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 Header Item Written Answers Nos. 75-84
 Header Item Overseas Development Aid Issues
 Header Item Banks Recapitalisation
 Header Item Tax Code
 Header Item Mortgage Arrears Proposals
 Header Item Mortgage Arrears Proposals
 Header Item Personal Insolvency Practitioners
 Header Item Money Laundering
 Header Item NAMA Loan Book
 Header Item Banking Sector Regulation
 Header Item Budget Consultation Process

Tuesday, 2 July 2013

Dáil Éireann Debate
Vol. 809 No. 2

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Written Answers Nos. 75-84

Overseas Development Aid Issues

 75. Deputy Kevin Humphreys Information on Kevin Humphreys Zoom on Kevin Humphreys asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will outline, in relation to the proposals on taxation in the Lough Erne declaration made by the G8 in June and the call for greater policy coherence in the recent Irish Aid policy paper One World, One Future, the way Ireland is planning to respond to the call for developed countries to help developing countries collect the taxes owing to them, and for legislation to bring an end to tax offshoring; and if he will make a statement on the matter. [31794/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I have referred, in answers to other Parliamentary Questions, to work done under the auspices of the OECD in relation to assistance to developing countries in tax matters. In particular, the tax and development programme implemented by the OECD's Committee on Fiscal Affairs (CFA) and Development Assistance Committee (DAC) is concerned with supporting effective tax systems in developing countries. Notwithstanding our own severe budgetary challenges resulting from the international financial crisis, Ireland, through Irish Aid, is contributing to the funding of this work on tax and development. The OECD’s Tax Inspectors Without Borders (TIWB) project is an important initiative under the tax and development programme which is directly concerned with helping developing countries to collect their taxes.

  To improve tax transparency and compliance in developing countries, civil society groups have for some time now been campaigning for multinational enterprises to publicly report on a country-by-country basis in their annual financial statements. Proponents of published country-by-country reporting suggest this would discourage profit-shifting between countries. Ireland supports the ongoing work at OECD level on tax and development issues, including work on country-by-country reporting. While supporting the principle of country-by-country reporting our position is that it should be rolled out carefully on a phased basis with an appropriate impact assessment. Ireland has given country-by-country reporting a significant boost by negotiating its extension to the financial services sector under our EU Presidency.

  Effective exchange of information is a critical tool in ensuring that countries are able to collect taxes owing to them. Ireland has now fully signed up to the joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters. Ireland’s instruments of ratification were deposited on 29 May of this year and the Convention/Protocol will enter into force on 1 September 2013. The deputy may wish to note, in particular, that an amending Protocol extends participation in this Convention to developing countries. This enables developing countries to access exchange of information with an ever-increasing range of countries without having to incur the expense of negotiating agreements with each of the countries concerned individually.    

Banks Recapitalisation

 76. Deputy Joe Higgins Information on Joe Higgins Zoom on Joe Higgins asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan following the release of recordings of senior Anglo Irish Bank executives, his views on the apparent abuse of the bank guarantee scheme by Anglo Irish Bank to secure deposits from other institutions; and if he will make a statement on the matter.  [31895/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The recordings to which the Deputy has referred are a matter of the most serious concern in the context of the background of the bank guarantee against which they were made. As I said last week in commenting on the affair, the content of the tapes has been very negative for Ireland’s standing internationally and has resulted in extremely unfavourable press coverage abroad. Here at home, public anger, disgust and dismay at the tone and content of the transcripts is, understandably, almost palpable. I, too, am appalled at what I have read and heard.

   The question of any abuse of the bank guarantee scheme in relation to deposit-taking by Anglo Irish Bank referred to by the Deputy is currently being examined by the Central Bank. The Bank is liaising with the Gardai on the matter and is examining whether or not any breaches of regulatory requirements may have occurred arising from the information contained in the transcripts. As the Deputy will appreciate therefore, I am not in a position to comment more specifically on this issue at this time.

  The revelations of the past week or so bring to the fore the need for a banking inquiry as soon as possible. Of course, this will be a matter for the Houses of the Oireachtas themselves to determine. As I said recently in responding to a Parliamentary Question on the matter, the Minister for Public Expenditure and Reform indicated that he supported the objective of holding a legally robust, parliamentary banking inquiry when he announced last month the publication of his Department’s ‘Houses of the Oireachtas (Inquiries, Privileges and Procedures) Bill 2013’. Indeed, Minister Howlin has since – in the wake of the publication of the transcripts - underlined the need for such an inquiry. While the primary purpose of the Bill is to create a legislative framework for Oireachtas inquiries generally, it would be of direct practical assistance in facilitating a banking inquiry in accordance with a decision of the Houses of the Oireachtas in this regard.  

Tax Code

 77. Deputy Joan Collins Information on Joan Collins Zoom on Joan Collins asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan in view of recent revelations about the low level of corporate tax paid by a number of high-profile companies based here, if he intends to change Ireland's corporate tax regime; and if he will make a statement on the matter. [31888/13]

 91. 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 will consider legislating to make every company operating here but not tax resident here or in any other country deemed tax resident in Ireland. [31877/13]

 94. Deputy John Halligan Information on John Halligan Zoom on John Halligan asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will consider establishing a 12.5% minimum effective tax rate and close off any loophole in our corporate tax that allows some companies based here to pay less than the current 12.5% nominal rate; and if he will make a statement on the matter.  [31854/13]

 127. Deputy Richard Boyd Barrett Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan in the aftermath of recent revelations about the very low level of corporate tax paid by a number of high-profile companies based here, if he intends to change Ireland's corporate tax regime; and if he will make a statement on the matter. [31851/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I propose to take Questions Nos. 77, 91, 94 and 127 together.

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

  However, I am aware of recent media reports which refer to the ways that some companies structure their international tax affairs to minimise their tax costs, and the fact that some of these reports make reference to Irish companies being part of these structures. By mixing up the Irish profits and the foreign profits of multinational groups, such reports can produce a global tax rate for the companies concerned that is lower than 12.5% — and an incorrect inference that the full Irish profits are not being charged.

  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 profits charged in Ireland fully reflect the functions, assets and risks located here by a multinational group. The payments to the non-resident company represent the required remuneration of intellectual property assets funded and owned outside the State and its tax payments are properly reduced in these circumstances by reference to expenditure incurred for the purpose of its trade. Ireland cannot expect to receive or retain the remuneration of these assets.

  The ability of entities to lower their global rate of tax using international structures reflects the global context in which Ireland and indeed all countries operate. Differences arise in the legal and tax systems between countries. International tax planning takes account of these differences in national systems and rules. What companies do outside of Ireland is beyond the scope of the Irish tax system. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to taxation in Ireland alone.

  The only way to effectively deal with such arrangements is for countries to work together to examine these structures and to consider how international rules can be amended to ensure fair levels of taxation. Ireland remains fully committed to this approach to ensure fair play in international taxation. In this regard, Ireland is participating in projects at EU and OECD level which aim to address international tax issues.

  Further, as part of the Irish Presidency of the EU, we were able to demonstrate our willingness to take the lead and made significant progress on a number of key files in the area of tax evasion and tax fraud. 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 up a roadmap on aggressive tax planning and good governance.

  All these achievements were acknowledged as significant, no less than by EU Tax Commissioner Algirdas Semeta last week when he referred to our “very successful Presidency” from a tax perspective.

  My Department has been actively engaged in the OECD Base Erosion and Profit Shifting (‘BEPS’) project. Following our invitation, the head of this project, Pascal Saint-Amans, spoke at our Tax and Economics conference last month and spoke very positively about Ireland’s support for the BEPS project. An Action Plan on BEPS will shortly be published: this Action Plan will be the main toolkit of the global effort to tackle this global issue. This is the appropriate forum in which to consider any potential changes to the Irish corporate tax system. My officials will take this under consideration as part of the regular Budgetary and Finance Bill process.   

Mortgage Arrears Proposals

 78. Deputy Richard Boyd Barrett Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he believes additional measures beyond the recently passed personal insolvency legislation is now necessary in order to deal with the worsening mortgage crisis; and if he will make a statement on the matter. [31852/13]

 119. Deputy Joan Collins Information on Joan Collins Zoom on Joan Collins asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on whether additional measures beyond the recently passed personal insolvency legislation are now necessary in order to deal with the worsening mortgage crisis; and if he will make a statement on the matter. [31889/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I propose to take Questions Nos. 78 and 119 together.   

  The 2011 Keane Report on mortgage arrears identified personal insolvency reform, and in particular the introduction of new and more accessible debt resolution mechanisms, as a central catalyst for the resolution of the mortgage arrears problem. Indeed, it went as far as stating that, without effective bankruptcy legislation, the mortgage arrears problem will not be resolved. The Government has accepted the need for fundamental reform in this area and the new debt settlement frameworks as provided for in the 2012 Personal Insolvency Act will very soon be available to debtors.

  However, the Government also accepts that personal insolvency reform on its own is not a sufficient response to deal with the problem. Other initiatives and measures are also required and are being implemented in tandem with personal insolvency reform. These include:-

- With Central Bank oversight, the development of mortgage arrears resolution strategies by mortgage lenders and the subsequent setting of performance targets for the main banks to require them to implement these strategies and, in particular, to propose sustainable solutions to their customers who are in mortgage difficulty. Associated with this is the recent Code of Conduct on Mortgage Arrears changes which seek to ensure an appropriate resolution of each case of mortgage difficulty and to require lenders to explore all meaningful alternative repayment arrangements offered by the lender for co-operating borrowers.

- The provision of general and, where appropriate, more targeted information and advice to mortgage holders which is free to the users of the service.

- The development of a "mortgage to rent" scheme as a social housing response to eligible households to allow them remain in their home.

  The necessary overall strategy and building blocks to address the mortgage arrears problem are, therefore, now in place. These include the Central Bank targets initiative, the new Code of Conduct on Mortgage Arrears, the fundamental change to personal insolvency legislation including the provision of new, more accessible and less penal resolution mechanisms to debtors and a comprehensive mortgage information and advice service.

  The onus is now on lenders to move to address individual arrears cases in a comprehensive and speedy manner. Therefore, I expect the banks to increase the number of “split mortgage” and the other long term restructured mortgage arrangements put in place over the remainder of this year.

As part of the process banks are requested to make regular returns to the Central Bank on their performance against the targets and the Central Bank will audit the performance of the lenders in this regard. I can assure the Deputy that, both my Department and I will keep in close liaison with the Central Bank and individual banks on this important issue.  

Mortgage Arrears Proposals

 79. Deputy Niall Collins Information on Niall Collins Zoom on Niall Collins asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan his views on reports that some banks require customers to sign confidentiality agreements prior to concluding an arrangement on restructuring their debt; and if he will make a statement on the matter. [31903/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan I have been advised by the Central Bank that confidentiality agreements should not impede consumers’ protections under the Code of Conduct on Mortgage Arrears (CCMA). Strong protections are included in the Code to protect indebted borrowers when dealing with their lenders.    

  In addition to these protections, provision 14 of the revised CCMA, which came into effect from 1 July, provides that a lender must prepare and make available to borrowers an information booklet providing details of its MARP. In the context of providing additional information in the MARP booklet, lenders must, if they make use of a confidentiality agreement or similar agreement, provide summary information in its MARP booklet.

  The Central Bank is currently considering the issue of confidentiality agreements by lenders and has asked lenders to furnish information on their use.

From information received from lenders to date following contact by the Central Bank, it would appear that not all of the covered banks are using confidentiality agreements. Once the outstanding information from the lenders is received by the Central Bank the matter can be assessed further.   

Personal Insolvency Practitioners

 80. Deputy Brendan Smith Information on Brendan Smith Zoom on Brendan Smith asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will reconsider his decision to apply VAT to personal insolvency services; and if he will make a statement on the matter. [31927/13]

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.

Money Laundering

 81. Deputy Derek Nolan Information on Derek Nolan Zoom on Derek Nolan asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he supports the fact that publicly accessible Government registries of beneficial owners of companies, trusts and foundations be agreed as a part of the revised anti-money laundering directive; and if he will make a statement on the matter.  [31781/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan The Commission published its proposals for a 4th Money Laundering Directive on 5 February 2013.    Article 29 of the Draft Directive provides as follows:

"Article 29

1. Member States shall ensure that corporate or legal entities established within their territory obtain and hold adequate, accurate and current information on their beneficial ownership.

2. Member States shall ensure that the information referred to in paragraph 1 of this Article can be accessed in a timely manner by competent authorities and by obliged entities."

  Article 30 makes similar provisions in relation to Trusts and other legal arrangements. Neither Article requires the establishment of a Government registry. While I concur with the policy objective that beneficial owners of a company should be identifiable for the purposes of combatting money laundering and terrorist financing, the Commission's proposals are currently under discussion in a Working Party of the European Council.

  The Deputy may be aware that the 3rd Money Laundering Directive requires financial institutions and other designated persons to identify any beneficial owner and take risk based and adequate measures to verify his identity so that the financial institution etc is satisfied that it knows who the beneficial owner is including, as regards legal persons, trusts and similar legal arrangements, taking risk based and adequate measures to understand the ownership and control structure of the customer. The 3rd Money Laundering Directive was transposed into Irish Law in the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010.   

NAMA Loan Book

 82. Deputy Aengus Ó Snodaigh Information on Aengus Ó Snodaigh Zoom on Aengus Ó Snodaigh asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if the National Asset Management Agency is currently compiling a new portfolio of loans, similar to the grouping of loans behind the Project Aspen and Project Club initiatives, which will be sold on as a grouped asset; and if the sale of this portfolio will lead to a conflict of interest with the developer behind the loans able to advise any single third party with his particular expertise on the portfolio.  [31883/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan Decisions relating to the sale of loans or of properties that secure these loans are an operational matter for the Board of NAMA which is guided by its commercial mandate under the NAMA Act 2009. NAMA advises that decisions as to whether to sell loans or the assets securing them are determined by reference to whichever option will result in the best outcome for the taxpayer.

  I am advised by NAMA that it has very clear rules regarding the open marketing of loans and all such sales are conducted in line with accepted international best practice. In line with this practice, as part of the formal loan sales process, potential purchasers are required to provide an undertaking that they will not engage with the debtor or other obligors at any stage during the sales process. Both debtors and potential purchasers are aware that the infringement of agreed protocols or undertakings may have an impact on NAMA’s decisions as to whether and to whom it sells a particular portfolio.   Furthermore, where NAMA approves the sale of any loan or approves the sale of any secured property by a debtor, it requires a confirmation that the purchaser is not connected to the debtor or other obligors.  

Banking Sector Regulation

 83. Deputy Catherine Murphy Information on Catherine Murphy Zoom on Catherine Murphy asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan if he will provide an update on the commitment given in the programme for Government to restructure the boards of covered banks and replace certain directors and other staff; and if he will make a statement on the matter.  [31667/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan As the Deputy is aware, in response to the Nyberg report and with regard to the restructuring of the banking sector, I stated that:

"a programme of rotation of board members, commencing with board members appointed before September 2008, will be expected to be part of the plan. This should apply to both Executive and Non-Executive Board members and provides a process to ensure a smooth succession of incumbent board members who were in place before September 2008. I would expect this succession to be substantially completed by early 2012, and will use my powers as shareholder to affect such changes if necessary"

  Across the financial institutions covered by the Credit Institutions (Financial Support) Act 2008, only one of the board members currently in place was in place in September 2008. That director, Mr Richie Boucher of Bank of Ireland, has passed a full fitness and probity review by the Central Bank.

  The Central Bank Reform Act 2010 became operational on the 1st December 2011 when the Central Bank prescribed regulations into law setting out those functions (“controlled functions”) which would be covered by the Act, and a smaller subset of controlled functions (“pre-approval controlled functions” or “PCFs”) which will require the prior approval of the Central Bank before an appointment can be made to a Bank.

  The Central Bank fulfils its functions under the Act by processing applications for approvals to all PCFs in all regulated financial service providers since 1 December 2011. The Central Bank may refuse to approve a proposed appointment to a PCF role where it is of the opinion that the proposed appointee is not of such fitness and probity as is appropriate to perform the relevant function. Where the Central Bank refuses to approve a proposed appointment, then a regulated financial service provider may not appoint the person to the role.

  Further, the Central Bank as part of its role in the on-going supervision of the financial services sector, including the banking industry, may from time to time consider that there is reason to suspect the fitness and probity of any person performing a controlled function and may commence an investigation into that person. The existence and progress of such investigations are confidential and details of such investigations may not be disclosed by the Central Bank.

  As previously announced, the Central Bank wrote to all directors of the state-supported institutions in 2011 to determine their intention to remain in their posts beyond 1 January 2012. During the period of the review, many of the long-standing directors of the six State-supported credit institutions resigned. The Central Bank issued a statement on 28 June 2012 where it was outlined that the fitness and probity review of all sitting directors of the six banks and building societies covered by the State guarantee had concluded. A copy of this statement is available on the Central Bank website. In respect of remaining directors of these credit institutions, the Central Bank continues to carry out its role in respect of the supervision of the fitness and probity of those directors. New applications to sit on the boards of any of these institutions which remain under the Bank’s active supervision will require the applicants to establish, to the satisfaction of the Bank, that proposed directors meet the Bank’s minimum standards of fitness and probity.

  All assessments of fitness and probity of persons being proposed to PCF roles, and of persons performing controlled functions are made with respect to the criteria set out in Section 25(3) of the Act and a Code issued by the Central Bank under Section 50 of the Act entitled “Fitness and Probity Standards (Code issued under Section 50 of the Central Bank Reform Act 2010).  

Budget Consultation Process

 84. Deputy Gerry Adams Information on Gerry Adams Zoom on Gerry Adams asked the Minister for Finance Information on Michael Noonan Zoom on Michael Noonan the consultations he will hold, here and with other EU countries and institutions and any others, before announcing the budget.  [31873/13]

Minister for Finance (Deputy Michael Noonan): Information on Michael Noonan Zoom on Michael Noonan As with every Budget there will be considerable consultation with a wide variety of organisations. Officials from my Department are already engaging in meetings related to Budget preparation. Meetings take place throughout the year between my officials and officials of other organisations, such as the NTMA, the Revenue Commissioners and other Government Departments, most notably the Department of Public Expenditure and Reform.

Given that there are still more than two months to Budget Day it is difficult for me to say exactly whom I will meet personally between now and then. However the Deputy will be aware that the Minister for Finance normally meets with IBEC, ICTU, the IFA, the ICMSA, the Construction Industry Federation and the Community and Voluntary Pillar in the run-up to the Budget and I would expect these meetings to take place as usual.

The Deputy will also be aware review missions to Ireland by the three external partners, the EU, the ECB and the IMF (the troika) take place each quarter as part of the regular review process of our EU-IMF Programme of Financial Support for Ireland. My colleague, the Minister for Public Expenditure and Reform, Mr Brendan Howlin T.D., and I meet with the EU-IMF delegation during each quarterly review mission. These meetings are also attended by senior officials from both Departments. A wide range of topics related to the progress of the Programme are covered at these meetings, including fiscal policy, financial reforms, structural reforms, and economic developments. Budget 2014 will be discussed in this context.

With regard to EU institutions, the enhanced economic governance regime now in place for euro area Member States directly impacts on national budget preparations. Regulation 473/2013, one of the ‘two pack’ surveillance and coordination regulations, provides that euro area member countries must make public their draft budget not later than 15 October each year. The Regulation further provides that euro area Member States must submit a separate draft budgetary plan, containing all of the information in the budget but in a common standardised format, to both the Commission and the Eurogroup by 15th October. Therefore, there is no obligation to submit the draft budgetary plan to the Commission or Eurogroup before the budget itself is announced but it is a matter for individual Member States to comply with the new budgetary timeline in whichever sequence they decide as long as the deadline of 15th October is respected. I intend to submit Ireland’s draft budgetary plan to the Commission following the publication of the Budget.


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