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Written Answers Nos 1-39The 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 9, inclusive, answered orally. Flood Risk Insurance Cover 10. Deputy Michael McGrath Minister for Finance (Deputy Michael Noonan): Government policy in relation to flooding is focused on the development of a sustainable, planned and risk-based approach to dealing with flooding problems, with a view to addressing the increased availability of flood insurance. To achieve this aim, there is a focus on prioritising spending on flood relief measures, development and implementation of plans by the Office of Public Works (OPW) to implement flood relief schemes. This strategy is complemented by a Memorandum of Understanding between the OPW and Insurance Ireland which provides for the transfer by the OPW of data in relation to completed flood defence schemes to the insurance industry, which should provide a basis for the increased provision of flood insurance in areas where works have been completed. The current flooding crisis has raised issues in relation to insurance and flooding. The Taoiseach and some other of my colleagues in Government met the insurance industry on Tuesday to discuss the industry role in providing flood insurance and to obtain industry views on flood insurance issues such as those outlined in the Deputy's question. The Taoiseach has asked the insurance industry to revert back within two weeks following further consideration of their approach to the provision of insurance in areas where demountable defences are in place, along with details on the availability of insurance in areas with flood defences. I would also note that my own officials are undertaking detailed research on alternative options with the potential to ensure greater availability of flood insurance. This will be in the form of a comparative analysis of the different approaches to flood insurance in other countries. Tax Code 11. Deputy Seamus Healy Minister for Finance (Deputy Michael Noonan): These estimates are provided by the Revenue Commissioners, based on estimates for 2016, using the actual data for the year 2013 (the latest year for which data are available) adjusted as necessary for income, self-employment and employment trends in the interim. They are provisional and may be revised. I believe the Deputy may be referring in his question to other forms of taxation paid by individuals, including indirect taxes such as VAT and excise duties, and to research on indirect taxes relative to a person's current income. In this context, it is worth noting that the cohort of people with lowest incomes includes those with other sources of support which can supplement their spending. As such, a measure of their indirect taxes paid as a proportion of their current income would not be appropriate, and a measure as a percentage of spending is more representative. When taken as a proportion of spending, research indicates that indirect taxes are flat at 15% across the bottom six income deciles. Taken together, a highly progressive income tax and effectively flat indirect taxes point towards an overall progressive tax system. Deputies will also be aware that the VAT system in Ireland operates a number of reduced VAT rates to assist those less well off. For example, there is a zero VAT rate on food, children's clothes and oral medicines. In addition, many services are exempt from VAT such as transport, education, schools and hospitals. Lobbying Data 12. Deputy Seamus Healy Minister for Finance (Deputy Michael Noonan): Fiscal Policy 13. Deputy Bernard J. Durkan Minister for Finance (Deputy Michael Noonan): Budgetary forecasts for the next five years were set out in Budget 2016. The Deputy will be aware that these provided for an increase in expenditure of over €700 million in 2016, while tax reductions worth approximately €700 million were also announced. The 2016 Expenditure Report published separately by the Department of Public Expenditure and Reform on Budget day, outlines Ministerial expenditure ceilings for the period to 2018. These amounts are reflected in the medium term budgetary forecasts prepared by my Department which also provide for demographic costs, public sector pay agreement, the public capital programme and also provide for the indexation of the income tax system. Accordingly, the forecast level of net fiscal space available for each year over the forecast horizon, was set out in Table A9 of the Budget and is based upon these and a number of other baseline assumptions, which are also set out in the accompanying Budget tables. The overarching objective of recent fiscal policy in recent years has been to return the public finances to a sustainable basis while promoting economic growth. Ireland will exit the excessive procedure because the general government deficit will be substantially below 3% of GDP in 2015. Indeed, the strong end-year Exchequer figures indicate that, all things being equal, the deficit for 2015 will be closer to 1½% of GDP, down from the budget day forecast of 2.1% of GDP. In terms of economic growth, Budget 2016 contained forecasts of 6.2% and 4.3% for 2015 and 2016 respectively. Figures up to the end of last year show that the recovery is gathering pace with the OECD expecting Ireland to be the fastest growing economy in the OECD in both 2015 and 2016. Encouragingly consumer spending is continuing to grow, a component of GDP that is both tax and jobs rich. The level of economic activity is already above pre-crisis levels, but importantly it is now more balanced than was the case at the height of the bubble, when it was driven largely by construction. Indeed, employment in 12 of the 14 economic sectors, highlighted in the recent Quarterly National Household Survey, has increased. On the domestic side, consumption and investment are contributing very positively, with very strong data also recorded on the external side. Overall the data available are consistent with an economy that is performing very strongly. Having said that, it is clear that global prospects are increasingly uncertain, with difficulties in emerging market economies and elsewhere. Accordingly, it is imperative that we remain competitive and continue to take the correct policy choices to underpin the sustainability of the public finances. Small and Medium Enterprises Debt 14. Deputy Michael McGrath Minister for Finance (Deputy Michael Noonan): In 2013 non-public institution specific SME distressed loan resolution targets were set for a number of banks. The targets required the banks to develop strategies, at borrower level, to resolve their non-performing loans. The targets ended in Q1 2015 with lenders reporting that they satisfied the requirements set out. Progress has been made by the relevant institutions in resolving SME NPLs in recent years and NPL trends continue to move in a positive trajectory. Bank of Ireland have indicated that they have reached resolution in 90% of distressed SME cases and more than 9 out of 10 restructured business banking borrowers continue to meet their agreed arrangements. AIB has also made significant progress in reducing distressed loan balances with the process of restructuring the group's SME book reaching its latter stages with the majority of offered SME restructures either complete or at the final stages of completion. Recognising these developments, alongside changes in the supervision of the banks following the introduction of the SSM, the Central Bank's approach to commercial NPL resolution utilises a bank specific approach taking into consideration a number of factors including inter alia the institution's NPL resolution strategy and operational capability. The sustainable resolution of distressed SME loans remains a significant priority for the Central Bank and will therefore continue to be central to their supervisory focus throughout 2016 and beyond. Supervision will continue to be intrusive, supplemented by targeted inspections and enhanced monitoring of performance of the banks in delivery of supervisory objectives. Strategic Banking Corporation of Ireland Data 15. Deputy Dara Calleary Minister for Finance (Deputy Michael Noonan): The Strategic Banking Corporation of Ireland (SBCI) was incorporated in September 2014 and its goal is to ensure access to flexible and lower cost funding for Irish SMEs. The SBCI launched its first product programme in February 2015 and lending to SMEs commenced in early March 2015 through its initial 'on lending' partners AIB and Bank of Ireland. Up to 30 September 2015, some €110 million in SME loans were approved and drawn down by c.3200 SMEs. The loans have been taken up by Irish SMEs for a variety of purposes and across a range of sectors in the economy. More than 90% of loans were for investment purposes and the average loan size is approximately €35,000. There is a wide geographical spread and the vast majority of loans are to regionally based SMEs outside Dublin. To further meet the financing needs of SMEs in Q4 2015 the SBCI announced on-lending agreements with two non-bank lenders, Finance Ireland and Merrion Fleet. This is a key step in creating greater competition for SME lending in the Irish market, by supporting smaller indigenous providers of finance and providing funding for a broader range of products, including Asset Finance, Leasing and Contract Hire. Furthermore, the SBCI announced in December 2015 an additional €200m facility with AIB to continue to lend to Irish businesses seeking lower cost working capital, business investment, agriculture and refinancing loans. The SBCI is in advanced discussions with a number of other bank and non-bank lenders, and it is anticipated that further announcements of new on-lending agreements will be made in the coming weeks and months. I am pleased to note that of the SBCI's initial funding capacity of €800 million, €676 million has now been committed to its 'on lending' partners to support the financing needs of SMEs. The SBCI is committed to leveraging existing and new relationships with on-lending partners to support SME growth and investment through the provision of lower cost and longer term funding. The SBCI has made significant progress over 2015, both in terms of providing funding to SMEs, and in relation to building a strong infrastructure through which it will continue to provide long term support to SMEs. Finally, the Deputy may be interested to note that the SBCI is currently preparing a detailed analysis of its lending activity for 2015 and that this will be published during quarter one of 2016. Credit Availability 16. Deputy Peadar Tóibín Minister for Finance (Deputy Michael Noonan): In the latest Central Bank of Ireland report on Trends in Business Credit and Deposits: Q3 2015, interest rates charged on new drawdowns by non-financial, non-property related SMEs was 4.78% during Q3 2015, a 16 basis point decline from the previous quarter. In addition, it should be noted that in the most recent Department of Finance SME credit demand survey, covering the six month period to September 2015, only 1% of SMEs that did not demand credit thought that it was too expensive to borrow. The same survey notes that, among those SMEs with outstanding loans, the average claimed cost of credit across all outstanding loans is 4.7%. The Strategic Banking Corporation of Ireland ensures access to flexible funding for Irish SMEs by facilitating the provision of: - Flexible products with longer maturity and capital repayment flexibility, subject to credit approval; - Lower cost funding to financial institutions which is passed on to SMEs; - Market access for new entrants to the SME lending market, increasing competition. To September 2015, in the first 7 months of the SBCI's operation, €110 million was loaned to c.3,200 SMEs by AIB and Bank of Ireland, with broad coverage across various business sectors and regions. Each on-lender is contractually obliged to pass on the full financial advantage of the SBCI's funding, thereby reducing the cost of credit to SMEs and creating additional competition in the SME credit market. In Q4 2015 the SBCI signed an agreement with two non-bank on lending partners, Finance Ireland and Merrion Fleet Management, who provide a range of lower cost financing solutions including vehicle leasing for SMEs. Lower cost funding by the SBCI should act as a catalyst for downward pressure on interest rates by fostering greater competition in the marketplace. The Credit Guarantee Scheme and the Microfinance Loan Fund also play an important role in this regard. Tax Code 17. Deputy Seamus Healy Minister for Finance (Deputy Michael Noonan): As I have stated on a number of occasions, wealth can be taxed in a variety of ways, some of which are already in place in Ireland. Capital Gains Tax (CGT) and Capital Acquisitions Tax (CAT) are, in effect, taxes on wealth, in that they are levied on an individual or company on the disposal of an asset (CGT) or the acquisition of an asset through gift or inheritance (CAT). Deposit Interest Retention Tax (DIRT) is charged at 41%, with limited exemptions, on interest earned on deposit accounts. Local Property Tax (LPT) introduced in 2013 is a tax based on the market value of residential properties. Finance Act 2010 introduced a new levy known as the Domicile Levy which can be seen as a form of wealth tax. It is aimed at high wealth individuals with a substantial connection to Ireland, whether they are tax resident or not, to ensure they make a tax contribution to this country in a year of at least €200,000. Issues relating to expenditure policy, including investment in health and education, are a matter for my colleague, the Minister for Public Expenditure and Reform. Mortgage Resolution Processes 18. Deputy Bernard J. Durkan Minister for Finance (Deputy Michael Noonan): The CCMA applies to all regulated mortgage lenders operating in the State when dealing with borrowers facing or in mortgage arrears on their primary residence, including any mortgage lending activities outsourced by these lenders. Furthermore, the Consumer Protection (Regulation of Credit Servicing Firms) Act 2015 now requires that the CCMA applies to credit servicing firms and an addendum to the CCMA was published during 2015 to reflect this fact. Regulated entities are required to comply with this Code as a matter of law. I am informed by the Central Bank that in order to determine which options for alternative repayment arrangements are viable in each particular case, a lender must explore all of the options for alternative repayment arrangements that they offer. The CCMA also requires lenders to review an alternative repayment arrangement at appropriate intervals for the type and duration of the arrangement. The lender must also carry out a review of an alternative repayment arrangement at any time, if requested by the borrower. You will be aware that on 23 June 2015 the Central Bank published the outcome of a themed inspection of lenders' compliance with its statutory CCMA, which found that, overall, lenders have implemented frameworks as required by the CCMA. The Central Bank has confirmed that all lenders that were subject to the CCMA themed inspection provided a response by the deadline of the 30th November 2015, all of which are currently being reviewed. It continues to engage with these lenders as part of it's on-going supervisory engagement to ensure compliance with the Code of Conduct on Mortgage Arrears (CCMA). In August 2014, the Central Bank of Ireland wrote to mortgage lenders to set out its expectations of them in their engagement and communications with borrowers who have interest-only for term mortgages on primary residences. Lenders were reminded that they should proactively communicate with borrowers about their repayment strategies throughout the term of the mortgage, with a view to identifying risks at an early stage. Where risks are identified, lenders should engage with borrowers in an appropriate and consumer-focussed way and consider options to facilitate the borrower in meeting their mortgage obligations. Mortgage Interest Rates 19. Deputy Peadar Tóibín Minister for Finance (Deputy Michael Noonan): In September I concluded a series of follow up meetings with the financial institutions and the reality is that the main banks have put options in place to allow borrowers reduce their repayments. Obviously, it is a matter for each individual borrower to decide what suits their circumstances but I encourage borrowers to contact their bank to see what is available to them or consider moving to another bank, where possible, if the offer is not satisfactory. I asked the banks to provide options by which borrowers could reduce their monthly repayments and I believe options have been put in place. It is up to the individual banks themselves to advertise their rates and products but as I am sure you are aware, some banks have focussed on fixed rate offerings or rates based on loan-to-value, while others have reduced their variable rates. Furthermore, I am pleased to see that new initiatives and reductions continue to take place. As recently as last week one bank introduced a 0.5% reduction on managed variable rates for new or switcher mortgages with a loan to value of 80% or less. Another bank reduced its SVR in December. These initiatives illustrate the increasing competitive dynamics in the market. I note that the Central Bank's statistical release of 11th December 2015 stated that mortgage interest rates generally declined during the third quarter of 2015. Variable Principal Dwelling House (PDH) rates declined by 17 basis points over the second quarter with corresponding Buy-to-Let (BTL) rates falling by 14 basis points during the same period. There has been discussion in the public domain over the last number of months regarding whether the regulation of interest rates would lead to a reduction in mortgage costs for borrowers. I believe that competition rather than regulation represents the best long term solution to this issue and Central Bank and ESRI research supports this position. In this regard, the previous Governor of the Central Bank, Professor Patrick Honohan, indicated his opposition to the administrative control of interest rates. While he acknowledged that a reduction in bank interest rates would benefit the economy at large, it was his firm belief that the introduction of administrative control on interest rates in Ireland would be bad for the country as a whole in the medium term including its negative effect on the entry of other banks to the market. You will also be aware that on 12 November the Central Bank published a consultation paper on proposed increased protections for variable rate mortgage customers. This is called Consultation Paper CP98 and is available on their website. The suggested measures fall under three broad categories: - Lenders would be required to publish a summary statement of the factors that impact on their variable rate and the criteria and procedures that apply to setting such rates; - On an annual basis lenders would be required to notify variable borrowers of alternative mortgage options. They would also have to notify borrowers of these options when increasing SVR rates and provide borrowers with a link to the Competition and Consumer Protection (CCPC) website to assist borrowers who wish to switch; - The Central Bank is consulting on increasing the notification period for variable rate increases (it is currently 30 days) and they are also consulting on a proposal to require the lender to state the reason for changing the rate. The closing date for submissions to the public consultation is 12 February 2016. Tax Code 20. Deputy Clare Daly Minister for Finance (Deputy Michael Noonan): As will be obvious from reading these papers, my Department did not oppose the introduction of a tax on sugar sweetened drinks but simply and objectively outlined the benefits and challenges of such a tax. The benefits included, for example, the potential revenue that would be raised from such a measure and potential impact on our nation's obesity statistics as outlined in the Department of Health commissioned Health Impact Assessment 2012. My Department also outlined challenges that must be considered before the introduction of such a tax. These included the potential impact on retailers and domestic soft drinks producers, the difficulties in applying an excise on a product which is not defined as a product under the EU general excise directive, the challenge in differentiating between sugar sweetened and artificially sweetened products and the challenge of collecting an excise on a product which has free movement between Member States and is not subject to the controls of a bonded warehouse like other excisable products such as alcohol, tobacco and mineral oils. My Department, however, did oppose one aspect of proposals for a sugar sweetened drinks tax. And that was to apply it as an ad valorem rate, i.e. a rate of 20%. An ad valorem tax would mean that essentially that the charge would be lower for value multi-packs and 'own brand' SSD products containing the same volume of sugar as more expensive brands of SSD products. My Department, rightly in my view, suggested that if such a tax were introduced it should be a volumetric tax, i.e. the tax would be based on the volume of the product. France, Hungary and Finland have used a volumetric tax on SSDs. As Minister for Finance, I carefully consider the positives and negatives all potential taxes in the context of the annual Budget and Finance Bill process. While a sugar sweetened drinks tax was not introduced in the last Budget it remains under consideration. Economic Growth Rate 21. Deputy Richard Boyd Barrett Minister for Finance (Deputy Michael Noonan): The text in the Budget documentation explicitly recognises that outside of Ireland's main export markets the pace of economic expansion has slowed and the outlook has become increasingly uncertain. The text also notes that while the spillover effects to Ireland's main trading partners appear to have been limited to date, a more pronounced impact cannot be ruled out. The Budget documentation also sets out a detailed analysis of risks which are described as being titled to the downside. The Deputy will already be aware that these forecasts were endorsed by the Irish Fiscal Advisory Council and also, that in its recent Fiscal Assessment Report, the Irish Fiscal Advisory Council welcomed the Department's view of the balance of risks and noted that it represented an important input into discussions around the macroeconomic and fiscal outlook. However despite the disappointing data flow in emerging market economies, Irish export growth was indeed very strong in 2015, with year-on-year growth of over 13 per cent recorded for the first three quarters of the year compared with the same period in 2014. Recent high frequency data releases point to continued strong growth in the fourth quarter in both the manufacturing and services side. Overall I am confident that these forecasts are realistic, and take due account of risks which are explicitly recognised. Mortgage Lending 22. Deputy Terence Flanagan Minister for Finance (Deputy Michael Noonan): The Central Bank is independent in the formulation and implementation of these macro prudential measures. At the outset of this new framework, the Central Bank committed itself to monitoring the implemented measures, in particular with regard to achieving the stated objectives of the measures and monitoring any unintended consequences. In recent public comments, the new Governor of the Central Bank, Philip Lane, re-affirmed this commitment and stated that, having introduced these macro prudential rules, it is the responsibility of the Central Bank to be as rigorous as possible in interpreting the impact of these rules. In that context he also indicated that, by the second half of this year, the new rules will have been in effective operation for around a full year and that a year of data will also have come in on how it has affected the allocation of mortgages in Ireland. Following on from this, I have been informed by the Central Bank that it will publish studies assessing the operation of the rules and of what it is seeing in the market in the second half of 2016. While no further detail on the format of this work is available at this time, the Governor nevertheless did indicate that if the Central Bank sees strong reasons to vary the rules then it would be open minded about making an adjustment if the analysis suggests that a change, in either direction, is appropriate. However, this will be a matter for the Central Bank to consider in due course. Tax Reliefs Application 23. Deputy Clare Daly Minister for Finance (Deputy Michael Noonan): Initially, for ease of administration, Revenue agreed with lenders to allow the relief on the basis of either 'interest charged' or 'interest paid'. A key part of the agreement required the lenders to inform Revenue of the exceptional cases where cumulative arrears built up over an 18 month period. All such cases were reviewed on a case by case basis and the relief was withdrawn where appropriate. The 18 month 'review period' was reduced to 6 months in September 2012 in light of the increasing numbers of mortgage arrears cases. As the number of arrears cases continued to increase post September 2012, Revenue was left with no alternative but to instruct lenders to apply the statutory position with effect from 1 January 2014, i.e. to only allow the relief on the basis of the interest paid by the borrower. The revised arrangements have no impact for borrowers who pay the correct mortgage amount on time, in accordance with the terms of their loan, or on those who make partial payment of the amount due equal to or exceeding the interest due for the relevant period. In instances where borrowers do not make payments, or pay less than the amount of interest due, then the TRS amount is reduced to reflect the actual amount of interest paid. Credit Unions Restructuring 24. Deputy Michael McGrath Minister for Finance (Deputy Michael Noonan): In October 2015 a detailed review of the work of ReBo was carried out under section 43 of the 2012 Act to examine whether or not ReBo had completed the performance of its functions. This review recommended that the final date for a credit union to receive a letter of offer from ReBo should be extended from 31 December 2015 to 31 March 2016. This extension provides additional time for credit unions considering entering the restructuring process to make an application in good time. Section 43(2)(b) of the 2012 Act provides that a further review must be carried out within twelve months of the first review to establish whether or not ReBo has completed its work. In accordance with the 2012 Act when I am satisfied that ReBo's work is done, I will by order dissolve ReBo. In the meantime, ReBo is continuing with its restructuring work and has provided assistance in forty completed credit union mergers involving eighty four credit unions. The ReBo board has approved a further ten mergers, involving ten credit unions in projects which will complete shortly. In total, and including the above, ReBo is engaged with 204 credit unions at varying stages of the restructuring process with a combined asset value of €8 billion. While I am very pleased with the progress ReBo has achieved to date in its engagement with the sector, I have no plans at this time to further extend the term of ReBo. Tax Reliefs Availability 25. Deputy Seán Kyne Minister for Finance (Deputy Michael Noonan): Banking Sector Regulation 26. Deputy Michael McGrath Minister for Finance (Deputy Michael Noonan): The Central Bank is independent in the formulation and implementation of these new macro prudential measures. At the outset of this new framework, the Central Bank committed itself to monitoring the implemented measures, in particular with regard to achieving the stated objectives of the measures and monitoring any unintended consequences. In recent public comments, the new Governor of the Central Bank, Philip Lane, re-affirmed this commitment and stated that, having introduced these macro prudential rules, it is the responsibility of the Central Bank to be as rigorous as possible in interpreting the impact of these rules. In that context he also indicated that, by the second half of this year, the new rules will have been in effective operation for around a full year and that a year of data will also have come in on how it has affected the allocation of mortgages in Ireland. Following on from this, I have been informed by the Central Bank that it will publish studies assessing the operation of the rules and of what it is seeing in the market in the second half of 2016. While no further detail on the format of this work is available at this time, the Governor nevertheless did indicate that if the Central Bank sees strong reasons to vary the rules then it would be open minded about making an adjustment if the analysis suggests that a change, in either direction, is appropriate. However, this will be a matter for the Central Bank to consider in due course. Tax Reliefs Application 27. Deputy Seán Kyne Minister for Finance (Deputy Michael Noonan): - The Employment and Investment Incentive provides tax relief for investors who invest in qualifying SMEs and is closely targeted at job creation. Tax relief is available at an initial rate of 30% on investments of up to €150,000 per annum per investor. Companies may raise up to €5 million per annum, subject to a lifetime limit of €15 million. Shares must be held by investors for a minimum of 4 years. After three years, if employment levels have increased or the monies raised have been expended on R&D, a further 10% of tax relief is available. - SURE or Start-Up Refunds for Entrepreneurs (formerly the Seed Capital Scheme) provides a refund of income tax previously paid to qualifying entrepreneurs who start their own qualifying business. The refund of tax available is based on the amount of the investment made by the entrepreneur and the amount of income tax paid over the previous 6 tax years, subject to certain conditions. This scheme is intended to assist entrepreneurs to invest seed capital in order to commence trading. Once the company has commenced trading, they can then seek further investments under the EII. - The Start Your Own Business initiative provides an exemption from income tax for 2 years for individuals starting a new business where the individuals were previously long-term unemployed. The profits of such a business, up to a maximum of €40,000, are relieved from income tax in each year of the first two years of trading. The Deputy may be aware also of a number of corporation tax relief measures which are available to all corporate taxpayers throughout Ireland, such as the R&D tax credit and the 3 year corporation tax relief for start-up companies. While these are not specifically targeted at development on a regional level they would nonetheless be available to taxpayers in the regions to stimulate investment and development. With regard to the overall question, any incentive targeting a specific location is likely to be subject to EU State Aid rules, and needs to be carefully considered in order to achieve the necessary results and obtain the necessary approval of the European Commission. Also, a tax incentive alone will have limited impact on regional development. In addition, I would note that there is no provision under the EU VAT directive which allows for different VAT rates to be charged on depending on the region in which the activity takes place. The Deputy may also be interested to know that there are non tax related measures in place to promote investment and development regionally. In particular up to the end of September 2015 the Strategic Banking Corporation of Ireland has lent approximately €110 million to c.3200 SMEs across Ireland. The vast majority of these loans, approximately 85%, were to regionally based SMEs outside of Dublin. The average size of these loans is about €35,000 and more than 90% have been for investment purposes. Banking Operations 28. Deputy Terence Flanagan Minister for Finance (Deputy Michael Noonan): Property Tax Administration 29. Deputy Peadar Tóibín Minister for Finance (Deputy Michael Noonan): In the course of the review, the Economics Division of the Department of Finance prepared estimates of the potential implications on taxpayer liabilities of price developments as a result of price increases since May 2013. The paper prepared by the Economics Division is included in Dr Thornhill's report at Chapter 7. I can confirm that the discussion and analysis undertaken in the course of the review did not, however, take account of projected price movements after that date. This was because residential price movements show considerable volatility not just from year to year but quarter to quarter. Any forward projections would be highly conjectural and run the possible risk of providing a poor basis for policy making. The Finance (Local Property Tax) Amendment Act 2015 was enacted in the last Dáil term. Among other things, it defers revaluation of properties for LPT purposes from 1 November 2016 to 1 November 2019; self-assessed valuations for properties made by homeowners as of 1 May 2013 stand for a further 3 years, until 1 November 2019, and this means that home owners will not be faced with significant increases in their LPT in 2017 as a result of increased property values. This arises out of one of the recommendations of the review. Issues relating to the implementation of other recommendations in the Report will be a matter for consideration by the next Government. IBRC Liquidation 30. Deputy Catherine Murphy Minister for Finance (Deputy Michael Noonan):
* As at 11 January 2016, the total nominal outstanding of this entire bond was €11,745m. As outlined in the Central Bank's Annual Report for 2014 published on 1 May 2015, the Bank has sold its €3.46bn holding of the fixed rate 5.4% Treasury Bond 2025; €350m in 2013, followed by another €2.3bn in 2014 and the remainder in early 2015. Also outlined in the 2014 Annual Report was the Bank's disposal of €500m nominal of the 2038 FRN to the NTMA on 22 December 2014. A further €500m nominal of the 2038 FRN was sold to the NTMA on each of the following dates: 26 June 2015, 18 August 2015 and 23 October 2015. Following these purchases and subsequent cancellations by the NTMA, the 2038 FRN was retired with no amount outstanding. On 21 December 2015 the Bank disposed of €500m nominal of the 2041 FRN to the NTMA. Following this purchase and subsequent cancellation by the NTMA, the total nominal outstanding for this bond has been reduced to €1.5 billion. Following these cancellations, the overall total nominal outstanding for all of the FRNs held by the Central Bank reduced from €25.034 billion to €22.534 billion at end-2015. The Central Bank indicated a minimum disposal schedule of €0.5 billion up to the end of 2014, €0.5 billion per annum 2015-2018, €1 billion per annum 2019-2023 and €2 billion per annum after that until all the bonds are sold. However, the Bank also stated that it would dispose of the government bonds as soon as possible, provided conditions of financial stability permit. This position remains unchanged. Due to improved financial stability conditions, the disposals of fixed and floating rate government bonds from the Special Portfolio have been faster than the minimum. Tax Yield 31. Deputy Seamus Healy Minister for Finance (Deputy Michael Noonan):
Credit Unions Regulation 32. Deputy Peadar Tóibín Minister for Finance (Deputy Michael Noonan): 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 her 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. While it is important to distinguish this division of roles, it is equally important to recognise that both the Registrar of Credit Unions and I, as Minister for Finance, are working together for the safety of members' savings and the security of the credit union sector. A maximum individual member's savings limit of €100,000 is being introduced by the Registrar to ensure the protection of members' savings and to continue to ensure that credit unions' funding is sufficiently diversified and is not dependent on a small number of members. I am very much aware of all of the issues raised by the credit union sector in respect of the implementation of the new regulations. Both myself and my officials met with the three credit union representative bodies to discuss these concerns. Meetings were also held with the Central Bank where the views of the credit union movement were considered. Following careful consideration I have been informed by the Central Bank that a number of modifications were agreed regarding the €100,000 cap on credit union savings as follows: - Credit unions that hold individual members' savings in excess of €100,000 at commencement of the regulations may apply for approval to the Central Bank to retain these savings, subject to certain criteria. - Regulation 37 now provides that certain credit unions may apply for approval to increase individual members' savings in excess of €100,000. Credit unions with a minimum asset size of €100 million may be granted approval to increase individual members' savings in excess of €100,000 where they have demonstrated to the Central Bank that it is appropriate for them to do so. I have been informed by the Central Bank that the application process will be updated to reflect these changes and that credit union bodies have been advised that the Central Bank will communicate with them on the matter in early 2016. I welcome the steps that have been taken to provide clarity for credit unions on the criteria for retaining savings of over €100,000 and I also welcome the Central Bank proposed engagement with the representative bodies to seek their comments on the application process. Tax Code 33. Deputy Mick Wallace Minister for Finance (Deputy Michael Noonan): These papers outlined the benefits and challenges of introducing such a tax. The benefits included, for example, the potential revenue that would be raised from such a measure and potential impact on our nation's obesity statistics as outlined in the Department of Health commissioned Health Impact Assessment 2012. My Department also outlined challenges that must be considered before the introduction of such a tax. These included the potential impact on retailers and domestic soft drinks producers, the difficulties in applying an excise on a product which is not defined as a product under the EU general excise directive, the challenge in differentiating between sugar sweetened and artificially sweetened products and the challenge of collecting an excise on a product which has free movement between Member States and is not subject to the controls of a bonded warehouse like other excisable products such as alcohol, tobacco and mineral oils. As Minister for Finance, I carefully consider the positives and negatives all potential taxes in the context of the annual Budget and Finance Bill process. While a sugar sweetened drinks tax was not introduced in the last Budget it remains under consideration. House Prices 34. Deputy Seamus Healy Minister for Finance (Deputy Michael Noonan): Recent price and rent developments are primarily the result of a shortage in the supply of accommodation particularly in Dublin and to some extent in the other major cities. As the economy continues to recover there has been significant growth in the number of people at work which has led to increased demand for housing. While there is evidence of a pick-up in building activity, it has not yet reached the level necessary to match demand. To improve housing supply, the Minister for Environment, Community and Local Government and I recently announced the Stabilising Rents and Boosting Supply package which was agreed by Government. This package is designed to provide greater stability in the rental market in the short run and support sustainable growth in the housing market. This package builds on the Construction 2020 and Social Housing strategies and is also complemented by the plans of NAMA to fund the construction of 20,000 units by 2020. In turn, these efforts should improve the capacity of ordinary families to access affordable accommodation as supply increases. It is not clear what the Deputy has in mind where his question refers to an increasing concentration of property ownership amongst corporate investors. In fact, property ownership is well distributed across the income distribution as is clear in the CSO's Household Finance and Consumption Survey 2013. In terms of the private rental market, this is made up of a large proportion of small landlords. However, there is a clear need to professionalise the private rental sector in order to better serve tenants. To help address this issue, the REIT tax regime was introduced in the Finance Act 2013 to attract large scale investment. In summary, I wish to assure the Deputy that my Department continues to monitor developments in the housing market, including their implications for macroeconomic performance and stability. Real Estate Investment Trusts 35. Deputy Mick Wallace Minister for Finance (Deputy Michael Noonan): The acquisition and management of properties by professional REITs is part of a more sustainable, long-term property rental market for both investors and property tenants. While commercial property investment has been a key focus for some of the REITs launched to date in Ireland, residential property also forms part of the sector's interest and exposure. It is expected that the sector will continue to develop over time and in so doing to increase the supply of professionally managed, good quality, secure and affordable rented accommodation. Historically the private rented sector in Ireland was characterised by small-scale landlords. The double layer of taxation had tended to result in individual investors holding individual, highly-mortgaged properties. This had exposed investors to significant risk in times of falling equity and falling rental returns. Attracting large scale investment in professionally managed residential property has an important role to play in helping to deliver the professional high-standard sector that tenants deserve. The success of REITs has resulted in benefits on a number of fronts. They have brought new capital into the Irish property market; new listings to the Irish Stock Exchange; and a new risk-diversified property investment option for investors. With its introduction in 2013, the REIT regime is in its relative infancy in Ireland. However, the REIT framework will be reviewed in the next one to two years in line with good practice. Community Employment Schemes Review 37. Deputy Michael McCarthy Minister of State at the Department of Social Protection (Deputy Kevin Humphreys): Following a review of the service in 2015, it was found that the level of supports could not be justified, based on the services provided. The level of grant support available for the operation of community facilities of this type has been determined to be €38,066 per annum, in line with similar operations nationally. The organisation may seek to have additional resources considered once they address the issues identified in the review conducted by Pobal on behalf of the Department. Illness Benefit Eligibility 38. Deputy Terence Flanagan Tánaiste and Minister for Social Protection (Deputy Joan Burton): The person concerned made a claim to illness benefit and this claim was received in my department on 22 April 2015. This claim was disallowed as the person concerned does not satisfy the above contribution criteria. The person concerned has been notified of this decision. The person concerned is currently in receipt of supplementary welfare allowance at the maximum rate. An application for disability allowance was received from the person concerned by the department on 26 June 2015. The application, based upon the evidence submitted, was refused on medical grounds and the person in question was notified in writing of this decision on 21 October 2015. The person concerned was also notified of their right to a review of this decision or to appeal it to the independent Social Welfare Appeals Office. Social Insurance Payments 39. Deputy Michael McCarthy Tánaiste and Minister for Social Protection (Deputy Joan Burton): Two changes have been made to the scheme since 2011. The number of PRSI contributions a person is required to have paid before being admitted to the scheme increased from 260 to 520 on an incremental basis between 2013 and 2015 and the minimum rate of the contribution increased to €500 per annum from 1 January 2013. The person concerned applied to become a voluntary contributor on 12 November 2012. Her application was accepted and she paid the contribution for the 2011 tax year within the prescribed time. The Department issued a bill in April 2013 in respect of the voluntary contribution due for the 2012 tax year, which was required to be paid by 31 December 2013. However, as this person failed to pay voluntary contributions for 2012 within the prescribed time limit her application to continue to make voluntary contributions lapsed and is no longer valid. |
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