Finance Oral Questions – Sugar Tax and Relief for Mortgages in Arrears

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Clare raised the subservience of the Department of Finance to the drinks industry with the Minister for Finance, who failed to implement a sugar tax in the last Budget. A sugar tax would be an important weapon in the war that needs to be waged against growing obesity levels in Ireland. Clare also raised the unfair treatment of mortgage holders who are in arrears and unable to access tax relief in any form which would assist them in meeting their repayments

QUESTION NO:  20

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)
by Deputy Clare Daly

for ORAL ANSWER on 14/01/2016

To ask the Minister for Finance the status of the advice he received from his Department opposing the introduction of a tax on sugar; and if he will make a statement on the matter.

REPLY

The proposal of a tax on sugar sweetened drinks (SSD) has been examined by my Department in the context of the 2015 and 2016 Budget process.  It was initially considered through the Tax Strategy Group (TSG) General Excise Paper in September 2014 and again September 2015.  The 2014 Tax Strategy Group paper (General Excise Duties 14.02) is available on my Department’s website and the 2015 TSG paper will be published very shortly.

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.

QUESTION NO:  23

DÁIL QUESTION addressed to the Minister for Finance (Deputy Michael Noonan)
by Deputy Clare Daly

for ORAL ANSWER on 14/01/2016

To ask the Minister for Finance if the rules in place for the application of tax relief at source unfairly discriminate against persons who are unable to meet their mortgage repayments, particularly given the ongoing mortgage crisis; and if he will make a statement on the matter.

REPLY

The statutory position in regard to mortgage interest relief entitlement is that individuals can avail of the relief in respect of qualifying interest paid in a tax year, as provided for by Section 244 of the Taxes Consolidation Act 1997.

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.