Michael McGrath (Cork South Central, Fianna Fail)
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1. To ask the Minister for Finance if he has considered the feasibility of allowing the proposed water charges tax credit to be deducted at source; the expected cost of administering it if individual taxpayers are required to make a tax return to claim it; the overall impact of water charges and the various reliefs on the public finances in 2015; and if he will make a statement on the matter. [42040/14]

Michael McGrath (Cork South Central, Fianna Fail)
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This question relates to water charges and the tax relief which the Government has promised to provide and for which the Minister provided €40 million in the budget. As part of the package which will be announced, I presume in the next week or two, will the tax relief be provided at source? What is the overall position of Irish Water? Is it on or off balance sheet? It seems very much that next year it will be on balance sheet. Will the Minister clarify these very important issues?

Michael Noonan (Limerick City, Fine Gael)
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A number of measures were announced on budget day to improve the overall affordability of water charges. The objective of these supports is to assist households which pay their water bills. Following the announcement on budget day, officials from the Department are working closely with their colleagues in other relevant Departments and agencies on the development of the processes that will be employed to deliver the relief. As I stated on budget day and subsequently, we will design the measure as broadly and efficiently as possible to ensure the relief reaches all households which pay their charges. While clearly there are cost implications for the administration of any relief, it is not possible to quantify the cost of administering the relief at this stage.

In the design of the relief we must be cognisant of the impact on Irish Water of Eurostat's market corporation test. As the Deputy is aware, the advantage of keeping Irish Water off the Government balance sheet is that the necessary investment in the water infrastructure in the country can be made by the utility without impacting on our deficit or debt targets under the Stability and Growth Pact.

More generally, in terms of the impact of water charges on the public finances, as the revenue from water charges is considered to be outside government, it has no impact on general Government revenue. Savings will accrue to the Exchequer over time as a result of a lower subvention from the Exchequer. As included in the summary of budget measures, the cost of tax relief at 20% on water charges up to a maximum of €500 per annum will be €40 million in 2016.

As Irish Water is considered to be outside government, expenditure by it does not impact on general Government expenditure. If tax relief was provided at source, Irish Water could fail the market corporation test and would, therefore, be classified within general government. Assuming that the operating and capital expenditure plans of Irish Water remained unchanged, the deficit would increase by between €500 million and €600 million, or 0.3 percentage points, in 2015. Separately, with regard to the impact on debt, all borrowings from third parties undertaken by Irish Water would be added to the outstanding stock of sovereign debt.

Michael McGrath (Cork South Central, Fianna Fail)
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I thank the Minister for the reply. He stated providing tax relief at source would result in Irish Water failing the market corporation test. That is the issue on which we need clarity. The €533 million to be provided next year from the local government fund will be accounted for in the general Government balance and thus will be on the balance sheet of the State. Is it the Government's intention that Irish Water will be off balance sheet in 2015? To achieve this, what level of revenue does Irish Water need to generate from domestic and non-domestic customers to pass the test?

Providing tax relief at source would have a number of benefits. People would receive the benefit upfront and it would avoid them having to go to the hassle of submitting tax returns. If those who will pay water charges in 2015 must submit a claim the following year, they would not receive the full benefit of the tax relief until the full following year.

The main issue is the market corporation test. Will the Minister explain the Government's position on it? What level of revenue does Irish Water needed to raise from domestic and non-domestic customers next year to pass the test and remain off balance sheet?

Michael Noonan (Limerick City, Fine Gael)
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The Central Statistics Office and Eurostat will adjudicate on this issue, but they will not give us an adjudication in advance. As it is not possible to run proposals by them and obtain an adjudication, we are operating without the degree of certainty the Deputy has requested in his question. My advice is a deduction at source would bring about a situation where probably only the net amount would be taken as a contribution. Consequently, while I cannot be absolute about it, there is a risk that Irish Water would fail the market test and everything would be on balance sheet if the deduction were to made at source.

Michael McGrath (Cork South Central, Fianna Fail)
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The Government has not ruled out the suggestion Revenue should in some way become involved in the collection of water charges. The Minister has overall responsibility for Revenue and needs to clarify the position on this matter. Because of the way Irish Water has been established as a commercial State company it is not open to the Revenue Commissioners to act as a debt collection agent for a commercial State company. Will the Minister clarify once and for all whether Revenue will in any way be involved in the collection of water charges?

Michael Noonan (Limerick City, Fine Gael)
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As the Deputy is aware, the entire issue of Irish Water and the policy underpinning it is being revisited by the Government and there will be an announcement next week or in the next couple of weeks by the Minister for the Environment, Community and Local Government. The re-examination is taking place with three principles in mind: to provide certainty about the bills people will face for water supply; the affordability issue - the Government is examining the situation to ensure whatever charge is applied will be affordable by the generality of households; and, for the reasons outlined by the Deputy, the fact that we would like to keep it off balance sheet because there would be an easier funding arrangement. As the money dedicated to Irish Water will be spent, it is not a question of extra money being spent. It is not even a question of having extra taxes to raise it; rather, it is how to account for the investment in Irish water. The potential effects of being on balance sheet are that the deficit would go up and the debt would increase. These are the considerations and we are proceeding on that basis.

Seán Barrett (Dún Laoghaire, Ceann Comhairle)
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We are over time.

Michael Noonan (Limerick City, Fine Gael)
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On Revenue, obviously, all options are being examined. As the Deputy stated, Revenue has never acted to collect outstanding debts. It is responsible for raising revenue.