Written Answers Nos. 60-83
60. Deputy Martin Heydon asked the Minister for Finance his views on the competitiveness of the insurance section at present; the work he is carrying out in the area; and if he will make a statement on the matter. [17832/19]
Amharc ar fhreagraThe Irish insurance sector is diverse, comprising life, non-life and reinsurance firms operating across a range of product and geographical markets. As Minister for Finance, I am responsible for the development of the legal framework governing financial regulation of the sector. This framework is mainly governed by the EU Solvency II Directive, which provides for three ways in which an insurance undertaking can operate within the Irish market. These are to:
- establish a head office in Ireland (authorised by Central Bank of Ireland);
- establish a branch in Ireland through Freedom of Establishment (FOE); or
- operate on a Freedom of Services basis, i.e. conduct business in Ireland from another country (FOS).
It should be noted that there are companies operating in each of these channels in the Irish insurance market.
The Solvency II framework is designed to allow for a level playing field across the European Union for insurers, not only in terms of access to markets within the EU, but also with regard to the level of supervision and regulation. Therefore it plays an essential role in facilitating competition in the insurance sector across the EU.
However, there are other factors, beyond the legal and regulatory framework which also inform insurance companies decision making processes as to whether or not to operate or to continue to operate in any country. For example, the level of awards, and the number of claims will be important such considerations for insurers. In this regard, there has been some sectors of our economy such as play centres where because of these aforementioned factors, insurance cover has either become unavailable or prohibitively expensive.
Consequently, in order to create a more competitive environment, the Government is focussing on implementing the recommendations of the Cost of Insurance Working Group (CIWG) including those of the second Personal Injuries Commission (PIC) Report which concluded that soft tissue injuries are significantly higher here than in England and Wales (4.4 times) and recommended that action be taken to address this disparity through the establishment of the Judicial Council.
The current position with the Judicial Council Bill is that the Minister for Justice and Equality has indicated that he hopes to have this Bill enacted by the summer. In this regard, it recently completed Committee Stage in the Seanad. Alongside this, the Law Reform Commission has included the subject of capping damages in personal injuries litigation in its draft 5th Programme of Law Reform and this work will begin shortly.
61. Deputy Pearse Doherty asked the Minister for Finance his views on the use of fixed assets receivers by vulture funds and State-owned banks to force the sale of buy-to-let properties in arrears; and if he will make a statement on the matter. [17793/19]
Amharc ar fhreagraAs the Deputy will be aware, there is an extensive array of regulatory protections for borrowers who are in arrears under the various statutory Codes of Conduct issued by the Central Bank, such as the Consumer Protection Code 2012 and the Code of Conduct on Mortgage Arrears 2013 (CCMA). Furthermore under the Consumer Protection (Regulation of Credit Servicing Firms) Act 2018, which came into effect on 21 January 2019, if a loan is transferred the holder of the legal title to the credit must now be authorised by the Central Bank as a credit servicing firm. Such credit servicing firms must act in accordance with 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.
However, while the legislative framework has been expanded to include the regulation of both loan owners and credit servicing, regulated lenders (or credit servicing firms) are entitled to make certain commercial decisions in relation to non performing loans whilst adhering to all the relevant consumer protection regulation that is in place.
The specific legislation and regulation of receivership would fall under the aegis of the Department of Business, Enterprise and Innovation who would be better placed to comment on and provide information on this topic.
With regard to the "state owned" banks or, more accurately, those in which the State has a majority shareholding, their corporate strategies and decisions are the responsibility of the boards and management and the firms must be run on an independent and commercial basis. The banks’ independence is protected by Relationship Frameworks which are legally binding documents which I as Minister, cannot change unilaterally. These frameworks which are publicly available, were insisted upon by the European Commission to protect competition in the Irish market.
That being said my officials received the following response from AIB:
"AIB continues to seek engagement with all borrowers in difficulty and only appoints Receivers when all other avenues have been exhausted. Appointments are primarily for the purpose of protecting and ultimately realising security, these are referred to as Fixed Asset Receivers. While appointed by the bank, the Receiver has a responsibility to realise the best return for the borrower."
My officials received the following from PTSB:
"Permanent TSB do not currently use Fixed Asset Receivers to sell properties".
64. Deputy Richard Boyd Barrett asked the Minister for Finance if he will provide a report on the local property tax review process undertaken by his Department; the reason for the deferral of changes; and if he will make a statement on the matter. [17791/19]
Amharc ar fhreagraA review of the local property tax was carried out by the Department of Finance in conjunction with the Departments of the Taoiseach, Housing, Planning and Local Government, Public Expenditure and Reform and the Revenue Commissioners. The terms of reference required that in conducting the review the review group was to have regard to the principle of achieving relative stability in the LPT payments of those liable for the tax and provide clear direction on the likely payments faced by households in 2020.
The review group was asked to look in particular at the impact on LPT liabilities of property price developments since the original valuation date of 1st May 2013. The review also included an examination of the outstanding recommendations of the 2015 Thornhill review of the Local Property Tax. A public consultation process was conducted as part of the review to enable all interested parties and individuals to submit their views on the future of the LPT.
The review focused on the impact of house price movements under a series of scenarios involving different rate and tax band structures. However, against a background of significant but geographically uneven increases in residential property price levels, I believe it is necessary to engage in further consultation in order to identify a scenario that would deliver on the condition I set that there should be relative stability for all taxpayers in their LPT liabilities and that any increases should be modest and affordable.
Having considered the findings of the review report, and as I announced on the 2nd of April, I have therefore decided to defer the valuation date from 1st November 2019 to 1st November 2020 and to submit the report to the Budget Oversight Committee (BOC) in the context of the recommendations in its report on LPT of 21 March 2018. The deferral of revaluation until November 2020 provides time and space for the BOC to consider the report of the inter-departmental review and to provide its views to me. Importantly, as a result of my decision, the LPT bills of those liable for the tax will not be increasing in 2020.
65. Deputy Thomas P. Broughan asked the Minister for Finance the income tax receipts for the first quarter of 2019; the reason the budget 2019 projection for this tax yield was not achieved; and if he will make a statement on the matter. [17643/19]
Amharc ar fhreagraI can advise the Deputy that in the year to-date income tax receipts of €4,973 million have been collected against a target of €5,144 million. This represents a small shortfall of just 3.3 per cent or €171 million. However, it should be noted that income tax is a broadly based tax-head, covering a range of sub-components. In the year to end-March there was some weakness recorded in receipts derived from unearned sources of income, and early Schedule D tax payments. However, it should be noted that PAYE income tax receipts which account for about 70 per cent of the overall annual target finished the quarter broadly in line with collection targets which reflects the continuation of positive labour market developments. Separately, USC posted a similar performance.
Finally, I would caution against drawing any conclusions for the year’s performance with just one quarter of data. My Department will continue to monitor developments over the course of the year.
66. Deputy Maurice Quinlivan asked the Minister for Finance if his attention has been drawn to businesses closing down due to the cost, and in some cases unavailability, of insurance; his plans to protect such businesses and the jobs of persons working in them; and if he will make a statement on the matter. [11152/19]
Amharc ar fhreagra68. Deputy Martin Heydon asked the Minister for Finance the actions he is taking to alleviate difficulties being experienced by business owners, particularly those in the play sector in securing insurance for their business at rates that are sustainable; and if he will make a statement on the matter. [17831/19]
Amharc ar fhreagra79. Deputy Maureen O'Sullivan asked the Minister for Finance the measures being taken to address the difficulties faced by persons and businesses regarding the high cost of insurance cover; and if he will make a statement on the matter. [17784/19]
Amharc ar fhreagraI propose to take Questions Nos. 66, 68 and 79 together.
I am very conscious of the difficulties being faced by certain small businesses in obtaining insurance and that a number of such businesses have had to close or are facing closure if they are unable to get cover. I believe that the issue of the rising cost of insurance and in some cases its unavailability is linked to high award levels particularly for soft tissue injuries, as well as what appears to be an increase in fraudulent and exaggerated claims. The result of this is that in certain parts of the economy such as play centres, insurers are withdrawing altogether as they argue they are incurring losses in these areas
The Deputy will be aware that neither I, as Minister for Finance, nor the Central Bank can interfere in the provision or pricing of insurance products. However it was recognised that the State could play a role in improving the environment within which insurers operate, thus explaining why the Cost of Insurance Working Group (CIWG) was established in July 2016.
The CIWG has produced two reports and a series of quarterly progress updates on the various recommendations made by CIWG and endorsed by Government. The difficulties facing the consumer, voluntary and small business sector from the high cost of insurance premiums are acknowledged in these reports.
A key recommendation of the CIWG was the establishment of the Personal Injuries Commission (PIC) which was asked to examine amongst other things award levels in this country compared with elsewhere. The PIC reported in September 2018 and concluded that soft tissue injuries are significantly higher here than in England and Wales (4.4 times) and recommended that action be taken to address this disparity through the establishment of the Judicial Council. The PIC recommended that this body would become responsible for preparing the guidelines on personal injury award levels, and would replace the Book of Quantum.
The current position with the Judicial Council Bill is that the Minister for Justice and Equality has indicated that he intends having it enacted by the summer. In this regard, it recently completed Committee Stage in the Seanad. Alongside this, the Law Reform Commission has included the subject of capping damages in personal injuries litigation in its draft 5th Programme of Law Reform and this work will begin shortly.
In relation to the investigation of insurance fraud by the Gardaí, Minister of State D'Arcy has been in regular contact with the Garda Commissioner. The Minister of State has been assured by the Commissioner that he is working to increase Garda capacity in this area and a public announcement is expected on this matter in the next couple of weeks.
I expect that insurers’ pricing of premiums in general will take account of the measures which have been, and are being, implemented as a result of the CIWG recommendations more broadly and I believe that insurers themselves recognise this. In this regard, I would recall that Justice Nicholas Kearns, the Chairperson of the Personal Injuries Commission (PIC), noted in the foreword of its second report that insurance industry representatives on the PIC repeatedly stated that, as award levels and associated costs account for the bulk of the cost of insurance, if claims costs come down and are maintained at a consistent and predictable level, then premiums will also reduce accordingly. A further public statement by insurers to this effect would assist in efforts to continue the necessary reform.
Finally, it has been suggested that the provision of support packages to businesses like play centres to protect the businesses and the jobs of persons working in them should be considered. However, this would amount to the State in effect becoming an insurance provider. Such a step would likely be in breach of the Solvency II Directive and as it would involve the State providing preferential support to one part of the economy over another, it would run the risk of being consider State Aid and contrary to EU State Aid rules. In addition, if a package of Government support, contained or otherwise available more generally to businesses, was put in place, it is also likely that such a measure could result ultimately in insurers withdrawing from large parts of the overall market. This would end up being counter-productive and bad for such small businesses in the longer term.
67. Deputy Bobby Aylward asked the Minister for Finance the measures taken to meet and engage with insurance companies regarding excessive premiums being charged to consumers, particularly in counties Carlow and Kilkenny; if he has investigated the possibility of opening up the insurance market to new providers in order to increase competitiveness in prices charged for motor insurance which will ultimately result in a better deal for the consumer; and if he will make a statement on the matter. [17651/19]
Amharc ar fhreagra73. Deputy Niamh Smyth asked the Minister for Finance the status of the measures taken to meet and engage with insurance companies here regarding excessive premiums being charged to consumers, particularly in counties Cavan and Monaghan. [17740/19]
Amharc ar fhreagraI propose to take Questions Nos. 67 and 73 together.
As outlined to the Deputy in previous PQ responses (including PQs 9764/19, 7359/19, 48428/18 and 40780/18), stakeholder consultation formed the foundation upon which the two primary reports of the Cost of Insurance Working Group and the accompanying recommendations were developed. This consultation process involved a wide range of stakeholders representing the different voices within this sector, including representative bodies, the major individual motor insurance providers and interest groups. The impact of excessive premiums being charged to consumers from all counties across the country was a feature of this engagement process with industry.
In addition, Department officials regularly raise specific issues affecting consumers across the country during their ongoing engagement with Insurance Ireland. Furthermore, Minister of State D’Arcy has separately met with representatives from insurance companies and other stakeholders in relation to a number of issues and the problems resulting from high insurance premiums have been discussed during these engagements.
Quarterly progress updates on the implementation of the Report on the Cost of Motor Insurance and the Report on the Cost of Employer and Public Liability Insurance provide more detailed information on the implementation of each of the recommendations and actions. The eighth quarterly update was published in March and is available on the Department’s website.
Alongside delivering fairer premiums for consumers, a key objective of the Working Group is to create a more competitive insurance market overall in this country. I believe that the full implementation of all of the recommendations will make Ireland more attractive to new entrants, thus increasing capacity as well as competition.
Finally, it should be noted that the nature of the EU Single Market is such that insurance undertakings authorised in other member states are allowed conduct business in the Irish market on either a freedom of service basis or a freedom of establishment basis, consequently there are no restrictions preventing such companies entering this market if they wish. You should also be aware that Recommendation 5 of the Report on the Cost of Motor Insurance called for the Department to support efforts and raise awareness of the need to improve cross-border insurance at EU level. Accordingly, the Department is monitoring developments at EU level on an ongoing basis and is for instance actively participating in the current Motor Insurance Directive amendment proposal.
69. Deputy Thomas P. Broughan asked the Minister for Finance the way in which the budget 2019 decision on VAT is reflected in the VAT yield for the Exchequer in the first quarter of 2019; and if he will make a statement on the matter. [17644/19]
Amharc ar fhreagraI presume the Deputy is referring to the Budget 2019 policy change to increase the VAT rate on tourism-related activities to 13.5 per cent from January 1st this year. The estimated increased Exchequer yield arising from this Budget change is €466 million in 2019. In terms of composition, the VAT rate increase in tourist accommodation is expected to yield €235 million, restaurants €191 million; hairdressing €27 million; bloodstock sales €7 million and cinemas and shows €6 million.
Generally speaking VAT is paid in arrears every second month with relatively insignificant receipts in the ‘off’ months. The January 2019 VAT receipts were primarily related to the November/December trading period, under which the old rate of 9 per cent would have applied to such tourism-related activity.
Accordingly, the recent March collection which mainly relates to the January/February trading period would have been the first under the new 13.5 per cent rate. In year-on-year terms monthly receipts were up by 9.0 per cent or €173 million. However, data is not available on what proportion of this relates to the rate increase or specifically the tourism sector.
70. Deputy Joan Burton asked the Minister for Finance his views on the recommendation in the recent report by the Oireachtas Select Committee on Budgetary Oversight on tax expenditures requesting that his Department prepares a report giving detailed reasons as to the reason sunset clauses are not attached to forgone tax expenditures; and if he will make a statement on the matter. [17827/19]
Amharc ar fhreagraI am aware of the Budget Oversight Committee's ongoing work in the area of tax expenditures, which recently culminated in its publication of a paper on the issue on the Monday of last week, 8th April 2019.
In advance of publishing this Report the Committee had met with representatives of my Department and Revenue (on January 22nd 2019), as well as of 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 recommendation regarding sunset clauses raised by the Deputy is one of eight recommendations set out in that Report. I confirm that all tax expenditures that commenced post-2014 have been subject to sunset clauses. Other tax expenditures will be reviewed over time as part of a process of the regular review process.
The recommendations made in the Report are currently being considered by my Department and by Revenue.
My Department and Revenue will continue to engage positively and constructively with the Committee on Budgetary Oversight in regards to any future work it may choose to undertake on the topic of tax expenditures.
71. Deputy Michael McGrath asked the Minister for Finance the reason for the delay in bringing another court application for funds to pay claimants involved with the collapse of a company (details supplied); and if he will make a statement on the matter. [17766/19]
Amharc ar fhreagraSetanta Insurance ("Setanta") was placed into liquidation by the Malta Financial Services Authority on 30 April 2014. As it was a Maltese incorporated company, the liquidation is being carried out under Maltese law.
The Deputy will be aware that under the Insurance Act 1964, as amended, monies may only be paid out of the Insurance Compensation Fund (ICF), with the approval of the High Court. As Minister for Finance I have no role in this process.
The liquidator of Setanta has informed me that since the last application was submitted in November 2018, a further 126 personal injury claims have now been settled and these will be included in the next application to the Fund together with a number of legal costs payments and third party property damage claims. The latest information from the liquidator estimates that the total value of the next tranche will be approximately €8.3 million.
In relation to when the next payments will be made, the Deputy will note that in accordance with the relevant legislation, there are certain steps to be completed in preparing any application to the High Court for payment from the ICF. These steps include the assessment and verification of each individual claim within the application by the State Claims Agency. The Agency have informed me that while it was hoped to arrange a court date during April, the court date provided by the High Court is the 13 May. This will allow for the payments to issue towards the end of May or early June.
Any individual (or their solicitor) who has queries about their payment should contact the liquidator via phone at +353 (0)818 255 255 or via email at iesetanta@deloitte.ie.
72. Deputy Pearse Doherty asked the Minister for Finance when he will make a decision and implement the decision on a change to betting tax in view the ongoing impact on the sector and on independent bookmakers; and if he will make a statement on the matter. [17795/19]
Amharc ar fhreagraThe 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. 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 with 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.
74. Deputy Joan Burton asked the Minister for Finance his views on the recommendation in the recent report by the Personal Injuries Commission that a judicial council be established and the judges on it provide guidelines on the appropriate levels of damages for personal injuries cases; and if he will make a statement on the matter. [17829/19]
Amharc ar fhreagraAs the Deputy is aware, a key recommendation of the Cost of Insurance Working Group (CIWG) was the establishment of the Personal Injuries Commission (PIC) which was asked to examine amongst other things award levels in this country compared with elsewhere. The PIC reported in September 2018 and concluded that soft tissue injuries are significantly higher here than in England and Wales (4.4 times) and recommended that action be taken to address this disparity through the establishment of the Judicial Council. The PIC recommended that this body would become responsible for preparing the guidelines on personal injury award levels, and would replace the Book of Quantum. In doing this, the PIC believes that the Judicial Council would, in compiling the guidelines, take account of the jurisprudence of the Court of Appeal and the results of its benchmarking exercise.
The PIC Report represents the first independent and objective acknowledgement of the differential of award levels between this country and England and Wales, and therefore in my view the implementation of its recommendations to address this differential through a judicial recalibration of the existing Book of Quantum by means of the Judicial Council would be an important step forward. Consequently, I see the enactment of the Judicial Council Bill by the Minister for Justice and Equality, Charlie Flanagan TD, as an important Government priority.
The current position with the Judicial Council Bill is that the Minister for Justice and Equality has indicated that he hopes that it can be enacted by the summer. In this regard, it recently completed Committee Stage in the Seanad. It should also be noted that alongside this legislation, the Law Reform Commission has included the subject of capping damages in personal injuries litigation in its draft 5th Programme of Law Reform and this work will begin shortly.
While the Judicial Council Bill’s role in reviewing the quantum of awards will be an important reform and has been highlighted in particular by insurers, I would expect that those insurers’ pricing of premiums in general and willingness to take on risk in particular sectors will also take account of the other measures which have been, and are being, implemented as a result of the CIWG recommendations more broadly and I believe that insurers themselves recognise this.
Finally, I would recall that Justice Nicholas Kearns, the Chairperson of the Personal Injuries Commission (PIC), noted in the foreword of its second report that insurance industry representatives on the PIC repeatedly stated that, as award levels and associated costs account for the bulk of the cost of insurance, if claims costs come down and are maintained at a consistent and predictable level, then premiums will also reduce accordingly. A further public statement by insurers to this effect would assist in efforts to continue the necessary reform.
75. Deputy Pearse Doherty asked the Minister for Finance his plans to increase carbon tax; his views on the impact of such an increase on the progressivity of the tax system; and if he will make a statement on the matter. [17796/19]
Amharc ar fhreagraDecisions in relation to the carbon tax take place as part of the annual budgetary process. The Energy and Environmental Taxes paper prepared annually for the Tax Strategy Group contains analysis on carbon tax policy options. Recent Tax Strategy Group papers are available to read on the Department of Finance website and the 2019 Environmental Tax paper will be published in the coming months. My decision in relation to the carbon tax will also be informed by the recent report of the Joint Oireachtas Committee on Climate Action as well as the All of Government Climate Plan being developed by my colleague the Minister for Communications, Climate Action and the Environment.
76. Deputy Willie Penrose asked the Minister for Finance his plans to support a public banking scheme based on the Sparkasse model due to the continued difficulties in lending volumes to SMEs, particularly in rural areas and the high interest rates charged; and if he will make a statement on the matter. [15648/19]
Amharc ar fhreagraAs the Deputy is aware, my Department in conjunction with the Department of Rural and Community Development, issued a report on Local Public Banking in Ireland last year. The report concluded that there is not a compelling case for the State to establish a new local public banking system based on the German Sparkassen model in Ireland.
However, a commitment was given in the report that my Department would arrange for an independent evaluation to consider how the objectives of community banking and how the local provision of banking and financial services could be furthered through other delivery mechanisms.
Following a procurement process, the contract was awarded to Indecon earlier this year and work on the independent evaluation is underway.
As regards SME loan volumes, the Department of Finance's SME Credit Demand Survey, which is published biannually, has consistently found a decline in the demand for Bank lending by Irish SMEs. This has fallen from 40% in the initial survey in 2011 to the current level of 20% in the most recent survey, covering the period October to March 2018.
In respect of the issue of the high interest rates charged to SMEs by the Deputy, I, as Minister for Finance, have no direct function in the relationship between the banks and their customers. I have no statutory function in relation to the banking decisions made by individual lending institutions as these are taken by the board and management of the relevant institution. This includes decisions in relation to product interest rates as determined by the banks from time to time.
It should be noted that in the most recent Department of Finance SME credit demand survey, only 1% of SMEs that did not seek credit stated it was due to it being too expensive to borrow. The same survey notes that four in ten of all SMEs with outstanding debt are not certain of the interest rate attached to their outstanding loans. Of those that are aware, the average cost of credit reported on outstanding loans is 4.4%, down from 5.1% in September 2017.
77. Deputy Pearse Doherty asked the Minister for Finance when the appeal against the European Commission ruling in a case (details supplied) will be heard; and if he will make a statement on the matter. [17797/19]
Amharc ar fhreagraThe Government profoundly disagrees with the Commission’s analysis in the Apple State aid case.
An appeal is therefore being brought before the European Courts. Such an appeal takes the form of an application to the General Court of the European Union, asking it to annul the Decision of the Commission.
The Attorney General prepared the legal grounds in support of the annulment proceedings and the application has been lodged in the General Court of the European Union. As is normal practice, a summary of these have been published in the Official Journal of the European Union. They were also published on the Department of Finance’s website in December 2016.
The case has been granted priority status and has been progressing through the various stages of private written proceedings before the General Court of the European Union. The written proceedings have now concluded and while the timing of any oral hearing is entirely at the discretion of the Court, it may be the case that the appeal could be heard in the coming months.
It will most likely be several years before the case is ultimately concluded.
78. Deputy Denis Naughten asked the Minister for Finance if he will consider providing income tax relief for the long-term lease of residential homes to address security of tenure in view of the success of a similar measure in the agricultural sector under section 664 of the Taxes Consolidation Act 1997 as amended by the Finance Act 2014; and if he will make a statement on the matter. [17648/19]
Amharc ar fhreagraI understand that the Deputy is proposing that income tax relief, similar to that which is provided for under Section 644 TCA 1997, would apply where landlords provide long-term leases of residential properties. As the Deputy will be aware, decisions by me in relation to the Tax Acts are made in the context of the annual Budget and Finance Bill process. However, bearing in mind the issues outlined below, I am not minded, at this time, to support a proposal along the lines of that put forward in the Deputy's question.
Generally, rental income, after deduction of allowable letting expenses, is subject to tax as part of the total taxable income of a landlord. Individual landlords are subject to income tax on all their income combined, at the applicable rates, including USC and PRSI where appropriate.
Section 664 of the Taxes Consolidation Act 1997 (‘relief for certain income from leasing of farm land’) provides for the exemption of certain income from the leasing of farm land, where the land is let under a qualifying lease. This particular relief was designed to encourage longer term leases of farm land, with the targeted policy objective of assisting with the mobility and productive use of agricultural land.
When considering the introduction of any tax expenditure measure, my officials undertake an evaluation of the proposal in accordance with the Department of Finance Tax Expenditure Guidelines. An evaluation will seek to address issues such as identification of the market failure, the policy rationale for intervention, cost, and whether a tax based measure is the most efficient form of intervention. With regard to the latter point, in many cases a market failure may be more appropriately remedied by a direct expenditure measure or through regulation. Other considerations include the potential for deadweight costs, the potential cost of the tax revenue foregone to the Exchequer and the scope for abuse.
Furthermore, Ireland’s past experience with tax incentives in the housing sector strongly suggests the need for a cautionary stance when considering intervention in the rental sector. There are many competing priorities which must be considered when deciding which policy measures to introduce and the rental sector is just one of many other sectors that may require assistance and intervention. I must be mindful of the many demands on the Exchequer and the need to maintain a broad base of taxation.
Finally, as the Deputy may be aware, in Finance Act 2018, and with effect from 1 January 2019, I provided for the full restoration of the amount of interest that may be deducted by landlords in respect of loans used to purchase, improve or repair their residential property, as a means to support the rental sector.
80. Deputy Richard Boyd Barrett asked the Minister for Finance if film producers who apply for and receive section 481 tax relief are responsible to ensure that the requirement to provide quality employment and training is met and have legal responsibility for employees and trainees on film productions funded by section 481 and that those legal responsibilities carry over from production to production in cases in which the same producer is involved; his views on whether the resulting number of jobs being created in the film industry is a small fraction of the number previously claimed by industry representatives in testimony and submissions to the Houses of the Oireachtas in view of the annual tax expenditure of €70 to €80 million on section 481; and if he will make a statement on the matter. [17825/19]
Amharc ar fhreagra89. Deputy Richard Boyd Barrett asked the Minister for Finance the penalties which will be imposed on film producers in receipt of section 481 tax relief that are found to have breached the legal rights of workers; if these will include withdrawal of the tax relief and other public funding; and if he will make a statement on the matter. [16759/19]
Amharc ar fhreagraI propose to take Questions Nos. 80 and 89 together.
The Deputy will be aware that a number of amendments were made to Section 481 of the Taxes Consolidation Act 1997 as part of Finance Act 2018. I would like to advise the Deputy that I signed the regulations and commencement order that give effect to the 2018 changes on the 27th of March.
One of the most significant changes I made relates to the potential for inflated claims. Production companies are now required to apply for payment of the tax credit under the self-assessment system. This brings the operation of the credit within the normal penalty and prosecution provisions for incorrect claims.
In relation to training, I legislated to split the certification process between Revenue and the Department of Culture, Heritage and the Gaeltacht (DCHG). Production companies are now required to apply to the DCHG before commencement of main production to have the film certified as a qualifying film. This provides an opportunity for earlier engagement on the training requirements associated with the credit and the quality of training intended to be provided.
Applicants must now provide a skills development plan if the amount to be spent on making the film in Ireland is over €2m, that plan must be agreed with Screen Ireland. There must be a skills development participant for every €177,500 of tax credit claimed, up to a maximum of 8 such participants. A post project skills development report is required for each project.
In relation to quality employment, as I have previously stated, the monitoring of compliance with employment rights legislation is primarily a matter for the Department of Business, Enterprise and Innovation through the Workplace Relations Commission, which falls within that Department’s remit. However, as part of the new certification process to be undertaken by DCHG, an applicant company is required to sign an undertaking of compliance with all relevant employment legislation. This undertaking is required to be signed and furnished with every section 481 application.
If a producer does not comply with the employment and skills development requirements set out by the Minister for Culture, Heritage and the Gaeltacht, including compliance with the undertaking, they are not eligible for the corporation tax credit. Any amount already claimed will be recoverable, with interest. As the claim for tax relief is made by the producer on a self assessment basis, in each case consideration would have to be given to Revenue’s Code of Practice for Revenue Audit and other Compliance Interventions to determine whether or not penalties and publication may arise.
In relation to numbers employed within the Industry, the Revenue Commissioners, from section 481 applications in 2016, estimate the number of employees directly engaged in Section 481 productions to be 2,158 (full time equivalents). My Department in carrying out the Section 481 cost benefit analysis in 2018 estimated that there were a further 902 indirect employments giving a total of 3,060 full time equivalents associated with Section 481 projects in that year. It must be emphasised that these figures relate specifically to projects in receipt of the section 481 tax credit, whereas some other figures quoted refer to the wider audio-visual and radio sector.
81. Deputy Denis Naughten asked the Minister for Finance the reason for the difference in the VAT registration threshold for the sale of services versus the sale of goods; if the anomaly will be reviewed; and if he will make a statement on the matter. [17649/19]
Amharc ar fhreagraVAT is governed by the EU VAT Directive (Council Directive 2006/112/EC), with which Irish VAT law must comply. Article 284 of the Directive permits Ireland to maintain two thresholds - €75,000 for goods and €37,500 for services.
Different VAT registration thresholds for the supply of goods and services are a feature of the EU VAT Directive and Irish VAT legislation and reflect the profound difference between the two supplies. In general, the value added in relation to the supply of goods will be much smaller relative to turnover compared with a supply of services. Having a lower VAT registration threshold for services reflects this difference in the proportion of value-added.
82. Deputy Michael McGrath asked the Minister for Finance when the OECD will bring forward its conclusions on potential digital tax reforms; the level of consultation there has been with the OECD in relation to digital tax and related corporation tax matters; and if he will make a statement on the matter. [17769/19]
Amharc ar fhreagraThe Deputy will be aware that the OECD are carrying out further work on the reform of the international tax system to address the tax challenges arising from increasing digitalisation.
There are two broad pillars to this work being discussed at the OECD. A first group of proposals advocate the need to reallocate a proportion of profits, and thus taxation rights, towards different concepts of value creation, including the value generated by having a presence in a market jurisdiction. The second group of proposals are asking whether there are remaining concerns about base erosion and profit shifting that should be addressed by common global minimum taxation rules.
A public consultation was held by the OECD in March which provided an opportunity for a wide range of stakeholders to contribute to the debate. There was considerable interest in the public consultation with approximately 250 responses received by the OECD. A detailed work plan is now being developed by the OECD to be brought before the BEPS Inclusive Framework in May 2019 for agreement. This in turn will be presented to G20 Finance Ministers in June 2019 for approval. It is expected that this workplan will request that the OECD's technical Working Groups further develop the proposals over the next 18 months with a view to reaching final agreement by end 2020.
I have consistently recognised that further change to the international tax framework is necessary to ensure that we reach a stable global consensus for how and where companies should be taxed. A certain, stable, and globally agreed international tax framework is vital to facilitate cross border trade and investment. I remain convinced that the OECD BEPS Inclusive Framework, where over 120 countries work together on an equal footing, is the correct forum for this work to be carried out.
There are a variety of views at the OECD table and the eventual outcome will need to strike a balance to reflect these differing interests. It is in Ireland's interest that an agreement is eventually reached to ensure the continuation of a stable, consensus based international tax framework which is vital to facilitate cross-border trade and investment.
83. Deputy Michael Moynihan asked the Minister for Finance if he or his officials have discussed the latest ESRI special article on Brexit published 26 March 2019; and its implications for the island of Ireland (details supplied). [16721/19]
Amharc ar fhreagraBoth my officials and I have discussed the recent joint ESRI and Department of Finance study of the potential macro-economic impacts of Brexit on the Irish economy.
The research does not examine the implications of Brexit on an all-island basis. As the UK Government and other research institutes have assessed, Brexit will have a negative economic impact on the UK economy and the Northern Ireland economy in particular. The all-island economy is a matter for my colleague, the Minister for Business, Enterprise and Innovation.
In terms of the joint ESRI and Department of Finance research, a range of alternative scenarios were considered given the uncertainty surrounding Brexit. The study finds that, compared to a no Brexit baseline, the level of GDP in Ireland ten years after Brexit would be around 2.6 per cent lower in a Deal scenario and 5.0 per cent lower in a Disorderly No-Deal scenario respectively. This assessment shows that all Brexit scenarios will imply a slower pace of growth with negative consequences throughout the economy.
This slower growth will have a negative impact on the labour market. Employment is still forecast to continue growing – but at a slower pace than would be the case under a no Brexit scenario.
The general government balance would worsen by an average of ½ a percentage point of GDP over the medium-term, and by nearly 1 per cent over the long-term, in the disorderly no-deal Brexit scenario. The deterioration in the fiscal balance would be structural, not cyclical in nature. This would reflect a permanent reduction in the size of the economy and consequently in the amount of tax revenue it generates. The implications of this will be considered as part of the Budgetary cycle.
It is important to recognise that such estimates may not capture the full impact, and the figures may be conservative. Indeed, the impact in certain exposed sectors and regions will be worse than the average.
The Government has also taken important steps to prepare our economy, including through dedicated measures announced in Budgets 2017, 2018 and 2019. We will continue to strengthen the resilience of the economy, to maximise opportunities and to prepare our economy for the challenges of Brexit.
