. I ask him to tell us, although I know that he will not, how much tax has been forgone as a result of section 110 and the REIT tax breaks. We can never get an answer to that question. They are still benefiting from them and, as we know, they just sat on properties and jacked up rents, worsening the housing crisis. I even logged onto PricewaterhouseCoopers' website today to see what it had to say about section 110. It is boasting, stating one should invest here because one would not have to pay any tax. "Tax neutral" is the wording used and what is being touted by these accountancy firms. They state people should get involved in the property market in Ireland because one would not have to pay any tax, there will be flexible and favourable domestic tax law reliefs and that Ireland allows for neutral treatment of corporation tax, provided certain conditions are met, blah, blah, blah. The Minister shows no interest in looking at this scandal, given what has been done to the property market.
The Minister needs to open his eyes and look at what is happening. Let us look at what the Central Statistics Office, CSO, stated. It stated non-household buyers were outstripping new homeowners in purchases of new houses in Dublin. Who makes up the largest component of non-household buyers? The answer is REITs qualified investor funds. Some 62% of new homes in Dublin were bought by those involved in that component and 44% nationally. They are outbidding families that are trying to get onto the property ladder because of the tax structure. The Minister gave a nice answer, that 85% of income had to be distributed to shareholders, but what he did not tell the House was that 85% of the investment in REITs was foreign. Therefore, there is no capital gains tax to be gained on the uplift of property values. That is why, of the profit of €238 million recorded by the three REITs in their accounts, they paid just over €5 million in tax to the State. The other thing the Minister dodged was the fact that officials in the Department of Finance and Revenue stated there were genuine, valid concerns and that the policy the Minister introduced was clogging up the market because it was more profitable for qualified investment funds or Irish Real Estate Funds, IREFs, to hold on to properties, leave them empty, not sell them or hold on to land because they could avail of the five-year rule, under which there would be no capital gains tax if they held on to property for five years. As the Minister's own officials are telling him this, he needs to step up and change the law to deal with a number of issues. He needs to give commitments in that regard because this is having a detrimental effect on renters and those trying to get into the property market.
I remind Deputies that they are interfering with the taking of other questions. I ask them, therefore, to stick to the time allotted.
I am well aware of the difficulties and challenges people face in the housing market across the country, whether they are looking to buy, living in rental accommodation or worried about the direction their rent is taking. I am as aware of them as the Deputy.
The Minister is creating them. His party is-----
What I do not need from the Deputy every time an effort is made by the Government to try to address the housing issue, for example, we made over €5 billion available to be invested in the provision of social housing is it being condemned as being insufficient by Sinn Féin which at no time explains to us from where we will get the additional resources.
The Minister should answer the questions asked.
Tax the accountancy firms.
What I have done is acknowledge the role REITs can play in dealing with the issue of housing supply. REITs, in particular, play a role in the release of commercial property which we also need. I have clearly outlined how income generated from REITs is taxed. It is taxed in different ways, depending on where one is resident. There is also the dividend withholding tax which has not been acknowledged by any Deputy who has criticised what I have said, but, of course, it is always the case.
The dividend withholding tax applies to IREFs.
As much as I appreciate the Deputy's interruptions, it would be helpful if he were to make these points in the time available to him, but I will continue to do my best to answer the last set of questions he asked. We have put in place measures aimed at boosting supply, while recognising the difficulties people face in the housing market. Like any taxation or policy measure, they will always be kept under review by me. I emphasise again the clear way in which those who invest in these funds pay tax.
24. Deputy Mick Wallace asked the Minister for Finance further to the recent announcement by NAMA of the appointment of a company (details supplied) as statutory auditor, the role played by his Department in this decision; the advice his Department and NAMA sought on this decision; if the Office of the Comptroller and Auditor General was consulted about the decision; if he has satisfied himself that the decision is not in breach of section 57(1) of the National Asset Management Act 2009 regarding the role of the Comptroller and Auditor General; and if he will make a statement on the matter. [31468/17]
My question relates to the appointment of a second auditor to NAMA arising from the EU audit directive. I have some questions about the process involved. When did this matter first arise? Will the Minister outline the advice his Department and NAMA received on the decision? Was the Comptroller and Auditor General engaged at all times in decision-making? If legal advice was sought from the Attorney General, is the Minister satisfied that the decision is not in breach of section 57(1) of the National Asset Management Act 2009 regarding the role of the Comptroller and Auditor General?
The pending implementation of the 2014 revised EU audit directive and regulations which underpin the Deputy’s question was first brought to the attention of my officials in the Department of Finance in respect of the potential impact for NAMA in May 2016 by officials within the Department of Jobs, Enterprise and Innovation, who are responsible for transposing the directive into Irish law. The Department of Jobs, Enterprise and Innovation made contact with my Department and the Office of the Comptroller and Auditor General regarding the implementation of statutory audit obligations in the 2014 revised EU audit directive and regulations prior to their transposition into Irish law via Statutory Instrument 312 of 2016 and the Companies Act 2014.
My Department engaged over a number of months with the Department of Jobs, Enterprise and Innovation, the Office of the Comptroller and Auditor General and NAMA on this matter. My Department also sought legal advice from the Office of the Attorney General on the directive which requires that certain companies, including NAMA, be audited by a statutory auditor within the meaning of the directive.
This audit requirement is separate from and in addition to the audit requirements set out in the NAMA Act which remain in effect. It was also confirmed that the Comptroller and Auditor General was not a statutory auditor within the meaning of the directive. I understand both NAMA and the Office of the Comptroller and Auditor General obtained separate legal advice which concurred with this position. Hence, the Comptroller and Auditor General's audit of the statutory financial statements of the NAMA group of entities from the financial year ending on 31 December 2016 onwards does not fulfil the requirements of the directive. I am advised that the Comptroller and Auditor General believes that, at a minimum, a change in legislation will be required in order for him to become a statutory auditor. In that regard, cognisance would also need to be taken of the particular features of the Constitution which safeguard the independence of the role.
According to the NAMA Act, the overall objective of NAMA was to bring stability to the banking system by removing impaired loans from bank balance sheets; it was never set up to make a profit. It would have to get back over €74 billion to make a profit. The Minister is saying the EU directive requires that certain companies, including NAMA, must be audited by a statutory auditor within the meaning of the directive. The NAMA Act states the Comptroller and Auditor General is the statutory auditor and I take it we are allowing the Act to be overruled by the directive. The directive's requirements relate to certain companies, including NAMA. Obviously, it does not explicitly name NAMA. I am assuming, therefore, that the Department believes NAMA falls under the public interest entity provisions of the directive. A public interest entity, essentially, is a listed company which must trade on the EU stock market and is deemed to have public importance by an EU member state. Will the Minister tell me the exact methodology used in interpreting that NAMA falls within the description of a public interest entity? I am aware that NAMA may have bonds trading, but it is stretching it in defining it as a listed company on the stock market.
I will come back to the Deputy on his question about NAMA being a public interest entity. To answer the main question he asked, it arises from a change to the audit requirements. Because the audit requirements emanated from an EU directive, we had to change how we were dealing with these matters. All of the bodies affected, including NAMA and the Comptroller and Auditor General, worked together to deal with the matter. We will now be in a situation where the Comptroller and Auditor General will continue to fulfil his role, but we will also have a statutory auditor in Mazars which will performing its own functions.
Speaking of Mazars, this morning Professor Richard Murphy of University College London called for greater regulation of the big four accountancy firms because of their ongoing facilitation of tax avoidance. We all know the names of the four firms: Deloitte, PwC, Ernst & Young and KPMG. Mazars is probably No. 5. The goal of the European Union with the directive was to reinforce the independence of auditors and there is probably no one more independent than the Comptroller and Auditor General. I argue - I think the Minister would not disagree with me - the Comptroller and Auditor General is more independent than any of the big five, including Mazars. Article 14 of the EU directive which deals with statutory auditors states, "In exceptional circumstances, Member States may derogate from the requirements laid down in this Article ...". NAMA has always been an exception, dating back to 2009 when the European Commission gave it a special exemption to receive state aid. Will the Minister tell us whether his Department sought an exemption from the European Union because of exceptional circumstances and, if not, why not?
To answer the Deputy's question, I am not aware that my Department sought an exemption. If I am wrong in that understanding, I will respond to the Deputy with the information.
There has been no change in the recognition of the constitutional role of the Comptroller and Auditor General as auditor of the State. It has not been affected.
The Deputy asked my view on the role of the Comptroller and Auditor General. The work he does is of the highest quality. As a former member of the Committee of Public Accounts, I have seen him in action. He will continue with his work on NAMA or any other body with which he has a relationship, but because of a change in the EU directive, in the way I outlined to the Deputy, it was necessary to appoint a further body, in this case, Mazars, to meet our obligations under law in relation to NAMA. There is no conflict in the matter. All of the parties affected co-operated in the change. As I said, if my understanding is wrong in relation to the exemption, I will revert to the Deputy and inform him of such.
25. Deputy Michael McGrath asked the Minister for Finance his plans for the remaining share of a bank (details supplied); his further plans in relation to the remaining share of all other State-supported financial institutions held by the Government; and if he will make a statement on the matter. [31245/17]
Following the recent AIB IPO, will the Minister clarify the Government's intentions in respect of the remaining shareholding the State holds in AIB and also its shareholdings in the other banks, namely, Bank of Ireland which is 14% State-owned and Permanent TSB which is 75% State-owned.
As the Deputy will be aware, the State has now sold 25% of AIB's ordinary share capital at a price of €4.40 per share for a consideration of almost €3 billion. The offering was strongly supported by a broad range of international institutional investors, with all of the top investors being categorised as longer term investors and sovereign wealth funds. The State also granted an additional over-allotment option to its appointed stabilisation agent Deutsche Bank, covering a further 3.75% of AIB's ordinary share capital as part of the transaction. Hence, unless some of the shares are bought back in the market in the period post-floatation, the State will recoup a further €400 million, bringing the total proceeds from the IPO to €3.4 billion.
Following the AIB IPO, the State's remaining shareholding in the bank is in a lock-up period of 180 days. This is standard market practice. I, therefore, expect no further sale of AIB shares in 2017. After this period elapses, officials in my Department will revert to monitoring the performance of the bank, its share price and equity markets more generally to determine the next sensible opportunity to realise and gain value from our investment. It is important to point out that exiting our full investment in AIB in a measured way that will maximise the gain will take a number of years, but I believe that in time we will recoup all of the money we invested in the bank. Under A Programme for a Partnership Government, any future sale of AIB shares contemplated before the end of 2018 would need to be approved by the Government.
Similarly, my officials and I continue to monitor the performance of Permanent TSB and Bank of Ireland and plan for exit opportunities that may arise in the future. However, having just completed a large equity capital markets transaction with the shares in AIB, I have no immediate plans to sell any of the State's shares in either of these banks at this time.
I thank the Minister for his reply. I note the AIB shares are trading at €5.09 and that investors are doing well so far, but, of course, it is early days. I understand the proceeds of the sale will be received by the Ireland Strategy Investment Fund and that, under the National Treasury Management Agency (Amendment) Act 2014, the Minister has the power to instruct the fund to make payments to the Exchequer. Will he confirm if it is the intention of the Government to issue such an instruction to the ISIF to transfer funds to the Exchequer and clarify that it is his intention to use them to reduce the Exchequer's borrowing requirement? Will the Minister also provide clarification on the use of future proceeds? He laid out the Government's position on the proceeds of the sale of the stake in AIB, but has the Government raised any issue with the European authorities, namely, the European Commission, about the future use of proceeds of the sale of other bank-related assets?
On the Deputy's first point about the share price and investors doing well, of course, the State is still an investor. It owns the vast majority of the bank and as the share price goes up, our stake in the bank also goes up.
To answer the Deputy's second question, it continues to be my intention to use the money to repay the national debt.
The €3 billion relating to the 25% of sales was released back to the Exchequer last Tuesday or Wednesday. We will be using it to pay down the national debt in a way that meets our requirements under EU law.
The future sale of bank shares is not on my immediate agenda as I outlined in my first reply to Deputy McGrath. I have not, as of yet, raised it with the European Commission or elsewhere. However, I expect there will be ongoing debate throughout the next one or two years in respect of the future role of fiscal rules within the eurozone.
Our view as a party is that there is no rush in disposing of further shares in AIB or in respect of Bank of Ireland or Permanent TSB either. The fact is that AIB is now resuming dividend payments. It is our view that, in the absence of any negotiations with the European Commission to secure greater flexibility for the State on how any future proceeds might be used, the State should not proceed with any further sale of shares. I am simply setting out our position.
We believe there is need for greater flexibility on the use of such one-off proceeds, especially in the area of investment. There is significant consensus across the House in favour of using proceeds in the future for that purpose. That is our position.
I take it from what the Minister has said that he is going to issue the instruction to the NTMA strategic investment fund under the Act to transfer the €3 billion or so into the Exchequer balance.
It is true to say that the Exchequer returns of yesterday were heavily flattered by the AIB receipt and the €3 billion referred to. There is essentially a political problem in the sense that expectations are building up with such flattering net figures. People want to see schools being built and hospitals being built and refurbished. Many old machines in hospitals have now run their life's course having been bought before the beginning of the collapse.
We cannot blame people for having these expectations. However, we should be careful what we say to people. The Minister may form his own view in due course but his predecessor in particular held firmly to the view that the release of extra capital investment would overheat the economy. Given our growing population and poor infrastructure, we desperately need additional investment in various areas, especially in areas of public transport and carbon saving. Has the Minister reconsidered, or has he had a chance to reconsider, the position in that regard?
Yesterday, my Department was clear and careful not to use the proceeds of the sale in the AIB share to influence the half-year figures for income and expenditure. The changes in our position overall were mostly driven by the improvement in tax collection, especially throughout June. We did not use the sale of the AIB share to influence the presentation of those figures, but of course it did have a big effect on the surplus that we delivered at this point in the year versus the deficit of last year.
I have not said, nor do I believe my predecessor said, that the release of extra capital in any circumstances would overheat the economy. I recall in the debate in the House some weeks ago when, as Minister for Public Expenditure and Reform, I said that additional capital investment was needed. I hope to make progress on that but we need to be careful that we do not release such quantities of money that we find ourselves in a position where we are back to where we were some years ago with construction and the pricing of property going up and up. The only people who suffer from that in the end are citizens and taxpayers.
Six minutes are left approximately. We have received apologies from Deputy Bernard Durkan and Deputy Dara Calleary.
28. Deputy Mick Wallace asked the Minister for Finance further to Parliamentary Question No. 138 of 3 May 2017, if the debtor involved in Project Shift was one of the seven advised by a person (details supplied) as reported in the Comptroller and Auditor General's report on Project Eagle; the reason Project Shift was not discussed at any NAMA Northern Ireland advisory committee meetings; and if he will make a statement on the matter. [31470/17]
This question deals with Project Shift, which relates to the sale by NAMA of the loans of a Northern Ireland debtor associated with German shopping centres and Cerberus, the same Cerberus that bought Project Eagle.
Until some months ago, little was known about Project Shift. However, from two previous replies to parliamentary questions we have established that it was not discussed at any NAMA Northern Ireland advisory committee meetings. NAMA cannot tell us whether Frank Cushnahan advised the debtor. NAMA will not answer any more questions and the agency has started to hide behind the commission of investigation. I hope the Minister can answer something about it.
As outlined to the Deputy in my written response to Parliamentary Question No. 107 on 29 June 2017, I am advised by NAMA that while Project Shift began as an asset sale it ultimately transacted as a loan sale.
While Project Shift and Project Eagle were two separate transactions and were completed as such, given that the same purchaser ultimately was involved in both transactions, it made sense to complete both sales as loan sales. As a result, the Project Shift transaction, which begun as an asset sale, was ultimately transacted as a loan sale. By doing so, NAMA was able to ensure the consistent and efficient completion of the disposal of all of the debtor's loans to Cerberus across both transactions.
The Deputy will be also aware that the previous Taoiseach signed SI 267 of 2017 on 13 June 2017 establishing a commission of investigation into Project Eagle. I am advised by NAMA that is likely that the commission of investigation, the terms of reference of which have been approved by Members of the Oireachtas, will consider that Project Shift falls within those terms of reference. On that basis, I am advised by NAMA that it considers it sensible not to comment further on these matters, but that the agency will co-operate fully with the work of the commission and, in the course of that work, NAMA will provide the commission with materials in respect of Project Shift and will answer any questions the commission may have relating to that project.
However, as was previously pointed out to the Deputy in Parliamentary Questions Nos. 15 and 31 of 18 May 2017, NAMA has advised that Project Shift was not discussed at meetings of the NAMA Northern Ireland advisory committee.
More generally, the Deputy will be aware that the former Minister for Finance and my Department are subject to one of the terms of reference of the commission. It would not be advisable for me to comment on any specific matters relating to the commission's work now that it has been established and is operational. The Deputy will be aware that Mr. Justice John Cooke has been appointed to lead the commission of investigation. I am sure he will examine all relevant matters within the terms of reference.
Deputy Wallace, if you could conclude with one supplementary, then we could get Deputy Burton in for a question.
Okay, but it will be a long supplementary.
I have spoken to Brian Rowntree several times lately. He said to me that he had never heard of Project Shift. He said that he was led to believe by NAMA, via the chairman, Frank Daly, and Ronnie Hanna, that Project Eagle was the first sale of any element of the Northern Ireland portfolio to a third party loan acquisition group. This is a matter of concern. I cannot understand why NAMA will not tell us whether Frank Cushnahan did or did not advise the debtor. We have recently found out who the debtor is - he is a pretty serious player. Can the Minister get an answer to that?
Although little is known about Project Shift we have found out from an internal e-mail that Ron Bolger represented Cerberus on the deal. This is the same Ron Bolger that arranged a meeting between the former Minister, Deputy Noonan, and Cerberus the day before Project Eagle.
Please refrain from using names.
Sorry. We have been in contact with Mr. Justice Cooke about Project Shift among other things. He has asked us to preserve any evidence relating to Project Shift. However, I cannot understand why the Minister might not be interested in getting answers to the questions around NAMA in this area.
I welcome the Minister to his new portfolio and I hope he gets on well in it. By the end of his days there I was unhappy with the former Minister's manner of refusing to deal openly with the workings of NAMA. I look forward to the current Minister having a more open approach and being a little more straight with us.
I will always be straight with Deputy Wallace but I fear he might be disappointed with the answers I can give him on this matter. I will always try to give him the fullest information I can as a Member of the Oireachtas. Many Deputies called for the establishment of a commission of investigation in the aftermath of the Committee of Public Accounts work on aspects of Project Eagle. I cannot publicly provide in the Dáil information in regard to a transaction that may well be subject to inquiry by this commission. It is good to hear that Deputy Wallace has preserved evidence in regard to his concerns around this transaction. I hope he will be in a position to share that with the commission. That body and Justice Cooke are best placed to deal with any issues of public concern in regard to Project Eagle or, if turns out to be the case, Project Shift as well.
