Irish Collective Asset-management Vehicles Bill 2014: Second Stage

I move: "That the Bill be now read a Second Time."

The Government's IFSC strategy and the Action Plan for Jobs call for the introduction of a new legal framework for corporate funds. The Irish Collective Asset-management Vehicles Bill is the Government's response to that call. I believe that this Bill will allow Ireland better compete for investment with other funds domiciled on an equal footing and will maintain Ireland's well-deserved reputation as a safe place in which to do business.

This Bill introduces a new corporate vehicle - an Irish collective asset-management vehicle, ICAV. The ICAV will provide a new platform for managers of collective investment schemes. It will complement the investment companies, investment limited partnerships, common contractual funds and unit trusts structures that are already provided for in Irish law. ICAVs will resemble in many ways companies established under company law but they will not be part of company law. General company law provisions are often irrelevant or inappropriate to investment funds and, increasingly, EU company regulations are creating unintended consequences and unnecessary expense for funds.

The Government and the funds industry invest significant resources in promoting Ireland to international investors as the very best place to domicile funds. With the ICAV, Ireland will be able to offer fund managers a more complete range of corporate structures to meet their various needs. The ICAV is the first really significant development on this front since the introduction of the common contractual fund ten years ago.

Luxembourg has had a variable capital corporate structure specifically designed for undertakings for collective investment in transferable securities, UCITS, and alternative investment funds, AIFs, for many years. Indeed, such structures can also be found in Italy, Spain, France, Germany, the United Kingdom and the United States. What we are doing with the ICAV is not novel or untested. Rather we are providing those whose job it is to secure investment and jobs for Ireland with the best tools to keep up with our competitors.

The Irish funds industry is a key part of the internationally traded financial services sector - often referred to as the IFSC. Some 5,671 investment funds are authorised and regulated by the Central Bank of Ireland while a further 6,962 are administered in Ireland. This amounts to some €1,563 billion in authorised - Irish domiciled - funds and some €2,956 billion in funds under administration. Some 13,000 staff are employed directly and indirectly in both the IFSC in Dublin and in a number of locations throughout the country - it is a myth that it is a Dublin-based sector. Some 2,500 of these staff provide legal and accounting services and the industry generates significant direct and indirect Exchequer receipts annually.

Throughout the difficulties of recent years, the funds industry has continued to perform well and generate jobs, driving growth in sustainable employment throughout the country. Lest we forget, as I stated already, the funds industry in Ireland is not only based in the docklands of Dublin, but stretches out to provide high quality jobs throughout the country. One need only consider the recent significant expansion in investment in local communities across the country by companies such as Northern Trust and State Street. These and similar operators conduct their activities in locations as diverse as Limerick, Cork, Drogheda, Naas and Wexford.

Why do we need to do more if we already have the right formula to make Ireland the world's leading alternative investment fund domicile, including highly educated and motivated staff, a conducive business environment and a regulatory regime which is responsive to the needs of industry while at all times ensuring the protection of the interests of investors? Put simply, we need to do more because our competitors do not stop developing new structures and products, and if we are to continue to compete our innovation cannot stop either.

The Irish funds regime does not stand alone. This is a global industry with the US authorities and the EU playing lead roles. We are also seeing moves to create a south-east Asian collective investment product to rival European and American funds. Much of Ireland's effort goes into shaping the approach that Europe takes collectively to develop the industry through the UCITS directives and the Alternative Investment Fund Managers Directive. We are currently intensively involved in negotiations on the money market fund regulation. However, the precise legal structures upon which these funds sit remains a matter for individual member states to determine, and this is where the ICAV comes in.

Under the Bill ICAV will operate as regulated collective investment schemes, in other words, as undertakings for collective investment in transferable securities or as alternative investment funds. Collective investment schemes involve a vehicle for pooling the investments of investors in order to obtain professional management for their pooled assets.

The purpose of a fund is to invest the pooled assets for the primary benefit of the investors. In the case of UCITS, these range from ordinary consumers saving for their retirements all the way to hedge fund managers in New York and London. From Ireland's perspective, they all have one thing in common. If their funds are invested in an Irish domiciled UCITS or alternative investment fund, we have a duty to ensure the funds are administered and supervised to the very highest international standards. That remains the overriding objective of our policy on funds. The ICAV Bill is part of that strategy. Its purpose is to enhance the attractiveness of the Irish funds offering while maintaining the highest regulatory standards at all times.

Cost is one of the important factors in any decision to domicile a fund in Ireland and a key motivating factor in introducing the Bill is to create a cost-effective product which can compete on an equal footing with similar corporate structures for investment funds in other jurisdictions. The advantage to certain investors of the ICAV is that it will stand apart from the huge body of company law rules concerning SMEs or multinational industrial conglomerates which seek to address the myriad forms of risk arising in normal commercial environments. The ICAV structure keeps the investors in UCITS and AIFs far more up to date with the success or otherwise of the enterprise through daily net asset valuations, and they are assured that the investment policies and corporate governance of the scheme are subject to the independent control of third party depositories who are also closely regulated by the Central Bank.

Another feature of the ICAV which will be attractive to investors is the potential for it to be tax transparent in certain jurisdictions. This means, for example, that the tax authorities in the United States will be able to tax US investors directly on returns earned from an ICAV-based fund without taxing the fund directly. For those investors, that has the advantage of bringing forward the opportunity to meet their ultimate tax liability and so avoid double taxation as well as interest payments which would otherwise be due. The advantage should be seen in light of Ireland having already signed an intergovernmental agreement with the United States to assist in the implementation of the US Foreign Account Tax Compliance Act, FATCA, which will ensure reporting on US investors to the US tax authorities by Irish fund managers of all relevant information.

I will outline to the House the key features of the Bill. The first Part deals with preliminary matters and contains definitions used throughout the Bill, as well as giving the power to make regulations in specified circumstances. The power of the Central Bank to make regulations and give directions on ICAVs and other regulated financial service providers is set out in the Central Bank (Supervision and Enforcement) Act 2013. The ICAV will be a corporate entity, with limited liability for investors, formed by two or more persons and with a registered office in the State.

The creation of a functioning ICAV involves two stages, as set out in Part 2, namely, registration and authorisation. Regarding the first stage, the Central Bank of Ireland will maintain a register of ICAVs and will discharge functions similar to those undertaken by the Companies Registration Office, CRO, in relation to companies. The provisions largely reflect the principles established for companies in company law.

The second stage is authorisation. From the introduction of the UCITS regime in 1989, the Central Bank was appointed as regulator under the relevant UCITS regulations. The regulations provide a mechanism for the bank to authorise the investment funds, and contain all the necessary rules and regulations that have to be complied with by authorised funds. The most recent iteration of the regulations was made in 2011. For convenience, this is referred to as the "UCITS regime".

Separate from this regime, many member states, including Ireland, developed a parallel regime for collective investment funds. For convenience, these are referred to as "Non-UCITS". In recent years, the introduction of the alternative investment fund managers directive has brought a harmonised European approach to the regulation of certain aspects of these investments, relating in particular to their management, but has stopped short of requiring a full authorisation process. While the transposition of UCITS regulations contains a discrete authorisation process, it is necessary to provide a similar mechanism for the authorisation of ICAVs that propose to operate as alternative investment funds, and chapter 2 of Part 2 contains the necessary provisions.

In accordance with settled industry norms supported by the existing prudential regulatory framework, ICAVs operating as AIFs will be capable of operating separate sub-funds whose liability will be segregated from the other sub-funds. Where an ICAV operates as an umbrella fund in this fashion, the enhanced governance rules set out in sections 36 and 37 will apply.

Part 3 deals with the shares of the ICAV and reflects provisions in place for funds which are incorporated under company law. As with Part XIII of the Companies Act 1990 investment company, the ICAV will be able to take investments and redeem investments, resulting in a fluid capital structure. The remainder of the provisions in this Part concern the maintenance of the register of members, and these also reflect established policy as set out in company law.

Part 4 concerns the appointment, removal and conduct of directors and to a large extent mirrors provisions in companies legislation. The provisions help ensure the integrity of the ICAV and include a prohibition on the making of directors' loans. ICAVs can only operate as regulated collective investments schemes and are subject to prudential regulatory requirements which far exceed those placed on trading companies. The directors of ICAVs will face not only the same rules on restriction, disqualification and prosecution for misconduct but are also subject to the exacting rules on fitness and probity operated by the Central Bank of Ireland and its administrative sanctions regime, which can bring swift and tough justice for any misuse or abuse of their privileged positions.

The ICAV is ultimately a financial services vehicle and creates legal obligations, a breach of which may give rise to enforcement action under numerous pieces of funds legislation, including UCITS, AIFMD and Prospectus, among others. Regardless of how the ICAV is structured, financial services obligations will continue to be enforced by the Central Bank. In particular, the Central Bank will remain responsible for all the enforcement relating to the actions of the fund itself and the fund's participants and management. Moreover, in addition to the capacity to seek the disqualification of a director, directors will be subject to the bank's fitness and probity regime.

The draft ICAV Bill contains 64 sections that give rise to an offence. Due to the link with the Companies Acts, enforcement measures in relation to a large number of offences would fall within the remit of the Office of the Director of Corporate Enforcement rather than the bank. Such offences contained within the Bill deal with breaches of standard corporate governance requirements such as the retention of meeting minutes, failure to notify the appointment of a liquidator or failure to furnish information to a liquidator. These offences are mainly relatively minor in nature. Some, however, are more substantial, such as seeking the disqualification of certain persons acting as officers or directors.

The Bill also cross-applies to directors of ICAVs the restriction and disqualification regime that applies in the case of company directors. In those circumstances, persons appointed as directors of ICAVs will have an appreciation and understanding of the regime with which they have to comply and how actions can be taken against them.

Part 5 concerns the meetings, including the annual general and extraordinary general meetings, of the ICAV. Of particular significance in that regard is the capacity of the board to dispense with the holding of an AGM. Members holding not less than 10% of the shares of the ICAV may, in any case, cause the convening of an AGM. That is an appropriate measure for an entity which is already subject to strict prudential oversight by a national financial regulator.

The approach adopted in Part 6 to keeping financial information and to the preparation of financial statements and their audit is not to replicate the more detailed accounting requirements contained in the Companies Act but to reflect the applicable requirements in both directives to which I referred. That maintains the necessity to comply with specified accounting standards and, at a minimum, to give certain specified information.

Part 7 concerns the conversion of an existing collective scheme incorporated as an investment company to an ICAV. This is necessary as not only do we expect promoters of new investment funds to adopt the ICAV as the bespoke solution to their requirements, but we expect that many existing fund managers will also want to avail of the advantages provided by the ICAV.

Part 8 sets out provisions relating to the appointment of a receiver, the winding up and the striking from and, if appropriate, the restoration to the register of an ICAV. In each case those rules which apply to an investment company will cross-apply to an ICAV with the necessary modifications. I am in the process of final review of the provisions to determine whether it might be better or desirable to set out slightly revised provisions in relation to the striking off and restoration of ICAVs from the register maintained by the Central Bank. I would appreciate the views of Members on the matter and, if necessary, I will bring forward some amendments in the area on Committee Stage.

Part 9 contains miscellaneous provisions, including the penalties for offences under the Bill, provisions for the inward migration of foreign fund structures to become ICAVs and vice versa, and the division of enforcement responsibilities between the Central Bank and the Office of the Director of Corporate Enforcement.

It must be acknowledged that the ICAV Bill is largely a technical one. While it may not engage the interest of many beyond this House or beyond those in financial and legal circles, in considering its merits I ask that we all bear in mind that it is a measure that will have real and lasting meaning for the economy, the taxpayer and, most important, for those young and not so young people who will reap the benefits of new investment funds domiciling in Ireland as a direct result of what we are doing today. The new ICAV structure will serve to maintain the strength of Ireland as a funds domicile and increase direct and indirect employment in the funds sector.

I hope the outline of the legislation I have provided gives the background and context underlining the benefits which will arise from the Bill. I very much look forward to a constructive debate and to hearing the contributions of Members working collectively to ensure we will put in place legislation that will protect and enhance competitiveness and attractiveness to investors as we set about looking at how we can continue to improve and advance the financial services sector.

I wish the Minister of State, Deputy Harris, well in steering through his first legislation as Minister of State with responsibility for the international financial services sector. I assure him that we in Fianna Fáil will support the legislation. Since the Irish Financial Services Centre was established in 1987, Ireland has established itself as a significant player in international finance. A dilapidated swathe of the quays that scarred the city of Dublin has been transformed into a thriving hub of global funds.

Every day some 13,000 people are employed directly and indirectly in both the Irish Financial Services Centre, IFSC, in Dublin and across a number of locations throughout the country. Financial services and the funds sector have a significant presence in Cork. Its success has been a major boost to the entire economy and, following the financial storms of the past six years, it offers fresh opportunities for job creation and growth.

The creation of the Irish collective asset management vehicle is a move towards further realising the industry's potential. However, this demands a renewed commitment by the Government to a strong regulatory framework and focus on the industry. In a fast moving sector, financial innovation constantly challenges legislators and regulators to respond in order to keep pace. Today's Bill is a step towards enabling Irish financial services to catch up with their EU competitors with a new investment vehicle. The legislation comes after a period of decline in the financial industry overseen by this Government. We have slipped from 10th place in the global finance index in 2008 to 70th in last month's survey. This dramatic drop underlines the need for Ireland to diversify its offerings in a competitive marketplace and restore our regulatory reputation. If the Government is serious about achieving the aims of its five year strategy for the international financial services industry in Ireland, it needs to raise the game. The serious drop in our international ranking does not bode well for job creation in the sector.

The scale of the industry, with some €2.7 trillion in funds and 13,000 jobs, highlights the importance of underpinning a sustainable industry. The sweep of the five year strategy has real potential for further expansion but requires serious and consistent commitment by the Government. If the Government takes its eyes off the ball, as it has done to date, it will miss an opportunity to renew focus on the sector and deliver the improvements required to make it more competitive. The financial services environment is now very cut-throat and competitive - ultimately it is the most mobile form of investment and things can change overnight. There is too much at stake to risk the future of the industry and the broader role it plays in our economy by being complacent. It was complacency that caused the massive drop in our international ranking in the global finance index.

In discussing the creation of a new financial vehicle model, it is important that we deal with the regulatory framework. The financial crisis, which continues to linger over the eurozone, has illustrated the need for a strong regulatory system to keep market excesses in check. The hard pace of innovation is not just a competitive challenge for Ireland, but also a regulatory one. The harsh lessons of the past six years cannot be forgotten or we risk being thrown back into the market turbulence that wreaked havoc here and globally.

The Central Bank is at the heart of efforts to keep abreast of new fund models. This requires a mixture of legal tools and key personnel equipped to implement them. Solid regulation is vital in building a strong reputation for business to grow and providing consistent, reliable rules to protect consumers. As the industry grows and expands with greater financial rewards available, the importance of attracting and retaining skilled personnel will become even greater. Adequate resources to oversee and maintain the industry are of paramount importance. The systemic risks of mobile capital to the economy demand greater vigilance than was shown before the financial crash - anything less than that is flirting with future disaster.

It is important to remember that a strong financial sector is an integral part of a modern economy, particularly a modern Irish economy. Used well, it targets investment where it is best deployed to create new jobs and stimulate economic growth. It empowers people to realise the dream of home ownership and plan their retirements with a sense of security. Enabling new models, such as the Irish collective asset management vehicle, ICAV, outlined in this Bill, creates new avenues for investment as well as strengthening Ireland's global position. Combined with solid regulation, it is a step towards sustainable recovery for this country and the financial services sector can be a key driver of that recovery. It is vital that we learn from the past to place financial services on a sound footing for the future. In this light, I welcome the Bill and its potential. I look forward to dealing with the Bill on Committee Stage and any future legislative action by the Government drawn from its five-year strategy. I hope that this legislation marks a revitalised focus by the Government on this important industry.

Go raibh maith agat. Cuirim fáilte roimh an Aire Stáit agus é ag déileáil leis an mBille seo. Mar a dúradh, tá an rannóg seo, atá ag fostú 13,000 duine, iontach tábhachtach d'eacnamaíocht na tíre. Cibé leasuithe atá muid ag tabhairt isteach, tá sé tábhachtach go mbeidh siad siosmaideach agus ciallmhar dóibh siúd atá fostaithe san earnáil seo agus dóibh siúd a bheidh fostaithe ann sa todhchaí. Fosta, caithfimid cinntiú go bhfuil na rialacha ceart againn agus go bhfuil struchtúr fadtéarmach, ciallmhar ceart againn a dhéanfaidh cinnte nach mbeidh daoine fágtha thíos leis má táimid ag laghdú na rialacha atá i bhfeidhm.

The Minister of State mentioned that this is a technical Bill and he is certainly correct about that - it is specific to a particular industry. It is interesting that this Bill was not mentioned in the programme for Government and it is clear that it is not at the top of the agenda in housing estates and villages. It is an important piece of legislation but perhaps the Bill to protect mortgage holders whose mortgages are owned by vulture funds or the Bill offering redress for women who were in Magdalen laundries should have come first in the queue.

This Bill relates to the IFSC strategy paper and is a product of the IFSC Clearing House Group, which is an unhealthily influential group of officials and business interests. In this group officials from the Department of the Taoiseach, the Department of Finance, Enterprise Ireland, IDA Ireland and the Revenue Commissioners sit with financial businesses and make plans for the future. The latest minutes available from the Clearing House Group, from February 2014, note that the representative of the Irish funds industry:

highlighted an area of opportunity under the AIFMD Directive which is not currently accessible to Irish funds. If addressed it could afford greater control and certainty to institutions and investors and would provide an additional product offering to the funds industry. He requested engagement between the various stakeholders to address this gap in Ireland's offering.

Am I right to presume that the source of this comment developed this Bill? I know of many community groups and non-governmental organisations, NGOs, working with vulnerable people who would love to have such influence. The question of influence does not stop at the Bill's conception. The website of one leading establishment legal firm proudly states that it was "a contributing member of the legislative group responsible for the preparation of the ICAV Bill". It is happy to take any questions on it, apparently. At this point of scrutiny it would be healthy to have the full list of contributors to this Bill for the sake of transparency. Who drafted the Bill and which inputs were significant?

The funds industry is an important employer in the State and one which is performing well. According to the industry itself, it employs 13,000 people with net assets under management in Ireland of over $1 trillion. That figure puts next week's budget in context. Such employment brings huge benefits but a broader analysis of the impact of the funds industry in the State is needed - in areas such as tax and regulation, for example. It is important that close scrutiny be paid to a trillion-dollar industry.

My instinct is to approach some aspects of the Bill with great caution. Part 6 of this Bill allows for what could be called a relaxation of accountancy demands on these new ICAVs. I understand many in the industry find the current rules overly cumbersome and unsuitable for the industry but accounting rules have arrived at the point they are at through trial and error. Some have pointed out that the banking collapses of recent years can be traced to lax scrutiny of accounting practices and differing interpretations of rules, among other things. I urge caution and careful scrutiny of this section in particular. Similarly, the removal of the obligation to hold an annual general meeting, AGM, flies in the face of long-standing governance structures. I understand that an AGM for a fund is not likely to be as well attended or controversial as recent bank AGMs but making it an option to have no AGM, unless 10% of shareholders object, is a big step.

It has been noted that this Bill does not have the same conditions on risk diversification as other existing models and, again, I point out that there are reasons why such conditions exist.

The Bill moves the regulatory duty for ICAVs from the normal remit of the Companies Registration Office and instead will see these bodies monitored by the Central Bank. I will seek evidence that this conforms to international best practice and, crucially, that the Central Bank has the capability and resources to provide sufficient oversight. The industry informs us that 15% all funds in the EU are based in Ireland. In per capita terms this is a very impressive return. The Bill seeks to safeguard this performance and go a step further.

Let us be clear that the Bill has two main aims: to compete with Luxembourg and to allow for greater US investment by making ICAVs eligible as "check the box" companies under US tax law. On Committee Stage I will seek greater clarification on whether these goals are worthy. Luxembourg is a very small state with an incredibly large financial sector. We must think long and hard about how much our rules will be dictated by trying to compete with such a specialist country. I will also seek greater clarification on what this will mean in real terms. What will it mean for Irish taxpayers? Given the ongoing EU investigation this should be examined closely, particularly the changes with regard to US companies. I look forward to clarification on these issues from the Minister before Committee Stage.

The Bill is technical but this does not mean it should be given a fee pass. There are questions about how such an industry-specific Bill came before us and questions as to who wrote the Bill. We must consider the benefits and disadvantages to the State and the risks to which the State is open. We must ask how sustainable a model which chases Luxembourg as a financial model can be, and whether creating law in our Parliament to avail of a provision of US tax law is a good, well-thought-out idea. I look forward to detailed examination of the Bill on Committee Stage. It needs to be teased out in detail and I look forward to engaging with the Minister and others on individual sections to get more transparency and understanding of whether they are of benefit to the State or pose risks to it in the long term.

Is it agreed the next two speakers, Deputies Richard Boyd Barrett and Shane Ross, will share time? Agreed.

I recently heard an advertisement on Newstalk which greatly disturbed me. It stated whether the economy goes up or down one can make money. This follows quite a widespread pattern of advertisements on radio stations these days which speak about spread trading and how one can make money out of thin air. If one has a bit of money one can give it to firms which will gamble on one's behalf. They are very professional gamblers, and whether the economy is going up or down and whether people are miserable or happy there is always a way to make money out of the situation. I find this obscene. I find it almost beyond belief this is not banned, if not heavily regulated, after what happened to the global economy.

This is typical of the madness of the way in which the international economy works now, which lay at the back of the global financial crisis we had. Anonymous fund managers sitting behind screens in financial hubs operate as sophisticated gamblers, whether in London, New York or, as the Government is keen to develop, the Irish Financial Services Centre. There is not a lot of difference, if any difference, between this and people who study the form of horses and work out ways in which one is guaranteed to win. Anybody who knows anything about gambling addiction and how the system works knows there are far more losers than winners.

Gambling on horses is at a relatively small scale, which perhaps impacts detrimentally in many cases on the individuals involved, but when one blows this up onto a large scale one realises the world economy works like a bookies but it affects the lives of millions of people and has the capacity to destabilise entire economies. Money can move at the flick of a switch from one place to another in a way which destabilises real economies and real things being made and produced, which are important and which society needs. These things are moved around and investment in them surges in one area and collapses in another because of decisions made by these funds which deal in hundreds of millions and sometimes billions of euro. They decide money can be made in one place or, because somebody else is losing money, they wait until the market collapses and move in to buy up everything so they can start another upward surge and sell before the whole thing goes belly-up again. This is what is going on and this was the background to the international financial crash.

For a very brief period there was talk of perhaps looking at it, wondering about the tooth and claw unregulated markets and perhaps thinking about regulation. Even when the likes of those of us on the left, who think there is a fundamental problem with operating an economy on this basis, asked whether lessons should be learned, people agreed they were in favour of more regulation and stated they would introduce measures for regulation. Some of these might almost appear to be convincing until one sees something like this or real estate investment trusts, REITs.

The press is not here now, but in two years time when it becomes a real problem or we discover something very serious is happening a journalist will develop an interest in it. At present nobody is here, and nobody really knows what these things are, but this is very important. We are speaking about an extraordinary €1.6 trillion in authorised funds domiciled in this country and €3 trillion in funds under administration. Mind-boggling amounts of money are being managed or channelled through the Irish financial services industry.

I will be happy to hear the Minister of State tell me I am totally wrong on this, but I had a look at KPMG's report on the ICAVs and to me they look like a means through which big investors can avoid tax and regulation, and we are trying to lure this type of business into Ireland. It is spelled out very clearly in KPMG's document:

As an ICAV will not be a PLC as defined by the Companies Acts, it will not have to comply with the provisions of those acts. As a result, administrative costs will be reduced and ICAVs will be future proofed against unintended consequences arising from changes in Irish and European company law.

Whoopee for the investors, who will be insulated from the law at Irish and European level and will face lower administrative costs because there will not be much regulation to deal with. This is with regard to trillions of euro. We are promoting this type of business so that big investors dealing in hundreds and millions of trillions can avoid the law and regulation.

The other big issue is tax. The KPMG document states:

The main advantage of the ICAV is that it will be able to make an election under the US "check the box" rules to be treated as a transparent entity for US federal income tax purposes. This will allow an ICAV to be treated as a "partnership" (if it has more than one investor) or a "disregarded entity" (if it has only one investor) for US tax purposes, and so allow US taxable investors to avoid certain adverse tax consequences which would normally apply to PFICs.

In contrast, an Irish fund established as a plc cannot use the “check the box” option because it is deemed to be a per se corporation.

This is, therefore, a way of avoiding tax. It goes on:

In addition, while an ICAV may elect to be treated as a transparent entity for US federal income tax purposes, it will, in general, be respected as a corporate entity in most other jurisdictions. This can be advantageous, as many jurisdictions provide for more favourable tax treatments in respect of dividends and gains on share transfers.

It is, therefore, about avoiding tax and about us creating conditions favourable to that sort of tax avoidance. It goes on:

The ICAV and Irish taxation

ICAVs also benefit from an attractive Irish tax regime which means:

- no Irish income tax at the fund level

- no Irish withholding tax on all distributions to non-Irish investors...

- no transfer taxes on the issue, redemption or transfer of shares

- access to Ireland’s extensive double taxation agreements...

- exemptions from Value Added Tax...

I find it beyond belief that this is what we are up to. When the REITs thing came up two years ago, I was one of the few people - perhaps the only person - who queried it. We were giving tax incentives to these real estate investment trusts which came in when they saw the property market on the floor, something we paid for. They started buying up massive amounts of Irish property and gaining control of the Irish property market as a result of the crash. These are the same types of investors - maybe not exactly the same people but I suspect some of the same people - who got us into the mess in the first place, for which we have paid an extraordinary price. We are now facilitating them yet again with tax incentives and laws that permit this type of stuff.

It is madness. What is even worse is that we will not even impose a 0.1% financial transactions tax on these people. We are told they would run a mile from a 0.1% tax. That is the excuse for not doing it. We are told that all these guys would be frightened away if we put a 0.1% tax on them, which the European Commission estimates would raise between €490 million and €700 million. Let us call it €500 million on the conservative end, which happens to be the same figure as the water charges. Let us think about fairness. Is it fair on low and middle income families who have been hammered repeatedly by the universal social charge, pension levies, pay cuts and property taxes, many of whom are in poverty and literally do not know if they will be able to pay the bills? Is it fairer that we lash another €300, €400, €500 or €600 tax on them per year or that we put a 0.1% tax on all the trillions of euro going through the financial services sector, in this speculation and gambling sector? The answer to that question seems fairly obvious.

The Government claims it has no alternatives to imposing harsh austerity and that it hurts it more than it hurts the people, and so it has to do it. It does not, because it could just impose a tax of one tenth of 1% on this stuff and we could raise the same amount of money and probably more, but it will not even do that. Instead we are passing legislation that is about reassuring these guys that if they want to pay as little tax as possible and be subject to as little regulation as possible, Ireland is a good place to come. We are a haven for that kind of thing.

I would be very suspicious. I have no doubt the Minister of State will say it is all much more complicated than that and that I do not really realise how beneficial all this stuff is and that there are 1,300 jobs in the Irish Financial Services Centre.

It is 13,000, but it does not matter though.

Sorry, 13,000. It matters a lot.

It matters a lot to the people who have them.

The jobs matter a lot. I do not think it is a good idea for the future of employment in this country or for a sustainable economy for us to become hostage to these people, which is what we have become. At the moment the world is claiming that these corporate entities that are avoiding tax - the big multinationals, the wealthiest corporations in the history of the world - are doing everything they possibly can to pay little or no tax. Everyone says we should do something about this. Then everyone says it is very difficult for us to do anything on our own, that we cannot do anything about it because it is an international problem. What does it mean that we cannot do anything on our own? It means we are hostages to them. We cannot do the right thing because we are afraid of them. We are afraid of them because we have allowed ourselves essentially to become hostage to them and to become prisoners of their money. That is not a very good idea.

First, it is grossly unfair. Second, it greatly disadvantages domestic industry, real industry, the small and medium-sized enterprises, which are the big employers and could develop a sustainable economy that would not be vulnerable to massive shocks of the sort we have seen in recent years. That is what we need to build up. That is the strength that will get us through the casino ups and downs of the global markets. Instead we have a Government policy that is disproportionately and overwhelmingly geared towards making Ireland an attractive option for the very forces that have created such instability and crisis in the European and global economy.

It is crazy from every point of view, from a moral point of view and from an economic point of view. I accept it is possible to get temporary ups from it. Capitalism is a system of booms and slumps. The problem is the Government is cheering on the boom and when the slump comes, everyone is asking what the hell happened. It might just look like ups and downs on a graph, but real lives are being destroyed by it. This stuff represents the economics of the lemming. We should move away from the economics of the lemming before we charge over the cliff once again.

When the IFSC was set up, I believe in 1987, I was one of those who moaned about it and was a detractor. I said it would never work and the jobs targets were far too high. I regarded it as an election gimmick, one of Charles Haughey's mad ideas. When I said this, I was cheered on by the leading socialists of the day, who were hoping it would not work for reasons of ideology.

I was wrong; that happens too. If one embarks on the bold business of making predictions, one sometimes gets it badly wrong. I am glad to say I was wrong. I am glad that due to the efforts of IDA Ireland and other organisations, which would not be my favourite semi-State bodies, and due to some fairly strange massaging and extraordinary concessions given to AIB and Bank of Ireland to make them move into the centre and which meant the centre was initially featherbedded, it succeeded.

The IFSC with its various functions has become a recognisable success in the global world of finance. I say that without apology. It has also done something very important. It has provided an extraordinarily large number of jobs. To do that it has had to do something I see very little shame in, which is make tax concessions to outside companies to attract them to come here.

It is the same argument as applies in favour of corporate tax, which is about attracting multinationals. The question we must ask ourselves is whether we want those companies that come into the IFSC. Are we so pure that we should be telling them we do not want them here because we do not like the way they do business and because they are too big and powerful? I do not want to live in a country that is barren but pure. I do not want to live in a country that says to these types of companies that we do not like what they do and they should go somewhere else and allow us to live in poverty instead.

There have, of course, been problems with a large number of the companies that have come here. Nevertheless, I say God bless the multinationals and the employment they have given us. God bless the foreign funds that come here. I say this as one who has benefited as a director of one of these companies. In fact, at this time, I am a director of a company that is registered in the IFSC. While declaring that interest, I emphasise the benefits these companies give to the country. The multinationals that come here are not acceding to the classical trade union diktats in respect of their workers. They are not acceding to the sort of culture we prefer here. They are, however, providing jobs and making us more prosperous. That is very important to people in this country and to the Government.

Deputy Boyd Barrett is right in much of what he says in so far as he related the facts about what the Government is about here. This is a deregulating Bill. The Government is very coy about that, but it is a fact. I have read the briefing notes on the legislation and listened carefully to the Minister of State's speech, but there is no mention anywhere that this is about deregulation. Why should the Government be coy about it? The purpose of that deregulation is to attract finance which would otherwise go to London, Luxembourg or the United States. That is what we are about here.

I share the fears of everybody in this House regarding deregulation. However, there is a world of difference between what happens to the retail investor and what happens to the large investor. The people this will attract are those who are called professional investors, which might be a euphemism. We are talking about parties who will invest hundreds of millions in one go. Indeed, the Minister of State referred to funds in the trillions. These are sophisticated people who understand, on the whole, the risks they are taking. We certainly could, if we like, tell them to go away and spend their money in Luxembourg because we do not want it. It seems to me, however, that if they are doing nothing that is utterly immoral, which they are not, then we cannot live in an ivory tower about what is happening here. Our position must be that we welcome this particular industry and its activities but we must regulate them properly.

Deputy Michael McGrath pointed out that our ranking as an international financial services centre has sunk from being almost in single digit figures into the 70s. That is very serious. The Bill before us today is one way of tackling that. My guess, however, is that our reputation is sinking for a reason which is not tackled in this Bill and which has in many ways got worse, namely, that our regulator has lost the confidence of many international global investors. I do not say that lightly. The Central Bank in Ireland, which we have done so much to seek to improve and prop up, does not have the same reputation as the Bank of England, the US Federal Reserve and other national regulators. What is often ignored in these discussions is what has happened since the crash of 2007-08. In the case of Custom House Capital, to give one example, retail investors were fleeced. The Central Bank was utterly asleep on the job and is still unable to do anything. That issue is a running sore for retail investors.

Another very serious issue is reflected in a comment I heard the Tánaiste make this morning to the effect that the Central Bank is an independent body. That is news to me. In fact, it is only nominally an independent body. This week, two directors, Mr. Michael Soden and Mr. Des Geraghty, were reappointed to the board of the Central Bank by the Minister for Finance. If I were an outside investor considering taking a risk with my money in any of these funds, I would be asking what in the name of God is the Minister doing appointing Mr. Des Geraghty to the board of the Central Bank. What is more, in the past five years, that individual has been chairman of the bank's risk committee. Mr. Geraghty has many great qualities but what in the name of God he is doing on the board of the Central Bank, I do not know.

These appointments tell outside investors all they need to know about how we do business in this country in terms of regulation. We were promised in the past week that people would be appointed on the basis of talent or expertise. Under the radar, however, we have somebody who happens to be a former president of SIPTU, a member of the Labour Party, a militant believer in social partnership and great supporter of the current Government landing a lucrative position on the board of the Central Bank without any knowledge that we know of, according to his CV, of banking, central banking or regulation. He knows a lot about being a member of God knows how many political parties, but there is no justification for the Government appointing him or people like him to these positions.

We must ask ourselves how we can have confidence in the Central Bank when people who are cronies of people in Government have regularly been appointed by this and the previous Administration. A former Governor of the Central Bank was a member of Mr. Bertie Ahern's dig-out gang.

I advise the Deputy that while he may speak about individuals, he should refrain from mentioning names.

I apologise, Chairman. This has been happening continually. There was blatant political imposition of Governors onto what was the old Financial Regulator and the old Central Bank. There is no question that this went on. Indeed, it was partly responsible for the crisis we found ourselves in, because these guys did not know what was going on. It was one of the principal causes of the crash, although there were lots of others. If we have a regulator in which key personnel are asleep on the job and people are not appointed on the basis of expertise, this is the sort of thing that happens.

The confidence we expect from global investors has been lost because we have failed to recover from the appalling situation where people were appointed to the boards of banks on the basis that they were part of a global magic circle. They, too, were asleep on the job and thereby contributed to the crisis. The problem today is that this has not changed. Month after month, we see the usual suspects - I will not mention any names - appointed to the boards of Bank of Ireland, Allied Irish Banks and other institutions. We see people who got off those boards some years ago coming back, with political approval, and being given appointments.

One sees it on the board of Bank of Ireland, AIB and Irish Life which have what are called "public interest directors" who are basically political stooges being put, and kept, on these boards for no purpose. I cannot see what they do. There is a flaw in the system which is so extraordinary, it is impossible to believe it continues. These people do not even have to stand for re-election. They are there at the whim of the Minister, to whom they are not accountable. The last time I asked a parliamentary question about this - I must ask another one - the Minister, as far as I could discern, almost never met them. They were accountable to the board itself, which could not remove them. They were not accountable to the shareholders, who cannot remove them either because they never come up for re-election. Without naming them, many of these people wear their political colours on their chests. At least three, of whom I can think, are former Ministers. I do not know what they know about banking or what qualifications they have to be on the boards of banks but they certainly have political loyalties which cannot be said to be in any way useful, because they do not report to anybody, and these obviously overshadow any expertise they have.

When the Minister of State replies to this debate, will he respond by saying the Central Bank can be improved? The Central Bank of Ireland is full of people who should not be in it. Look at what happened to the last deputy governor. We had this sheriff riding in from overseas to clean up the Central Bank of Ireland, and people welcomed him with open arms. We thought there was great hope coming through, and this is no disrespect to the Governor, Professor Patrick Honohan, who has wonderful intentions for the Central Bank. However, the last deputy governor was brought in from overseas with, as far as we know, this truly independent outlook, which is a rare thing in Ireland, specifically because of the problems I mentioned and because he was different. However, he left long before his contract was due to end. The reason for that was that he shared the disillusionment I am expressing here.

I found the last two contributions interesting, especially that by Deputy Ross. We should probably discuss the whole idea of Ireland's reputation in international financial services at some point. We went through a very difficult period of time a number of years ago, partly due to the international crisis, and some reputational damage was done to Ireland. However, it is important for us to correct that reputational damage and ensure we do things to acceptable international standards. Deputy Boyd Barrett's hankering back to making things has a playful naivety about it but the world has moved on dramatically. It reminded me of comments made at the launch of the original iPhone. I do not know to whom the comments are attributed but someone said he thought it would come to nothing. No doubt he rued the day he made those comments publicly. There is nothing wrong with wanting to go back to banking and financial services of the pinstripe suit, the bowler hat and the black umbrella but the world has moved on.

One of the biggest issues with which we are now dealing is global trade and global taxation. We have an open economy and are very involved in global trade and global taxation. When global trade took off a century ago, the biggest issue was tax treaties between nations, which allowed for trade to be taxed in one jurisdiction only. It was all about ensuring profits and investment were not taxed in two jurisdictions, that is, double taxation. Over the last century, the pendulum has swung back and the issue is of no taxation in this jurisdiction, and that is where much of the discussion is focused currently. Preventing double taxation in the last century was also a global issue and it was resolved by up to 3,000 global taxation treaties. The solution to the current problem will also be a global one.

That is why the discussion currently is very much at OECD level, involving 50 of the world's developed nations, including Ireland. It has been heavily involved in the global taxation debate and global taxation avoidance issues since 1999. This discussion has been going on for the past five years. The G20 has made this a key issue to be addressed in the coming years.

If one listened to some individuals in this House, one would think the only country which needed to look at itself was Ireland. This is a global issue. We are not involved in any criminal money-laundering. We have the most open and transparent system, which may not, to some degree, be to our advantage because it makes it easy to beat up on us as it is easy to see where our taxes go and how we tax people. Many countries have very opaque systems of taxation, especially when it comes to large multinationals or even large conglomerates in their countries.

At times there is a need for us to stand up for what we are doing well. The Irish Financial Services Centre is something good. We are recovering in terms of getting our reputation back. One of the things which attracts investors to this country is that we have a very sound legal system. It is a very competitive country in terms of keeping costs down and having the right calibre of people to administer these funds. We are attractive to investors, because these things are very important to them, and also to employees who want to come to work with these companies. Many of the employees who work in these types of services are of the highest calibre and they are difficult to attract. One should not for one moment believe that all we need to attract these individuals is to speak English and have a well-educated workforce. If one visits the areas in which Google, Facebook and LinkedIn are located in the evening, one will see that people from every nation in the world are working in those companies. That must be borne in mind.

One thing at which we have got particularly good over the past few decades is innovating and changing how we do business, whether it is Enterprise Ireland, the IDA or the civil servants who lead these policies in the Department of Finance and other Departments. We constantly innovate and evolve how we do business and constantly keep up with the way international business is carried out. As soon as we stop, we will be dead in the water. When we see problems in Departments and in parts of the public services we are supposed to provide, the major problems are in the ones which fail to reform, innovate and evolve.

I do not consider myself an expert in collective investment or transferable securities or understand what the Alternative Investment Fund Managers Directive is all about but what I do know is that international financial services and banking are a vital part of our economy. It is not only those 13,000 individuals who represent every nation in the world and who are so important to us, this spreads beyond them. Ireland, for instance, is a leading nation in aviation re-financing. How did that happen? We do not build aircraft or have the population to generate that sort of activity but someone somewhere got that expertise together, innovated and evolved. That is another niche area in which Ireland is successful.

We are a great people for attracting direct foreign investment. I hear talk of reputational damage, and that we are corrupt. Deputy Ross referenced the political cronies in the banks and so on but in terms of what went wrong in banking, it was stockbrokers, investment bankers and other professionals who made the mistakes. In dealing with these issues we must learn from our mistakes. We are making sure we regulate what we do here with this Irish Collective Asset-management Vehicles Bill. We have to continue regulating because Ireland must protect its reputation, but there is not a requirement to regulate these vehicles in the way we have to regulate other companies. It is an unnecessary cost and an unnecessary burden. It may make people in opposition feel comfortable but it hinders our potential development. We must remain innovative in that regard.

What we are doing here will not be easy, and the Minister will have a lot of work to do. The impression has been given that somehow we are competing with countries like Luxembourg. We are not. We are competing with the City of London. Dublin and the International Financial Services Centre are minute in comparison to what the City of London is about. In some respects we would be irrelevant to international finance if we disappeared in the morning because we are so small. In comparison to what happens not just in the City of London but in New York, Singapore, Hong Kong and across the world, we have a very small share of the international financial services sector, regardless of what we might think.

There have been many attacks on us with regard to issues to do with our taxation. I found it interesting that the British Prime Minister, David Cameron, criticised Ireland's taxation issues yet his Government is bringing out a corporation tax plan for 2015 to 2019, which is different from the one it brought out for 2011 to 2015. He is bringing in changes to compete with us, some of which one could say directly contradict what he says at G20 meetings. We need to position ourselves in terms of this debate, which is very much at international level, and we must be very careful in the way we move forward. We do not need to kill off what is a vital part of our financial services sector. At the same time it is a very small part and it could be easily damaged. That is an important point.

The Minister will take this Bill to the finance committee where we will tease out many of the concerns raised about it by some people. Other countries operate a very similar system. The French operate the SICAV system. The United Kingdom operates its own open-ended investment company, and many other jurisdictions have very similar legislation to the Bill before the House. We are not doing anything particularly new. We are adding another area to our financial services, and I hope we will get it right. I hope that everybody here will go out and promote Ireland because we cannot compete with Wall Street. If one travels to those jurisdictions one will see that the Financial Times or The Wall Street Journal promotes their own countries. They will not promote Ireland on our behalf so we have to do that for ourselves. We have huge advantages. We have a sound legal system, which is very attractive to investors. We are part of the eurozone. We should emphasise more often that we are not just an economy of 5 million people but that as part of the eurozone we are part of a much wider economy of over 250 million, and that we can trade freely within the European Union. We need to promote our fine attributes outside Europe and America in terms of being a country in which to do business and carry out financial services and banking transactions.

I wish the Minister of State the best of luck because he is also examining a new strategy for the Irish financial services industry and international banking. It is recognised that we have a great future and that there are many opportunities for us in that regard. We have built up a huge corporate memory over the course of the past 25 years in how to deal with international financial services. Our civil servants have built up a huge amount of knowledge in terms of how to work this, which is very important. Deputy Boyd Barrett's Luddite thinking was to the effect that we should all go back to making things, whatever that means, but the day of this country having major industries is gone. We have to be sharper than that if we are to progress in the future. It is important that we have opportunities in what we do well, and one of the things we do well is that we never fall behind. Not only do we keep up with what everybody else is doing, we try to go beyond that and become even more innovative in how we make it work. Nobody will ever go back to a situation where we would look for deregulation or some sort of free-for-all as happened in the past.

There have been changes in international finance. Over the past decade some people who tried to make more money engaged in practices that were dangerous for international finance. We should avoid that. It most certainly is not a squeaky clean industry, no more than any system where people set out to make a profit and try to be different, but we must be very careful that we do not get involved in that, even if it may appear attractive at the outset. We must be cautious in that regard but we have to plough on. There is great scope in this area for Ireland, and we are in a pivotal position to make a difference with regard to this issue.

I wish the Minister the best of luck with this Bill and I hope we can discuss it further on Committee Stage. I have no doubt that much more legislation along these lines will be brought forward and discussed. I have not seen anything in the Bill that we should be overly concerned about but I will listen to members' contributions in the finance committee debate. The Bill will probably come to the finance committee relatively quickly and therefore we need to make sure we have an opportunity to discuss those concerns with the Minister.

I am glad to be able to give a cascade of welcome to both the Minister of State in his new position and on his first Bill, and also to the incoming chairman of the Joint Committee on Finance, Public Expenditure and Reform, Deputy Twomey, who was elected the other day, a committee which I feel very saddened I was expelled from by the Government, along with my membership of the Joint Committee on Public Service Oversight and Petitions, a year ago as a result of voting in according with conscience.

I am glad to be able to offer a preliminary contribution on this Bill. I was very interested to hear the opening statement of the Minister and the observations of Deputy McGrath, and those of Deputies Boyd Barrett and Ross. It was an interesting melange of initial response, and all of it had validity.

I am reading a book, Stress Test , by Timothy F. Geithner, former president of the Federal Reserve and of the Federal Bank of New York, which came out recently. It would be well worth the while of anyone who wants to contribute to this debate to read it because it shows, even with cutting edge experience and qualification and high head count resources in the Federal Reserve, supported by the Securities and Exchange Commission, SEC, which looks after the Wall Street end of things, while the Federal Reserve looks after the licensed deposit, Federal Deposit Insurance Corporation, FDIC, banks in America, how far behind the curve even the best operated regulators and central bankers found themselves when the crisis began to crack in America. It was not a once-off explosion like a volcano. There were splutterings at first. Bear Stearns went. The type of leveraged instruments and assets that had been created in the preceding years were very badly understood by everyone, even the most sophisticated. Geithner had hands-on experience on site in the Asian crisis and the previous crises. This thing was unravelling faster than they could understand it. By a fluke they had just about got a handle on the tri-party obligation transactions approximately a year and a half before the uncontrollable crisis started to occur.

The danger, and I say this with all due respect, is that the introduction to this Bill sounds impressive. It is jargonised and full of technospeak. All these things in new instruments, new ways of doing business in mobile capital, exposures, liabilities and insurance products, because that is what they are, are hugely leveraged and built sometimes on the slimmest of margins. We call this Bill the Irish Collective Asset-management Vehicles Bill 2014, but it is not all about Irish collective asset-management vehicles. It covers international collective asset-management vehicles registered in Ireland. Let us correct that first. Let us strip them all back to find out what is behind the facades. What do their businesses do? Whose money is under investment? Where are the destination investments held? If we are the location for the management, whether back office management or decision-making management, with contractual party positions being taken up, we may be assuming, if we put it under the umbrella of an Irish Central Bank review or regulation, professional indemnity exposures to this country.

Our Central Bank is still wobbling from lack of resources, experience, qualification, involvement and meaningful conversation with the institutions it supposedly regulates. As regards the mortgage crisis, which is bread and butter stuff, it does not have a clue what is going on in the banks. It trots out aggregate figures for arrears reported by the banks, but no one is drilling down into what exactly is going on. No one has asked for a sample of 100 cases to be explained at bone marrow level. Jargon is a great veil to hide behind. There is too much opaque glass, too many veils hiding the realities and the nuts and bolts of what is going on. We should be getting into the engine rooms.

I speak from experience. Does anyone remember what a CDO is? The Minister of State probably remembers the SIV, special investment vehicle. A CDO is a collateralised debt obligation. These companies proliferated at the IFSC, theoretically to improve the cost of capital of international banks that were already highly leveraged. The transactions that took place on the commercial paper issued in America, in dollar terms, to finance banks that had European balance sheets, when everything started to seize up and credit contracted from the over-leveraged positions of many banks, became a not very pretty sight. Who is behind the drafting of this legislation is a very good question. IFSC clearing house members are people of whom to be very wary. I am not saying they are untrustworthy but the Minister of State should cross-examine them. He should get down to nuts and bolts and quantify everything. He should not be afraid to ask the questions.

Tim Geithner admits in his book that they did not know what was going on. They had to get special teams to start beginning to learn what was going on. Bear Stearns was rescued in a breathless state of misunderstanding by a bank which equally did not know where it stood. Lehman Brothers did not have a clue. These were the investment banks with undoubted reputations. We vaunt our reputation. We talk about it and massage it. When one has to talk about one’s reputation, it is already gone. A banker said that and he was right. When one has to protest that one is safe, one is not safe.

This Bill will need a great deal of close interrogation and examination on the next Stage. We will not gloss over it because the cost will be too high if everything starts going wrong. We will be the platform for approximately €4.5 trillion of funds. Do we know what proportion of those funds will be leveraged? People think when they talk about an investment that it is saved up money invested in the product destination of the investment. It is not. Usually it is leveraged. Even the Federal Reserve is leveraged 77:1. The normal leveraging level of the Fed was approximately 20:1. Deutsche Bank is over 50:1, Lehman was 40:1 when it went bust. Lloyds reinsurance and insurance market almost went into meltdown from the stage when its reputation to that point had been undoubted, where people made presumptions and talked in the jargon of admiration.

We hear names like PwC, KPMG and Ernst & Young being trotted out with the suggestion that they make favourable observations and comments about the establishment of this type of arrangement. We should not forget certain facts in this context. KPMG acted for ten years or more as the auditor of Irish Nationwide, which blew losses of €5.5 billion onto the households of the Irish people. Ernst & Young acted as the auditor of Anglo Irish Bank, which blew losses of €32 billion onto Irish citizens. Anglo is still there, by the way. People think it has gone away, more or less, because of the promissory notes and bonds and it is all brilliant. It has not gone away. If any of those bonds are sold, we will be really on the hook because we will not be able to cancel them at that point. It is like the bar of the cross on the Irish people. The Government should cancel them because it was wrong to place such a level of losses on the Irish people. This is an example of a serious international financial service that the Government could do for the people of Ireland. It would enable water charges to be removed until a proper system of water infrastructure funding, investment and delivery is put in place. The same thing applies to the property taxes. Those taxes are income taxes by another name. They have to be paid out of income.

So far, corporates have been relieved of having to make any contribution to the national recovery. The effective corporate tax rate for multinational corporations is approximately 6.5%. As the Minister of State will recall, I said from the outset at parliamentary party meetings that a corporate contribution should be made in the form of a national recovery levy. The Government was well able to get hundreds of millions of euro by robbing pension funds at levels like 0.6% and 0.75%. It will get €750 million from pension funds this year. It is afraid to ask multinational corporations to contribute 3% of their reported profits - the profits they declare in their stateless existence - to a national recovery levy for three years. It is not right that these corporates hover over jurisdictions in which they pay no taxes until they decide where they would like to pay them and subsequently pay a very small amount of tax. It is a fact that taxes can only be paid from the incomes of individuals or corporates. The only exception to this is when, on the transfer of the realised difference in the cost of the investment to the point of sale, there is an actual profit cash uplift and a little bit of that is paid as capital gains tax. Otherwise, when people are being asked to pay money - one can call it a property tax, a water charge or whatever else one likes - it has to come out of their incomes. In effect and in reality, it is substantively an income tax. In the few remaining days before the budget, I ask the Minister of State to get the word back to the big man that he can do it if he applies some courage to a proper substantive understanding of what is going on.

Does the Minister of State know how many homeless people were asleep on Grafton Street yesterday morning? When I spoke to Michael, who sells newspapers and magazines like The Phoenix from a mobile stand at the junction of Johnson's Court and Grafton Street, he told me that when he was going to work with his newspapers early yesterday, he counted 40 human souls - people without homes - sleeping rough on Grafton Street. That is how all the losses and graphs, ups and downs, and pluses and minuses of the economy translate into human lives in our society. There is merit in people with higher levels of income having to pay a little extra until we steer around the ship. Approximately €500 million of necessary funding and expenses needs to be given to the health service to correct the ship. In real terms, this involves people waiting for operations and MRI scans etc. Does the Minister of State know that people with serious symptoms in their heads or brains have to wait two years for MRI scans in the public health system? That is how long one has to spend on the waiting list if one does not have private health insurance. There is no need for that in our society. It would amaze me if the CEOs, CFOs and COOs of foreign multinationals that have invested in Ireland were not able to advocate for the rightness and justification of taking on board an annual 3% levy on reported profits for three years as part of this country's national recovery effort. I am absolutely certain of it. I have asked many of them. Some of them are my contemporaries. They would not blink. It is a shame that the conservative establishment is frightened of its own shadow at times.

I would like to add a few thoughts to my brief remarks about the potential for professional indemnity exposure if we get the management of this arrangement wrong and funds start to sue us because our regulator was remiss or the on-site management went astray. The combined fines, penalties and settlements paid last year by two banks based in the US - Citigroup and Bank Of America Merrill Lynch - amounted to approximately $110 billion. Fines, penalties and settlements arise from bad operations, misbehaviour or rule-breaking. Citigroup has a reddened face in many of the parts of the world in which it has operated. Tim Geithner talks about this in his book. We should not be Pied-Pipered into something by buzzwords, jargon and technospeak. We should be able to ensure all of this is explained exactly. At the end of the day, it is all simple. People swoon over the sub-prime slicing and dicing of mortgages when it is referred to as securitisation. Even at home, on the familiar forecourt, people say "do not talk to me about car engines". They think it is a matter for an engineer to lift the bonnet. It is not rocket science. If one takes it simply, there is an engine with cylinders, which are spaces in which pistons go up and down. When petrol is injected and ignited, it explodes and moves the pistons, which in turn drive the rods that drive the shafts that drive the wheels. Finance is the same, but we do not ask enough questions. That is why we got into the mess we have experienced.

I begin by agreeing with Deputy Mathews that we often fail to ask enough questions. He does not need to say that to me, however. I am not glossing over anything. I have been here for the entire debate. I have been here to hear everybody's contributions. I am here now to respond to some of the issues that were raised. It is great to see such a great turnout. This legislation does matter. I agree with Deputy Boyd Barrett that it is serious stuff. We are talking about a sector that employs many people. Deputy Mathews is right when he says these regimes should not be overly complicated. We should scrutinise them and tear them down. We are talking about serious meaty policy issues. Deputies Pearse Doherty and Mathews raised the question of who wrote this. It is perfectly acceptable-----

Citigroup fired 50,000 people in one weekend.

I am going to be up against the clock. Given that Deputy Mathews had 20 minutes, I ask him to give me a moment. We need to make it clear that it is fine for the Government and the public sector to consult. In my view, it is perfectly appropriate to have consultative forums in place. That is what the Clearing House Group is.

However, it is on the floors of this and the Upper House and in the committee rooms that we make decisions. The Clearing House Group comprises industry stakeholders who meet stakeholders from the public sector and discuss what we need to do to have a robust and competitive financial services sector, but it is us, as the people's elected representatives, who make the decisions. That is the purpose of the legislative process. Let us not try to create conspiracy theories. This legislation has been steered by the Department of Finance in conjunction with the Department of Jobs, Enterprise and Innovation and in close contact with the Central Bank.

A theme of this debate has been that we have much to learn from the regulatory mistakes of the past so as to ensure that they do not recur. I will endeavour to address as many of the issues raised as I can, but I thank the Deputies for their contributions. We had a constructive engagement in which an interesting array of points were made. Some were reasonable and some were not. I am looking forward to a more detailed consideration of the provisions on Committee Stage.

I will begin with some of Deputy Michael McGrath's comments. He declared his support for the legislation, for which I am grateful. He was correct, in that we have been through serious "financial storms" in recent years. The financial services sector is fast moving and, in his words, we all need to raise our game - the Government, the Oireachtas, industry and public bodies. I was appointed by the Taoiseach to be the first Minister of State with responsibility for the financial services sector in almost 20 years because political oversight and leadership was necessary. As such, we are preparing a new, action-based financial services strategy that will be published early next year. I would welcome submissions from Deputies on all sides of the House as to how Ireland should be positioned to ensure that we continue selling our country as a great location for international banking while creating jobs and investment.

Deputy Pearse Doherty raised the question of AGMs not being held under the provisions of this legislation. While directors can decide not to hold an AGM, members holding 10% of shares can demand that one be held. It should also be remembered that the investors will have daily access to the net asset value of the scheme. As such, they are in a different position from the shareholders of trading companies.

The Deputy also stated that we needed further answers about the proposed transfer of some elements of the Companies Registration Office, CRO, to the Central Bank. That is a reasonable proposition and I will happily address it with him and others on Committee Stage.

Deputies Michael McGrath, Boyd Barrett, Ross and Mathews raised concerns about regulation. All Irish collective asset management vehicles, ICAVs, will be subject to regulation by the Central Bank. We have already discussed the various relevant European directives.

That is the problem.

Deputy Mathews made reasonable points about skill sets and resourcing, but this Bill is not about deregulation, which was Deputy Ross's allusion. Rather, the Bill is about asking whether we have the correct structure in place, should we view funds in the same way as stereotypical companies, should we examine what competitor countries are doing or should we stay as we are. This is the debate. In this Bill, I am proposing that we consider installing a new structure, the ICAV.

Deputy Pearse Doherty asked about the Bill's origin, which I have already addressed. A range of stakeholders were involved in the Bill's gestation, including the funds industry, its advisers and the public service, but it was driven by the Department of Finance in close consultation with the Central Bank and my colleague, the Minister for Jobs, Enterprise and Innovation.

Deputy Boyd Barrett discussed a range of topics. He would accept that we come at this issue from different ideological points of view. We live in a global economy and funds are already based in this country. Deputies could do worse than to visit some of the funds to speak with the Irish men and women, who are young in many cases, working in that industry. They are not bad people working in a bad industry. They are honest, honourable, well qualified and skilled people from this country.

Their bosses are the problem.

Deputy Mathews might have an issue with their bosses, but these employees are not faceless people. As Deputy Michael McGrath mentioned, they are not just working in offices in Dublin's docklands or the IFSC, but also in communities in Drogheda, Naas, Cork and Wexford. Let us acknowledge this fact. While mistakes have been made in the industry, many mistakes have also been made in this House. It does not mean that everyone in the House is a bad or incompetent person. The House has many fine Irish people who are making a positive contribution.

We are not allowed to name people.

Deputy Boyd Barrett was concerned that the Bill was about avoiding tax or regulation. I suggest that he read it in advance of Committee Stage and have an exchange with us then. Some 64 sections give rise to an offence.

As to the question of tax advantages for investors in ICAVs, it is important to reiterate that, while investors in undertakings for collective investment in transferable securities, UCITS, or alternative investment fund structures like ICAVs may be able to avail of the US check-the-box tax treatment, which is already available to unit trusts, common contractual funds and investment limited partnerships, the tax treatment of any fund structure is a matter for each jurisdiction where the liability arises and such "look through" vehicles have long been available to fund promoters in Ireland and across Europe.

Deputy Pearse Doherty asked whether we were simply introducing this legislation to compete with Luxembourg. My colleague, Deputy Twomey, alluded to this matter. Luxembourg has a similar vehicle, but so do Italy, Spain, France, the UK, Germany and the USA. Deputy Michael McGrath summed up the situation well, in that the House needs to make a collective effort - that is the Government's wish - so that our structures can "catch up" and be fit for purpose. Let us make the jobs of the people who are travelling the world promoting Ireland as a location for employment and investment easier by ensuring that the structures we have in place are like those used by our competitors. If we do not do so, we will get left behind.

I want to answer as many questions as possible. The ICAV Bill should not be seen in isolation as a technical exercise to make the lives of fund managers or their accountants or lawyers easier. The legislation's intention is to bring Ireland to a point where we can compete on an even footing with other European fund domiciles. We should not cede ground to our competitors when it could mean the loss of investment. I did not get appointed as the Minister of State with responsibility for international banking and the IFSC to cede ground. I have been appointed to provide political oversight, bring the public sector together and ensure that we have fit-for-purpose structures and innovative products and that we are ready to compete for more jobs and investment. While one cannot be certain as to the precise number of new jobs that will result from the availability of the ICAV structure, past evidence suggests that industry makes use of whatever vehicles are available. The fact that we will not need to apply unnecessary company law requirements arising from EU obligations to ICAVs will be a bonus.

As drafted, the Bill cross-applies a number of provisions of the Companies Act. On further reflection, it may be desirable to set out some of these regimes in a more extensive form. I expect to conclude my consideration of where this might be most appropriate in the near future. If necessary, I will table proposals on Committee Stage in this regard and consider amendments from colleagues on all sides.

Deputy Ross admitted that he sometimes got things wrong. He got some things wrong today. It is wrong to name in the House an individual or series of individuals, apply derogatory terms like "cronies" and "stooges" and imply that having political affiliations or being involved in political life somehow makes someone a bad person or debars one from contributing to State agencies. I heard him make the same comment in respect of the Garda, the Judiciary and State boards. We need transparent procedures for appointments to State boards. My colleague, the Minister for Public Expenditure and Reform, outlined reforms on behalf of the Government this week. My party has made mistakes, but I would suggest that every party and Independent in the House has done so. We must put reforms and mechanisms in place. In doing so, however, let us not suggest unfairly that everyone who serves on a board or has been appointed to a Garda or judicial position is somehow unable. The sort of commentary in which someone shouts, roars and makes wild statements before leaving the House without listening to my response, which was requested, is unhelpful. We need to reform the system. Deputy Ross has previously suggested various individuals for senior appointments to banking positions.

Were I to name those individuals, which I will not, I might even make him blush. Consequently, Members should not try to be whiter than white here. Members should look at the system and together should introduce the reforms.

I will conclude on this point but there was also a comment on the broader, global taxation issues. While this issue is not directly related to this Bill, it is fair that it is brought up in the context of international banking. Again, however, one should not pretend that nothing is happening in this regard. An OECD discussion is under way, as is the base erosion and profit shifting, BEPS, process and the Department of Finance has opened this process to public consultation and submissions were received. Moreover, the first series of reports are available. It is fair to state that Ireland, as a small open economy with a small population, must move in line with our international partners. We need global action on this issue as it is a global matter. This is not to state - I see Deputy Mathews appears animated - there are not measures the Government could take and may take and obviously, there will be a budget next Tuesday.

However, the ESRI this week has produced an interesting report on the issue of corporation tax. I believe it was published with its quarterly economic commentary. It has done some modelling of what would happen, had our corporation tax rate been increased-----

In our equal society.

-----in respect of an impact on jobs and investment. It makes interesting reading for those who believe that slapping additional taxation on business will somehow not have any impact on jobs and investment. While the Deputy has suggested I should read Timothy Geithner's book-----

What about the pension funds?

-----I suggest he have a look at the ESRI report published this week. It is fresh off the presses and the Deputy should read it. I would be interested in his feedback on it.

I will conclude by noting there undoubtedly will be an opportunity to discuss the matters raised by Deputies as this Bill continues to progress through the House. I wish to thank my officials and I thank Members for their contributions. I look forward to having these further discussions. I commend the Bill to the House and ask people, in consideration of this legislation, to remember its purpose, which is to make Ireland competitive, to continue to attract funds here and to continue to create jobs and investment. This is a collective challenge and is one on which I look forward to engaging.

That concludes the debate and I will now put the question.

Sorry, a Leas-Cheann Comhairle, I wonder whether the Minister of State has an answer to a question. He may wish to comment on it. I refer to my opening remarks of welcome and good wishes to the Minister of State and to Deputy Twomey as Chairman of the Joint Committee on Finance and Public Expenditure. Perhaps this is an opportunity for me to ask whether there is any chance that the Government may wish to reappoint me to that committee? Could the Minister of State ask?

That is not appropriate.

Question put and agreed to.