Written Answers Nos. 1-30
10. Deputy Michael McGrath asked the Minister for Finance the position regarding the formal investigation being undertaken by the European Commission into Ireland's corporation tax arrangements with a company (details supplied); if the Irish authorities have co-operated fully with the investigation; the investigation will be concluded; and if he will make a statement on the matter. [4669/15]
Amharc ar fhreagraLast year, the Competition Directorate of the European Commission announced their intention to open formal state aid investigations into tax rulings provided to a number of companies in various Member States of the European Union.
This announcement is part of a much wider review of tax ruling practice that is currently being undertaken by the European Commission and recently the Commission announced that it was broadening its enquiries to include all Member States.
As the Commission have acknowledged, Ireland has co-operated fully with the process to date and will continue to do so.
I would like to emphasise that, while the Commission has opened a formal investigation in relation to one particular case involving Ireland, it has not made a final determination in the matter. For state aid to exist in this case, less tax must have been charged to the company than should have been applied under our domestic legislation, and this must have distorted competition within the single market.
As part of this formal investigation, the Commission wrote to Ireland to ask for our response to their concerns in relation to the particular case. Ireland has responded to this letter, comprehensively addressing the Commission's concerns and making it clear that the appropriate amount of Irish tax was charged in accordance with the relevant legislation, that no selective advantage was given and that there was no state aid. This is a confidential matter between Ireland and the Commission and I am not in a position to comment on the specific details of our response as the matter is subject to a formal process of investigation and relates to a specific taxpayer.
While it would not be appropriate to speculate on the outcome at this stage, I remain confident that there was no breach of State aid rules in this case and that the legislative provisions were correctly applied. The Commission have indicated publicly that they expect to make their final decision on this issue in the first half of 2015.
After an investigation such as this, the Commission may decide that there is no state aid after a Member State provides the additional information and clarification.
However, in the event that the Commission forms the view that there was state aid, Ireland is entitled to challenge this decision in the European Courts. As I and my colleagues in Government have already indicated, we will take that course of action, if necessary, to continue to vigorously defend the Irish position.
11. Deputy Paul Murphy asked the Minister for Finance the cost each year of tax exemptions for real estate investment trusts; and if he will report on the impact of REITs on the housing market. [4697/15]
Amharc ar fhreagraThe tax framework for Real Estate Investment Trust companies was introduced into law in Finance Act 2013. My officials have been advised by the Revenue Commissioners that there is no tax return data available yet in relation to the three REITs that have been established:
- The first REIT to be listed on the Irish Stock Exchange was the Green REIT plc in July 2013 but my understanding is that this REIT did not make its first property investment until November 2013.
- The second Irish REIT, Hibernia REIT plc, listed in December 2013 and did not make its first acquisition of property until the early months of 2014.
- The third Irish REIT, Irish Residential Properties REIT plc, listed in April 2014 with an existing portfolio of over 300 residential units and commenced to make further property acquisitions shortly thereafter.
The first REIT corporation tax returns and accounts are not expected before the end of the first quarter of 2015 and it should be noted that such returns and accounts will be of somewhat limited value in attempting to ascertain tax costs associated with REITs. The function of the REIT framework is not to provide an overall tax exemption, but rather to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply to property investment via a corporate vehicle.
As such, the estimated cost attached to REITs relates not to an exemption from tax, but rather to the move from direct taxation of rental income in the hands of investors, to the taxation of dividends distributed to investors from REIT profits arising from that rental income. The REIT legislation requires that 85% of all property income profits be distributed annually to shareholders.
As regards the taxation of the REIT itself, REITs are investment vehicles that are specifically designed to hold rental investment property. They are focused on long-term holding of income-producing property. They are not designed to undertake development activities, or as a vehicle for short-term speculative gains.
A REIT is allowed to do a very limited amount of development of its rental assets up to 30% of the value of any property without impairing its REIT status. This is allowed in order that a REIT may finish out a nearly-complete property, or carry out periodic refurbishments.
If the REIT exceeds these limits and does not subsequently hold the completed property for at least three years as a rental asset, any gain on the sale of the developed property will not qualify for the REIT exemption and will be subject to tax under the normal rules.
With regard to the housing market, the Deputy will be aware that Construction 2020 Strategy: A Strategy for A Renewed Construction Sector sets out the Government's strategy to address a number of issues being faced in the property and construction market and remove blockages from the system in order to get the market moving and increase supply. Some 75 time-bound actions are included in the Strategy, my Department is party to a range of actions which, among other issues, focus on:
- housing supply, with particular attention directed at planning issues and appropriate and sustainable development financing;
- transparent and sustainable mortgage lending;
- the application of the tax code to the construction and property sectors; and
addressing legacy issues associated with the property bubble.
This includes facilitating the sustainable and professional development of the private rented sector. Historically the private rented sector in Ireland has been characterised by small-scale landlords. Attracting large scale investment in professionally managed residential property, for example using Real Estate Investment Trusts and other options for long-term investment, can have an important role to play in helping to deliver the professional high-standard sector that tenants deserve.
I have introduced a number of targeted initiatives in various budgets since 2011 to aid in revitalising the property and construction sectors and to help increase the supply of suitable residential housing stock in certain urban areas where supply limitations are most pronounced, including the introduction of the REIT tax framework in Budget 2013.
The acquisition and management of properties by professional REITs is part of a more sustainable, long-term property rental market for both investors and property tenants. While commercial property investment has been a key focus for some of the REITs launched to date in Ireland, residential property also forms part of the sector's interest and exposure. For example, since its launch in April 2014, Irish Residential Properties REIT, the first Irish REIT with a primarily residential property investment focus, has built up a portfolio of high quality Dublin residential properties. It recently reported that as of September 2014 it had acquired 1,204 residential units which it was professionally operating with an occupancy rate of c. 99%.
We must remember that the REIT regime is in its relative infancy in Ireland. We expect the sector to continue to develop over time and in so doing to increase the supply of professionally managed, good quality, secure and affordable rented accommodation.
12. Deputy Pearse Doherty asked the Minister for Finance the measures he will bring forward to prevent banks moving to repossess family home before all other solutions have been exhausted; and if he will make a statement on the matter. [4655/15]
Amharc ar fhreagraThis Government is tackling the issue of mortgage arrears head on. We overhauled the structures to support customers in arrears to find solutions. The Deputy will be aware that the Government's Strategy to address the problem of mortgage arrears was formulated in response to the recommendations of the Keane Report (2011) and the main elements of it are:
- Engagement with the banks to develop appropriate measures for their customers in mortgage arrears;
- Personal insolvency law reform and implementation;
- Mortgage to rent; and
- A Mortgage Advisory function
The strong view of the Government is that, in respect of co-operating borrowers under the Mortgage Arrears Resolution Process, repossession of a person's primary home should only be considered as a last resort and that every effort should be made to agree a sustainable arrangement as an alternative to repossession. Even after the commencement of the legal process, it will be possible for lenders and borrowers to re-engage and it will be in the best interest of all parties if that happens.
The Deputy will be aware of the Code of Conduct on Mortgage Arrears (CCMA), issued under Section 117 of the Central Bank Act, 1989. This Code provides that a lender may only commence legal proceedings for repossession where the lender has made every reasonable effort to agree an alternative repayment arrangement with the borrower or his/her nominated representative and the specific timeframes set out in the Code have adhered to or the borrower has been classified as not co-operating. In the case of not co-operating borrowers, before classifying a borrower as such, a lender must write to the borrower to notify them that they may be classified as not co-operating and explain the steps for the borrower to take to avoid that classification.
The Deputy may also wish to note that the Central Bank commenced a themed inspection of compliance with the CCMA in Quarter 4 of 2014. The themed inspection includes onsite inspections of a number of regulated mortgage lenders to examine the processes in place around certain provisions of the CCMA and the controls lenders have in place to ensure compliance with those processes and the CCMA.
Overall, the CCMA provides a strong consumer protection framework to ensure that borrowers are treated in a fair and transparent manner by their lender and that long-term resolution is sought.
13. Deputy Paul Murphy asked the Minister for Finance if he will report on the most recent ECOFIN meeting. [4693/15]
Amharc ar fhreagraThe Ecofin Council met on 27 January 2015. It was the first Ecofin meeting held under the Latvian Presidency of the Council.
I represented Ireland at the meeting which was attended by representatives of the other 27 EU Member States along with representatives of the European Commission; the European Central Bank; the European Investment Bank; the Economic and Financial Committee of the Council and the Economic Policy Committee of the Council.
For the information of the House, I will briefly outline the main agenda items that were discussed.
At the Ecofin Breakfast discussions, the President of the Eurogroup, as is common practice, briefed the Council on the previous day's Eurogroup. Ministers also discussed the economic situation, the provision of further macrofinancial assistance to Ukraine and measures to stop the financing of terrorist organisations.
Turning to the formal Agenda, a number of items were approved under the 'A' lists procedure (i.e. without debate) including, the final compromise text of the Anti-Money Laundering Directive and the Regulation on Information which Accompanies Transfer of Funds; on the taxation side, the anti-abuse clause to the Parent/Subsidiaries Directive was adopted; and a recommendation for a regulation amending Regulation (EC) No 2532/98 concerning the powers of the European Central Bank to impose sanctions was adopted.
Ministers discussed the Commission proposal Investment Plan for Europe: European Fund for Strategic Investments Proposal for a Regulation of the European Parliament and of the Council on the European Fund for Strategic Investment and amending Regulations (EU) No 1291/2013 and (EU) 1316/2013. This involves the establishment of a European Fund for strategic investments. Ministers had a preliminary exchange of views with the Presidency stating that it was its objective to reach agreement on the proposal in March 2015.
ECOFIN noted a Presidency report - Current legislative proposals - on the state of play in negotiations on current financial services legislative proposals.
Ministers were given presentations by the Presidency and Commission respectively on the agenda items - Presentation of the Presidency Work Programme and the Commission Work Programme 2015. Minsters also discussed two items under the heading of Economic Governance Commission Communications. The first one related to the Six Pack and Two Pack review.
The second related to Flexibility within the existing rules of the Stability and Growth Pact Flexibility - Communication from the Commission to the European Parliament, the Council, the European Central Bank, the Economic and Social Committee, the Committee of the Regions and the European Investment Bank making the best use of the flexibility within the existing rules of the Stability and Growth Pact.
The Commission presented both communications together and there was a broad ranging discussion and all parties agreed that progress had been made in these issues. The Council will come back to these in due course as the Semester process unfolds.
Finally, Ministers adopted the Terms of Reference under the agenda item: Preparation of G20 Meeting of Finance Ministers and Central Bank Governors on 9-10 February 2015 in Istanbul.
As part of the Government's engagement with the Oireachtas on European matters, Minister of State Harris will appear before the Joint Committee on Finance and Public Expenditure on Tuesday, 10 February to discuss the outcome of the January ECOFIN Council and the agenda items for the forthcoming February ECOFIN Council.
14. Deputy Sean Fleming asked the Minister for Finance when the European Commission will deliver its response to the restructuring proposals for Permanent TSB; when the bank will raise the capital it requires under the stress tests; the progress that has been made to date in ensuring Permanent TSB plays a positive role in the Irish banking market; and if he will make a statement on the matter. [4677/15]
Amharc ar fhreagraA way forward for Permanent TSB was agreed with the Troika in April 2012 which envisaged it playing an important role in the future of Irish retail banking, being a more focused retail bank bringing competition to the marketplace which has consolidated significantly since 2008. In this regard Permanent TSB prepared a Restructuring Plan, which was submitted to the European Commission ("the Commission") in June 2012. As requested by the Commission, an updated version of the plan was submitted in August 2013 which incorporated improvements in performance over the intervening period.
The Permanent TSB restructuring plan submitted in autumn 2013 is now outdated and has been updated for both recent positive financial and operational performance in 2014 and the results of the Comprehensive Assessment. My officials have been in detailed discussions with the Commission over recent months in relation to the plan, details of which are confidential between the parties and commercially sensitive at the present time. However, I expect the restructuring plan to be agreed in advance of the capital raise.
As the Deputy is aware Permanent TSB is an important bank in a highly concentrated Irish market. While no restructuring plan has been approved, it has not prevented Permanent TSB from making significant progress in delivering key elements of the Restructuring Plan submitted over the last year and the business is being managed structurally in the way envisaged in the plan. Permanent TSB has made steady progress on returning to operating profitability, has significantly de-risked its balance sheet through a sale of a tranche of its UK mortgage portfolio and the sale of Springboard Mortgages and has made positive progress on arrears reductions, with 90 day + arrears in Homeloans c. 33% below peak levels at end 2014. I expect that the bank's full year 2014 annual results, which will be issued on 11 March 2015 will confirm this.
With regards to the Capital Raise, the Comprehensive Assessment Adverse Stress Test result identified a shortfall of €855 million. As a consequence the bank has submitted a Capital Plan to the SSM, which outlines how the bank intends to meet the capital shortfall. Much of the shortfall has been met through performance in 2014 and deleverage of assets in 2014. The remaining shortfall will require the bank to raise capital, including equity capital, from private sources in 2015, diluting the State's shareholding. Details of the capital raise will be finalised shortly. While there are no current plans to sell shares held by the State during the process I will keep this under review as it could be required to ensure a successful capital raise process for the State and other shareholders.
I am of the view that the best way to protect the value of the State's shareholding is to ensure Permanent TSB is well prepared, that it conducts a comprehensive and competitive exercise to raise the capital with appropriate legal and financial advice, and that the State has meaningful oversight and involvement in the process. Officials from my Shareholding Management Unit and our financial advisers, JP Morgan Cazenove, are well placed to fulfil this role.
15. Deputy Mick Wallace asked the Minister for Finance further to Parliamentary Question No. 25 of 3 December 2014, the progress made since the beginning of 2015 on the public consultation on the introduction of a tax on vacant sites, as outlined in his budget speech in view of rising property prices and a shortage of supply; and if he will make a statement on the matter. [4705/15]
Amharc ar fhreagraIn Budget 2015 I announced my intention to launch a public consultation on the issue of unused zoned and serviced land with a view to examining what taxation measures might be taken to penalise land owners who do not develop such land. I expect to launch this consultation shortly.
The aim of the public consultation will be to assess the extent to which the taxation system - through penal measures can be utilised to encourage the development of such zoned and serviced land to assist with the shortage of residential properties in certain areas. Any existing levies will be considered as part of the consultation process and any taxation measures that may be introduced as a result of the consultation will take account of any existing levies in place.
The Government's Construction 2020 Strategy published in May 2014 outlined a range of actions aimed at incentivising increased housing construction activity and supply. These actions are being progressed as a matter of urgency, including measures incorporated in the forthcoming Planning and Development No. 1 Bill, for example the revision of the Part V social housing obligations on developers, retrospective application of reduced development contributions, the introduction of the vacant site levy and "use it or lose it" arrangements in relation to planning permissions.
In addition, further to the Construction 2020 Strategy, a Dublin Housing Supply Co-ordination Task Force was established in June 2014 to examine the issue of housing supply in the Dublin area. It has reported that there are currently sufficient planning permissions, with no insurmountable infrastructural deficits, to deliver over 20,000 housing units in four Dublin local authority areas while a further 25,000 new homes are considered permissible on existing lands zoned for residential use if landowners and developers wished to seek those permissions. The objective of the Government now is to facilitate the activation of such permissions with a view to delivering on the associated housing supply to meet demand. The possible introduction of tax measures to incentivise the development of zoned and serviced land will be considered in this overall context.
16. Deputy Ruth Coppinger asked the Minister for Finance her views on ending the artist tax exemption for artists who are already in receipt of large incomes and funding. [46868/14]
Amharc ar fhreagraThe most recent year for which data is currently available in respect of levels of income from all sources, including exempt artistic income, of those who claimed the Artists' Exemption is 2012. In that year, approximately 44% of claimants had incomes of between €0 and €20,000, while almost 20% of claimants had incomes of between €20,000 and €40,000. 27% had incomes of between €40,000 and €100,000, while under 10% had incomes in excess of €100,000.
These figures show that for 2012, approximately 64% of individuals who availed of the Artists' Exemption had incomes that in total fell below the current €50,000 limit for the exemption.
In relation to other sources of funding provided by the State, that would primarily be a matter for the Minister for Arts, Heritage and the Gaeltacht. However, I understand that artists can receive direct support through certain Arts Council's awards programmes:
1. The Bursary Award supports artists in the development of their artistic practice. In 2013, the Arts Council distributed over €1.2 million to 137 individual artists across all art forms and arts practices.
2. The Project Awards support the creation of new work and audience engagement. The Arts Council disbursed over €3 million to 106 recipients in 2013.
3. The Dance and Theatre Residency schemes saw the Council disburse €256,342 to 15 recipients in 2013.
4. Means-tested grants to 161 Aosdána members totalling €2.7m in 2013.
I would point out that the Artists' Exemption is a specified relief for the purposes of the high earners' restriction. This limits the amount of reliefs that an individual can claim in any one tax year to €80,000 before the restriction begins to apply.
As the Deputy may be aware, my officials will be carrying out a review of the Artists' Exemption in advance of Budget 2016. The terms of this review have not yet been finalised but I expect it to commence shortly.
17. Deputy Dara Calleary asked the Minister for Finance his views on the performance of the Strategic Banking Corporation of Ireland to date; and if he will make a statement on the matter. [4674/15]
Amharc ar fhreagraThe Strategic Banking Corporation of Ireland (SBCI) is built on the foundation stone that was laid by the Taoiseach and Chancellor Merkel when they agreed that the German promotional bank Kreditanstalt für Wiederaufbau (KfW) would help finance the Irish SME sector when Ireland was exiting the EU/IMF programme in late 2013.
I asked my Department and the National Treasury Management Agency to create the necessary mechanisms to construct the SBCI. Building on the initial funding offer from the KfW, the Government added funding from the European Investment Bank (EIB) and the Ireland Strategic Investment Fund (the new fund to which the assets of the National Pensions Reserve Fund were transferred). The Government approved this approach and legislation enabling the establishment of the SBCI was passed by the Oireachtas in July 2014.
The SBCI was incorporated in August 2014 and since then the SBCI has made considerable progress in building relations with lending partners and in constructing the complex operational capability required to bring products to market. These include establishing operational capability with funders and lending partners, building internal systems and business processes, and establishing a team to safely and effectively manage the funding provided on behalf of the State. In that regard, it is worth pointing out that both the CEO of KfW and the President of the European Investment Bank have complimented the Government's work on the establishment of the SBCI noting that the project from concept to establishment was achieved much more promptly than similar initiatives in other countries.
The SBCI drew down €200m of its funding from the European Investment Bank during December 2014 so that funds could be borrowed by its lending partners to be distributed to SMEs.
The SBCI is preparing for a nationwide launch of its products shortly. The Government's aim for the SBCI is to change the range and profile of SME finance providers in Ireland. The SBCI are achieving this by working with existing and new providers to develop enhanced products, and by supporting new entrants to the SME lending market.
The Deputy may wish to be aware that I am seeking suitable applicants who consider they possess the skills and experience necessary to join the expanded board of SBCI. People who wish to contribute to the development of the SBCI and who possess a range of experience in SME finance and SME development can apply using the new state appointments process on www.stateboards.ie. The closing date for applications is 6 February 2015.
18. Deputy Pearse Doherty asked the Minister for Finance the way the ECB’s quantitative easing programme will be implemented by the Central Bank of Ireland and the ECB; and if he will make a statement on the matter. [4653/15]
Amharc ar fhreagraAs widely anticipated, the ECB, announced an expanded asset purchase programme on January 22nd to include bonds issued by euro area central governments, agencies and European institutions. Under this expanded programme, the combined monthly purchases of public and private sector debt securities will amount to €60 billion. These monthly purchases are intended to be carried out from March until end-September 2016 and will, in any case, be conducted until inflation moves onto a path consistent with price stability, in line with the mandate of the ECB. In principle, this would see the ECB balance sheet expand to over €1 trillion.
Many details in terms of the implementation of the expanded asset purchase programme are not, as yet, publically available and these are, of course, an internal matter for the ECB and the National Central Banks. The ECB has, however, indicated that its asset purchase programme in relation to sovereign bonds will be restricted to bonds with a remaining maturity of greater than 2 but less than 30 years. It has also indicated limits on the Eurosystem's holdings of any one issuer's bonds, taking into account existing holdings. These limits refer to the same 2 to 30 year maturity window.
To be precise, holdings within the 2 to 30 year remaining maturity window will not exceed 33 per cent of an issuers' tradable bonds within the same window. The majority of the bonds acquired by the Central Bank of Ireland (CBI) in exchange for the Promissory Notes have more than 30 years remaining. Currently, this is the case for €19 billion out of the original €25 billion nominal issuance. Therefore, the holding of these bonds by the CBI will, in practice, have no impact on the amounts that can be purchased by the CBI. While other bonds within the 2-30 year maturity window that are already held by the CBI and other National Central Banks will be taken into account for the purposes of calculating the amounts that can be purchased, I understand that this still leaves ample room for participation by the CBI in the asset purchase programme.
19. Deputy Denis Naughten asked the Minister for Finance the progress made to date in investigations into petrol stretching; and if he will make a statement on the matter. [4607/15]
Amharc ar fhreagraI am advised by the Revenue Commissioners, who are responsible for tackling fuel fraud, that they are very aware of the risks posed to consumers' vehicles, legitimate businesses and the Exchequer by all forms of fuel fraud.
Over the past number of months the Revenue Commissioners have received reports from a variety of locations around the country of problems relating to petrol quality, with suggestions that these problems are attributable to petrol stretching. Petrol stretching involves the illegal addition of a low tax commodity to petrol to defraud motorists and the State. Revenue has received 134 complaints to date, the majority of which originated from the counties covered by Revenue's Border Midland West Region.
Every filling station about which a complaint was made has been visited by Revenue enforcement officers and fuel samples taken from them were sent for analysis by the State Laboratory. To date, samples have been taken from over 50 filling stations nationwide and 300 samples, from them and from other sources, have been referred to the State Laboratory.
The scientific analysis required is complex and time-consuming and the State Laboratory has conducted an extensive series of tests on the samples. Despite this extensive testing, evidence of the presence of prohibited stretching agents has been found in only two samples from one location. The conclusive results received from those two samples have resulted in the seizure of the product and files are being prepared with a view to prosecution.
Following a series of further tests conducted by the State Laboratory, results were received which indicate the presence of traces of road diesel in several samples taken from a variety of locations. This could indicate that petrol was contaminated with road diesel at some point in time. There is no rational economic reason or fraudulent incentive for anyone to deliberately mix normal road diesel with petrol. If the problems that have come to light were caused by an unintended contamination as a result of diesel being inadvertently mixed into petrol at some point along the supply chain, there would be no Revenue offence involved. However, the Deputy can be assured that the Revenue Commissioners are vigorously investigating the possibility of tax fraud being associated with the identified problems. In any instances where the analysis of petrol samples by the State Laboratory indicates the presence of illegal stretching agents, Revenue will take speedy and determined action and pursue prosecutions against offenders where possible.
Revenue have been working closely with An Garda Síochána in this investigation, sharing information and intelligence, and will continue to do so. I am also advised by Revenue that they undertake, on an ongoing basis, an extensive programme of compliance and enforcement actions to ensure adherence to the legal requirements governing the supply and sale of mineral oil and to allow action to be taken against fraud. This involves, among other things, carrying out analysis of the monthly oil movement returns that oil traders are required to make, and of other supply chain data. In addition, Revenue officers conduct control or compliance visits to mineral oil traders, during which they examine transport and movement documentation and take samples of fuel for analysis.
I am satisfied that the Revenue Commissioners are taking all possible actions to identify the problem and challenge any instances of identified fuel fraud, including, where possible, pursuing prosecutions against offenders.
20. Deputy Michelle Mulherin asked the Minister for Finance if he will review the tax code which provides for the singling out of the self-employed for payment of a higher rate of universal social charge and its potential to adversely affect business investment, growth and potentially job creation and retention in small and medium enterprises; and if he will make a statement on the matter. [4610/15]
Amharc ar fhreagraFirst of all, I would point out to the Deputy that the USC surcharge only impacts on a small proportion of the high earning self-employed. In 2012, the latest year for which definitive figures are available, just over 11,000 taxpayers paid the 3% USC surcharge. This represents approximately 6% of taxpayers whose primary income is not subject to PAYE, or half of one per cent of all income earners.
The introduction of USC in 2011 was accompanied by a series of other reform measures designed to simplify the tax system and widen the tax base. As part of these the PRSI ceiling on income over €75,000 was removed for all employees. This meant that those employees on incomes in excess of €75,000 would now be liable to an additional 4% charge on that portion of their income. At the same time the PRSI rates for self-assessed income earners was increased from 3% to 4%.
At that time, a 3% USC surcharge, in addition to the 7% rate on that portion of self-assessed income over €100,000, was introduced. The alternative would have seen self-assessed high income earners benefit when compared to their PAYE counterparts from the tax package introduced in 2011. On the basis of fairness, this could not have been countenanced at the time.
It was necessary to maintain the 3% in Budget 2015 in order to ensure that the self-assessed on high incomes did not benefit disproportionately from the Income Tax package and that the maximum benefit is capped for all taxpayers at €14 per week.
To allow large increases for the self-assessed on high incomes would be difficult to justify, or indeed would not be fiscally prudent, at a time when the country is only beginning to emerge from a prolonged economic downturn.
Far from being anti-enterprise, a fair, efficient and competitive income tax system is essential for economic growth and job creation. The Statement of Priorities issued by the Government in July 2014 included a commitment for an income tax reform plan to be delivered over a number of budgets, to reduce the 52% marginal tax rate on low and middle-income earners, including the self-employed, in a manner that maintains the highly progressive nature of the Irish tax system.
It is important to note that the self-assesed were subject to a marginal tax rate of 55% on incomes in excess of €100,000 in 2014, and they will continue to face the same rate on such income in 2015.
21. Deputy Paul Murphy asked the Minister for Finance his views on the level of mortgage arrears and on the increased rate of repossessions; and if he will make a statement on the matter. [4694/15]
Amharc ar fhreagraThis Government tackled the issue of mortgage arrears head on. We overhauled the systems and structures to support customers in arrears to find solutions.
The Deputy will be aware that the Government's Strategy to address the problem of mortgage was formulated in response to the recommendations of the Keane Report (2011) and the main elements of it are:
- Engagement with the banks to develop appropriate measures for their customers in mortgage arrears;
- Personal insolvency law reform and implementation;
- Mortgage to rent; and
- A Mortgage Advisory function
The Strategy is working, as evidenced by the monthly improvements in the mortgage restructures data collected by my Department officials. The situation at end November shows that total mortgage accounts in arrears (all arrears 1 day past due) now stand at 91,963. The number of Principal Dwelling Home accounts in arrears of greater than 90 days and not restructured has fallen by almost 27% at end of November 2014 when compared to the state of play at end of August 2013. During November 2014 there was an increase of 2,551 permanent mortgage restructures over the previous month. The number of mortgage accounts in arrears of greater than 90 days continues to fall, decreasing by 1,879 to 64,196 accounts at the end of November 2014.
The strong view of the Government is that, in respect of co-operating borrowers under the Mortgage Arrears Resolution Process, repossession of a person's primary home should only be considered as a last resort and that every effort should be made to agree a sustainable arrangement as an alternative to repossession. Even after the commencement of the legal process, it will be possible for lenders and borrowers to re-engage and it will be in the best interest of many parties if that can and does happen.
There is no doubt that the issue of longer terms arrears remains the biggest challenge. Many customers are finding solutions when they engage with their lender. Data published by the Central Bank in December shows that just under 110,000 principal dwelling home mortgages (PDH) were classified as restructured at the end of quarter 3 in 2014. Of these restructured accounts, 83% were deemed to be meeting the terms of their current restructure arrangement.
This Government has put in place a number of initiatives to assist homeowners in difficulty. Borrowers in difficulty must engage with their lender as early as possible in order to identify the best solution to their debt situation. This will afford them the protection of the Code of Conduct on Mortgage Arrears (CCMA) and ensure that the resolution arrangement that is finally agreed is both affordable and sustainable. Of course, the Central Bank is also working to ensure that banks are fully complying with the codes of conduct.
In addition, the Money Advice and Budgeting Service (MABS) provides independent advice and practical assistance to those in debt and I would advise anybody who is struggling with unsustainable debt to contact them as soon as possible.
The Insolvency Service of Ireland (ISI) also has a role in restoring citizens who are insolvent to solvency in a fair, transparent and equitable way and will help people to address their problems. It is essential that the banks and customers engage with each other.
22. Deputy Michael McGrath asked the Minister for Finance if he is satisfied with the pace of restructuring in the credit union sector; his views that the lending restrictions are having a detrimental impact on the ability of credit unions to lend to their members; and if he will make a statement on the matter. [4672/15]
Amharc ar fhreagraThe Credit Union Restructuring Board (ReBo) is actively involved with 147 credit unions in 68 different projects. Of these, 8 credit union mergers involving 20 credit unions have been completed to date; 4 proposals involving 12 credit unions are at approval stage and are due to complete shortly; 30 proposals, involving 69 credit unions are at an advanced stage of development and the remainder are at a more initial stage of development. ReBo expects that a significant percentage of these will be involved in successful completed mergers by the end of its remit.
In line with the Commission on Credit Unions recommendation, restructuring is being carried out on a voluntary, incentivised and timebound basis. I am satisfied that ReBo continues to work to the timetable set out in the Commission on Credit Unions Report and is expected to complete its work by the end of December 2015.
Credit unions have an important role to play in providing credit in local communities around the country and I am supportive of safe and responsible lending by credit unions.
Acting as the independent regulator, the Registrar of Credit Unions at the Central Bank has applied lending restrictions to some credit unions. I have been informed that these restrictions are viewed as short term in the majority of cases and are imposed as a means of allowing a credit union to address identified concerns as quickly as possible. These restrictions are reviewed on a regular basis.
With regard to the impact of lending restrictions on the ability of credit unions to lend, I have been further informed by the Registrar of Credit Unions that data available to the Central Bank shows that there is no material difference between the average loan-to-asset ratio of credit unions with and without restrictions. Also, where individual lending restrictions are imposed, this data also shows that the majority of credit unions are not lending up to the lending restriction amount, with the majority of loans granted being at lower loan levels.
Reviews of individual lending restrictions are included within the planned 2015 supervisory work programme of the Registry of Credit Unions. Where credit unions can evidence improvements in their credit management practices, and systems and controls which support prudent lending, the Registrar is open to removal of restrictions.
I am satisfied that the safety of members savings and the security of the credit union sector as a whole are central to any actions taken by the Registrar of Credit Unions.
23. Deputy Richard Boyd Barrett asked the Minister for Finance if he discussed with Christine Lagarde at their recent meeting in Dublin, economic stagnation in Europe and the IMF's downgrading of growth prospects for Europe; and if he will make a statement on the matter. [3377/15]
Amharc ar fhreagraGrowth prospects in Europe were discussed by Madame Lagarde and all participants, including myself, during the panel discussion at a conference in Dublin Castle entitled Ireland Lessons from Its Recovery from the Bank-Sovereign Loop. These discussions were streamed live by the event organisers and are available at: http://www.imf.org/external/np/seminars/eng/2014/ireland/index.htm.
The latest economic developments in the euro area have been disappointing with low growth, low inflation and an unemployment rate which is still unacceptably high. Growth in the third quarter of 2014 was weak, at 0.2 per cent on a quarterly basis.
In terms of this year, economic activity in the euro area will be supported by lower oil prices, supportive monetary policies and a depreciation of the euro. Notwithstanding these positive developments, other factors acting in the opposite direction - such as weaker investment - mean the IMF has revised down its forecast for the euro area by about a quarter of a per cent this year and next. The forecast for the UK was left broadly unchanged.
Reviving economic growth in the euro area will require a combination of monetary, fiscal and structural reform policies. In relation to the fiscal stance, a differentiated approach is needed, whereby those with fiscal space should use it. On the monetary side, I welcome the recent policy announcement that the ECB is to expand its balance sheet through large scale asset purchases, including the purchase of sovereign debt in the secondary market (quantitative easing). Finally, structural reforms are needed to unlock the growth potential in large parts of the euro area.
24. Deputy Richard Boyd Barrett asked the Minister for Finance if he discussed with Christine Lagarde at their recent meeting in Dublin, the suggestion of Syriza in Greece that a debt conference should be held to discuss the debt burden affecting Greece, Ireland, Spain, Italy and Portugal; and if he will make a statement on the matter. [3376/15]
Amharc ar fhreagraThe issue of a debt conference was discussed by Madame Lagarde and all participants, including myself, during the panel discussion at a conference in Dublin Castle entitled Ireland Lessons from Its Recovery from the Bank-Sovereign Loop. These discussions were streamed live by the event organisers and are available at: http://www.imf.org/external/np/seminars/eng/2014/ireland/index.htm.
As you will see from the recording, Madame Lagarde stated the view from the 188 countries in the IMF that debt should continue to be governed by contractual relationships between the creditors and the debtors. Madame Lagarde continued that, while the IMF had tried in the past - without much success - to establish a Sovereign Debt Restructuring Mechanism, she would refrain from prescribed general collective approaches.
As I have stated on a number of occasion, including in the Press Conference following my meeting with Madame Lagarde and Minister Howlin, my view is that negotiation is better than conflict and unilateral action. The Eurogroup and Ecofin, where every country in the euro area and in the European Union, respectively, are represented are the appropriate fora for resolving outstanding issues.
25. Deputy Mick Wallace asked the Minister for Finance if he will support Syriza's call for a European debt conference; his views on offering Ireland as a venue for such a conference; and if he will make a statement on the matter. [4704/15]
Amharc ar fhreagraMy view is that when countries encounter difficulties, a process of negotiation is always better than one of conflict.
Specifically in the case of euro area Member States, all programme negotiations have been conducted within the Eurogroup and Ecofin, with IMF involvement as appropriate. My view is that these are the appropriate fora for resolving outstanding issues.
26. Deputy Pearse Doherty asked the Minister for Finance his views on whether the European Commission water conservation grant amounts to an Exchequer transfer to Irish Water and the implications a similar finding from EUROSTAT would have on his budgetary plans. [4651/15]
Amharc ar fhreagraTo promote sustainable use of water and to enhance water conservation in households, the Government decided to introduce a €100 water conservation grant for all households (principal private dwellings) that complete a valid response to Irish Water s customer registration process. The grant of €100 per annum will be available to all households, irrespective of the manner in which their water is provided and is not tied to expenditure on any particular aspect of water provision. It is my Department's opinion that the grant has the characteristics of a transfer to households and is not a transfer to the water provider. However, it will be the responsibility of the Central Statistics Office and Eurostat to classify this transfer for the purposes of returns required under the Maastricht Treaty.
As a transfer from government, the conservation grant will be considered government expenditure. PQ 42850/14, which I answered on the 11th of November last, described the market test criteria that Irish Water and other semi-State companies must meet in order for their costs not to be included in the general Government accounts. The impact on the deficit if Irish Water is included in general government, which has been covered previously in PQ No. 68 (45572/14) of the 27th of November 2014, is estimated to be in the region of €524 million in 2015.
27. Deputy Michael McGrath asked the Minister for Finance if he has had direct discussions with US private equity funds which have purchased circa. 90% of the assets sold by the National Asset Management Agency, with regard to their intentions for their investments in view of the important influence they now have on the Irish economy; and if he will make a statement on the matter. [4673/15]
Amharc ar fhreagraAs the Deputy will be aware, a significant consequence of the financial crises in Ireland has been the deleveraging of our financial services system, which includes the individual bank asset sales programmes which are now largely complete, the liquidation of IBRC and the ongoing disposal of NAMA's assets.
A key objective in each of these deleveraging processes has been to achieve the best possible financial return for the State. With asset disposal processes occurring and set to continue in both Ireland and across Europe, Irish institutions have and will continue to face competition for investment capital as they seek to achieve the best possible financial return.
Ireland is a small open economy and as such we do not discriminate between domestic and international investment capital. The vast majority of Irish assets sold in the wake of the financial crisis have been openly marketed for sale to ensure that the best price available in the market is achieved. This approach allows both Irish and non-Irish buyers to compete for all assets. It would not be in the interest of the State to favour any class of buyer or impose restrictions or curtailments on these transactions.
As part of our broader efforts to attract much needed capital to Ireland in Th wake of the financial crises and generally encourage inward investment into Ireland, stakeholders across the Irish system, including the banks, NAMA, IBRC, the IDA, the NTMA as well as my officials and occasionally myself, do meet with investors interested in investing in Ireland including through the acquisition of loan or property assets and the establishment of business enterprises in Ireland.
This has included occassional meetings with representatives of private equity funds who have purchased or may be interested in purchasing significant amounts of loans and assets from NAMA and other Irish sellers. Such discussions do not involve the discussion of specific sales processes or specific assets but rather provide these investors with the opportunity to communicate their broader interests in and investment proposition regarding Ireland, their plans for further investment and potential for local business development and job creation. They also provide myself and the other Irish institutions with increased visibility regarding Ireland's relative attractiveness as destination for foreign capital investment.
28. Deputy Pearse Doherty asked the Minister for Finance the way the planned tax cuts in 2016 announced by him will be in line with the expenditure benchmark and the Stability and Growth Pact. [4652/15]
Amharc ar fhreagraAs the Deputy will be aware, the Statement of Priorities issued by the Government in July 2014 included a commitment for an income tax reform plan to be delivered over a number of budgets, to reduce the 52% marginal tax rate on low and middle-income earners, in a manner that maintains the highly progressive nature of the Irish tax system.
The first stage of the plan was given effect in Budget 2015 when the marginal rate of income tax was reduced from 41% to 40% and the standard rate band was extended by €1,000 to €33,800 for a single individual, which is above the average industrial wage. The standard rate band was also extended by €1,000 to €42,800 for jointly assessed married one earner couples and by €2,000 to €67,600 for married two earner couples. In addition, the Budget also contained USC measures which provided tax relief for those on lower incomes, as well as limiting the benefits that could accrue to those on higher incomes.
I have stated many times in the House that I intend to further reduce the marginal rates of income tax in a similar manner to last year's changes. This would be subject to having the required fiscal space available or through a refocus of the tax system. However, decisions on specific taxation measures will be considered in the context of the annual budgetary process.
29. Deputy Seán Kyne asked the Minister for Finance if in his position as a member of the Economic and Financial Affairs Council the issue of an examination and review of the VAT directives will be raised with respect but not limited to the ongoing effects of the application of national rules which existed prior to 1991 including such measures as the charging of VAT for safety equipment; and if he will make a statement on the matter. [4701/15]
Amharc ar fhreagraIn relation to safety equipment, Article 110 of the EU VAT Directive law provides that it is only possible to apply a zero rate to goods and services where a Member State applied a zero rate to that specific good or service on and from 1 January 1991. Zero-rating is an historical derogation from the normal VAT rules, where the intention is that such VAT treatment is temporary, and should be removed over time. In addition, only a small number of Member States apply zero-rated VAT treatment and the EU Commission has actively been trying to simplify the VAT rating system to improve the efficiency of the Single Market. This is a sensitive area for Ireland given our use of zero rates for social reasons in areas such as children's clothes and shoes, food, oral medicines, etc. Accordingly, I do not consider that a proposal to seek a review of the application of national rules which existed prior to 1991 would succeed.
30. Deputy Catherine Murphy asked the Minister for Finance further to Parliamentary Question No. 220 of 16 December 2014, if he will indicate if, notwithstanding the commercial independence of Irish Bank Resolution Corporation at the time, his Department endeavoured to query the reason such a large loss to the State, amounting to over €100 million, was permitted to happen in the sale of the company concerned (details supplied); if not, the reason his Department was not concerned that such a large loss had occurred when the clear objective of IBRC was to maximise the return to the State; and if he will make a statement on the matter. [4700/15]
Amharc ar fhreagraFor clarity's sake, the sale of Siteserv occurred prior to the Special Liquidation of IBRC, under the previous board and management of IBRC.
As already indicated to the Deputy in Parliamentary Question No. 220 of 16 December 2014, notwithstanding the State's ownership of the bank at the time, it was a matter for the board and management of IBRC to determine and implement all commercial decisions in their organisation.
As set out in the Relationship Framework, which governed the relationship between the State and IBRC at the time, the State did not intervene in the day to day operations of the bank or its management decisions regarding commercial matters which were a matter for the board and management. For the avoidance of doubt, the Relationship Framework ensured that IBRC continued to operate as an independent operator in the market, albeit on a work-out basis only.
Under the Relationship Framework, IBRC were obliged to consult with the State in respect of any proposed decision that was within the ordinary course of business but which met certain financial thresholds; the sale of Siteserv did not meet these financial thresholds, therefore it was solely a matter for the board and management of IBRC at the time. Notwithstanding this position, my officials did take an active interest in the running of the bank through their interaction with the management of the bank at the time.
I am aware that KPMG Corporate Finance and Davy Corporate Finance were engaged by Siteserv to run a joint sales process to sell Siteserv which was in severe financial difficulties and was unable to service or pay back its loans to IBRC. The sales process was initiated by Siteserv and overseen by a subcommittee of the Siteserv Board. The sales process involved two stages and IBRC was briefed after each stage.
The Board of Siteserv, as advised by KPMG Corporate Finance and Davy Corporate Finance, recommended the successful bid as representing the best return for IBRC. I am advised that the Board of IBRC at that time were satisfied that this was the case.
