Written Answers Nos. 28-38
28. Deputy Brian Stanley asked the Minister for Finance his views on the recent decision by Bank of Ireland to increase the interest rates on their variable rate mortgages; if he has had any contact with the bank since the decision was made; his views on whether the decision will further exacerbate the mortgage crisis and if he believes that the decision should be reversed. [42269/12]
Amharc ar fhreagraAs the Deputy will be aware, the Bank of Ireland’s policies in relation to lending rates is a matter for the board and management of the institution. Notwithstanding the fact that the State is a significant shareholder, I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as set out in the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. A Relationship Framework has been specified that defines the nature of the relationship between the Minister for Finance and the bank. This Framework was published on 30 March 2012 and can be found on my department’s website. (http://banking.finance.gov.ie/presentations-and-latest-documents/). Ultimately the pricing of financial products, including standard variable mortgage interest rates, is a commercial decision for the management team and board of the bank, having due regard to their customers and the impact on profitability, particularly where the cost of funding to the bank, including deposit pricing, is under pressure. Neither the Central Bank nor the Department of Finance has a statutory function in relation to interest rate decisions made by individual lending institutions at any particular time.
The Government and BOI are acutely aware of the social and economic impacts that any lending rate increases may have in the current environment. However, the bank has informed me that the majority of its lending products are currently priced on a par with their peers, with interest rate increases required in order to return the Bank to profitability and long term viability.
29. Deputy Gerry Adams asked the Minister for Finance the rationale for the appointment of a person (details supplied) as a director of AIB; if he was consulted on this appointment and if the Government consented to the appointment. [42259/12]
Amharc ar fhreagraAs the Deputy will be aware, Relationship Frameworks have been specified that define the nature of the relationship between the Minister for Finance and the banks. These Frameworks were published on 30 March 2012 and can be found at; http://banking.finance.gov.ie/presentations-and-latest-documents/. Per the Relationship Framework with AIB, “the Minister will continue to work with the Board to strengthen its membership through the appointment of suitably qualified, independent non-executives”. In this regard, the Board is expected to consult with the Minister in respect of any Board appointments that it proposes.
The process for independent non-executives selection involves the relevant board of AIB identifying what vacancies they have and the relevant skills they require. To help facilitate the selection process, the Department of Finance placed advertisements in the national papers during 2011 seeking expressions of interest from suitably qualified persons for inclusion among those to be appointed or nominated to the Bank’s Board of Directors. This formed part of the commitments given in the Programme for Government. The bank considers potential candidates from this group, as well as from other sources.
With respects to the individual whose details were supplied in this PQ, I was informed that he passed the Central Bank of Ireland’s Fitness and Probity (F&P) Review. As a result coupled with his extensive financial experience, I had no objection to his appointment.
30. Deputy Seán Crowe asked the Minister for Finance the plans, if any, he has to gender proof each of the various options being considered for Budget 2013; the plans, the Government has to publish a distributional analysis of each of the various options being considered with specific reference to gender; and if he will make a statement on the matter. [42273/12]
Amharc ar fhreagra59. Deputy Jonathan O'Brien asked the Minister for Finance the plans, if any, he has to equality proof each of the various options being considered for Budget 2013; the plans the Government has to prepare and publish a distributional analysis of each of the various options being considered; and if he will make a statement on the matter. [42272/12]
Amharc ar fhreagraI propose to take Questions Nos. 30 and 59 together.
With regard to budgetary matters, when focusing on the primary objectives of reducing the deficit and returning sustainability to the public finances, it has been of vital importance to the Government to spread the burden of the adjustments made in as fair and equitable a manner as possible, while also seeking to minimise their negative impact on economic growth.
There are currently no plans to specifically equality and gender proof Budget 2013. That said however, the Deputies should be aware that the Programme for Government does contain a clear commitment requiring all public bodies to take due note of equality and human rights in carrying out their functions. I would also remind the Deputy that the State and its bodies must, of course, comply with all provisions of equality legislation in the development and delivery of its policies and services.
Furthermore, when proposals are put to Government there is a requirement to indicate clearly, whether there is any impact of the proposal on, amongst other things, gender equality, persons experiencing or at risk of poverty or social exclusion and people with disabilities.
The Deputies should also be aware that a distributional analysis of proposed budget measures is performed each year based on income levels.
31. Deputy Seamus Kirk asked the Minister for Finance his views on whether the continued low level of transactions in the housing market reflects a failure to communicate to potential first time buyers the impending end of mortgage interest relief for owner occupiers; and if he will make a statement on the matter. [42303/12]
Amharc ar fhreagraI would not accept that the low level of transactions in the housing market reflects a failure to communicate to potential first-time buyers the impending end of mortgage interest relief for owner occupiers on 31 December 2012. In Budget 2012, I confirmed that mortgage interest relief would no longer be available to house purchasers who purchase after the end of 2012 and that it will be fully abolished from 2018. This was clear in all budget briefing. Furthermore, I reconfirmed this at the press conference on 8th February 2012 to announce the publication of the Finance Bill 2012.
I have re-iterated this point on a number of occasions since, including in a speech at the Property Industry Ireland conference last June and most recently on Friday last the 28th September in a speech at the Construction Industry Federation Annual Conference. I have stated clearly that there will be no extension of mortgage interest relief for those who purchase after 2012. This point has been reported widely in the national media.
Detailed information on Mortgage Interest Relief including the fact that it is no longer available to house purchasers who purchase after the end of 2012 is available on the Revenue website – www.Revenue.ie.
32. Deputy Michael Colreavy asked the Minister for Finance the plans, if any, he has to prepare and publish a full cost benefit analysis, including the cost to the Exchequer, of all existing tax reliefs; and if he will make a statement on the matter. [42275/12]
Amharc ar fhreagraThe issue of cost benefit analysis of tax expenditures was considered by the Commission on Taxation. The Commission was of the opinion that tax expenditures should be the subject of ongoing evaluation and appropriate and timely cost benefit analysis. This is to ensure that they are both economically efficient and that parliamentary oversight can be well informed. However, there is an underlying principle of proportionality in cost benefit analysis. In other words - the level of resources invested in carrying out the analysis should be commensurate with the scale of the expenditure involved.
In addition sufficient time is needed to undertake the analysis required for various measures.
An example of such work recently conducted by my Department would be the Economic Impact Assessment of Potential Changes to Legacy Property Reliefs. This assessment, undertaken last year and published by my Department, included a consultation paper, engagement from over 700 submissions and an analysis, enabled the Department to understand the possible legacy costs to the State as well as the impacts on individuals and economic sectors of a change in law relating to the use of these particular reliefs.
Another example, which is currently work in progress, is the Public Consultation on Section 481 Film Tax Relief. I published a consultation paper which set out preliminary analysis and data and invited interested parties to make submissions as part of an economic impact assessment of film tax relief. The impact assessment will enable the Department to better understand the benefits that may accrue to the exchequer as well as consequences for investors, the audiovisual industry, and the wider economy arising from potential changes to the relief.
Such approaches provide a transparent and comprehensive process in line with best international practice for policy evaluation.
I would note further that costs of tax credits, allowances and reliefs are provided by the Office of the Revenue Commissioners in their Annual Statistical Reports. The most recent figures related to tax expenditures appear in the 2010 report, which sets out the total identifiable costs to the Exchequer of all income tax and corporation tax allowances, reliefs, exemptions and tax credits available for 2008 and 2009, the most recent year for which information is available. The work of updating cost details for the following year is well advanced and Revenue hope to be in a position to publish them in the near future.
Finally, I would advise the Deputy that all tax reliefs are kept under review and as a matter of course form part of the Tax Strategy Group’s (TSG) discussions in advance of the Budget. The TSG papers are subsequently published on the Department of Finance’s tax policy website: www.taxpolicy.gov.ie.
33. Deputy Barry Cowen asked the Minister for Finance if he is satisfied with the progress being made in re-structuring the credit union sector; and if he will make a statement on the matter. [42296/12]
Amharc ar fhreagraThe Final Report of the Commission on Credit Unions was agreed unanimously by its members, including representatives of the credit union movement. The Commission recommended that the credit union sector should be restructured on a voluntary, time-bound and incentivised basis and that the Credit Union Restructuring Board (ReBo) should be established to facilitate and oversee the restructuring process.
The Credit Union Bill 2012 was published on 28 September 2012 and implements over 60 of the Commission’s recommendations. The Bill makes provision for the establishment of ReBo on a statutory basis and sets out the functions of the board and staff of ReBo. This new legislation also provides the basis for the restructuring of the sector over time in a way that is stable and protects credit union members.
I want to ensure that progress on restructuring is not delayed pending enactment of the Credit Union Bill and so I have established the Board of ReBo on an administrative basis in the meantime. The Board consists of 13 members and its composition reflects the recommendation in the Commission report, comprising five independent members as well as members from credit union representative bodies, the Central Bank and the Department of Finance. The Board was established on 31 August 2012 and held its first meeting on 28 September 2012.
The first phase of ReBo’s work will involve undertaking preliminary engagement with credit unions during Quarter 4 of 2012. I am pleased that progress is in line with the timeline as set out by the Commission on Credit Unions.
34. Deputy Dessie Ellis asked the Minister for Finance the plans, if any, he has to conduct and publish an analysis of the net employment effects of the measures taken in Budget 2012; and if he will make a statement on the matter. [42277/12]
Amharc ar fhreagraThe Government framed Budget 2012 in such a way as to make it as job-friendly as possible, with various sectoral measures aimed at job creation. As I stated on Budget day, the primary purpose of the Budget was to support the creation and retention of jobs in the short-, medium- and long-term. It should be acknowledged that while restoring the public finances to a sound footing is crucial for Ireland’s future, consolidation can have a negative short-run impact on the economy. However, it is the framing of this consolidation which is important and I want to assure the Deputy that the Government is conscious of the need to minimise the impact of consolidation on the labour market.
I would like to point out that employment data are presented in net terms and information on gross flows into and out of employment is not available. This unfortunately makes it difficult to assess the number of jobs created by any policy initiative.
Having said that, I think it’s fair to say that there are tentative signs of stabilisation in labour market conditions, albeit at a very weak level. For instance, the latest data from the Live Register show an annual decrease of 8,106 (-1.9%) people on the Live Register in September.
So leaving aside the fact that quantifying the impact is difficult, I am confident that the measures targeted at job creation for the different sectors of the economy in Budget 2012, as well as the measures introduced by the Jobs Initiative and the Action Plan for Jobs, such as reducing the rate of VAT in the high value-added tourism sector, are playing an important role in both creating and sustaining employment.
Finally, I want to reiterate that addressing the labour market difficulties remains the Governments biggest challenge and, accordingly, Government is giving its highest priority to job protection and job creation.
35. Deputy John Halligan asked the Minister for Finance if he will consider a wealth tax as an alternative to property tax; and if he will make a statement on the matter. [42324/12]
Amharc ar fhreagra57. Deputy Richard Boyd Barrett asked the Minister for Finance if he will consider a wealth tax as an alternative to property tax; and if he will make a statement on the matter. [42283/12]
Amharc ar fhreagraI propose to take Questions Nos. 35 and 57 together.
The Government has decided, as part of our commitment under the EU/IMF programme of financial support to Ireland, to introduce an annual recurring property tax. This forms part of a long term policy to broaden the tax base, to provide a stable funding base for local government and to assist the strengthening of democracy at local level. A Bill to introduce the tax will be published with the forthcoming Budget.
The Government does not propose at this time to introduce a wealth tax, although all taxes and potential taxation options are constantly reviewed.
Asset values increase and decrease over time and in the context of recent economic circumstances, they may have declined considerably in many cases. Thus, if the value of an asset or of an individual’s wealth is measured at a particular time there is no guarantee that the asset value or the individual’s wealth will remain at that level or increase from that point. This would make it difficult to predict the potential yield from a wealth tax and would have to be borne in mind in terms of its consistency as a source of revenue. Although property valuations have also experienced much fluctuation in recent years, international experience shows that an annual recurring property tax is a stable source of revenue and is therefore an important base-broadening measure for the Irish tax system.
To estimate the potential revenue from a wealth tax, we would need to identify the wealth held by individuals, which is not possible at present.
I am informed by the Revenue Commissioners that they have no statistical basis for compiling estimates in relation to a potentially annually recurring tax on wealth. Although an individual’s assets and liabilities are declared in a limited number of specific circumstances - for example, after a death - Revenue state that it is not in a position to link an individual’s income to her/his financial assets. It would therefore be difficult to gauge the likely return from a tax on wealth.
I am informed by the Central Statistics Office that the institutional sector accounts do not give an indication of the number of households or persons classified by the categories of wealth they hold. These statistics are based on aggregate information collected from financial institutions and do not contain the demographic details which would enable such a breakdown of the statistics. However, I understand that, following discussions between the Department of Public Enterprise and Reform, the CSO and the Central Bank, the CSO has commenced a “Household Finance and Consumption Survey”, which will include, inter alia , a survey of wealth. The first results of this survey will be available in 2014. The data to be collected by the CSO as part of this survey is primarily targeted as general information on the financial situation and behaviour of households.
36. Deputy Clare Daly asked the Minister for Finance if he will intervene with AIB in relation to the proposed closure of the branch in Rush, County Dublin, which affects more than 10% of the total numbers affected by the 67 closures, concentrated in one community. [42247/12]
Amharc ar fhreagraAs you will be aware, operational decisions for the covered banks – AIB, Bank of Ireland, IBRC and Permanent TSB - remain the responsibility of the boards and managements of the institutions. Notwithstanding the fact that the State is a significant shareholder in these institutions, I must ensure that the banks are run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset to the State. The Relationship Frameworks between the Minister for Finance and each bank define the nature of the relationships with those banks as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. These Frameworks were published on 30 March 2012 and can be found at; http://banking.finance.gov.ie/presentations-and-latest-documents/. As I have stated previously, the Deputy will appreciate that it is an inevitable, but unfortunate, consequence of the necessary restructuring of the banking system – and return to viability - that branches in certain towns and villages will be closed. I appreciate that the branch closures will have an impact on certain towns and villages, but I do expect that all the banks involved to work with their customers to ensure that they minimise the impact of the closures.
However, specifically in relation to Rush, AIB has informed me that the receiving branch will be the Balbriggan branch. Additionally Rush has a post office which will be offering AIB banking services to customers and AIB will retain 3 branches within less than 10 miles of Rush with the closest branch under 5 miles from Rush.
37. Deputy Denis Naughten asked the Minister for Finance the steps being taken to regulate food securities trading on the stock market; and if he will make a statement on the matter. [42245/12]
Amharc ar fhreagraAs outlined to the Deputy previously, food securities trading forms part of the regulation of derivatives. These can be divided into OTC (over-the-counter) derivatives and derivatives traded on exchanges. The regulation of both types of derivatives features in formal proposals by the EU Commission. OTC derivatives are now regulated by the European Markets Infrastructure Regulation (EMIR). This EU Regulation, which is directly applicable in all Member States, entered into force on 16 August 2012.
In relation to derivatives traded on exchanges, the existing regulatory regime which comes from the 2004 EU Markets in Financial Instruments Directive (MiFID) is currently being reviewed at EU level. The negotiations on the MiFID review (‘MiFID 2’ and ‘MiFIR’) are still underway in the Council of the EU and the European Parliament. The trading of derivatives is part of this agenda.
EMIR and MiFID 2/MiFIR are expected to result in a tighter regime for all derivatives, including food securities, whether traded OTC or through exchanges. The measures are intended to keep pace with trends in derivatives trading, and in line with G20 commitments. When finalised, these EU legislative initiatives will come into force in all Member States.
The Central Bank of Ireland is the competent authority in this country for the purposes of derivatives legislation.
38. Deputy Sandra McLellan asked the Minister for Finance the amount of money that would be raised in a full year by limiting the business and agriculture reliefs for Capital Acquisitions Tax by reducing the level of discount on market value before tax is calculated from 90% to 50% and by introducing a €3 million ceiling on the qualifying amount; and if he will make a statement on the matter. [42279/12]
Amharc ar fhreagraI am advised by the Revenue Commissioners that the estimated full year yield from reducing Business Relief and Agricultural Relief from 90% to 50% would be in the region of €30 million and €70 million respectively. In arriving at an estimate of yield from these changes it has been taken into account that a reduction in the Business and Agricultural Reliefs may not produce a corresponding tax increase due to the availability of unused exemption thresholds.
It is not possible to estimate the yield from imposing a ceiling of €3 million on the qualifying amount.
It should be noted that these estimates are based upon an assumption that there would be no behavioural impact from such changes, which could lead to a less than expected result from a change to the tax base. In addition, the realisation of any estimated yield from an increase in taxation on assets relating to property is subject to movements in the value of such assets which are currently occurring in the economy.
