Written Answers Nos. 174-184
174. Deputy Pearse Doherty asked the Minister for Finance his views on whether international banks are booking their profits through the State for the purpose of tax efficiency; and if he will make a statement on the matter. [16263/17]
Amharc ar fhreagraI assume that the Question is referring to comments made in a recent report published by Oxfam. The report, and the figures it is based on, provide limited information on the nature of the activities that the companies concerned carry out in each country in which they operate. Whether a company is correctly allocating profits among its activities is a question for the tax authorities in the countries in which the company operates. Ireland has been, and remains, committed to ensuring that tax authorities have access to all relevant information.
I want to reiterate that Ireland's corporate tax policies are designed to attract real and substantive operations to Ireland. We only want real and substantive FDI, the kind that brings real jobs and investment. Ireland has not been and will never be a brass plate location.
The OECD has made a series of recommendations, as part of the BEPS process, which are designed to give tax authorities the tools necessary to ensure that profits are correctly attributed to the country where the economic activity which generates them takes place. The BEPS recommendations will greatly enhance the ability of participating countries to ensure the correct alignment of tax and substance and Ireland is playing its part in the implementation of these recommendations.
The terms of reference of the review of the corporation tax code being undertaken by Mr Seamus Coffey includes examining further implementation of Ireland's commitments in this area.
175. Deputy Pearse Doherty asked the Minister for Finance if consideration has been given to extending the bank levy to banks that book profits in Ireland; and if he will make a statement on the matter. [16264/17]
Amharc ar fhreagraIn accordance with Section 126AA of the Stamp Duties Consolidation Act 1999, an annual levy was imposed on certain financial institutions for each of the years 2014, 2015 and 2016. The levy was charged at 35% of the Deposit Interest Retention Tax (DIRT) paid by a financial institution in 2011 and raised approximately €150 million annually for the Exchequer. In the case of a financial institution where the amount of DIRT in the base year did not exceed €100,000, the levy was not payable.
I am informed by the Office of the Revenue Commissioners that a total of ten financial institutions were registered to pay the bank levy over the period of years 2014, 2015, and 2016. Four of the ten are domestically owned. The ultimate parent company of the remaining six institutions is outside of the State.
In the budget statement two years ago, I announced that I intended to extend the levy for a further five years to 2021. I indicated that the overall yield from the levy would be maintained at €150 million annually but that I would undertake a review of the DIRT based methodology for calculating the levy.
That review, which included a public consultation on the issue, was undertaken by my Department in early 2016. Following that review, I decided that the DIRT based formula should be retained but that the base year for calculating the levy in 2017 and 2018 would be changed from 2011 to 2015. I have also decided to introduce a rolling two-year series of base years which will introduce a new base year of 2017 for calculating the levy in 2019 and 2020 and a new base year of 2019 for calculating the levy in 2021.
An institution's liability to the levy relates to the size of their Irish operation, since the levy is a percentage of their DIRT payment, and does not have regard to whether the institution is domestic or foreign.
176. Deputy Tony McLoughlin asked the Minister for Finance if an application by a person (details supplied) for tax relief under the scheme for drivers with disabilities will be expedited by his Department; and if he will make a statement on the matter. [16266/17]
Amharc ar fhreagraI am advised by Revenue that an application under the Drivers/Passengers with Disabilities Scheme was received on 16 March 2017 from the person (details supplied). The required Exemption Notification is available for download by the person concerned. The person concerned will need to register via the online service at www.revenue.ie(myAccount) if they have not already done so in order to download the notification.
177. Deputy Catherine Murphy asked the Minister for Finance the amount of VAT collected from tolls from each of the tolled roads by year, location and amount collected for each of the past five years and to date in 2017, in tabular form; and if he will make a statement on the matter. [16293/17]
Amharc ar fhreagraI am informed by Revenue that, as the information provided on VAT returns does not require the yield from particular activities or products to be separately identified, it is not possible to provide the VAT collected from toll roads or to separate this collection by road or toll location. Furthermore, I am advised that, even if the information were available, due to Revenue's obligation to protect the confidentiality of taxpayers' information, it would not be possible for Revenue to provide the information.
178. Deputy Declan Breathnach asked the Minister for Finance if, following a recent ruling of the European Court of Justice that VAT should not be applied to tolls on State-owned motorways, he will consider calling on Transport Infrastructure Ireland to postpone an increase in toll charges planned from 1 April 2017 in view of the fact they are no longer liable for VAT; if his attention has been drawn to the fact that such an increase would be damaging to the road haulage sector, which is already severely impacted by insurance costs threatening the viability of many of its businesses; and if he will make a statement on the matter. [16310/17]
Amharc ar fhreagraI am advised by the Revenue Commissioners that the Court of Justice of the EU in the National Roads Authority v The Revenue Commissioners judgment decided key questions of principle in relation to the liability to VAT of tolls charged to road users by a public authority for the making available of road infrastructure (the Dublin Tunnel and the Westlink (M50) toll road), which were referred by the Appeal Commissioners.
While the case has not yet been concluded, the effect of the judgment is that VAT does not apply to tolls collected from road users by a body governed by public law which carries on an activity consisting of providing access to a road on payment of a toll. Prior to the judgment, Revenue's position was that tolls were liable to VAT at the rate of 23%, which was collected from road users by toll operators regardless of whether they were a public body or a private operator.
Following the judgment it remains that tolls collected by a body other than a body governed by public law which is engaged in the activity of making road infrastructure available on payment of a toll under national statutory provisions are liable to VAT.
With regard to pricing of tolls charged by Transport Infrastructure Ireland, I am informed by my colleague, the Minister for Transport, Tourism and Sport, that the statutory power to levy tolls on national roads, to make toll bye-laws and to enter into agreements relating to tolls on national roads is vested in Transport Infrastructure Ireland under Part V of the Roads Act 1993 as amended.
179. Deputy Joan Burton asked the Minister for Finance the proposals he is considering to ensure that mortgage holders, tenants and small and medium enterprises that have loans or credit from non-bank lenders or vulture funds are fully protected; if he is considering extending the provisions of the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 in this regard; and if he will make a statement on the matter. [16351/17]
Amharc ar fhreagraThe Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 was enacted in July 2015. It was introduced by the previous Government to fill the consumer protection gap where loans were sold by the original lender to an unregulated firm. The Act introduced a regulatory regime for a new type of entity called a 'credit servicing firm'. Credit Servicing Firms are now subject to the provisions of Irish financial services law that apply to 'regulated financial service providers'.
Under the Act, purchasers of loan books must either be regulated by the Central Bank themselves or else the loans must be serviced by a credit servicing firm that is regulated by the Central Bank. The significant point is that the regulation is focussed at the point of contact with the customer. Therefore relevant borrowers, whose loans are sold to third parties, maintain the same regulatory protections they had prior to the sale, including under the various statutory codes (such as the Consumer Protection Code, Code of Conduct on Mortgage Arrears) issued by the Central Bank of Ireland and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48) (Lending to Small and Medium-Sized Enterprises) Regulations 2015 which came into operation in July 2016. It is also important to highlight that the transfer of a loan from one entity to another does not change the terms of the contract or the borrower's rights and obligations under the original contract.
As the Deputy will be aware, the Central Bank is now the competent authority for the authorisation and supervision of credit servicing firms. Credit servicing firms must comply with all relevant requirements of financial services legislation, including the various codes and Regulations mentioned already and Fitness and Probity Standards (including minimum competency requirements).
In addition to compliance with Central Bank codes of conduct, credit servicing firms will have to demonstrate to the Central Bank that they have:
- Robust governance and adequate resources to ensure compliance;
- Agreements with loan owners that enable the credit servicing firm to fully comply with its obligations under Irish financial services legislation; and
- Adequate and effective control of loan servicing in the State to enable Central Bank oversight.
In addition, the Consumer Protection (Regulation of Credit Servicing Firms) Act, 2015 ensures that a regulated credit servicing firm cannot do something, or fail to do something, which would be a prescribed contravention if performed, or not performed, by a retail credit firm. The legislation also prevents the owner of credit from instructing a regulated credit servicing firm to perform such an action. Therefore the borrower is protected because the owner cannot give an instruction that would breach the rules but also the instruction cannot be implemented by the regulated credit servicer, over whom the Central Bank has oversight as a regulated entity.
Nonetheless, my Department will continue to keep all relevant legislation under review in order to ensure that borrowers whose loans have been sold are properly protected and do not lose any protections that they previously enjoyed. In addition, the Department of Finance expects that the Central Bank, as regulator of credit servicing firms, will be vigilant in this area and raise any specific instances where they have found consumers have not had their protections upheld or that their positions have been disadvantaged.
180. Deputy Joan Burton asked the Minister for Finance the amount of funding that has been made available through the Ireland Strategic Investment Fund for social and affordable housing provision; if he is satisfied with the current rates of interest being charged to borrowers through the fund; if he is reviewing the operation of the mechanisms through which credit is accessed from the fund; and if he will make a statement on the matter. [16352/17]
Amharc ar fhreagraAs the Deputy will be aware, in the social and affordable housing market, in line with Rebuilding Ireland commitments, the Ireland Strategic Investment Fund (ISIF) and a number of key Government Departments are examining the feasibility of establishing a funding vehicle, in conjunction with the private sector, which could facilitate investment in social and affordable housing.
Key factors which must be addressed to facilitate ISIF involvement in such projects include: the commercial viability of proposals; Eurostat treatment of fund structures which receive a substantial proportion of their revenue from Government sources; and the ability to create off-balance sheet vehicles outside of the existing PPP model. Engagement with the other stakeholders in both the public and private sector, including with Eurostat, is ongoing.
ISIF informs me that whilst it has made progress in conjunction with the other stakeholders in the public and private sectors in respect of this opportunity, as well as other potential social housing investment opportunities, there are still considerable hurdles including commerciality and balance sheet treatment as identified in Rebuilding Ireland. These hurdles must be overcome before any such proposals can be brought to a successful conclusion.
Separately, ISIF is making a very substantial contribution to new private housing supply which is critical in terms of meeting the pent up demand for housing across all sectors of the market. In line with its double bottom line mandate, ISIF has already invested in a number of significant financing platforms and projects in the construction sector, and is actively examining other investment opportunities.
ISIF has total investment commitments to housing investment vehicles of €404m comprising €325m in Activate Capital, €25m in the Ardstone Residential Partnership and €54m to student accommodation in DCU. In addition ISIF has committed €125m in total to more general real estate investment vehicles, including €75m to the Wilbur Ross Cardinal Commercial Real Estate Mezzanine Debt Fund and €50m to Quadrant Real Estate Advisors, both of which to date have completed some investment in housing. Through these ISIF-supported projects, 8,400 housing units are expected to be delivered in the near term (a small portion of which has already been delivered).
In addition, ISIF's current near term pipeline of potential housing projects including in the build-to-rent sector and off-campus student accommodation as well as a smaller project that may have the ability to deliver some affordable housing, indicates potential to deliver a further 8,700 units in total.
ISIF is working with local authorities and private developers on the financing of housing-enabling infrastructure. Its pipeline includes one private sector pilot housing infrastructure project (totalling approximately 3,000 units) which is actively being progressed. Public sector projects (also totalling approximately 3,000 units) are currently being considered; the extent to which these projects can be progressed will in part depend on whether Local Infrastructure Housing Activation Fund (LIHAF) or other forms of financing can be leveraged to complement ISIF financing.
ISIF is also currently engaging with a range of Higher Education Institutions ("HEIs") in respect of the provision by them of on-campus student accommodation.
ISIF invests on a risk adjusted basis in the various housing financing platforms and these platforms, in turn, provide finance, also on a risk adjusted basis, to developers, which can be equity or debt according to the business model of each platform. The interest rate applied to any individual debt financing arrangement therefore relates to the level of risk and other investment factors in the underlying housing development proposal.
181. Deputy Joan Burton asked the Minister for Finance the preparations and contingency plans his Department has put in place in the event of a British exit from the European Union; and if he will make a statement on the matter. [16353/17]
Amharc ar fhreagraThe Department of Finance has been assessing and preparing for the impact of a British exit from the European Union since well before the referendum on 23 June 2016. Work was carried out in the Department to assess the potential economic and financial sector implications arising, including through the ESRI-Department of Finance research programme study published in November 2015 titled 'Scoping the Possible Economic Implications of Brexit on Ireland'. This work was undertaken within the whole-of-Government framework established by the Department of the Taoiseach.
Following the result of the UK referendum and to prepare for the forthcoming negotiations, work has been intensified across the whole of Government level including in my own Department. A Brexit Unit within the EU and International Division was established in July 2016 to oversee and coordinate this work and to act as a key liaison point with the Department of the Taoiseach, in particular. In addition, the Department of Finance staff complement in the Irish Permanent Representation to the EU in Brussels has been strengthened. The challenges which we face as a result of Brexit is mainstreamed across all divisions of my Department and this is reflected in business planning.
As part of Budget 2017, the Department of Finance published the Economic and Fiscal outlook which presented a full macroeconomic projection including updated estimates of economic growth, the public finances and the fiscal space, taking account inter alia of the impact of Brexit. In addition, the Department published detailed analysis of sectorial exposure to Brexit across the economy. Utilising the Department of Finance sectorial exposure analysis, Budget 2017 included a number of measures to respond to the challenges of Brexit, to mitigate future risks, and to support any opportunities that might arise. These include measures to support SMEs, entrepreneurship, agri-food and Irish exporters.
More recently, the Department has worked with the ESRI to deepen the macroeconomic analysis and a report titled 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland' was published in November 2016. In April 2017, updated macroeconomic forecasts will be published by my Department, as part of the Stability Programme Update.
We know from our own published research that the potential impact on the Irish economy is significant. It is important to recognise that the full impact of the UK's exit is only expected to materialise over time. As we cannot control the international environment, we will need to continue to improve our competitiveness, including by focussing on costs we can control, by boosting our productivity and ensuring sustainable public finances.
The best and most immediate policy under the Government's control to counter the likely negative economic impacts of Brexit is to prudently manage the public finances in order to ensure that Ireland's economy continues to remain competitive in the face of future economic headwinds. In this context, in Budget 2017, I signalled a lower debt target of 45 per cent of GDP for the mid-to-late 2020s. This will help to provide an additional fiscal 'shock absorber' capacity to the public finances to help withstand any shock including that of the impact of Brexit. It will also complement the contingency or 'rainy day' fund which will be established following the achievement of a balanced budget in 2018 and will help provide a further counter-cyclical buffer.
Separately, Brexit will provide opportunities for Ireland to increase its share of financial services based inward investment. Minister of State Eoghan Murphy T.D. has responsibility for Financial Services, including the implementation of the IFS2020 Strategy. The IFS2020 Strategy is a dynamic and evolving strategy. On January 23rd the Minister of State launched the IFS2020 Action Plan for 2017. Brexit both underpins this year's Action Plan while also featuring in individual measures to achieve the strategic priorities of IFS2020. We will continue to leverage our IFS2020 Strategy to maximise any opportunities.
The work being done by the Department will be an important input to ensuring that Ireland will be in a position to counter any negative economic impact arising from Brexit and to ensure that Ireland's interests are protected in the upcoming negotiations at EU level. The Department will continue to monitor the economic impacts, to carry out relevant analysis and to frame budgetary policy advice in this new context.
182. Deputy Joan Burton asked the Minister for Finance if he will provide a full report on the way in which the annual €150 million banking levy will be calculated as it extends to 2021; and if he will make a statement on the matter. [16354/17]
Amharc ar fhreagraAs I outlined in my response to the Deputy's questions on 17th January and 28th February last, in accordance with Section 126AA of the Stamp Duties Consolidation Act 1999, an annual levy was imposed on certain financial institutions for each of the years 2014, 2015 and 2016. The levy was charged at 35% of the Deposit Interest Retention Tax (DIRT) paid by a financial institution in 2011 and raises approximately €150 million annually for the Exchequer. In the case of a financial institution where the amount of DIRT in the base year does not exceed €100,000, the levy is not payable.
In the budget statement two years ago, I announced that I intended to extend the levy for a further five years to 2021. I indicated that the overall yield from the levy would be maintained at €150 million annually but that I would undertake a review of the DIRT based methodology for calculating the levy.
That review, which included a public consultation on the issue, was undertaken by my Department in early 2016. Following that review, I decided that the DIRT based formula should be retained but that the base year for calculating the levy in 2017 and 2018 would be changed from 2011 to 2015. I have also decided to introduce a rolling two-year series of base years which will introduce a new base year of 2017 for calculating the levy in 2019 and 2020 and a new base year of 2019 for calculating the levy in 2021.
The introduction of the rolling two-year series of base years has a twofold effect. Firstly, it ensures that financial institutions entering the market over the five further years for which the levy will apply will be subject to the levy and financial institutions exiting the market will cease to be subject to the levy. Secondly, it will help to correct, on an ongoing basis, any anomalies for individual institutions thrown up by prevailing market conditions, such as the interest rate offering, in any one year.
In order to maintain the annual yield from the levy at €150 million, I have to increase the rate at which the levy is charged from 35% to 59% for 2017. This is because the assessable amount, DIRT payments in 2015, have reduced significantly since 2011. This new rate, combined with the new 2015 base year, will preserve the existing contribution of €150 million paid by the affected financial institutions. That rate will be subject to review to ensure that the yield from the levy is not impacted from changes in interest rates and/or DIRT rates.
183. Deputy Joan Burton asked the Minister for Finance if he has requested the Central Bank to procure an independent assessment of the arrears and negative equity loan books of the banks as per the recent programme for Government commitment; and if he will make a statement on the matter. [16355/17]
Amharc ar fhreagraThe Deputy will be aware that the Central Bank has an ongoing role in monitoring the level of arrears and negative equity on mortgage and other loan assets. The Programme for a Partnership Government contains a range of commitments in the broad housing and banking area and my Department regularly engages with the Central Bank on all the Programme for Government Commitments which will impact on the Central Bank and its role in relation to mortgages.
In this context, the Central Bank last year produced a report on mortgage arrears following my request to the Governor. This report provides a detailed assessment of mortgage arrears in banks and non-bank entities and includes analysis on mortgage restructuring activity and the range of solutions offered that may affect borrowers' capacity to remain in their primary residence. This report was published on 16th December 2016 and is available on http://www.finance.gov.ie/what-we-do/banking-financial-services/publications/reports-research/report-mortgage-arrears-2016. The report notes that progress on mortgage arrears is well established and clearly moving in the right direction. In addition, the Central Bank considers the range of restructures offered by banks to be broadly appropriate in balancing consumer protection imperatives, and maintaining a mortgage market for all borrowers, and a functioning banking system.
Furthermore, the Central Bank publishes quarterly statistics on Residential Mortgage Arrears and Repossessions. In addition, the Central Bank's Household Credit Market Report contains data on negative equity. The latest report for the second half of 2016 is available at https://www.centralbank.ie/docs/default-source/publications/household-credit-market-report/household-credit-market-report-2016h2.pdf?sfvrsn=4 and table 7 (Page 20) in the report presents the percentage of loans in default and in negative equity. The data in the Household Credit Market Report are for 2015 and do not reflect changes to loan balances and house prices since December 2015. The Central Bank estimates that 15 per cent of PDH loans and 26 per cent of BTL loans were in negative equity at end December 2015 of which 10 per cent of PDH and 14 per cent of BTL loans were deemed to be performing.
The Deputy should also be aware of the most recent Central Bank Residential Mortgage Arrears and Repossessions quarterly bulletin for Q4 of 2016 which indicates that the level of mortgages in arrears is continuing to fall for the fourteenth consecutive quarter, with the cohort of loans in arrears for more than 720 days recording the sixth quarterly decline to date and a 3.2 per cent quarter-on-quarter decrease, the largest quarterly decline in this category to date.
184. Deputy Joan Burton asked the Minister for Finance if he has ceased appointing new public interest directors to the banks; the reform of the procedures for the appointment of bank directors by the State that is currently being considered; and if he will make a statement on the matter. [16356/17]
Amharc ar fhreagraIn the Programme for a Partnership Government ('PPG') the Government has committed to, "Cease to appoint new Public Interest Directors to the banks, and reform the procedures for the appointment of bank directors by the State, with a view to increasing transparency in the process".
As the Deputy will be aware, the rights for the State to appoint public interest directors to the boards of the Covered Institutions were derived from the terms of the guarantee schemes introduced in 2008 and last for the period of the guarantee. The last of the guaranteed liabilities are due to mature between now and Spring 2018 and as such I do not expect to make any new appointments of Public Interest Directors to the board of the banks.
Going forward however the State will have the ability to appoint directors to banks in which we have a large shareholding. My officials are developing new procedures for any future appointments to bank boards, that will address the commitment in the PPG.
Any new appointment procedure for bank directors needs to have due regard to the distinct differences which exist relative to appointments to State boards. These include the fact that the State is not the only shareholder in these banks, the requirements of the Central Bank/SSM Fitness and Probity Regime and the requirement to have a broad set of expertise relevant to large regulated entities in an ever more complex regulatory environment.
