Written Answers Nos. 75-97
75. Deputy Finian McGrath asked the Minister for Finance his views on correspondence concerning accidental landlords and additional income (details supplied); and if he will make a statement on the matter. [5037/16]
Amharc ar fhreagraThe Deputy will be aware that landlords are liable to tax on their net rental profit after deduction of allowable letting expenses, and not on the gross rental income received. As regards properties that are rented, a landlord may be allowed a deduction of 75% of the interest paid on borrowed money used to purchase, improve or repair rented premises when calculating rental income. There are also a number of other allowances and deductions available to reduce the tax on rental income paid. These include, for example, the cost to the landlord of any goods provided or services rendered to a tenant and the cost of maintenance, repairs, insurance and management of the property.
The Office of the Revenue Commissioners has published a guide to the income tax treatment of rental income. It sets out the amount of rental income to be taken account of for income tax purposes and provides a comprehensive list of expenditure items that are allowable for deduction in computing rental income for tax purposes. This guide is available at:
http://www.revenue.ie/en/tax/it/leaflets/it70.html.
The Deputy may also be aware that in Finance Act 2015, I introduced a new relief which will allow a full 100% mortgage interest deduction where a landlord undertakes, for a period of at least three years, to provide accommodation to tenants in receipt of social housing supports and registers such undertakings with the Private Residential Tenancies Board within certain time limits. Further information on this relief is available in section 97 of the Revenue Commissioners Notes for Guidance Taxes Consolidation Act 1997 Finance Act 2015 Edition Part 4 Principal Provisions Relating to the Schedule D charge, which is available at http://www.revenue.ie/en/practitioner/law/notes-for-guidance/tca/part04.pdf.
The taxation of all rental property in the State is dealt with under the same legislation, and an attempt to carve out a cohort of 'accidental' landlords would prove problematic. There are many reasons why individuals might choose, or feel obliged, to rent a property while putting their own mortgaged property out to rent, such as relocation for work purposes or changed family circumstances, and all are treated equally by the tax system. The provision of additional tax deductions to one sub-set of landlords could create difficulties in the rental marketplace as a result of the advantage obtained over other landlords of similar residential property.
I am conscious of the challenges that individuals continue to face, despite the improving economic conditions. However I would also note that the changes to the income tax system included in Budget 2015 mean that individuals who paid Income Tax and or USC in 2014 saw a reduction in their tax bill in 2015 where incomes were equal. Budget 2016 continued this process of reducing the tax burden on low and middle income earners including, among other changes, a decrease in the three lowest rates of USC with effect from January 2016.
76. Deputy Michael McGrath asked the Minister for Finance the status of applying value added tax to the cost of servicing defibrillators; if he is aware of the financial impact this has on community organisations which are not able to register for value added tax; and if he will make a statement on the matter. [5047/16]
Amharc ar fhreagraThe VAT rating of goods and services is constrained by the requirements of EU VAT law with which Irish VAT law must comply. Defibrillators, other than implantable defibrillators, are liable to VAT at the standard rate, currently 23%. Parts or accessories for, together with servicing of, defibrillators and defibrillator training are also liable to VAT at the standard rate.
There is no provision in VAT law that would make it possible to apply a reduced rate or zero rate to the service of such products.
77. Deputy Michael Healy-Rae asked the Minister for Finance the status of Airbnb (details supplied); and if he will make a statement on the matter. [5056/16]
Amharc ar fhreagraThe Deputy asked about the rent-a-room relief, and I am advised by the Revenue Commissioners that rent-a-room relief is provided for in section 216A of the Taxes Consolidation Act (TCA) 1997. Under section 216A, sums arising to an individual in respect of the letting of a room or rooms as residential accommodation in his or her home and from meals or other services supplied in connection with the letting are exempt from income tax, USC and PRSI where they are below the annual limit for the tax year in question (€12,000 for 2015 and 2016) and certain other conditions are satisfied.
The purpose of the relief is to increase the supply of affordable rental residential accommodation by incentivising homeowners to rent out a room or rooms in their principal private residence to individuals. It applies where an individual is effectively using the room either on its own or in conjunction with other parts of the residence, as his or her home. The relief is not, and never was, intended to apply to income arising from the provision of guest accommodation to occasional visitors.
It is also worth noting that profits arising from the provision by individuals of guest accommodation in their home are subject to tax, irrespective of whether such accommodation is provided in the manner described in the details supplied or through more traditional forms of service provision, such as a guest house or B&B. Where accommodation is provided on an occasional basis, as distinct from in the course of a guesthouse or B&B trade, the income arising is treated as miscellaneous income and expenses incurred directly in the provision of the accommodation, for example the cost of providing meals, light, heat or laundering costs, would be allowed to be deducted in computing the homeowner's taxable profits from that activity. A homeowner who is carrying on a trade of guest accommodation can avail of the normal trading deductions in computing his or her taxable profits.
Regardless, however, of whether guest accommodation is provided on an occasional basis or in the course of a trade, and whether it occurs in the manner described in the details supplied or through more traditional forms of service provision, any profits arising from such activity are chargeable to income tax, universal social charge and PRSI in the normal manner. In addition, there is no provision in the TCA 1997 which exempts such profits from income tax below an income limit.
78. Deputy Pearse Doherty asked the Minister for Finance the number of documents his Department has handed over to the European Commission regarding the investigation into a company (details supplied); the number requested to date; the date of each set of requests; and if he will make a statement on the matter. [5130/16]
Amharc ar fhreagraGiven the confidential and legal nature of the ongoing process I do not propose to make a detailed comment on the matter at this time, save to say that Ireland has co-operated fully with the EU Commission's investigation since the first information request was received in June 2013. We have submitted comprehensive responses throughout the process to address the Commission's questions, making it clear that the appropriate amount of Irish tax was charged in this case in accordance with the relevant legislation.
79. Deputy Pearse Doherty asked the Minister for Finance if he has raised the issue of a review of the macroprudential lending rules with the Central Bank of Ireland; and, if so, the context and the result of any such discussions. [5131/16]
Amharc ar fhreagraIn February 2015 the Central Bank of Ireland, in line with its mandate to safeguard financial stability, put in place macro-prudential measures for new residential mortgage lending. These measures apply proportionate loan-to-value and loan-to-income limits to mortgage lending by regulated financial service providers in the Irish market. The key objective of these measures is to increase the resilience of the banking and household sectors to the housing sector and to reduce the risk of bank credit and house price spirals from developing in the future.
The Central Bank is independent in the formulation and implementation of these macro prudential measures. In that context, the Deputy will be aware that when he appeared before the Oireachtas Finance Committee last January the Governor of the Central Bank stated that the Bank is firmly committed to deploying such macro prudential tools on an ongoing basis, with periodic reviews to ensure that the measures are appropriately calibrated. In that context he also stated that he expected the first review of the mortgage rules to be published by the Bank by November this year. This review will be based on an analysis of the evidence provided by data on the first year of the operation of the rules, while taking into account other factors that may have influenced the mortgage market during this period. He also indicated that the Central Bank is open to tightening or loosening the calibration of these rules in response to the evidence but also referenced that the value of stability in a rules-based framework means that the evidence threshold to justify adjustments to these rules is significant. He noted that tools such as mortgage macro prudential rules and the recently introduced system of counter-cyclical capital buffers would have mitigated the costs of the boom-bust credit cycle in Ireland in the mid-2000s and that the Irish economy remains vulnerable to adverse shocks, with limits to household leverage offering protection to households and banks.
80. Deputy Pearse Doherty asked the Minister for Finance his plans to ensure vulture funds operating in the residential and commercial property sector are paying a level of tax commensurate with their profits; and if he will make a statement on the matter. [5132/16]
Amharc ar fhreagraI understand that a number of the funds referred to operating in the residential and commercial property sector are 'qualifying companies' within the meaning of section 110 Taxes Consolidation Act 1997. As such the profits of the qualifying company are chargeable to tax at 25% (under Schedule D, Case III) but are computed by reference to the rules applicable to trading companies (i.e. in accordance with the provisions of Schedule D, Case I).
A company must notify the Office of the Revenue Commissioners in advance of its intention to fall within the scope of section 110 Taxes Consolidation Act 1997. The companies are required to pay their taxes and file their tax returns in the same way as all other companies and are subject to the same monitoring by the Revenue Commissioners. The Financial Services Unit in Revenue's Large Cases Division is responsible for monitoring/auditing section 110 companies.
81. Deputy Pearse Doherty asked the Minister for Finance the steps he will take to ensure mountain rescue services can avail of a reduced tax burden given the stated European Commission position that, in general, member states can also introduce on a national level targeted compensation mechanisms outside the VAT system to alleviate the cost of VAT on acquisitions; and if he will make a statement on the matter. [5133/16]
Amharc ar fhreagraVAT law is governed by the EU VAT Directive, with which Irish VAT law must comply. The EU VAT Directive makes specific provision under Articles 148 and 169, for a zero rate of VAT to apply to the supply of vessels for rescue or assistance at sea. Irish VAT law transposed this provision in 1978 by providing that the zero rate of VAT apply to the supply of large vessels used for sea rescue. In addition, a VAT Refund Order for the purchase of smaller sea rescue vessels was introduced from 1985, and extended in 2013 to apply to vessels for inland water rescue. Irish VAT law does not provide for an exemption from VAT on supplies or purchases of mountain rescue equipment as this is not provided for under the EU VAT Directive.
Last year as part of Budget considerations a Working Group comprising representatives from the Department of Finance, the Revenue Commissioners and the Irish Charities Taxation Reform (ICTR) group was established to examine options available to reduce the VAT burden of charities. Having considered the report, I decided to take no action in relation to the VAT burden on charities at this time.
Mountain rescue services are treated in a similar manner to charities in that they are exempt from VAT under the EU VAT Directive. This means that they do not register for VAT and cannot recover VAT incurred on goods and services that they purchase. This non-entitlement to VAT deductibility is a general feature of VAT exemption. Introducing a VAT refund scheme for an exempt organisation such as mountain rescue services would lead to similar claims from other VAT exempt organisations including charities and sporting organisations. Requests for new Ministerial Refund Orders have been consistently refused since the 1980s primarily to maintain the integrity of the VAT system and I will not be introducing a targeted compensation scheme for mountain rescue services at this time.
82. Deputy Pearse Doherty asked the Minister for Finance his plans to make legislative changes to clarify the division of responsibility between the Motor Insurers Bureau of Ireland and the insurance compensation fund to prevent legal issues arising, were another company to collapse in similar circumstances to a company (details supplied); and if he will make a statement on the matter. [5134/16]
Amharc ar fhreagra83. Deputy Pearse Doherty asked the Minister for Finance his plans to alter the criteria for accessing the insurance compensation fund or to change the maximum level of payment it can make; and if he will make a statement on the matter. [5135/16]
Amharc ar fhreagraI propose to take Questions Nos. 82 and 83 together.
The Minister for Transport, Tourism and Sport and I have asked our officials to carry out a review of the framework for motor insurance compensation in Ireland. The work on this review is advanced and it is anticipated that the Joint Group will report to us in the coming weeks.
The objective of the Review is to identify the features of a motor insurance compensation framework for Ireland that is comprehensive, effective, affordable and consumer focused. The Review will make recommendations on the arrangements for motor insurance arising from the liquidation or administration of an insurance company and on the arrangements in relation to the payment of compensation for road accidents caused by uninsured and untraceable road users.
The Joint Group is engaging with relevant stakeholders involved in governance and administration of the motor insurance system. The frameworks for motor insurance compensation in other EU jurisdictions and relevant legislative and regulatory developments in Ireland and in the EU are also being considered.
I am not in a position to advise if there will be any legislative changes at this time as the review is still underway and its recommendations have yet to be finalised for consideration.
84. Deputy Robert Troy asked the Minister for Finance if he will extend the living in town initiative to all provincial towns to incentivise persons to move back into town centres to help revitalise our towns; and if he will make a statement on the matter. [5156/16]
Amharc ar fhreagraI assume the Deputy is referring to the Living City Initiative, which was enacted in the Finance Act 2013 and commenced on 5th May 2015. This Initiative has been extended beyond the original planned pilot cities of Limerick and Waterford, to include the cities of Dublin, Cork, Galway and Kilkenny as well. In line with my Department's commitment to evidence based policy-making, the inclusion of these additional four cities followed the completion of a comprehensive, independent ex-ante cost benefit analysis.
The Initiative targets particular areas of the cities which are most in need of regeneration, especially inner city areas, which are largely comprised of dwellings built before 1915, where there is above average unemployment and which demonstrate clear evidence of neglect, dereliction and under-use.
I do not currently intend to extend the Initiative further than the six cities. However, my Department will closely monitor the progress of the Initiative in the six cities, and will keep the matter under review.
85. Deputy Mattie McGrath asked the Minister for Finance to reduce the capital gains tax rate and increase the capital gains tax free allowance; to provide details of the income from this tax over the past four years; and if he will make a statement on the matter. [5167/16]
Amharc ar fhreagraI do not have any immediate plans to reduce the rate of capital gains tax (CGT) or to increase the allowable tax-free annual gain. In common with all taxes, however, CGT is subject to on-going review, in which the rate of tax and all reliefs and exemptions are carefully considered. However, decisions concerning changes to taxes, generally, are taken in the course of the Budgetary and Finance Bill process and I will bear the Deputy's concerns in mind in that context, subject to my continuing in my role as Finance Minister following the formation of the next Government.
With regard to the second part of the Deputy's question I am advised by the Revenue Commissioners that a wide range of statistical information is available on the Commissioners' Statistics webpage http://www.revenue.ie/en/about/statistics/index.html .
Information on potential costs of reducing the rate of Capital Gains Tax (CGT) or increasing the annual allowance can be found on the webpage under the "Ready-Reckoner" heading (http://www.revenue.ie/en/about/statistics/ready-reckoner.pdf) and information on tax receipts from CGT for various years can be found under the "Receipts" heading (http://www.revenue.ie/en/about/statistics/receipts-taxhead.html ).
86. Deputy Pearse Doherty asked the Minister for Finance the cost in budget 2017 of reducing each of the universal social charge rates by 0.5% and by 1%, by individual measure and by cumulative amount; and if he will make a statement on the matter. [5172/16]
Amharc ar fhreagra87. Deputy Pearse Doherty asked the Minister for Finance the cost in budget 2017 of abolishing the universal social charge for self-employed persons earning over €100,000 per year. [5173/16]
Amharc ar fhreagra88. Deputy Pearse Doherty asked the Minister for Finance the cost in budget 2017 of abolishing the universal social charge rates of 3% and 1% and leaving all other rates and thresholds unchanged. [5174/16]
Amharc ar fhreagra90. Deputy Pearse Doherty asked the Minister for Finance the cost in budget 2017 of exempting all income below €19,572 per annum from the universal social charge; and if he will make a statement on the matter. [5176/16]
Amharc ar fhreagra92. Deputy Pearse Doherty asked the Minister for Finance the cost of abolishing the 1% rate of the universal social charge that applies to income up to €12,012 per year. [5178/16]
Amharc ar fhreagraI propose to take Questions Nos. 86 to 88, inclusive, and 90 and 92 together.
I am advised by the Revenue Commissioners that a Post-Budget 2016 Ready Reckoner is available on the Revenue Statistics webpage at http://www.revenue.ie/en/about/statistics/index.html.
In relation to the Deputy's Questions regarding the reduction or abolition of the current USC rates, this Ready Reckoner shows a wide range of detailed information, including the estimated cost or yield to the Exchequer of changes to the Universal Social Charge (USC) bands and rates. While the Ready Reckoner does not show all of the specific costings requested by the Deputy, others can be estimated on a pro-rata basis with those displayed in the Reckoner. For example, the full year cost of decreasing the 3% USC rate to 2% is estimated to be €148 million. Other decreases can be estimated on a straight line basis.
In regards to the Deputy's Question relating to the abolition of the USC surcharge for self-employed persons earning over €100,000 per year, the first and full year costs to the Exchequer are estimated to be €34 million and €112 million respectively.
In regards to the Deputy's question relating to the cost to the Exchequer of exempting income below €19,572 from the USC, these costs are estimated to be €63 million and €87 million for the first and full year respectively. For the purposes of these costs, it has been assumed that the current USC bands and rates will apply to taxpayers whose USC-liable income exceeds €19,572.
These figures are estimates from the Revenue tax forecasting model using latest actual data for the year 2013, adjusted as necessary for income, self-employment and employment trends in the interim. They are estimated by reference to 2016 incomes and are provisional and may be revised. Estimates for 2017 incomes will not be available until later this year.
89. Deputy Pearse Doherty asked the Minister for Finance the fiscal space available in budget 2017; and if he will make a statement on the matter. [5175/16]
Amharc ar fhreagra91. Deputy Pearse Doherty asked the Minister for Finance the effect of non-indexation of the universal social charge on the fiscal space between 2016 and 2021. [5177/16]
Amharc ar fhreagraI propose to take Questions Nos. 89 and 91 together.
Estimates of the fiscal space for the period 2017 to 2021 were provided in the documentation accompanying the Budget last October. These remain the most up-to-date estimates. On this basis, after providing for pre-committed expenditure (demographics, pay increases under the Lansdowne Road Agreement, expenditure increases as part of the Public Capital Programme), net fiscal space for 2017 was estimated at around €500 million.
It is important to stress that the various inputs required to calculate the fiscal space (such as forecasts for the GDP deflator) can, and will, change. This, in turn, will alter the fiscal space. Any decision on when to publish revised estimate of the fiscal space will be a matter for the Government.
It was estimated at the time of Budget 2016 that an annual decision not to index the tax system could potentially add a further €2 billion to the level of fiscal space over the period 2017 to 2021; these figures were also set out in the Budgetary documentation. In relation to this additional €2 billion of fiscal space, some €500 million was apportioned to the Universal Social Charge. These figures will be reviewed as part of the forthcoming Stability Programme Update, which will incorporate the latest economic and fiscal data and must, in turn, be approved by the Government before it is submitted to the European Commission.
Finally, I would stress that any decision regarding indexation of the tax system is, of course, a matter for the Government.
93. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from standardising the tax relief on employee pension contributions when an individual exceeds €4,000 in annual employee pension contributions, that is, employee pension relief, which applies as normal up to €4,000 in contributions and when this amount is exceeded, relief is applied at 20%. [5179/16]
Amharc ar fhreagra94. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from standardising the tax relief on employee pension contributions when an individual exceeds €3,000 in annual employee pension contributions, that is, employee pension relief, which applies as normal up to €3,000 in contributions and when this amount is exceeded, relief is applied at 20%. [5180/16]
Amharc ar fhreagra95. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from standardising the tax relief on employee pension contributions when an individual exceeds €3,500 in annual employee pension contributions, that is, employee pension relief, which applies as normal up to €3,500 in contributions and when this amount is exceeded, relief is applied at 20%. [5181/16]
Amharc ar fhreagra96. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from restricting the tax-free value of employer pension contributions to €25,000 per employee per year, that is, any contributions above this value being taxed under normal income tax rules. [5182/16]
Amharc ar fhreagra97. Deputy Pearse Doherty asked the Minister for Finance the expected revenue from reducing the standard fund threshold to €1 million, €1.1 million and €1.2 million. [5183/16]
Amharc ar fhreagraI propose to take Questions Nos. 93 to 97, inclusive, together.
I am advised by the Revenue Commissioners that, regarding the first three questions, a breakdown of the cost of tax relief on employee contributions to occupational pension schemes is not available as tax returns by employers (of employee contributions) to such schemes are aggregated and do not provide the detail per employee required to estimate the changes suggested. There is therefore no basis on which an estimate of the impact on the Exchequer of the changes in the Questions could be compiled.
Regarding the fourth question, I am informed by the Revenue Commissioners that data on employer contributions to pension schemes and other pension arrangements are supplied to them in aggregate form and do not provide a sufficient basis to provide a reliable estimate of any tax saving in the terms set out in the Question.
In regards to the fifth question, the Standard Fund Threshold (SFT) is the maximum allowable pension fund on retirement for tax purposes, which was introduced in Finance Act 2006 to prevent over-funding of pensions through tax-relieved arrangements. The threshold was initially set at €5 million, it was subsequently reduced to €2.3 million with effect from 7 December 2010 and further reduced to €2 million with effect from 1 January 2014.
Information on the numbers and values of individual pension funds or on individual accrued benefits are not generally required to be supplied to the Revenue Commissioners by the administrators of pension schemes and personal pension arrangements. There is, therefore, no underlying data readily available to the Revenue Commissioners on which to base reliable estimates of the savings that would arise specifically from the respective changes to the SFT indicated in the question.
