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Tax avoidance issues known for months, but still not on the government agenda – Doherty

25 July, 2016 - by Pearse Doherty TD


Sinn Féin Finance Spokesperson Pearse Doherty TD has questioned why, despite the Department of Finance being aware of issues for some time, that the Tax Strategy Papers contain no recommendation or analysis of the use of tax avoidance schemes as highlighted by him and others for months.

The Donegal TD called for the government to get real on the issue and to commit to a comprehensive plan to tackle not only the Section 110 issue but also the abuse of ICAVs (Collective Asset-management Vehicles) and Qualifying Investment Funds too. The Minister for Finance had committed to such action in April in a parliamentary reply to Deputy Doherty.

Deputy Doherty said:

“It is time for a clear commitment from government that they intend to tackle tax avoidance schemes in Budget 2017. This issue goes far beyond the well-known Section 110 loopholes but must also look at the wider picture including the use of ICAVs and Qualifying Investment Funds to avoid tax, including on property transactions. Over three months ago in April, the Minister confirmed to me that he was looking at these issues and that if a problem was identified ‘appropriate action will be taken and any necessary legislative changes that may be required will be put forward for my consideration’.

“The fact that there is not even a passing reference in the Tax Strategy Papers means there is no government priority attached to these schemes. That must change with a commitment from Minister Noonan that Budget 2017 will include a comprehensive plan to end these schemes.

“I welcome the recent media attention on one issue- the Section 110 status, but as far back as April, I was seeking a review with a focus on vulture funds’ arrangements. Following a Freedom of Information paper, I called upon the Charities Regulator to investigate the role of companies designated as charities within this infrastructure.  He confirmed to me that he would work with Revenue to look into the issue of abuse of charity status by some schemes. A wider exercise looking at the whole avoidance infrastructure is now needed.

“It comes as no shock to me that Revenue and the Department of Finance are fire-fighting on this issue. It is clear they have been aware of major tax avoidance schemes since at least March of this year. There can be no surprise from government about this issue either; they, and Fianna Fail before them, have created a culture and laws which not only facilitate but encourage the avoidance of tax by those with the ability to access the legal expertise to do so.

“Even now, despite the current focus, Irish companies are openly offering their services to companies that want to avail of these schemes. The tax avoidance industry carries on and has no fear of this government stopping it in its tracks.  A cursory look at the website of Davy’s stockbrokers brings you to a scheme to use Qualifying Investment Funds to buy Irish Real Estate to ‘mitigate tax liabilities’ to this State.

“Budget 2017 must be the one where we finally get to grips with this issue. No amount of spin or lobbying should allow us to minimise the damage this industry is causing. It’s an industry that does not fear a Fine Gael or Fianna Fail government because these parties set up and still support these schemes.” 


Note: The PQs in question can be seen below.

QUESTION NOS:  85,86,87,88

DÁIL QUESTIONS addressed to the Minister for Finance (Deputy Michael Noonan)
by Deputy Pearse Doherty
for WRITTEN ANSWER on 14/04/2016  

* To ask the Minister for Finance the income, gains and associated taxes paid in relation to qualifying investor funds investing in real estate since their introduction; the tax paid by their associated shareholders, by year; and if he will make a statement on the matter.

- Pearse Doherty T.D.

For WRITTEN answer on Thursday, 14 April, 2016.

* To ask the Minister for Finance thel income, gains and associated taxes paid in relation to Irish collective asset management vehicles investing in real estate since their introduction; the tax paid by their associated shareholders, by year; and if he will make a statement on the matter.

- Pearse Doherty T.D.

For WRITTEN answer on Thursday, 14 April, 2016.

* To ask the Minister for Finance if he has considered anti-avoidance measures in relation to Irish collective asset management vehicles investing in real estate, given the recent revelations concerning massive profits being made in property located here and funnelled through these vehicles, resulting in the Exchequer being deprived of Corporation Tax, Income Tax and Capital Gains Tax earned on profits from source assets; and if he will make a statement on the matter.

- Pearse Doherty T.D.

For WRITTEN answer on Thursday, 14 April, 2016.

* To ask the Minister for Finance if he has considered anti-avoidance measures in relation to qualifying investor funds investing in real estate, given the recent revelations concerning massive profits being made in property located here and funnelled through these vehicles, resulting in the Exchequer being deprived of Corporation Tax, Income Tax and Capital Gains Tax earned on profits from source assets; and if he will make a statement on the matter.

- Pearse Doherty T.D.

For WRITTEN answer on Thursday, 14 April, 2016.

REPLY.

Irish collective asset management vehicles (ICAVs) were introduced in 2015 as a measure to develop and enhance Irish competiveness in the funds industry in Ireland and to promote employment in the State.   

Qualifying Investor Funds, once authorised by the Central Bank, fall under the definition of an "investment undertaking", in Chapter 1A, Part 27 of the Taxes Consolidation Act and so are subject to the provisions of that chapter.  The legislation provides a tax exemption to the undertaking itself and to certain investors for example investors not resident in the State.

The Revenue Commissioners have informed me that as such funds are not chargeable to tax in respect of relevant profits they would not have the information sought.  Exit tax is imposed on Irish resident unit holders but a breakdown of this specific taxhead for a qualifying investor fund is not available.  

I am further advised by the Revenue Commissioners that they are currently examining recent media coverage concerning the use of investment funds for property investments.  Should these investigations uncover tax avoidance schemes or abuse, which erodes the tax base and causes reputational issues for the State, then appropriate action will be taken and any necessary legislative changes that may be required will be put forward for my consideration.

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