Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I am pleased to have the opportunity to discuss with the committee the 2018 Estimates for the Department of Finance and other Votes within the finance group covering the Office of the Comptroller and Auditor General, the Revenue Commissioners and the Tax Appeals Commission.

I will focus on my own Department first. The EU and international division deals with the development and implementation of strategies at European Union and euro area level, and internationally on economic, fiscal and financial policy formulation and the cross-departmental co-ordination of EU policy. It manages the EU budgetary process and EU economic governance. It also builds relationships through Ireland’s diplomatic network and ensures that both I and the Department are fully apprised of EU and international developments.

A dedicated Brexit unit within the EU and international division was established in July 2016 to manage Brexit work across the Department. This includes co-ordination of the Department’s contribution to the overall Government response to Brexit, including input to the EU-level negotiation process and domestic preparations to ensure that our country and economy is Brexit ready, and liaison with the Central Bank of Ireland, the National Treasury Management Agency, NTMA, and other agencies as appropriate.

Several proposals for the deepening of economic and monetary union, EMU, will be discussed at the European meetings in 2018. These relate to delivery of banking union and capital markets union, convergence in a more integrated economic and fiscal union and promotion of structural reform.

The EU and international division also manages our relationship with the International Monetary Fund, IMF, the European Central Bank, ECB, and the European Commission in the context for our former programme of financial support. The division has responsibility for the management of membership of, and policy development relating to, the European Stability Mechanism, ESM. The European Commission is due to bring forward its proposals on the post-2020 multi-annual financial framework in May. This will be a key challenge and priority for the Department.

During 2017 the funds, insurance, markets and pensions division made a positive contribution towards Council agreement on a range of dossiers, including the anti-money laundering directive and European market infrastructure. The revised prospectus regulation and the fifth anti-money laundering directive were concluded in 2017.

In the area of anti-money laundering and countering the financing of terrorism, CFT, we had a favourable assessment in the Financial Action Task Force, FATF, mutual evaluation in 2016-2017. The report, published in September 2017, acknowledges the strength of our CFT systems, but includes a series of recommendations.

The first report of the cost of insurance working group was published in January 2017. Work commenced on the cost of employer and public liability insurance, culminating on the publication of the report in January 2018.

The international financial institutions division manages Ireland’s relationship with a number of international financial institutions. These include the IMF, the World Bank Group, the European Investment Bank, EIB, the European Bank for Reconstruction and Development, the Asian Development Bank and the Council of Europe Development Bank. Our membership of these institutions provides Ireland with a voice at important fora on global economic and international development issues. Most recently Ireland became a member of the Asian Infrastructure Investment Bank. The year 2017 also represented the largest ever annual financing by the European Investment Bank in Ireland. More than €1 billion of new financing was signed last year with new investments around the country.

The banking division is responsible for contributing to the development of a financial services system capable of supporting economic growth and job creation. This involves policy areas such as the provision of credit, SME financing, consumer protection and addressing mortgage arrears. That division focuses on supporting the needs of the SME sector. Along with officials from that division, I have appeared before the committee to discuss matters such as the tracker mortgages. Decisions I have made recently in that and other areas include doubling the level of compensation that the Financial Services and Pensions Ombudsman may award to a consumer who has been adversely affected by the action of a financial services provider. I am now taking steps to appoint two new members to the Central Bank commission with a particular focus on consumer protection. That process is under way.

The shareholding and financial advisory division is responsible for the management of the State’s investments in the banking sector. It responsible for the management of our shareholding in the National Asset Management Agency, NAMA, and represents my interests regarding the oversight of the agency. A key highlight here was the successful IPO of AIB. That unit also works on many issues relating to credit unions

The tax division manages taxation and budgetary policy. It is responsible for analysing, drafting and preparing legislation, including the Finance Bill and the completion of the annual budget process. As I noted in my budget speech, a key part of its work programme in the coming year will be initiating a process to consider options for the amalgamation of USC and PRSI. I aim to have this work complete by the end of June. I recently announced a review of the local property tax, on which the committee has been briefed. The Finance Act 2017 provides for an exploration of other issues, such as the potential application of a tax on vacant residential property. I consider that the objective to be met by such a tax would be to increase the supply of homes.

The economic division is responsible for developing a strategy for the Irish economy across all sectors and the economic analysis of departmental policies.

The funding allocation sought for the finance group of Votes for 2018 totals €407 million, which compares with a 2017 Vote group total of €389 million. This is an increase of €17.9 million or 5%. The primary driver of this increase is the provision of a €15.7 million increase for the Office of the Revenue Commissioners. I will touch on that in a moment.

The gross allocation sought for the Department of Finance Vote in 2018 is €42 million, of which €10 million is provided for a fuel grant scheme for disabled drivers, a further €950,000 is provided to fund the office of the Financial Services and Pensions Ombudsman. Leaving these aside, my Department’s allocation provides for the administrative and non-administrative costs of the Department. The vast majority of this, some 61%, is provided to cover salaries and allowances, with a further €5.3 million to cover facilities and non-pay costs. The remaining €6.9 million is provided to cover the legal, advisory and committee costs necessary to support my Department.

The allocation for Vote 8, the Office of the Comptroller and Auditor General, is applied towards a single audit and reporting programme. The Comptroller and Auditor General is independent of my Department and is a constitutional officer. The Comptroller and Auditor General is responsible for controlling the release of funds for public services as approved by Dáil Éireann, auditing public accounts, undertaking independent examinations and reporting the results of the work to Dáil Éireann.

The financial audit role covers 290 sets of accounts produced by public bodies. These bodies have financial transactions that total over €200 billion. The allocation for this Vote is €7.927 million, which is an increase of 15%.

On Vote 9, the Office of the Revenue Commissioners has requested a budget allocation of €357 million. Three quarters of Revenue's budget relates to payroll. Revenue plays a vital role in our economy by collecting taxes and duties due to the State. These receipts underpin Government’s capacity to fund vital services and facilities. In 2017, Revenue collected a record €50.7 billion. It continued to support taxpayers in meeting their tax and duty obligations. For example, 2.2 million payments were made through online Revenue services. A key priority for Revenue is PAYE modernisation, on which work is well advanced. The 2018 Estimates provide for an additional €3 million in capital and current funding for IT developments required for the administration and smooth transition to PAYE modernisation.

Non-compliance with tax and duty obligations is an ever-present challenge. In 2017, the Revenue yielded €575 million though its audit and compliance interventions. There were 24 criminal convictions, an increase of six on the previous year. I have allocated an additional €4 million in the 2018 Estimates for an additional 100 compliance staff.

Tackling tax evasion is always high on Revenue’s agenda. In 2017, 2,786 disclosures with a declared value of €84 million. Revenue has initiated a new inquiry to identify and pursue taxpayers engaged in offshore tax evasion and avoidance.

In other areas, Revenue continues to assist the Department of Finance in the formulation and implementation of tax policy. It will support my Department in the review of the Coffey report. In the context of Brexit, Revenue has been participating in the interdepartmental work co-ordinated by the Departments of the Taoiseach and Foreign Affairs and Trade.

On Vote 10, the Tax Appeals Commission, TAC, has a budget of €1.626 million in 2018, a 1% increase on the previous year. The significant increase in the 2018 Estimate is to provide for the TAC with the resources needed to advance its programme of modernisation and reform and to address its caseload in an efficient and effective manner, while also meeting its obligations and accountability as an independent Civil Service body. Specifically, during 2018, as a result of the Revised Estimate, the commission hopes to recruit more staff, including tax-qualified case managers. It will also move office during 2018 to premises which are fit for purpose, largely to allow for multiple hearings and meetings with appellants to take place in parallel. Further expenditure by the TAC is in the area of ICT as it addresses the significant level of appeal cases.

I thank members for their attention and I commend the Estimates to the committee.