Wednesday, 8 May 2019

Written Answers Nos. 124-148

Departmental Contracts Data

Ceisteanna (124)

Jonathan O'Brien

Ceist:

124. Deputy Jonathan O'Brien asked the Minister for Finance the amount of money spent in fees across all Departments to private audit and advisory firms in each of the years 2011 to 2018. [18840/19]

Freagraí scríofa

Minister for Finance

Below, please find a breakdown of fees paid for legal and consultancy work to private audit and advisory firms by my Department, in each of the years 2011 to 2018.

	2011	2012	2013	2014	2015	2016	2017	2018
A&L Goodbody	2,823	2,869	2,873	54,740				44,034
Agency Assessments Ireland				1,230
Aram	100,000
Arthur Cox		2,879,427	1,728,407	824,247	934,654	242,234	286,961	435,061
BDO		64,575
Byrne Wallace				6,605
Carr Communications					37,018	73,136
Charles River Associates	50,000
Crowe Howarth			36,851
Deloitte		61,553	35,055
Dillon Eustace					36,900
Ernst & Young				6,150
Grant Thornton		31,808
Hayes Solicitors	6,050			6,888	74,251	3,766	1,449
Hogan Lovells International Ltd				3,200
IBFD					76,974
Indecon			28,290	103,689	106,887		67,121	438,254
KPMG								119,138
Mamo TCV							2,460
Mason Hayes & Curran				10,455	23,567	733
Matheson		289,604	717,923	88,314	33,333			123,035
Mazars	52,454	60,885
McCann Fitzgerald							3,754
Merc Partners					63,748
Mercer (Ireland) Ltd		73,800	72,570
MKF Property				28,721
PMCA Economic Consultancy			49,043
PWC						73,031
VM Forensics Ltd				14,804	16,133	1,476
William Fry				20,664	570,469	245,236	1,659,773	464,832

The Deputy might note that further information on all legal and consultancy spending is available on my Department’s website: www.gov.ie/en/collection/ae6733-consultancy/

Insurance Industry

Ceisteanna (125)

Róisín Shortall

Ceist:

125. Deputy Róisín Shortall asked the Minister for Finance his plans for insurance reform in particular in view of the recent significant increase in insurance premium liability for industry, business and traders; and if he will make a statement on the matter. [18898/19]

Freagraí scríofa

Minister for Finance

Both I and the Minister of State for Financial Services and Insurance, Deputy Michael D’Arcy, are very conscious of the difficulties that increased insurance costs generally are having on many businesses in this country.

Consequently, following the publication of its Report on the Cost of Motor Insurance in 2017, the Cost of Insurance Working Group undertook an examination of the employer liability and public liability insurance sectors. This second phase culminated in the publication in January 2018 of the Report on the Cost of Employer and Public Liability Insurance. The Report makes 15 recommendations with 29 associated actions, detailed in an action plan with agreed timelines for implementation.

The most recent progress update was published at the beginning of March and shows that 24 out of the total of 26 action points which were due for completion during 2018 overall have been accomplished. I am confident that the two outstanding actions will be completed in the coming months, along with the three remaining action points with deadlines set for various quarters throughout 2019.

The actions implemented to date cut across a number of different areas and include:

- The publication of by An Garda Síochána of the Guidelines for the Reporting of Suspected Fraudulent Insurance Claims by Insurance Entities to An Garda Síochána;

- Sections 8 and 14 of the Civil Liability and Courts Act 2004 have been amended to ensure defendants are appropriately notified of a claim having been submitted against their policy and to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected, respectively;

- An Garda Síochána commencing the collection of statistics under the new “insurance fraud” category which has been added to the PULSE system; and,

- The Courts Service confirming that it will publish a more detailed breakdown of awards in personal injury cases in its Annual Reports.

Undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs is to bring the levels of personal injury damages awarded in this country more in line with those awarded in other jurisdictions. In this regard, the Personal Injuries Commission has highlighted the significant differential between award levels in this country and other jurisdictions, and has made a number of recommendations to address this issue, in particular the establishment of a Judicial Council to compile guidelines for appropriate general damages for various types of personal injury. Minister of State, Deputy D’Arcy believes that this awards gap needs to be significantly closed and he and the Minister for Justice and Equality, Deputy Charlie Flanagan, are working closely together to ensure that this happens at the earliest opportunity.  Alongside this, the Law Reform Commission (LRC) is  undertaking a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries as part of its Fifth Programme of Law Reform.  I understand that an LRC Issues Paper on the matter is anticipated later this year.

Finally, I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with implementing those from the Report on the Cost of Motor Insurance. I am hopeful that the cumulative effects of the completion of the two reports’ recommendations will include increased stability in the pricing of insurance for businesses and a more competitive insurance market.

Tax Data

Ceisteanna (126)

Mattie McGrath

Ceist:

126. Deputy Mattie McGrath asked the Minister for Finance his views on the way in which the cost of tax expenditures in revenue forgone are calculated; if he is satisfied that the current calculating methodology is adequate; the amount of revenue foregone in each of the years 2011 to 2018 and to date in 2019; and if he will make a statement on the matter. [18920/19]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that the available information in respect of the cost of tax expenditures (credits, allowances and reliefs) is published on Revenue’s statistics web page at

www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/costs-tax-expenditures.pdf.

My Department also publishes its own Report on Tax Expenditures each year, and I expect that it will be  published with the Budget 2020 documents later this year, as they have been each year since 2015. 

Both Revenue and my Department acknowledge that estimates of revenue foregone can be different due to different definitions of what is included in a list of tax expenditures. My Department uses a classification for tax expenditure which is aligned with an OECD’s definition of tax expenditure.  

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.

However the Department is unable to provide the cost of tax foregone for around 40 per cent of tax expenditures for a number of reasons including tax payer confidentiality and because the data is not collected by Revenue for some tax measures. For example the Cycle to Work Scheme is currently not costed because it is expected that the administrative cost of collecting the data would exceed the amount of Revenue foregone. Therefore we are unable provide an accurate total figure for tax expenditures.

I am satisfied that the costing basis used, i.e. revenue foregone, provides the most appropriate data to my Department and Revenue.

Code of Conduct on Mortgage Arrears

Ceisteanna (127, 138)

Peter Fitzpatrick

Ceist:

127. Deputy Peter Fitzpatrick asked the Minister for Finance if he will address a matter regarding legal fees being added to mortgage arrears accounts (details supplied). [18943/19]

Michael McGrath

Ceist:

138. Deputy Michael McGrath asked the Minister for Finance the position on the legal fees of the lender being applied to the mortgage account of the borrower in a mortgage arrears situation; and if he will make a statement on the matter. [19175/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 127 and 138 together.

I am advised by the Central Bank of Ireland that it is aware of the reported practice that some lenders apply legal costs to the mortgage accounts of borrowers in arrears before the conclusion of legal proceedings.

The Central Bank is examining this practice to determine if it is permissible under the Code of Conduct on Mortgage Arrears, CCMA, the Consumer Protection Code 2012, and other regulations.

Tax Yield

Ceisteanna (128)

Eoin Ó Broin

Ceist:

128. Deputy Eoin Ó Broin asked the Minister for Finance the amount of taxes paid to the Exchequer by companies (details supplied) over the past five years in tabular form. [18988/19]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that it cannot disclose the amounts of any tax paid by identified individual taxpayers, including companies, due to its obligation to protect taxpayer confidentiality as provided for by Section 851A of the Taxes Consolidation Act 1997.

However, the aggregate amount of taxes paid by companies operating in the sector in which the Deputy is interested are provided under the “Mining and Utilities” in the ‘Revenue net receipts by Sector’ information available on the Revenue website at:

https://www.revenue.ie/en/corporate/information-about-revenue/statistics/receipts/receipts-sector.aspx.

 The table below provides information in relation to the amount of corporation tax collected from the “Mining and Utilities” sector from 2011 to 2017. As noted in the figures provided, there is some fluctuation, in both an upward and downward trend, from year to year.

Year	Corporation Tax Receipts (€ Million)
2011	73.85
2012	39.96
2013	76.01
2014	108.43
2015	102.09
2016	40.37
2017	45.03

European Bank for Reconstruction and Development

Ceisteanna (129)

Mattie McGrath

Ceist:

129. Deputy Mattie McGrath asked the Minister for Finance if Ireland has received financial support from the European Bank for Reconstruction and Development in each of the years 2011 to 2018 and to date in 2019; and if he will make a statement on the matter. [19091/19]

Freagraí scríofa

Minister for Finance

While Ireland is one of 67 shareholders in the European Bank for Reconstruction and Development, EBRD, we are not an EBRD Country of Operation. As such, Ireland has not received financial support from the Bank since it was established in 1991.

Further details of the EBRD's regions of operations are available on the Bank's website:

www.ebrd.com/where-we-are.html  

Code of Conduct on Mortgage Arrears

Ceisteanna (130)

Michael McGrath

Ceist:

130. Deputy Michael McGrath asked the Minister for Finance if under section 40 of the Code of Conduct on Mortgage Arrears 2013, lenders should share with borrowers their documentation of its considerations of each option examined under provision 39 including the reasons the option or options offered to the borrower is or are appropriate and sustainable for their individual circumstances; the reason the option or options considered and not offered to the borrower is or are not appropriate and not sustainable for the individual circumstances of the borrower; and if he will make a statement on the matter. [19102/19]

Freagraí scríofa

Minister for Finance

I have been advised by the Central Bank of Ireland that Provision 40 of the Code of Conduct on Mortgage Arrears, CCMA, requires a lender to document its considerations of each option examined under Provision 39 including the reasons why the option(s) offered to the borrower is/are appropriate and sustainable for his/her individual circumstances and why the option(s) considered and not offered to the borrower is/are not appropriate and not sustainable for the borrower’s individual circumstances.

In March 2019, the Central Bank issued a letter to all relevant regulated entities in relation to certain obligations under the CCMA.  With respect to the specific requirements relating to communications with borrowers where an alternative repayment arrangement (ARA) is offered or not offered, the letter sets out that the Central Bank expects regulated firms to provide the following additional information to borrowers:

1. A copy of the firm’s assessment of the borrower’s case carried out in accordance with Provision 37 and as documented by the firm in compliance with Provision 40; and

2. The reasons why ARAs considered by the firm, but not offered to the borrower, are not appropriate and not sustainable for the borrower’s individual circumstances, as documented by the firm in compliance with Provision 40.

 A copy of the letter is available at the following link.

Tax Code

Ceisteanna (131)

Tony McLoughlin

Ceist:

131. Deputy Tony McLoughlin asked the Minister for Finance his plans to abolish the universal social charge; and if he will make a statement on the matter. [19118/19]

Freagraí scríofa

Minister for Finance

An inter-departmental working group was established in February 2018 to examine and report on options for the amalgamation of USC and PRSI over the medium term.  The working group completed their work, in line with their terms of reference and their report was submitted to me in late in 2018.   Follow-on decisions will be taken in due course and I will make these public at the appropriate time.

More generally, the Government is committed to measures that positively benefit workers while also keeping the tax base broad.

Our income tax system has been transformed since 2008, following a necessary reform to broaden the income tax base in the interest of ensuring a stable revenue stream to fund essential public services.

I am determined to balance the priorities of ensuring that our personal taxation system remains progressive, competitive but also resilient in the future. 

This is why we have been introducing targeted changes to the income tax system within available resources to make steady and sustainable progress in reducing the income tax burden, focusing on low and middle income earners.  This has been done by making targeted changes to the USC and also by increasing the entry point to the higher rate of income tax.

It is the Government’s position that earners start to pay the marginal rate of income tax at too low a level and we are committed to reducing excessive tax rates for low and middle income earners while also keeping the tax base broad.

It is expected that continued progress in this area will also be made in the context of limited resources available in Budget 2020 balanced against all of the competing demands.

Insurance Levy

Ceisteanna (132)

Tony McLoughlin

Ceist:

132. Deputy Tony McLoughlin asked the Minister for Finance the amount of revenue raised from the levy on insurance; the way in which this funding was used in 2017 and 2018; and if he will make a statement on the matter. [19125/19]

Freagraí scríofa

Minister for Finance

The purpose of the Insurance Compensation Fund (ICF) is to provide a means to compensate policyholders in a situation where an insurer goes into liquidation or is put in administration.  The ICF is funded by advances from the Minister for Finance which are refunded by levies which are placed on all non-life insurers except for health policies.  Currently there is a 2% levy on gross written premiums in place in order to recoup advances  of €1,133 m made in relation to the  Quinn administration. It should be noted that in addition to the outstanding loan in respect of the administration of Quinn Insurance, there are currently three insurers in liquidation, for which compensation has and will be paid by the ICF:  Setanta Insurance Ltd., Enterprise Insurance Company plc. and Gable Insurance AG.   

The amount of the ICF levy collected  in 2018 was €69,108,008.30  and €76,173,504 for 2017  (as per the Accounts of  the ICF) with a total of  €465,215,041 collected since the levy was reintroduced in 2012. €376.6 million has been recouped to the Exchequer to date.

While the only pure "levy" charged on insurance premiums is the 2% charged to fund the ICF, the Deputy may also be enquiring about the 1% stamp duty charged on life insurance premiums and the 3% stamp duty charged on certain non-life premiums.

The stamp duty on insurance  premiums is sometimes erroneously perceived as a "levy", and I am advised by Revenue that information on Stamp Duty yields, which includes the Life Assurance and Non-Life Insurance Levy components for 2017 and 2018, can be found on the statistics page of the Revenue website at www.revenue.ie/en/corporate/documents/statistics/receipts/stamp-duty-receipts.pdf. 

The revenue received under both stamp duties goes towards general expenditure, and is not hypothecated.

Financial Services Sector

Ceisteanna (133)

Michael McGrath

Ceist:

133. Deputy Michael McGrath asked the Minister for Finance the position on the ability of banks and credit unions here to extend credit to Irish citizens that are principally living abroad; and if he will make a statement on the matter. [19127/19]

Freagraí scríofa

Minister for Finance

The European Communities (Consumer Credit Agreements) Regulations 2010 provide a framework within which lenders in the European Union must operate.  The evaluation of a credit application by a lender must include an assessment of the consumer’s creditworthiness on the basis of sufficient information. However, the extension of credit by lenders to potential customers remains a commercial decision for the lender. 

The European Union (Consumer Mortgage Credit Agreements) Regulations 2016 (‘the Mortgage Credit Regulations’) transpose the Mortgage Credit Directive and came into effect on 21 March 2016.  The Mortgage Credit Regulations apply to a credit agreement that came into effect after 21 March 2016.

Part 6 of the Mortgage Credit Regulations states that before concluding a credit agreement, a creditor shall make a thorough assessment of the consumer’s creditworthiness. That assessment shall take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement.

Part 9 of the Mortgage Credit Regulations deals with ‘foreign currency loans’.  The Regulations define a “foreign currency loan” as a credit agreement where the credit is:

(a) denominated in a currency other than that in which the consumer receives the income or holds the assets from which the credit is to be repaid, or

(b) denominated in a currency other than that of the EEA Member State in which the consumer is resident.

While the Regulations provide a framework within which creditors must operate, including such matters related to exchange rate risk, the extension of credit by creditors to potential customers is a commercial decision and is not precluded by the Regulations.

The EU treaties provide for the free movement of capital and services between EU Member States.  As part of this EU common market for financial services, the “passporting” provisions in the Capital Requirements Directive IV (as transposed in Ireland through the European Union (Capital Requirements) Regulations 2014 - SI 158/2014), enable a licensed credit institution in another EEA jurisdiction to offer banking services/products to Irish residents.  (In this context it should be noted that all Central Bank consumer protection requirements apply equally to credit institutions ‘passporting’ in from another EEA member state as they do to an Irish incorporated credit institution.)  Likewise, there is no general restriction on Irish residents obtaining banking services/products from non-Irish credit institutions.

Additionally, credit unions cannot do businesses with the general public and as such only extend credit to their members. As per Section 6(1) of the Credit Union Act 1997, membership of a credit union is restricted to persons who share the common bond of that credit union, which is founded on a pre-existing social connection, such as belonging to a particular community, industrial or geographic group.

Motor Insurance Costs

Ceisteanna (134)

Charlie McConalogue

Ceist:

134. Deputy Charlie McConalogue asked the Minister for Finance the status of measures to tackle the cost of car insurance; the progress made to date; the further associated actions that remain to be carried out; and if he will make a statement on the matter. [19150/19]

Freagraí scríofa

Minister for Finance

As the Deputy is aware, the Cost of Insurance Working Group was established in July 2016 and undertook an examination of the factors contributing to the increasing cost of insurance in order to identify what short, medium and long-term measures could be introduced to help reduce the cost of insurance for consumers and businesses.  The initial focus of the Working Group was the issue of rising motor insurance premiums and the Report on the Cost of Motor Insurance was published in January 2017. 

The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, which are set out in an Action Plan. The completion of this work remains very important in order to fully achieve the objectives of delivering fairer premiums for consumers and businesses, and a more stable and competitive insurance market.  In this regard, I believe that significant progress has been made on the motor side which is reflected in the fact that the most recent Central Statistics Office data indicates that the cost of motor insurance has fallen by 23.8% since July 2016.  Consequently the average consumer should be seeing reductions when renewing their motor insurance.

I would like to draw attention to some significant legislative developments.  Most recently, the Personal Injuries Assessment Board (Amendment) Act 2019 (No. 3 of 2019) has been enacted and has been commenced. The Act will strengthen the functioning of the Board in a number of ways, including dealing with issues of non-attendance at medicals and failure to provide details of special damages or loss of earnings.  In addition, the Central Bank (National Claims Information Database) Act was commenced on 28 January.  As well as of course leading to the full functioning of the database itself, it has also facilitated amendments to sections 8 and 14 of the Civil Liability and Courts Act 2004 which many stakeholders sought in order to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected.

The Deputy will be aware that the Personal Injuries Commission (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. 

While the Working Group will continue to focus on implementing all of its recommendations and will continue to report on its advancements, in the Progress Updates, which hereafter will be produced on a biannual basis, I consider that bringing the levels of damages awarded in this country more in line with those awarded in other jurisdictions is undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs.  The current position with the Judicial Council Bill is that the Minister for Justice and Equality has indicated that he hopes that the Bill will be enacted as soon as possible.  In this regard, it recently completed Committee Stage in the Seanad.  Alongside this, the Law Reform Commission (LRC) is undertaking a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries as part of its Fifth Programme of Law Reform.   I understand that an LRC Issues Paper on the matter is anticipated later this year.

Finally, I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Motor Insurance in parallel with implementing those from the Report on the Cost of Employer and Public Liability Insurance.  I am hopeful that the cumulative effects of the completion of the two Reports’ recommendations will include increased stability in the pricing of insurance for consumers and businesses and a more competitive insurance market.

Vehicle Registration Data

Ceisteanna (135)

Robert Troy

Ceist:

135. Deputy Robert Troy asked the Minister for Finance the number of persons here that have been fined for not having VRT in each of the past five years. [19170/19]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that the number of persons fined by the courts for VRT offences in each of the past five years is provided in the table below.

Year	Number of persons fined
2014	13
2015	15
2016	11
2017	8
2018	10

 

The total number of VRT Seizures and Compromise Penalties paid (dealt with administratively) in each of the past five years is provided in the table below.

2014	1,054	€716,765
2015	1,133	€698,570
2016	1,357	€1,006,487
2017	1,304	€825,130
2018	1,223	€818,915

Code of Conduct on Mortgage Arrears Breaches

Ceisteanna (136)

Michael McGrath

Ceist:

136. Deputy Michael McGrath asked the Minister for Finance if his attention has been drawn to the fact that certain lenders are not complying with section 45(a) of the Code of Conduct on Mortgage Arrears 2013 and the mortgage arrears resolution process due to the fact that they are only offering borrowers the option of voluntary surrender in a scenario in which the mortgage has been deemed to be unsustainable; and if he will make a statement on the matter. [19173/19]

Freagraí scríofa

Minister for Finance

The Code of Conduct on Mortgage Arrears 2013 (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. Banks, retail credit firms and credit servicing firms are all required to comply with the CCMA. 

The CCMA sets out the Mortgage Arrears Resolution Process, (MARP), a four-step process that regulated entities must follow: 

Step 1: Communicate with borrower;

Step 2: Gather financial information;

Step 3: Assess the borrower’s circumstances; and

Step 4: Propose a resolution

Each regulated entity must consider the borrower’s situation in the context of the solutions they provide, which may differ from firm to firm.  The CCMA does not prescribe the solution which must be offered and lenders are not required to offer a particular solution to a borrower.   The CCMA also provides that a lender must prepare and make available to borrowers, an information booklet providing details of its MARP, which must include an explanation of all ARAs available from that lender and any other options offered by the lender (other than alternative repayment arrangements), such as mortgage to rent, voluntary surrender, voluntary sale, and trading down, and a statement that the availability of these options are subject to an individual assessment of each case and meeting the lender’s (or a third party’s) criteria.

Provision 45 of the CCMA provides that if a lender does not offer a borrower an alternative repayment arrangement, for example, where it is concluded that the mortgage is not sustainable and an alternative repayment arrangement is unlikely to be appropriate, the lender must provide the reasons, on paper or another durable medium, to the borrower. In these circumstances, the lender must inform the borrower of other options available to the borrower, such as mortgage to rent, voluntary surrender, trading down, or voluntary sale and the implications of each option for the borrower; and his/her mortgage loan account.

At the end of the MARP, regulated entities are required to provide a three-month notice period to allow co-operating borrowers time to consider their options, such as voluntary surrender or an arrangement under the Personal Solvency Act, before legal action can commence. 

The CCMA does not prescribe the solutions which must be offered and lenders are not required to offer a particular solution to a borrower and so the question of compliance with Provision 45(a) of the CCMA does not arise in the circumstances outlined by the Deputy in his question.

Code of Conduct on Mortgage Arrears Data

Ceisteanna (137)

Michael McGrath

Ceist:

137. Deputy Michael McGrath asked the Minister for Finance the success rate of appeals lodged by borrowers to the appeals process within lender institutions against an alternative repayment arrangement in circumstances in which one is offered or in which none is offered; the number of appeals upheld in which the appellant is appealing against the fact that no alternative repayment arrangement was offered; and if he will make a statement on the matter. [19174/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, the Central Bank collects detailed consumer data and information in relation to aspects of the Code of Conduct on Mortgage Arrears (CCMA) is part of this Conduct of Business Reporting (COBR). The COBR is collected from selected principal credit institutions and retail credit firms holding personal residential mortgages.  I have been informed by the Central Bank that the reporting institutions were selected on the basis of representation of the market and the data relates to personal consumers, as defined in the Consumer Protection Code 2012, resident in the State only.

Central Bank data shows that in the most recent reporting period (i.e. H2 2018), 231 decisions were reported as having been made by the Banks’ Appeals Boards in relation to appeals against the decision of the Arrears Support Units regarding Alternative Repayment Arrangements (ARAs). 19% of appeals received were upheld or partially upheld in favour of the borrower and 81% were rejected.

The Central Bank has informed me that the institutions do not specifically report appeals against the non-offer of an ARA.

Question No. 138 answered with Question No. 127.

Mortgage Interest Relief Application

Ceisteanna (139)

Michael McGrath

Ceist:

139. Deputy Michael McGrath asked the Minister for Finance if he is satisfied that all lenders are applying the rules governing mortgage interest relief in cases in which the borrower is in arrears on the mortgage; and if he will make a statement on the matter. [19176/19]

Freagraí scríofa

Minister for Finance

The legislation governing mortgage interest relief is contained in Section 244 Taxes Consolidation Act 1997, as amended.  “Qualifying interest” for the purpose of entitlement to mortgage interest relief is defined in that section as “the amount of interest paid by the individual in the year of assessment in respect of a qualifying loan”.

The effect of this provision is that only interest paid in a tax year, relating to the current or previous tax year, is eligible for mortgage interest relief, subject to the ceiling (maximum amount of interest allowed) applicable in the year the interest payment is made.  In instances where a borrower pays less than the amount of interest due, then the relief is reduced to reflect the actual amount of interest paid.  Where no interest payments are made, no relief is allowed. If the borrower pays the arrears in a later year, then the appropriate mortgage interest relief will be paid in the year in which the payment is made, subject to the ceiling applicable for that year.

Mortgage interest relief is administered through the Tax Relief at Source (TRS) system.  Revenue issues detailed instructions to each lending institution setting out the criteria to be used in calculating the correct amount of mortgage interest relief applicable to the various qualifying loans. The lending institutions then apply the criteria to interest payments received from borrowers to calculate the correct amount of relief.

Revenue does not have any authority to instruct mortgage providers on how payments received from borrowers should be allocated to the borrower’s account, and any disputes in this regard are a matter for both parties to resolve. Revenue’s only role is to ensure the TRS system is properly administered, based on the information provided, and that payments claimed through the system are made on a timely basis.

Revenue carries out compliance checks on the various mortgage providers to ensure the correct operation of the mortgage interest relief scheme. As part of the compliance process, each main lender is required to submit a monthly electronic file to Revenue setting out the amount of qualifying interest paid by each borrower and the amount of mortgage interest relief allowed in respect of each qualifying loan in the previous month.  Smaller lenders and local authorities are required to submit annual files setting out similar information.  Each month, Revenue cross-checks the information provided by the lenders against its own database and any discrepancies are immediately followed up with the lender. 

The most recent compliance checks to be completed related to March 2019, during which 261,299 TRS accounts were reviewed. Following the review 2,460 queries were raised with the various lenders, of which only 14 remain to be resolved.

Under Section 244A of the Taxes Consolidation Act 1997, Revenue can request a lender to provide information in relation to any qualifying mortgage loan to verify that the correct relief was applied, and the lender must comply with the request within 30 days. On the rare occasion where a shortfall is identified, Revenue will pay the amount due directly to the borrower.

On receipt of any complaints or queries from mortgage holders or their representatives, Revenue will always follow up with the lending institution to ensure issues are investigated and resolved without delay.

I am also advised by the Central Bank of Ireland that if a regulated entity has applied charges or reliefs to consumers in arrears (whether that be through a misapplication of tax relief or any other relevant charge) in a way that results in arrears figures being incorrect or overstated, the Central Bank of Ireland expects that, as an error, it is rectified speedily and accurately and in line with the provisions of the Consumer Protection Code, 2012 (the Code). In particular, section 10 of the Code makes specific provision for resolving consumer complaints.

Banking Sector

Ceisteanna (140)

Richard Boyd Barrett

Ceist:

140. Deputy Richard Boyd Barrett asked the Minister for Finance if his attention has been drawn to and his views on whether it is appropriate that a bank (details supplied) as a majority State owned institution, has contracted services from a company that is one of the biggest arms manufacturers in the world; and if he will make a statement on the matter. [19228/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, AIB is an independent company with listings on the Irish and London Stock Exchanges. Decisions in regards to contracting are the sole responsibility of the board and management of AIB which must be run on an independent and commercial basis. The bank's independence is protected by a Relationship Framework which is a legally binding document that cannot be changed unilaterally. This framework which is publicly available, was insisted upon by the European Commission to protect competition in the Irish market. The AIB Relationship Framework can be found here: www.gov.ie/en/publication/597d15-aib-relationship-framework-agreement-june-2017/

Question No. 141 answered with Question No. 117.

Insurance Industry

Ceisteanna (142, 143)

Robert Troy

Ceist:

142. Deputy Robert Troy asked the Minister for Finance the work completed to ensure that all companies involved in the leisure and tourism industry can obtain a reasonable insurance premium; and the actions taken by him to assist companies that have experienced difficulty in securing an insurance quotation. [19245/19]

Robert Troy

Ceist:

143. Deputy Robert Troy asked the Minister for Finance his views on the difficulties faced by a company (details supplied) in securing an insurance policy. [19246/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 142 and 143 together.

At the outset, the Deputy will be aware that as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation, and neither I nor the Central Bank of Ireland can interfere in the pricing or provision of insurance products, as these are matters of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept.  These matters are considered by insurance companies on a case-by-case basis.  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.  I am also not in a position to comment on individual cases, however both I and the Minister of State for Financial Services and Insurance, Deputy Michael D’Arcy, are very conscious of the difficulties in respect of the cost and availability of insurance  that many small businesses are facing in this country, in particular in the leisure and tourism sector. 

Consequently, following the publication of its Report on the Cost of Motor Insurance in 2017, the Cost of Insurance Working Group undertook an examination of the employer liability and public liability insurance sectors.  This second phase culminated in the publication in January 2018 of the Report on the Cost of Employer and Public Liability Insurance.  The Report makes 15 recommendations with 29 associated actions, detailed in an Action Plan with agreed timelines for implementation.

The most recent Progress Update was published at the beginning of March and shows that 24 out of the total of 26 action points which were due for completion during 2018 overall have been accomplished.  I am confident that the two outstanding actions will be completed in the coming months, along with the three remaining action points with deadlines set for various quarters throughout 2019.

The actions implemented to date cut across a number of different areas and include:

- The publication of by An Garda Síochána of the Guidelines for the Reporting of Suspected Fraudulent Insurance Claims by Insurance Entities to An Garda Síochána;

- The recommendation that the Law Reform Commission (LRC) undertake a detailed analysis of the possibility of developing constitutionally sound legislation to delimit or cap the amounts of damages which a court may award in respect of some or all categories of personal injuries, as part of its Fifth

Programme of Law Reform has commenced;

-Sections 8 and 14 of the Civil Liability and Courts Act 2004 have been amended to ensure defendants are appropriately notified of a claim having been submitted against their policy and to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected, respectively;

-An Garda Síochána has commenced the collection of statistics under the new “insurance fraud” category which has been added to the PULSE system; and

-The Courts Service has confirmed that it will publish a more detailed breakdown of awards in personal injury cases in its Annual Reports.

Undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs is to bring the levels of personal injury damages awarded in this country more in line with those awarded in other jurisdictions.  In this regard, the Personal Injuries Commission has highlighted the significant differential between award levels in this country and other jurisdictions, and has made a number of recommendations to address this issue, in particular the establishment of a Judicial Council to compile guidelines for appropriate general damages for various types of personal injury.  Both I and Minister of State D’Arcy believe that this awards gap needs to be significantly closed and we are working with the Minister for Justice and Equality Mr Charlie Flanagan TD to ensure that this happens at the earliest opportunity.

Finally, I think it is worth noting that Minister of State D’Arcy has met with a number of relevant businesses impacted, including those from the leisure and tourism sectors and their relevant representative bodies, to understand the issues they have experienced in their particular sectors.  In addition, the Minister of State has held meetings with Insurance Ireland, and some relevant insurers, on these issues.  I would like to assure the Deputy that the Cost of Insurance Working Group will continue to focus on implementing the recommendations of the Report on the Cost of Employer and Public Liability Insurance in parallel with implementing those from the Report on the Cost of Motor Insurance.  I am hopeful that the cumulative effects of the completion of the two Reports’ recommendations will include increased stability in the pricing of insurance for businesses and a more competitive insurance market.

Tax Code

Ceisteanna (144)

Jan O'Sullivan

Ceist:

144. Deputy Jan O'Sullivan asked the Minister for Finance further to Parliamentary Question No. 64 of 18 April 2019, the status of the outcome of the meeting between the Revenue Commissioners and an organisation (details supplied); and if he will make a statement on the matter. [19287/19]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that the meeting scheduled for 17 April 2019 with the organisation concerned took place.

I am further advised that in the course of the meeting Revenue confirmed its position that the rules and limits in relation to increases in pensions in payment as set out in the Revenue Pensions Manual does not restrict pension annuity providers paying out on historic policies that had escalators built in to them that exceeded these limits.

The Revenue Pensions Manual is in the process of being amended to make sure the aforementioned position is clear.

Irish Real Estate Fund

Ceisteanna (145, 148, 151, 152, 153)

Pearse Doherty

Ceist:

145. Deputy Pearse Doherty asked the Minister for Finance the value of property held by IREFs in each of the years 2016 to 2018 and to date in 2019. [19315/19]

Pearse Doherty

Ceist:

148. Deputy Pearse Doherty asked the Minister for Finance the effective corporate tax and capital gains tax rates for IREFs in each of the years 2016 to 2018. [19321/19]

Pearse Doherty

Ceist:

151. Deputy Pearse Doherty asked the Minister for Finance if the removal of the IREF five-year holding capital gains tax exemption applies to all IREFs and is retrospective to assets acquired before 1 January 2019. [19324/19]

Pearse Doherty

Ceist:

152. Deputy Pearse Doherty asked the Minister for Finance the rate capital gains tax is chargeable regarding IREFs which are subject to the tax; and if this can be reduced through double tax treaties or by the fact that the IREF is owned by institutional investors such as pension funds. [19325/19]

Pearse Doherty

Ceist:

153. Deputy Pearse Doherty asked the Minister for Finance the reason he chose to allow IREF shareholders an exemption from capital gains tax on disposal of IREF shares even in cases in which the shares are not quoted on the stock exchange as was originally anticipated when this legislation was introduced. [19327/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 145, 148, and 151 to 153, inclusive, together.

The Irish Real Estate Fund (IREF) regime was introduced by Finance Act 2016 and is effective for accounting periods starting on or after 1 January 2017. Under the regime, a fund is classified as an IREF if it derives 25% or more of its value from Irish land and buildings. The section was introduced to address the use of certain fund vehicles to invest in Irish property by non-resident investors, thereby avoiding a charge to tax on profits arising from Irish real estate.

I am informed by Revenue that information in relation to the value of property held by IREFs for the years 2016 to 2018 is currently incomplete. Partial information is available in relation to IREFs from the tax returns they have made to Revenue for the years 2017 and 2018. This is due to the fact that only IREFs that have a taxable event in a year are required to make a tax return to Revenue and not all IREFs have made returns for the requested years. Revenue are currently working on the tax returns that have been made to them for the years 2017 and 2018. Financial statements were filed on 30 January 2019 with Revenue for all IREF’s for all accounting periods which ended during 2017 and accounting periods which ended or on or before 30 June 2018. This accounting data is being analysed by Revenue at present. When this work is complete Revenue will be in a position to provide the information that the Deputy has requested.

In terms of effective rates, as IREFs are fund vehicles which are taxed under the gross roll-up exit tax regime they are not subject to corporation tax or capital gains tax. Accordingly, there are no effective corporation tax rates or capital gains tax (CGT) rates for IREFs for the years 2016, 2017 and 2018.

With regard to the exemption from IREF withholding tax on the distribution of capital gains on assets which had been held for more than 5 years, this exclusion was removed as part of Finance Act 2017.  The removal applies to any assets disposed of on or after 1 January 2019, regardless of the date on which the asset was acquired.

In relation to the taxation of institutional investors, IREF withholding tax at 20% applies to profits paid out of an IREF, this withholding tax does not apply to certain categories of investor. Irish pension funds, for example, are exempt from Irish tax with tax being levied when the pensioner draws down the pension.  As such, Irish pension funds are also exempt from IREF withholding tax. European pension funds which are equivalent to Irish pension funds are likewise exempt from the IREF withholding tax.  There are however anti-avoidance rules, known as the Personal Portfolio IREF rules, which prevent closely held exempt vehicles being used to avoid a charge to IREF withholding tax.

Where an investor holds less than 10% of the units in an IREF, they may be able to claim a refund of any IREF withholding tax suffered under the dividend article of a double tax agreement.  Investors who hold more than 10% of the units cannot avail of a refund under a double tax agreement.

With regard to the applicability of CGT on the disposal of shares, an amendment was made in Finance Act 2017 to clarify the tax position in respect of an indirect disposal of IREF units – e.g. a disposal of a share that derives its value from IREF units. The amendment clarified that an indirect disposal of the units would not trigger CGT, as the profits to which the IREF charge applies remain within the IREF and within the scope of IREF withholding tax. This change was made to ensure consistency in the application of the IREF legislation. By contrast, a direct disposal of an IREF unit (e.g. the sale of a unit) is not subject to CGT as any gains within the IREF, which are reflected in the value of the unit, are subject to tax under the IREF tax regime.  It was considered inconsistent to have a situation whereby the direct disposal of a unit was not subject to CGT due to being already subject to an exit tax, whereas the indirect disposal of a unit was subject both to CGT and the IREF withholding tax.

Real Estate Investment Trusts

Ceisteanna (146, 149, 150)

Pearse Doherty

Ceist:

146. Deputy Pearse Doherty asked the Minister for Finance the value of property held by REITs in each of the years 2016 to 2018 and to date in 2019. [19316/19]

Pearse Doherty

Ceist:

149. Deputy Pearse Doherty asked the Minister for Finance the effective corporate tax and capital gains tax rates for REITs in each of the years 2016 to 2018. [19322/19]

Pearse Doherty

Ceist:

150. Deputy Pearse Doherty asked the Minister for Finance the definition of completed REITs which are subject to capital gains tax on developed assets sold within three years of completing development; if it refers to building structures such as roofs in place; and if not, if it refers to completed when furnished. [19323/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 146, 149 and 150 together.

Finance Act 2013 introduced the regime for the operation of Real Estate Investment Trusts (REITs) in Ireland. The function of the REIT framework is not to provide an overall tax exemption, but rather to facilitate collective investment in rental property by removing a double layer of taxation which would otherwise apply to property investment via a corporate vehicle.  

A company electing to be a REIT must meet specific conditions in accordance with Part 25A of the TCA. Once such conditions are met a REIT is not chargeable to corporation tax on income derived from its property rental business or chargeable to capital gains tax accruing on the disposal of assets of its property rental business under section 705G (1) TCA 1997. The definition of effective tax rates is not defined or settled but given that REITs in general are not liable to corporation or capital gains taxes the issue of an effective rate doesn’t generally apply.

While qualifying property rental income and gains arising are exempt from tax within the REIT, a REIT is subject to CGT if:

- it acquires an asset that is used for the purposes of its property rental business and

- following that acquisition the asset is developed to the extent that the development cost exceeds 30 per cent of the market value of the asset at the time the development commenced and

- the asset is then disposed of within 3 years of completion of the development

Completion in this context applies to the completion of the development work, and not the completion of a building, for example.  The concept of developing land, which is not defined, has been in the Tax Acts for over 50 years. It is given its normal meaning rather than any specific tax meaning. In order to determine when the development work in question commenced and concluded, each scenario would be considered on the specific facts and circumstances applying.

In relation to the value of property held by REITs, I am informed by Revenue that given the small number of REITs they are unable to provide details of specific taxpayer information for reasons of taxpayer confidentiality. This includes information concerning the value of property held by REITs. However, each REIT publishes detailed annual reports and financial accounts which are publicly available and may provide the Deputy with the desired information.

Question No. 147 answered with Question No. 115.

Question No. 148 answered with Question No. 145.