Written Answers Nos. 23-33
23. Deputy Thomas Pringle asked the Minister for Finance the specific proposed legislative changes to be made to deal with the mortgage crisis, as mentioned in the Spring Economic Statement 2015; and if he will make a statement on the matter. [17508/15]
Amharc ar fhreagraAs the Deputy is aware, the Government has put in place a broad strategy to address the problem of mortgage arrears and family home repossessions. The primary focus of this strategy is to support those homeowners in difficulty with their mortgage repayments and, insofar as possible, to avoid repossession of the family home. The Central Bank of Ireland's Code of Conduct on Mortgage Arrears (CCMA) sets out requirements for mortgage lenders dealing with borrowers facing or in mortgage arrears on their primary residence and provides a strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long term resolution is sought by lenders with each of their borrowers. Where a borrower engages with his lender, a sustainable restructure arrangement to address his/her mortgage arrears situation is agreed in the majority of cases. The Central Bank's most recent quarterly release on Residential Mortgage arrears and Repossessions (Q4 2014) indicates that almost 115,000 restructure arrangements have been put in place.
A key focus of any forthcoming initiatives from Government will be to ensure that distressed borrowers are fully informed about appropriate supports, how to access them and how they can help. Many borrowers can find solutions through the options offered by the Insolvency Service of Ireland and Government will ensure that the personal insolvency process is as fair and effective as possible and that the objectives as set out in the original Personal Insolvency Act are realised as much as possible. My colleague, the Minister for Justice and Equality, and her officials are actively preparing amendments to the legislative framework for personal insolvency aimed at enabling Government's objectives in this regard to be met and allowing more people in distressed debt to access the available mechanisms than has been the case to date. Where a mortgage in arrears is deemed to be unsustainable by the lender the mortgage to rent scheme, administered by my colleague, Alan Kelly, TD, Minister for Environment, Community and Local Government may be a viable alternative which will enable families to remain in the family home and his Department are examining the possibilities for more throughput via this mechanism. The effective management of the mortgage arrears issue is an area that remains under continuous review. More and concerted action can be undertaken by the banks to assist customers in arrears. As the Deputy is aware the Taoiseach has previously announced that the Government is considering a range of options to support the existing framework and to improve the uptake of personal insolvency solutions. Given the importance of the issue, his Department is co-ordinating the response across the various Government Departments and agencies and I anticipate that a detailed announcement will be forthcoming shortly.
24. Deputy Thomas P. Broughan asked the Minister for Finance if he will provide an update on the preparation for the review by the European Parliament's tax committee; if he will provide an update on the current status of Ireland with regard to the Foreign Account Tax Compliance Act, and what this means for Ireland; and if he will make a statement on the matter. [17376/15]
Amharc ar fhreagraThe European Parliament has decided to establish a special committee on tax rulings and other measures similar in nature and effect. The European Parliament Special Committee on Tax Rulings (TAXE) has six months in which to complete its work. As part of the parliamentary activities that have been scheduled for this purpose, the coordinators of the political groups in the TAXE Committee decided to conduct fact-finding missions to several Member States. These fact-finding missions are designed to take place in full cooperation with the national authorities, and TAXE members wish to hold constructive and forward-looking dialogues with the relevant bodies. As outlined in our policy documents "Ireland's International Tax Strategy" (2013) and the "Road Map for Ireland's Tax Competitiveness" (2014), Ireland is fully committed to transparency in international tax matters and to that end we will assist the European Parliament in their important work.
Section 891E of the Taxes Consolidation Act 1997, introduced in Finance Act 2013, provides for the implementation of the agreement between the Governments of Ireland and the United States of America on the operation of the Foreign Account Tax Compliance Act (FATCA).
The related Financial Accounts Reporting (United States of America) Regulations 2014 came into effect on 1st July 2014. These regulations require financial institutions in the State to make a return of information with regard to accounts held for the benefit of citizens or residents of the United States not later than 30th June 2015. I am further advised that the Revenue Commissioners have agreed protocols with the IRS for the exchange of this information and that the first such exchanges of information will take place in September of this year.
Our participation in FATCA, together with our participation in other programmes for the automatic exchange of financial account information developed by the EU and the OECD, serves to demonstrate Ireland's commitment to openness and transparency in tax matters and to playing our part in combatting tax evasion worldwide. By participating in these exchanges of information the Revenue Commissioners will receive information on financial accounts held abroad by tax residents of this State which will be of value to them in combatting tax evasion.
25. Deputy Mick Wallace asked the Minister for Finance his plans to abolish the non-domicile regime; and if he will make a statement on the matter. [17569/15]
Amharc ar fhreagraDomicile is a common law legal term, rather than a tax concept. Every person must have a domicile, whether domicile of origin or domicile of choice. They can have only one at any given time.
An individual who is resident and domiciled in Ireland is taxable on their worldwide income and gains.
A person who is resident but not domiciled in Ireland is only taxable on their Irish source income and any foreign income which they remit into the state, the so-called remittance basis of taxation. Regarding employment income, the charge to tax extends to all income from an Irish employment and income attributable to the performance of duties of a foreign employment in the State. The income attributable to the performance of the duties of a foreign employment outside the State is chargeable only when remitted to the State. Remittances are effectively amounts which are brought directly or indirectly into the State. (e.g. using foreign income to pay off a foreign loan, where the proceeds of the loan had been used in the State.)
There can be many valid reasons why a person resident in Ireland would not be domiciled here and avail of the remittance basis. However, it is important to ensure that the combined impact of domicile status and the remittance basis do not inappropriately operate in such a way as to avoid taxation in Ireland. Anti-avoidance measures have been introduced over the years for this purpose. E.g.:
1 - Provisions to tackle an abuse whereby a non-domiciled spouse would gift income or the proceeds of a sale to a domiciled spouse, who would then remit the amounts into Ireland avoiding a charge to income tax or CGT as the remittance basis only applies to non-domiciles.
2 - Up to FA 2010 the remittance basis was available to Irish citizens who were not ordinarily resident in the State. From 2010, the remittance basis is only available to non-domiciles.
3 - Up to 31 December 2005, a resident but non-domiciled individual with income from a non-Irish sourced employment qualified for the remittance basis. Following FA 2006 changes, the portion of that income attributable to the performance of the duties of employment in the State no longer qualifies for the remittance basis.
While all tax policies are continually open to review, it is not customary for the Minister for Finance to comment in advance on issues that are appropriate for consideration in the context of the Budget.
26. Deputy Terence Flanagan asked the Minister for Finance his plans for making the National Asset Management Agency more accountable, and for eventually winding it down; and if he will make a statement on the matter. [17382/15]
Amharc ar fhreagraI am advised that the NAMA Chief Executive, in his opening address to the Public Accounts Committee on 18 December 2014, stated that NAMA is aiming to redeem a cumulative 80% (€24 billion) of its senior debt by the end of 2016 and that it hopes that it will have redeemed all of it by the end of 2018. He stated that those targets were predicated on conditions in the Irish market remaining favourable and on NAMA being in a position to retain sufficient specialist staff to enable it to generate the optimal financial return from the realisation of its residual loan portfolio.
The Deputy may be aware that the NAMA Board has also undertaken to facilitate the timely and coherent delivery of key Grade A office space, retail and residential space within the Dublin Docklands strategic development zone and Dublin's Central Business District and to maximise the delivery of residential housing units in areas of most need. Given that these commitments were agreed with NAMA only in July 2014, it is too early to speculate as what date in the future NAMA will have made sufficient progress on its objectives as to warrant consideration of its dissolution.
As regards accountability, it is important to point out that NAMA is already subject to a high level of public accountability compared to other commercial bodies, including commercial bodies in the State sector.
Its Annual Report and Financial Statements are laid before the Houses of the Oireachtas. In addition, NAMA is also required to submit to me an Annual Statement by 30 September each year setting out its proposed objectives for the following financial year, the scope of activities to be undertaken, its strategies and policies and its proposed use of resources.
NAMA is also required to report to me on a quarterly basis giving detailed information about its loans, its financing arrangements and its income and expenditure. These reports, which also include other information specified under Section 55 of the NAMA Act, track progress on a quarterly basis. I am obliged to lay such reports before the Oireachtas and I endeavour to do so on a timely basis.
The Chairman and Chief Executive are also accountable to the Committee of Public Accounts (PAC) and other Oireachtas committees and to give evidence to those committees whenever required to do so. Furthermore, there have been numerous Parliamentary Questions addressed to me on NAMA-related issues and the associated replies are on the Oireachtas record.
NAMA's accounts are comprehensively audited by the Comptroller and Auditor General, who has a permanent team of officers based in the Agency with unrestricted access to all its records and files. If there is concern about a specific aspect of NAMA's work, it is within the power of the Comptroller and Auditor General to scrutinise any aspect of it. The Comptroller and Auditor General has already produced three special reports on NAMA's activities and they have been broadly positive in their assessment of how NAMA is managing its complex business.
Against this backdrop, I do not accept that there is a need to make NAMA more accountable than is already the case.
27. Deputy Catherine Murphy asked the Minister for Finance further to Parliamentary Question No. 80 of 26 March 2015 in relation to his Department's inquiries into the sale of Siteserv by Irish Bank Resolution Corporation, the reason he stated this matter was further discussed at a meeting between the former Secretary General of the Department of Finance and the then chief executive officer of the corporation took place in August 2012, when the chief executive officer in question has stated in the public domain that the matter was not discussed at that meeting (details supplied); if he disputes the account provided by the former chief executive officer; if not, if it was his intention to mislead Dáil Éireann in this matter; and if he will make a statement on the matter. [17564/15]
Amharc ar fhreagraA record of the briefing note ahead of the former Secretary General of the Department of Finance meeting with the then CEO of IBRC in August 2012 shows that Siteserv was one of a number of topics which was contained in the briefing note.
A further record of an email which outlines outputs from this meeting also exists. The main output relating to this issue was the agreement to the secondment of a senior Department of Finance official to IBRC. (These records have been released under FOI and are available on the Department of Finance website at http://www.finance.gov.ie/news-centre/press-releases/ibrc-foi-documents.)
This led to a senior Department of Finance official being announced as the Bank's new Head of Market Solutions on secondment from the Department of Finance, commencing the role on 2 October 2012. Given the banking experience of this person it was decided that he would be seconded to IBRC to explore opportunities for deleveraging with a view to maximising the recovery for the taxpayer. This had the additional benefit of providing greater oversight while supporting the management team.
The responsibilities of the person referred to in the question included:
- Membership of the Bank's Group Executive Committee (GEXCO);
- Membership of the Transaction Review Committee;
- Contribute to the strategic leadership of the Bank;
- Analyse existing investments within the portfolio, critically assess business plans, operations, management, processes, risks, and opportunities;
- Structure/restructure loans/investments from an optimal financial perspective, negotiate the structure and preferred terms;
- Identifying and developing deal opportunities with external investors and financiers that meet the various strategic and financial objectives of the Bank in wind down;
- Build and maintain dialogue with potential investors and counterparties to establish market opportunities and viable transaction options that assist the Bank meeting its wind down objectives;
- Engagement will be across private equity funds, credit opportunity funds, real estate funds and sovereign wealth funds as well as banks and other providers of credit in the European markets;
- Work with asset recovery teams;
- Appoint brokers/advisors in accordance with the Bank's procurement and compliance policy;
- Team management, and;
- Lead the execution of transactions and engage with counter parties while involving internal group functional groups as well as external service providers.
As the Deputy is aware, the former Secretary General of the Department of Finance who attended this meeting no longer works for the Department of Finance. However, given the facts outlined above, it should be very clear to the Deputy that it was not, nor never would be, my intention to mislead Dáil Éireann.
28. Deputy Sean Fleming asked the Minister for Finance his plans to review capital acquisition tax thresholds in view of rising asset prices, in particular residential property; and if he will make a statement on the matter. [17546/15]
Amharc ar fhreagraCapital 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.
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.
The Group A tax free threshold of €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.
The Group B tax free threshold of €30,150, applies where the beneficiary is a brother, sister, a nephew, a niece or lineal ancestor or lineal descendant of the disponer.
The Group C tax free threshold €15,075, applies in all other cases.
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. In recent years these thresholds were reduced and the rate has been increased in order to maintain the yield from capital taxes in the face of falling asset prices and as part of our fiscal consolidation efforts. In addition, taxes on capital are less harmful from an economic perspective than taxes on employment.
I am aware that the property market continues to improve, with positive developments which had been restricted to the Dublin area now manifesting in other areas of the country, though not to the same extent in terms of price rises, and I recognise that this has a bearing on taxation of the inheritance and gifting of property with respect to CAT thresholds. In this light, I will be keeping Capital Acquisitions Tax thresholds and other aspects of the tax under review, particularly in the context of preparations for Budget 2016 and the consequent Finance Bill.
29. Deputy Mick Wallace asked the Minister for Finance in view of his spring statement announcement of 200,000 net new jobs by 2018, if he has been in contact with the Department of Public Expenditure and Reform and the Department for Jobs, Enterprise and Innovation to ensure these jobs will not be low paid or low hours; and if he will make a statement on the matter. [17570/15]
Amharc ar fhreagraSince the low-point of the crisis experienced in the second half of 2012, some 95,000 jobs have been created to date. The April 2015 Stability Programme Update, on which the Spring Economic Statement is based, projects that relative to this low-point, some 245,000 net new jobs will be created by the end of 2018.
In addition to increases in employment volumes, my Department is forecasting an increase in wages and the number of hours worked per employee over the horizon. Of course, this is the aggregate position there will be sectors that will perform better than average, and those that will be below average trends.
In terms of outlook, over the period to 2018 economy-wide pay per head is projected to increase by an average of just over 2½ per cent per annum. Following a contraction in the number of hours worked over the crisis years, projected hours per worker are also anticipated to increase over the period.
Certainty for employees around their working hours in particular is important from both a stability and financial planning perspective. I welcome the study recently commissioned by the Minster for Business and Employment Mr Ged Nash which will investigate both the prevalence and impact of zero hours and low-hour contracts.
The key objectives of the study are:
- To fill the gap in knowledge that currently exists in terms of hard data on zero-hour and low-hour contracts that is available concerning the prevalence of zero hour and low hour contracts in the Irish economy and the manner of their use.
- To assess the impact of zero hour and low hour contracts on employees, and
- To enable the Government to consider any evidence-based policy recommendations deemed necessary on foot of the study
The study will have a broad scope covering both public and private sectors and will have a particular focus on the retail, hospitality education and health sectors. I look forward to its completion which will allow the Minister for Jobs, Enterprise and Innovation to make evidence-based policy recommendations which will be considered on a whole-of-government approach.
I also await the findings of the Low Pay Commission which will report to Government in July and make recommendations on the rate of minimum wage, giving due consideration to "assist as many low-paid workers as is reasonably practicable without creating significant adverse consequences for employment".
I look forward to actively engaging with my colleagues as part of the above processes.
30. Deputy Thomas Pringle asked the Minister for Finance in accordance with paragraph 13 of the ministerial instructions to the special liquidators, if he will divulge to the original mortgage holder the valuation of the Irish Bank Resolution Corporation's assets and the value at which that person's original mortgage was sold to a third party, as the special liquidators are themselves precluded from divulging the valuation of the corporation's assets other than to the National Asset Management Agency or to the Minister for Finance; and if he will make a statement on the matter. [17509/15]
Amharc ar fhreagraI am advised by the Special Liquidators (SLs) that the valuation of the residential mortgage assets and/or the prices obtained in their sale will not be disclosed as this information is considered commercially sensitive financial information.
It is also important to note that the Department of Finance is not in possession of such information. In order to protect the confidentiality of customer data, the integrity of the sales processes and the liquidation more generally, the Department of Finance and NAMA were not made aware of nor did they receive the independent valuations of the loan assets at either a portfolio or a loan level, nor have they been made aware of the sales prices achieved for any individual mortgage sold as part of the liquidation.
The SLs were appointed over Irish Bank Resolution Corporation Limited ("IBRC") in February 2013 pursuant to Section 4 of the Irish Bank Resolution Corporation Act, 2013 (IBRC Act). The SLs instructions and obligations provide for the winding up of IBRC in an orderly and efficient manner in the public interest and in order to maximise the return for the creditors of IBRC. The passing of the IBRC Act and the appointment of the SLs was part of the promissory note transaction which yielded significant benefits for the State.
On the appointment of the SLs, I instructed them to arrange for and complete the independent valuation of IBRC s loan assets by no later than 30 November 2013. In this respect, the SLs appointed PwC as independent advisors to value the residential mortgage portfolio and to provide advice in developing a strategy for the sale of the residential mortgage portfolio which would ensure that maximum value was obtained for all creditors of IBRC. I further instructed the SLs to ensure that the sale of all loan assets was agreed or completed by no later than 31 December 2013 or as soon as practicable thereafter.
Per my instruction, the assets of IBRC could only be sold at a price equal to or in excess of the independent valuations obtained. Should a bid not be received in excess of the independent valuation obtained, the loan asset was to transfer to NAMA at the independent valuation price.
In total there were 11,825 individual residential mortgage customers in IBRC (comprising 12,702 mortgages with a par value of €1.8 billion). Following receipt of legal advice, the SLs corresponded with all residential mortgage holders and provided them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets. The SLs reviewed and considered each and every representation. The representations were also considered by PwC in providing their sales strategy advice.
Following the receipt and review of borrower representations and the independent advice provided by PwC, it was decided that the mortgage portfolio (i.e. the Sand portfolio) be sub-divided into four portfolio tranches with a view to maximising market interest and return within the timelines set out in the Ministerial Instruction.
The SLs did consider the concept of selling individual mortgages but a number of issues impacted on the decision, including:
- cost;
- timing;
- independent advice received from PwC;
- borrower only bids;
- confidentiality of personal information;
- delivering best results for the creditors including the taxpayer; and
- execution risk.
The valuation of the Sand portfolio completed on 11 November 2013 and the sales process commenced on 14 October 2013
On 1 April 2014, the Special Liquidators announced that 64% of the mortgage portfolio (with a par value of €1.8 billion) had been sold to two buyers, namely Lone Star and Oaktree Capital Management L.P.
Following my instruction in April 2014, NAMA were no longer obliged to purchase the unsold IBRC assets at their independent valuation as previously envisaged due to the fact that the expected proceeds from the sale of the IBRC loan assets was sufficient to fully repay the IBRC debt to NAMA. The SLs therefore devised a further sales process in respect of the unsold loan assets to maximise the return to all remaining creditors of IBRC, including the State.The SLs again corresponded with all those remaining residential mortgage holders whose loan assets were not sold in the first sales process providing them with an opportunity to make written representations on the method of disposal of their loans and the criteria for determining who may bid for loan assets. Consideration was given to these Borrower representations and the SLs responded to these Borrower representations.
Following representations received from borrowers and the independent advice received, the unsold residential mortgage loan assets, which were now known as the Pearl portfolio were split into two tranches. The sale of the Pearl portfolio tranches were contracted prior to 31 December 2014 and completed in February 2015.
31. Deputy Catherine Murphy asked the Minister for Finance in view of the information which has emerged in the public domain recently which demonstrates a severely strained relationship between his Department and the senior management at the Irish Bank Resolution Corporation in advance of its special liquidation, if he will state that such difficulties were not a contributory factor in the early winding up of the corporation in February 2013; and if he will make a statement on the matter. [17571/15]
Amharc ar fhreagraThere was a professional working relationship between my Department and senior management of IBRC at all times. Given the issues which the bank was dealing with at the time, this may not have always led to agreement on certain matters between my Department and senior management of IBRC, nor should this be expected. I would expect healthy debate on such matters between the parties involved and expect they would have asked difficult questions of each other during their interactions given the importance of the decisions being made.
We should expect professionals to challenge, debate and sometimes disagree with each other and not shy away from having difficult discussions in pursuing and justifying what they believe to be the best course of action in whatever issue they are addressing.
The decision to liquidate IBRC and exchange the Promissory Notes was taken with the expressed purpose of protecting the taxpayer, to end the exposure of the State and the Central Bank to IBRC, to enable the state to re-establish normalised access to the international debt markets, to resolve the debt of IBRC to the Central Bank, to restore confidence in the banking sector more generally and to provide for the orderly wind down of IBRC which was being supported, at a heavy cost to the State, by the Promissory Notes.
The relationship with the management of IBRC was not a contributory factor, nor the decision making process surrounding the formulation, design and structuring of the Promissory Note transaction and liquidation of IBRC.
32. Deputy Peadar Tóibín asked the Minister for Finance the steps he has initiated to prevent banks selling loans to third-party institutions for significantly less than the negotiated offers made by debtors. [17565/15]
Amharc ar fhreagraThe banks are independent commercial entities and the relationship between the banks in which we have a shareholding and the Minister for Finance are defined in the relationship framework. I do not intend intervening in any decisions they may make in relation to how they dispose of loans at present.
I should add that the borrowers whose loans are sold to unregulated entities will be protected by the Consumer Protection (Regulation of Credit Servicing Firms) Bill 2015 which will require entities dealing with the consumer to be authorised by the Central Bank and subject to its Codes of Conduct. Dealing with the consumer is credit servicing and the definition of credit servicing is broad. Owners of loan books who deal directly with consumers, that is, who are servicing their own loan books, will be regulated. Otherwise they can have the loan book serviced by a regulated credit servicing firm.
The Bill was published in January and second stage of the Bill was taken in the Dáil on 4 February. Since then, my officials have been in contact with the Central Bank and with the Office of the Attorney General to further progress the legislation. The Bill will continue its progress through the legislative process and I look forward to further discussion of the Bill at Committee Stage.
33. Deputy Ruth Coppinger asked the Minister for Finance if he will report on the consultations between his Department and the Irish Bank Resolution Corporation on the sale of corporation’s United States of America loan book; if he will report on the loss to the Exchequer from the sale of the loan book; and if he will make a statement on the matter. [17572/15]
Amharc ar fhreagraI can confirm that there were various discussions between my Department and IBRC in relation to the disposal of IBRC's US loan book and I was kept informed of the progress being made on this matter. The disposal of Anglo's US loan portfolio is a reserved matter which required my consent under the relationship framework which was in place at that time. On 25 August 2011, I gave my consent for the disposal of IBRC's US loan book subject to a number of conditions including the securing of a minimum price, maximising value for the shareholder, that IBRC conduct a fair and transparent process and that IBRC continued to cooperate with the Department of Finance.
It was the fiduciary responsibility of the IBRC Board that the process achieved the objective of maximising value for the shareholder. As part of this responsibility the Board would have evaluated and weighed any loss to IBRC on the sale of an asset against the potential loss from continuing to hold the asset.
I am advised by the Special Liquidators of IBRC that this transaction will form part of the review in which I have directed them to undertake.
