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Wednesday, 17 Apr 2019

Written Answers Nos. 38-59

Brexit Preparations

Ceisteanna (48)

James Browne

Ceist:

48. Deputy James Browne asked the Minister for Finance the steps he has taken and plans to take to date in preparation for post-Brexit customs checks at ports, specifically Rosslare Europort to date; and if he will make a statement on the matter. [17639/19]

Amharc ar fhreagra

Freagraí scríofa

I am informed by Revenue that significant work has been undertaken in preparation for post-Brexit Customs checks at Rosslare Europort. The Office of Public Works are responsible for the delivery of the necessary infrastructure and in preparation for the no-deal scenario, temporary facilities were installed in Rosslare Harbour including public office facilities, basic driver comfort facilities and exam areas for SPS and Customs controls. OPW are currently working to ensure that permanent facilities will be in place by 1 January 2021.

As regards staffing and resources, I am advised that Revenue appointed over 400 additional staff nationally to customs and related roles for Brexit in the period September 2018 to 12 April 2019. 30 of these additional 400 staff were assigned to Rosslare Europort. These additional staff brought the total Revenue staff in Rosslare Europort to approximately 50.  In order to facilitate trade, Revenue will operate extended opening hours to suit current trade flows.

Revenue has engaged directly with trade and business to provide advice and support in relation to the changes that will occur as a result of Brexit. On 30 January, Revenue, together with Department of Agriculture Food and the Marine, hosted a Customs Brexit Information seminar in Wexford town. This was part of an ongoing and extensive trader engagement program highlighting the Brexit-related Revenue supports and providing an opportunity for traders to speak directly with experts across a range of specific Customs themes as well as from other Government Departments and agencies.

On 5 April 2019, Revenue commenced direct engagement with truck drivers at both Dublin Port and Rosslare Europort. Customs Officers provided advice to drivers waiting to embark ferries and on-board a number of sailings. Information leaflets providing key customs advice for truck drivers were distributed to ensure that drivers understand and are aware of the impact Brexit will have on their journeys. 

On 8 April 2019, Revenue gave a presentation in Rosslare Europort to the haulage sector outlining the Customs procedures and obligations in relation to the flow of goods through Rosslare Europort.

Question No. 49 answered orally.

Economic Competitiveness

Ceisteanna (50, 98)

Bernard Durkan

Ceist:

50. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the economy performs robustly and competitively in line with other economies across Europe; if specific precautions are required at this juncture; and if he will make a statement on the matter. [17799/19]

Amharc ar fhreagra

Bernard Durkan

Ceist:

98. Deputy Bernard J. Durkan asked the Minister for Finance if specific issues affecting the competitiveness of the economy have been identified; if remedial action is required; and if he will make a statement on the matter. [18035/19]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 50 and 98 together.

Our economy continues to grow at a robust pace, with GDP growth of 6.7 per cent in 2018. As a result, Ireland continues to be one of the fastest growing economies in Europe. I would like to stress that while the headline GDP figure can be exaggerated in an Irish context, other indicators such as consumer spending, modified domestic demand, along with taxation receipts confirm the robust growth in our economy. 

Our economic health is most clearly evident in the labour market with more people working in Ireland than ever before (2.28 million) and the unemployment rate is now significantly below that of other Euro Area countries. The outlook for the economy remains positive over the coming years, with modified domestic demand, a more meaningful measure of underlying economic activity in Ireland, is set to expand by 4.0 per cent this year and 3.3 per cent next year.

The strength of our economy, in part, reflects the important steps we have taken to improve our competitiveness. Since 2008, the Central Bank’s real harmonised competitiveness indicator has improved by approximately 22 per cent.  

The restoration of competitiveness has been hard-won through improvements in productivity, along with wage and price moderation. However we cannot become complacent. As the National Competitiveness Council (NCC) highlighted in its recent report, there remains a number of bottlenecks at a sectorial level which impact on Ireland's cost competitiveness. 

Importantly, the robust economic growth in recent years has not yet given rise to significant inflationary pressures. For 2018 as a whole, Ireland’s inflation averaged just 0.7 per cent, this compares to an average inflation rate of 1.9 per cent for the EU as a whole. The comparatively low level of inflation in Ireland should help to maintain our competitiveness and protect real wage growth.

On wage developments, while average hourly earnings grew at 3 per cent in 2018, a noticeable increase on the growth rate of 1.7 per cent recorded in 2017, this came on the back of a near decade of low or negative growth in earnings. The rise in household incomes is a welcome development, however it needs to be monitored closely to avoid a significant acceleration in wages, which may undermine Ireland’s competitiveness relative to other European countries.

Despite the positive outlook for our economy, the risks over the coming years are numerous and primarily external in nature. The best way we can mitigate against these risks is through prudent budgetary policy, careful management of the public finances and by focusing on competitiveness-oriented policies. Through the National Development Plan in particular, we are investing significantly to address the bottlenecks to growth which emerged during the recovery, such as the need for housing and public infrastructure investment. This should ensure that our economy remains competitive and avoid the build-up of bottlenecks that could limit our growth potential.

Financial Services Regulation

Ceisteanna (51)

Michael McGrath

Ceist:

51. Deputy Michael McGrath asked the Minister for Finance when he plans to bring forward legislation on the regulation of personal contract plans as recommended by the review of regulation on personal contract plans; and if he will make a statement on the matter. [17765/19]

Amharc ar fhreagra

Freagraí scríofa

As I have indicated previously to the Deputy, it is important to keep the market for the provision of financial services under review to ensure that the level of consumer protection continues to be robust.  In this context, last summer I asked Mr. Michael Tutty to conduct a review of the PCP market and regulatory structure and his report was subsequently published by my Department in November.  That report found that there was currently no evidence of significant consumer detriment arising from PCPs but nevertheless it set out a number of conclusions and recommendations to help avoid possible problems arising in the future.  Among these it suggested that legal advice should be obtained on, inter alia, the precise legal status of PCPs and on the scope and means of ensuring that relevant provisions of the Central Bank Consumer Protection Code, should apply to the providers of PCP agreements to consumers.

My Department is currently consulting the Office of the Attorney General on these queries and it is expected that a response will shortly be received.  When it is to hand and in the light of the content of the advice, my Department will then further engage with the Central Bank, the Department of Business, Enterprise and Innovation and the Competition and Consumer Protection Commission on the further steps as may be required or desirable, such as the need for additional legislation, in order to advance the Tutty Report recommendations.

Credit Union Lending

Ceisteanna (52)

John Curran

Ceist:

52. Deputy John Curran asked the Minister for Finance the steps he is taking and the progress being made in establishing a mechanism that would allow and facilitate funds from an organisation (details supplied) to be invested in social housing; and if he will make a statement on the matter. [17724/19]

Amharc ar fhreagra

Freagraí scríofa

This is a question that has been asked, and answered, many times. I last answered it in the Dáil myself in mid February this year (PQ 1750/19) and my colleague Minister English also answered a similar question at his oral Parliamentary Questions last week. Each time it has clearly been stated that the Government is not, and has never committed to, establishing a Special Purpose Vehicle (SPV) on behalf of the organisation mentioned in the details supplied. 

At present I am not aware of any legal or regulatory barriers to the organisation mentioned establishing its own SPV to invest social housing through Tier 3 Approved Housing Bodies (AHBs). 

Since 2015, there has been extensive engagement from my Department and the Department of Housing with this organisation. Following analysis of their two proposals and meetings with the organisation in question, both Departments stated in writing that the second of the proposed models – the establishment of an SPV by credit unions – was the most suitable.

In July 2016, Rebuilding Ireland separately committed to establishing an Innovation Fund to support the development of innovative financial models, such as SPVs, by Approved Housing Bodies (AHBs).  It has been repeatedly clarified both in writing and indeed in answers to Parliamentary Questions that this commitment was not to establish a state owned SPV, rather to provide funding to help develop a sector-led AHB SPV.

In relation to supporting Credit Unions in the provision of funding for social housing, the role of the Government and the Central Bank is to ensure there are is an appropriate legislative and regulatory framework. In this regard, the Central Bank revised the Credit Union Investment Regulations in March 2018 to enable credit unions to invest in social housing via an SPV.

As such the Government and the Central Bank have fulfilled their role and it is now up to both the credit union and social housing sectors themselves to progress and develop any specific funding mechanisms.

I am aware that one of the Credit Union representative bodies has completed all of the preparatory work for establishing an SPV but is awaiting a minimum level of projects to justify the costs of establishing the SPV. I have not been made aware of progress made by the organisation referred to in establishing such an SPV.

Tax Code

Ceisteanna (53)

Pearse Doherty

Ceist:

53. Deputy Pearse Doherty asked the Minister for Finance the steps he will take to change the lucrative tax arrangements in place in order to disincentivise commercial investors from distorting the market for new housing in Dublin and nationally through the buy-to-rent model; and if he will make a statement on the matter. [17794/19]

Amharc ar fhreagra

Freagraí scríofa

I am aware of recently expressed concerns to which the Deputy refers, in relation to the potential effect investors adopting the 'buy to rent' model are having on the Irish property market.

I would like to advise the Deputy that my Department actively monitors developments in this sector on an ongoing basis, and has recently published a paper on Institutional Investment in the Housing Market. The paper is based on CSO data up to 2017, the latest year available.

While there is a perception that institutional investors are purchasing large amounts of housing stock, the data show that their activity has been limited in the context of the overall housing market.  In 2017 — the latest year for which we have data – firms in this category were net purchasers of just 1 per cent of residential sales, or just over 500 units. Furthermore, from 2010 to 2017, net purchases by Real Estate Investment Trusts (REITs), real estate funds and private equity firms were less than 0.01 per cent of available units, or just 380 units.

In relation to the tax treatment of such entities, the function of the REIT framework for example, is not to provide an overall tax exemption. It is to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply on property investment via a corporate vehicle. REITs are required to distribute 85% of their property profits each year for taxation at the level of the shareholder and Dividend Withholding Tax is collected on the distributions. 

Additionally, the Irish Real Estate Fund (IREF) regime was introduced in Finance Act 2016 as a result of concerns raised in both the media and the Dáil regarding the activities of certain non-resident investors in the Irish property market. These provisions apply to certain investment funds deriving 25% or more of their value from Irish real estate assets and impose a Dividend Withholding Tax on distributions to non-resident investors.

I currently have no plans to change the aforementioned treatment of such entities, however, as the Deputy will be aware, as part of the 2018 Finance Bill process I committed that my officials would undertake a report of the impact of REITs, IREFs and Section 110 companies on the residential property market. This report to be presented to the Tax Strategy Group this summer, and work is ongoing in this regard.

Flood Risk Insurance Cover Provision

Ceisteanna (54)

Robert Troy

Ceist:

54. Deputy Robert Troy asked the Minister for Finance when measures will be introduced to ensure insurance companies cannot refuse insurance in locations in which flood defence measures have been introduced. [10612/19]

Amharc ar fhreagra

Freagraí scríofa

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, you should be aware that the provision of insurance is a commercial matter for insurance companies, which has to be based on a proper assessment of the risks they are willing to accept. This assessment will in many cases include insurers own presumptions based on their private modelling and research. Consequently, neither the Government nor the Central Bank 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. This position is reinforced by the EU framework for insurance (Solvency II Directive) which expressly prohibits Member States from doing so.

The core strategy for addressing areas at potentially significant risk from flooding is the OPW Catchment Flood Risk Assessment and Management ("CFRAM") Programme. The CFRAM Programme focussed on 300 Areas for Further Assessment ("AFAs") including 90 coastal areas, mainly in urban locations nationwide, identified as being at potentially significant risk of flooding. The proposed feasible measures, both structural and non-structural, identified for AFAs are outlined in Flood Risk Management Plans. The Plans set out the flood relief schemes that have already been constructed and those that are currently underway. The Plans also provide the outline of 118 proposed schemes that can protect a further 11,500 properties and the evidence to prioritise their delivery to where its benefit is greatest. OPW have informed us that they and Local Authorities will work closely together on the all of the projects to ensure that they are all implemented in the lifetime of the Programme.

The Government continues to believe that its existing policy and investment in relation to flooding which is focused on the development of a sustainable, planned and risk-based approach to dealing with flooding problems is the best way forward. This commitment is underpinned by a significant capital works investment programme by the OPW and Local Authorities, and complemented by a Memorandum of Understanding between the OPW and Insurance Ireland, which provides for the exchange of data in relation to completed flood defence schemes. 

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 in March 2019 of approximately 87% of the property insurance market in Ireland indicates that of the completed defence schemes, 95% of policies in areas benefitting from permanent flood defences include flood cover, while 74% of policies in areas benefitting from demountable defences include flood cover. It should be noted that my Department is continuing to actively examine what can be done to increase the level of cover in areas with demountable defences.

VAT Exemptions

Ceisteanna (55, 63)

Gino Kenny

Ceist:

55. Deputy Gino Kenny asked the Minister for Finance if his attention has been drawn to the precedent set by his predecessor (details supplied) in which his predecessor intervened in a decision by the Revenue Commissioners to impose VAT on herbal teas in 2014 which resulted in the abandonment of the proposed VAT imposition; if he has given consideration to intervening in the proposed imposition of 23% VAT on food supplements planned to commence on 1 March 2019; and if he will make a statement on the matter. [17646/19]

Amharc ar fhreagra

Gino Kenny

Ceist:

63. Deputy Gino Kenny asked the Minister for Finance his plans to intervene to defer the planned imposition of 23% VAT on food supplements until a review of the impact of same on small businesses and employees has taken place, in view of the impending effect of Brexit in addition to the VAT hike; and if he will make a statement on the matter. [17647/19]

Amharc ar fhreagra

Freagraí scríofa

I propose to take Questions Nos. 55 and 63 together.

The background to the issue is that VAT legislation does not apply the zero rate of VAT to food supplements but shortly after the introduction of VAT Revenue applied a concessionary zero rating to certain vitamin, mineral and fish oil food supplement products. As the market developed this treatment resulted in the zero rating by Revenue of further similar products.  However, it had become increasingly difficult to maintain an effective distinction between food supplements that could benefit from the zero rate and those that were standard rated.

After undertaking a comprehensive review of the VAT treatment of food supplements, including getting an expert report on the definition of food for the purposes of the VAT Consolidation Act, Revenue concluded that the status quo was no longer sustainable and issued new guidance in December 2018 which removed the concessionary zero rating of various food supplement products with effect from 1 March 2019.

Following representation from Deputies and from the industry I wrote to Revenue outlining my plans to examine the policy and legislative options for the taxation of food supplement products in the context of Finance Bill 2019. Revenue responded by delaying the withdrawal of its concessionary zero rating of the food supplement products concerned until 1 November 2019. This will allow time for the enactment of any legislative changes in the context of Budget 2020. The Deputy referred to the example of the change in the VAT treatment of herbal teas. The change in that instance was affected by amending the VAT Consolidation Act by way of an amendment in Finance Act 2014. Following the consultation process that is planned I will consider if an amendment concerning food supplements is necessary.

I have committed to putting in place a consultation process to help me identify the policy options in relation to VAT on food supplements and will publish the conclusions in the Tax Strategy Papers later this year. I envisage seeking input from a wide range of interested parties, including from health and nutrition experts, to ensure that any legislative changes I bring forward are evidence based, and I will consult with my colleague the Minister for Health in this regard.

Details on the public consultation will be announced shortly.

Tax Credits

Ceisteanna (56)

Thomas P. Broughan

Ceist:

56. Deputy Thomas P. Broughan asked the Minister for Finance his views on the refunding of unused tax credits to persons and couples on lower incomes; if his Department has costed different income levels of such refunds in the preparations for budget 2020; and if he will make a statement on the matter. [17650/19]

Amharc ar fhreagra

Freagraí scríofa

This matter was looked at in some detail in 2002 by the Working Group established under the Programme for Prosperity and Fairness. The Group was chaired by the Department of Finance and included representatives from ICTU, IBEC, the various farming organisations, the Community and Voluntary Pillar, relevant Government Departments and the Office of the Revenue Commissioners.

The Working Group found that there were significant disadvantages with such a system.  These included the potential negative impacts on the incentive to work, labour supply, labour force participation and overall productivity and output.  The Commission on Taxation in its 2009 report also did not recommend the introduction of refundable tax credits.

Furthermore, the cost of providing refundable tax credits would be extremely high.  Revenue have in the past estimated the cost of providing a limited refundable tax credit, that is, refundable only to those currently on the tax record, at approximately €2 billion per annum.

I am aware that certain Groups have proposed different schemes for refundable tax credits which are based on a number of arbitrary restrictions such as age, hours worked, income and PRSI contributions in the previous year.  These Groups have claimed much lower costs for these schemes.  However, my Department and the Revenue would dispute these lower costings. 

What is not in doubt, however, is that refundable tax credits can have a negative impact on the incentive to work. 

In these times when we need to encourage people to join the workforce and remain in the workforce, however very significant difficulties exist with the use of refundable tax credits.

Tax Code

Ceisteanna (57)

Thomas P. Broughan

Ceist:

57. Deputy Thomas P. Broughan asked the Minister for Finance his views on a recent presentation to the Oireachtas Select Committee on Budgetary Oversight that the cost of tax expenditures in revenue forgone is approximately €21.4 billion per annum; and if he will make a statement on the matter. [10482/19]

Amharc ar fhreagra

Freagraí scríofa

I am aware of the Budget Oversight Committee's ongoing work in the area of tax expenditures, and the publication of a report on the topic earlier this month.  The Committee had met with representatives of my Department and Revenue on January 22nd 2019. It had also met separately with the Parliamentary Budget Office (who have also done considerable work in the area of tax expenditures), and with the economist Dr. Micheál Collins from the School of Social Policy in UCD. 

The Budget Oversight Committee Report acknowledges that estimates of revenue foregone can be different due to different definitions of what is included in tax expenditure. The Parliamentary Budget Office aggregate cost estimate is in the region of €5 billion based on the Department of Finance classification which is narrower and is aligned with an OECD’s definition of tax expenditure.  

The work on tax expenditures review is a continuous process. The 2017 tax strategy group paper on the topic noted significant advances have been made in the analysis of tax expenditures. There is the Department’s 2014 tax expenditure guidelines, a comprehensive analytical process for evaluations and ex-ante evaluations of proposed new tax incentives.  All tax expenditures that commenced post 2014 have been subject to sunset clauses.

With regards to the eight recommendations made in the Report by the Committee, they are currently being considered by my Department, and by Revenue.  

NAMA Investigations

Ceisteanna (58)

Mick Wallace

Ceist:

58. Deputy Mick Wallace asked the Minister for Finance if he will consider suspending the work of NAMA immediately pending the final report of the Cooke commission of investigation into Project Eagle; and if he will make a statement on the matter. [17800/19]

Amharc ar fhreagra

Freagraí scríofa

On 13 June 2017 the Government agreed the order establishing the NAMA Commission of Investigation and selected Justice John Cooke to lead the Commission in investigating the NAMA’s disposal of its Northern Ireland loan portfolio, referred to as “Project Eagle”. The Commission of Investigation is under the remit of the Department of Taoiseach and the former Minister for Finance and Department of Finance Officials are the subject of one of the terms of reference. Therefore, it is not appropriate for me to comment extensively. The Commission's terms of reference and interim report are available on the Merrion Street website. Neither call for a suspension of NAMA's activities. The Commission's final report is scheduled to be published by the end June 2019.

It is important to note that in no way has the integrity of NAMA or the NAMA Board or the integrity of its decisions been brought into question in relation to the disposal of Project Eagle. I therefore have no intention of directing NAMA to halt its activities. To do so would irreparably damage NAMA's positive contribution to our recovery and damage our reputation as a credible, open and transparent market. By extension, any such interference would be detrimental to the interests of Irish taxpayers.

The decision of the Oireachtas in 2009 to allow NAMA to carry out its functions in an independent manner has been vindicated by its strong performance since inception. In October 2017 it eliminated the Irish taxpayers' contingent liability of €30 billion which arose from the senior debt issued in order to acquire bank loan portfolios.  NAMA also expects to redeem its subordinated debt by March 2020 and to produce a surplus – currently estimated at €3.5 billion – by the time it completes its work subject to continued positive market performance.

Halting NAMA’s activities would put these achievements at risk. It would entail the State taking direct control of NAMA and bring NAMA onto the State’s balance sheet. Such action also would raise serious competition concerns limiting the State’s flexibility in recovering value from NAMA’s remaining assets.  Such action would also create significant challenges for NAMA in retaining staff and preserving a viable platform to maximise the return from its remaining assets.

Tax Code

Ceisteanna (59)

Robert Troy

Ceist:

59. Deputy Robert Troy asked the Minister for Finance the status of the review his Department is undertaking on the 100% increase in betting duty. [17641/19]

Amharc ar fhreagra

Freagraí scríofa

The increase in the betting duty rate from 1 per cent to 2 per cent, and the betting intermediary duty rate from 15% to 25%, came into effect on 1 January 2019. The last time that the betting duty rate was increased was in 1975 and at 1% betting duty was at an all time low.   

Receipts from betting duty represented less than 1 per cent of all excise receipts in 2018 as in previous years. In addition, unlike other excisable commodities, there is no VAT applied on betting transactions. I have outlined why I consider the betting sector needs to make a fair contribution to the Exchequer.

In any discussion on betting duty, we must acknowledge the raised public consciousness of the problem of gambling in society. While problem gambling can result in the problem gambler, and their family, bearing the severest of economic and of course personal costs, the social costs of problem gambling can extend to their employers and to public institutions in the health, welfare and justice systems, such costs ultimately being borne by taxpayers. I have outlined my view that this needs to be better reflected within the betting duty regime.   

In the course of last year's Finance Bill process, I acknowledged that small independent bookmakers may have difficulty competing with larger bookmakers with retail and/or online operations. At the time I agreed to review an alternative proposal put forward by the betting sector. My officials are currently considering this proposal, including the compatibility of a core element with EU rules, and will set out analysis and options in relation to betting duty at the Tax Strategy Group (TSG) meeting in July. The TSG Papers will be published on the Department's website shortly afterwards. 

Ultimately many taxes on goods or services are passed through to the end consumers and bookmakers will need to make commercial decisions on such matters in their pricing decisions. Betting duty will be given further consideration in the next budget and in that context my decision will be informed by the outcome of the review into the alternative proposal put forward by the betting sector as well as the other considerations which I have set out.

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