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 Header Item Written Answers Nos. 92-115
 Header Item Employment Investment Incentive Scheme
 Header Item VAT Exemptions
 Header Item Community Banking
 Header Item Stamp Duty
 Header Item Banking Sector Remuneration
 Header Item NAMA Operations
 Header Item Tax Code
 Header Item Economic Growth Rate
 Header Item Community Banking
 Header Item Tax Appeals Commission
 Header Item Motor Insurance Costs
 Header Item Tax Code
 Header Item Insurance Costs
 Header Item Economic Competitiveness
 Header Item Banking Operations
 Header Item Proposed Legislation
 Header Item Mortgage Lending
 Header Item Tax Avoidance
 Header Item Tax Code
 Header Item Ministerial Meetings

Wednesday, 11 July 2018

Dáil Éireann Debate
Vol. 971 No. 6

First Page Previous Page Page of 111 Next Page Last Page

Written Answers Nos. 92-115

Employment Investment Incentive Scheme

 92. Deputy Alan Kelly Information on Alan Kelly Zoom on Alan Kelly asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his plans in respect of the employment incentive and investment scheme for budget 2019; and if he will make a statement on the matter. [30982/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe Indecon Economic Consultants are currently carrying out a review the Employment and Investment Incentive (EII). I expect that the report will be completed within the next month or so.

  The findings of the review, when concluded, will, amongst other factors, inform any decisions I may make on the future configuration of the incentive in the context of Budget 2019 and otherwise.

  The scope of the review is as follows:

  - An examination of the extent to which the objectives of the incentives remain valid.

  - An examination of the extent to which objectives of the incentives are being met.

  - An examination of the cost effectiveness of the incentives.

  - An examination of alternative options which may exist for the provision of state support.

  - An examination of the effect of GBER (the General Block Exemption Regulations) on the incentives.

  - A comparison of the incentives with similar incentives in operation in other EU Member States in terms of design: objectives, criteria, take-up, impact and cost-effectiveness.

  - An examination of whether the incentives, as currently designed, provide a platform for the effective operation of the reliefs.

  - The review of the design of the incentives should include:

  - Conclusions and Recommendations arising from the analysis.

  I await the outcome of the review and I do not propose to comment further on the future arrangements for the relief at this point.

VAT Exemptions

 93. Deputy Jonathan O'Brien Information on Jonathan O'Brien Zoom on Jonathan O'Brien asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his plans to implement changes in the VAT system exempting changes at EU level which could allow greater flexibility to Ireland in exempting certain services. [31033/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The European Commission published a proposal on 18 January 2018 which aims to simplify VAT rating. This proposal aims to give Member States more flexibility in setting VAT rates. The proposal will be discussed at European Council and must be agreed unanimously by all Member States before being adopted. It is expected that discussions on the proposal will be robust and it is likely that the final agreed text will be the subject of many compromised amendments. Ireland will, as always, engage positively in the Council discussions.

Community Banking

 94. Deputy Pearse Doherty Information on Pearse Doherty Zoom on Pearse Doherty asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the role his Department played in the recent publication of the report on the role of Sparkasse; and if he will make a statement on the matter. [30970/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe As the Deputy will be aware, my Department and the Department of Rural and Community Development were jointly responsible for fulfilling the Programme for Government commitment to “thoroughly investigate the German Sparkassen model for the development of local public banks that operate in well-defined regions”.

My colleague, Minister Ring and I, brought the completed Report on Local Public Banking in Ireland, to Government for approval after circulating it to all Government Departments for observations. The Report was approved by Government and has now been published on the website of both Departments.

The Report involved a public consultation process with stakeholders and interested parties who were invited to submit responses on the issue of public banking. These were summarised and included in the Report. The Report outlines the current banking environment in Ireland and describes how the German Sparkassen model of local public banking currently operates in Germany. Sparkassen are publically owned and are only permitted to operate in specific geographic regions. Their aim is to support local and rural economic development. An important part of this business model involves building relationships with SMEs in the geographic area they operate. A proposal for how this model could potentially work in Ireland was put forward by Irish Rural Link and the Savings Bank Foundation for International Cooperation, the international development wing of the Sparkassen Group. Detailed analysis of the proposal was carried out, which is included in the Report.

While the findings of the Report are that there is not a compelling case to establish a local public banking system in Ireland, my Department will commission an independent external evaluation of other possible ways in which the objectives of local public banking in Ireland could possibly be promoted in Ireland. It will also continue to engage in a dialogue with stakeholders and other interested parties, such as Irish Rural Link.

Avoiding the replication of existing Government supports and the work already being done by the post offices and credit unions in terms of the provision of financial and banking services, particularly in rural and regional areas, is a key priority.

Promoting the economic growth and development of rural economies and supporting regional small businesses, enabling them to create employment and contribute to economic growth remains a Government priority.

Stamp Duty

 95. Deputy Joan Burton Information on Joan Burton Zoom on Joan Burton asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his plans to review stamp duty on stock transactions; and if he will make a statement on the matter. [30828/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The "Getting Ireland Brexit Ready" document, published in conjunction with Budget 2017, committed my Department to conduct a review of Stamp Duty on share transactions in 2017. This document noted that it was proposed to carry out a review of the application of Stamp Duty to stocks or marketable securities of an Irish incorporated company in the context of the sustainability of the Stamp Duty yield and the future relationship between the EU and the UK.

  I launched a public consultation on the issues encompassed in this review last year, and this is now closed to further submissions.

  The objective of this review is to examine the rationale for retaining Stamp Duty on share transactions in its current form in the context of a changing financial and economic environment.

  I understand that my Department expects to present its report on this matter to me in the next few months and I can consider any recommendations it might make in advance of Budget 2019.

Banking Sector Remuneration

 96. Deputy Paul Murphy Information on Paul Murphy Zoom on Paul Murphy asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the consultations being held with trade unions in the banking sector on the banking remuneration review; his views on the need for a distinction between the pay of senior management and low and middle income bank staff; and if he will make a statement on the matter. [30980/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe As the Deputy will be aware Government policy on banking remuneration has remained unchanged since the financial crisis. The State's banking remuneration restrictions date back to the State’s 2009 preference share investments and these were replicated and extended in the 2011 "Minister's letter".

These restrictions apply to all staff at all ranks impacting c. 23,000 workers across the three banks in which the State has a shareholding. These restrictions also apply to all staff of the banks regardless of the country in which they work and as such the bank cannot use variable pay as a retention mechanism in the UK, US and Europe even in business lines where this would be the norm.

The restrictions not only limit total remuneration for staff in AIB, Bank of Ireland and PTSB to €500,000 (excluding a standard pension contribution). They also dictate that bonuses (including those paid in shares) and many other benefits cannot be paid to any staff members. These include no new fringe benefits, no new commission or incentive schemes and restrictions over contractual arrangements with staff on termination that provide compensation.

As you will know I voted against a remuneration resolution at the AIB AGM in April and abstained from a resolution at the Bank of Ireland AGM. I did this because I have been very clear that any changes in relation to restrictions on compensation for the banking sector will have to be led by the Government.

However I do recognise that the overall economic circumstances have changed markedly since these restrictions were introduced and that an un-level playing field currently exists in the market as no such pay restrictions apply in the case of any other banks, financial institutions or non financial companies operating in Ireland. This puts the three banks in which the taxpayer is the largest shareholder at a competitive disadvantage.

As you know I have initiated a review of our bank remuneration policy to advise on whether it remains fit for purpose, identify its impacts and update me on how this policy compares in a wider European context. My Department is in the process of a procurement exercise in order to engage a professional consultancy firm to advise and assist in the review.

I do not want to pre-empt this review by prescribing or predicting what the outcomes will be but I will note that included in the terms of reference is a planned review of general compensation arrangements across junior and middle ranks in the retail and commercial banking sector in Ireland and whether this presents issues for the banks involved. This part of the review will focus on the structure and composition of their compensation (i.e. absence of any variable pay) rather than their absolute quantum of compensation, given that at these levels within the banks the €500,000 salary cap is not relevant and compensation is determined by market considerations.

  Question No. 97 answered with Question No. 80.

NAMA Operations

 98. Deputy Richard Boyd Barrett Information on Richard Boyd Barrett Zoom on Richard Boyd Barrett asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if the mandate of NAMA will be changed to become a vehicle for the delivery of public and affordable housing rather than selling land and assets under its control to private investors engaging in these practices in view of the mounting evidence of widespread land hoarding and property speculation and the impact this is having on the housing crisis; and if he will make a statement on the matter. [31030/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe It is important to recognise from the outset that NAMA does not own property, rather, NAMA owns loans secured by property which is owned by its debtors. NAMA, as a lender, cannot force a borrower to take action which would reduce his or her repayment capacity, such as providing a property for social or private housing where that is not the financially optimal course of action for the debtor. To do so would compromise a borrower's capacity to repay his or her debts to NAMA and would constitute a direct breach of the borrower's property rights, protected under Article 43 of the Constitution. I am advised that directing NAMA to act counter to these obligations is not one lawfully open to me in all the current circumstances.

Furthermore, there would be many legislative, balance sheet and State aid implications in repurposing NAMA away from its existing objectives. NAMA was established with a very specific legal mandate, which was approved by the European Commission in 2010. It is important that NAMA’s role is preserved and that it completes its work in line with its original mandate.

Therefore I do not propose to change NAMA’s mandate.

That being the case, NAMA is already making a significant contribution to the supply of housing within the State where it is in a position to do so. NAMA’s residential funding programme, has delivered over 7,300 new residential units since it was announced in 2014 and is committed to facilitating the delivery of 20,000 residential units by 2020. In addition, NAMA has an established policy of identifying to Local Authorities and approved housing bodies, properties within its portfolio which may be suitable for social housing. To date 6,984 such properties have been identified, with demand confirmed for 2,717 and 2,474 delivered or committed. Part of this delivery has been through NAMA’s innovative National Asset Residential Property Services (NARPS) model, which has purchased nearly 1,300 properties from NAMA debtors and leased them on for social housing.

Finally, I wish to highlight that the Minister for Housing, Planning and Local Government launched a number of initiatives in January of this year, including the Rebuilding Ireland Home Loan and a new Affordable Purchase Scheme, each of which should make a contribution to delivering homes that are more affordable for potential buyers.

Tax Code

 99. Deputy Maureen O'Sullivan Information on Maureen O'Sullivan Zoom on Maureen O'Sullivan asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if the Revenue Commissioners are concerned about opportune weddings taking place for the purpose of inheritance tax avoidance; and his views on whether the format of inheritance tax is not applicable to modern society and places too much emphasis on marriage. [30963/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe It is a long-held principle of capital acquisitions tax (CAT) that transfers of property between spouses are exempt. Since 1985, all inheritances between spouses are exempt from tax and are not taken into account in computing tax. A similar exemption for gifts between spouses is also in place since 1990. The spousal exemption from gift and inheritance tax was extended to civil partners with effect from 1 January 2011.

I am informed by Revenue that, while the official status of a marriage or civil partnership may need to be established for the purposes of the exemption, its legitimacy is not a matter for determination by them.

As a result of the full tax exemption that applies, spouses and civil partners are not included in any of the tax-free Group thresholds and gifts and inheritances between spouses and civil partners are not counted for the purposes of aggregating lifetime gifts and inheritances.

While single persons may not transfer assets free of CAT under the spouse or civil partner exemption, they may transfer assets to individuals free from inheritance tax provided the value of the benefits do not exceed the relevant thresholds when previous benefits to the beneficiary are taken into account.

In addition, single persons can bequeath their principal private residence, generally the most substantial asset held by an individual, free from CAT under the dwelling house exemption which allows for property to be inherited tax-free irrespective of its value where the beneficiary is already living in the home subject to certain conditions.

Agricultural property and relevant business property of a single person can also be gifted or bequeathed with a significant 90% reduction in their taxable values under the Agricultural Relief and Business Relief schemes where the relevant conditions are met.

Economic Growth Rate

 100. Deputy Michael McGrath Information on Michael McGrath Zoom on Michael McGrath asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his views on whether there is a risk that contract manufacturing will have a similar effect on 2018 GDP figures as with 2017 GDP figures; and if he will make a statement on the matter. [30926/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe Contract manufacturing is a form of outsourcing whereby an Irish-resident firm engages a company abroad to manufacture goods on its behalf (and vice versa). Crucially, for the purposes of calculating GDP in accordance with the internationally agreed standards (ESA 2010), the inputs used in the production process, including the valuable intellectual property rights, remain in the ownership of the Irish-based entity and no change of economic ownership is deemed to take place during the production process.

  Putting it another way, the foreign-based contract manufacturer supplies a manufacturing service to the Irish-based company and the former never takes ownership of the product. When these goods are finally sold in a third country, a change of economic ownership is deemed to take place and the transaction is recorded as an export from the Irish-based entity for the purposes of GDP estimates. It is important to stress that while this activity inflates Ireland’s exports and GDP, it has almost no impact on Irish living standards as it generates little or no domestic activity/employment.

  My Department is forecasting GDP growth of 5.6 per cent this year. This projection assumes that statistical factors such as exports associated with contract manufacturing boost the headline GDP figure this year. However, as noted in the Stability Programme Update 2018, statistical factors – including exports linked to contract manufacturing - could have a stronger than expected impact on GDP growth this year.

  In general, high frequency indicators such as industrial production have been poor leading indicators for contract manufacturing in recent quarters. As a result, the initial impact of contract manufacturing on the GDP figures will only become evident when the preliminary figures for the first quarter of 2018 are published later this month.

Community Banking

 101. Deputy Willie Penrose Information on Willie Penrose Zoom on Willie Penrose asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the engagement he has had with an organisation (details supplied) in respect of the public banking investigation; and if he will make a statement on the matter. [30913/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The Programme for a Partnership Government contains a commitment to “thoroughly investigate the German Sparkassen model for the development of local public banks that operate in well-defined regions”. My Department and the Department of Rural and Community Development were tasked with fulfilling this commitment. As the Deputy will be aware, the Report on Local Public Banking in Ireland has now been approved by Government and was published last week.

The Report contains a detailed analysis of a proposal for a possible means of implementing the German Sparkassen model of local public banking in Ireland. This proposal was provided by Irish Rural Link and the Savings Bank Foundation for International Cooperation (SBFIC), who are the international development wing of the Sparkassen Group. Officials from my Department and Minister Ring’s Department met with representatives from Irish Rural Link and SBFIC to discuss their proposal on numerous occasions.

Ultimately, the report found that there is not a compelling case for the State to establish a new local public banking system in Ireland in the proposed form. The proposal was for 8-10 local public banks, starting with a pilot local public bank in the Midlands. There are a number of challenges relating to the assumptions underlying the business model for a local public banking system that was proposed in the report. These include assumptions regarding the estimated total cost to the Exchequer and estimated interest rates and loan attrition rates. Similarly, the suggested locations in the proposed pilot in the Midlands would overlap with existing banks, credit unions and post offices.

The cost to the Exchequer for the proposed new model is estimated at a minimum of €170 million. The Government is committed to reducing its shareholding in the banking sector and encouraging a more competitive, private market. There is, however, no impediment to any interested parties separately pursuing the establishment of a system of local public banks, in a manner that does not involve Exchequer funding or State ownership. Indeed, the Government would encourage any potential new market entrants to engage with the Central Bank of Ireland and the Department of Finance in relation to this matter.

The Government is committed to continuing to engage with interested parties and stakeholders, such as Irish Rural Link, further on this issue by way of a stakeholder forum. Details of this stakeholder forum will be announced in due course.

Tax Appeals Commission

 102. Deputy Peter Burke Information on Peter Burke Zoom on Peter Burke asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if he will address the shortage of staff and resources at the Tax Appeals Commission to ensure it can underpin a transparent and fair taxation system; and if he will make a statement on the matter. [30765/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The Tax Appeals Commission (TAC) was established in March 2016 as part of the reform of the Finance (Tax Appeals) Act 2015. The vision for the new commission was that it would provide enhanced arrangements for an independent, efficient, well-defined, clear and transparent system for appeals relating to decisions of the Revenue Commissioners.

  The Tax Appeals Commission (TAC) has received significant additional resources since its establishment - an increase from two Commissioners and 5 support staff at end 2016 to three Commissioners and 15 support staff in 2018. The budget for the Commission almost quadrupled between 2014, when the budget for the Office of the Appeals Commission was €477,000, and the agreed TAC budget for 2018 of €1.626 million.

  The TAC has also recently moved to new office premises that afford both better hearing facilities to allow multiple hearings to proceed in parallel and more office space to accommodate increased staff numbers.

In February 2018, the Accounting Officer of the TAC submitted a request to my Department for significant additional administrative staff and resources to meet the increased caseload of the TAC. Granting this request would involve an effective doubling of the TAC’s budget for 2018 from €1.626 million to an estimated €3.226 million. This request includes extra resources for ICT and infrastructure in the TAC's new office space.

  Due to the substantial increase in public resources being sought by the TAC, my officials requested further information to support the resource request to ensure that the proposed balance of administrative staff and the existing Commissioners would be effective in addressing that workload. The TAC informed my Department in early March of this year that they had commenced commissioning a review of their resources and operations. I am awaiting receipt of this report and, in the meantime, I have also commissioned an independent reviewer with significant experience of civil service bodies and operations to assess the current position and advise how best to address the TAC's resource needs going forward. This review has been expedited in order that resourcing decisions, based on a sound business case for the resolution of the current backlog, can be made as soon as possible.

  I am conscious that an effective, transparent and fair tax appeals system for taxpayers is an essential aspect of any tax system. As Minister, I must ensure that the TAC is provided with the right resources so that it may best address the issues it faces and provide an effective, transparent and robust service for taxpayers. I expect to receive the reports from both reviews soon, and the recommendations from these reports will inform my decision making in relation to the Commission's resource needs.

Motor Insurance Costs

 103. Deputy John Curran Information on John Curran Zoom on John Curran asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if his attention has been drawn to the rise in the number of motor vehicles being scrapped each year in view of the fact owners are either failing to get motor insurance quotes or are receiving prohibitively expensive quotes; the steps he will take with the motor insurance industry to address this issue; and if he will make a statement on the matter. [30687/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe While the issue of "End of Life" Vehicles does not fall under the remit of my Department, I am aware that there is a motor industry group which is highlighting what they consider to be a link between the number of cars being scrapped annually and the lack of availability or the higher price of motor insurance for such cars. In this respect, Minister of State Michael D’Arcy TD met last week with the group to listen to their concerns. He has asked the group to submit more information on aspects of their conclusions as they relate to insurance. I also understand that the Minister of State intends to write to Insurance Ireland on foot of this in order to try and get a more detailed perspective on the matter of insurance for older cars.

I would like to reiterate however that neither I, nor the Central Bank of Ireland can interfere in the provision or pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on an assessment of the risks they are willing to accept. This position is reinforced by the EU framework for insurance which expressly prohibits Member States from adopting rules which require insurance companies to obtain prior approval of the pricing or terms and conditions of insurance products. Consequently, I am not in a position to direct insurance companies as to the pricing level or terms or conditions that they should apply in respect of particular categories of drivers or vehicles.

I understand that motor insurers use a combination of rating factors in making their individual decisions on whether to offer cover and what terms to apply. Factors include those such as the age of the vehicle, as well as the type of vehicle, the age of the driver, the relevant driving experience, the claims record, the number of drivers, and how the vehicle is used. Insurers do not all use the same combination of rating factors, and as a result prices and availability of cover varies across the market. In addition, insurance companies will price in accordance with their own past claims experience, meaning that in relation to the age of a vehicle and the availability of cover, different insurance companies will use different age thresholds.

Notwithstanding the above, my officials are engaging with Insurance Ireland in relation to the availability and cost of insurance for older cars, and have been informed that certain insurance providers have recently changed their acceptance criteria and increased their vehicle age threshold levels.

Tax Code

 104. Deputy Pearse Doherty Information on Pearse Doherty Zoom on Pearse Doherty asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the reason the cap on intangible assets that could be written off against profits was raised to 100% in budget 2015. [30969/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe Capital allowances for intangible assets were introduced in Finance Act 2009 to support the development of the knowledge economy and the provision of high quality employment. When the capital allowances were introduced, to ensure that a measure of tax remained in charge annually, a restriction was provided to cap the amount of income that the allowances could be used against in any year at 80%. The restriction did not deny the use of the capital allowances, it merely lengthened the time period over which they could be utilised.

Ireland is not unique in providing capital allowances for intangible assets and the tax treatment of intangible assets is similar to the approach taken in other countries, such as the UK and the US.

In Finance Act 2014, the cap of 80% was increased to 100%, effective for accounting periods commencing on or after 1 January 2015. The rationale for increasing the cap was to bring the tax treatment of intangible assets into line with the tax treatment of similar assets in other jurisdictions and to enhance the competitiveness of the Irish regime for intangible assets to make Ireland an attractive location for companies to develop intellectual property. This was in recognition of the fact that investment and growth in OECD economies is increasingly driven by investment in intangible assets.

Noting a significant increase in the use of the capital allowances in 2015, the Coffey Review recommended that, to ensure some smoothing of corporation tax revenue over time, the 80% cap should be restored, and this recommendation was acted on in Finance Bill 2017. Again the cap does not affect the overall capital allowances available but merely lengthens the time frame over which they can be used.

  Question No. 105 answered with Question No. 73.

  Question No. 106 answered with Question No. 78.

Insurance Costs

 107. Deputy Niamh Smyth Information on Niamh Smyth Zoom on Niamh Smyth asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the measures that have been taken to meet and engage with insurance companies here regarding excessive premiums being charged to consumers particularly in counties Cavan and Monaghan. [30683/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The Deputy should note that in my role as Minister for Finance, I am responsible for the development of the legal framework governing financial regulation. Neither I nor the Central Bank can interfere in the pricing of insurance products, as these matters are of a commercial nature, and are determined by insurance companies based on the risks they are willing to accept.

However, it is acknowledged that pricing in the motor insurance sector has been subject to a lot of volatility in recent years, from a point where some premiums appeared to be priced at an unsustainably low level to the more recent experience of large increases.

Indeed, the problem of rising motor insurance premiums was the main impetus for the establishment of the Cost of Insurance Working Group, which is now chaired by the Minister of State for Financial Services and Insurance, Mr. Michael D’Arcy T.D. Its Report on the Cost of Motor Insurance was published in January 2017. The Report makes 33 recommendations with 71 associated actions to be carried out in agreed timeframes, set out within an Action Plan. The Working Group continued its work throughout 2017 and subsequently published the Report on the Cost of Employer and Public Liability Insurance in January 2018.

Stakeholder consultation formed the foundation upon which the Working Group’s two Reports and their recommendations were developed. This consultation process undertaken by the Working Group involved a wide range of stakeholders representing the different voices within this sector, including Insurance Ireland and the major individual motor insurance providers. The impact of excessive premiums being charged to consumers from all over the country was a feature of this engagement process with industry.

In addition, my officials regularly raise specific issues affecting consumers across the country during their ongoing engagement with Insurance Ireland, including within a sub-group formed to implement relevant consumer-focused recommendations from the Motor Report.

Furthermore, Minister of State D’Arcy has separately met with representatives from insurance companies and other relevant stakeholders in relation to a number of issues and the problems resulting from high insurance premiums have been discussed during these engagements.

Economic Competitiveness

 108. Deputy Bernard J. Durkan Information on Bernard Durkan Zoom on Bernard Durkan asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe the extent to which he remains satisfied that the economy remains competitive, facilitates growth and is capable of meeting the challenges ahead including Brexit; if there are particular initiatives that need to be taken; and if he will make a statement on the matter. [30966/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe Ireland’s economic recovery has been underpinned by a significant improvement in competitiveness. The latest figures from the Central Bank of Ireland show that Ireland's real harmonised competitiveness indicator, a widely used measure of competitiveness in Europe, has improved by approximately 19 per cent between its peak in 2008 and February 2018.

The restoration of Irish competitiveness since 2008 has been hard-won through productivity improvements and wage and price moderation. It is important that this competitiveness is preserved and continues to facilitate growth. In this regard, the most recent National Competitiveness Council bulletin, which highlights our decline in the 2018 IMD Competitiveness rankings, though remaining the 3rd most competitive economy in the euro area, serves as a reminder that we cannot afford to be complacent. This is all the more important given the significant economic risks we face both internationally and domestically.

On the external side, the impact of Brexit has already been felt through the strengthening of the euro against sterling. Other international risks include the policy stance in the US, including in relation to taxation. In terms of domestic risks to competitiveness, overheating and housing supply pressures are of particular concern. The housing sector can adversely impact on competitiveness through, for example, restricting the mobility of labour.

These risks highlight the importance of maintaining competitiveness-oriented policies, including sustainable fiscal policies, to help address emerging uncertainties and avoid pro-cyclical policy contributing to overheating pressures. With regard to housing, a number of initiatives were introduced in Budget 2018, in addition to the measures implemented in ‘Rebuilding Ireland: An Action Plan for Housing and Homelessness’, to tackle the underlying problem of a supply shortage.

Regarding Brexit, as part of the Government’s trade strategy, Ireland Connected, a number of measures have been set out to specifically address Brexit related issues, including diversification of markets for indigenous exporters. Greater market diversification must be part of the policy response, so that dependence and exposure to the UK market is reduced.

In summary, competitiveness has improved but we must not be complacent. My Department will continue to monitor all relevant developments closely as we seek to ensure that the economy is best placed to weather economic shocks to the greatest extent possible. Competitiveness is an important factor in this.

  Question No. 109 answered with Question No. 89.

Banking Operations

 110. Deputy Niamh Smyth Information on Niamh Smyth Zoom on Niamh Smyth asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his plans to address the diminution of banking services in rural areas; and if he will make a statement on the matter. [30682/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe I should stress at the outset that the Government has no formal role in the commercial decisions of the banks as to their future business model and whether or not they will close particular branches.

The Deputy will no doubt appreciate that the provision of services by banks, including the location of branches, is a commercial decision for the Boards and management of the institutions.

That said, I expect that any bank closing branches will do everything that it can to mitigate the impacts of the branch closures on local communities, including technology and the use of alternative means of service delivery. I also expect that the bank will ensure that customers are kept informed about developments and provided with the appropriate assistance to move branches, switch to other banks and avail of alternative means of accessing financial services. The Central Bank will also have a role in ensuring that consumer protection rules are followed.

As the Deputy will be aware, the Report on Local Public Banking by my Department and the Department of Rural and Community Development has now been published.

Specifically, the Report examined a proposal from Irish Rural Link and the Savings Bank Foundation for International Cooperation for 8-10 local public banks, starting with a pilot local public bank in the Midlands. The suggested locations in the proposed pilot in the Midlands are already serviced by existing banks, credit unions and post offices.

The Report concludes that there is not a compelling case for the State to establish a new local public banking system in Ireland using €170 million of Exchequer funds, based on the proposed model. However, as set out in the Report, my Department will commission an independent external evaluation of other possible ways in which the objectives of local public banking, such as financial inclusion and economic development of rural areas, could be furthered in Ireland.

Furthermore, the Government is committed to continuing to engage with interested parties and stakeholders, including those representing rural areas, on this issue by way of a stakeholder forum.

The Report also highlights the positive contribution of An Post and credit unions to the Irish banking environment. There is a commitment to continuing to work with An Post and the credit unions in relation to the development of the provision of financial and banking services by them, particularly in rural areas. My Department has been engaging with Minister Naughten’s Department in this regard.

The Deputy will be aware of the Strategic Banking Corporation of Ireland (SBCI) whose mission is to deliver to Irish SMEs effective financial supports that address failures in the Irish credit market, while supporting competition and innovation and ensuring the efficient and effective use of available EU resources.

The SBCI does not engage in direct lending. It utilises an on-lending model, making finance available through both bank and non-bank partner finance providers, known as on-lenders. It is also developing further risk-sharing-counter guarantee schemes, such as the Agricultural Cashflow Support Loan Scheme and the Brexit Loan Scheme.

The SBCI began lending in March 2015. To the end of December 2017, SBCI supported funding of €920m has been provided to 22,962 SMEs supporting 119,392 jobs. Of specific relevance to this question is that approximately 85% of SBCI supported lending has gone to SMEs based outside Dublin..

Proposed Legislation

 111. Deputy Thomas P. Broughan Information on Thomas P. Broughan Zoom on Thomas P. Broughan asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe when he will introduce legislation on the rainy day fund; and when he will report on the work done to date by his Department in framing the structure and rules of this expenditure. [28985/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe I intend to introduce rainy day fund legislation very shortly. The Bill has been drafted, and I am now seeking the Government's approval for its publication and presentation to Dáil Éireann.

It is my intention to commence second stage on this Bill at the beginning of the Autumn session, at which time I look forward to discussing my policy approach and how it takes account of Ireland's economic vulnerabilities and of our obligations under national and EU law.

Mortgage Lending

 112. Deputy Clare Daly Information on Clare Daly Zoom on Clare Daly asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if he has had discussions with the banks on negative equity trade-up mortgages in terms of increasing their availability for growing families. [30929/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe As Minister for Finance, I have no role in the decision making processes of credit institutions and what products any such institutions wish to provide. This is a commercial matter for each individual credit institution having regard to the relevant legal and regulatory requirements which apply.

The Deputy may, however, be interested to note that the Central Bank of Ireland, as part of its independent mandate to preserve and protect financial stability in Ireland, introduced macro-prudential measures for residential mortgage lending in February 2015. These macro-prudential measures apply certain loan-to-value (LTV) and loan-to-income (LTI) restrictions to residential mortgage lending by financial institutions regulated by the Central Bank. Currently these measures generally provide, subject to a certain level of discretion available to lenders, that the size of a primary dwelling residential mortgage loan shall not exceed 3.5 times the gross annual income of the borrower(s) or, in the case of a second and subsequent buyer(s), 80 per cent of the value of the residential property which will act as security for the mortgage loan.

However, the particular loan-to-value restrictions on mortgage borrowers as set out in the regulations do not apply to borrowers in negative equity who wish to purchase a new home. This means that the mortgage shortfall remaining after a person sells their existing home can be added to the balance of the new mortgage for a new home and that the macro-prudential deposit requirements will not apply to that new mortgage.

Nevertheless, it should also be noted that, subject to the requirement to comply with the provisions of the Central Bank Consumer Protection Code and other regulatory requirements, ultimately it is still a commercial matter for an individual lender to decide whether or not to provide a new mortgage loan in any particular case, or how much new credit to provide in any particular case.

Tax Avoidance

 113. Deputy Thomas P. Broughan Information on Thomas P. Broughan Zoom on Thomas P. Broughan asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his views on a report which alleges that Ireland is the top tax haven in the world; his further views on whether this and similar reports constitute a serious risk to Ireland's financial reputation and future economic development; and if he will make a statement on the matter. [30685/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe I understand that the Deputy is referring to report "The Missing Profits of Nations" by G. Zucman, T. Tørsløv and L. Wier, that examines attribution of profits by mutlinationals around the world.

Firstly, I reject any assertion that Ireland is a tax haven. The report does not provide any definition of a tax haven and appears to assert that Ireland, and many other countries, are tax havens without providing a rationale for that assertion.

In the report, the authors appear to use the terms "low-tax countries" and "tax havens" interchangeably. The inference that Ireland is a tax haven simply because of our longstanding 12.5% corporate tax rate is totally out of line with the long established position that a low corporate tax rate applied to a wide tax base is good economic policy for attracting investment and supporting economic growth.

The central analysis of the paper looks at links between the level of profit booked, and the level of wages paid in a country. This creates a totally misleading impression that corporate profits are or should be directly linked to wage levels rather than to the outputs of investment in all income generating activities such as investment in R&D, intangible assets, capital intensive machinery and investment in staff etc. A small country with high levels of high value adding FDI relative to the size of the domestic economy will of course appear like an outlier in this type of analysis.

It is important to be very clear – corporation tax is paid where value is created not simply where companies have their highest wage bills. It is therefore misleading to assert that profits are being artificially shifted by focusing on the ratio of profits to wages in each country.

In terms of reputation, Ireland has a competitive corporation tax rate, an attractive and stable tax regime and a strong reputation and commitment to transparency.

Ireland’s tax regime is designed to encourage the location of real, substantive and high-value adding investment in the country. We do not apologise for having a competitive tax regime because we ensure that our overall regime is fully in line with international standards for fair tax competition as agreed at the EU and the OECD.

It is clear that the only way to ensure that the right tax is paid in the right place is to ensure that all tax authorities have access to all relevant information for assessing whether they are owed any tax. This is why tax transparency and exchange of information among tax authorities is so vital.

Ireland has continuously made changes to our tax legislation to ensure we meet all international best practices for exchange of tax information. Last August, the Global Forum on Tax Transparency and Exchange of Information (an OECD led peer-review) awarded Ireland the highest international rating on tax transparency and exchange of information, one of only twenty two jurisdictions globally to be so rated following a new and enhanced peer review process.

Ireland actively contributes towards preventing aggressive tax planning through the implementation of the OECD BEPS reports and the numerous EU Directives we have agreed on tax avoidance. We continue to play our part in this ongoing work. It is widely acknowledged that difficulties in the international tax system mainly arise from asymmetries between the taxation systems of different countries. Only by acting together can we ensure that companies are taxed appropriately.

Tax Code

 114. Deputy Jonathan O'Brien Information on Jonathan O'Brien Zoom on Jonathan O'Brien asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe his views on whether the decision in budget 2018 to reduce from seven to four years land must be held before it can be sold free of capital gains tax has contributed to a spike in the sale of commercial property in the first quarter of 2018. [31032/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe I am advised by the Revenue Commissioners that in order to qualify for the capital gains tax exemption announced in Budget 2018 for land and buildings held for a minimum period of 4 years, the land or building must have been acquired in the period commencing on 7 December 2011 and ending on 31 December 2014.

There are a range of factors that influence the sale of commercial property, therefore, it would be difficult to assess whether the reduction of the period for which land or buildings must be held in order to qualify for the CGT exemption has contributed to any increase in the sale of commercial property in the first quarter of 2018. Other factors such as increased demand for commercial property arising from increased economic activity may have contributed to any uplift in sales.

Ministerial Meetings

 115. Deputy Alan Kelly Information on Alan Kelly Zoom on Alan Kelly asked the Minister for Finance Information on Paschal Donohoe Zoom on Paschal Donohoe if he will report on his recent meeting with IMF Secretary General, Ms Christine Lagarde. [30981/18]

Minister for Finance (Deputy Paschal Donohoe): Information on Paschal Donohoe Zoom on Paschal Donohoe The Managing Director of the IMF, Christine Lagarde, visited Dublin on 25-26 June to attend a conference, ‘The Euro at 20’, organised by the IMF together with the Central Bank of Ireland which also hosted the event.

  I met with Ms Lagarde on Monday 25th June during the course of this visit. The meeting did not have a formal agenda. However, in the course of the meeting we discussed developments in the Irish economy and the outlook for the period ahead. Our discussions also touched on EU and international economic and financial developments, including Brexit.

  This discussion took place in the context of the subsequently published International Monetary Fund Article IV Report on the Irish Economy. As the Deputy will be aware, the Article IV process is a requirement for all members of the Fund and takes place on a periodic, usually annual, basis. It is a long-standing element of Ireland’s regular engagement with the IMF and focusses on medium to longer-term policy issues. This year’s Report recognises Ireland’s continued strong economic growth, leading to a rapid reduction in unemployment and strengthened public and private balance sheets. It also notes that our economy continues to grow at a pace well above the EU average and it is approaching full employment. The Report outlines that the outlook is expected to remain favourable, although significant external risks, in particular Brexit and an escalation in global protectionism, will pose challenges.


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