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 Header Item Written Answers
 Header Item Tax Code
 Header Item NAMA Debtors
 Header Item Personal Insolvency Practitioners
 Header Item Mortgage Arrears Proposals
 Header Item Bank Charges

Tuesday, 2 July 2013

Dáil Éireann Debate
Vol. 809 No. 2

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Written Answers

 The following are questions tabled by Members for written response and the ministerial replies as received on the day from the Departments [unrevised].

  Questions Nos. 1 to 14, inclusive, answered orally.

  Questions Nos. 15 to 61, inclusive, resubmitted.

  Questions Nos. 62 to 69, inclusive, answered orally.

Tax Code

 70. Deputy Patrick Nulty Information on Patrick Nulty Zoom on Patrick Nulty asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on recent allegations made in the US Senate committee hearings that Ireland is being used by certain transnational corporations to significantly reduce their tax liability.  [25452/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The corporation tax paid by some large multinational corporations and the rate at which they pay that tax is an issue that has attracted a lot of public and media attention recently. Every country in the world has its own particular tax system. These systems have been put in place and developed over the years to reflect their own circumstances. Some multinational corporations, with the assistance of legal practitioners and tax advisers, have exploited the differences in these systems to their own advantage. What is evident is that these corporations can organise their company structures to such an extent that they are able to minimise their corporate tax liabilities while still acting within the law.

  In recent weeks national and international attention has turned to Ireland, our competitive corporate tax rate, and the tax arrangements employed by some multinational corporations based here. I want to reiterate some points that are very important to the debate.

  Firstly, I want to make it clear that we do not have a special low corporation tax rate for multinational companies. Ireland’s tax system is statute-based so there is no possibility of individual special tax rates for companies.

  All companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%.

  The tax rates that were quoted publicly are, emphatically, not the rate of tax paid by such companies, or by any company, on their Irish activities. Having examined the document produced by the US Senate Subcommittee, it appears that the rate that is being quoted is reached by taking the Irish tax chargeable on the branch activities of companies that are not tax resident here, and dividing this figure by the entire global profit of the company concerned.

  It is clearly wrong and misleading to attribute this rate of tax to Ireland. Companies which are not tax-resident in Ireland are not chargeable in Ireland in respect of their non-Irish profits, and these non-Irish profit figures should not be used to assert special tax rates that simply do not apply here.

  Secondly, the ability of multinational entities to lower their aggregate, global tax payments using international structures reflects the global context in which Ireland and indeed all countries operate. This is an issue that we cannot solve on our own, and in a time where citizens are being asked to dig deeper into their pockets, Governments around the world are now taking co-ordinated action to ensure that these corporations pay their fair share of taxes.

  I would like to reassure the house that Ireland has been proactive and has already taken the lead on many of these global issues, for example:

- The Irish Presidency has made significant progress on a number of key files in the area of tax evasion and tax fraud and we were able to bring a number of these to a successful conclusion:

- At the June Ecofin meeting we agreed a VAT anti-fraud package to combat sudden and massive VAT fraud.

- In May, significant progress was made on widening the scope of the EU Savings Directive which involves automatic exchange of information between tax authorities, an important step forward in an area where progress has been stalled for a number of years.

- And also in May we brokered an agreement among EU Finance Ministers to set out a roadmap on aggressive tax planning and good governance.

  All of these achievements have been acknowledged as significant by our EU colleagues. In fact, the EU Tax Commissioner, Algirdas Semeta, took to Twitter last week publicly thanking us for our "very successful Presidency" from a tax perspective.

- Beyond the EU, Ireland is actively participating in the OECD’s "Base Erosion and Profit Shifting" project, which will shortly produce an action plan that will be the main toolkit of the global effort to tackle this issue.

- And, in December last year, Ireland signed an Agreement with the United States to provide for the automatic reporting and exchange of information between the US Treasury and the Irish Revenue Commissioners. In so doing, Ireland was the fourth country in the world to sign such an agreement, which gave effect to the FATCA regulations. This was a welcome opportunity to demonstrate our commitment to combat tax evasion, and in particular, demonstrates our excellent relationship with the US authorities in such matters.

  Both the OECD and EU work has clearly demonstrated that this is a global problem, which cannot be solved by one nation or even one continent acting on its own.  

NAMA Debtors

 71. Deputy Sandra McLellan Information on Sandra McLellan Zoom on Sandra McLellan asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan further to his response in Dáil Éireann where he set out that 45 National Asset Management Agency developers had a collective amount of €8 billion owing to NAMA when they were declared bankrupt outside of Ireland, if NAMA has made provision for the non-payment of what was owed by these developers on its books and what that means for NAMA's financial outworkings.  [31881/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan As advised in response to a recent Parliamentary Question No. 82 of 20th June 2013, NAMA debtors who have been declared bankrupt outside of Ireland had, by reference to the nominal or par value of loans, exposure to debt of approximately €8 billion at the time of NAMA's acquisition of loans from the participating institutions. As also advised, NAMA has enforced over the assets securing these loans and continues to realise these assets.    

  Bankruptcy proceedings relate, generally, to any remaining unencumbered or unsecured assets held by the bankrupt. The role of the bankruptcy trustee is, therefore, to realise any other residual or unencumbered assets, including property and cash, which the bankrupt may have and to make a distribution to creditors including NAMA. The bankruptcy trustee can also seek to have the bankrupt contribute from post-bankruptcy earnings through an income payment order.

  NAMA advises that it does not write off debt as a result of debtors filing for bankruptcy outside the jurisdiction of the State. Rather, it is a matter for the bankruptcy proceedings to deal with the outstanding debt. NAMA advises that even where the bankruptcy is discharged, the bankruptcy estate continues until such time as all assets have been liquidated and the debt, in so far as possible, has been repaid. NAMA advises that, in its position as a secured lender, its experience has been that bankruptcy has not tended to prejudice recoveries.

  The Deputy may wish to refer to NAMA’s Annual Report and Financial Statements for 2012, which contains extensive information regarding the Agency’s operations, including, as set out in pages 26-27 in particular, its insolvency activity and on the locus of debtor bankruptcy. The end 2012 financial statements takes account of the financial position of its whole loan book including those debtors that have declared bankruptcy. As with all debtor connections, NAMA conducts regular impairment reviews of connections whose principals have been declared bankrupt. The fact of being declared bankrupt does not in itself necessarily cause the impairment position to deteriorate. NAMA’s security position is not impacted by bankruptcy proceedings.

  It is important to point out that debtors are entitled to petition to bankrupt themselves in other jurisdictions if they are entitled to do so under the laws of that jurisdiction. The Deputy will be aware that for a debtor to avail of bankruptcy in any given jurisdiction he/she must first of all establish that jurisdiction as his/her centre of main interest (COMI). The establishment of COMI is a matter for the relevant authorities in the jurisdiction in which bankruptcy is sought. NAMA advises that in each instance of bankruptcy involving a NAMA debtor it reviews its options and selects the most appropriate method of ensuring the best possible return for the taxpayer. NAMA advises that it is currently challenging bankruptcy applications on the basis of COMI in two instances and in a further case is supporting the application of another secured bank with a view to having bankruptcy proceedings take place in Ireland.

  NAMA advises that in each instance of bankruptcy involving a NAMA debtor it reviews its options and selects the most appropriate method of ensuring the best possible return for the taxpayer. As advised in NAMA’s Annual Report and Financial Statements, the Agency, as a secured creditor, is generally neutral on the locus of bankruptcy proceedings and its experience has been that the location has not tended to prejudice recoveries. This position is based in part on its positive on-going engagement with several bankruptcy trustees of debtors who have been adjudged bankrupt in the UK. The Agency also advises that the bankruptcy regime in the UK is well-established, sophisticated and that bankruptcy trustees under the UK system possess extensive powers to compel production of legal and banking information, on a cross-border basis, from the bankrupt. These powers have been used in bankruptcy cases involving NAMA debtors to uncover significant undeclared assets.

  NAMA further advises that the comparatively shorter duration of bankruptcy in the UK is not a consideration for the Agency as the bankrupt’s assets remain in the control of the bankruptcy trustee long after the bankrupt may have been discharged from bankruptcy and any failure to make full disclosure may result in the period of bankruptcy being extended. NAMA advises that it challenges the release from bankruptcy of any debtor in instances where there is non-co-operation with the bankruptcy trustee.    

Personal Insolvency Practitioners

 72. Deputy Denis Naughten Information on Denis Naughten Zoom on Denis Naughten asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will abolish the 23% VAT rate on fees charged to families by a personal insolvency practitioner; the estimated cost to the Exchequer in the current year and a full year if VAT was not charged on home insolvency proceedings; and if he will make a statement on the matter.  [31478/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I am informed by the Revenue Commissioners that the service provided by personal insolvency practitioners does not qualify for exemption in accordance with the EU VAT Directive, Irish VAT law, and relevant decisions of the European Court of Justice. Therefore, like other insolvency services such as those provided by liquidators, receivers and examiners, the service provided by a personal insolvency practitioner is liable to VAT at the standard rate of 23%.

  I am also informed by the Revenue Commissioners that under a personal insolvency arrangement, the personal insolvency practitioner’s fees are ultimately deducted from the dividend payments to the creditors under the arrangement rather than charged to the debtor. As the debtor is availing of a personal insolvency arrangement because of their insolvent position, it is the creditor who is bearing the ultimate cost of the fees and the VAT on the fees.

  Since information is not available on the volume of personal insolvency practitioner activity or the fees charged, it is not possible to estimate the cost to the Exchequer of exempting the service from VAT were it possible to grant such an exemption. 

Mortgage Arrears Proposals

 73. Deputy Dessie Ellis Information on Dessie Ellis Zoom on Dessie Ellis asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he has held negotiations with the troika over tracker mortgages; and if he is planning any regulatory or legislative changes to allow for borrowers in some circumstances to be moved off tracker mortgages.  [31863/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan As the Deputy is aware, I have no statutory function in relation to banking decisions made by individual lending institutions at any particular time. This is ultimately a commercial decision for the management team and board of each bank, having due regard to their customers and the impact on profitability. I must ensure that the banks are run on a commercial, cost effective and independent basis to ensure their value as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF. A Relationship Framework has been specified that defines the nature of the relationship between the Minister for Finance and each bank. These Frameworks were published on 30 March 2012 and can be found at:

  The Code of Conduct on Mortgage Arrears (CCMA) stipulates very strict and narrow conditions for any change of a tracker mortgage contract. As the Deputy is aware, the CCMA requires that a lender must not require the borrower to change from an existing tracker mortgage, as part of any alternative repayment arrangement offered, except where:

- all other options, which would retain the tracker rate, have been considered to be unsustainable;

- the arrangement offered is affordable to the borrower;

- the arrangement is a long-term sustainable option.

  The Central Bank has reviewed the CCMA and undertook a consultation in relation to the provisions in the CCMA. The revised CCMA was published on 27 June 2013 and came into effect on 1 July 2013.

  The CCMA provides an integrated and cohesive package of consumer protection measures for borrowers facing or in mortgage arrears. It reflects the current mortgage arrears situation and seeks to deliver on the following principles, to:

- ensure appropriate resolution of each borrower’s arrears situation;

- ensure that lenders deal with borrowers in a fair and transparent manner;

- support and facilitate meaningful engagement between lenders and borrowers; and

- ensure borrower awareness of the benefits of co-operating with their lender, and the consequences of not co-operating.

  With regard to restructuring of mortgage loans, the CCMA requires lenders to explore all of the options for alternative repayment arrangements offered by that lender, for each particular case.

In addition, where an alternative repayment arrangement is offered by a lender, the revised CCMA requires the lender to outline the reasons why the alternative arrangement offered is considered to be appropriate and sustainable, as well as the advantages and any disadvantages or potential disadvantages of any arrangement offered, with regard to the individual circumstances of the borrower.  

Bank Charges

 74. Deputy Jonathan O'Brien Information on Jonathan O'Brien Zoom on Jonathan O'Brien asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on the recent increase in bank charges by AIB; and if he has had any contact with the bank regarding this increase. [31884/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan While the Government is acutely aware of the increasing financial stress that some households and businesses are facing in the current environment, ultimately the pricing of financial products, including customer account charges, is a commercial matter for the management and the Board of the Institution. As the Deputy will be aware the Relationship Framework with the bank provides that the State will not intervene in the day-to-day operations of the bank or their management decisions. These frameworks are published on the Department of Finance website. I must ensure that the bank is run on a commercial, cost effective and independent basis to ensure the value of the bank as an asset to the State, as per the Memorandum on Economic and Financial Policies agreed with the EU Commission, the ECB and the IMF.   

  I have been informed by AIB that these pricing changes will increase the average Maintenance and Transaction cost for fee paying personal customers by €0.75 per month and by less than €2 per month for business customers. These fee increases do not affect the circa 40% of personal banking customers in AIB who avail of free banking via, "a way to bank free of maintenance and transaction fees", if they are students or Advantage customers over the age of 60. Free banking offers also exist for start-up businesses and young farmers, while business customers have the option to negotiate fees on a case by case basis.

  I have also been informed by the bank that for every ATM transaction the actual cost of providing the service is greater than the fee charged to customers for availing of the service. The bank also provides a guide on its website for customers on the way to reduce the cost of banking.

  It should also be noted that the Central Bank of Ireland is required under section 149 of the Consumer Credit Act 1995 to approve any increases in bank charges and approval for these increases was received prior to the announcement last week.

  In 2011, I requested that the Central Bank examine ways to improve Ireland's payment infrastructure. The Central Bank established a Steering Committee which prepared and submitted the National Payments Plan to me. Government subsequently approved the plan in April 2013 and my Department is now working to implement its recommendations.  

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