Written Answers Nos. 189-205
189. Deputy Michael McGrath asked the Minister for Finance when the merger of the Financial Services Ombudsman and Pensions Ombudsman will be completed; and if he will make a statement on the matter. [22430/16]
Amharc ar fhreagraThe Department is progressing the development of the legislation to underpin the amalgamation of the Financial Service Ombudsman and the Pensions Ombudsman. The previous Government agreed outline Heads of a Bill to provide for the amalgamation of offices in May of 2015 and both offices have already been physically merged in one location. Recent legislative changes have enabled the appointment of the Financial Services Ombudsman as Pensions Ombudsman.
As the Deputy will be aware, the timing of the introduction of the legislation is contingent on a number of actions: the conclusion of relevant legislative drafting work; the presentation of a draft Bill to the Government for their agreement and publication; and the legislative programme that may be adopted by the Government. This piece of legislation is currently on the 'second list' of the current legislative programme set out by the Office of the Government Chief Whip that is, Bills that are expected to undergo Pre-Legislative Scrutiny this session.
190. Deputy Michael McGrath asked the Minister for Finance if AIB plans to go ahead with the redemption of its €1.6 billion contingent capital note; and if he will make a statement on the matter. [22431/16]
Amharc ar fhreagraYes, without question this repayment will proceed as planned. As the Deputy is aware, the Contingent Capital Note, or 'CoCo', which was issued by the State to AIB in July 2011, is a contractual commitment and is due to mature later this month. On July 28th, AIB will redeem the CoCo for its full value of €1.6bn, returning this capital to the State along with all interest outstanding.
The redemption of the CoCo removes the final 'legacy' capital instrument of the financial crisis from the balance sheet of AIB and follows on from the 2015 capital reorganisation which allowed for the part redemption of the State's 2009 Preference Shares for €1.7 billion in cash for the State, while converting all remaining Preference Shares into ordinary shares. Following the CoCo redemption, the bank, which has been capital generative since 2014, will have a normalised balance sheet structure.
191. Deputy Michael McGrath asked the Minister for Finance the number of expressions of interest the Central Bank has received from financial institutions seeking to relocate their main centre of operations here since the United Kingdom referendum result; and if he will make a statement on the matter. [22432/16]
Amharc ar fhreagraThe Central Bank has informed me that it cannot comment on authorisation applications or inquiries from individual firms.
In respect of firms or funds potentially seeking to locate in Ireland, the Central Bank Deputy Governor (Financial Regulation) said the Bank remains committed to providing a clear, open and transparent authorisation process while ensuring a rigorous assessment of the applicant against regulatory standards so as to continue to ensure a high, consistent level of consumer protection.
Prior to and since the referendum on the United Kingdom's membership of the European Union, the Bank has been in close contact with the firms it supervises, as well as the Irish Government, ECB-SSM and other EU institutions, and continues to monitor carefully developments in the financial markets and regulated financial services providers.
In addition, the Central Bank on 14 July hosted a roundtable discussion with representatives from my Department, Irish financial sector representatives and other stakeholders about the potential consequences for the sector following the outcome of the recent referendum. The purpose of the engagement was to allow stakeholders present their views on the impacts for the regulated financial sector.
192. Deputy Michael McGrath asked the Minister for Finance if the rate of compliance with the property tax has improved since the recent initiative by the Revenue Commissioners to write to 290,000 households regarding their 2016 liability; and if he will make a statement on the matter. [22434/16]
Amharc ar fhreagraI am advised by Revenue that the Local Property Tax (LPT) compliance rate for 2016 currently stands at 95% and is comparable with previous years.
Revenue has recently published detailed LPT statistics in respect of 2016, which can be accessed via the following link: http://www.revenue.ie/en/about/statistics/local-property-tax-june2016.html.
193. Deputy Michael McGrath asked the Minister for Finance the number of charitable donations subject for which tax relief was claimed in 2015; the total amount of relief granted; if he is satisfied that the system is working adequately to ensure charities are able to fully avail of the relief to which they are entitled; and if he will make a statement on the matter. [22435/16]
Amharc ar fhreagraSection 848A of the Taxes Consolidation Act 1997 provides tax relief at a blended rate of 31% on donations made by individuals to eligible charities and other approved bodies. As the Deputy may be aware, changes were made to the scheme of tax relief for donations to approved bodies in Finance Act 2013 as follows:
1. Donations from all individual donors under the scheme are treated in the same manner, with the tax relief in all cases being repaid to the charity.
2. A blended rate of relief of 31% applies to all taxpayers regardless of their marginal tax rate. All donations are grossed up as was previously done for donations from individuals within the PAYE collection system.
3. The charitable donations scheme has been removed from the scope of the high earners' restriction in recognition of the fact that donors will no longer benefit from the tax relief associated with their donations.
4. An annual donation limit of €1 million per individual, for which a refund of income tax can be claimed by approved bodies, has been applied.
These changes were made following a process of engagement between officials at the Department of Finance and the Revenue Commissioners with representatives of the charities sector from the Irish Charities Tax Reform Group (ICTR).
The objectives of that process were threefold: (i) to simplify the operation of the regime, (ii) to reduce the administrative overheads on charities and on the Revenue Commissioners incurred in the operation of the scheme, and (iii) to ensure that any change would be Revenue neutral from the Exchequer perspective. The proposals for the changes were also recommended in the Report of the Forum on Philanthropy and Fundraising.
I am informed by Revenue that in respect of 2014, the latest year for which returns are available in respect of both individual and corporate donations, €31 million was refunded to approved bodies in respect of 127,000 donors. The Deputy should note that these figures are provisional and may be revised.
ICTR has indicated to my officials that the sector has welcomed the changes and the operation of the new regime has been a success.
194. Deputy Michael McGrath asked the Minister for Finance the reason the minimum imputed distribution from an approved retirement fund is set at 5% per annum; his views on whether this places an undue burden on persons making long-term financial plans including possibly the provision of nursing home care; and if he will make a statement on the matter. [22436/16]
Amharc ar fhreagraApproved Retirement Funds (ARFs) are part of the flexible options at retirement introduced in Finance Act 1999 to provide control, flexibility and choice to the holders of personal pension plans and proprietary director members of occupational pension schemes in relation to the drawdown of their retirement benefits. Prior to that Act, any person taking a pension from a Defined Contribution (DC) scheme or a Retirement Annuity Contract had no choice but to purchase an annuity with their remaining pension pot after drawing down the permissible retirement lump sum. These flexible options at retirement have since been extended to the benefits taken by any individual from DC pension arrangements, generally.
An imputed distribution of the value of assets in an ARF was introduced because an internal review of tax relief for pensions provision undertaken by my Department and the Revenue Commissioners in 2005 found that the ARF option was largely not being used as intended to fund an income stream in retirement but was, instead, being used to build up funds in a tax-free environment over the long-term.
In an effort to counteract this, Budget and Finance Act 2006 introduced, with effect from 2007, an imputed or notional distribution of 3% of the value of the assets of an ARF on 31 December each year (subsequently changed to 30 November each year). The notional distribution arrangement only applies where the ARF owner is 60 years or over for the whole of a tax year. The notional distribution was phased in over the period 2007 to 2009, with 1% applying in 2007, 2% in 2008 and the full 3% from 2009. The notional amount is taxed at the ARF owner's marginal income tax rate. Funds actually drawn down by ARF owners are credited against the imputed distribution in that year to arrive at a net imputed amount, if any, for the year. Budget and Finance Act 2011 increased the rate of the notional distribution to 5% of the value of the assets of an ARF, while Finance Act 2012 further increased the rate to 6% in respect of ARFs with values over €2 million.
In Finance Act 2014, however, I reduced the 5% rate to 4% for ARF owners who are under the age of 70 (and where the value of assets in the ARF is €2 million or less). This reduction in the imputed distribution rate is intended to reduce the risk that individuals in the age group 60 to 70 years might outlive the funds in their ARFs.
An important point to note is that, while most ARF owners take actual draw downs at least equal to the notional distribution rate, there is no obligation on them to do so. The requirement in the legislation is not a statutory minimum drawdown condition. The only requirement is that tax is paid from the ARF on the notional drawdown amount, whether it is drawn down or not.
I do not accept the implied suggestion in the question that the imputed distribution arrangements for ARFs should not apply in order to facilitate financial planning. We operate what is known as an EET system of pension taxation, whereby contributions to pension arrangements and the build-up of the pension assets in the pension fund are both tax-exempt, while pensions are taxed as income in the pay-out phase. ARFs, although they are post-retirement investment vehicles and not pension funds per se, nonetheless represent an alternative to the traditional pay-out phase of a taxable annuity for those who choose that option. Pension fund assets are not taxed on transfer to an ARF. The ARF benefits from gross roll-up and so it is only right that tax is applied at the point when the ARF owner accesses his or her funds. As already mentioned, the imputed distribution regime was introduced to encourage ARFs to be used as intended, that is, to provide an ongoing income stream in retirement as a flexible alternative to annuities.
195. Deputy Michael McGrath asked the Minister for Finance the outstanding measures in the Finance Act 2015 and previous Finance Acts subject to EU approval; and if he will make a statement on the matter. [22437/16]
Amharc ar fhreagraI am advised by Revenue that the outstanding measures in the Finance Act 2015 and previous Finance Acts which are subject to European Union approval are as follows:
Exemption from Stamp Duty (Section 70 Finance (No. 2) Act 2013)
Exemption from Stamp Duty on the transfer of shares of companies listed on the Enterprise Securities Market of the Irish Stock Exchange, remains subject to State Aid approval. The proposed measure aims to encourage entrepreneurs and growing businesses to use public equity markets as a source of funding for growth and the creation of jobs. Discussions are on-going with the EU Commission.
Relief from stamp duty on agricultural leases (Section 74 Finance Act 2014)
It is proposed that this relief would apply to leases for a period of not less than 6 years and not more than 35 years. The land must be used exclusively for farming carried on by the lessee. The lessee who acquires the lease of the land must be either a farmer with an agricultural qualification or a farmer who spends not less than 50% of his or her normal working time farming on a commercial basis and with a view to the realisation of profits. This relief is subject to a Commencement Order pending State Aid approval by the European Commission. In this regard, Responsibility for discussions with the Commission lies with the Department of Agriculture, Food and the Marine.
Succession Farm Partnerships (Section 667D Taxes Consolidation Act 1997 as inserted by Section 19 Finance Act 2015)
A limited tax relief for Succession Farm Partnerships was introduced in Budget 2016. This is a succession planning model that encourages older farmers to form partnerships with young trained farmers and to transfer ownership of the farm, within a specified period, to that young trained farmer. As this measure requires the approval of the European Commission, a commencement order was included in the Finance Act 2015 pending this approval.
196. Deputy Pearse Doherty asked the Minister for Finance the process by which companies are designated as section 110 companies; and if he will make a statement on the matter. [22464/16]
Amharc ar fhreagraI am informed by the Revenue Commissioners (Revenue) that a company that is, or intends to be, a qualifying company within the meaning of section 110 Taxes Consolidation Act 1997 must notify Revenue in writing. In notifying Revenue of such intent, the company confirms that it complies with the conditions attaching to a qualifying company. This notification is a self-assessment process.
197. Deputy Pearse Doherty asked the Minister for Finance the qualifying assets relevant to section 110 companies and when each of these assets was designated as qualifying; and if he will make a statement on the matter. [22465/16]
Amharc ar fhreagraFor the purposes of section 110 Taxes Consolidation Act, and with effect from the enactment of Finance Act 2003, qualifying asset is defined as an asset which consists of, or of an interest in, a financial asset, and financial asset is defined as:-
- shares, bonds, and other securities;
- futures, options, swaps, derivatives and similar instruments;
- invoices and all types of receivables;
- obligations evidencing debt (including loans and deposits);
- leases and loan and lease portfolios;
- hire purchase contracts;
- acceptance credits and all other documents of title relating to the movement of goods;
- bills of exchange, commercial paper, promissory notes and all other kinds of negotiable or transferable instruments.
Finance Act 2008 amended qualifying asset to an asset which consists of, or of an interest (including a partnership interest) in a financial asset, and added to the list of financial assets:-
- greenhouse gas emissions allowance and
- contracts for insurance and contracts for reinsurance.
Finance Act 2011 amended qualifying asset to an asset which consists of, or of an interest (including a partnership interest) in a financial asset, commodities or plant and machinery and added to the list of financial assets:-
- carbon offsets.
Commodities is defined as tangible assets (other than currency, securities, debts or other assets of a financial nature) which are dealt in on a recognised commodity exchange.
198. Deputy Michael McGrath asked the Minister for Finance if he has considered the development of a United Kingdom flood insurance model here; and if he will make a statement on the matter. [22563/16]
Amharc ar fhreagraThe Department of Finance has carried out a review of flood insurance with a particular focus on the strategies that other jurisdictions have implemented to increase the availability of flood insurance cover. This work examined a number of policy options, including a United Kingdom type model, and the completed report has been sent on to OPW to feed into the final report of the Inter-Departmental Flood Policy Coordination Group, chaired by Seán Canney TD, Minister of State with special responsibility for the Office of Public Works and Flood Relief. It is my understanding that the final report of the Inter-Departmental Group will be considered by Government shortly.
199. Deputy Sean Fleming asked the Minister for Finance if funding is being provided for any scheme by his Department or agencies under the aegis of his Department to assist developers buy land to enable them to build houses in view of the housing crisis; and if he will make a statement on the matter. [22565/16]
Amharc ar fhreagraIn line with its statutory mandate, the Ireland Strategic Investment Fund (ISIF) is examining opportunities to make investments on a commercial basis that have the potential to support increased housing output.
The Fund is involved in a number of important initiatives in this area including its investments in: (i) Activate Capital, which is described further below; (ii) Ardstone Residential Partnership, which is a residential equity investment fund that is seeking to develop and deliver residential units to the market over the short- to medium-term and which has already commenced development on sites with a prospective total number of houses of around 1,200; and (iii) the Wilbur Ross Cardinal Commercial Real Estate Mezzanine Debt Fund, which has funded a number of residential developments in recent months.
Activate Capital is an innovative non-bank financing platform that has been established by ISIF and global investment group KKR to invest on a commercial basis in residential development projects in Ireland to help address the current supply shortages in the main urban centres, in particular, new residential development in Dublin, the greater Dublin area, Cork, Limerick and Galway which have been identified as the areas of greatest demand. Activate can provide up to 90% of project funding and will provide funding for both the acquisition of land and to bring projects through the planning process. Its product is flexible as to term and repayment schedules, thereby enabling alignment with the cashflows of any particular development opportunity. To date, Activate has provided finance in respect of around 800 residential units and has a promising pipeline of further opportunities.
In addition, ISIF is currently exploring supporting the delivery of housing-related enabling infrastructure in large scale priority development areas. This is in order to kick start the development process, provided such financing can be done on the basis of appropriate risk and commercial return for the risks taken. Proposals will be assessed on a project by project basis. ISIF's flexible approach to funding and ability to look at potential longer timeframes means it can play a role that is not suited to more traditional debt providers or developer equity. Such finance for housing infrastructure would unblock large development sites to enable individual developers to proceed with building houses on individual landbanks and sites owned by them within the larger scale priority development areas.
200. Deputy Bernard J. Durkan asked the Minister for Finance if the Revenue Commissioners will consider a restructuring of proposals to meet arrears of tax for a person (details supplied) in a way more sustainable and conducive to the payment of their current taxes and a sum off the arrears thereby allowing the person to trade their way out of the difficulty and at the same time meet the requirements of the Revenue Commissioners; if the sheriff's office might be appraised of any such proposal; and if he will make a statement on the matter. [22577/16]
Amharc ar fhreagraI am advised by Revenue that its clear preference is to engage with viable taxpayers experiencing temporary cash flow difficulties rather than deploying debt collection/enforcement sanctions. Revenue's commitment in this regard is clearly demonstrated by the fact that it currently supports over 8,000 taxpayers in respect of almost €100m of debt with phased payment arrangements.
However, where an acceptable solution can not be agreed or where the taxpayer does not engage with the issue in an open and realistic manner then Revenue has no alternative but to protect the Exchequer by using its debt collection/enforcement options. In most cases the enforcement option is likely to be either the sheriff or solicitor and once a case is referred, the collection agent is fully empowered to agree appropriate phased payment arrangements.
The case in question has a very poor tax compliance record and has consistently failed to file Returns or pay tax liabilities on a timely basis. This has resulted in both declared and estimated liabilities being referred to the sheriff for collection. At this point it is not possible for Revenue to agree any arrangement with the business as there are still a number of tax Returns outstanding and as a consequence the total liability can not be fully quantified.
If the business now wishes to properly engage with Revenue it should immediately file all of the outstanding Returns, including in respect of any periods that are already with the sheriff on an estimated basis. Once the outstanding Returns are submitted and the liability is quantified, Revenue will be in a position to discuss the issue with the business and/or its tax advisor. The business should provide clear proposals on how it intends to meet the liabilities in advance of any such discussions.
Any phased arrangement will include statutory interest on which Revenue has no discretion and will require clear commitments from the business in regard to the timely payment of current taxes. Any outstanding charges to the sheriff will also have to be discharged by the business.
201. Deputy Pearse Doherty asked the Minister for Finance the cost of increasing the PAYE and self-employed tax credits by €400 each and tapering out the increase from €55,000 to €65,000, by 10% per €1,000, resulting in no entitlement to the increased credit over €65,000. [22579/16]
Amharc ar fhreagra202. Deputy Pearse Doherty asked the Minister for Finance the cost of increasing the PAYE and self-employed tax credits by €300 each and tapering out the increases from €50,000 to €70,000, by 5% per €1,000, resulting in no entitlement to the increased credit over €70,000. [22580/16]
Amharc ar fhreagra203. Deputy Pearse Doherty asked the Minister for Finance the cost of increasing the PAYE and self-employed tax credits by €400 each and tapering out the increases from €50,000 to €70,000, by 5% per €1,000, resulting in no entitlement to the increased credit over €70,000. [22581/16]
Amharc ar fhreagra204. Deputy Pearse Doherty asked the Minister for Finance the cost of increasing the PAYE and self-employed tax credits by €300 each and tapering out the increase from €55,000 to €65,000, by 10% per €1,000, resulting in no entitlement to the increased credit over €65,000. [22582/16]
Amharc ar fhreagra205. Deputy Pearse Doherty asked the Minister for Finance the cost of increasing the PAYE and self-employed tax credits by €200 each and tapering out the increase from €55,000 to €65,000, by 10% per €1,000, resulting in no entitlement to the increased credit over €65,000. [22583/16]
Amharc ar fhreagraI propose to take Questions Nos. 201 to 205, inclusive, together.
I am advised by Revenue that the estimated first and full year cost to the Exchequer of increasing the PAYE and the Earned Income Credits by €400 and tapering out the increase by 10% per €1,000 on income between €55,000 and €65,000 is in the order of €380 million and €445 million respectively.
The first and full year cost to the Exchequer of increasing the PAYE and Earned Income Credits by €400 and tapering out the increases from €50,000 to €70,000 by 5% per €1000 is estimated to be in the order of €375 million and €440 million respectively.
The first and full year cost to the Exchequer of increasing the PAYE and the Earned Income Credits by €300 and tapering out the increase by 10% per €1,000 on income between €55,000 and €65,000 is in the order of €217 million and €244 million respectively.
The first and full year cost to the Exchequer of increasing the PAYE and the Earned Income Credits by €300 and tapering out the increases from €50,000 to €70,000 by 5% per €1,000 is estimated to be in the order of €287 million and €336 million respectively.
The first and full year cost to the Exchequer of increasing the PAYE and the Earned Income Credits by €200 and tapering out the increase by 10% per €1,000 on income between €55,000 and €65,000 is in the order of €92 million and €113 million respectively.
The estimates above have been generated by reference to 2017 incomes as calculated on the basis actual data for the year 2014, the latest year for which returns are available, adjusted as necessary for income, self-employment and employment trends in the interim. The estimates are provisional and may be revised.
The Deputy may wish to note that the annual update of the Tax Modeller application has now taken place. The Base Year dataset has been updated from 2013 to 2014, the latest year for which returns are now available. In addition, the reference year for which costs/yields are estimated, after adjustments for income, self-employment and employment trends in the interim, has been updated from 2016 to 2017. In advance of the updating of the model this year, an analysis of the First Year/Full Year apportionment of costs was also undertaken to ensure the estimated apportionment is as accurate as possible. It should be noted that this revision does not impact on the total cost/yield of a measure, it only changes the apportionment of the Exchequer impact over the first and second years in which it comes into effect.
Finally, I have been advised by Revenue that, given the current tax structures, major issues would need to be resolved as to how in practice such a credit tapering could be integrated into the current system and how this would affect the relative position of different types of income earners.
