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Thursday, 29 Sep 2016

Written Answers Nos. 79 - 90

Credit Union Services

Ceisteanna (79)

Michael McGrath

Ceist:

79. Deputy Michael McGrath asked the Minister for Finance the number of credit unions that have expressed an interest in providing mortgages to members; and if the Central Bank has any knowledge of the type of demand there might be for mortgages from credit union members. [27883/16]

Amharc ar fhreagra

Freagraí scríofa

My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions.  Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.

I have been informed by the Central Bank that currently credit unions may provide mortgages to members subject to the maturity limits contained in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (2016 Regulations) which sets out the percentage of a credit union's loan book that can be outstanding for periods exceeding both five years and ten years, as well as limits on the maximum outstanding liability to an individual member. Under the 2016 Regulations, issued at the beginning of January, credit unions continue to be allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years. In addition, credit unions can apply to the Central Bank for an extension to their longer term lending limits (up to 40% of their loan book over 5 years and up to 15% of their loan book over 10 years).  Approval is subject to conditions set by the Central Bank. I have been informed that 12 credit unions have been approved for an extension to their longer term lending limit.

Credit unions are not required to seek specific approval from the Central Bank to provide mortgages, thus the Central Bank does not have specific data on the number of credit unions that have an interest in providing mortgages.  However, there is some anecdotal evidence that credit unions may have an interest in providing such loans. Credit unions may express an interest in providing mortgages in the context of on-going engagements with the Central Bank. Additionally, discussions in the Sector Stakeholder Dialogue have indicated an interest in this area. 

As the Central Bank does not engage directly with credit union members it therefore would not have knowledge as to what kind of demand there might be for mortgages from credit union members.

The Central Bank considers that credit unions must have appropriate systems, controls and expertise to undertake such lending and is of the view that scale is an important factor in determining whether a credit union can put these in place and offer mortgages as a viable business line. The Central Bank informs me that there are currently some sectoral initiatives in relation to the provision of mortgages being discussed with sector stakeholders.

Credit Union Data

Ceisteanna (80)

Michael McGrath

Ceist:

80. Deputy Michael McGrath asked the Minister for Finance the amount of surplus funds credit unions have available to lend at the moment; the amount permissible under current term limits as mortgages with terms less than ten years; and if he will make a statement on the matter. [27884/16]

Amharc ar fhreagra

Freagraí scríofa

My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions.  Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.

I have been informed by the Central Bank that based on information provided by credit unions in the 30 June 2016 Prudential Returns to the Central Bank the sector has total assets of €15.6bn with €4.04bn in loans and €11.3bn in investments.

The Credit Union Act, 1997 (1997 Act) and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (2016 Regulations) (which set out services exempt from additional services requirements) set out the services that a credit union may provide to its members.

Currently credit unions may provide mortgages to members subject to the maturity limits contained in the 2016 Regulations which set out the percentage of a credit union's loan book that can be outstanding for periods exceeding both five years and ten years, as well as limits on the maximum outstanding liability to an individual member. Under the 2016 Regulations, credit unions continue to be allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years. In addition, credit unions can apply to the Central Bank for an extension to their longer term lending limits (up to 40% of their loan book over 5 years and up to 15% of their loan book over 10 years).  Approval of an extension to longer term lending limits is subject to conditions set by the Central Bank.

Credit Union Services

Ceisteanna (81)

Michael McGrath

Ceist:

81. Deputy Michael McGrath asked the Minister for Finance if his attention has been drawn to the fact that some financial institutions have already started charging credit unions for holding their funds. [27885/16]

Amharc ar fhreagra

Freagraí scríofa

My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions. Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.

While both this Government and the Central Bank are supportive of credit unions, the board of directors at a credit union has responsibility for the general control, direction and management of the affairs, funds and records of the credit union.

In addition, under section 43 o f the Credit Union Act, 1997 credit unions are required to manage their investments to ensure that they do not involve undue risk to members' savings. The Central Bank also informs me that credit union investments must also fall within the classes of investments set out in the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016 (the Regulations) and the maturity and concentration limits set out in the Regulations.  Credit unions must continue to adhere to these requirements in the current low interest rate environment. While adhering to these measures, a credit union has discretion as to where it chooses to deposit or invest its own funds. 

The Government recognises the important role of credit unions as a volunteer co-operative movement in this country. The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is determined to support a strengthened and growing credit union movement.

Credit Union Regulation

Ceisteanna (82)

Michael McGrath

Ceist:

82. Deputy Michael McGrath asked the Minister for Finance if his attention has been drawn to the fact that progressive credit unions that have the necessary skills and infrastructure to issue mortgages and who have evidence of significant demand are restricted in the amount they can lend as mortgages under the new regulations to just 5% of their current member shares. [27886/16]

Amharc ar fhreagra

Freagraí scríofa

My role as Minister for Finance is to ensure that the legal framework for credit unions is appropriate for the effective operation and supervision of credit unions.

The Registrar of Credit Unions at the Central Bank is the independent regulator for credit unions.  Within her independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.

The Credit Union Act, 1997 (the 1997 Act) and the Credit Union Act 1997 (Regulatory Requirements) Regulations 2016  (which set out services exempt from additional services requirements) (2016 Regulations) set out the services that a credit union may provide to its members. Currently credit unions may provide mortgages to members subject to the maturity limits contained in the 2016 Regulations which sets out the percentage of a credit union s loan book that can be outstanding for periods exceeding both five years and ten years, as well as limits on the maximum outstanding liability to an individual member. Under the 2016 Regulations, issued at the beginning of January, credit unions continue to be allowed to lend up to 30% of their loan book over five years and up to 10% of their loan book over 10 years, subject to a maximum maturity of 25 years.  In addition, credit unions can apply to the Central Bank for an extension to their longer term lending limits (up to 40% of their loan book over 5 years and up to 15% of their loan book over 10 years). Approval of this extension is subject to conditions set by the Central Bank.  The 2016 Regulations do not provide for a specific limit of 5% of current member shares.

The Government recognises the important role of credit unions as a volunteer co-operative movement in this country. The Government's priorities remain the protection of members' savings, the financial stability of credit unions and the sector overall and it is determined to support a strengthened and growing credit union movement into the future.

Ministerial Meetings

Ceisteanna (83)

Micheál Martin

Ceist:

83. Deputy Micheál Martin asked the Minister for Finance the issues discussed at his meeting with Chancellor Hammond in London on 22 September 2016; if any actions will be taken; and if he will make a statement on the matter. [27939/16]

Amharc ar fhreagra

Freagraí scríofa

I met with the UK Chancellor of the Exchequer in London on 22 September 2016.   

At this meeting, I set out the key issues for Ireland arising from the UK referendum on EU membership, while fully respecting the agreement at EU level that there will be no negotiations until the UK has triggered Article 50. 

The key issues for Ireland have been articulated on numerous occasions by me and other members of the Government and relate to the close economic relationship with the UK and the interconnectedness of our trade, the potential economic and political impact on North-South relations, the Common Travel Area and the EU itself.

In terms of actions, substantial work has already been undertaken across Government to identify the key strategic, policy and operational risks arising. Following the referendum outcome, this work has been intensified and prioritised across all Government Departments and agencies. In any future negotiations, our primary objective remains to protect and advance this country's interests.

House Prices

Ceisteanna (84)

Micheál Martin

Ceist:

84. Deputy Micheál Martin asked the Minister for Finance if he or his Department have received any reports outlining concerns regarding the impact assisting first-time buyers will have on the property market; if he has concerns regarding any changes to assistance being provided; if it is being examined by his Department before any announcement is made; and if he will make a statement on the matter. [27940/16]

Amharc ar fhreagra

Freagraí scríofa

A key priority for this Government is to develop a fully functioning housing market that responds adequately to the needs of our citizens. To this end the Deputy will be aware that the Government launched 'Rebuilding Ireland - The Action Plan for Housing and Homelessness' last July. Implementation of the plan is being led by the Minister Coveney at the Department for Housing, Planning, Community and Local Government, with cross Departmental support including from my Department.

This comprehensive Action Plan takes a holistic approach in addressing the many interacting structural constraints affecting the housing market in areas such as planning and land use, as well as regulation and skills deficits in the construction sector. While the primary focus of the Action Plan is to tackle structural constraints, fiscal supports can play a supporting and time-bound role in addressing the current problems in the housing sector.

It is in this context that the proposed help-to-buy scheme should be considered. Its role would be to complement the other measures in the Action Plan. The extent to which the scheme could lead to an increase in residential property prices will very much depend on the speed and efficiency with which structural supply constraints are eliminated and residential building activity increases. Therefore, the impact of the help-to-buy scheme on property prices cannot be considered in isolation from the impact of other measures contained in the Action Plan, which are primarily designed to increase supply.

Property Tax Exemptions

Ceisteanna (85)

Bernard Durkan

Ceist:

85. Deputy Bernard J. Durkan asked the Minister for Finance if a person (details supplied) qualifies for exemption from local property tax; and if he will make a statement on the matter. [27995/16]

Amharc ar fhreagra

Freagraí scríofa

The qualifying criteria in respect of the exemption from Local Property Tax (LPT) on foot of significant pyritic damage was modified by the Finance (Local Property Tax) (Amendment) Act 2015.

The modifications were introduced by me on foot of recommendations made by Dr. Don Thornhill following a review of LPT in 2015. The revised criteria includes properties where a certificate of damage has been completed by a competent person as set down in I.S. 398-1.2013; the property has been accepted into the pyrite remediation scheme operated by the Pyrite Resolution Board; an insurance company has remediated the property or provided sufficient funds to carry out the remediation; or the person who built the property has remediated it or provided sufficient funds to carry out the remediation.

The 2015 LPT Amendment Act does not provide any entitlement to an exemption from LPT on foot of pyritic damage where the property was remediated prior to the commencement of LPT. 

The person in question claimed the pyrite exemption in 2013 but the supporting documentation that was subsequently provided to Revenue confirmed that the property was remediated in 2012. On that basis the person is not entitled to the relief and Revenue has no choice but to withdraw the exemption in accordance with the law.

However it is accepted that the person incorrectly claimed the pyrite exemption in good faith and Revenue has assured me that it will work with him to agree a mutually acceptable payment arrangement in respect of the arrears that have accumulated.

The Deputy should advise the person to make contact with the LPT team at telephone number 065- 6849292 as soon as possible so that the necessary arrangements can be finalised. 

Mortgage Arrears Proposals

Ceisteanna (86)

Bernard Durkan

Ceist:

86. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the lending institutions are expected to accommodate, by way of an extension of the mortgage repayment period, borrowers in arrears in respect of their family homes, having particular regard to that fact that all borrowers and taxpayers have had to contribute to the bailout of the lending institutions; and if he will make a statement on the matter. [27996/16]

Amharc ar fhreagra

Freagraí scríofa

I would remind the Deputy that the lending institutions in Ireland, including those in which the State has a significant shareholding, are independent commercial entities and that relationship frameworks are in place with the State owned banks which provide that the State will not intervene in the day-to-day operations of the banks or their management decisions. These frameworks are required to ensure that the banks are run on a commercial, cost effective and independent basis to ensure the value of the banks as an asset for the State.  

The Code of Conduct on Mortgage Arrears (CCMA) sets out a process, called the Mortgage Arrears Resolution Process (MARP).  Under the MARP, each lender must explore all of the options for alternative repayment arrangements offered by his company and must document its consideration of each option examined including the reason(s) why the option(s) offered to the borrower is/are appropriate and sustainable for his/her individual circumstances and why the option(s) considered and not offered to the borrower is/are not appropriate and not sustainable for the borrower's individual circumstances.  This requirement ensures that if 'extending the term of the mortgage' is one of the alternative repayment arrangements offered by the lender then he must consider whether this option is appropriate and sustainable for the borrower and if he concludes that it is not then he must inform the borrower of the reasons for this conclusion.

The CCMA applies to the mortgage lending activities and credit servicing activities in respect of mortgage loans of all regulated entities, except credit unions, operating in the State.  It provides a strong consumer protection framework to protect borrowers struggling with mortgage repayments, ensuring that they are treated in a fair and transparent manner by their lender.  The CCMA recognises that it is in the interests of borrowers and regulated entities to address financial difficulties as speedily, effectively and sympathetically as circumstances allow.

The Deputy will be aware that the Action Plan For Housing and Homelessness sets out how the Government plans to meet the challenging commitments made in the Programme for a Partnership Government in respect of dealing with homelessness, including how it will address the high level of mortgages currently in arrears for more than two years.  Implementation of this plan is being overseen by the Cabinet Committee on Housing and Homelessness. One action on mortgage arrears relates to a commitment to work with the Central Bank to amend the Code of Conduct on Mortgage Arrears to include an obligation on providers of mortgage credit to provide a range of sustainable arrears solutions.  I have written to the Governor of the Central Bank in this regard to request that an assessment be undertaken of the range of available sustainable restructure solutions offered by banks and non-bank entities.  I have asked that this assessment should consider in particular how the available options may impact on the distressed borrower's capacity to remain in their primary residence.  Other actions to support the position of borrowers in arrears and to adjust the legal framework are being advanced separately by the Department of Social Protection and the Department of Justice and Equality.

State Aid Investigations

Ceisteanna (87, 88, 89)

Bernard Durkan

Ceist:

87. Deputy Bernard J. Durkan asked the Minister for Finance if the decision by the European Commission in respect of the requirement that income earned by foreign direct investors in other EU and non-EU states is liable for tax here, if applied broadly, will require an amendment to EU treaties; and if he will make a statement on the matter. [27997/16]

Amharc ar fhreagra

Bernard Durkan

Ceist:

88. Deputy Bernard J. Durkan asked the Minister for Finance the number and location of countries other than Ireland in respect of which profits made by a company (details supplied) which are likely to be deemed taxable here in the event of the EU courts ruling in favour of the European Commission; and if he will make a statement on the matter. [27998/16]

Amharc ar fhreagra

Bernard Durkan

Ceist:

89. Deputy Bernard J. Durkan asked the Minister for Finance the basis on which members of the competition and taxation committee of the European Parliament and members of the European Commission can claim to speak authoritatively regarding the outcome of any EU court decision on the European Commission's decision relating to the profits by a company (details supplied) earned in other jurisdictions being eligible for taxation here; and if he will make a statement on the matter. [27999/16]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 87 to 89, inclusive, together.

On 30 August 2016, the European Commission issued a negative decision in the Apple State Aid case. 

The Government profoundly disagrees with the Commission's analysis in the Apple case and will now challenge the decision before the European Courts.  Dáil Éireann has also passed a motion supporting the Government's decision to appeal the European Commission's decision.

Ireland has a period of two months and 10 days to bring an appeal.  The appeal process may take several years.  An appeal to the European Courts takes the form of an application to the General Court of the European Union, asking it to annul the decision of the Commission. 

Ireland's position remains that the full amount of tax was paid in this case and no State aid was provided.  Ireland did not give favourable tax treatment to Apple.  Ireland does not do deals with taxpayers.

Notwithstanding the negative decision, no fine or penalty has been imposed on the State.

The European Commission has stated that "This decision does not call into question Ireland's general tax system or its corporate tax rate".  No other companies are subject to this decision by the European Commission.

On foot of the Commission's decision, Ireland is required to recover up to €13bn of alleged state aid from the company covering a ten year period.  Notwithstanding the right of appeal, Ireland is legally obliged to recover the alleged state aid from Apple in the interim.  Given that this money may ultimately have to be returned to the company in the event of a successful appeal, the money can be held in escrow until the case has concluded.  

The Commission has stated that:

- The amount of unpaid taxes to be recovered by the Irish authorities would be reduced if other countries were to require Apple to pay more taxes on the profits recorded by Apple Sales International and Apple Operations Europe for this period.

- The amount of unpaid taxes to be recovered by the Irish authorities would also be reduced if the US authorities were to require Apple to pay larger amounts of money to their US parent company for this period to finance research and development efforts.

This illustrates the contradiction at the heart of the European Commission's decision.  While requiring Ireland to recover the tax sums, the Commission is also acknowledging that the sums may in fact be taxable in other jurisdictions.

Budget 2017

Ceisteanna (90)

Bernard Durkan

Ceist:

90. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he expects to be in a position in the forthcoming budget to combine prudent fiscal management with the need to accommodate the issues which affect the general population in terms of the economic downturn; and if he will make a statement on the matter. [28000/16]

Amharc ar fhreagra

Freagraí scríofa

Significant progress have been made in returning the public finances to a sustainable footing. Last year, the underlying deficit was reduced to 1 per cent of GDP, thereby facilitating Ireland's successful exit from the excessive deficit procedure.

It is important that the public finances are maintained in a sustainable position. In this regard, our new fiscal anchor is to achieve a structural deficit of 0.5 per cent of GDP.  Based on the revised trajectory and assumptions set out in the recent Summer Economic Statement, we are on track to achieve this medium term objective, of a balanced budget in structural terms, by 2018.

Once this goal is achieved, it will provide us with more flexibility to increase expenditure on priorities over the medium term. In the short term, the estimated indicative fiscal space for 2017 is around €1 billion, with the cumulative available fiscal space over the period 2017 to 2021 projected to be around €11.3 billion. This is the amount that remains after providing for pre-committed policies such as demographics etc., while still complying with the fiscal rules.

Expenditure increases in the order of €0.6 billion in current expenditure and €0.25 billion in capital expenditure are expected from the fiscal space available for Budget 2017. These increases will allow targeted improvements in the public services, with a particular focus on health, housing, education, disability and child development and care.

One third of the available fiscal space in Budget 2017 will be allocated to taxation measures. I have long said that the burden of income tax in Ireland is too high and that I would seek to reduce it as soon as it is prudent to do so.  I introduced measures to reduce this burden in both Budgets 2015 and 2016, with a particular focus on low and middle income earners.

In the Programme for Partnership Government there is a commitment to ask the Oireachtas to continue to phase out the USC as part of a wider medium-term income tax reform plan that keeps the tax base broad, reduces excessive tax rates for middle income earners, and limits the benefit for high earners. Reductions will be introduced on a fair basis with an emphasis on low and middle income earners.

Separately, my colleague the Minister for Public Expenditure and Reform Pascal Donohoe is considering budgetary expenditure proposals which will be subject to a seperate announcement on Budget day.

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