Thursday, 26 Sep 2019

Written Answers Nos. 1-35

Tax Collection

Ceisteanna (14)

Pearse Doherty

Ceist:

14. Deputy Pearse Doherty asked the Minister for Finance if he is satisfied that REITs and IREFs are paying a fair share of tax; and if he will make a statement on the matter. [39082/19]

Freagraí scríofa

Minister for Finance

Institutional investors represent one aspect of the property market and have an important role in increasing supply.

Notwithstanding this, the Government monitors the actions of investors in the market and has taken action when abuses have been identified. In 2016, changes were introduced to address concerns regarding the use of collective investment vehicles by foreign investors to take profits derived from Irish real estate without paying Irish tax.

This resulted in the introduction of the IREF (Irish Real Estate Fund) framework in 2016.  IREFs are investment undertakings, excluding UCITS, where at least 25% of the value of that undertaking is made up of Irish real estate assets. Where an IREF makes an actual distribution or on the redemption of units in the IREF, non-resident investors will be subject to a withholding tax of 20%. Certain investors such as pension funds, life assurance companies, charities and credit unions are exempt from the withholding tax as this is the norm for such bodies across the tax acts.

The Real Estate Investment Trust (REIT) framework was introduced in 2013, to facilitate long-term, risk-diversified, collective investment in rental property. In order to be a REIT, a company must be listed on the main market of an EU stock exchange within three years of forming, and it must be widely held. Income and gains from Irish property are not taxed within the REIT but are instead taxed in the hands of the investor when distributed.

Dividend withholding tax at 20% must be applied to all distributions from REITs, other than distributions to certain limited classes of investors such as pension funds and charities as they are more generally exempt from tax.

Given the important implications which developments in the property market can have for the economy, my Department actively monitors developments in this sector on an ongoing basis. As part of the 2018 Finance Act process I committed to produce a report on REITs, IREFs and section 110 companies as they invest in the Irish property market. This report was prepared by officials in my Department and was presented to the Tax Strategy Group in July. This paper provides a basis for policy discussions in relation to institutional investment in the Irish property market.

Tax Reliefs Eligibility

Ceisteanna (15, 16)

Richard Boyd Barrett

Ceist:

15. Deputy Richard Boyd Barrett asked the Minister for Finance the way in which the condition for receiving section 481 tax relief, which requires the recipients to provide quality employment and training, can be met by the producer companies that apply for and receive the relief when those same producer companies are denying responsibility for employment and training on film productions but rather claiming that a designated activity company, which exists only for a time limited specific financial purpose, is the entity responsible for employment and training; and if he will make a statement on the matter. [38988/19]

Bríd Smith

Ceist:

16. Deputy Bríd Smith asked the Minister for Finance if the condition for receiving section 481 tax relief is being met by the producer companies in the film industry that apply for and receive the relief; and the way in which this is monitored by his Department. [39094/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 15 and 16 together.

The Deputies will be aware that a number of amendments were made to Section 481 of the Taxes Consolidation Act 1997 as part of Finance Act 2018.

I legislated to split the certification process between Revenue and the Department of Culture, Heritage and the Gaeltacht (DCHG). Production companies are now required to apply to the DCHG before commencement of Irish production to have the film certified as a qualifying film.

As part of the application process, applicants must provide a skills development plan and, if the amount of eligible expenditure is over €2m, that plan must be agreed with Screen Ireland. Additionally, a post project skills development report is required for each project.

In terms of quality employment, the monitoring of compliance with employment rights legislation is primarily a matter for the Department of Business, Enterprise and Innovation, through the Workplace Relations Commission.  However, as part of the new certification process to be undertaken by DCHG, an applicant company is required to sign an undertaking of compliance with all relevant employment legislation. This undertaking is required to be signed and furnished with every section 481 application.

These conditions shall be met not just by a producer company but also by the qualifying company. If a producer does not comply with the employment and skills development requirements set out by the Minister for Culture, Heritage and the Gaeltacht they may not be eligible for the corporation tax credit.  Any amount already claimed may be recoverable, with interest. 

I have further been advised by my officials that, following a joint request by the Irish Congress of Trade Unions (ICTU), the Services, Industry, Professional and Technical Union (SIPTU), and Screen Producers Ireland, the WRC has agreed to undertake an audit of the Republic of Ireland Independent Film and Television Drama Production Sector with a view to examining industrial relations generally, employment practices and procedure, assessing issues arising (if any), and making recommendations for their improvement where appropriate.

The WRC has published a Workplace Relations Notice on its website, inviting submissions from stakeholders on the above listed matters by 31 October 2019.

Credit Unions

Ceisteanna (17)

Fiona O'Loughlin

Ceist:

17. Deputy Fiona O'Loughlin asked the Minister for Finance if the proposed levy for credit unions will be scrapped; and if he will make a statement on the matter. [39035/19]

Freagraí scríofa

Minister for Finance

As the Deputy is aware, credit unions are regulated and supervised by the Registrar of Credit Unions at the Central Bank who is the independent regulator for credit unions. Within his independent regulatory discretion, the Registrar acts to support the prudential soundness of individual credit unions, to maintain sector stability and to protect the savings of credit union members.

Since 2004 the amount of the Industry Funding Levy payable by each credit union has been capped at a rate of 0.01% of total assets.

Consultation Paper 95 "Joint Public Consultation Paper - Department of Finance and the Central Bank of Ireland - Funding the Cost of Financial Regulation" (CP95) was published in 2015 and set out proposals to move from partial industry funding of financial regulation towards full industry funding, noting the proposal set out in an earlier consultation conducted by the Central Bank (CP61 "Consultation on Impact Based Levies and Other Levy Related Matters") to move credit unions to fund 50% of the cost of regulating the credit union sector. 

The Central Bank indicated, in its Funding Strategy and 2018 Guide to the Industry Funding Levy, that it intended to seek my approval to increase the proportion of financial regulation costs to be recovered from credit unions on a phased basis setting out an initial target of 50% to be reached by 2021.

In response to the Central Bank's request I recommended that credit union contributions should not increase beyond the 50% target until:

1. The levy trajectory has reached the planned 50% rate, at which time the impact on the viability of the sector will be better understood; and

2. A public consultation regarding increasing the levy rate for credit unions beyond 50% is undertaken, which would include a regulatory impact assessment of such a change on the sector.

In contrast to this, recovery rates in 2018 for all other industry categories ranged from 65% to 100%, and the Central Bank intends to increase all to 100% funding over the next number of years. 

The Deputy might also wish to note that the Department of Finance, in collaboration with the Central Bank, held a public consultation on potential changes to the Credit Institutions Resolution Fund Levy, which is expected to reduce materially from 2020. The outcome, following the public consultation, will be published shortly.

It is also important to note that as Minister for Finance I have reduced the Stabilisation Scheme Levy materially and that since 2017 no further levies have been charged by the Credit Union Restructuring Board (ReBo). I have previously committed to a further review of the Stabilisation Scheme in 2020.

On 28th August last, I also held a meeting with the credit union representative bodies to discuss their views on the Industry Funding Levy and other credit union related matters.

Question No. 18 answered with Question No. 12.

Tax Code

Ceisteanna (19)

Thomas P. Broughan

Ceist:

19. Deputy Thomas P. Broughan asked the Minister for Finance if consideration is being given to the introduction of a green tax and dividend approach to decarbonising society and the economy; and if he will make a statement on the matter. [38767/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions. Having said that, the Deputy will be aware that the Climate Action Plan 2019 provided a commitment to assess a Carbon Tax trajectory of at least €80 per tonne by 2030, having regard to considerations on the social and economic impacts. 

A carbon tax was introduced in Ireland on a phased basis beginning in 2009.  Initially it applied to transport fuels, and was extended to other non-solid fuels (such as kerosene, green diesel, liquefied petroleum gas and natural gas) in May 2010.  When introduced, the rate was €15 per tonne of CO2 emissions and this was increased to €20 per tonne in December 2011.  Carbon tax was extended to solid fuels at a reduced rate of €10 per tonne from May 2013 which increased to €20 per tonne in May 2014.  In 2018, the VAT exclusive yield from carbon tax was approximately €431 million. 

While hypothecation is not a feature of the Irish taxation system in general as it can constrain the flexibility of the Government in expenditure decisions, the Joint Oireachtas Committee on Climate Action recommended that hypothecation of carbon tax revenues be considered. To this end my Department conducted a public consultation on the options for use of revenues raised from increases in the carbon tax. Among the options presented were a “tax and dividend scheme”. There were 66 respondents to the consultation, representing businesses, private individuals as well as social, voluntary and community and “other” sectors.   

The most favoured options were ring-fencing additional carbon tax revenues for the purposes of enhancing the current Sustainable Energy Authority of Ireland (SEAI) grant scheme for household energy efficiency improvements and to fund sustainable transport infrastructure.  The option of returning the proceeds by way of dividend to citizens or households through the social welfare and/or tax system received a negative response overall, being one of the least supported and most opposed options.

In the context of Budget 2020 and future tax policy, I will consider all options relating to the carbon tax.  

Tax Code

Ceisteanna (20)

Pearse Doherty

Ceist:

20. Deputy Pearse Doherty asked the Minister for Finance if the review of the special assignee relief programme has been completed and published; and if he will make a statement on the matter. [39081/19]

Freagraí scríofa

Minister for Finance

The Special Assignee Relief Programme (SARP) is an income tax incentive aimed at reducing the cost to employers of assigning key individuals in their companies from abroad to take up temporary, short-term positions in the Irish based operations of the employer with a view to transferring essential skills to Irish based workers. For example, such individuals may be transferred to head up new divisions of the company or take charge of new product development.

In accordance with the Department of Finance Tax Expenditure Guidelines, SARP is currently the subject of an independent review which is being carried out by Indecon Economic Consultants. The review exercise affords an opportunity to look at all elements of the relief and it also includes consultation with stakeholders. 

The terms of reference of the review include:

- the continuing relevance of the programme;

- the performance of the programme in terms of meeting its objectives;

- the particular features of the programme;

- the annual cost and

- the overall impact of the programme.

The appropriateness of the present upper and the lower limit on the quantum of income that should benefit from the tax relief is also to be examined having regard to the objectives of the scheme and to the principles of tax equity. 

I understand that the report is currently being finalised and I expect that it will be submitted to my Department in the next few days.  It is my intention to publish the report in the context of the forthcoming Budget and Finance Bill.

Brexit Issues

Ceisteanna (21)

Joan Burton

Ceist:

21. Deputy Joan Burton asked the Minister for Finance the effect of a no-deal hard Brexit on customs clearance and other requirements for importing from the UK mainland and Northern Ireland; his views on the implications of a no-deal hard Brexit for VAT and business; and if he will make a statement on the matter. [39045/19]

Freagraí scríofa

Minister for Finance

When the UK leaves the EU, it will become a third country from a customs perspective and the free circulation and free movement of goods between the EU and the UK will end. This will increase substantially the number of businesses that will have to complete customs formalities and other related obligations for trade with the UK and through the UK landbridge to the EU. This will present a significant challenge for many of those businesses which have not had any experience of third country trade and customs formalities.

I am advised by Revenue that in the last few months as part of its ongoing multi-layered trader engagement programme, Revenue wrote to all businesses who traded with the UK in 2018 or in the first six months of 2019, outlining the practical preparatory steps to take based on their trade pattern with the U.K. In addition, businesses with significant or frequent trade with the UK received or will soon receive a follow up phone call from Revenue. I understand that follow up calls will be completed by Revenue by the end of September.

In regard to VAT, under existing rules, when the UK becomes a third country, VAT on import will be chargeable at the point of importation unless the importer is approved to use the current deferred payment system, which allows approved traders to defer payment of certain charges, including customs and VAT at import, until the 15th of the month following importation. The Deputy will be aware that I made provision in the Withdrawal of the United Kingdom from the European Union (Consequential Provisions) Act 2019 for the introduction of postponed accounting for VAT registered traders importing goods from non-EU countries, which will be implemented if the UK leaves the EU without a withdrawal agreement.

Revenue continue to assist businesses planning to register for VAT in Ireland for the first time as a result of Brexit, and for businesses that may choose to make their Mini One Stop Shop digital sales VAT returns through Ireland following a UK departure from the EU.

Tracker Mortgages

Ceisteanna (22)

Michael McGrath

Ceist:

22. Deputy Michael McGrath asked the Minister for Finance his views on banks using the time limit for tracker mortgage appeals to the Financial Services and Pensions Ombudsman; his further views on whether the banks should lift the time limits; if he has engaged with the banks about this issue; and if he will make a statement on the matter. [39058/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware the Financial Services and Pensions Ombudsman (FSPO) is an independent statutory office which operates under its own legislative framework and presents customers with a statutory means of resolving their complaint against a regulated financial services provider in a fair and independent manner.

I am aware that the Deputy was recently in correspondence with the Ombudsman in relation to this matter. As outlined by the Ombudsman in his reply, before a formal investigation of a complaint can commence, this FSPO must assess whether the complaint has been made within the time limits set out in Section 51 the 2017 Act.

Section 51 of the 2017 Act provides that the complaint must be made, within whichever of the following periods is last to expire;

(i) 6 years from the date of the conduct giving rise to the complaint;

(ii) 3 years from the earlier of the date on which the Complainant became aware or ought reasonably to have become aware, of the conduct giving rise to the complaint;

(iii) Such longer periods as the Ombudsman may allow where it appears to him that there are reasonable grounds for requiring a longer period and that it would be just an equitable, in all of the circumstances to extend the period.

In order for the Ombudsman to exercise his discretion under Section 51(2)(a)(iii) there must be reasonable grounds in the particular complaint, for him to permit a longer period to enable the complaint to be made, and it must be just and equitable in all of the circumstances for him to do so.

When an assessment is conducted, it is open to a provider to express a view that the complaint was made within the time-periods in s51 of the 2017 Act. Some providers have taken this approach in relation to all tracker mortgage interest rate complaints. This is then taken into account in making a determination on the application of the time limits.

Property Tax

Ceisteanna (23)

Richard Boyd Barrett

Ceist:

23. Deputy Richard Boyd Barrett asked the Minister for Finance if the local property tax will be abolished and replaced with a landlord's tax that increases in rate depending on the number of properties the landlord has; and if he will make a statement on the matter. [38986/19]

Freagraí scríofa

Minister for Finance

The Local Property Tax was introduced in 2013 to provide a stable and sustainable funding base for local authorities and is a significant base-broadening measure. LPT has yielded over €2.42 billion for local authorities since its introduction, with the annual LPT allocation currently standing at close to €465 million, which supplements other local authority income. The Local Property Tax is currently forecast to yield approximately €470 million this year.

The taxation of property through a recurring annual tax is less economically distortionary than tax imposed on either income or capital. This is supported by analysis and international experience where, for example, the OECD in 2011 suggested that tax on property is considered the least harmful to growth. It is also the International and European norm. At just 0.6% of national income, the LPT yield in Ireland is low when compared to rates of 2.8% in France and over 3% in the United Kingdom.

I am informed by Revenue that LPT returns require owners to indicate whether their properties are principal or non-principal primary residences (NPPR). However, the information does not distinguish whether NPPR properties are owned by commercial landlords or otherwise. Page 27 of the Revenue Ready Reckoner which is available online shows the effect of additional charges on NPPR properties. If Principal Private Residences were exempted from the tax as the Deputy seems to suggest, approximately €410 million currently collected under the LPT would be lost. The number of properties indicated as NPPRs, is  approximately 260,000 and, consequently, for the Deputy’s suggested replacement tax, a very high tax rate would have to be imposed on these properties in order to maintain the current yield.

Last April, the Report of the Inter-Departmental Review Group was published and, having considered the findings of the review report, I decided to defer valuation date from 1st November 2019 to 1st November 2020. This deferral gives sufficient time to build consensus about the best way forward for the tax and to prepare appropriate legislation.  Therefore, I have no plans to abolish the Local Property Tax.

VAT Rate Application

Ceisteanna (24)

Michael McGrath

Ceist:

24. Deputy Michael McGrath asked the Minister for Finance the status of the VAT treatment of food supplements; and if he will make a statement on the matter. [39057/19]

Freagraí scríofa

Minister for Finance

Irish VAT legislation does not provide a zero rate for food supplement products; instead there is a legislative provision for zero rating food and drink. The zero rate for food and drink is provided for under a derogation from EU VAT law which allows Member States to retain certain zero rates for goods and services which were expressly covered in their national VAT legislation on 1 January 1991. The legislative provision for food and drink was in place on 1 January 1991, however there was no legislative provision for food supplement products and therefore they cannot be legally zero rated. 

Shortly after the introduction of VAT Revenue allowed the zero rate to be applied to certain food supplement products (vitamins, minerals and fish oils). This concessionary approach expanded as the market developed over the years and resulted in the zero rating by Revenue of further similar products, including products other than vitamins, minerals and fish oils. 

Revenue conducted a comprehensive review of the VAT treatment of food supplement products, including getting an expert report on the definition of food for the purposes of the VAT Consolidation Act. The expert prepared a detailed, scientific report that concluded that food supplement products are not conventional food. Based on the expert report and its own legal analysis, Revenue concluded that the status quo was no longer sustainable. 

Following this review, Revenue engaged with my Department concerning policy options that might be considered in the context of Finance Bill 2018. The relevant legislation was not changed in Finance Act 2018 and therefore Revenue issued new guidance in December 2018 which removed the concessionary zero rating of various food supplement products with effect from 1 March 2019. Following representation from Deputies and from the industry, I wrote to Revenue outlining my plans to examine the policy and legislative options for the taxation of food supplement products in the context of Finance Bill 2019. Revenue responded by delaying the withdrawal of its concessionary zero rating of the food supplement products concerned until 1 November 2019. This will allow time for the consideration of any legislative changes in the context of Budget 2020. 

Corporation Tax Regime

Ceisteanna (25)

Michael McGrath

Ceist:

25. Deputy Michael McGrath asked the Minister for Finance the status of the OECD BEPS process; the next steps involved; when he expects an agreement among the OECD members; the progress made on a review as to the sustainability of corporation tax receipts here in the coming years; and if he will make a statement on the matter. [39059/19]

Freagraí scríofa

Minister for Finance

On 28 May 2019, the OECD BEPS Inclusive Framework adopted a Programme of Work to develop a consensus solution to the tax challenges raised by digitalisation. This was subsequently endorsed by G20 Finance Ministers at their meeting in Fukuoka on 8-9 June 2019, and by G20 Leaders in Osaka on 28-29 June 2019.  This Programme of Work splits the continuing work among two separate Pillars.  

Subsequently the OECD Secretariat has been working on a “unified approach” based on significant commonalities of the three proposals under Pillar One of the Programme of Work.  This proposal will be published in October and it is anticipated that there will be a public consultation during November.

My position has consistently been that Pillar One proposals examining the issue of where companies generate their value and whether new concepts of value creation need to be recognised might provide a basis upon which a sustainable agreement could be found at the OECD. Nevertheless there remains many questions to be answered before we have a workable solution which achieves consensus on this proposal.

Pillar Two of the Programme of Work seeks to examine whether minimum effective tax rate rules should be agreed.  As I have said previously, this Pillar remains problematic, not least because of a lack of clarity as to what it is the proposal is trying to achieve. I remain to be convinced of the validity and appropriateness of this proposal in reaching an agreed outcome to addressing the tax challenges of digitalisation.

I have long acknowledged that further change to the international tax framework is necessary to ensure that we reach a stable global consensus for how and where companies should be taxed.  A certain, stable, and globally agreed international tax framework is vital to facilitate cross border trade and investment.  The Programme of Work has targeted an agreed outcome by the end of 2020 although further time would then be required for any agreement to be implemented by countries whether domestically or multilaterally.

Work on assessing all of the issues around the sustainability of corporation tax receipts and the potential fiscal vulnerabilities this may cause is ongoing. At a recent sitting of the Budget Oversight Committee I indicated that I would consider whether the expected publication date of March 2020 could be brought forward.

Brexit Preparations

Ceisteanna (26)

James Browne

Ceist:

26. Deputy James Browne asked the Minister for Finance the steps he has taken to date and plans to take in preparation for post-Brexit customs checks at ports here, specifically Rosslare Europort; and if he will make a statement on the matter. [38309/19]

Freagraí scríofa

Minister for Finance

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

I am advised that Revenue appointed 30 additional staff to Rosslare Europort. These additional staff brought the total Revenue staff in Rosslare Europort to approximately 50. In order to facilitate trade, Revenue will operate extended opening hours to reflect current trade flows through the Europort.

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

In April 2019, Revenue undertook direct engagement with truck drivers at both Dublin Port and Rosslare Europort. Customs Officers provided advice to drivers waiting to embark ferries and on-board a number of sailings. Information leaflets, providing key customs advice for truck drivers were distributed to ensure that drivers understand and are aware of the impact Brexit will have on their journeys. Revenue also made a presentation in Rosslare Europort to the haulage sector outlining the Customs procedures and obligations in relation to the flow of goods through Rosslare Europort. Revenue will continue to support initiatives to support trade preparations for Brexit.

Revenue Commissioners Data

Ceisteanna (27)

Joan Burton

Ceist:

27. Deputy Joan Burton asked the Minister for Finance the estimated increase in the number of high net worth persons dealt with by the Revenue Commissioners' large cases division if the threshold for inclusion was reduced to €30 million; the additional resources which would be required to provide for such a reduction; if such resources will be made available to the Revenue Commissioners; and if he will make a statement on the matter. [39047/19]

Freagraí scríofa

Minister for Finance

I am advised by Revenue that it split its Large Cases Division into two divisions in 2018, one of which, Large Cases – High Wealth Individuals Division (LC-HWID), has a focus on HWIs, avoidance and pensions. As reflected in one of the recommendations in the 2017 Annual Report by the Comptroller and Auditor General (C&AG), this new Division reviewed the case base with a view to increasing the number of HWIs it manages.  This review has been published on the Revenue website and sets out the revised criterion to be considered a HWI and to therefore come within the remit of the HWI branches of LC-HWID is net assets of €20 million and over.  

I am advised by Revenue that as there is no statutory obligation on individuals to return details of their net worth on returns of income it is not possible to estimate the number of individuals with a net worth within the threshold requested by the Deputy. 

The allocation of resources is a matter for Revenue, but I understand that Revenue’s structural realignment, of which the setting up of the LC-HWID was a part, was supported by an expansion in the number of specialist and experienced staff assigned to the oversight of the new Division’s case base.  The number of staff currently assigned to the HWI branches is c.60.

Finally, I would like to say to the Deputy that over the last number of Budgets I supported the business case put forward by Revenue in relation to additional resources, both personnel and ICT, and I will continue to examine any proposal put forward by Revenue in the future.

Excise Duties

Ceisteanna (28)

Pearse Doherty

Ceist:

28. Deputy Pearse Doherty asked the Minister for Finance his plans to increase the excise duty on diesel fuel; his views on the impact of such an increase on the haulage industry in view of the threat posed by Brexit; and if he will make a statement on the matter. [39083/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, it is a longstanding practice of the Minister for Finance not to comment, in advance of the Budget, on any tax matters that might be the subject of Budget decisions.

Irish Fiscal Advisory Council

Ceisteanna (29)

Thomas P. Broughan

Ceist:

29. Deputy Thomas P. Broughan asked the Minister for Finance the way in which and when he will respond to the recent criticism from the Irish Fiscal Advisory Council that the Government needs to develop a more credible medium-term plan for budget 2020; and if he will make a statement on the matter. [38307/19]

Freagraí scríofa

Minister for Finance

The main point raised by the Irish Fiscal Advisory Council (IFAC) in relation to medium-term budgetary planning relates to expenditure ceilings. In this area, my view is that there is a balance to be struck. 

In theory, fixing expenditure ceilings over the medium term has certain advantages, including higher levels of certainty.  

In practice, however, experience shows the inherent risk of expenditure ceilings acting simply as a baseline (i.e. floor), with additional expenditure arising above and beyond this.  The experience in the lead-up to the fiscal and economic crisis is testament to this: large and ultimately unsustainable increases in expenditure were implemented during the pre-crisis period, bringing our country to the verge of bankruptcy.

I am not prepared to go down this route. 

What I have done, however, is to raise the medium-term projected annual growth rate in current expenditure from 2½ per cent to 3¼ per cent in the Summer Economic Statement (SES). Taking into account the increases set out in the National Development Plan and the additional allocation for the National Broadband Plan, this equates to an overall average annual increase of c.3¾ per cent in gross voted expenditure over the period 2020 - 2024.

This is a more plausible growth rate and a rate of expenditure growth that is consistent with the point of the economic cycle where the Irish economy is likely to be.

On the points raised in relation to corporation tax, I have requested my officials to examine potential policy options as to how vulnerabilities could be addressed. I will bring recommendations to Government in due course.  Furthermore, my Department will undertake and publish an assessment of the sustainability of corporation tax receipts, in light of future multilateral policy changes in this area.

Finally, in relation to debt ratio targets, my Department’s analysis of debt as published in its Annual Report on Public Debt in Ireland includes, amongst others, the debt-to-GNI* metric, as suggested by IFAC.

Insurance Costs

Ceisteanna (30)

Bobby Aylward

Ceist:

30. Deputy Bobby Aylward asked the Minister for Finance the measures taken to meet and engage with insurance companies regarding excessive premiums being charged to consumers, particularly in counties Carlow and Kilkenny; and if he will make a statement on the matter. [38814/19]

Freagraí scríofa

Minister for 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 either to consumers or businesses.

However, I acknowledge the general problems faced by many consumers across the country in relation to the cost and availability of insurance.  I also appreciate that there is some frustration about the perceived 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 the above, I wish to reemphasise how important this issue is for the Government.  As the Deputy is aware, the Cost of Insurance Working Group (CIWG) 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 Deputy will recall that the CIWG has produced two reports since its inception and has been working to implement the 33 recommendations of the Cost of Motor Insurance Report published in 2017, as well as the 15 Recommendations of the Cost of Employer and Public Liability Insurance Report, published in 2018.

Quarterly progress updates on the implementation of both of the CIWG reports provide more detailed information on the implementation of each of the recommendations and actions.  The ninth quarterly update was published in July and is available on the Department’s website. It shows that vast majority of the recommendations due before Q2 2019 have been completed.

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.

As outlined to the Deputy in previous PQ responses (including PQs 25241/19, 17651/19, 9764/19, 7359/19, 48428/18 and 40780/18), stakeholder consultation formed the foundation upon which the two primary reports of the Cost of Insurance Working Group and the accompanying recommendations were developed.  This consultation process involved a wide range of stakeholders representing the different voices within this sector, including representative bodies, the major individual motor insurance providers and interest groups.  The impact of excessive premiums being charged to consumers from all counties across the country was a feature of this engagement process with industry.  

In addition, Department officials regularly raise specific issues affecting consumers across the country during their ongoing engagement with Insurance Ireland. Furthermore, Minister of State D’Arcy has separately met with representatives from insurance companies and other stakeholders in relation to a number of issues and the problems resulting from high insurance premiums have been discussed during these engagements.

Ireland Strategic Investment Fund Investments

Ceisteanna (31)

Thomas Pringle

Ceist:

31. Deputy Thomas Pringle asked the Minister for Finance the status of the divestment of public funding in the Ireland Strategic Investment Fund from fossil fuel companies since the enactment of the Fossil Fuel Divestment Act 2018; his plans as part of the climate action plan 2019 to encourage the private sector to divest from fossil fuel companies and offer investors fossil free alternatives; and if he will make a statement on the matter. [38453/19]

Freagraí scríofa

Minister for Finance

The Fossil Fuel Divestment Act 2018 provides for the divestment by the Ireland Strategic Investment Fund (ISIF) from fossil fuel undertakings, that is, companies that derive more than 20% of their revenues from the exploration, extraction and/or refinement of fossil fuels, within a practicable timeframe. Under the Act, fossil fuels are defined as oil, natural gas, peat, coal or any derivative thereof intended for use in the production of energy by combustion.

I am informed by ISIF that by early January 2019, it had sold approximately €72m worth of stocks and bonds in 38 individual fossil fuel undertakings.

Following enactment, ISIF published a Fossil Fuel exclusion list on its website, encompassing 148 companies in which it will not invest. The list is actively monitored and reviewed every 6 months, and so, in July 2019, was extended by a further 33 undertakings. As part of ongoing compliance with the Act, further divestments were therefore made.

The recently launched all of Government Action Plan contains a number of actions which aim to encourage private sector investment to assist in the low carbon transition. While I believe that questions relating to the Plan are more appropriately for answer by the Minister for Communications, Climate Action and the Environment, there are two actions which are broadly related to the Deputy’s query which do fall under the remit of the Department of Finance.

Under action 10, the State will be exploring options for non-Exchequer sources of financing climate action and green investments and assessing the international sustainable and green finance environment for other potential solutions. The direct focus of the action is investment, not necessarily divestment, but, nonetheless, is part of the broader green finance agenda.

Action 11, meanwhile, includes the promotion of the sustainable finance sector in Ireland, through the new strategy for international financial services, ‘Ireland for Finance’. It also includes engagement at EU level on sustainable finance proposals, particularly regarding establishment of a framework to facilitate sustainable investment by creating a unified classification system of environmentally sustainable economic activity. This will be an important step in advancing the connection between financial markets and private investors with a sustainability agenda.

Departmental Legal Cases

Ceisteanna (32, 44)

Pearse Doherty

Ceist:

32. Deputy Pearse Doherty asked the Minister for Finance when the appeal against a ruling by the EU Commission (details supplied) will conclude; and if he will make a statement on the matter. [39084/19]

Richard Boyd Barrett

Ceist:

44. Deputy Richard Boyd Barrett asked the Minister for Finance the cost to date and the projected costs for the entire case for the Irish legal team taking an appeal against an EU ruling (details supplied); and if he will make a statement on the matter. [38984/19]

Freagraí scríofa

Minister for Finance

I propose to take Questions Nos. 32 and 44 together.

The Government profoundly disagrees with the Commission’s analysis in the Apple State aid case. An appeal has therefore been brought before the European Courts. Such an appeal takes the form of an application to the General Court of the European Union, asking it to annul the Decision of the Commission.

The Attorney General prepared the legal grounds in support of the annulment proceedings and the application has been lodged in the General Court of the European Union.

As is normal practice, a summary of the legal grounds for the appeal have been published in the Official Journal of the European Union.  They were also published on the Department of Finance’s website in December 2016. The oral hearing for the appeal took place at the General Court of the European Union on 17 and 18 September 2019 and an overview of Ireland’s position at the oral hearing was published on the Department’s website.

The cumulative cost to date in respect of the entire appeal and recovery in the Apple case is in the order of €7.2 million (including VAT). This includes all legal costs, consultancy fees and other associated costs. These fees have been paid by the Department of Finance, Revenue Commissioners, NTMA, Central Bank of Ireland, Attorney General's Office and Chief State Solicitor's Office.

It will most likely be several years before the full process of litigation, which may include engagement with the European Court of Justice, is ultimately concluded. For this reason, it is not possible to have a fixed projection of costs for the entire case.

This case has involved a significant degree of legal and technical complexity and additional expertise has been engaged where required. With regard to future anticipated costs, as it is and will continue to be an important issue for the State, it will continue to be appropriately resourced.

Capital Expenditure Programme

Ceisteanna (33)

Bernard Durkan

Ceist:

33. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he can support borrowing for capital purposes with particular reference to measures to address infrastructural deficits in the aftermath of Brexit; and if he will make a statement on the matter. [39010/19]

Freagraí scríofa

Minister for Finance

As the Deputy will be aware, it is not the practice of the Minister for Finance to discuss the details of measures which may be under consideration as part of the Budget and Finance Bill.

Insurance Fraud

Ceisteanna (34)

Aindrias Moynihan

Ceist:

34. Deputy Aindrias Moynihan asked the Minister for Finance the progress in developing legislation to create an integrated insurance fraud database; and if he will make a statement on the matter. [39092/19]

Freagraí scríofa

Minister for Finance

The Cost of Insurance Working Group Report on the Cost of Motor Insurance’ (January 2017) includes a recommendation to establish a fully functioning integrated fraud database for industry to detect patterns of fraud managed by an independent not-for-profit body but funded by industry. This approach is designed to provide for complete and open access to the data held on any such database for all market participants.  

The current position in relation to the development of this database is that the Insurance Fraud Database Working Group, chaired by the Crime Division of the Department of Justice and Equality  (DJE)is continuing to meet in order to work through the various requirements of such a database including satisfactory data protection requirements.

In this regard, DJE submitted a Data Protection Impact Assessment (DPIA) on the current industry database ‘Insurance Link’ to the Office of the Data Protection Commission (ODPC) on behalf of Insurance Ireland in June 2019. DJE is continuing to engage with Insurance Ireland and the Office of the Data Protection Commission on this matter.

It is too early at this stage to consider whether legislation is needed to underpin such a database. A decision of this nature can only be made when all data protection-related issues have been addressed. If it becomes apparent that legislation is required, my Department will consider in conjunction with the Department of Justice and Equality how to progress this matter appropriately.

Subject to consultation with the ODPC, the next phase towards implementation of this recommendation will require the identification of an appropriate independent body to manage the database. The Cost of Insurance Working Group will continue to closely monitor progress of the implementation of this recommendation.

Tax Code

Ceisteanna (35)

Maurice Quinlivan

Ceist:

35. Deputy Maurice Quinlivan asked the Minister for Finance his plans to either increase the upper limit or reduce the lower threshold in the special assignee relief programme in budget 2020; and if he will make a statement on the matter. [39090/19]

Freagraí scríofa

Minister for Finance

I am currently awaiting the completion of a comprehensive review of the Special Assignee Relief Programme (SARP).  The review is being carried out by Indecon Economic Consultants and my Department expects to receive the relevant report within the coming days.  The review affords an opportunity to look at all elements of the relief, including the particular aspects to which the Deputy refers.

I propose to wait until the report is received and I have had a chance to consider its conclusions and recommendations before making decisions on any aspect of SARP.

However, I would remind the Deputy that the incentive as currently framed in the legislation is due to operate until the end of next year so that the timeframe within which decisions must be made relating to the relief, or aspects thereof, is a relatively long one.