Tax Data

Ceisteanna (124)

Jim O'Callaghan

Ceist:

124. Deputy Jim O'Callaghan asked the Minister for Finance the extent to which the State subsidises diesel cars and fuel; his views on the health impact of diesel fumes; and if he will make a statement on the matter. [24987/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Air quality is an issue of increasing social concern with a number of pollutants being linked to a range of medical conditions including strokes, cancer, lung and cardiovascular diseases. Ireland generally has better overall air quality than most countries in Europe. Nevertheless, in larger towns and cities, where prevailing winds are disrupted and harmful pollutants cannot disperse due to high density developments, the negative implications for local ambient air quality and for public health and well-being are exacerbated.

The transition of our national fleet to alternative fuels is an important step-change to effect a substantial reduction in transport emissions. Fossil-fuelled road transport, including diesel, is a major source of air pollution emissions, particularly nitrogen oxides (NOx) and PM2.5, from both exhaust release and tyre & brake wear. Road transport is the principal source of NOx emissions in Ireland accounting for approximately 41% of the total NOx emissions in 2016.

The All of Government Plan on Climate Action Plan sets out a number of strategies to decarbonise the economy, including a series of ambitious targets relating to the transport sector such as large scale electrification of the national fleet by 2030.

The forthcoming National Clean Air Strategy will provide the policy framework necessary to promote integrated measures across Government to reduce air pollution and promote cleaner air.

I am advised by Revenue that estimates for the revenue foregone arising across a number of tax areas and schemes is provided in the following tables.

Table 1: Revenue foregone arising from reduced mineral oil tax rates

Tax Type

Product Type

Nominal Revenue foregone (exc. VAT)

Excise Duty

Marked Gas Oil

€409 million

Excise Duty

Auto Diesel

€390 million

Data relates to 2018 unless otherwise stated, and calculations are based on the excise rate when compared to that applied to petrol.

Table 2: Revenue foregone arising from Schemes/legislation

Scheme Name

Product Type

Nominal Revenue foregone

Fuel Grant Scheme

Auto Diesel

€7.5 million

Diesel Rebate Scheme (price dependent)

Auto Diesel

€2.4 million (2018) €21 million (2014)

Disabled Drivers and Disabled Passengers Scheme

Diesel cars (VRT/VAT)

€43 million (approximate)

In addition to the above businesses are entitled to reclaim VAT on a wide range of business expenses including diesel fuel expenditure. This may be considered as a subsidy to the extent that the general population cannot avail of this VAT reclaim. However, due to the pro business approach to the administration of VAT and the relatively low level information gathered from businesses, a breakdown of VAT reclaim data is not available, although the VAT reclaim on diesel is likely to be substantial.

VAT Exemptions

Ceisteanna (125)

Bobby Aylward

Ceist:

125. Deputy Bobby Aylward asked the Minister for Finance the steps he will take to reduce the unaffordable price of pembrolizumab by removing the cost of the VAT on same to assist in potentially life-saving treatment as in the case of a person (details supplied); and if he will make a statement on the matter. [25333/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The VAT rating of goods and services is subject to EU VAT law, with which Irish VAT law must comply. In accordance with Irish VAT legislation, oral medicines (for human consumption) which are licensed/authorised by the Health Products Regulatory Authority are liable to VAT at the zero rate.

However, non-oral medicines (products such as injections and infusions) are liable to VAT at the standard rate, currently 23%, and there is no discretion, under the Directive, to exempt these products from VAT.

Insurance Costs

Ceisteanna (126)

Brendan Griffin

Ceist:

126. Deputy Brendan Griffin asked the Minister for Finance his views on a matter relating to insurance for sports facilities (details supplied); and if he will make a statement on the matter. [25376/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

At the outset, the Deputy should note that I am responsible for the development of the legal framework governing financial regulation. Neither I, nor the Central Bank of Ireland, can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. Consequently, I am not in a position to direct insurance companies as to the price or the level of cover to be provided to consumers or businesses.

The Deputy will appreciate that I, as Minister for Finance, cannot comment on individual cases. The primary reason for this is that I do not have full information on such cases. For instance, I do not know whether there are claims outstanding or other issues relevant to the pricing of cover of this type, such as claims levels within the sector as a whole. These are factors which will impact upon the availability and pricing of such insurance cover.

However, I acknowledge the general problems faced by many small businesses and voluntary/community associations in relation to the cost and availability of insurance as well as the frustrations that some may have with the pace of reform. Unfortunately, there is no single policy or legislative “silver bullet” to immediately stem or reverse premium price rises. This is because there are many constraints faced by the Government in trying to address this issue in particular the fact that for constitutional reasons, it cannot direct the courts as to the award levels that should be applied and for legal reasons it cannot direct insurance companies as to the pricing level which they should apply in respect of businesses seeking insurance.

Notwithstanding this, I wish to re-emphasise how important this issue is for the Government. 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. I believe there has been significant progress in the implementation of the two CIWG Reports. Examples include the following:

- the establishment of the Personal Injuries Commission, and its subsequent recommendations relating to addressing award levels for soft tissue injuries – this has provided the objective evidence we need to be able to address award levels;

- the establishment of the National Claims Information Database in the Central Bank to increase transparency around the future cost of private motor insurance; the Central Bank is currently reviewing the possibility of expanding is scope to cover business insurance;

- reforms to the Personal Injuries Assessment Board through the Personal Injuries Assessment Board (Amendment) Act 2019 ;

- amendments to Sections 8 and 14 of the Civil Liability and Courts Act 2004 to make it easier for businesses and insurers to challenge cases where fraud or exaggeration is suspected;

- the reform of the Insurance Compensation Fund to provide certainty to policyholders and insurers; and,

- various reforms of how fraud is reported to and dealt with by An Garda Síochána, including increased co-ordination with the insurance industry, as well as the launch recently of Operation Coatee, a co-ordinated operation to tackle insurance fraud.

I believe that these reforms are having a significant impact with regard to private motor insurance (CSO figures from May 2019 show that the price of motor insurance is now 24.5% lower than the July 2016 peak). The Government is determined to continue working to ensure that these positive pricing trends can be extended to other forms of insurance, including those relevant to businesses.

Undoubtedly the single most essential challenge which must be overcome if there is to be a sustainable reduction in insurance costs particularly for small businesses 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 Ireland 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. In this regard, work is progressing as a matter of priority on the Judicial Council Bill, and it is due to complete Report and Final Stages in the Seanad this week, prior to being submitted to Dáil Éireann shortly thereafter. I would hope that members of both Houses of the Oireachtas can collectively work together to ensure that the Judicial Council Bill is enacted by the summer.

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.

Finally, Insurance Ireland operates a free Insurance Information Service for those who have queries, complaints or difficulties in relation to obtaining insurance. Insurance Ireland can be contacted at feedback@insuranceireland.eu or 01-6761914.

Cycle to Work Scheme

Ceisteanna (127)

John Curran

Ceist:

127. Deputy John Curran asked the Minister for Finance his plans to increase the cap of €1,000 on the bike to work scheme in order to allow for the purchase of e-bikes and cargo bikes that are substantially more expensive to purchase but would open up the option of cycling to more persons; and if he will make a statement on the matter. [25536/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Cycle To Work scheme provides an exemption from tax on the first €1,000 of expenditure incurred by an employer in connection with the provision of a bicycle or safety equipment to an employee or director. The bicycle must be for the employee/director’s personal use in undertaking the whole or part of the journey to or from work. Safety equipment includes helmets, lights, bells, mirrors and locks but does not include child seats or trailers.

The scheme applies to a pedal cycle, tricycle and a pedelec. A pedelec means a bicycle or tricycle which is equipped with an electric motor (with a maximum continuous rated power of 0.25 kilowatts) which cuts out when a speed of 25 kilometres per hour is reached, or sooner if the cyclist stops pedalling the bicycle or tricycle.

It is assumed that the reference to “cargo bikes” by the Deputy means a bicycle specifically designed to carry a load. Such a bicycle would qualify under the cycle to work scheme, assuming all of the required conditions are satisfied.

It should be noted that the cost of a bicycle purchased under the scheme may indeed be more than €1,000, however the exemption from tax does not apply above this limit.

While schemes of this nature are reviewed in the context of the annual Budget and Finance Bill process I have no plans at present for any increase.

European Central Bank

Ceisteanna (128, 146)

Michael McGrath

Ceist:

128. Deputy Michael McGrath asked the Minister for Finance the appointment process of the new President of the European Central Bank; the candidates being considered; when the final decision will be made; and the level of consultation he has had with other European partners in this regard. [24828/19]

Amharc ar fhreagra

Michael Moynihan

Ceist:

146. Deputy Michael Moynihan asked the Minister for Finance the process for appointing the new President of the European Central Bank. [25190/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I propose to take Questions Nos. 128 and 146 together.

The President of the European Central Bank, Prof. Mario Draghi, is due to step down on 31 October this year.

The selection process to appoint a candidate to succeed Prof Draghi will open when the President of the Eurogroup will invite nominations for the position. Following receipt of nominations the name(s) will be discussed at Eurogroup and agreed at ECOFIN. The European Central Bank and the European Parliament will also be consulted. Finally the nominee will formally be appointed by the European Council.

Tracker Mortgage Examination

Ceisteanna (129)

Fergus O'Dowd

Ceist:

129. Deputy Fergus O'Dowd asked the Minister for Finance if the concerns of a person (details supplied) regarding tracker settlements will be considered; and if he will make a statement on the matter. [24831/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I understand that the Central Bank has clearly set out its expectations of lenders to provide appropriate redress and compensation to affected customers in its documented Principles for Redress published in December 2015.

The principles provide, inter alia, that “Any tax liability that impacted customers may incur as a result of the relevant issue in or respect of any redress, compensation or other payment made to impacted customers…are to be discharged by the lender. The lender is to liaise directly with Revenue in this regard”.

The Principles of Redress provide for a number of different classes of redress payments depending on the harm suffered by individual borrowers. The question of whether a tax liability arises in any given case depends on the specific issues to be redressed and the facts and circumstances of that particular case.

I am advised by Revenue that a number of lending agencies are liaising with them in order to identity any tax liabilities owing and to discharge same.

The tax liability will depend on the type of loan (for example, for a home loan or a “buy to let” property) and the redress and compensation payment to the borrower. In order to estimate the tax due in any particular case detailed information is required relating to

- the type of mortgage

- the amount of interest refunded (redress)

- the compensation payment to the customer made to reflect the detriment suffered by the borrower.

There is insufficient information in the details supplied to provide a definitive view of the taxation consequences of a settlement in the circumstances outlined.

Tax Residency

Ceisteanna (130)

Pat Deering

Ceist:

130. Deputy Pat Deering asked the Minister for Finance when a certificate of tax residence will be issued to a person (details supplied). [24832/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I am advised by Revenue that a hard-copy Letter of Residence recently issued to the person in question.

The person originally applied for the Letter of Residence through the postal system and subsequently made an online request. Following the online request, an electronic copy issued to their 'MyAccount' service. Unfortunately, the person was not aware that the electronic version had issued and their expectation was that they would receive a hard-copy version.

Revenue has also confirmed that it contacted the person directly to apologise for the late response to their original application and to explain the online system to them.

Strategic Banking Corporation of Ireland Remit

Ceisteanna (131)

Billy Kelleher

Ceist:

131. Deputy Billy Kelleher asked the Minister for Finance the approximate regulatory and administrative cost in addition to other potential costs of enabling the SBCI to lend directly to SMEs; and if he has examined the concept of relicensing the SBCI in order for it to develop branches for direct lending. [24839/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The SBCI is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs to address gaps and potential failures in the Irish SME finance market as well as encouraging competition and innovation, and facilitating the efficient and effective use of EU resources and financial instruments. The SBCI achieves this through the provision of low cost liquidity and risk-sharing guarantee activities that support the provision of appropriately priced, flexible funding to Irish SMEs.

From a policy perspective, the SBCI is not intended to be a bank and its role as a national promotional institution is quite different from a bank. The SBCI does not lend directly, rather, it lends through partner financial institutions, known as on-lenders. If the SBCI were to lend directly to SMEs it would move from working with financial institutions to being in direct competition with these financial institutions. Paradoxically, this could reduce the reach of the SBCI. Accordingly, there are no plans to enable the Strategic Banking Corporation of Ireland (SBCI) to lend directly to SMEs.

As there are no plans to change the operational model of SBCI, no assessment of the likely costs has been done. However, it is likely that there would be significant cost implications in relation to regulation and there would also be state aid and competition issues that would need to be addressed.

Strategic Banking Corporation of Ireland Data

Ceisteanna (132, 133)

Billy Kelleher

Ceist:

132. Deputy Billy Kelleher asked the Minister for Finance the details of bank and non-bank on lender of SBCI funds in 2018 and to date in 2019; and the amount loaned to SMEs in tabular form. [24840/19]

Amharc ar fhreagra

Billy Kelleher

Ceist:

133. Deputy Billy Kelleher asked the Minister for Finance the lending targets the SBCI set for lending to SMEs in 2018 and 2019, in tabular form; and the progress to date on same. [24841/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I propose to take Questions Nos. 132 and 133 together.

The Strategic Banking Corporation of Ireland (SBCI) is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs to address gaps and potential failures in the Irish SME finance market as well as encouraging competition and innovation, and facilitating the efficient and effective use of EU resources and financial instruments. The SBCI achieves this through the provision of low cost liquidity and risk-sharing guarantee activities that support the provision of appropriately priced, flexible funding to Irish SMEs.

Instead of lending directly to SMEs, the SBCI operates through partner finance providers, known as on-lenders. The SBCI has provided funding to a mixture of both banks and non-bank finance providers and currently has 6 on-lenders, 3 bank and 3 non-bank finance providers: AIB, Bank of Ireland, Ulster Bank, Finance Ireland Limited, Bibby Financial Services Ireland, and FEXCO Asset Finance. Additionally in 2018, the SBCI had a further non-bank finance provider as an on-lender, First Citizen Agri Finance. This facility was closed in October 2018 following First Citizen Agri Finance raising commercial funding.

Please see the following table of liquidity funding and guarantees provided by the SBCI to its on-lenders since March 2015, to date.

Chronological Table of SBCI Funds and Guarantees Committed to On-Lenders

Date

On Lender

Liquidity (Funds)

Risk Sharing (Guarantees Provided)

December 2014

Bank of Ireland

€200m

February 2015

Allied Irish Bank

€200m

October 2015

Finance Ireland

€51m

November 2015

Merrion Fleet

€25m*

November 2015

Allied Irish Bank

€200m

December 2015

Ulster Bank

€75m

May 2016

First Citizen Agri Finance

€40m**

June 2016

Bibby Financial Services Ireland

€45m

November 2016

Fexco Asset Finance

€70m

January 2017

Bank of Ireland

€65m

January 2017

Allied Irish Bank

€60m

January 2017

Ulster Bank

€25m

March 2018

Bank of Ireland

€128m

March 2018

Allied Irish Bank

€122m

March 2018

Ulster Bank

€50m

May 2018

Bibby Financial Services Ireland

€25m

Dec 2018

Finance Ireland

€75m

*Facility closed in July 2017 following the sale of Merrion Fleet to Société Générale

**Facility closed in October 2018 following its raising of commercial funding.

The SBCI has forwarded updated figures to my Department that show, to the end of December 2018, the total amount of SBCI supported lending activity (through the provision of liquidity) was €900 million to 21,783 Irish SMEs supporting 141,658 jobs. Under the SBCI’s risk sharing schemes, €152 million has been drawn down by 4,278 SMEs supporting 6,572 jobs.

The SBCI continues to work on developing new innovative products, such as the Brexit Loan Scheme, which was launched in March 2018. This €300 million scheme is to provide working capital support to SMEs to enable them to adapt and innovate in response to the challenges and opportunities posed by Brexit. From the launch of the scheme on 28 March 2018 to 12 June 2019, the SBCI has received 645 applications. Of these, 582 have been deemed eligible and can proceed to one of the participating finance providers for a loan under the scheme. 139 SMEs have progressed to sanction at finance provider level to a total value of €30, 566,300.

Following on from launch of the Brexit Loan Scheme, a Future Growth Loan Scheme has been developed to provide long-term investment financing for Irish businesses to help them strategically invest in a post-Brexit environment. There is an absence of financing available for businesses in excess of seven years and the Future Growth Loan Scheme is addressing that gap providing loans of eight to ten years. SBCI's open call to financial institutions for designation as a lending partner closed on 11 February 2019 and the scheme was launched on 27 March. The SBCI began accepting eligibility applications from SMEs on 17 April 2019.

The SBCI’s focus is meeting the credit needs of SMEs that are not currently being fully met by the private sector. The SBCI’s lending to SMEs is largely driven by market demands and needs that are not fully met by the private sector. The Deputy can rest assured that the SBCI is working to develop a more diverse range of on-lenders and innovative products. This will enable it to broaden its distribution capability and market coverage, meet the evolving requirements of the SME finance market and contribute to a sustainable and competitive economy in the medium to long term.

Financial Services Regulation

Ceisteanna (134)

Pearse Doherty

Ceist:

134. Deputy Pearse Doherty asked the Minister for Finance the estimated saving that would accrue from moving the entire cost of regulation of the financial sector onto the industry with the exception of credit unions; and if he will make a statement on the matter. [24863/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The Central Bank's total funding requirement for financial regulation activity is determined on an annual basis by the resources required to discharge its legal responsibilities under domestic and EU law. Section 32D and 32E of the Central Bank Act 1942, as amended, provide that the Central Bank Commission may make regulations relating to the imposition of levies and fees on the financial services sector in respect of the recoupment of the costs of financial regulation.

As it stands, the financial services industry currently funds 80% of the costs incurred by the Central Bank for financial regulation, with certain exceptions. [Banks which had participated in the Eligible Liabilities Guarantee (ELG) Scheme, namely AIB, Bank of Ireland and Permanent TSB, which are required to fund 100% of the Central Bank's regulatory costs. The levies for Credit Unions are currently capped at 0.01% of total assets as at 30 September in the previous year. As a result, the Credit Union sector currently funds approximately 9% of the cost of their regulation.] This means that the subvention from the Central Bank amounts to approximately 20% of the total cost. What this translates to in monetary terms will be determined by the resources required by the Bank to discharge its legal responsibilities during a given year.

In 2018, the cost of financial regulation activities was funded by levy income of €129 million and subvention of €66 million.

If industry was fully charged, there would be no subvention, however, there are certain costs (e.g. markets supervision) which it may be appropriate to continue to subvent on an ongoing basis where the costs cannot be attributed to specific firms but do relate to the orderly function of markets and the financial stability agenda.

In 2015, the Department of Finance and Central Bank of Ireland issued a joint public consultation on ‘Funding the cost of Financial Regulation’ (CP95).

In response to that consultation, my predecessor as Minister for Finance, Michael Noonan, agreed to a phased movement towards 100 per cent Industry Funding in order to eliminate subvention, by the taxpayer, of regulatory costs. Since then, recovery rates have increased in stages across most industry sectors, determined on a yearly basis. Now, in order to give greater clarity to industry, I have approved the trajectory to bring the recovery rate of levies across sectors to 100 per cent over the coming years. This change in policy will apply the user pays principle to the regulation of financial services.

The table below shows the planned trajectory for levy rates across all sectors. Credit Union recovery rates from 2022 onwards will be subject to review and a public consultation to guide strategy once 50% recovery rates have been achieved. The Central Bank published this trajectory on 14 June 2019 and it is available on the Central Bank website at the following link: https://www.centralbank.ie/news/article/press-release-funding-the-cost-of-financial-regulation-14-june-2019

Levy Year

2017

2018

2019

2020

2021

2022

2023

2024

Levied in

2017

2018

2020

2021

2022

2023

2024

2025

ELG Banks

100%

100%

100%

100%

100%

100%

100%

100%

Banks

65%

80%

90%

100%

100%

100%

100%

100%

Insurance Undertakings

65%

80%

90%

100%

100%

100%

100%

100%

Investment Firms & Fund Service Providers

65%

80%

90%

100%

100%

100%

100%

100%

Funds

65%

65%

80%

90%

100%

100%

100%

100%

Retail Intermediaries & Debt Management Co’s

50%

65%

70%

75%

80%

90%

100%

100%

Moneylenders

65%

65%

70%

75%

80%

90%

100%

100%

Approved Professional Bodies

65%

65%

70%

75%

80%

90%

100%

100%

Bureau de Change/Money Transmitters

65%

65%

70%

75%

80%

90%

100%

100%

Retail Credit / Home Reversion / Credit Servicing Firms

65%

65%

70%

75%

80%

90%

100%

100%

Payment & EMoney Institutions

65%

65%

70%

75%

80%

90%

100%

100%

Invoices for 2019 levies will issue on an arrears basis in Quarter 3 2020 as the Central Bank implements its strategy to move from levies based on budgeted to lives based on actual costs. This is to address an aspect of volatility in response to industry feedback by eliminating large balancing surpluses and deficits in favour of levies based on the Central Bank’s audited financial statements. While businesses should accrue for 2019 costs in their financial statements, many will welcome the cashflow effect arising from this change.

Further information can be found in the Funding Strategy and Guide to the 2018 Industry Funding Regulation, where the Central Bank set out its 3-year funding strategy. The Strategy document is available on the Central Bank website at the following link: https://www.centralbank.ie/docs/default-source/regulation/how-we-regulate/fees-levies/industry-funding-levy/guidance/funding-strategy-and-guide-to-the-2018-industry-funding-regulations.pdf?sfvrsn=4

Irish Fiscal Advisory Council Reports

Ceisteanna (135)

Micheál Martin

Ceist:

135. Deputy Micheál Martin asked the Minister for Finance if he will report on the Irish Fiscal Advisory Council report of June 2019; if he has discussed same with his officials; if extra controls on spending will be put in place; and if he will make a statement on the matter. [24928/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I can confirm for the Deputy that I have received a copy of the Fiscal Assessment Report (FAR) as published by the Irish Fiscal Advisory Council on Tuesday, 11th June. In keeping with established practice, I will provide a formal response which will issue in due course.

In terms of the Council’s assessment of the Stability Programme Update 2019 (SPU), I note its assertion that the current macroeconomic outlook is ‘unusually uncertain’ - balanced between potential overheating on one hand and the possibility of an “exceptional shock” arising from Brexit on the other. Accordingly, the Council has recommended caution in preparing for Budget 2020, a policy approach that has been a consistent hallmark of this Government’s management of the public finances.

The Summer Economic Statement (SES), will be published later this month. This will address the clear and emerging challenges the economy is facing. It will set out the broad parameters for macroeconomic growth and the fiscal outlook as well as the constraints facing the economy over the medium term.

Finally, in terms of specific controls on spending, I would say that enhanced expenditure reporting requirements can be implemented in cases where Departments have not managed within budget in the previous year. For example, such arrangements have now been put in place for the Department of Health. This involves the creation of a new oversight group chaired by the Department of Public Expenditure and Reform, to monitor spending and act as an early warning mechanism. Monthly spending reports from Health are now submitted to the Cabinet Committee on Health, and regular updates are provided to Government on the overall Health position.

Brexit Issues

Ceisteanna (136)

Micheál Martin

Ceist:

136. Deputy Micheál Martin asked the Minister for Finance if he has received advice from his officials regarding possible tax cuts in view of the threat of Brexit as outlined in the Irish Fiscal Advisory Council report; and if he will make a statement on the matter. [24929/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The decision of the UK to leave the European Union gives rise to unprecedented challenges for Ireland across all economic sectors.

The Government have taken steps to maximise the resilience of the economy so that it may effectively manage the negative economic developments. National budgets have been framed to prepare for the challenge of Brexit.

Budget 2019 maintained the overall approach of prudent financial management to strengthen the resilience of Ireland’s economy against the backdrop of heightened uncertainty.

As Minister for Finance, I receive advice from a wide variety of sources on an ongoing basis. In the normal course of business I am involved in ongoing discussions with my officials as part of the preparation for Budget 2020. A key part of this process is the work of the Tax Strategy Group whose policy papers, prepared by officials, set out the issues identified and options to be considered as part of the annual Budgetary process. I would expect these papers to be published in July.

Also, the Summer Economic Statement, to be published later this month, will set out the Government’s overall economic and budgetary strategy and establish the parameters for the forthcoming Budget, particularly in the context of the increased probability being assigned to a disorderly Brexit.

In addition, the recent IFAC report is under consideration while there are a number of tax policy consultations and studies ongoing that are likely to contribute to the tax formulation process. The Deputy will be aware that the National Economic Dialogue will take place on 26th and 27th June. This Dialogue will be an opportunity for stakeholders from a variety of backgrounds to consider how to optimise available resources in the interests of all citizens.

Naturally, I am not in a position at this point to set out what may be contained in the forthcoming Budget or Finance Bill. However, as part of the Programme for a Partnership Government, I remain committed to reducing excessive tax rates for middle income earners while also maintaining a broad tax base. As Ireland’s economy has recovered over the last number of years, tax reductions have been utilised to increase the reward for work and support enterprise and employment.

Tax Code

Ceisteanna (137)

Micheál Martin

Ceist:

137. Deputy Micheál Martin asked the Minister for Finance the actions he will take to be less dependent on income from corporation taxes; and if he will make a statement on the matter. [24930/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Ireland has been consistently successful over several decades in attracting leading multinationals to base here and given our high level of integration with the global economy, it is not altogether surprising that our corporation tax base has become concentrated, as it has been for a number of decades. Nonetheless, I would acknowledge that there are risks associated with this increase in corporation tax receipts. A fiscal vulnerability exists in the form of the exposure of the public finances to corporation tax receipts, which last year were at their highest ever share of Exchequer revenues at 18.7 percent of overall tax receipts. By way of context VAT and Income Tax receipts accounted for approximately 64 percent of our overall tax receipts.

In recent years, I have taken steps to broaden our corporation tax base, including through the introduction of the 80 per cent cap on capital allowances for intangible assets in Budget 2018 and the introduction of a broader Exit Tax regime in Budget 2019. Measures have also been introduced which will ensure a continued broadening of the overall tax base. These include the introduction of the Universal Social Charge, the Local Property Tax and the sugar sweetened drinks tax. Further measures that I have taken which will enhance the tax base include the increase in the VAT rate for tourism related goods and services from the 9 per cent rate to the 13.5 per cent rate in Budget 2019. For 2019 all of these measures are projected to raise revenues equivalent to approximately 1.5 percent of GDP or 5.7 percent of overall general government revenue.

Further steps which I have taken include an increase in the commercial (non-residential) Stamp Duty rate from 2 per cent to 6 per cent in Budget 2018 and an increase in the betting duty levy from 1 per cent to 2 percent in Budget 2019. I have also removed some tax reliefs, such as the Home Renovation Incentive and the Start your own Business Relief, and continued a roll-out of enhanced taxation compliance measures. However, I would note that further potential for base broadening exists, particularly in the environmental area where important policy priorities exist.

The ongoing systematic review of tax expenditures, taken in line with my Department’s Tax Expenditure Guidelines, will assist in this process through identifying deadweight, resource misallocation and assessing if tax reliefs still meet their initial policy objectives. This will also provide a ‘health check’ as to whether they accord with the OECD tax hierarchy in terms of their impact upon economic growth.

My Department will shortly publish a paper to highlight some of these in-built vulnerabilities to our tax revenues and to quantify where possible, the impact of a shock to corporation tax receipts. Potential solutions to this are presented in order to prompt a policy discussion around how best to mitigate against this emerging over-reliance. It is my intention to give consideration to these – and possibly other suggestions – with a view to making recommendations to Government in the autumn.

Small and Medium Enterprises Supports

Ceisteanna (138)

Micheál Martin

Ceist:

138. Deputy Micheál Martin asked the Minister for Finance the actions he will take to stimulate the small and medium enterprise sector following the Irish Fiscal Advisory Council report; and if he will make a statement on the matter. [24931/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

As the Deputy will be aware, under the Fiscal Responsibility Act 2012, the Irish Fiscal Advisory Council (IFAC) has been assigned the monitoring and assessment functions required of an independent national fiscal institution under the Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. The Act requires IFAC to “provide an assessment of whether the fiscal stance for the year or years concerned is, conducive to prudent economic and budgetary management”.

In addition, as part of the Council’s so-called ‘endorsement function IFAC provides an independent assessment of the official macroeconomic forecasts of the Department of Finance, upon which the Stability Programme Update (SPU) and Budgets are based. Accordingly, the Council’s role is to assess the overall fiscal stance as well as the forecasts underpinning the SPU and Budget publications. Therefore, the impact of all government expenditure, is assessed by the Council in this context.

In respect of the actions that my Department will take to stimulate the small and medium sized enterprise sector, I would note that the Irish Fiscal Council Report that the Deputy refers to, which was published this month, does not explicitly address SMEs beyond the level of credit advanced to them. I note the trend of an increase in new credit advance to Irish SMEs over the past four years, as well as a general decrease in the level of indebtedness of Irish SMEs. This appears to be consistent with the findings of the Central Bank’s SME Market Report for 2019.

It is worth noting that demand for credit by SMEs has been consistently subdued in recent years according to a number of studies including the SME Credit Demand survey carried out by my Department. This survey is conducted twice a year; over 1500 SMEs are surveyed to identify credit issues experienced by SMEs, the largest of its kind in the State. The latest Survey results, covering the period April – September 2018, has shown that demand for credit decreased to 20%, and of those SMEs that did not access credit 89% cited lack of credit requirements as their reasoning.

There are a number of policy supports and initiatives in place to support access to finance by Irish SMEs including the Credit Review Office, Enterprise Ireland, the Local Enterprise Offices, the SME Online Tool, Microfinance Ireland and the Strategic Banking Corporation of Ireland (SBCI).

The SBCI is Ireland’s national promotional institution. The purpose of the SBCI is to deliver effective financial supports to Irish SMEs to address gaps and potential failures in the Irish SME finance market as well as encouraging competition and innovation, and facilitating the efficient and effective use of EU resources and financial instruments. The SBCI achieves this through the provision of low cost liquidity and risk-sharing guarantee activities that support the provision of appropriately priced, flexible funding to Irish SMEs.

Since it began its activities in March 2015, to the end of December 2018, the total amount of SBCI supported lending activity (through the provision of liquidity) was €900 million to 21,783 Irish SMEs supporting 141,658 jobs. Under the SBCI’s risk sharing schemes, €152 million has been drawn down by 4,278 SMEs supporting 6,572 jobs.

Additionally, the Government launched the Brexit Loan Scheme in March of last year. This is a €300 million loan scheme to provide short term working capital support to SMEs to enable them to adapt and innovate in response to the challenges and opportunities posed by Brexit. From the launch of the scheme on 28 March 2018 to 12 June 2019, the SBCI has received 645 applications. Of these, 582 have been deemed eligible and can proceed to one of the participating finance providers for a loan under the scheme. 139 SMEs have progressed to sanction at finance provider level to a total value of €30, 566,300.

Following on from launch of the Brexit Loan Scheme, a Future Growth Loan Scheme has been developed to provide long-term investment financing for Irish businesses to help them strategically invest in a post-Brexit environment. There is an absence of financing available for businesses in excess of seven years and the Future Growth Loan Scheme is addressing that gap providing loans of eight to ten years. SBCI's open call to financial institutions for designation as a lending partner closed on 11 February 2019 and the scheme was launched on 27 March. The SBCI began accepting eligibility applications from SMEs on 17 April 2019.

The Deputy may rest assured that my Department is committed to supporting Irish small and medium sized businesses and the Government recognises that such businesses are vital for sustainable economic growth and employment.

Central Bank of Ireland Data

Ceisteanna (139)

Michael McGrath

Ceist:

139. Deputy Michael McGrath asked the Minister for Finance if a borrower is still considered a private dwelling house borrower or a buy-to-let borrower in the mortgage arrears statistics of the Central Bank in cases in which a borrower originally lived in the house and due to arrears subsequently moved out in order to try to pay the mortgage arrears; and if he will make a statement on the matter. [24947/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I am advised by the Central Bank of Ireland that the compilation notes for the mortgage arrears statistics define PDH and BTL mortgages as follows:

Principal Dwellings (PDH):

Mortgage loans to private individuals for house or apartment purchase, renovation, improvements or own construction of housing, fully and completely secured by mortgage on the residential property, which is or will be occupied by the borrower.

Buy-to-Let (BTL):

Mortgage loans to private individuals for house or apartment purchase, renovation, improvements or own construction of housing, fully and completely secured by mortgage on the residential property, which is or will be let for residential purposes by the borrower. The BTL format should also include mortgages secured on properties which are or will be used as holiday homes or second homes.

In the example provided in the Parliamentary Question, given that the property is not owner occupied it is expected this would be reported in the BTL category. Such cases retain the protections provided under the Central Bank Code of Conduct on Mortgage Arrears where the property is the only residential property in this State owned by the borrower.

Departmental Funding

Ceisteanna (140)

Michael McGrath

Ceist:

140. Deputy Michael McGrath asked the Minister for Finance if there are restrictions on the way in which Departments can spend funds to be withdrawn from the rainy day fund as envisaged in the legislation going through Dáil Éireann; if the restrictions are in domestic fiscal rules or EU fiscal rules; and if he will make a statement on the matter. [25197/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

Withdrawals from the fund as provided for under the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 will be to the Exchequer and any expenditures will be subject to the normal public financial procedures.

The Fiscal Responsibility Act 2012 imposes a duty on the Government to endeavour to comply with the fiscal rules. The National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 does not amend or change this obligation.

Once established, the Rainy Day Fund will be bound by both EU and domestic fiscal rules such as the expenditure benchmark and the debt rule and deposits into and withdrawals from the fund must comply with these rules.

Separately, the existing fiscal rules allow for the impact of one-off measures to be corrected for under the structural balance and the complementary expenditure benchmark pillar. These issues would need to be fully teased out with the Commission to assess compliance with the rules.

General Government Debt

Ceisteanna (141)

Michael McGrath

Ceist:

141. Deputy Michael McGrath asked the Minister for Finance the forecasted general government debt from 2019 to 2023, broken down by component parts, including the component parts that make up the gross national debt, the national debt and other general government debt components that make up the ultimate General Government Debt; and if he will make a statement on the matter. [25204/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

General Government Debt (GGD) is a measure of the total gross consolidated debt of the State compiled by the Central Statistics Office. It is the measure used for comparative purposes across the European Union Member States.

National Debt is the net debt incurred by the Exchequer after taking account of cash and other financial assets. The national debt is the principal component of general government debt. The latter measure also includes extra-budgetary funds, non-commercial state-sponsored bodies and the debt of local authorities.

The developments in the General Government Debt forecast for the years 2019 to 2023, broken down into available components, were published in Table A5 of the Stability Programme Update 2019. The table is reproduced below for the Deputy's convenience.

€ billions, unless stated

2019

2020

2021

2022

2023

Opening general government debt

206.2

205.1

196.7

203.6

203.5

Exchequer borrowing requirement

2.1

-0.4

-0.6

0.2

-0.6

Change in Exchequer Deposits

-2.5

-8.3

5.1

-1.2

1.3

Net lending of NCSSBs*

-0.2

0.2

0.2

0.2

0.3

Net lending of local government

0.2

0.2

-0.1

-0.2

-0.3

Change in collateral held

0

0

0

0

0

Other

-0.7

-0.1

2.3

0.8

1.8

Closing general government debt

205.1

196.7

203.6

203.5

206.0

General government debt to GDP ratio

61.1

55.8

55.4

53.2

51.6

*NCSSBs = Non-commercial semi-state bodies

VAT Rate Reductions

Ceisteanna (142)

Michael Healy-Rae

Ceist:

142. Deputy Michael Healy-Rae asked the Minister for Finance if he will review the increase in the VAT rate for the hospitality sector (details supplied); and if he will make a statement on the matter. [25315/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The second reduced 9% VAT rate was introduced on a temporary basis as part of the Jobs Initiative from July 2011 to December 2013 and was aimed at boosting tourism and the creation of additional jobs in that sector. The rate was designed to be temporary, but was maintained in subsequent Budgets. In 2016, the Programme for Partnership Government committed to maintaining the 9% VAT rate, dependent on prices remaining competitive in the sector. I decided in Budget 2018 not to make any change to the 9% VAT rate. However, I accepted that the rate must be subject to analysis. In this context, I asked my Department to undertake a comprehensive study of all aspects of the 9% VAT rate ahead of Budget 2019.

The “Review of the 9% VAT rate: Analysis of Economic and Sectoral Developments” was published by my Department in July 2018, in order to better inform any decision in relation to the 9% reduced rate going forward. In addition to assessing the relevance, cost, value-for-money, and impact to date of the 9% VAT rate, the Review also looked at the estimated impact on the relevant sectors were the rate to be increased.

The Review found that tourism expenditure was more sensitive to income growth and the economic cycle than price changes. The economy is currently performing well, with high levels of employment and strong demand in the tourism sector. This positive economic outlook means that the income channel of demand is likely to ensure that economic activity within the sector remains strong. The Review concluded that the VAT rating applied to the tourism sector should not greatly impact demand or employment in the sector. The Budget decision to increase the VAT rate was made following this analysis.

Furthermore, the Revenue Commissioners also published a report on the 9% VAT Rate in June 2018 which analyses the output and employment impact of the 9% VAT rate using Revenue data. The analysis found an estimated increase in employment of on average 1.8 employees for each firm benefitting from the reduced rate in the accommodation and food sector in the year following the introduction of the reduced rate. However, beyond the short term, they were unable to distinguish the impact of the rate on employment from the impact of other factors in the economy.

Given the impact of an increase in the VAT rate on the hospitality sector has only recently been reviewed by my Department and the Revenue Commissioners, there does not seem to currently be a case for reviewing the impact of the increase.

However, in noting that changes made in Budget 2019 may present a challenge to the tourism and hospitality sector, an extra €35 million was allocated to the Department of Transport, Tourism and Sport in order to provide more targeted supports. This allocation includes targeted supports of €4.5 million for regional initiatives such as Ireland’s Hidden Heartlands and the Wild Atlantic Way, and nearly €10 million for the development of greenways.

Tax Code

Ceisteanna (143)

Joan Burton

Ceist:

143. Deputy Joan Burton asked the Minister for Finance his views on the country-by-country report of the European Commission recommending that the State limit the scope and number of tax expenditures and broaden the tax base; and if he will make a statement on the matter. [25325/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

The European Commission published the draft Country Specific Recommendations (CSRs) on 5 June.

The overall objective of the CSRs is to encourage the Member States to increase their growth potential by continuing to improve their economies and further strengthening their economic resilience. It recommends that Member States should prioritise investment needs and address bottlenecks and reforms over the next twelve to eighteen months with the aim of improving sustainable and inclusive growth.

The purpose of the European Semester, of which the CSRs are part, is to coordinate economic policies across EU Member States to help achieve aggregate macroeconomic stability and growth. It involves monitoring of progress by the Commission and discussion with Member States on their economic position and budgetary plans. It culminates in July with the adoption by ECOFIN of the Country Specific Recommendations, which Member States take into account as part of their budgetary cycle.

As part of this process, three CSRs were issued to Ireland for 2019 and 2020, one of which was that we should seek to:

"Achieve the medium-term budgetary objective in 2020. Use windfall gains to accelerate the reduction of the general government debt ratio. Limit the scope and number of tax expenditures, and broaden the tax base. Continue to address features of the tax system that may facilitate aggressive tax planning, and focus in particular on outbound payments. Address the expected increase in age related expenditure by making the healthcare system more cost-effective and by fully implementing pension reform plans ."

In respect of the element of that recommendation selected by the Deputy, I can confirm that I, and my Department, continue to review the range of tax expenditures to ensure they remain fit for purpose and make a positive contribution to the lives of the citizens who avail of/benefit from them and to the economy as a whole. I can also confirm that I and my Department, continue to seek ways to broaden the tax base that do not run contrary to the growth focus of this Government.

Tax Code

Ceisteanna (144)

Joan Burton

Ceist:

144. Deputy Joan Burton asked the Minister for Finance his views on the country-by-country report of the European Commission recommending the State to cut its fossil fuel subsidies and to send a stronger price signal to investors by committing to a schedule of increases in the carbon tax over the next decade; and if he will make a statement on the matter. [25327/19]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Finance)

I welcome the publication of the draft Country Specific Recommendations (CSR) for Ireland which form part of the overall European Semester process.

The Commission has opined that Ireland has further potential to improve the way its tax system can support environmental objectives. Reducing fossil fuel subsidies and committing to a schedule of increases in the carbon tax over the next decade are viewed as possible measures in this regard.

The Joint Oireachtas Committee on Climate Action has also recommended that a trajectory of increases in the rate of Carbon Tax up to €80 by 2030 should be implemented once an evidence based plan is in place to provide supports for climate action measures including the provision of supports for fuel poverty. As recommended by the Joint Committee on Climate Action, my Department has launched a public consultation on the options for use of revenue raised from increases in the Carbon Tax. The feedback received from this consultation will help to inform future Carbon Tax policy options. The consultation is open for submissions until 28th June 2019 and is accessible at the following link:

https://assets.gov.ie/9384/b078dbb6c7614c748b897ba01b481532.pdf.

An examination of fossil fuel tax subsidies and carbon tax will take place in the Tax Strategy Group papers as part of the annual budgetary process.