Mick Wallace
Ceist:44. Deputy Mick Wallace asked the Minister for Finance the reason behind the introduction of a deferral system as part of the local property tax; and if he will make a statement on the matter. [14058/13]
Amharc ar fhreagraProperty Taxation Collection
Ceisteanna (44)
Freagraí scríofa
In February 2012, the Minister for the Environment, Community and Local Government established an Inter-Departmental Group under the chairmanship of Dr. Don Thornhill – the “Thornhill Group” – to consider the structures and modalities for a full property tax. As part of their terms of reference the Thornhill Group were to consider the design of a property tax to replace the household charge which is equitable and is informed by previous work and international experience. In designing the tax the Thornhill Group were guided by, inter alia, the principles of simplicity, transparency, equity and efficiency. The Thornhill Group had due regard to issues such as ability to pay and considered the provision of waivers or deferrals for households unable to pay the tax or where a payment requirement would cause hardship.
When considering reliefs, the Thornhill Group had regard to the following issues:
- The arrangements for payment of tax due arising from the ownership of properties should have regard to the ability of the owners to pay.
- Reliefs create costs which have to be paid for – either by taxpayers not benefiting from them, or by reductions in public expenditure.
- Reliefs should be designed to address clear economic and social policy needs.
- Considerable care would need to be taken in designing reliefs to ensure that the gains from the reliefs are targeted based on need and that there are not unintended and inequitably distributed gains.
- The LPT will not be assessed on incomes.
The Thornhill Group favoured allowing voluntary deferrals rather than waivers. Deferrals focused on particular categories of householders can address cases where there is an inability to pay the LPT. Income related waivers were considered to be an inefficient and costly method of targeting reliefs. They run the risk of creating inequities between taxpayers in broadly comparable situations. Income related waivers also create poverty traps and employment traps resulting in work disincentives. As a general principle, eligibility for deferral should be based on gross income.
The Group also stated that, in current circumstances, an additional case can be made to target assistance on owner occupiers suffering severe financial stress as a result of housing mortgage commitments undertaken during the housing boom period, aggravated in some cases now by reductions in income. The Government agreed with the recommendations of the Thornhill Group with regard to income related reliefs. The Government decided, as a matter of policy, and in order to keep the rate of the tax low, that universal liability should apply, and that reliefs should be targeted at owner occupiers where there is inability to pay the tax.
The deferral thresholds in the Local Property Tax legislation were based on the recommendations of the Thornhill Group. In recommending the thresholds the Group had regard to analysis it commissioned from the ESRI. An income level of €25,000 for joint and co-owners/spouses/civil partners/cohabitees was recommended in order to enable most households in the lowest 40% of income levels to have the option of deferral. This is considered appropriate, having regard to the findings in the ESRI study regarding potential impacts on households and having regard to the need for balance and equity in terms of the burden thereby imposed on those with higher (but still average or below average) incomes. The ESRI report notes that increasing the income thresholds will have an impact on the rate of property tax that will be applied. As the income threshold increases the rate would also be required to increase to achieve the same revenue yields.
The Government accepted the gross income thresholds for a full deferral, as recommended by the Thornhill Group, and adapted the recommended gross income thresholds for a partial deferral so that they are €10,000 rather than €5,000 above the thresholds for a full deferral.
Accordingly, the Finance (Local Property Tax) Act 2012 (as amended) provides for the possibility of deferring the charge to LPT for individuals on low incomes in certain cases. To qualify for a deferral, the residential property must be occupied as a sole or main residence. The gross income thresholds for a full deferral will be €15,000 for a single person and €25,000 for a couple, whether married persons, civil partners or cohabitants. A person may claim a deferral if their gross income will not “as can reasonably be foreseen at the liability date” exceed these thresholds in that year.
An increased gross income threshold applies in the case of properties occupied as a sole or main residence and subject to a mortgage. In such cases, the gross income thresholds may be increased by 80% of the mortgage interest payments. A deferral option in qualifying cases in this regard will apply until the end of 2017 and will assist individuals currently in mortgage distress.
A deferral of up to 50% of the LPT liability will be possible where the gross income of the liable person does not exceed €25,000 for a single person or €35,000 for married persons/civil partners/cohabitants.
A deferral of 50% of the LPT will also be available where gross income does not exceed the above thresholds (€25,000 single, €35,000 couple) as increased by 80% of the gross mortgage interest payments that a liable person expects to make by the end of the year for which the gross income is being estimated. This type of deferral will also be available until 31 December 2017.
Where a liable person no longer satisfies the necessary conditions, amounts deferred prior to the date on which eligibility ceased may continue to be deferred. Interest of c. 4% per annum will apply to any amounts deferred. The deferred amount, including interest, will attach to the property and will have to be paid before the property is sold or transferred.
Gross income from all sources consists of total income before any deductions, allowances or reliefs that may be taken off for income tax purposes and includes income that is exempt from income tax and income from the Department of Social Protection but excludes Child Benefit.
I appreciate that some property owners may find themselves unable to pay Local Property Tax but do not qualify for a deferral under the income thresholds. For this reason, additional reliefs introduced in the Finance (Local Property Tax) (Amendment) Act 2013 provide that a person who has entered into an insolvency arrangement under the Personal Insolvency Act 2012 may apply for deferral of the LPT that is due during the period for which the insolvency arrangement is in effect. The 2013 Act also provides that a person who suffers both an unexpected and unavoidable significant financial loss or expense, as a result of which he or she is unable to pay their LPT without causing financial hardship, may apply for full or partial deferral.
Banking Sector Remuneration
Ceisteanna (45)
Jonathan O'Brien
Ceist:45. Deputy Jonathan O'Brien asked the Minister for Finance his views on the fact that even after a 10% cut the salary of the CEO of Bank of Ireland will still be more than €500,000. [14084/13]
Amharc ar fhreagraFreagraí scríofa
When publishing the Review of Remuneration Practices and Frameworks at the Covered Institutions, on 12 March 2013, I indicated that the Government had formed the view that with the remaining covered institutions still incurring losses it was an inescapable conclusion that the cost base of the institutions needs to be reduced further. This is essential if they are to return to profitability, be in a position to support the economy and repay the State’s investment through a return to private ownership. On behalf of the Government, I have now directed the banks to come up with plans as to how they intend to address this issue in a manner that can help meet the State’s objectives. I expect the value of those plans to mean a saving of 6% - 10% of total remuneration costs, through reductions in payroll and pension benefits, new working arrangements and structures that deliver efficiency gains.
The Review states strong leadership will be required from the management of the institutions, with industrial relations difficulties to be addressed and managed, in order to execute the above policy. In these circumstances, I do not believe it appropriate to focus in on an individual’s salary. The Deputy will note that the Review opined that salaries at the senior executive level (and above), at the three remaining covered institutions, are generally behind the market as compared to quoted Irish companies and the Mercer European Financial Services survey.
Eurozone Crisis
Ceisteanna (46)
Bernard Durkan
Ceist:46. Deputy Bernard J. Durkan asked the Minister for Finance his objectives in the course of Ireland’s Presidency of the EU with particular reference to the need to convince his EU colleagues and institutions regarding the importance of their need to recognise the economic sacrifices made by the Irish people arising from the consequences of the financial bailout which he inherited from his predecessors and the need for a substantial alleviation of this burden in the future; his views on whether progress can be achieved in this regard in the next six months; and if he will make a statement on the matter. [14020/13]
Amharc ar fhreagraFreagraí scríofa
The theme of the Irish Presidency is Stability, Jobs and Growth, which is pertinent for both Ireland and the EU as a whole. As President of the ECOFIN Council I will continue to pursue the objectives set out in the ECOFIN work programme of the Irish Presidency of the European Union which were outlined to the ECOFIN Ministers on January 22nd last. This document set our ambitions on financial services dossiers (including the Banking Union proposals), economic governance and taxation measures. In respect of work on the Banking Union proposals we have achieved support on a compromise package reached with the European Parliament on the Capital Requirements Directive IV. Provisional agreement was recently reached with the European Parliament on the Single Supervisory Mechanism. The Bank Recovery and Resolution proposals are proceeding well in the Council and European Parliament.
Making progress on the banking union proposals is of particular importance, both to Ireland and to the wider EU, as a way of breaking the vicious circle between banks and sovereigns. In so doing we will be fulfilling the goal set down by the Heads of State and Government on the 29 June 2012.
Agreement has been achieved with the Commission and European Parliament on the "two pack" of economic surveillance measures for the Eurozone and this reflects the final part of this set of agreed proposals on improved economic governance. The Irish Presidency has also worked to ensure the smooth operation of the European Semester process across the ECOFIN Councils in January, February and March.
The Deputy will appreciate that there is a need for the Presidency to remain impartial in order to be able to seek and achieve agreement with European partners on our Presidency agenda.
That being said, I am happy to inform the Deputy that I am satisfied that there is clear awareness among my ECOFIN colleagues - and indeed across the whole EU - of the actions being taken by this Government to bring stability to our public finances and banking system and in that context an awareness of the economic sacrifices being made by the Irish people arising from these actions.
I am also happy to inform the Deputy that there have been some recent positive developments, which will assist in our return to more normal economic and fiscal conditions. I refer in particular to:
- The agreement at the March Eurogroup and Ecofin, to ask the Troika to come forward with a proposal for their best possible option for an adjustment of the maturities on the EFSF and EFSM loans for Ireland and Portugal. In this regard it is important to note that, in advance of the Troika coming forward with proposals at the recent Eurogroup, Finance Ministers agreed to an adjustment of maturities on the loans of the EFSF.
- The enactment of the Irish Bank Resolution Corporation Act 2013 to provide for the winding up of Irish Bank Resolution Corporation in an orderly and efficient manner, which resulted in the removal of emergency liquidity assistance (ELA) from the Irish financial system.
- The ending of the Eligible Liabilities Guarantee Scheme for new liabilities incurred after the 28th of March 2013. This marks an additional significant step in the normalization of our banking system and reduces substantially the associated contingent liability of the State.
- The successful conclusion of the ninth review mission of our EU-IMF Programme. In line with each of the previous quarterly reviews, Ireland has met all of its commitments and our continued strong programme implementation has been recognized by the Troika.
- The successful issuance of treasury bills and longer term bonds by the NTMA in 2012 and 2013, together with the continued Irish yield contraction, which shows improved sentiment and reduced risk perception towards Ireland.
These outcomes were achievable primarily as a result of the Government’s determined and steady management of Ireland’s economy, the goodwill and support of our EU partners and the EU Institutions and the improved perception of Ireland in financial markets. These outcomes have also arisen from improving our relations with EU partners and institutions and improving these relations has been part of the aims of my Department as set out in the recently published Department of Finance Review 2012.
Property Taxation Exemptions
Ceisteanna (47)
Alan Farrell
Ceist:47. Deputy Alan Farrell asked the Minister for Finance his views on the possibility of including all homes that have tested positive for category 1 pyrite to receive an exemption from the property tax; and if he will make a statement on the matter. [12663/13]
Amharc ar fhreagraFreagraí scríofa
Section 10A of the Finance (Local Property Tax) Act 2012 (as amended) provides for an exemption for a temporary period from the charge to Local Property Tax (LPT) for residential properties that have been certified as having “significant pyritic damage”. This is in line with the recommendation of the independent Pyrite Panel established by my colleague, the Minister for the Environment, Community and Local Government. I am advised by the Minister that he will be making regulations shortly setting out the methodology for the assessment of dwellings to establish significant pyritic damage. The primary route for homeowners to demonstrate significant pyritic damage will be in accordance with the recently published standard by the National Standards Authority of Ireland, IS 398 – Reactive Pyrite in sub-floor hardcore material – Part 1. This standard provides guidance on the visual condition assessment, sampling regime and testing to be carried out. The standard must be used for all assessment and testing undertaken after its publication date of 29 January 2013. The Revenue Commissioners will not be carrying out tests for pyrite. I am assuming that, by “category 1 pyrite”, the Deputy is referring to “damage rating 1” under IS 398. I am advised by the Minister for the Environment, Community and Local Government that “damage rating 1” will not qualify as “significant pyritic damage” and therefore will not qualify for an exemption from LPT. I am not proposing to change the exemption as provided for in the LPT legislation.
IBRC Liquidation
Ceisteanna (48)
Eamonn Maloney
Ceist:48. Deputy Eamonn Maloney asked the Minister for Finance if he will provide an update on negotiations between staff of the Irish Bank Resolution Corporation and the special liquidator (details supplied); and if he will make a statement on the matter. [13940/13]
Amharc ar fhreagraFreagraí scríofa
There is ongoing communication between the employees and the Special Liquidators of IBRC which is not confined to meetings with the IBOA, including the announcement on Tuesday 19 March by the Special Liquidators that contracts of staff would be extended out to 7 August with one month’s notice thereafter. This should provide significant reassurance to IBRC staff relative to the common position in liquidations where staff contracts are terminated on liquidation. I am advised that the Special Liquidators met with the IBOA on Monday 11 March. This was the earliest possible date following the unavoidable postponement of the previously arranged meeting of Wednesday 6 March and the IBOA’s unavailability on Thursday and Friday, 7 and 8 March. The Special Liquidators continue to engage with the IBOA.
Mortgage Arrears Proposals
Ceisteanna (49)
Dara Calleary
Ceist:49. Deputy Dara Calleary asked the Minister for Finance the way he plans to deal with the mortgage arrears crisis in the buy-to-let sector in a manner that does not disrupt the overall well-being of the economy; and if he will make a statement on the matter. [14029/13]
Amharc ar fhreagraFreagraí scríofa
The Central Bank of Ireland when it published its mortgage arrears data for end of September 2012 also, for the first time, included data on buy-to-let properties. The focus by Government is primarily on formulating and implementing appropriate measures to assist those homeowners who are experiencing genuine difficulty with the mortgage repayments on their principal home. In that regard, the ‘Keane Report’ made a number of key recommendations and the Government is now actively progressing the implementation of those main recommendations. However, some of these initiatives will also be of assistance in addressing significant ‘buy to let’ mortgage arrears and over indebtedness. The Deputy will be aware that last week the Central Bank announced new measures to address mortgage arrears, including the publication of performance targets for the main mortgage banks in respect of principal dwelling homes and the buy-to-let sector. This new approach is aimed at ensuring that banks offer and conclude sustainable solutions for their customers in arrears by setting performance targets and proposing revisions to provision standards. Banks will be required to make regular returns to the Central Bank on their performance against the published targets. The Central Bank will consider each bank’s performance against the targets, including assessing whether sustainable solutions have been offered to customers. Assessments will be carried out towards the end of 2013 and 2014 and the outcome of these assessments will determine whether targets have been met. If banks are deemed not to have met the targets they may be subject to regulatory and supervisory actions by the Central Bank.
Economic Growth
Ceisteanna (50)
Éamon Ó Cuív
Ceist:50. Deputy Éamon Ó Cuív asked the Minister for Finance if he is concerned by the slowdown in the European economy in the fourth quarter of 2012; the discussions he has had with his ECOFIN colleagues to stimulate growth in the European Union; and if he will make a statement on the matter. [14044/13]
Amharc ar fhreagraFreagraí scríofa
In 2012, the slowdown of the European economy was larger than expected. However, fourth quarter data suggest that the euro area economy bottomed out at the end of 2012. Recent high-frequency indicators have provided some positive signals: euro area PMI data improved significantly in January to reach a 10-month high, the European Commission’s Economic Sentiment Indicator has increased well above economists’ expectations and euro area industrial production increased by 0.7 per cent in December. In its latest assessment, the European Commission predicts subdued activity in the first half of 2013 followed by a gradual recovery in the second half of the year. In relation to Ireland, figures published earlier today show GDP increased by 0.9 per cent last year, the second year of positive growth. While modest, the figures are encouraging. They suggest that the policy-mix sequence followed by the government has been appropriate. They also show that fiscal consolidation should not be regarded as an antithesis to growth, but rather as a precondition for it.
Nonetheless, such effort has to be balanced. Sluggish economic activity and high unemployment have broadened the consensus in Europe for policies more supportive of growth. In this regard, in June 2012, EU Heads of State or Government agreed on a "Compact for jobs and growth" which includes inter alia reorienting of structural funds, a €60bn increase of the European Investment Bank’s lending capacity and a commitment to remove regulatory barriers to economic growth.
Also, to prevent fiscal retrenchment from undermining growth prospects, the ECOFIN of February 2013 emphasized the importance of a "differentiated, growth-friendly consolidation strategy" in the EU.
IBRC Liquidation
Ceisteanna (51)
Aengus Ó Snodaigh
Ceist:51. Deputy Aengus Ó Snodaigh asked the Minister for Finance his views on whether it is acceptable to appoint a legal firm, which heretofore was a creditor of the Irish Bank Resolution Corporation while acting as legal advisors to the bank, in the drafting of the legislation designed to liquidate that bank and in the process burn creditors. [14083/13]
Amharc ar fhreagraFreagraí scríofa
I can advise the Deputy that providing previous legal services to IBRC would not in itself preclude a firm from advising in support of the preparation of the IBRC legislation and the arrangement involving the IBRC Promissory Notes. As the Deputy is aware, there is a small pool of sufficiently resourced legal firms operating in Ireland and it is likely that a number of these would have provided legal advice to IBRC, and therefore have been a creditor. Legal advisors have an obligation to act in a professional manner and systems and procedures are in place to ensure that confidentiality is maintained.
IBRC Mortgage Loan Book
Ceisteanna (52)
Thomas P. Broughan
Ceist:52. Deputy Thomas P. Broughan asked the Minister for Finance if he has received any updates on the arrangements that are being put in place for the mortgages of citizens in the now liquidated Irish Bank Resolution Corporation and in Irish Nationwide; if this will include the transfer or selling on of these mortgages to other financial institutions; and if he will make a statement on the matter. [13938/13]
Amharc ar fhreagraFreagraí scríofa
I am advised that it is the intention of the Special Liquidators to package and sell the mortgage book as a portfolio. Borrowers (whose total debt is in excess of an amount to be determined by the Special Liquidators), third parties and other financial institutions will be given the opportunity to bid for specific portfolios (or component parts thereof) as part of an open and transparent process.
Strategic Investment Bank Establishment
Ceisteanna (53)
Caoimhghín Ó Caoláin
Ceist:53. Deputy Caoimhghín Ó Caoláin asked the Minister for Finance the progress made on the programme for Government commitment to establish a strategic investment bank. [14069/13]
Amharc ar fhreagraFreagraí scríofa
The establishment of the Strategic Investment Fund (SIF) was announced by the Government in September 2011. Resources from the National Pensions Reserve Fund (NPRF) will be channeled through the SIF towards productive investment on commercial terms in the Irish economy. The SIF will seek matching commercial investment from the private sector in order to maximise the resources of the NPRF. The immediate priority for the Government is to put NewERA on a statutory footing and reorient the NPRF into a Strategic Investment Fund which will make strategic investments to support economic activity, competitiveness and employment in Ireland. Officials of my Department are liaising with the National Treasury Management Agency, which is the Manager of the NPRF, in identifying and drafting the necessary legislation to achieve this objective.
Establishing a Strategic Investment Bank is a considerably more complex and time-consuming process than establishing the SIF. Given the need in the short term to enable the SIF make investments to support economic activity and employment in Ireland, the development of the SIF and drafting of necessary legislation is being prioritised.
Economic Policy
Ceisteanna (54)
Mary Lou McDonald
Ceist:54. Deputy Mary Lou McDonald asked the Minister for Finance the way the two pack discussed at ECOFIN will change the budgetary process here. [14067/13]
Amharc ar fhreagraFreagraí scríofa
The Irish Presidency of the Council of the EU has secured agreement on 20th February 2013, on behalf of euro area member countries, with the European Parliament and the European Commission, on two proposed regulations – the “two-pack”. It is expected that the measures will be formally adopted in May or June 2013. One of the proposals is on the monitoring and assessment of draft budgetary plans and on ensuring the correction of excessive deficits. The other is on the strengthening of economic and budgetary surveillance and sets out explicit rules for enhanced surveillance of countries experiencing or threatened with financial difficulties. The key requirements under the “two-pack” which impact our budgetary process are:
- The draft budget for central government and the main parameters of the draft budgets for all the other sub-sectors of the general government must be published by the 15th of October each year;
- The draft budget must be based on independent macroeconomic forecasts which are defined as forecasts produced or endorsed by an independent body; and
- The budget for the central government must be adopted or fixed upon and published by the 31st of December each year.
The potential impact of these provisions on the budgetary timeline and the budgetary process are being considered and discussed by my Department and the Department of Public Expenditure and Reform. Other relevant Departments, such as the Department of Environment, Community and Local Government in relation to the local government sub-sector of general government, are also being consulted. When this process is completed in the near future, the Minister for Public Expenditure and Reform and I will bring a Memorandum to Government setting out our proposals to meet the requirements I set out above.
Deputies should also be aware that the “two-pack” specifies that all euro area Member States, not in a macroeconomic adjustment programme, will be required to submit to the Commission and the Eurogroup and make public a draft budgetary plan, which is separate to the draft budget, no later than 15 October each year.
The draft budgetary plan, which will be in a harmonised format, will be assessed by the Commission, which shall adopt an opinion on it by the end of November. The draft regulation also provides that the Commission may request a revised draft budgetary plan in exceptional circumstances where it identifies particularly serious non-compliance with the budgetary obligations laid down in the Stability and Growth Pact.
I can assure the Deputy that all necessary action will be taken to ensure that Ireland complies with the new requirements.