Wednesday, 11 Jul 2018

Written Answers Nos. 61-91

Tax Code

Ceisteanna (71)

Peadar Tóibín

Ceist:

71. Deputy Peadar Tóibín asked the Minister for Finance the effect the non-application of income tax rules on foreign music performance has on the development of Irish musicians and their craft. [27053/18]

Freagraí scríofa

Minister for Finance

An Irish tax resident person is subject to Irish income tax on their world-wide income, including income from a foreign source such as fees from performances abroad. If the performance fees are paid in a jurisdiction with which Ireland has a Double Taxation agreement, relief may be granted for foreign tax paid by way of a credit against any Irish tax that may be due.

In the case of a music artist who is not tax resident or ordinarily tax resident in the State, their liability to Irish tax is only on income where it arises from the exercise of their profession in the State, such as concert performances.

Further, the artist’s performance fee is also subject to VAT for concerts that take place in Ireland, following the EU Directives that govern the application of VAT within the Single Market of the European Union. In the case that the concert has an Irish promoter, it is Irish VAT that is applied.

While the collection of Irish tax is not directly linked with the development of Irish musicians and their craft, I would remind the Deputy that Irish tax receipts form part of the Exchequer which in turn funds the provision of public services that are administered by the State, including the various grants and supports that are given to Irish musicians and their craft.

Tax Compliance

Ceisteanna (72)

Clare Daly

Ceist:

72. Deputy Clare Daly asked the Minister for Finance if his attention has been drawn to the recent GUE/NGL report into efforts by a company (details supplied) to avoid and evade tax across Europe by using Irish tax loopholes; and if he will make a statement on the matter. [30928/18]

Freagraí scríofa

Minister for Finance

I am aware of the recent report by the GUE/NGL group in the European Parliament.

As the Deputy is aware, I am not at liberty, nor is it appropriate for me, to discuss the tax affairs of individual companies.

I would first note that Revenue, as a statutorily independent body, monitors the tax affairs of taxpayers and takes a proactive approach to the identification of, and response to, non-compliance. In any particular circumstance, including the application of the tax legislation referred to in the report referenced by the Deputy, compliance with existing tax law is always a matter solely for Revenue.

I am aware that the report refers to a number of elements of Ireland’s Corporation Tax Code, including Section 291A, the Rand D Tax Credit, tax relief on foreign dividends, tax treaties and the overall effect these have on effective rates of tax.

I would note however that analysis undertaken by my Department, co-authored by an independent academic, and a report undertaken by the Comptroller and Auditor General (C&AG), confirm that the effective rate of tax paid by corporations in Ireland is between 10% and 11%. On the basis of this extensive analysis, I am satisfied that companies in Ireland are paying the appropriate rate of corporate tax on their profits generated in Ireland.

With regard to the payment of tax in other jurisdictions, such as across Europe, I recognise the importance of ensuring effective taxation of multinational companies and the need for internationally agreed solutions to counter aggressive tax planning. Ireland has fully engaged with international efforts to counter aggressive tax planning, through both the OECD’s BEPS project and the subsequent co-ordinated action at EU level leading to the agreement of the two Anti-Tax Avoidance Directives (ATADs). Work is ongoing in Ireland, and across Europe, to implement the agreed ATAD measures.

I should also add that my officials are currently finalising a roadmap setting out a clear programme of action in relation to Ireland’s Corporation Tax regime for the coming years having regard to developments at EU, OECD and the wider international level. This Roadmap follows on from the independent review of Ireland’s Corporation Tax Code conducted by Mr. Seamus Coffey, and will set out a comprehensive schedule of actions under way to action the Coffey recommendations, implement the remaining OECD BEPS recommendations and transpose the EU Anti-Tax Avoidance Directives. This Roadmap will be published in the coming weeks.

Universal Social Charge Review

Ceisteanna (73, 105)

Joan Burton

Ceist:

73. Deputy Joan Burton asked the Minister for Finance his plans for the reform of the universal social charge; and if he will make a statement on the matter. [30829/18]

Joan Burton

Ceist:

105. Deputy Joan Burton asked the Minister for Finance his plans for the reform of the universal social charge; and if he will make a statement on the matter. [28994/18]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 73 and 105 together.

The Programme for Government commitment to the phasing out of the USC was specified to be as part of a wider medium-term process of income tax reform which would maintain the breadth of the tax base, while reducing excessive tax rates for middle income earners and limiting the benefits for high earners. We have made steady progress in reducing the personal tax burden in the last four Budgets with a particular focus on low to middle income-earners, and these reductions have been achieved primarily through cuts to the lowest three rates of USC.

Following a commitment that I made in Budget 2018, an inter-Departmental Working Group has been established to examine and report on options for the amalgamation of USC and PRSI. I am expecting to receive a Report from this Group by the end of July 2018. The Group is chaired by the Department of Finance and it includes officials from the Department of the Taoiseach, the Department of Public Expenditure & Reform, the Department of Employment Affairs & Social Protection, the Revenue Commissioners and an independent external expert.

Its Terms of Reference are to examine and present options for the amalgamation of PRSI and USC in a manner which seeks to address:

- the need to preserve the tax base having regard to the need for certainty, equity, and ease of compliance and administration;

- current and future funding challenges facing the Social Insurance Fund;

- issues likely to arise from a phased implementation over a number of years of the new instrument;

- simplification of the personal tax and social insurance systems; and

- any other relevant matters arising.

The Working Group is also considering the structure and rates of personal tax and social insurance in other countries and the macroeconomic and demographic contexts in Ireland as part of its work.

An important issue of consideration by the Group is the different treatment of the Social Insurance Fund and the USC in the Government accounts. The Social Insurance Fund is funded by PRSI contributions paid by employers, employees, the self-employed, voluntary contributors and it has some additional income from investments. It finances social insurance based payments. The USC is a tax receipt, is paid to the Revenue Commissioners and forms part of the Exchequer.

The available Government resources when considering the introduction of any option will also be relevant.

The amalgamation of USC and PRSI is a medium-term plan and any decision to proceed along such lines would be likely to be implemented over a number of years.

Community Banking

Ceisteanna (74)

Joan Burton

Ceist:

74. Deputy Joan Burton asked the Minister for Finance his plans to implement the recommendations of the public banking investigation in respect of the provision of financial services to rural and disadvantaged urban areas; and if he will make a statement on the matter. [30831/18]

Freagraí scríofa

Minister for Finance

My Department and the Department of Rural and Community Development published a Report on Local Public Banking pursuant to the Programme for Partnership Government commitment to “thoroughly investigate the German Sparkassen model for the development of local public banks that operate in well-defined regions”.

Specifically, the Report examined a proposal from Irish Rural Link and the Savings Bank Foundation for International Cooperation for 8-10 local public banks, starting with a pilot local public bank in the Midlands. The suggested locations in the proposed pilot in the Midlands are already serviced by existing banks, credit unions and post offices.

The Report concludes that there is not a compelling case for the State to establish a new local public banking system in Ireland using €170 million of Exchequer funds, based on the proposed model.

However, as set out in the Report, my Department will commission an independent external evaluation of other possible ways in which the objectives of local public banking, such as financial inclusion and economic development of rural and disadvantaged urban areas, could be furthered in Ireland.

The Report also highlights the positive contribution of An Post and credit unions to the Irish banking environment. There is a commitment to continue to work with An Post and the credit unions in relation to the development of the provision of financial and banking services by them, particularly in rural and disadvantaged urban areas. My Department has been engaging with Minister Naughton’s Department in this regard.

The Government is committed to continuing to engage with interested parties and stakeholders, including those representing rural and disadvantaged urban areas, on this issue by way of a stakeholder forum.

This commitment has been demonstrated by supporting access to credit for SMEs and microenterprises through a number of policy measures. These include the Strategic Banking Corporation of Ireland, the Supporting SMEs Online Tool, the Microenterprise Loan Fund, Local Enterprise Offices, the Credit Review Office and the Credit and Counter Guarantee Schemes. Many of these supports already focus on the provision of financial and banking services to rural and disadvantaged urban areas.

The Deputy may rest assured that supporting economic growth and development and facilitating the provision of financial services, particularly in rural and disadvantaged urban areas, remains an important Government priority.

Motor Insurance Coverage

Ceisteanna (75, 86)

John Curran

Ceist:

75. Deputy John Curran asked the Minister for Finance if his attention has been drawn to the difficulty being experienced in insuring vehicles that are ten years of age and older in circumstances in which persons are either receiving quotes or receiving prohibitively expensive quotes in view of the fact that all these vehicles must be mechanically roadworthy and pass an annual NCT test; the action he will take with the motor insurance industry to address this issue; and if he will make a statement on the matter. [30688/18]

Brian Stanley

Ceist:

86. Deputy Brian Stanley asked the Minister for Finance the steps he will take to end the practice of insurance companies charging excessive premiums for cars over 10 years old; and if he will make a statement on the matter. [30937/18]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 75 and 86 together.

I am aware of the concerns raised by the Deputies. However, you should note that neither the Minister for Finance, the Central Bank nor I can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products.

Policy in relation to the NCT lies with the Minister for Transport, Tourism and Sport. A valid NCT is generally a minimum requirement in order for an insurer to provide cover. It is however not the only rating factor taken into account in the provision of motor insurance, therefore just because a car has a valid NCT does not automatically mean that an insurer will offer cover. In making their individual decisions on whether to offer cover and what terms to apply, insurers will also use a combination of other rating factors, which include the age of the vehicle, as well as the type of vehicle, the age of the driver, the relevant claims record and driving experience, the number of drivers, how the car is used, etc. My understanding is that insurers do not all use the same combination of rating factors, and as a result prices and availability of cover varies across the market. In addition, insurers will price in accordance with their own past claims experience, meaning that in relation to the age of a vehicle and the availability of cover, different insurers will use different age thresholds.

Department officials have been engaging with Insurance Ireland in relation to the availability and cost of insurance for older cars, and have been informed that certain insurance providers have recently changed their acceptance criteria and increased their vehicle age threshold levels. Notwithstanding this, I intend to write to Insurance Ireland in order to try and get a more detailed perspective on this matter.

Brexit Negotiations

Ceisteanna (76)

Pearse Doherty

Ceist:

76. Deputy Pearse Doherty asked the Minister for Finance the preparations being undertaken with regard to customs in the event of a no-deal Brexit. [30972/18]

Freagraí scríofa

Minister for Finance

The Government are negotiating to avoid a hard border on the island of Ireland. Co-ordination of the whole-of-Government response to Brexit is being taken forward through the cross-Departmental coordination structures chaired by the Department of Foreign Affairs and Trade. This includes ‘no deal’ contingency planning. This planning provides base line scenarios for the impact of Brexit across all sectors. This approach is also enabling the modelling of potential responses under different scenarios, such as one where a withdrawal agreement is concluded and where a Free Trade Agreement is the basis for the future relationship between the EU and the UK.

My Department, along with the Revenue Commissioners, is actively engaged in this planning work which has intensified in recent months and is well advanced.

Revenue’s priority to date has been on upgrading relevant IT systems to have the most advanced systems possible to support and facilitate smooth and efficient trade flows. In the event of a no deal Brexit there will be a significant increase in the number of customs declarations received by these systems. Performance testing is well advanced and I am assured by Revenue that based on the work completed to date they are confident that the various IT systems will support the expected additional load arising from Brexit, ensuring customs processes can continue to operate effectively and efficiently post-Brexit.

Allied to this upgrading of IT systems, I am advised by Revenue that it continues to examine the full range of simplifications provided for within the Union Customs Code. There are several customs authorisations and simplifications that traders may avail of when completing their customs formalities. Revenue is meeting with representative groups and attending industry seminars to discuss the potential issues resulting from Brexit. Revenue has advised and continues to advise and encourage businesses to examine the possible impacts of Brexit on their supply chains and to consider applying for one or more of the authorisations or simplifications available that best suit their business model. Advice and assistance on customs authorisations and simplifications is available on the Revenue website and Revenue is ready to support businesses that wish to apply to avail of them.

As well as the planning work, the Government has already taken actions to get Ireland Brexit ready.

In the past two Budgets, the Government has continued its policy focus of preparing the economy and enhancing the resilience of the public finances to deal with the challenges posed by Brexit.

Specifically, it is currently projected that Ireland will achieve its medium-term budgetary objective of a balanced budget in 2019. Complementing this, Budget 2018 further established the ‘Rainy Day Fund’, which provides an important measure to strengthen the economy’s shock absorption capacity to mitigate the impact of future external shocks. Legislation to establish the rainy day fund is currently being prepared and, pending its approval, will begin capitalisation in 2019.

Budget 2018 also announced further dedicated Brexit responsive measures including a new €300 million Loan Guarantee Scheme for Brexit-impacted business and a complementary €25 million Agriculture Brexit Loan Scheme – targeted at enhancing the competitiveness of the businesses most exposed to Brexit.

Economic Growth

Ceisteanna (77)

Bernard Durkan

Ceist:

77. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy continues to grow in a sustainable way in keeping with best practice and competitiveness, having particular regard to all the challenges ahead including Brexit; and if he will make a statement on the matter. [30965/18]

Freagraí scríofa

Minister for Finance

Recent economic indicators have generally been positive, indicating that the recovery is continuing in a sustainable manner.

Preliminary real GDP growth of 7.8 per cent was recorded for 2017, but this is heavily distorted by activity in the multinational sector. Modified domestic demand, which adjusts for distortions in the data, is up 4.0 per cent in 2017.

The strength of domestic demand is evident in the labour market. Employment growth remains strong with an annual rate of 2.9 per cent recorded in 2017, representing over 61,000 additional jobs. The momentum in the labour market has continued into 2018 with data for the first quarter again showing employment growth of 2.9 per cent. As a result, there are now more people working in Ireland than ever before.

Other recent data confirm that momentum in the economy has continued into 2018:

- Core retail sales, i.e., excluding car sales, are up 4.5 per cent in the first 5 months of the year compared to the same period in 2017.

- Export growth has been very strong with the volume of exports increasing by 18.7 per cent on an annual basis in the first four months of the year.

- The monthly unemployment rate for June was 5.1 per cent, down from its peak of 16 per cent in early-2012.

While the unemployment rate is close to levels which could reasonably be called full employment, data on wage developments and consumer prices suggest that from a macroeconomic perspective overheating pressures are currently limited. However, there is no scope for complacency with overheating the principal domestic risk we face. As set out in the 2018 Summer Economic Statement, it is crucial that we continue to prudently manage the public finances to avoid pro-cyclical policies.

While the economic situation is relatively healthy at present, the external environment is becoming increasingly challenging. The UK’s imminent exit from the European Union, changes in the international corporate tax landscape, and the possibility of disruptions to the global trading system are some of the principal external risks facing the Irish economy at present.

As well as ensuring that the public finances continue to be managed in a prudent fashion, the best way to mitigate these and the other risks we face is to improve the resilience of the economy. The Government will play its part by continuing to implement competitiveness-oriented policies – including those that address emerging bottlenecks.

Revenue Commissioners Enforcement Activity

Ceisteanna (78, 106)

Brendan Smith

Ceist:

78. Deputy Brendan Smith asked the Minister for Finance his plans to introduce new measures on a cross-Border basis to counteract illicit trade; if there are ongoing discussions with the authorities in Northern Ireland to address cross-Border smuggling; and if he will make a statement on the matter. [30915/18]

Brendan Smith

Ceist:

106. Deputy Brendan Smith asked the Minister for Finance his plans to introduce additional measures to counteract smuggling and illicit trade in products such as fuel and tobacco; and if he will make a statement on the matter. [30914/18]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 78 and 106 together.

The threat that fuel fraud and the illicit tobacco trade pose to legitimate business, to consumers and the Exchequer is clear and I am advised by Revenue that taking action against this criminality continues to be a priority for them.

Steps taken by Revenue to combat the illegal fuel trade include the introduction of stringent new supply chain controls and reporting requirements together with a rigorous programme of enforcement action. In addition, Revenue and the UK Revenue and Customs undertook a joint initiative to introduce a new marker for use in marked fuels, which came into operation from April 2015.

The industry view is that the action taken has been successful in curtailing fuel fraud. I am advised also that Revenue conducted a random National Sampling Programmes in 2016 and 2017 to assess the extent of fuel laundering. The programmes each involved nearly one in ten of the some 2,500 holders of auto fuel trader licences, and tests of diesel samples taken from the randomly selected traders found no evidence of the new marker in any of them. The results of these sampling are a clear indication that Revenue’s actions have resulted in the near elimination of the selling of laundered products at retail level. A further sampling programme, in 2018, was expanded to include hauliers and other businesses in the transport sector and the data are currently under analysis.

Revenue acts against all aspects of the illegal tobacco trade, so that the illicit products involved can be seized and those responsible for smuggling or supplying them can be prosecuted. A combination of risk analysis, profiling and intelligence, and the risk-based screening of cargo, vehicles, baggage and postal packages is used to intercept illicit products. Action after importation includes checks at retail outlets, markets and private and commercial premises. This action has achieved considerable success, with the seizure in 2017 of 34 million cigarettes and 1,768 kilograms of tobacco. In March this year a joint operation with An Garda Síochána led to the closing down of a major illicit cigarette factory in Jenkinstown, County Louth. Over 20 million cigarettes and 70 tonnes of tobacco were seized at this facility, which could produce 250,000 illicit cigarettes an hour.

Revenue and An Garda Síochána work together on an ongoing basis in acting against fuel and tobacco crime, and both bodies cooperate closely with their counterparts in Northern Ireland, in the framework of the North-South Joint Agency Task Force. I am advised that this cooperation plays a key role in targeting the organised crime groups responsible for much of this criminality, who operate across jurisdictions.

I am satisfied that Revenue’s work against fuel fraud and the illicit tobacco trade has achieved a considerable level of success. Revenue is, however, conscious of the resourcefulness of those involved in these forms of criminal activity and is vigilant for, and ready to respond to, any new developments in these areas. For my part, I will consider any additional proposals for legislative change that may be brought forward by Revenue which could enhance its capacity to deal effectively with fraud and criminality in these areas.

Tax Appeals Commission

Ceisteanna (79)

Michael McGrath

Ceist:

79. Deputy Michael McGrath asked the Minister for Finance his views on the situation at the Tax Appeals Commission; his plans to address the backlog of cases; and if he will make a statement on the matter. [30924/18]

Freagraí scríofa

Minister for Finance

The Tax Appeals Commission (TAC) was established with the goal of providing an enhanced and cost-effective appeal mechanism for tax cases, and to provide transparency and increased certainty for taxpayers.While dealing with the backlog of appeals is a matter for the independent Commission, I was happy to support the work of the Commissioners in this regard by, since their inception, positively responding to earlier requests for additional resources. I note that in 2016 and 2017, the TAC made several requests for increased resources. Over this time, the annual budget has increased from €775,000 for the former Office of the Appeal Commissioners in 2015 to €1.626 million for the TAC in 2018. My Department engaged constructively with each request received and increases were sanctioned to administrative staff as well as the recruitment of additional temporary Appeal Commissioners. There has been a significant increase in staffing at the TAC over the last two years, increasing from 2 Commissioners and 5 administrative staff at end 2016 to 3 Commissioners and 15 administrative staff in 2018, and it has recently moved to new premises with improved hearing room facilities and office space to accommodate further staff.A further request for additional administrative staff and resources was received by my Department in February of this year. As granting this request would involve an effective doubling of the TAC’s budget in 2018 from €1.626 million to an estimated €3.226 million, careful consideration is being given to the Commission’s needs to ensure that the proposed balance of administrative staff and the existing Commissioners would be effective in addressing the TAC's workload. The TAC informed my Department in early March that they have commissioned a review to examine their operations and resources. I am awaiting receipt of this report and, in the meantime, I have also commissioned an independent reviewer with significant experience of civil service bodies and operations to assess the current position and advise how best to address the TAC's resource needs going forward. This review has been expedited in order that resourcing decisions, based on a sound business case for the resolution of the current backlog, can be made as soon as possible.I do not doubt that the Commission requires an increase in resources to fulfil its envisioned purpose. However, as Minister for Finance and for Public Expenditure and Reform, I must ensure that any public funds granted to the Commission will go towards alleviating the backlog of appeals in a cost efficient and effective manner.The recommendations of the reviews currently ongoing will inform my decision making on the Commission’s request for resources. I am conscious that an effective tax appeals system is an essential part of a fully functional tax administration system, and it is my intention to ensure that the TAC is appropriately resourced and structured to fulfil its function.

Motor Insurance Costs

Ceisteanna (80, 97)

Bobby Aylward

Ceist:

80. Deputy Bobby Aylward asked the Minister for Finance the status of the implementation of the recommendations made in the report by the working programme on reducing the cost of motor insurance; the number of recommendations that have not been implemented to date; the reason for same; and if he will make a statement on the matter. [31035/18]

Aindrias Moynihan

Ceist:

97. Deputy Aindrias Moynihan asked the Minister for Finance the status of the implementation of the report on the cost of insurance working group for motor insurance; and if he will make a statement on the matter. [30967/18]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 80 and 97 together.

The Cost of Insurance Working Group’s Report on the Cost of Motor Insurance was published in January 2017 and makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, set out in an Action Plan.

In line with the commitment to publish quarterly update reports on the implementation of the recommendations of the Motor Report, the Working Group has published five such updates, most recently on 11th May last. This report shows that of the 50 separate relevant deadlines within the Action Plan set up to the end of Q1 2018, one relates to an action no longer being proceeded with; of the remaining 49 deadlines, 40 have been met. Substantial work has also been undertaken in respect of the nine action points categorised as “ongoing”.

In respect of the nine actions which were not fully completed by the end of Q1 2018 as scheduled, three relate to legislation issues, while another requires further discussion, and subsequent final agreement, between the Department and Insurance Ireland. Other outstanding actions are contingent on, respectively, the establishment of the new Office of the Legal Costs Adjudicators, the development of a register of personal injuries proceedings by the Courts Service, and the completion of an extensive examination by the Personal Injuries Commission. The remaining two actions both relate to Recommendation 26, which requires the approval of both the Minister for Justice and Equality and the Garda Commissioner for potentially far-reaching cooperative mechanisms between Insurance Ireland and An Garda Síochána to be formalised.

It should be recognised that significant progress has been made in respect of the implementation of all nine of these aforementioned actions, most particularly regarding the establishment of a new National Claims Information Database. Also, it must be acknowledged that the average cost of motor insurance has been consistently falling since the middle of 2016, with the most recent CSO data (for May 2018) indicating that private motor insurance premiums have decreased by 19% since peaking in July 2016.

Finally, it is envisaged that the sixth quarterly update will be completed around the end of July. This update will provide details on the implementation of all of the recommendations from both the Motor and Employer/Public Liability Reports, with a particular focus placed upon the 14 actions with Q2 2018 deadlines, including seven actions from the Report on the Cost of Motor Insurance.

Question No. 81 answered with Question No. 70.

Promissory Notes

Ceisteanna (82)

Joan Burton

Ceist:

82. Deputy Joan Burton asked the Minister for Finance his plans to buy back high-rate loans issued at the height of the crisis; his further plans in respect of the IBRC promissory note held by the Central Bank; and if he will make a statement on the matter. [30832/18]

Freagraí scríofa

Minister for Finance

While it may appear prudent to replace debt that was issued at a higher borrowing cost than the cost that applies to debt issued today, the reality is more complex and often less attractive. When bond yields fall, the market value of debt issued at higher rates goes up. This means it would cost the National Treasury Management Agency (NTMA) more to buy that debt from the investors who hold it than was originally borrowed. For example, a holder of a bond that is paying an annual coupon of 5% will not exchange that bond for a lower coupon without charging a significant premium.

That said, the Deputy will be aware of the steps already taken to reduce refinancing risk and smooth the debt redemption profile.

Some €23.5 billion in Programme loans from the International Monetary Fund, Sweden and Denmark were repaid ahead of schedule and replaced with cheaper marketable debt. This generates significant interest savings for the Exchequer, whose interest bill is expected to drop to €5.8 billion this year. This compares to €7.5 billion in 2014.

The NTMA has also executed bilateral bond switches – redeeming early shorter-term, higher coupon bonds in exchange for longer-term, lower coupon bonds – and, since late-2014, reduced the 2018-2020 bond refinancing requirement by €5 billion.

The NTMA continues to pre-fund and to build up its cash balances, which stood at over €23 billion at end-June. These balances can be applied towards future debt redemptions such as October’s €8.8 billion bond redemption.

As regards the Floating Rate Notes (FRNs) acquired by the Central Bank in 2013 at the time of the liquidation of Irish Bank Resolution Corporation, the Bank has committed to disposing of these assets as soon as possible, provided financial stability conditions permit.

The sole responsibility for decisions regarding disposals of the FRNs rests with the Bank. The Bank will sell FRNs in accordance with the minimum schedule of disposals agreed with the NTMA in the Exchange Option Deed.

The Bank has so far disposed of €11.5 billion nominal of the FRNs. The NTMA has purchased all FRNs so far disposed of by the Bank and in doing so, is locking in the current low market interest rates and is, in effect, taking out further insurance against interest rates rising into the future.

State Aid Investigations

Ceisteanna (83)

Mick Barry

Ceist:

83. Deputy Mick Barry asked the Minister for Finance the amount spent defending a tax judgment (details supplied); and if he will make a statement on the matter. [30962/18]

Freagraí scríofa

Minister for Finance

Ireland has never accepted the Commission’s analysis in the Apple State aid decision and is challenging the Commission's decision before the European Courts. Notwithstanding this, the Irish authorities have engaged fully with the Commission throughout the State aid investigation. This involved a significant degree of legal and technical complexity, and additional expertise has been engaged where required.

Recovery of the alleged aid is progressing, with the expectation that the total amount will have transferred into the escrow fund by the end of September, 2018.

Over the past four years, costs of approximately €2.7 million (including VAT) have been incurred in relation to defending the State’s position on the Commission’s decision and the annulment application before the European Courts. This includes all legal costs, consultancy fees and other associated costs. These fees have been paid by the Department of Finance, Revenue Commissioners, NTMA, Central Bank of Ireland, Attorney General's Office and the Chief State Solicitor's Office. As this is an important issue for the State, the case will continue to be resourced as appropriate.

Flood Risk Insurance Cover Provision

Ceisteanna (84)

Jan O'Sullivan

Ceist:

84. Deputy Jan O'Sullivan asked the Minister for Finance the progress made on access for businesses to flood insurance in areas which are at risk of same; and if he will make a statement on the matter. [30501/18]

Freagraí scríofa

Minister for Finance

I am conscious of the difficulties that the absence or withdrawal of flood insurance cover can cause to homeowners and businesses, and that is one of the reasons the Government has been prioritising investment in flood defences over the last number of years.

However, the provision of insurance cover and the price at which it is offered is a commercial matter for insurance companies and is based on an assessment of the risks they are willing to accept and adequate provisioning to meet those risks. As Minister for Finance I have responsibility for the development of the legal framework governing financial regulation, and neither I, nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products or have the power to direct insurance companies to provide flood cover to specific individuals or businesses.

Insurance Ireland has informed me that its members, since 1 June 2014, have taken into account data on all completed flood defence schemes, provided by the OPW, into their overall assessment of flood risk. This information has been provided as part of the information sharing arrangement entered into between OPW and Insurance Ireland (Memorandum of Understanding). The nature of this arrangement is such that it has led to a greater availability of flood cover in previously higher risk areas. For instance, the most recent Insurance Ireland survey of approximately 85% of the property insurance market in Ireland indicates that of the completed defence schemes, 90% of policies in areas benefitting from permanent flood defences include flood cover, while there has been an increase from 66% to 77% of policies in areas benefitting from demountable defences including flood cover.

In addition, the Insurance Ireland/OPW working group, which the Department of Finance attends, meets on a quarterly basis to support the above information flow and to improve the understanding of issues between both parties. The working group allows for the sharing of relevant data on completed flood defence schemes. In this regard, the OPW has also provided a significant amount of data in relation to adequacy and resourcing of flood warning systems, and mobilisation, efficacy, maintenance and development of demountable defences to Insurance Ireland. A sub-group has also been set up to explore the technical and administrative arrangements that may allow for the further sharing of data.

European Council Meetings

Ceisteanna (85)

Joan Burton

Ceist:

85. Deputy Joan Burton asked the Minister for Finance if he will report on his attendance at the June 2018 ECOFIN meeting; the engagement he has had with his ECOFIN colleagues in respect of the proposed EU digital tax; and if he will make a statement on the matter. [30830/18]

Freagraí scríofa

Minister for Finance

The June ECOFIN Council commenced with a Breakfast discussion on the economic situation and Ministers were debriefed by the Eurogroup President on the Eurogroup meeting held on the day before. We also discussed the future of EU finances in the framework of discussions on the next multiannual financial framework.

On the legislative side of the agenda, the Council discussed the VAT "quick fix" Directive and Regulation, however, agreement was not reached on the file. Ministers noted the Presidency report on progress with the technical discussions on the European Deposit Insurance Scheme. Under the Any Other Business item, Ministers were debriefed by the Presidency on the state of play of current legislative proposals in the field of financial services as well as on the state of play of the negotiations on the Insolvency Directive .

On the non-legislative side of the agenda, the Council approved recommendations on the National Reform Programmes as well as on the updated Stability or Convergence Programmes which are part of the 2018 European Semester, and were subsequently endorsed by the June European Council.

In the framework of the Stability and Growth Pact , Ministers adopted the following acts:

- a Decision to abrogate the Excessive Deficit Procedure for France;

- a Decision establishing that no effective action has been taken by Romania under the Significant Deviation Procedure; and

- recommendations with a view to correcting the significant deviation from the adjustment path towards the medium-term budgetary objective in Hungary and Romania.

The Council took note of the Convergence Reports for Bulgaria, the Czech Republic, Croatia, Hungary, Poland, Romania and Sweden , prepared every two years by the European Central Bank and the Commission. The next regular reports are due in June 2020.

The Council also approved the list of legislative "A" items and non-legislative “A” items (matters agreed without debate).

Taxation of the Digital Economy was not on the formal agenda of the Ecofin Council. The Commission’s proposals are currently the subject of technical discussion among Member States. There is a growing recognition that issues arising from the digitisation of the economy require a global solution that is sustainable in the longer term. While a number of Member States are still in favour of the interim EU Digital Service Tax proposal, it is important to recall that the recent OECD Interim Report of the Task Force on the Digital Economy found that there is no consensus on the merit or need for such short term measures which it is widely acknowledged can be economically damaging. OECD work is focussed on finding a sustainable globally agreed solution by 2020, based on the principle that taxation should occur where value is created, which is also the basis of Ireland’s taxation system. Ireland will continue to actively contribute towards the debate at both OECD and EU level with a view to finding a sustainable solution that works for all.

Question No. 86 answered with Question No. 75.

Dog Breeding Industry

Ceisteanna (87)

Maureen O'Sullivan

Ceist:

87. Deputy Maureen O'Sullivan asked the Minister for Finance the audits carried out by the Revenue Commissioners on dog breeding establishments; his views on tax compliance in the industry; and if the Revenue Commissioners will be contacted regarding possible issues with tax compliance by some establishments (details supplied). [30964/18]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that dog breeding businesses are monitored for compliance with tax and duty obligations in the same way as taxpayers across all other business sectors. This includes analysing risk indicators and selecting cases for intervention based on the risks identified. Depending on the level of risk identified the intervention can include assurance checks, tax audit or investigation in the most egregious cases.

As previously advised to the Deputy, Revenue examined a number of dog breeding establishments as part of its 2017 compliance programme, which confirmed that most of the businesses involved were tax compliant, with enquiries still ongoing in a small number of cases. Revenue is legally obliged to protect the confidentiality of taxpayers by Section 851A of the Taxes Consolidation Act 1997 and cannot provide any information that could identify the persons or businesses involved in the enquiries.

Revenue has assured me that any information it receives concerning suspicions of tax evasion or general tax and duty non-compliance is taken seriously and is fully examined and followed up as necessary. If the Deputy is aware of any such non-compliance by individual dog breeding establishments I would urge her to make that information known to Revenue.

Mortgage Book Sales

Ceisteanna (88)

Declan Breathnach

Ceist:

88. Deputy Declan Breathnach asked the Minister for Finance if he will liaise with the Central Bank to ensure that appropriate legislation is brought forward in order to compel banks and mortgage providers to offer distressed mortgages to local authorities at the same floor values at which they are being purchased by vulture funds; if the legislation will include a clause to require that local authorities would then enter into a Rebuilding Ireland home loan proposal or a mortgage to rent scheme proposal with the mortgage holder to allow them remain in their home; and if he will make a statement on the matter. [30684/18]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, I do not have a role in the decision making process of banks which must be run on a commercial basis. This is the responsibility of the Board and management of the banks.

In relation to the issue of the sale of distressed mortgages, the Single Supervisory Mechanism (SSM) has tasked the management and board of each institution with developing and implementing a strategy to address the challenge posed by the elevated level of non-performing loans across the Irish banking system. Despite progress made over the last few years, the level of such loans in Ireland remains well above the European average. The sale of distressed loans is one of the ways in which banks are able to address this issue.

The role of running these sales processes, including the selection of the successful bidder, is entirely the role and responsibility of the board and management of whatever Bank in question. Any interference by me would be highly inappropriate.

In terms of providing protections to consumers whose loans are part of loan sales, the Code of Conduct on Mortgage Arrears (CCMA) forms part of the Central Bank’s Consumer Protection Framework. It is a statutory Code first introduced by the Central Bank in February 2009, with the current CCMA becoming effective from 1 July 2013. The CCMA provides a strong consumer protection framework, aimed specifically at the process to be followed by relevant firms, to ensure borrowers in arrears or pre-arrears in respect of a mortgage loan secured on a primary residence are treated in a timely, transparent and fair manner.

As the Deputy will be aware, most loan agreements include a clause that allows the original lender to sell the loan on to another firm. The Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 (“the 2015 Act”) was introduced to fill the consumer protection gap where loans are sold by the original lender to an unregulated firm. Under the 2015 Act, if the firm who bought loans from the original lender is an unregulated firm, then the loans must be serviced by a ‘credit servicing firm’ which is regulated by the Central Bank. Credit Servicing Firms are typically firms that manage or administer credit agreements such as mortgages or other loans on behalf of unregulated entities.

Credit servicing firms must act in accordance with the requirements of Irish financial services law that applies to ‘regulated financial service providers’. This ensures that consumers, whose loans are sold to another firm, maintain the same regulatory protections that they had prior to the sale, including under the various statutory Codes of Conduct issued by the Central Bank such as the Consumer Protection Code 2012, Code of Conduct on Mortgage Arrears 2013, and the SME Regulations. Contractual terms are not changed by the sale of the loan.

Over the last number of months, there has been a lot of concern regarding loan sales. Arising from this, Deputy Michael McGrath published a Bill, the Consumer Protection (Regulation of Credit Servicing Firms) (Amendment) Bill 2018, on the regulation of loan owners. Committee Stage is scheduled for this Thursday, 12th July. The approach taken with this Bill will require that loan owners are authorised by the Central Bank.

In February this year, I wrote to the Governor of the Central Bank and requested that they carry out a review of the CCMA to ensure it remains as effective as possible and this is currently underway and to be completed as soon as practically possible.

Finally, issues relating to Rebuilding Ireland and Mortgage to Rent are a matter for my Government colleague Eoghan Murphy T.D. Minister for Housing, Planning & Local Government.

Corporation Tax Regime

Ceisteanna (89, 109)

Thomas P. Broughan

Ceist:

89. Deputy Thomas P. Broughan asked the Minister for Finance his plans to limit the availability of banks to offset historic losses against their tax bills; and if he will make a statement on the matter. [30686/18]

Pearse Doherty

Ceist:

109. Deputy Pearse Doherty asked the Minister for Finance when the report on banks and corporation tax will be published; and if he will make a statement on the matter. [30971/18]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 89 and 109 together.

Corporation Tax Loss Relief is provided for by Section 396 of the Taxes Consolidation Act (TCA) 1997. It allows for losses incurred in the course of business to be taken into account when calculating the business’ tax liabilities on certain profits incurred in other accounting periods. Loss relief for corporation tax is a long standing feature of the Irish Corporate Tax system and is a standard feature of Corporation Tax systems in all OECD countries.

Prior to 2014, section 396C of the TCA 1997 restricted loss relief for NAMA participating institutions, such that only 50% of taxable profits in a given year could be sheltered by losses carried forward. However by Finance Bill 2013 this measure was considered to have outlasted its initial purpose as, subsequent to its introduction, the State had acquired substantial holdings in the banking sector and, as a result, the restriction was deemed to be acting against the State's interests. The restriction was therefore lifted in Finance Bill 2014, putting the remaining NAMA participating banks in the same position with regard to loss relief as other banks, and companies in other sectors, operating in Ireland.

As I have previously stated, changing how tax losses are currently treated for Irish banks, including those that were bailed out by the State, may well have consequences that would make it difficult for me to fulfil other objectives in respect of the Irish banking system. There would be a material negative impact on the valuation of the State's investments from any change in tax treatment of accumulated losses where the banks are concerned. It is critically important to understand that the State is actually getting value today from these tax losses through our share sales.

It should be noted however that the banks are contributing to the Exchequer through the financial institutions levy introduced in 2013, in recognition of the part that the banks played in the financial crisis. The annual revenue to the Exchequer from the levy is approximately €150 million and the levy was extended to 2021 in Budget 2016.

At Committee Stage of Finance Act 2017, I agreed that my officials would produce a report on the effect of limiting tax reliefs on losses carried forward for banks, with the stipulation that the policy outlook I will adhere to is the maintenance of the current position with regard to loss relief and the generation of Exchequer revenue via the financial institutions levy. It is envisaged that this report will be submitted to the FinPer Committee shortly.

Insurance Costs

Ceisteanna (90)

Aindrias Moynihan

Ceist:

90. Deputy Aindrias Moynihan asked the Minister for Finance the status of the implementation of the report on the cost of employer and public liability insurance; and if he will make a statement on the matter. [31009/18]

Freagraí scríofa

Minister for Finance

The second phase of the Cost of Insurance Working Group project culminated in the publication on January 25th of the Report on the Cost of Employer and Public Liability Insurance, following its approval by Government. This Report makes 15 recommendations with 29 associated actions to be carried out, detailed in an Action Plan contained in the Report with agreed timelines for implementation. All 29 actions are scheduled to be implemented before the end of 2019, with 26 due for completion this year.

There is a commitment within the Report that the Working Group will prepare quarterly updates on its progress. Following the four previous such quarterly reports which focused exclusively on the implementation of the Report on the Cost of Motor Insurance, the Fifth Progress Update was published on May 11th and shows that in respect of the eight actions from the Report on Employer and Public Liability Insurance due for completion in Q1 2018, all eight deadlines have been met.

It is appreciated that these eight actions in the main can best be described as stepping stones to the implementation of broader policy initiatives such as, for instance, improving the engagement process between insurers and policyholders with claims submitted against them, and ensuring that enhanced communication between An Garda Síochána and the insurance industry will lead to more effective investigation and prosecution of cases involving insurance fraud. Nevertheless, they are important first steps and I am confident that further significant progress can be made over the coming months.

It is envisaged that the next quarterly Progress Update will be completed by the end of July and will be ready for publication on the Department of Finance website shortly after. This update will provide details on the implementation of all of the recommendations from both primary Reports. However, a particular focus will be placed upon the 14 actions across the two Reports with Q2 2018 deadlines, including seven actions from the Report on the Cost of Employer and Public Liability Insurance.

Mortgage Lending

Ceisteanna (91)

Michael McGrath

Ceist:

91. Deputy Michael McGrath asked the Minister for Finance his views on the Central Bank's review on mortgage-related advertisements with a focus on cash back incentives; the actions he or the Central Bank plan to take to address the findings of the review; his views on whether cash back offers serve a purpose in the mortgage market; and if he will make a statement on the matter. [30923/18]

Freagraí scríofa

Minister for Finance

The Central Bank undertook the recent review of mortgage related advertising, with a focus on cash back incentives, to assess whether or not lenders were advertising mortgages with cashback offers in a clear and unambiguous way.

183 advertisements were reviewed for compliance with the advertising requirements in the Consumer Protection Code 2012 (the Code) and the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (S.I. No. 142/2016). In some cases, the same advertisement may have appeared across all formats of advertising reviewed.

As a result of the review, the Central Bank instructed lenders to withdraw or amend c.75% of the advertisements included. In summary, the key findings from the review were:

- Key information and qualifying criteria was not always included in the main body of the advertisements, or indeed in the small print (e.g. whether a current account with the lender was required in order to qualify);

- The content of some webpages was not accurate and/or up to date; and

- The content of some of the advertisements was unclear (e.g. how the cash back incentive was calculated).

Following a public consultation process in 2017, the Central Bank announced changes to the Consumer Protection Code on 20 June 2018 to help consumers make savings on their mortgage repayments, provide additional protections to consumers who are eligible to switch, and facilitate mortgage switching through enhancing the transparency of the mortgage framework. The changes are being made by way of an Addendum to the Code which will take effect from 1 January 2019.

In relation to incentives such as cashback offers, from 1 January 2019 the existing provision 6.12 in the Code will be extended to apply the same protections to all mortgage holders i.e. for new, existing and switching mortgage holders. This is to ensure that consumers have sufficient clarity about the precise nature and scale of the benefit of an incentive to them, including the potential impact of an associated incentive on the cost of their mortgage. Provision 6.12 of the Code requires lenders to provide consumers with information needed to consider the incentive offered. This information must:

a. Quantify the implications for the consumer of availing of the incentive including an indicative cost comparison of the total cost of the existing mortgage if they do not avail of the incentive and the total cost of the mortgage if they avail of the incentive;

b. Clearly set out the length of time during which the incentive will be available;

c. Clearly set out any assumptions used, which must be reasonable and justifiable;

d. Set out the advantages and disadvantages to the personal consumer of availing of the incentive;

e. Include other key information which the personal consumer should have available to them when considering the incentive; and

f. Include a statement that the personal consumer may wish to seek independent advice prior to availing of the incentive.

In relation to incentives, the Central Bank also expects regulated entities to be fully cognisant of robust product oversight and governance arrangements, for example the European Banking Authority Guidelines on product oversight and governance arrangements for retail banking which have applied since 3 January 2017.

It is also important to note that, as Minister for Finance, I have no role in the decision making processes of credit institutions and what products any such institutions wish to provide. This is a commercial matter for each individual credit institution having regard to the relevant legal and regulatory requirements which apply.