Finian McGrath
Ceist:42. Deputy Finian McGrath asked the Minister for Finance his views on correspondence (details supplied) regarding inheritance tax. [49898/13]
Amharc ar fhreagraTax Code
Ceisteanna (42)
Freagraí scríofa
Capital Acquisitions Tax (CAT) is the overall title for both Gift and Inheritance Tax. The tax is charged on the amount gifted to, or inherited by, the beneficiary of the gift or inheritance.
I am informed by the Revenue Commissioners that for the purposes of CAT, the relationship between the person who provides the gift or inheritance (i.e. the disponer) and the person who receives the gift or inheritance (i.e. the beneficiary), determines the maximum life-time tax-free threshold – known as the “Group threshold” below which gift or inheritance tax does not arise.
There are, in all, three separate Group thresholds based on the relationship of the beneficiary to the disponer.
Group A: tax free threshold €225,000 – applies where the beneficiary is a child (including adopted child, stepchild and certain foster children) or minor child of a deceased child of the disponer. Parents also fall within this threshold where they take an inheritance of an absolute interest from a child.
Group B: tax free threshold €30,150 – applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.
Group C: tax free threshold €15,075 – applies in all other cases.
Each child is therefore separately entitled to receive life-time gifts or inheritances up to the value of €225,000 from his or her parents before any liability to CAT would arise.
In addition to the life-time tax free Group A threshold below which a child is not liable for gift or inheritance tax, there is an exemption from CAT that is separately available for certain dwelling houses under section 86 Capital Acquisitions Tax Consolidation Act (CATCA) 2003. The purpose of this exemption is to benefit individuals who have been living in a house for a period prior to taking the benefit, either by way of gift or inheritance. The main conditions attaching to the exemption are that the beneficiary of the dwelling house must have resided in the house for a minimum of 3 years prior to the gift or inheritance and must not have an interest in any other dwelling house. In addition, the beneficiary must continue to occupy that dwelling house as his or her only or main residence for a period of 6 years commencing on the date of the gift or inheritance.
This exemption ensures that what may be the family home for many people will not be the subject of gift or inheritance tax when it is transferred.
The dwelling house exemption is available to any beneficiary who meets the conditions for the exemption, irrespective of whether or not they are related to the disponer.
Gifts or inheritances that qualify for the dwelling house exemption do not erode a person’s tax free threshold.
For example, a child who qualifies for the dwelling house exemption in respect of a gift or an inheritance taken by him or her of that dwelling house also still fully retains his or her Group A tax free threshold of €225,000 which can separately be applied against the value of other assets received by way of gift or inheritance from his or her parents.
Where a person receives gifts or inheritances in excess of their relevant tax free threshold, CAT at a rate of 33% applies on the excess over the tax free threshold.
There were no changes to CAT in the recent Budget.
Enterprise Support Schemes
Ceisteanna (43)
Michael McCarthy
Ceist:43. Deputy Michael McCarthy asked the Minister for Finance the number of persons in each county that have availed of the start your own business initiative since its introduction in budget 2014; and if he will make a statement on the matter. [49907/13]
Amharc ar fhreagraFreagraí scríofa
In the recent Budget I announced the Start Your Own Business initiative, which provides an exemption from Income Tax for individuals who have been long-term unemployed and start a new, un-incorporated business between 1 January 2014 and 31 December 2016. Legislation is currently proceeding through the Oireachtas to provide for the budget measures. As the scheme has not yet commenced, there are no figures available for the level of take-up.
Universal Social Charge Exemptions
Ceisteanna (44)
Michael McGrath
Ceist:44. Deputy Michael McGrath asked the Minister for Finance if the universal social charge is payable on deposit interest earned by Irish residents in Northern Ireland; and if he will make a statement on the matter. [49911/13]
Amharc ar fhreagraFreagraí scríofa
Deposit interest earned by an Irish tax resident individual in a financial institution in Northern Ireland such as a bank, building society or credit union is exempt from the USC, as is deposit interest earned from similar institutions located in the State.
Mortgage Interest Relief Eligibility
Ceisteanna (45)
Willie Penrose
Ceist:45. Deputy Willie Penrose asked the Minister for Finance the reason a person (details supplied) in Dublin 15 has been refused mortgage interest relief in respect of the purchase of their new house; and if he will make a statement on the matter. [49914/13]
Amharc ar fhreagraFreagraí scríofa
The position is, as I stated on many occasions in this House, in order to qualify for tax relief at source in respect of mortgage interest, a loan must have been drawn down and used in the purchase, repair or development of a principal private residence on or before 31 December 2012 and will be fully abolished from 2018. This decision was announced in Budget 2011 and introduced in Finance Act 2012. I am advised by the Revenue Commissioners that as the loan in question was not used to purchase the new house until 28 January 2013, it does not meet the criteria set down in Section 244 and for that reason it does not qualify for the relief.
Property Taxation Assessments
Ceisteanna (46)
Tom Fleming
Ceist:46. Deputy Tom Fleming asked the Minister for Finance if he will clarify an issue in respect of the local property tax whereby the residents of a house in 2013 who have paid up to date for this year and are now finalising the sale of this house to new owners (details supplied), the position regarding an exemption for 2014 demand for the local property tax on original owners as they have complied with the payment demand for this year; and if he will make a statement on the matter. [49922/13]
Amharc ar fhreagraFreagraí scríofa
In accordance with the Finance (Local Property Tax) Act 2012 (as amended), liability for Local Property Tax (LPT) will arise where a person owns a residential property on the liability date, which was 1 May 2013 for 2013 and for subsequent years, 1 November in the preceding year. As I informed the House previously in my replies to Questions Nos. [49518/13] and [49556/13] on 19 November 2013, where a liable person sells their residential property between 2 November 2013 and 31 December 2013, provided that they owned the property on 1 November 2013, they will be liable to pay LPT on that property for 2014. I also noted that detailed guidance on LPT issues arising in the context of the sale or transfer of a residential property was prepared by the Revenue Commissioners in consultation with the Law Society and is available on the Revenue website at http://www.revenue.ie/en/tax/lpt/sale-transfer-property.html .
For a tax such as LPT to function properly, legislation must specify a liability date for the tax to have application for a particular year. Whatever date is prescribed, the question of liability when there is a change of ownership has to be managed, and I expect that the LPT liability is likely to be factored in during negotiations between the parties on the sale price and the closing date of a particular contract.
An individual selling a property will often be purchasing another property at around the same time. While a vendor who owns a property on 1 November 2013 is liable for the 2014 LPT on that property, if s/he does not purchase another property before 1 November 2013 s/he will not be liable for the 2014 LPT on that "replacement" property - whoever is the owner as of 1 November 2013 will be liable.
In reply to the Deputy’s question as to whether the original owner can claim an exemption from the 2014 LPT charge, the legislation does not provide for an exemption for any vendor who was the liable person for the property on 1 November 2013 (and therefore liable to pay the tax for 2014) but who subsequently sells the property by the end of 2013.
Exchequer Returns
Ceisteanna (47)
Lucinda Creighton
Ceist:47. Deputy Lucinda Creighton asked the Minister for Finance if he will provide the total costs associated with maintaining the cash balances of the State in 2011, 2012 and to date in 2013 arising from the fact that the return on cash and related assets is lower than the cost of borrowing; and if he will make a statement on the matter. [49934/13]
Amharc ar fhreagraFreagraí scríofa
The proceeds of all borrowings by the Exchequer, including borrowing under the EU/IMF programme, as well as tax revenues, non-tax revenues and other receipts, are lodged to the Exchequer account at the Central Bank of Ireland to fund on-going Government expenditure. There are constant flows into and out of the Exchequer account and all moneys within it are fungible. The Government must ensure through its management of expenditure, tax and non-tax receipts and borrowings that there are prudent and adequate balances available to the Exchequer at all times. This also helps to provide investors with the assurance they require that they will be repaid upon the maturity of debt. For small open economies such as Ireland, budgetary aggregates are generally more susceptible to the negative effects of external and internal shocks. In general terms the overall level of cash reserves maintained depends on the amount of liabilities falling due for payment in the short term and the State’s risk appetite in relation to such shocks over the longer term. Particular factors which arise in that context include the international economic situation, the State's debt maturity profile and the projected pattern of Exchequer receipts and expenditure.
The National Treasury Management Agency (NTMA) manages the national debt in order to ensure liquidity for the Exchequer. Decisions regarding the appropriate level of cash and related assets to be maintained take account of various factors in addition to the cost of maintaining such reserves. These factors include the potential risks of not maintaining an adequate and prudent cash balance, including the risk that the Exchequer would be unable to meet its obligations and that market funding rates for Ireland would therefore be higher than would otherwise be the case due to the perception that the State had a precarious liquidity position.
As Ireland returns to funding itself through the debt markets while still running a large though declining budget deficit, the need to hold appropriate cash balances as we emerge from the EU/IMF programme is paramount. The NTMA plans accordingly to have cash on hand as at the end of the programme in December 2013 to cover the Exchequer's full needs for the calendar year 2014 and the early part of 2015. The State earns a return on its cash balances and related assets which the NTMA manages in a prudent manner consistent with minimising risk and always having sufficient cash on hand to cover any volatility which might arise.
Due to the fungibility of the various cash streams flowing into the Exchequer, it is not possible to provide a precise measure of the total cost of maintaining the cash balances in 2011, 2012 and to date in 2013. However, the NTMA has estimated that the difference between the average rate of interest payable on long-term borrowing and the average rate receivable on cash and related assets was in the range 2.4 to 3.1 percentage points in 2011-2012 and 2.7 percentage points in 2013 to date. The inputs to the cost of long-term borrowing include EU/IMF programme funds and the bond issuance done by the NTMA during 2012 and 2013
The NTMA continues to keep the quantum, maturity and timing of market funding under review based on its assessment of what is required to regain full market access and the overall level of cash balances that it is prudent to maintain. It is the intention to run lower cash balances in the coming years and this has been reflected in the Budget 2014 projections.
Irish Fiscal Advisory Council Reports
Ceisteanna (48)
Lucinda Creighton
Ceist:48. Deputy Lucinda Creighton asked the Minister for Finance if he will list, since the Irish Fiscal Advisory Council came into effect in December 2012, the specific number of policy or technical measures assessed by the Irish Fiscal Advisory Council that were not being implemented by him or his Department under section 8(2), (3) and (4) of the Fiscal Responsibility Act 2012 where the Fiscal Council favoured change; the specific actions taken by him or his Department in reaction to assessments by the Irish Fiscal Advisory Council of measures they were not adopting which the Irish Fiscal Advisory Council favoured change; and if he will make a statement on the matter. [49962/13]
Amharc ar fhreagraFreagraí scríofa
I assume that the Deputy is asking me to set out possible actions or recommendations made by the Fiscal Council since December 2012 that were not implemented by me or my Department. As the Deputy may be aware, the Irish Fiscal Advisory Council was established on an interim basis in July 2011 and on a statutory basis in December 2012 under the Fiscal Responsibility Act 2012. The Act was subsequently amended by the Ministers and Secretaries (Amendment) Act 2013 to assign it the further function of endorsing the macro-economic forecasts as set out below, along with the Council’s other functions. These are;
- To endorse, as it considers appropriate, the macro-economic forecasts prepared by the Department of Finance on which the Budget and Stability Programme Update are based.
- To assess the official forecasts produced by the Department of Finance.
- To assess whether the fiscal stance of the Government is conducive to prudent economic and budgetary management, with reference to the EU Stability and Growth Pact (SGP).
- To monitor and assess compliance with the budgetary rule as set out in the Fiscal Responsibility Act. The budgetary rule requires that the Government’s budget is in surplus or in balance, or is moving at a satisfactory pace towards that position.
- In relation to the budgetary rule, to assess whether any non-compliance is a result of ‘exceptional circumstances’. This could mean a severe economic downturn and/or an unusual event outside the control of Government which may have a major impact on the budgetary position.
The Fiscal Council’s most recent Fiscal Assessment Report published in April 2013, is the only assessment report published since December 2012. In this report the Fiscal Council assessed the fiscal stance as appropriate. In addition, the Fiscal Council set out its views in relation to a wide range of macro-economic and fiscal matters. The key points of relevance to the question are set out below:
- In chapter 2 on the assessment of Budgetary Forecasts the Council state:
"While the budgetary outlook has improved, significant macro-economic and public finance risks remain. The Budget 2013 projections assume the delivery of sizable expenditure savings. Achieving these savings, notably in the health sector, will be a key challenge."
The position is that the delivery of the required expenditure consolidation in 2013 is a priority for all Ministers and their Departments. The Department of Public Expenditure and Reform is working with all Departments and Offices to monitor voted expenditure. At the end of October 2013, net voted expenditure was €844 million behind profile. This highlights that in aggregate expenditure is being managed well within the targets for the year.
- In Chapter 3 on the assessment of Compliance with Fiscal Rules, the Council commented:
"The structural budget balance plays a key part in the domestic and EU fiscal rules. However, this poses serious measurement challenges. These need to be addressed both at EU level and by the development of a more comprehensive domestic analysis."
My Department has stated previously that measuring and projecting the structural balance for a small open economy such as Ireland is challenging because it involves unobservable items such as the output gap, the future path of potential GDP and adjusting the deficit for the impact of economic cycle. Structural balance estimates, by their nature, are subject to revision. At EU level, the Commission is investigating alternate model-specifications to improve estimates of the output gap, particularly around turning points in the economic cycle. My Department is working on improving the empirical rigour of its output gap modelling.
- In chapter 4 on the assessment of the Fiscal Stance, the council stated the following:
"The suggested margin of safety has therefore been broadly achieved under the Government’s current plans and so the Council is no longer making the case for €1.9 billion in additional adjustments in this assessment. However, the Council’s assessment is that the planned adjustments of €3.1 billion in 2014 and €2.0 billion in 2015 should not be reduced."
The call for an additional €1.9 billion had been made in the September 2012 Fiscal Assessment Report. Government considered the proposal taking account of the potential impact additional consolidation could have on economic activity. Given the need to protect the emerging economic recovery, it was decided to stick to the previously announced consolidation strategy. In the intervening period, significant changes occurred, including the restructuring of the promissory note. In relation to Budget 2014, the Government did introduce a budgetary adjustment of €3.1 billion including tax increases and expenditure cuts worth €2.5 billion. Government decided to do this to help ensure a continued return to economic growth while also ensuring that fiscal sustainability was demonstrated by targeting a fiscal deficit below the required limit coupled with a small primary balance.
- The Council also stated that:
"Budget-impacting developments will have to be monitored closely, with particular attention paid to any shortfalls in growth and the effective implementation of expenditure-reduction plans."
It should be noted that budgetary outturns for both revenue and expenditure are closely monitored by the Department of Finance and the Department of Public Expenditure and Reform. Outturns for Exchequer revenue and issues are published on the second working day of the following month, thereby ensuring difficulties, if any, will be identified and can be acted upon, if required.
- Finally the Council stated that:
"A robust return to State creditworthiness – which has continued to show the improvement highlighted in the September 2012 Fiscal Assessment Report – would be further reinforced by post-programme precautionary funding arrangements and extensions to the maturities on official loans."
The Government decided on 14 November that Ireland is now in the best position to exit the EU-IMF programme of financial assistance on December 15 without the need to prearrange a new precautionary credit line from our EU and IMF partners. Following a careful and thorough assessment of all of the available options, and various consultations with the European Commission, the ECB, the IMF, the President and members of the Eurogroup, the Governor of the Central Bank of Ireland and the NTMA, the decision was taken to exit the programme without a prearranged precautionary facility or backstop. The Economic Adjustment Programme for Ireland includes a joint financing package of €85 billion which includes contributions from the EU/EFSM of €22.5 billion, and from the euro area Member States/EFSF of €17.7 billion. Agreement in principle was reached at the 12th – 13th April 2013 informal Eurogroup and ECOFIN meetings in Dublin to increase the maximum average maturity of both types of loan by a further 7 years, bringing the total maximum average maturity of the EFSF loans to 22 years, and the EFSM loans to 19.5 years. The 20th - 21st June meetings of Eurogroup and ECOFIN formally approved these extensions. The principal benefits of the maturities extension is the smoothing of our debt redemption profile, the consequent improvement in our ability to fund ourselves in the financial markets and the beneficial impact on our debt sustainability.
Property Taxation Administration
Ceisteanna (49, 50)
Róisín Shortall
Ceist:49. Deputy Róisín Shortall asked the Minister for Finance if persons who paid their 2013 local property tax by cash, cheque-postal order or single debit authority and did not receive a LPT1A payment instruction form for 2014 are assumed to be paying by the same methods for 2014, as is the case of those who pay through deduction at source; and if he will make a statement on the matter. [49963/13]
Amharc ar fhreagraRóisín Shortall
Ceist:50. Deputy Róisín Shortall asked the Minister for Finance when letters will issue to persons who alerted the Revenue Commissioners that they did not receive their LPT1A payment instruction form for 2014; and if he will make a statement on the matter. [49964/13]
Amharc ar fhreagraFreagraí scríofa
I propose to take Questions Nos. 49 and 50 together.
I am advised by the Revenue Commissioners that letters were issued in October 2013 to over 980,000 property owners who paid their 2013 LPT by lump sum (that is, by debit or credit card, cash, cheque, postal order or single debit authority) or by way of regular cash payments. These owners were requested to decide how they wished to pay their LPT in respect of 2014, and confirm this to Revenue by the relevant deadline. This is because these payment methods did not automatically apply in 2014.
I am also advised that property owners who filed a paper LPT1 Return for 2013 received a Form LPT1A (payment instruction) with their letter. These owners could then choose whether to confirm their payment method for 2014 either in paper or on-line by the relevant deadline. Property owners who filed their LPT1 Return for 2013 on-line did not receive a paper Form LPT1A (payment instruction) with their letter. These owners were advised to access their LPT Record on-line using their Property ID, Property PIN and PPSN or tax reference number and to confirm their payment method for 2014 by 27 November 2013.
The Commissioners have confirmed that a small residue of property owners who had raised queries with Revenue or who had unresolved issues on their property records were not included in the bulk issue of letters to property owners in October. In these cases, a letter will issue to the property owner, along with a Form LPT1A for those filing in paper, when the relevant issue has been resolved. These property owners can be assured that they will be afforded adequate time to confirm their payment method for 2014 and this will be outlined in the letter they receive from Revenue.
Finally, property owners who paid their 2013 LPT by deduction at source from salary, occupational pension or certain Government payments, or direct debit, those who opted to defer their full LPT liability and those who claimed an exemption, did not receive a letter from Revenue as all of these options will continue to apply for 2014. No action is required to be taken by these property owners, unless they wish to change to a different payment method for 2014.