Finance Bill 2017: Report Stage (Resumed)

Debate resumed on amendment No. 34:
In page 30, after line 40, to insert the following:
"19. (1) The Minister shall within 6 months of the passing of this Act, bring a report on the potential to raise additional Corporation Tax revenue by closing down loopholes, examining the extent, legitimacy and abuse of all corporate tax expenditures, exemptions, allowances and deductions, such as losses forward, R&D tax credits, the Knowledge Development Box, Intra-group Transactions, allowances on Intangible Assets and establishing a minimum effective tax rate of 12.5 per cent on gross trading profits and incomes.
(2) The Minister shall, within 6 months of the passing of this Act, bring a specific report and comparative study on the relative social and economic benefit of Research and Development Tax Credit expenditures, benefitting private corporations as against the investment of the equivalent funds into Research and Development in public universities.".
- (Deputy Richard Boyd Barrett).

We were discussing an amendment where we propose to deal with the enormous loopholes being exploited by a small number of multinational companies to avoid tax by having a report produced on these loopholes, with the intent of closing them. That would give the people in this country billions of euro for housing, health and education, which we need so badly. The report would examine how a minimum effective tax rate of 12.5% should be imposed. It is currently not being imposed and this allows corporations like Apple to pay less than 1% in tax on billions of euro in profit. The average tax rate is not the 12.5% claimed by the Government but approximately 4%. If we had a minimum effective corporate tax rate that companies had to pay before any of these loopholes kicked in, we could raise at least another €6 billion or €7 billion in revenue, which would transform the lives of Irish citizens.

We dealt with much of this matter last night. I appreciate the views of the Deputy on it but as I explained last night, I profoundly disagree with the approach he has taken. I reiterate that corporation tax policy and decisions we make on how to tax activity within our country is a legitimate part of an economic and political model for a country of our scale and size, located where we are and which has proven successful over many decades in attracting investment to our country. As Deputy Boyd Barrett and I debated last night, missing in the analysis he offers is the role of that policy in generating very valuable jobs. There are over 200,000 such jobs in our country.

A decision to move to the kind of tax rate and model the Deputy has described could pose a risk to those jobs. In view of that and the need for certainty in our tax model and for it to be clearly understood and impartially implemented by the Revenue Commissioners, I am not accepting the Deputy's amendment. As I said last night, I accept that we and many other jurisdictions must evolve and improve our tax code to ensure it meets the growing international consensus regarding how tax should be collected globally and the Government and I are playing our part in that. However, Ireland cannot be a global tax collector for any company and we cannot do all this work on our own but, rather, it has to happen as part of a broader global journey.

Amendment put:
The Dáil divided: Tá, 41; Níl, 93; Staon, 0.

  • Adams, Gerry.
  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Connolly, Catherine.
  • Coppinger, Ruth.
  • Crowe, Seán.
  • Cullinane, David.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kelly, Alan.
  • Kenny, Gino.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Nolan, Carol.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Sullivan, Jan.
  • O'Sullivan, Maureen.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Ryan, Eamon.
  • Sherlock, Sean.
  • Shortall, Róisín.
  • Smith, Bríd.
  • Tóibín, Peadar.
  • Wallace, Mick.

Níl

  • Aylward, Bobby.
  • Bailey, Maria.
  • Barrett, Seán.
  • Brassil, John.
  • Breathnach, Declan.
  • Breen, Pat.
  • Brophy, Colm.
  • Browne, James.
  • Burke, Peter.
  • Butler, Mary.
  • Byrne, Catherine.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Niall.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • Cowen, Barry.
  • Curran, John.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donnelly, Stephen S.
  • Donohoe, Paschal.
  • Dooley, Timmy.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Fleming, Sean.
  • Griffin, Brendan.
  • Halligan, John.
  • Harris, Simon.
  • Harty, Michael.
  • Haughey, Seán.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kelleher, Billy.
  • Kyne, Seán.
  • Lahart, John.
  • Lawless, James.
  • Lowry, Michael.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McGrath, Michael.
  • McGuinness, John.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • Ó Cuív, Éamon.
  • O'Brien, Darragh.
  • O'Callaghan, Jim.
  • O'Connell, Kate.
  • O'Dea, Willie.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • O'Rourke, Frank.
  • Phelan, John Paul.
  • Rabbitte, Anne.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Stanton, David.
  • Troy, Robert.
  • Zappone, Katherine.

Staon

Tellers: Tá, Deputies Richard Boyd Barrett and Paul Murphy; Níl, Deputies Joe McHugh and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 35:

In page 32, line 11, to delete “interest paid” and substitute “interest or other distribution payable”.

Section 19 amends section 110 of the Taxes Consolidation Act 1997, which deals with the taxation of special purpose structured finance companies. The current regime was set up to create a tax neutral regime for securitisation and structured finance purposes.

Last year's Finance Act introduced restrictions on the ability of 'qualifying companies', within the meaning of section 110, to remove capital profits arising from Irish property from the Irish tax net.

Revenue has kept the use of section 110 structures under review and has identified a gap in the Finance Act 2016 amendments, which was not identified at the time. That gap involves the use of shares which derive their value from Irish land.

This Report Stage amendment is technical in nature. It corrects the drafting to ensure that the Finance Bill amendment to section 110 applies only to interest which becomes payable on or after 19 October 2017. This ensures that there is no retrospective impact on interest which is paid on or after 19 October 2017 but which was accrued in previous years. Without this change, the provision would affect the tax liability of a company for those previous years which would be retrospective legislation.

I commend this amendment to the House.

If I understand the Minister correctly, what he says is a technical amendment is actually an amendment of very serious substance because we want retrospection. The Minister does not. We know that but when it comes to the section 110 tax break we absolutely want retrospection, as much of it as we can get because the section 110 tax break has been ruthlessly exploited by vulture funds to be, as the Minister describes it, "tax neutral". I love these euphemisms. "Tax neutral" means, for the ordinary member of the public, these financial vultures which have swept in and made an absolute fortune at our expense pay no tax on their enormous profits. The Minister established structures that would allow them do so.

For the layman who does not understand the technicalities of this, let us keep it really simple. No worker in this country gets tax neutral status, a special dispensation not to pay any tax. There are measures in our tax code that were designed to ensure these enormously profitable, speculative, vulture-type entities, would be "tax neutral", and would pay no tax on their income or their capital gains.

Where the Government had made some efforts to close that loophole for the future, although not completely, the Minister says he is determined that it not be retrospective. Most people would say that we should claw back as much as we possibly can from these vulture entities that have been let away with murder under section 110 tax breaks.

Will the Minister clarify that I have understood him correctly and that his fear is that unless we make this amendment, some of these section 110 companies could have a bigger tax liability, that is, the Exchequer could receive more tax revenue from these section 110 entities? If that is what he is saying, then I will certainly vote against the Government's amendment.

Clarification is required in this regards. It appears that a technical amendment is a substantive amendment, which could have substantive changes to the tax liabilities of these section 110 companies. Will the Minister confirm that Irish property that would be put into a section 110 structure would now be taxable retrospectively and therefore would not be tax neutral if this amendment does not go through? Will he confirm that if this amendment does go through, anything up until last year's Finance Act will continue to be able to avoid paying tax through those section 110 structures?

Will the Minister clarify the nature of the gap in the 2016 changes that were made and the impact the existence of that gap over the past 12 months will have had in respect of the changes made to the treatment of section 110 companies in the Finance Act 2016? We made those changes a year ago. We amended section 17 of the current Finance Bill as published to include shares that derive their value from Irish land in the definition of specified mortgages. In respect of the interest issue, the Minister now proposes to make a change that may be technical but is not without consequence. He needs to clarify this issue.

During the debate on this issue last year, the Minister clearly undertook to close a loophole. He needs to give the House a clear indication of the impact of this proposal will be. Will it result in a gain to the Exchequer and if so, how much and over what period? Alternatively, will it result in a loss to the Exchequer and if so, how much is that loss and over what period? It is regrettable that in the case of these amendments, which are quite technical, no detailed briefing material is available, whether on a dedicated website available to people who are dealing with the Finance Bill or by way of a detailed briefing. We need to know. There is now a budgetary oversight committee and the Government has committed to greater transparency but it has introduced an amendment such as this without a detailed explanation of what it is about and its likely financial impact on the Exchequer, good or bad. It is essential that the Government clarify this now. If there is no financial impact, will the Minister tell Members in order that they can assess the proposal?

To clarify, this refers to the shares that derive their value from the property. While colleagues may differ in their evaluation of the policy overall, the amendment deals with shares that derive their value from property that are held in section 110 companies.

As for Deputy Boyd Barrett's remarks, we do not tax retrospectively. We differ on that. Regardless of what the asset or the income is, our approach to taxation is to tax from this moment on if we change the law, which is why I am making this change. I do not believe that retrospective taxation would be enabled if the amendment was not passed, as it is such a well-established tenet of how we implement tax policy here. On any benefit that the State will accrue from this amendment, we expect the financial benefit to be exceptionally small as we are not aware of this being used to avoid a tax liability but now that we are aware of the issue I want to change it. On briefing, these amendments have been available for a period of time. I have supplied information and clarification to anyone who has sought it from me. I understand the Committee on Budgetary Oversight has a growing staff, which might be able to assist on matters such as this. I will be happy to engage with the committee or any Deputy on similar issues for next year's Finance Bill to provide clarification in advance.

That answer is in no way satisfactory. We do not have to hand the Minister's initial note in order to go through it. This is the problem which I raised yesterday and Deputy Burton has raised it again. We have amendments before us, which may be very substantial, that were not in the initial draft Bill but could have significant implications and we have not been given a proper explanatory note.

The Minister referred to the tax-neutral status of these section 110 companies and his concern that if this amendment is not made, there could be retrospection. The Minister has said that he does not like retrospection but we do when it relates to section 110 companies. If the Minister is saying that by not changing it that there is a possibility of retrospectively capturing some tax from section 110 companies, which have got away with murder and have avoided tax to an extent that the Minister cannot give us figures - he has never given us figures on the amounts of tax foregone as a result of the section 110 loophole - then I say to him he should leave it as it is. Then we can see how we might use the current tax code to get some of the foregone tax lost in recent years as a result of this scandalous section 110 tax-neutral structure, which allows these vulture funds to pay no tax on enormous profits and capital gains. I refer to shares on property, income gains and the capital gains they might make on those shares on Irish property, which has shot up in value, as well as in respect of the rental income generated from it.

Dealing with shares in a company rather than dealing with the properties themselves is probably one of the best-known mechanisms for arranging tax affairs and mitigating tax in respect of tax schemes. Will the Minister clarify whether he or his officials made an estimate as to what is the likely gain or loss to the Exchequer and over what period or whether it is neutral to the Exchequer? If it relates to the underlying shares, that implies there are groups of shareholders who are potential beneficiaries or who will pay extra tax, we do not know which, as a consequence of this arrangement. Will the Minister also tell us the likely value of the asset portfolios in the companies whose shares the Minister is referencing to make this mechanism available to shareholders in these companies?

When what happened in relation to section 110 was identified, there was absolute agreement across the House that the loophole should be closed and the Minister's predecessor moved to close it. Now the Minister is making an amendment to it. I understand it is complicated. Tax is always complicated. However, it is an absolutely fair demand on the Minister that he would explain to the House what it is and who broadly are the shareholders. Are they likely to be offshore or onshore shareholders? Are they other companies in chains of companies? Are they individual savers? We require an explanation.

I have explained what we are doing. Any inference that I am in any way looking to reduce the value or the impact of changes made to how these organisations were taxed in the past is wrong and inaccurate. My Department and the Revenue Commissioners regularly review the tax code to see if we need to make any changes to either deter avoidance or deal with discrepancies that might lead to difficulties in the future. The Deputy asked me earlier if I could give the House an estimate of a yield. I told the Deputy that I cannot and the reason is that we have no evidence at the moment that this is being used in any way to diminish a yield that the State should currently be receiving. However, we are making this change in case it could create an opportunity in the future that we would not want someone to take advantage of or a problem for the tax code overall.

The second question Deputy Burton put to me concerned who are the shareholders. They could be any of the groups to which she referred. I am not in a position to comment on who are the owners of shares of different organisations that fall under the heading of section 110.

On Deputy Boyd Barrett's point, we have a clear policy difference on this matter. For reasons we have previously debated, I do not believe retrospection would be an improvement within our tax code. Instead it would undermine the way it has operated. This is a principle which should be held firm for individuals, companies and organisations such as these.

To tell the Minister the God's honest truth, this is about as clear as mud. He is amending an amendment to the section in the consolidated Act which was brought in on Committee Stage. The amendment to section 19 of the Finance Bill was that this section would only apply to interest paid on or after 19 October 2017. The significance of this amendment is that it does not include just interest but also other distributions payable. There is a responsibility on the Minister for Finance to outline the purpose of section 19, the addition of "other distribution payable" and what it means and how it applies, as the Minister states, to the issue of retrospection. This issue is not clear to us.

No briefing note was circulated. For years we have been dealing with this type of situation where technical amendments have been tabled by the Minister for Finance. Every single year, I have asked, as a matter of course, that the speaking note the Minister is happy to put on the public record in a Dáil debate would be circulated to Deputies in order that we could speed up this process. If we knew in detail what this was about, perhaps we would not have any difficulty with it. However, I cannot stand here and support this amendment after the Minister noted on the public record that this is about retrospection while not being clear about what the amendment specifically means, how it interacts with section 19 of the Finance Bill and how it concerns retrospection. We know that many will try to game the system by wrapping property up in companies and the value of the shares. This is a big issue but it does not just relate to this matter. We will visit it again when we deal with stamp duty issues. However, I cannot support this amendment if the Minister does not give us a clear explanation of what exactly he is trying to achieve.

To be clear, in accordance with Standing Orders, the Minister may speak three times. He has spoken three times, but to be helpful, we will ask him to respond to the Deputy's question. However, we need to get all the questions before the Minister has spoken three times if we are to speed up the process.

It would also be helpful if he read the original speaking note again. What I heard disturbed me but we do not have the note in front of us to examine it.

We cannot tell the Minister how to answer. However, he will answer now. Will you, Minister?

The reason I have not spoken to the section itself is because we are not on Committee Stage and I am, therefore, dealing with each of the amendments before me. To deal with the issue again, as the Deputy will be aware, this year we extended the scope of this provision by also catching shares that derive their value from Irish property, which we debated on Committee Stage. The intention was to catch any interest payments in respect of the period since budget day, which was 19 October. However, the drafting in the Finance Bill is not quite right in that it refers to interest paid after budget day. This, for example, means that interest which was accrued before budget day but paid out after it would be caught by the provision and this would amount to retrospection taxation. This is the point I have been attempting to make during the debate on this amendment. By making this change, we will catch the interest since budget day but not before. This goes back to the differing views on retrospective taxation.

Amendment put:
The Dáil divided: Tá, 51; Níl, 41; Staon, 40.

  • Bailey, Maria.
  • Breen, Pat.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Halligan, John.
  • Harris, Simon.
  • Harty, Michael.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kyne, Seán.
  • Lowry, Michael.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Níl

  • Adams, Gerry.
  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Connolly, Catherine.
  • Crowe, Seán.
  • Cullinane, David.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Howlin, Brendan.
  • Kenny, Martin.
  • McDonald, Mary Lou.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Nolan, Carol.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Jan.
  • O'Sullivan, Maureen.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Ryan, Brendan.
  • Ryan, Eamon.
  • Sherlock, Sean.
  • Shortall, Róisín.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Wallace, Mick.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Breathnach, Declan.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Michael.
  • Collins, Niall.
  • Cowen, Barry.
  • Curran, John.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Ó Cuív, Éamon.
  • O'Callaghan, Jim.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • O'Rourke, Frank.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Joe McHugh and Tony McLoughlin; Níl, Deputies Richard Boyd Barrett and Paul Murphy.
Amendment declared carried.

I move amendment No. 36:

In page 37, between lines 24 and 25, to insert the following:

"(3) The Minister shall within one month of the passing of this Act, prepare and lay before the Oireachtas a report on the potential impacts of changes to section 135 of the Principal Act on management buy-ins and buy-outs and third party SME company purchases and whether legislative changes can be used to mitigate these impacts.".

During Committee Stage the Minister introduced an amendment to section 135 of the Principal Act. He put on record the rationale for the change. He explained at the time that the package of anti-avoidance measures was being introduced to deal with a number of specific tax-avoidance schemes which had been uncovered by the Revenue Commissioners. He said that, essentially, those schemes involved converting what should be taxable income payments into capital gains to avail of the lower capital gains tax, CGT, rates. The Minister went into an amount of detail in that regard. I have no issue with introducing anti-avoidance measures to deal with those contrived arrangements.

I must ask the question on behalf of those who raised the issue who claim that this will also affect bona fide commercial transactions. Has the Minister examined the impact of this proposal in that respect because a number of people put it to me that the measure will close down most forms of commercially motivated management buy-out transactions and many third party SME company purchases because of the wording adopted? It is important that the Department would deal with it. That is the essential claim that is being made by some representatives and I ask the Minister to give an assurance that it would not be the case and that the anti-avoidance measures that have been introduced by him on Committee Stage are only going to affect the type of contrived arrangements we all agree should not be allowed.

The amendment brought forward on Committee Stage to section 135 of the Taxes Consolidation Act, in introducing a new subsection (3A), is intended to counter a specific tax avoidance scheme which has been uncovered by Revenue. The scheme involves individuals avoiding a liability to income tax where a company indirectly buys back shares from a shareholder and the purchase is funded from the assets of the company. The changes announced to the legislation are to ensure that distribution treatment correctly applies to such transactions.

The broad policy objective of the Committee Stage amendment was to ensure that where, in effect, a shareholder receives distributable reserves of a company on a disposal of their shares in that company, then the member is treated as having received a distribution from the company which is subject to income tax. The draft amendment meets this policy objective.

That amendment, which now forms section 22 of the Finance Bill, has no impact on bona fide management buy-outs, buy-ins or third party SME company purchases. The amendment only has application where shareholders enter into arrangements to dispose of their shares and where the consideration is paid from the assets of the target company.

I am aware that many management buy-outs involve the provision of financing by the target company out of the assets of the company. However, a bona fide buy-out is not structured on the basis of a shareholder specifically arranging for the proceeds to be funded from assets of the target company. Bona fide financing arrangements entered into by the purchaser to fund the purchase of the shares are outside of the scope of the new provisions. Therefore, on the basis that the proposed amendment to section 135 does not apply to bona fide management buy-out transactions, I do not propose to accept this amendment. I am advised that Revenue will be issuing comprehensive guidance once the provision has been enacted and that should meet the Deputy's concerns.

I welcome the commitment to publish guidance and also the reassurance the Minister of State has given that the provisions will not impact on bona fide commercial transactions because I know that is not the purpose of the changes introduced. In our economy commercially motivated management buy-outs are an important feature, as are third party SME company purchases and we do not wish in any way to impact on transactions that are commercially motivated. The nature of the anti-avoidance schemes was explained on Committee Stage, which convert what is essentially taxable income into capital gains and thus avoids the payment of CGT using certain reliefs under a certain tax structure. I have no issue with that being addressed and I welcome the commitment and reassurance provided by the Minister of State. I ask that Revenue would monitor the implementation of the measure to address any legitimate concerns that arise that it would in any way impede commercial transactions. On that basis I will withdraw the amendment.

Amendment, by leave, withdrawn.
Amendments Nos. 37 and 38 not moved.

Amendment No. 39 arises out of committee proceedings. Amendments Nos. 39 and 40 are related and will be discussed together. They are in the names of Deputies Boyd Barrett, Paul Murphy, Bríd Smith, Gino Kenny, Mick Barry and Ruth Coppinger.

I move amendment No. 39:

In page 41, between lines 35 and 36, to insert the following:

"(3) The Minister shall, within 3 months of the passing of this Act, bring a report on the amount of tax revenue foregone as a result of the changes to capital allowances relating to intangible assets made in budget 2014 and the re-introduction of the 80 per cent cap in such allowances in Budget 2018, the reasons for the Budget 2014 changes and the additional revenue that would be generated by applying the 80 per cent cap for the time prior to 11 October 2017 where the allowance was 100 per cent.".

This is again an amendment which is of considerable importance to the people of this country. It is directly related to the scandal of the €13 billion Apple case. It turns what is already an enormous scandal around that €13 billion of tax that Apple should have paid but did not pay, which the Government still does not want to collect, but now we discover, courtesy of the so-called Paradise Papers that in regard to the double Irish tax scam which our tax code facilitated to the tune of €13 billion in lost taxes to the people of this country, the real figure of losses may be far greater.

The reason for that is the phasing out of the double Irish was indicated as being likely to happen from the end of 2013 onwards because of political pressure in the House. The pressure was primarily from the left, including from ourselves and Sinn Féin, and externally from people raging about tax avoidance by multinationals as well as from growing international opprobrium about the scams of these multinationals to rob ordinary people of billions in tax revenue. That revenue could have gone into housing, health and education, especially at a time of austerity.

We discovered that the so-called closing of the double Irish tax scam was simply a prelude to the opening of another tax scam to benefit Apple and a few other extraordinarily wealthy corporations. The narrative and chronology is well worth setting out. In July 2013 Joe Higgins, Deputy Pearse Doherty and I and some others were the only people who wanted Apple brought in, along with Facebook and Google, to appear before the Joint Sub-committee on Global Taxation. Fianna Fáil, Fine Gael, the Labour Party and some Independents who were on the committee closed ranks. They said that the committee would not bring in representatives from those companies to ask questions about the double Irish. Not only that, incredibly they turned off the cameras when we were discussing the matter. There was an unprecedented decision to have the discussion in camera in private session to discuss whether the companies should come in and when a vote would be taken on whether they should come in. Such was the degree of servility of the entire political establishment in the face of Apple when the rumours about the scale of the double Irish were abounding and being articulated by some of us in the committee.

When we roll the clock on, the scale of the double Irish tax scam becomes clear, as does the likelihood that the Government would be forced into agreeing to close down the loophole. The then Taoiseach, Deputy Enda Kenny, scurried over to a private meeting with the chief executive of Apple in January 2014. He admitted on the record when questioned by us after that meeting that corporation tax was discussed. I would dearly like to see the minutes of those meetings or the recording of those meetings to learn what was discussed.

We know now, thanks to the Paradise Papers, that in March, shortly after that meeting, lawyers acting on behalf of Apple started to contact Appleby. The legal firm specialises in tax avoidance for big corporations. Apple contacted the legal firm's subsidiaries in March 2014 in the British Virgin Islands, Bermuda, Isle of Man, Guernsey and Jersey. They are all tax havens where there is no corporate tax. Apple settled on Jersey. The legal firm acting on behalf of Apple asked whether the jurisdiction in question could confirm that an Irish company could conduct management activities without being subject to taxation in that jurisdiction. Apple was busy reconfiguring the tax scam and using its Irish companies because of the possibility of the double Irish being closed down. The then Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, went over and met Apple representatives later in the year. We had a debate at the committee on the 2014 budget. At the debate I suggested, to much ridicule from the Government, that the much trumpeted double Irish will, in fact, be replaced by another scheme through which the same companies will be able to avoid pretty much the same amount of taxes but in a slightly different way by speaking about patents and intellectual property rights.

I did not know how right I was. The scam was already being planned. The replacement of the double Irish was already being engineered by the Government and Apple. How else can the Minister explain the extraordinary coincidence of Apple not paying a single extra cent of tax after the closing of the double Irish, the reconfiguration of its subsidiaries to Jersey and the interaction allowing them to pay no tax? That has been confirmed by Seamus Coffey. According to Seamus Coffey, raising the cap to 100% on intangible assets meant that we lost €722 million in tax revenue in 2015. Mr. Coffey went on to comment on the changes the Government brought in through a recent budget. He said they are only active from the day of the budget. He points out that they could have applied to all claims during the period when the Government had raised the allowance to 100%. He said that would have resulted in up to €1 billion of additional corporation tax being collected in 2018. In other words, this is not simply history. The Government decided not to take €1 billion from Apple under next year's budget. We can only imagine what that could have done for the housing crisis, the health crisis and the lives of people who are chronically under-resourced in areas of key public services.

I went back to look at the debate in the Dáil when this cap was removed to enable full exemption on intangible assets. The change was brought in by the then Minister for Finance, Deputy Michael Noonan. He said:

Section 35 provides for additional enhancements to section 291A of the Taxes Consolidation Act 1997 which provides capital allowances for expenditure incurred on the provision of certain intangible assets for use in an Irish trade. It removes the current cap on the aggregate amount of allowances and related interest expenses that may be claimed and amends the definition of intangible assets which may qualify for the relief to specifically include certain customer lists.

That is it. It is completely innocuous. It was simply a paragraph in a Second Stage speech by the then Minister for Finance.

However, it is difficult to avoid the conclusion that the Minister knew what the consequence would be. He knew he was facilitating massive tax avoidance by Apple and other corporations. He knew that working with intangible assets is a key mechanism by which these companies avoid taxation. He knew that what subsequently happened would happen. As the Government is aware, what happened was an explosion of foreign direct investment in intangible assets. The relevant figure went from approximately €3 billion to approximately €29 billion. That was an explosion of €26 billion as a result of one paragraph in that speech and one law that was changed for the benefit of these corporations.

We need answers from the Government. It is good that the Government is going back to change this under extraordinary pressure. How can the Government justify the original change being made? We can read papers on what qualifies as, and the indicators of, tax havens. There is a paper by Taylor, Richardson and Lanis based on data from Australian and US companies. They identified large inward movement of intangible assets as tending towards proof of the country in question being a tax haven. It is a key indicator of a tax haven. Ireland has this by the bucket-load in view of the explosion in activity that has taken place.

The Government has a problem in light of Seamus Coffey's paper. The paper highlights the explosion of €26 billion and explains why it occurred. It also explains that if the 80% cap had been in place in 2015, then almost €6 billion of these allowances would not have been allowable and would have been subject to tax in 2015. Had that been the case, up to €722 million in additional corporation tax would have been collected in 2015. Seamus Coffey went on to say that we do not know what impact not removing that cap would have had and he said that it is unknowable. The point is the measure does not add anything to the Irish economy. The Government likes to talk about jobs, etc., but the movement of these intangible assets has nothing whatsoever to do with jobs.

Another important point was raised by Seamus Coffey. He maintains not only do we not benefit from this inflow of intangible assets over this period, but in fact we lose out. We lose out because it is a key factor in the increase in our gross national income and, therefore, the increase in our contribution to the European Union budget.

He outlines how the payments from the Exchequer account for Ireland's contributions increasing from slightly less than €1.7 billion in 2014 to €2 billion in 2015 and again in 2016, to €2.3 billion in 2017 and €2.65 billion in 2018. There is a cost, in cent and euro, for the artificial inflation of our gross national income, GNI, and a significant reason is the increase in supposed intangible assets investment in Ireland.

This returns us to the point made about the finance curse and the fact that the country is being run for elites who do not live here. Policy has been captured by these elites and we go to such extreme lengths to shape policy for their interests that we offer them a tax haven and allow them to use this country to avoid paying large amounts of tax for years. We then end up paying for it through an increase in our contribution to the European Union budget.

For these reasons, the Government should agree to the proposal to have a report done on how much income we have foregone, the reasons the changes in the 2014 budget were made and the reason the Government, under pressure, agreed to reverse them. Does the Minister now accept it was not a good idea to introduce the change and that, rather than benefitting the real economy, we incurred only losses through the increased payment to the EU? Alternatively, does he maintain that the change was good for a certain period but is no longer a good idea? We need to know the answer to these important questions.

I have made these points previously but it is clear the Minister is still hellbent on allowing hundreds of millions of euro in tax to go unpaid as a result of the onshoring of intellectual property. Mr. Seamus Coffey's report, on which he did excellent work in flagging up this issue, was interesting and embarrassing for the Government. What was more embarrassing, however, was Mr. Coffey's blog in which he asked why one would allow a 100% cap for intellectual property that had been already onshored. This is not like our previous conversation about retrospective taxation because the capital allowances in question must be used year after year. We are not arguing that capital allowances used prior to 2017 would have a different rate applied to them but that from this point onwards, a company would be able to use only 80% against its tax liability. This does not deal with the issue. That is not an issue of the core retrospection of taxation.

Mr. Coffey made clear that €850 million in revenue will be lost to the State as a result of a couple of words the Minister is willing to insert in this Bill, for whatever reason. The Minister informs us the Government does not do tax policy for individual companies. In this case, the policy is not designed for an individual company because a group of companies, albeit a small one, will benefit. There is serious suspicion about the reasons this has been done. I would like to know which companies, groups or representatives of groups the Department and Minister consulted on this amendment and section. All this information should be placed in the public domain because transparency is needed.

This tax measure will allow well known multinational companies such as Apple to pay very little tax on substantial sales they are recording in this State. Let us examine precisely what is being done here. Until 2015, Apple recorded all of its sales outside the Americas in Ireland. It did this through a stateless company. As a result, even though all the sales were being recorded through a company in Cork, which had no employees or management structure, it did not pay tax on these sales because the company was not tax resident here or anywhere else in the world. This loophole was closed down in 2014. We learned in the Paradise Papers that Apple subsequently changed its structures and Apple itself told the media two weeks ago that all of its sales outside of the Americas continue to go through an Irish company. This time, however, the company is tax resident, which means Apple must pay taxes arising from these sales in Ireland. This is what happens normally across the world. Whether a company is producing widgets in a factory in Mayo or crisps in Gaobh Dobhair, it pays taxes in the country in which it is tax resident. Why then have Apple's taxes not increased significantly? The reason is that when the tax residency laws were changed in 2014, the Government set a timeframe for implementing the change and introduced the 100% cap. As a result, the company in Cork which now owns the intellectual property of Apple, which bought it from the company that is offshored on the Isle of Man, now holds these capital assets that it can write off against its profits. That is what is happening here.

I am sure the Government will argue that the measure results in the deferment of tax and that once the capital allowances are paid, the companies in question will have to pay additional taxes. There is no guarantee that when that time comes, these companies, given their current structure and form, will be resident here, will still have their current structures or will have profits that are taxable. Some of the intellectual property, particularly that which is based on patent protections, may generate profits while such protection lasts but will evaporate when the patent protections expire.

This is a core issue involving €850 million of tax foregone. As has been pointed out, the increase in intellectual property also impacts on gross national income and results in an increase of €200 million in our annual payment to the European Union. Despite this, the Government has decided not to tax this intellectual property because it was onshored heretofore. This is the wrong policy.

I have no doubt Fianna Fáil will support the Minister on this issue. It is not a case of trying to screw Apple or the multinationals but an issue of achieving tax fairness. I am not asking the Minister to change the rates that applied ten, seven or five years ago. My argument is that if capital allowances are to be used against profits that are generated by a company in 2018, 2019 or 2020, a cap of 80% should apply. What the Minister is building into the Bill is a 100% cap for profits that are generated in future, which is not acceptable.

We have all seen the manoeuvres and tut-tutting Ministers engage in concerning tax schemes, such as the so-called single malt. Earlier this week, we were told the Government was examining the single malt. The scheme is not new as it has been on the radar for some time. A report by Christian Aid brought the issue into the public domain in a very understandable way. As I stated, however, the single malt was raised directly with the previous Minister for Finance by my colleague, Matt Carthy, MEP, a year and a half ago in the European Parliament. It is Government policy and when the public finds out about it and anger spills over at some point, the Government tut-tuts and states it is focusing on the issue and will make a change in the next finance Bill. It then introduces this type of scam - it cannot be described as a loophole if it is, like this one to apply a cap post-2018, deliberately inserted in the finance Bill.

This is not a minor issue. Many of the provisions we have discussed cost significant amounts of money and can result in significant losses to the State. The chair of the Irish Fiscal Advisory Council, the person who the Government asked to carry out a report on corporation tax, is telling us the State will lose €850 million per annum as a result of this measure and argues there is no reason the cap cannot be applied to intangible assets that have been onshore until now.

The Minister needs to address the points made by Mr. Seamus Coffey in his blog regarding the impact this measure will have on Exchequer receipts. The Minister indicated previously that this is a timing issue and the amount of tax paid will be the same over the relevant period. Mr. Coffey questions that view, although he does not definitively state it is wrong.

Given the pace of change in corporation tax globally and in how these companies structure their affairs, it is a valid question to ask.

The Minister provided for a yield in the budget day book of €150 million in 2018 from this measure. I question the basis of that. The capital allowances related to the intellectual property, IP, that was onshored prior to budget day can be used to shelter 100% of relevant income and one would have to question whether these companies will continue to transfer IP to Ireland, what impact it will have on such activity and whether there will be a yield of €150 million from this measure in 2018. The Minister needs to explain the basis of that.

The impact of the removal of the 80% cap in budget 2015 was quite extraordinary. The scale of the impact was mind-boggling. In 2014, the capital allowances claimed on IP amounted to €2.6 billion and the following year, in 2015, they amounted to almost €29 billion. We have the data in respect of the onshoring. The Minister confirmed it in parliamentary questions that, "While data on the value of intangible assets onshored through this channel is more limited, the relocations in 2015 along with RandD related imports added approximately €300 billion to Ireland's capital stock." Corporation tax receipts increased quite substantially in 2015. That has to be acknowledged as well. They went up by €2.3 billion, increasing by 50% more than the Government had envisaged.

The changes in 2015, as a result of the removal of the cap, were staggering and we are still dealing with the fallout from that. The Minister is reinstating the cap at 80% and he has made what he has confirmed is a policy decision that the change only applies to IP that is onshored after budget day. In other words, the capital allowances relating to the IP that was already here on budget night can continue to be used to shelter 100% of the relevant income. The Minister needs to explain in detail the basis of that policy decision. We learned on Committee Stage that it is not a recommendation from the Department of Finance officials. It is very much a policy decision.

The Minister needs to explain the implications of not putting in the effective date of budget night. He needs to explain what would be the implications if he was to say that the future claims of capital allowances against all IP now here would be subject to the 80% restriction in terms of the relevant income that can be sheltered by it. Presumably, those implications, which the Minister has assessed and has thought through, are the reasons he has decided not to apply it in that manner.

Given the scale of what happened in 2015 and given that this is an important policy decision, the Minister needs to explain what level of consultation there has been and with whom, for instance, individual companies and representative bodies. All of that needs to be in the public domain and on the public record in order that we can have the fullest possible information as to what has guided and informed what the Minister stated is a policy decision, not a recommendation.

The decision that was made by the then Minister, Deputy Noonan, at that point on the management of capital allowances and the rate at which their depreciation could be discounted in the tax code was the right decision then on the basis of what we understood about the magnitude of those assets then, on the basis of how we treated at that point other assets in the tax code, and on the basis of how intangible assets were taxed in other countries against which we would benchmark ourselves and against which we need to be competitive for investment, for the registration of assets and for the maintenance of jobs. The decision that I am making to go back to the 80% is the right one now. I have made a policy choice. I made that policy choice in consultation with my officials because, of course, the Department of Finance outlines choices to me and gives views on this matter.

It is fair to say, as it was acknowledged by a number of speakers, that the Seamus Coffey report laid out a broad policy direction on this, but it is up to me regarding the timing and how it is implemented, and as Minister for Finance I have made that policy choice. I have made that policy choice for two reasons. First, I looked at the value of intellectual property assets as we understand them now, the way in which they move across the world and the impact that they have on payments that the Exchequer needs to make, and I decided that now it is right to tax them in the way I have described in the Finance Bill, and that is what I have done.

On the reason for the timing and how I have done that, I believe there is an opportunity for Ireland across the coming years to get to a point where we have employment, research, manufacturing and the registration of intellectual property assets related to all of those activities all located in our country. Getting to a place where we have both commercial activity and employment and registration of assets related to that work - all, or most of it - located in Ireland for a company, it is my judgment that, over the years ahead with all of the change that could develop around our country, this could offer a new form of competitive advantage to Ireland. That is why I have made the choice on the timing of this.

It was acknowledged, in fairness, by those who are criticising what I have done, that this affects the timing as to when the tax will come in rather than the magnitude of the tax itself. The expectation is that, if those companies stay present in Ireland and if the assets remain located in Ireland, at a point in the future we will gain those tax payments, and this decision is about affecting the timing of when we will be able to receive that tax revenue. I made that choice, as I explained a moment ago, because I believe bringing in this tax change in the way I have done will best serve and allow us to meet an opportunity that is there for Ireland to tax these assets better and combine the location of these assets with other forms of economic activity in our country. I was not under pressure to make this move. It was something that formed a core recommendation of the Coffey report and I made that recommendation myself.

I already answered questions on Committee Stage about who I met about this, but I will answer again. I met the American Chamber of Commerce. In my meeting with the American Chamber of Commerce, this matter did not come up. However, I had many meetings with my officials on this and other policy choices that were presented to me, and in those meetings the officials outlined different options that were open to me, and I made this choice.

Returning to a question that was asked about what happened in 2014 when the treatment of it was changed, it is important to record that the reason this was done, and it has also led to the reasons I have now decided to make this change, was to change the tax treatment of these assets, to bring it into line with how some of these assets were taxed elsewhere, and to bring the treatment of those assets into line with how we taxed comparable assets in the tax code then. That is the reason it was done. It is important to acknowledge that in the subsequent period, other changes have taken place across the world, primarily driven by the OECD base erosion and profit shifting, BEPS, process that is under way, that have changed how those assets are taxed elsewhere.

It meant that companies which have incredibly valuable designs or brands looked for new places in which to locate. They are the policy reasons behind that change. I have made this change now because I believe this is the fairest and most effective way for us to tax very valuable assets such as these.

One of the things to which Seamus Coffey also alludes, which the Minister and everyone else knows, is that the value ascribed to these intangible assets, and the key is in the word "intangible", as in "we do not know", is ascribed by the company itself. That is what happens. The company gives these assets precisely the value that is necessary to ensure that it pays no tax. That is the way it works and Seamus Coffey says it very clearly. The increase in capital allowances almost exactly offsets the increase in intangible asset-related profits such that the onshoring of these assets resulted in little or no additional corporation tax being collected in 2015. That is the way it has always worked, including with the double Irish. He also pointed out that the Minister's decision to not apply the new reduced cap on the allowance for intangible assets was unprecedented in terms of the treatment of such assets because whenever changes were made previously, they applied to all claims. He points out that the specific regime for capital allowances for intangible assets was introduced in 2009. Amendments were introduced in the Finance Acts from 2010 to 2014. He goes through a number of the changes and points out that all previous changes to the regime applied to all claims for capital allowances related to expenditure on intangible assets and were applied to all claims for capital allowances under the regime. The most recent change is the first occasion on which a change was introduced to the regime that only applies to new claims. Who does that suit? It suits Apple and a few other companies. In fact, the full extent of the lost tax revenue is apparent in the Revenue tables on tax expenditures which jumped by about €9 billion or €10 billion between 2014 and 2015.

I would like to explore a little the rationale that the Minister is giving for the decision that was made by the previous Minister for Finance in 2014. The Minister for Finance now says that it was purely based on the information that we had at the time, the situation in terms of the tax regimes of competing countries and so forth. He is saying that it had nothing to do with the fact that this was when the pressure was mounting and the Government was forced to end, or at least wind down, the double Irish regime. He is claiming that it is purely a coincidence that the Government announced the ending, or winding down over an extended period, of the double Irish at the same time as opening up that tax loophole. It seems to me to be quite an extraordinary coincidence that one tax avoidance opportunity would be closed and another one would open up, without any relationship. Of course, the same budget marked the beginning of the so-called "knowledge development box."

Is the Minister saying that if he had the information that was available to the former Minister for Finance, Deputy Noonan, he would make the same decision? If the Minister had the information that he has now about the situation that pertained then, would he also have made the same decision?

Does the Minister have any estimate of the amount of revenue lost by the change implemented in budget 2015 and the cost to the Exchequer in terms of the increase in payments to the EU?

The Minister may have misheard me earlier. I was not acknowledging that this was an issue of tax deferred or an issue of timing. What I was saying was that this was what the Minister would claim. I went on to point out that it may not be the case because the companies may not be here in ten years' time when all of the capital allowances are used. Allowances for intangible assets, which have patent protection would have lost value and so on and the structures could have changed. Had we taken that approach with Nokia, for example, as has been pointed out by the author of the report, we would have been caught well short. Companies change, move, change their structures and so forth. We know that Apple did it in 2015, so it is not just a case of money that will come to us at a future point in time.

The Minister says that this was the right decision at the time but it was not. He said that it was the right decision at the time with the knowledge that was available. What was that knowledge? What we know now is that the Minister's predecessor, his Fine Gael colleague, was lobbied through the Department by multinational companies, a multinational tax planner and by the representative body for US multinationals and lo and behold, who benefits from this? Who benefits, not to the tune of a couple of bob here or there, a couple of thousand, million or even billion euro? We are talking about massive amounts of money and it was the American multinationals who benefitted from the decision. They lobbied for this. They asked the Government to do this. They asked the Government to increase the cap. A multinational tax planner argued in a submission to the Department that the multinationals needed certainty about the onshoring of intellectual property, IP, because the Government was changing the tax residency rules. If there is one reason to vote against this Finance Bill, it is this. This amounts to €850 million next year, the year after and the year after that. It is €850 million that the Minister is deciding not to collect now because he wants all of the IP that was onshored to be able to be used against future profits these companies may generate in order that they can write down their tax liability to close to zero.

The Minister said that the Department of Finance would set out options and that he would make the policy decisions. However, in setting out options, he said that the Department would also convey views. Has the Department given a view or a recommendation on this specific issue? It is important that the Minister would answer that question. How long will it be before the capital allowances in respect of the IP onshored prior to budget day will have been exhausted? That is a particular number of years. How long before that will be exhausted? The Minister did not answer the question about the yield from this. What is the basis of the estimate that this will bring in an additional €150 million in 2018?

I ask the Minister to deal with the issue of the risk that this is not a timing issue and that there is a loss to the Exchequer as a result of this over time. This goes back to the points that Seamus Coffey made when he outlined three key risks in that regard. First, it requires the profits to be present in the future in order for the tax to be collected. Second, some of the intangible assets will, by their very nature, be time limited. Third, there is a risk of the asset leaving the country when the capital allowances have been exhausted. Capital allowances will be exhausted at some point in time so the argument that it is a timing issue is dependent on there still being taxable income in respect of those companies after the capital allowances in respect of the IP onshored up to budget day have been exhausted. That really is the nub of the issue.

As for recommendations from the Department of Finance, different options were outlined to me with regard to every budget day choice that I had to make. The pros and cons of different options were outlined and it was left to me to make the choice and that is what I have done. That is what I am stating in the Dáil here this afternoon.

Several questions were put to me that I have not answered to date. Deputy McGrath just asked how long we believe it will take before existing allowances are fully exhausted or used. That depends on how the lifetime of the asset is currently being accounted for by companies.

We believe that, across a five-year to ten-year period, we will see all of the relevant allowances for these kinds of assets fully drawn down.

In regard to the Deputy's question about the risks that are outlined by Mr. Coffey, I acknowledge those risks are there but I believe they are outweighed by Ireland getting to a point where we can have the co-location of IP assets and economic activity about further investment and jobs located here. I believe that is a long-term, valuable opportunity for Ireland in a quickly changing world.

In regard to the question on yield, I estimate the costing is €5 million for every €150 million that is located here in Ireland. To look at the quantity of movement in Ireland in 2016 and on the available figures for 2017, I believe that €150 million figure will be achievable. On the question on the cost of EU contributions, the figure is approximately €200 million.

There will be a final contribution by the proposer. Just one Member can come in.

The Government may fall over which Ministers knew what in connection with the emails in regard to Maurice McCabe and so on. This, in my opinion, is an even bigger scandal and, at the very least, it needs to be investigated. It is inexplicable that the then Minister, Deputy Noonan, in 2014 changed the tax code around intangible assets to essentially neutralise the impact of closing down the double Irish tax scam. One tax scam closed down and another one opened, directly as a result of a decision made by Deputy Noonan and the Government which has not been explained. To get an 80% allowance on these intangible assets is extraordinary, in and of itself, but to get 100%, and for the former Minister to make that decision in 2014, is unbelievable.

For the current Minister, similarly, having recognised that this needs to be changed, to then make a decision not to ensure that we collect an extra €800 million a year, and to essentially exempt the claims from before budget day, is extraordinary and, again, the only beneficiary can be Apple and that small group of corporations. They designed this and the Minister has danced to their tune. Hundreds of millions are being lost which people desperately need in this country for housing and health. That is what this exposes. At the very least, we want a thorough investigation so all of the facts can be laid out before the people and they can judge what was lost, why decisions were made and whether it is, as I believe, one of the biggest scandals, if not the biggest scandal, it is possible to imagine in this country in terms of people having tax revenues stolen from them.

All the slots have been exhausted. Is Deputy Boyd Barrett pressing the amendment?

As a proposer of one of the amendments, do I not get a third slot?

No. It is just whoever moves the first amendment.

Amendment put:
The Dáil divided: Tá, 38; Níl, 52; Staon, 40.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Connolly, Catherine.
  • Coppinger, Ruth.
  • Cullinane, David.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Kenny, Gino.
  • Kenny, Martin.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Nolan, Carol.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Laoghaire, Donnchadh.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Jan.
  • O'Sullivan, Maureen.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Sherlock, Sean.
  • Shortall, Róisín.
  • Smith, Bríd.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Wallace, Mick.

Níl

  • Bailey, Maria.
  • Breen, Pat.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Harris, Simon.
  • Harty, Michael.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kenny, Enda.
  • Kyne, Seán.
  • Lowry, Michael.
  • McGrath, Finian.
  • McGrath, Mattie.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Breathnach, Declan.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Michael.
  • Collins, Niall.
  • Cowen, Barry.
  • Curran, John.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Fleming, Sean.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Ó Cuív, Éamon.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • O'Rourke, Frank.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Richard Boyd Barrett and Paul Murphy; Níl, Deputies Joe McHugh and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 40:

In page 41, between lines 35 and 36 to insert the following:

“25. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax implications of allowing intangible assets acquired prior to 11 October 2017 be subject to a 100 per cent cap for annual write downs.”.

Amendment put and declared lost.
Sitting suspended at 3 p.m. and resumed at 3.30 p.m.

I move amendment No. 41:

In page 41, between lines 35 and 36, to insert the following:

25. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on the tax paid in 2016 by companies that act as loan originators in the State and avail of section 110 status.”.

The amendment deals with the issue of the section 110 regime that was introduced. A carve-out was built in regarding non-bank lenders that were involved in loan origination business, meaning that non-bank lenders with hundreds of millions lent to Irish businesses and with profits in the millions could continue to pay as little tax as €250 per annum. BlueBay Ireland is one of the beneficiaries of this treatment. It has lent out more than €160 million across the State. BlueBay has issued debt to, among many others, the fast food restaurant company Abrakebabra and the Mater Private Hospital. I assume, on looking at its lending rates, the blended average of the loan book is in the region of 6%. This would mean profits in the millions in 2016. Looking at its accounts, which can be seen by anyone who wants to look at them, we see the total sum it paid in tax on those millions in profits was €250. Irish banks will not pay tax for 20 years because of the losses they have carried forward, but these non-bank lenders are not paying tax either. There are other sweetheart deals in respect of some multinationals that we discussed on previous amendments but this was supposed to be dealt with when we dealt with the section 110s in last year's Finance Bill. This whole section, in the context of section 110, is dodgy, and the evidence suggests it needs further tidying up, to say the least. It is incredible that a foreign bank can set up a section 110 company, and we have examples of this. That company then lends into this State hundreds of millions of euro and makes profits on that lending and, because it is in this type of vehicle, no tax is payable. BlueBay is not unique in this regard. There are other such companies that pay as little as €250 in tax. I imagine the Minister will take to his feet and, without naming the company, present words to the House that will somehow justify that a company recording millions of euro in profit pays €250 in tax, yet he says this State is not facilitating State-sponsored tax avoidance. That is exactly what this is.

Section 110 of the Taxes Consolidation Act 1997 sets out the Irish regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax-neutral regime for securitisation and structured finance purposes.

Loan originations involve a section 110 company fronting for a foreign bank and either lending directly to larger, more sophisticated borrowers or immediately issuing newly made loans to smaller borrowers from foreign banks. Provided the foreign bank is established in one of the countries with which we have signed a double tax agreement, no Irish tax would have arisen on its interest income had it lent directly to the Irish borrowers. As the original creditor, there can be no taxable capital gain on any subsequent sale of the loans. If the loan origination company is a qualifying company within the meaning of section 110 of the Taxes Consolidation Act 1997, it can operate in a tax-neutral manner in Ireland using a section 110 company.

The Deputy will recall that in the Finance Act 2016, the reporting requirements for section 110 companies were enhanced. As a result, the Revenue Commissioners will have access to more information and at an earlier time regarding these companies. However, getting complete data from the Revenue Commissioners may take longer than the timeframe suggested by the Deputy. Given this constraint, it would not be appropriate to put the preparation of the requested report into legislation.

Regarding the Finance Act 2016 changes, the desire was to address issues relating to property and property-based loans. I acknowledge, however, that issues outside property are more complex and I want to ensure that section 110 operates in a proper manner. If concerns are raised regarding the operation of section 110 in the loan origination space, I will ask the Revenue Commissioners and my officials to investigate these concerns. Furthermore, on an ongoing basis, officials from the Department of Finance will continue to work with the Revenue Commissioners to analyse the use of the section 110 regime to minimise tax avoidance opportunities.

I cannot therefore accept the proposed amendment.

I note the Minister said he will ask the Revenue Commissioners to investigate any concerns regarding section 110s. The problem is that BlueBay, for example, is owned by the Royal Bank of Canada. Obviously, there is a different currency here; this section 110 company was set up in Ireland and money filtered through the Royal Bank of Canada into the section 110 company. A total of €160 million of it went into the Mater Private, Abrakebabra and others and a 6% interest rate was recorded on that, which gave the company taxable profits in their millions on which it paid €250 in tax. That is what is happening with BlueBay or, really, with Royal Bank of Canada. The Minister would argue for this in terms of double tax treaties but if the Royal Bank of Canada wanted to lend here, it would face serious barriers regarding currency and other issues. The problem is that this is completely legal because when we dealt with section 110 companies - and I quizzed the Minister's predecessor on this at the time - loan originators were carved out from it. We made an exception for loan originator companies. I question whether there are issues of state aid if a foreign bank can come in, lend on, structure it within a section 110 company in Ireland and not pay any tax in respect of the profits it records from its lending activity. I have serious concerns about this. While I heard what the Minister said about the timing of this issue, I believe a report within six months is possible. There may need to be a further assessment afterwards but the Minister needs to start the ball rolling in this regard. I have been raising this since the Government carried out this carve-out two years ago and I am not satisfied with the response the Minister has given. I note he will ask the Revenue Commissioners to investigate these matters, which I welcome, but he needs to go further.

I will not comment on an individual company. If the activity to which the Deputy refers is due to the operation of a double taxation agreement, and if a company is not paying tax in one jurisdiction, it will pay tax on that economic activity in the other jurisdiction.

In regard to what I said earlier, not only have I asked the Revenue Commissioners to investigate the matter, I have also asked my officials apprise me of the matter because, as I said on Committee Stage, I acknowledge that issues outside the management of property are more complicated. I want to ensure that section 110, as it is structured, operates in a proper manner and does not maximise tax avoidance opportunities.

I welcome the clarification that not just the Revenue Commissioners but the Minister's Department will carry out a review. I presume we will return to this issue again and again. There are serious issues. I tabled a parliamentary question on this and the Minister has mentioned again that where there are double taxation treaties, there would be no tax liability. I seriously question that. Does that mean that the Royal Bank of Scotland operated here on a tax-free basis? Does that mean any foreign bank can lend into the State tax-free? I doubt that is the case. However, when a company sets up a non-bank lender which uses section 110 of our tax code, it then becomes tax-free.

There are serious lending impediments to lending for firms not located in this jurisdiction, including transfer issues, currency costs, having personnel in the country and so on. I want a report. The Minister has given no commitment to come back with any type of assessment. He gave a commitment to ask the Revenue and his officials to apprise him of the issue and determine whether there are any problems, but there is nothing in terms of transparency.

The Minister has not committed to bringing forward any type of report. He is not committed to providing any information to the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach or the Committee on Budgetary Oversight or parliamentarians in the House which would better inform us of this issue, if so required, or reassure us that there are no issues. My amendment is an attempt to deal with the fact that there are non-bank lenders in the State which are branches of international banks making millions in profit by using a section unique to our tax code, that is, section 110, and paying only €250 in tax.

Will the Minister give a commitment to share the information with the Committee on Budgetary Oversight or the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach in some form in order that we can carry out our own analysis and assessment of the issue and examine it with the relevant parties?

The Minister can answer by way of a nod or a quick "Yes" or "No".

I will answer the question. I am happy to come to a committee and engage on this matter in the new year. I cannot commit to a formal report as part of the Bill for the reasons I have given. I have listened carefully to the concerns raised by Deputies in regard to loan origination. It is a matter on which I want further analysis, and when I have received that, if at all, I will be happy to answer any further questions.

Amendment put:
The Dáil divided: Tá, 35; Níl, 49; Staon, 37.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Connolly, Catherine.
  • Coppinger, Ruth.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Fitzmaurice, Michael.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Kelly, Alan.
  • Kenny, Martin.
  • McGrath, Mattie.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Catherine.
  • Murphy, Paul.
  • Ó Broin, Eoin.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Maureen.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Shortall, Róisín.
  • Smith, Bríd.
  • Stanley, Brian.
  • Tóibín, Peadar.
  • Wallace, Mick.

Níl

  • Bailey, Maria.
  • Breen, Pat.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Halligan, John.
  • Harris, Simon.
  • Harty, Michael.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kenny, Enda.
  • Kyne, Seán.
  • McGrath, Finian.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.
  • Zappone, Katherine.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Niall.
  • Cowen, Barry.
  • Curran, John.
  • Donnelly, Stephen S.
  • Fleming, Sean.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Ó Cuív, Éamon.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Loughlin, Fiona.
  • O'Rourke, Frank.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Aengus Ó Snodaigh and Denise Mitchell; Níl, Deputies Joe McHugh and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 42:

In page 41, between lines 35 and 36, to insert the following:

“25. The Minister shall, within six months from the passing of this Act, prepare and lay before Dáil Éireann a report on options available to restrict banks from carrying forward losses against taxable profits of the banks, which could result in many institutions paying no corporation tax for the foreseeable future.”.

This is a very simple amendment, the provisions of which we have been debating for several years since the Government changed our tax code to allows banks to carry forward 100% of their losses against profits recorded. The Minister will correctly say that is standard accounting practice and is allowed for every company in Ireland. However, we must acknowledge that when the NAMA Act was going through the Oireachtas in 2009 at a time of great pressure, the then Minister, the late Brian Lenihan, had the foresight to recognise that while the banks were bust and needed to bailed out by the Irish people and had losses of tens of billions of euro - at that early stage the quantity of the losses were not known but there was an indication of how large they would be - when the banks became profitable again, normal accounting practice under the tax code should not apply to them because they would doubly benefit by not paying tax for a long period until all the losses they had incurred were absorbed, as well as the Irish public having had to put its hand in its pocket to pay for those losses. He made it very clear that should not apply to Irish banks that were guaranteed by the State and needed to be bailed out, which is why he introduced through the NAMA Act a change to the legislation to allow for only 50% of losses to be carried forward.

Similar to some of the points earlier made by the Minister's regarding intangible assets, this is a deferred tax. The same amount of tax will be paid unless the bank leaves the country or goes bust. Had the Brian Lenihan provision been kept in place, the banks would pay tax this year, next year and the year after. They can afford to do so. AIB is on course to record €1.5 billion profits this year, Bank of Ireland recorded €1 billion profits last year and Permanent TSB went into profitability last year. In spite of that, AIB and Permanent TSB told the finance committee that on current projections, it will be 20 years before they start to pay taxes to the Irish public. That is not acceptable to me, my party or the majority of the Irish people who understand the pain and suffering the people went through as a consequence of picking up the tab for those banks.

The Minister will point to the banking levy. It is a separate entity and also applies to banks that did not cause financial distress in the State. This amendment addresses a very clear issue in terms of carrying forward losses and that Members believe it is not right for one of the most profitable banks in Europe, which will record €1.5 billion in profits this year, not to pay any corporation tax for 20 years. My five year old will hopefully have finished college by then and be out in the world on his own. He will still be shouldering the banking debt because of the Anglo bonds and so on but it is only at that stage that AIB will start to pay tax. That is unacceptable.

Although I disagree with it, there was a reason at the time for the Government to change the Lenihan provision and that was because of the way capital losses are accounted for in terms of the capital within the accounts of the banks. The Government's argument was that if the tax code was not changed, the State may have had to provide additional capital to the banks, which would be completely unacceptable to the Irish people. The Minister was right to make that case. However, the current financial position of AIB tells us that if we revert to the position of the Lenihan provision, the State would not have to provide any additional capital. The same is true for Bank of Ireland. This is about raw fairness, which Irish people understand. We bailed out the banks that crushed the economy and destroyed families.

Members alone will make the decision on this issue. We have been sent here to make decisions such as this and within the next 30 minutes will have to decide whether we will accept that the most profitable banks in Europe will not pay a penny in corporation tax for over 20 years or will start to pay a portion of tax from next year while still allowing them to carry forward their losses and exhaust them over a longer period of time. However, at least the banks would then be starting to contribute to tax revenue and that could be used to provide for the real issues facing our people, society and country. Because it increases the fiscal space, it could be used to build houses, create child care places, extend hospitals in order that they have enough beds and provide greater protection for those who need it. Members need to decide on that issue within the next 30 minutes. I appeal to them to do what is right and what I believe the Irish people want us to do, which is to ensure fairness is brought to the heart of this discussion and this part of our tax code and to bring back the Lenihan provision that, with the foresight of what he believed the situation was going to be, would ensure profitable banks would pay some taxes. He knew they were going to be profitable again and, by God, they have become profitable on the backs of the Irish people. Now, not in 20 years' time, is when they should start to pay their taxes.

The provision inserted by the late Brian Lenihan and referred to by Deputy Doherty involved much foresight and upheld the principle in our corporate tax code that trading losses can be carried forward indefinitely. The provision did not disallow tax losses from being utilised but instead lengthened the period over which they could be used by limiting the set-off to 50% of profit in any given year. Each year, at least half the profit would, therefore, be subject to tax and could not be sheltered by losses brought forward. That was changed in the Finance Act 2014, as referred to by Deputy Doherty.

The bank levy is not relevant to this discussion as it is a separate matter and is levied for different reasons. It is based on the deposit books of the institutions concerned. However, the relevant figures show that as at June of this year the deferred tax assets of Bank of Ireland included an amount of €1.25 billion in respect of tax losses available to relieve future profits from tax, while at the end of last year AIB had recognised deferred tax assets of €2.9 billion and Permanent TSB had deferred tax assets and tax losses carried forward of €373 million, equating to tax losses of just under €3 billion.

The Minister in effect promised a report.

The Minister needs to deliver a report on this issue. Before I made a decision on whether to change the policy I would need to see the full information. We have it on record from some banks that changing this provision, or reverting to the original provision in respect of limiting the losses that can be offset against profits, would not impact on their capital position in terms of the State having to inject new capital. We need to know the implications for Bank of Ireland, AIB and Permanent TSB, which it is widely known is not in such a strong position. We need that assessment and those facts on the impact on core tier 1 capital and on whether additional capital would have to be injected in the case of one bank I mentioned.

I respect and accept the principle of trading losses being carried forward indefinitely to be set off against future profits, and I support that. By any definition the events that happened between 2008 and 2011 or so, when the recapitalisation of the banks and the National Asset Management Agency, NAMA, transfers occurred and the losses were crystallised on the banks' books, were truly exceptional and extraordinary and resulted in enormous losses and deferred tax assets on the books of the banks.

The Minister needs to prepare a report on this issue. I understood it was pledged, in what form I am not entirely sure, but the Minister needs to do that. It is important that we tread carefully, that any change in policy is well thought through and that it examines all the consequences and fall out from such a change. We need that analysis and assessment and I hope the Minister will accept at least one of these amendments.

I too support Deputy Pearse Doherty's amendment. The majority of people do not realise how this country is run. If they knew a little bit more about what does happen and how things are done there would be much more anger.

The notion that banks that were rescued because there was a banking crisis and austerity was introduced to help deal with its outcome, are back making money and can put off losses against that is ridiculous. I agree as well that companies have to be able to carry losses and get fairness but this is a completely different situation. If these banks had not been bailed out by the people, I would say fine, let them keep on carrying the losses forward. It is not that the banks solved their own problems. They did not. The State decided to bail them out and that meant the people bailed them out. It is irrational to equate them with normal companies. Aside from the figures Deputy Doherty mentioned about the profits they are about to make, when these guys got a bit of oxygen in their lungs and got back on their feet they started to throw some people out of their homes. History will be pretty unkind to this period in terms of many decisions that were made and how those people have behaved. The Minister should try to relate this to a normal situation in life where somebody is on the flat of their back, cannot eat or drink, is out for the count until someone comes along and rescues them, makes them strong again, feeds and nurtures them back to health and then they turn on the same people who nursed them back to health and look to throw some of them out of their homes. How can we ever say that was the right thing to do? I do not understand how we can. The notion that they would not pay their fair share of tax now is ridiculous.

We have discussed this several times before with the Minister. I am sorry to say the Government is really cowardly on this issue. To recall the figures for the well-known banking sector, the high street banks, AIB has €3 billion of deferred tax assets. They are called deferred tax assets because they are worth that in terms of AIB being able to reduce its tax bill now that it has begun to make profits. We are all delighted that AIB is back in business and is doing much better because everybody in the State bailed it out. A deferred tax asset is part of the balance sheet and value structure. Perhaps the Minister is holding this deferred tax asset in this way in order to boost the company's value. Bank of Ireland has €1.3 billion in deferred tax assets, that is losses from the crash period which it can utilise as it begins to make profit and write off all of its profits without paying any tax. Somebody working in a hotel or restaurant will pay tax on their low income: somebody who is making profits of €1 billion a year will pay no tax. That situation will possibly continue because the bank will have capital allowances, intellectual property rights and so on. Permanent TSB has €373 million in deferred tax assets. We got a cheery little public relations statement during the week from KBC. I do not know whether it was toasting itself in the bank's headquarters because its owners abroad and staff in Ireland have discovered that they have approximately €128 million. That is all but that is still a good little deferred tax asset to have. There is also a wide range of other financial companies for which we do not know the details. There is a wide range of construction and development, land and property, companies, which because of the crash also have deferred tax assets.

The Minister has refused to address this issue. There are several ways to address it. From a fairness point of view, is it really correct that a family earning two salaries, whose joint worth ranges between €80,000 and €120,000, is properly contributing income tax, pay related social insurance, PRSI, and so on, and that a small business, a shop in any part of Ireland, that makes a profit of €50,000 or €100,000 potentially has to make a corporation tax contribution? We are very good at talking about the corporation tax contribution because, rightly, we say our corporation tax is very low, and the Minister has defended this. It is 12.5%. It is not as high as the top marginal rate of income tax that the couple on €90,000 or €100,000 will pay. The effective rate of tax in their joint cases is likely to be approximately 35%. We have tax structures that must raise the money we need to run the country but the Minister is saying that the banks and the construction and development companies, particularly those which speculated, drove the property bubble and crashed the economy bringing the banks with them, will be singled out for Fine Gael's and the Independent Alliance's largesse, care and consideration.

Remember that the corporation tax rate is only 12.5% here, after allowing due deductions for any capital investments and so on, in terms of purchasing capital into the country. Ordinary businesses pay that. I have gone to the OECD and negotiated on the base erosion and profit shifting, BEPS, process, of which I am a very strong supporter, because we need a fair taxation system which collects enough money to fund the country. The Government has said, "Hold on, there is an exception to this. Profitable banks will be left out of making a tax contribution." The people who work in the banks in different jobs pay income tax, the small and medium sized businesses who pay interest on their borrowings from the bank pay 12.5% on their taxable profit, but the banks themselves are picked out for a special exemption. I ask the Minister not to tell me that this is because Ireland has a tax law structure. Of course we do and in the ordinary course of events, if one makes an ordinary loss, of course that may be written off, but these are not ordinary losses. Over recent years, we have listened to and met with people who have been badly dealt with by the banks in respect of tracker mortgages. The Minister has himself acknowledged this in a very genuine way, but then he turns around to the same banks and tells them, "Folks, have a free ride on us". There are easy ways to address this issue. I was part of the discussion with Brian Lenihan to limit the banks use of losses.

We also limited very high income earners, and the Minister supported this because his predecessor, Deputy Michael Noonan, supported it on foot of the Labour Party's participation in the last Government. All the Minister has to do is get the banks to pay a minimum effective corporation tax, let us say, for instance, 8%, and then the losses will go forward.

The Minister has to respond to this. He cannot stick his head in the sand and not recognise that fair tax means that those with resources or who are making profits must pay.

I support Deputy Doherty's amendment. It is intolerable that Irish taxpayers who bailed out these banks are in some cases being thrown out of their houses by these same banks, ruthlessly and without mercy. These banks decided to sell on debts to vulture funds which treat these people even worse than the banks had and now we are to give them a rolling tax break as long as they like, to let them roll. If that was an ordinary company which had set up in any part of this country, Revenue would be after it every year, screwing them, going as hard as they could on them and threatening them but because the banks are this elite group that brought this country to its knees, and are torturing people still, they seem to have some magic wand that they can wave over Government which means that it will not face up to tackling them. It is scandalous what they are getting away with when one sees how what I call the little people, like ourselves, are being treated by these entities. What Deputy Doherty is doing is right, in fact we should go further. There should be no breaks for these people. We should make sure that the money that the Irish people, through blood, sweat and tears, put into these banks is recouped after everything they have gone through, losing houses, businesses over the last ten years. The banks were the cause of the problem and we kept throwing money at them - it was like throwing it into a cesspit - and saying "You are great guys, keep going. We believe you are right." At the same time, the ordinary people are suffering the consequences of what they did. Until we as legislators face up to this and stop patting these people on the back, the ordinary people of Ireland will remain downtrodden.

Amendments Nos. 42 and 44 call for reports within six months, that is what we are talking about. Having listened to the debate at the finance committee, I think it is reasonable to ask in relation to the banks that these amendments be treated in the same way and that the reports and information be made available to this House. What annoys people the most about the banks now is that they are now back on their feet, making an obscene level of profit. As parliamentarians, we have to ask ourselves if this is the type of banking system we want in this country, a banking system that will ignore the pain and suffering of the citizens we represent in the interests of their profitability and that only.

Looking at what is happening in the banks now, they are taking people to court for repossession. People do not even know which part of the bank they are dealing with. AIB and the other banks now have numerous entities with banking licences within their organisations. A customer may have taken out their loan from AIB, but they may be taken to court by AIB, PLC which is an entity in itself. People cannot defend themselves against them. The banks are mounting massive legal battles with families and individuals who have been pushed from pillar to post and have no money left in their family finances and they are fighting for their homes and we are letting the banks away with it.

Ulster Bank, for example, has sold loans to vulture funds knowing full well that the loan they have sold depends on its income on a family home. They are dividing up the loans and sending the customers to the courts. Vulture funds, represented by Capita, are treating people in the most despicable manner. It is incredible what that regulated authority is getting away with. The finance committee, having requested the vulture funds to come before us, received its first response today saying thanks for asking, but no thanks. If they have access to the Minister's Department, and we have all the dates and times that those funds met the Minister, I believe the Minister should tell them that there will be no further meetings, accommodation or consideration of any position that relates to them until such time as they sit before the finance committee and answer its questions on behalf of citizens, who are their customers, who we represent. It is appalling for Capita to sit back and treat this as though they are untouchable. This House has to make some statement, whether by the Minister providing the reports that we are asking for or some other means of legislation, that will put manners on the banks, the vulture funds and Capita and the service providers that represent them. We are allowing them to crush the people who are left fighting for their family homes. We are allowing the banks to walk all over them while at the same time we are allowing the same banks to carry on making the obscene profits that they have been making. At the same time as this is happening, the public banking system in Germany is telling us what we should be doing here. We must consider the balance between the citizen and their rights, a public banking system and the type of greedy vultures who we now have in the general banking system in Ireland and in the vulture funds. They are getting away scot free. All these amendments are asking for is a report within six months and that is reasonable, particularly after the arguments that I have heard at meetings of the finance committee. It is not acceptable that we would ignore what is going on.

For anyone to be making billions of euro of profits off the backs of people they currently have in court is not acceptable.

While we were discussing the tracker mortgage issue, families were in court dealing with attempts to have their properties repossessed. One of those cases was brought by KBC although it said it had none. It said it was not doing it but it was and on the same day we were sitting. Alongside these reports, we need to consider telling the banks that no further action can be taken through the courts against the SME sector or home owners until such time as investigations are carried out into the way they are making their money. The SME sector is linked to all of this. Let us be honest about it. Some of them were encouraged by the banks to move away from their core business and now everything is affected, including family homes and businesses. If they were separated out and structured properly, they would survive. For example, the global restructuring group, GRG, in Ulster Bank is a huge issue which has not been resolved. As we discuss this and await reports, which we want, all of these people continue at speed to take families and small business to court and to ruin local communities further.

The German playwright, Bertolt Brecht, stated that the crime of robbing a bank is absolutely nothing compared with the crime of owning one. Never was a truer word said when we consider what the banks have done and allowed to be done to the people of this country in recent years. The people of this country have paid a bitter price in the crash of the economy for the reckless gambling and greed for profit and bonuses of the bankers. They paid a further bitter price in the enormous cost of the bailout, which was paid for with cruel suffering and austerity over years. Finally, when those banks are nursed back to profitability as a result of the suffering ordinary people have endured due to the banks' activities, the Minister reprivatised them to ensure that the full fruits of the profits which they will make in future years, and not just the 12.5% tax, are given away to shareholders. They are not given to those who paid the price but to the private shareholders who can buy bank shares. That is the first crime and, even now, one that the Government should pull back from in its further plans to reprivatise the banks. As if all those crimes which were carried out for the banks and their shareholders are not bad enough, we then have the extraordinary situation of banks, which are once again fantastically profitable, for years to come paying no tax. It is absolutely true, as Deputy Wallace said, that there would be murder if the people of the country knew it.

When I try to explain to people these sorts of loopholes which allow banks, vulture funds and corporations to avoid tax, most of them do not believe me. When I tell them that AIB is making profits again, repossessing homes and charging extortionate interest rates but is paying no tax at all and will not for years, they do not believe me. They think it could not be true, yet it is true. It is because it is so unbelievable that there is no revolution in the country. I am being absolutely straight with the Minister. If people really knew the extent of this carry-on, there would be a revolution. If they knew that, side by side with the homelessness crisis, the chronic situation in our hospitals, the overcrowded schools and the massive deficit in our infrastructure, billions upon billions are going out in tax expenditures for losses made by these banks every year, they would revolt. However, the Government is lucky. It is saved by the fact that very few people are really listening to the detail of the debate, and even if they did, they would hardly believe it or understand what they were hearing. It is absolutely shocking.

I am not so sure about losses being brought forward. It is another example of one law for the rich and one law for the poor. What about all the people who suffered losses during the austerity period through no fault of their own? What about those who ran up personal debts and lost out in all sorts of ways? Can they carry their losses forward against their income tax next year? Will they get any allowances in their income tax next year or the year after for the losses they made? Not at all. However, the banks will pay no tax at all for years. Their shareholders will make dividends and the value of their shareholdings in those banks will appreciate. It is absolutely outrageous. Perhaps there is a case for losses being brought forward for certain genuine businesses to keep them in business. However, that these banks, in particular, can do it is shocking.

It is an open goal for tax avoidance in the future and for our friends who have subsidiaries. Losses can be manufactured. We know how they manufactured and manipulated the prices of intellectual property assets, which we were discussing earlier. It is quite possible to manufacture losses when there is a network of subsidiaries. That is another problem I have with the whole principle of losses being brought forward. The idea that the banks, after all they have done to us and all we have done for them, can pay no tax beggars belief. AIB is one of the most profitable banks in Europe. The Government is lucky that it beggars belief though. It would be paying a much bigger political price if it was not so incredible.

I too want to lend my voice of support to amendment No. 42 and a number of similar amendments. However, it all seems to be a waste of time and energy. As I said last night, although I hate being repetitive, Deputy Boyd Barrett is right about how Joe Bloggs and Mary Public would react if they knew what was going on with the cartels and the regulators who are in bed with them. We have regulators for everything in this country and we are getting new ones every day, and they are absolutely useless, toothless and fruitless. They are out only for themselves and get into cosy positions with these big cartels.

There is no will from this Government. It is not that we are a couple of hundred years old as a State. We only have our freedom in this country a limited time. We will have a very important commemoration in two years. If the Soloheadbeg ambush men came back, they would not waste bullets shooting the Government. They would line the Ministers up and shoot ten of them with the one bullet. Think of Dan Breen, Seán Treacy, Seán Hogan - those great men. Men on both sides died. For what? To be raped and plundered by vultures and for the Government of the day to acquiesce in it. The Government is cushioning them. It is bringing them into the bowels of the Department and asking them what they want it to do.

The argument might be made that we needed some funding when we hit the crash. Why did we hit the crash? It was naked greed and the regulator was asleep. The regulator should have been prosecuted, but not at all. We could not prosecute the regulators because they are doing what Governments allowed them to do and not the jobs they are paid to do. Where are their contracts? We now have public interest directors in the banks. It is a joke. They are just taking up space at a boardroom table. They are doing absolutely nothing. I questioned the Minister's predecessor, Deputy Noonan, several times about them. I asked if they were going to be held accountable and what was their role. He told me that they had no public interest role. He told me that agus é ag suí sa suíochán ansin. He told me that himself. They do not have a public interest role. It is just optics. It looks good. The big game goes on.

What the banks are doing to the people is linked with the courts. There is very little justice in the courts for unfortunate families and small farmers. Some are from the Minister of State's constituency. He knows them well.

They are of hurling fame. I refer to the blackguarding of the individual and his family, including his daughters and sons, at this hour, last week and the week before in the Four Courts. It is terrorism. We are aware of war crimes in various wars. What I refer to are war crimes being perpetrated against the people. It is terrorism. It is emotional terrorism. Mr. Tony O'Brien was criticising people who were concerned about families they believe, rightly or wrongly, are sick because of a vaccine. I will not say whether they are right or wrong. Mr. O'Brien called it emotional terrorism. I am referring to the real emotional terrorists and bullies. War crimes are being committed by the banks and their thugs, with the repossession agents. They are nothing better than thugs. I was in the Minister of State's native county to see them in action. They represent a third force. It was like guerrilla warfare, with balaclavas and Alsatians. They were tearing down a house. When the Garda superintendent and inspector were asked to defend a woman standing at her own gate, they turned their backs. I met that superintendent in the Garda station in the Minister of State's town. The latter did not turn up. He might not remember it.

A poor man and his boy were kicked and beaten senseless by thugs - a guerrilla force in a democratic country. The boy, who was 14, was nearly killed as he punctured his lung. A fire brigade paramedic who was asleep in his house heard the rumpus and attended to the boy. Only for him, the boy would have been killed. It took two hours for a Garda squad car to come. Were there prosecutions? No. I am ashamed to say some of the thugs were from my own county. They had carried out ten repossessions on the night. It is a lucrative, greasy, messy, disgusting practice. It is as bad as the drug trade. It is every bit as bad as it because in involves blood money from ordinary citizens. Year in, year out, we are failing here to pass legislation to protect the people. It is despicable and reprehensible in every case.

Deputy McGuinness and others mentioned Capita. This agent and others like it are just mercenaries. That is all they are. I mentioned a mercenary last night and the Ceann Comhairle stopped me. They asked advisers what to do and went off again. The agents are no better than mercenaries who went to various wars all over the world and killed as a career. It is despicable and it is happening under our watch. I do not agree with Deputy Boyd Barrett on many things but he is 100% right. If the people knew about it, there would be complete uproar, and rightly so. Small businesspeople and SMEs took out loans and the banks shovelled money at them. They could not keep the bankers away from their doors, in that there were loans for this and loans for that. When the crash came we all suffered but there is no mercy shown, only selling on to the next sleazy vulture fund at rates of 17%, 20% and 30%. The businesspeople themselves might come up with 80%, being the asking value, but there would be no sale to them. It is dirty, messy, disgusting and abhorrent to any right-thinking person. Why it has not sunk in here among successive Ministers for Finance and the permanent government, I do not know. I do know part of the permanent government is comprised of the regulators. A very good friend of mine, a very decent businessman, Mr. Seamus Maye, who was himself destroyed by a cartel, spoke at an event quite close to the constituency of the Minister of State, namely, the Kilkenomics festival in Kilkenny. I ask people to look at the video. We have plenty of regulators but no regulation. We have no regulation of the banks. I am not blaming the ordinary staff in the banks but those deep in the board rooms. The robbers are living inside them now and they are creating the policies on how they can rob the people blind without any gun or violence. They just rob and steal from them. We have the tracker mortgage issue and everything else. I am involved with the Friends of Banking Ireland and I have a template of a letter that is being sent to people to inquire into their circumstances. We are getting amazing responses back. People are just getting an offer of €10,000 or €20,000 in pay-back money or go-away money to compensate for the robbing and the stealing.

A man went down to the court last week and said he was overcharged by the bank by €260,000. It is not a matter for the courts, he was told. Unfortunately, many eminent people in the courts and their families are up to their necks in hock to the banks. They should not be sitting to hear such cases. It is quite clear that if they had any moral compass, they would remove themselves from such cases. It is a merry-go-round. The merry-go-round gets murkier and dirtier but it is like ice on a pond. When the sun comes one of these days, the ice will melt and you all will be submerged. The Government has the opportunity to change this but will not.

We are getting back our financial independence somewhat. Why do have we to be lying down, licking these people and letting them run amok among our own citizens? They are running amok and destroying lives. I referred last night to suicides, marriage break-ups and children in awful situations. There is also the homelessness crisis, which the Government will not deal with. More people are being made homeless on an hourly basis. There is something very sinister at the heart of the Government and our institutions, which are in a cabal with the people I have spoken about.

I just cannot let that go. Deputy Mattie McGrath has now impugned the entire Judiciary of this State.

He has impugned them all. The Acting Chairman, Deputy O'Rourke, should ask the Deputy to withdraw his statement. It is not the practice for Members of the Legislature to criticise the Judiciary in this House.

I ask the Deputy to withdraw the comment.

On a point of order-----

I have been asked a question.

I understand that the practice of the House is that one cannot make a charge against somebody who is not here to defend himself or herself. I understand that is the order of the House. It is understandable that many Members of the House want to make charges based on the motives of people or choices that are being made that cause great difficulty and anxiety for people. Deputy McGrath, however, just stood up and made allegations against members of the Judiciary. The Chair needs to provide direction to the House regarding the Standing Orders on this matter. Having received them, he should make a determination as to whether the Deputy's comment was in order.

I have been asked to withdraw something. If our good friends, na hAirí - the Minister and Minister of State - visited the courts any day of the week, they would see the justice being meted out to the ordinary people. It is there for anybody to see. I have no intention of withdrawing my remark. I did not impugn all the members of the Judiciary. I am saying that certain members are hearing cases involving banks with which they and their families are personally involved. That is wrong.

The Deputy has to withdraw the remark he made about the Judiciary. He must do so.

I have no intention of withdrawing the remark. I said certain members of the Judiciary are hearing cases when their family members or whatever are seriously in hock to the banks involved in those cases. How could that be fair or right?

The information is that the Deputy made a charge against the Judiciary-----

The remark cannot be upheld, obviously, and we ask the Deputy to withdraw it.

If the learned gentlemen went down the courts any day of the week, they would know what I am talking about, bearing in mind the circumstances of the decent family from Wexford.

In order for us to progress here, we must deal with the many amendments ahead of us.

We cannot progress because we have cartels and cabals.

We are asking Deputy McGrath to withdraw the comment.

I cannot because I have been------

On a point or order, Deputy McGrath's comment was a general one, as I understand it.

I believe the Standing Order uses the phrase "to make him, her or it identifiable". If I am correct in my understanding of the comments attributed to Deputy McGrath, the Acting Chairman needs to give the wording of the Standing Order and then let the House or the Chair decide on the comments. That is what needs to be done. I would like to hear the Standing Order.

I am not asking the Deputy to withdraw the comment. I am asking that the Acting Chairman provide guidance to the House regarding the Standing Orders on this. That is what he is here for. Having checked it, he should provide guidance on the matter. Deputy McGrath has not made a general comment. In his further clarification to the Minister of State, Deputy D'Arcy, he made a reference that could be interpreted as referring to individual members of the Judiciary. We either have Standing Orders of the House or we do not. I am asking that the Chair provide guidance on the matter and take action accordingly. Whatever that action is, I will support it, of course.

The Government seems split on this. One wants the remark withdrawn and the other wants clarification.

What I am saying is that there is a general situation affecting unfortunate people every day of the week. I am not mentioning anyone in person. What I describe is happening time and again. Where is the regulation?

The Deputy mentioned cases.

If the Minister wanted to go down with his constituents - I have been in Wexford a number of times-----

On a point of order, if the Government is now of the view that the Deputy should not withdraw his comments and all we need is a clarification of Standing Orders, I suggest that, since it is 4.50 p.m., we can all read Standing Orders in our own time. If there is no request for a withdrawal - it is up to the Deputy whether he withdraws the remark - we need to pursue the issue we are discussing. The Minister has already availed of his first opportunity out of two and has not referred at all to the fact that the losses are allowed to be carried on in the banks. Let us not lose focus on what we are discussing.

The advice of the senior clerk is that, under Standing Order 61, a Deputy cannot make a charge against someone who is not here to defend himself or herself, and a Deputy cannot mention the Judiciary.

One cannot bring-----

Deputy McGrath should please respect the Chair. I am not finished.

I thank Deputy McGrath. He has two options. He can withdraw the charge or refer it to the Committee on Procedure, whichever he prefers.

Could I clarify that I did not mention any specific person but if anyone-----

Deputy McGrath referred to the Judiciary in general.

Yes, I do not withdraw that charge. I do not include all members of the Judiciary but I said that in certain cases, certain eminent judges who themselves or their families were in major hock or had major borrowings, some of which were written off, presided over cases on which they should not have been involved.

We will refer it to the Committee on Procedure.

That is fine. I am sorry if I delayed the House but I am here to represent the public.

That is okay. I thank Deputy McGrath. He has had more than his say. I invite the Minister of State to respond.

Many charges have been made in the context of the amendment before us. The Minister, Deputy Donohoe, has never met with Capita.

Perhaps it would be helpful to the Chair of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach, Deputy McGuinness, for me to let him know that I subsequently met representatives of Banking and Payments Federation Ireland and I put in place a structure, which I hope to be able to conclude soon, in which Members of the Oireachtas will meet members of the federation, which is composed of the banks and the service providers, and if there are particular cases members of the public have brought to the attention of Members, they will be in the room with the right people to try to bring those matters to a conclusion. That is something on which I took the initiative some months ago. I hope to make an announcement in that regard in the coming weeks.

In response to the amendment, loss relief is a standard feature of corporate tax regimes worldwide. Under the Irish corporate tax regime, losses incurred in the course of a business are allowed to be taken into account in calculating the appropriate amount of tax due by companies. Loss relief recognises the fact that business cycles run over a longer period than just a single year and that it would be inequitable to tax profits in one year and not to allow loss relief in the next.

Under existing loss relief provisions in the tax Acts, any unrelieved trading losses of a company for an accounting period may be carried forward for off-set against trading income of the same trade in future accounting periods. Alternatively, a company may claim to have the loss set off against profits of any description for the same accounting period in which the loss was incurred or of an immediately preceding accounting period of the same length. The provision of relief for such losses is a standard feature of our tax code and of all other OECD countries. It would be difficult to justify the taxation of business profits without also taking due account of business losses.

As Deputies are aware, under the NAMA Act 2009 a new section – section 396C – was inserted into the Taxes Consolidation Act 1997. The provision limited the amount of prior-year losses that a NAMA-participating institution could off-set against trading profits to 50% of trading profit for each accounting period. It should be noted that it did not disallow any tax losses from being utilised but instead lengthened the period over which they could be used.

In 2013, the Minister for Finance decided it was appropriate to remove the restriction on relief for losses in participating institutions, with effect from accounting periods beginning on or after 1 January 2014. That was done against the backdrop of the introduction of the new capital rules under the EU capital requirements directive, CRD IV.

The removal of the restriction has protected the carrying value of deferred tax assets at the banks in which the State has a significant stake thus improving capital ratios under the new Basel III rules and consequently increasing the value of the State’s investment.

The removal of section 396C enabled the banks to absorb their losses over a shorter timeframe than would be the case with a 50% limit in place. While corporation tax will not be payable on the banks' trading profits until their losses are fully absorbed, the net effect of the measure in terms of tax receipts is largely one of timing. This will be off-set by an improvement in the valuation of the State's equity stakes in the banks, as well as its debt investments, while the risk to the State as backstop provider of capital is also reduced.

Rather than interfere with the deferred tax assets by changing tax policy, the Government has ensured a contribution from the sector by introducing a bank levy which has been payable since 2014. This provided an annual contribution of approximately €150 million to the Exchequer for the period from 2014 to 2016. In budget 2016, the payment of this levy was extended until 2021. It is anticipated that the bank levy will raise €750 million over five years. Therefore, I do not accept the proposed amendment.

On Committee Stage, the Minister, Deputy Donohoe, agreed to provide a technical paper. He will consider a range of options, and they will be presented to the finance committee for it to consider. He has not committed in any shape or form to changing the current tax strategy in respect of deferred tax assets.

Before I call the next speaker, I remind Deputies that they have a two-minute speaking slot. I call Deputy Pearse Doherty.

I am aware of the commitment made by the Minister for Finance on Committee Stage on foot of my amendment and I welcome the fact that a technical paper will be forthcoming but this amendment goes further and requires a change in law and that a report would be produced within six months on the options available to restrict banks from carrying forward losses against taxable profits.

The Government's position is very clear, namely, that the policy is the policy but what I cannot understand is why the Government is continuing with this course of action. I have been fair to the Government in my previous contribution in acknowledging that the 2014 change was to ensure no additional capital was provided to the banks. That was the argument that was put forward. There is a certain validity to that although I disagreed with it at the time. However, there is none today. No argument exists in terms of AIB and Bank of Ireland. The Minister is asking Members to vote down an amendment that would outline the direction of the Government's policy, which would be that banks should pay their fair share of tax. I cannot agree to that because this is a scandal. Massive amounts of profits are being collected by the banks on the back of extraordinary interest rates that are twice the European average, and on the back of the tracker mortgage scandal, which they will have to pay back.

I am sorry but Deputy Doherty's time has elapsed.

I will finish now. The profits are being made due to the fact that the banks are not cutting deals with people yet the Government will not ask them to pay tax for the next 20 years. That is something I cannot agree with.

The amendment we are debating, No. 42, looks for a report to be provided within six months. My amendment No. 44 is similar but the amendments are not grouped. It has been said that the Minister will deliver a technical paper. We need to get more detail on what will be in the technical paper. The amendment before us looks for the options available to restrict the carrying forward of losses. The other amendment looks for details on the potential impacts of restricting the carrying forward of loss relief. Can the Minister give an assurance that both of those issues will be addressed comprehensively in the technical paper or report or whatever one calls it? Could he elaborate on that and provide confirmation?

I take it from what has been said that the Minister does not want the measure to be in the Finance Bill but could he give us a commitment on a timeframe? A report has been requested within six months and for the Minister to then agree to make himself and his officials available to go through the technical paper or report on the options and their implications. We need to have the full facts on what the implications are. We have it on the record in respect of AIB and Bank of Ireland that no additional capital requirement from the State will be triggered. Permanent TSB may be in a different situation and that may be a consideration for the Government. I do not know but those are the facts that we need to have at our disposal when we make such an assessment.

I am extremely disappointed at the conservatism, if not cowardice, of the reply of the Minister of State. This is actually a running scandal in the country. If we allow the banks to take us for a ride, then take us for a ride they will.

Fine Gael accepted, reluctantly, a bank levy at the request of the Labour Party. That was only because Fine Gael absolutely refused to address this area. The argument of the Minister of State is wrong. The four banks I have named will get €5.5 billion of deferred tax assets. They will thank Fine Gael very much. These are the people who brought the country close to its knees.

The Government is not even willing to match the actions of the banks in respect of how they are treating people with tracker mortgages and accidental landlords, a cause dear to the heart of the Minister of State. The houses of many of those people are being repossessed. The banks are not even being put on a par with ordinary businesses that pay their taxes.

Perfectly acceptable ways have been found to deal with this. They may not be perfect but they would actually result in these banks making a contribution.

We need to build schools, roads and public transport among other things. We need to build our health service. We could even reach an agreement that the tax so engendered could be used to fund the new health service. That would be a reasonable arrangement and I imagine all of us could agree on it.

It is a cowardly and wrong response. Technically, with that response the Government is actually making us the laughing stock of Europe. Why should European countries hold out a hand to us when we cannot even put up a hand on our own behalf?

I wish to comment on the arrangement that the Minister seems to have come to in respect of the banks, the funds and this House. While it might be welcomed to resolve some issues, the banks, vulture funds and organisations like Capita should appear before the committees of the House. This is not about individual cases, although they are important. It is about the culture within the banks that we need to expose. It is about the culture of greed that led us to the collapse in the first place. That culture continues to destroy families and businesses. The banks have questions to answer in terms of how they are handling funds now and how they are dealing with clients now. They have questions to answer about their attitude and the fact that they are using extreme legal muscle to punish people. Those questions can only be answered with accountability and transparency in public session before the appropriate committees of the House. That is what the Department of Finance needs to emphasise.

It is not business as usual. The banks are accountable and they must appear before the committees of the House. They cannot be compelled, but they can be brought in and made to respect democracy and rights of citizens before Oireachtas committees.

I too am appalled that the Government will not act. The old saying about laughing all the way to the bank is appropriate. The bankers are laughing all the way to the bank, inside the bank and all over the bank. They are literary piddling all over the people. Why not, since they get aplomb from the Government?

Deputy Burton mentioned different cuts and what can be done for the children's hospital and so on. People who are going blind in Cork and Kerry cannot get cataracts removed. We could reference any category, including those involving schools, education, disabled people or unfortunate people who are downtrodden. Up to 30 or 40 people are languishing on trolleys for three or four days in my hospital in Clonmel. There is mayhem and bedlam. They have blankets for pillows.

On the other hand, these institutions are being let off tax-free. This is a scheme designed to allow them to write off taxes, yet they have bled the people dry. Why would they not do so, seeing as they get the support of the Government and the entire system of administration and taxation and so on?

What about the ordinary person who pays taxes? I heard the Minister suggest the Government did not have enough money even to make a start to pay back the women who had to give up work. Those women are now being penalised with certain payments. They had to retire under the public service ban when they got married and became pregnant. They had to give up work. Many other areas could be helped in some small way.

However, it is all for the big institutions and big people. It is political and moral cowardice to an extraordinary degree because the Government will not tackle the banks or take any opportunity to try to bring them before committees, as Deputy McGuinness suggested, to hold them accountable to the House.

We are accountable to the people, and so we should be, as Teachtaí Dála. We are messengers of the people. However, we are not even tickling these people. They are a protected species, like the hen harrier. We cannot go within 100 miles of them.

As the previous speaker put it, these banks are running riot all the time. I urge the Minister of State to ensure that there is not one law for the banking community and another for the rest. Banks are companies. If we make an arrangement for one company and set a precedent for that company to get away with X, Y or Z, then why not do it for every other company throughout the country that incurs losses? Many small businesses throughout Ireland have suffered losses. Unfortunately, they do not get the same type of deals. I am deliberately using the term "deals" when referring to what the banks are getting.

As Deputy McGuinness pointed out, rightly, what they are doing is remarkable. Capita has now changed its name to the Link Group. We have to start dealing with another new set-up now. In recent weeks, a letter went out to all the people who the company is torturing at the moment. We have another new company set up along with the 300 others with various types of names. These companies are sending letters out to people. These companies seem to be doing whatever they want to the ordinary person, yet they are still clapped on the back and get whatever relief is needed.

I will address several points as best I can. Companies are entitled to carry losses forward by two years.

As Deputy McGuinness knows well, a referendum went to the people on compellability. It was turned down by the people. The Department of Finance does not have the authority to compel any financial institution to attend committees of the House. That is the reality.

Then the Government should not meet them.

We have committed to providing a technical paper. We are not putting it into the Finance Bill. Like the other reports, we aim to get it in as quickly as possible in order that it will be made available. We will have it done within a six-month period.

I want to finish on one point. Deputy Burton always amuses me. It is as if she had never been in Cabinet and was never Tánaiste.

I made the decision in Cabinet.

Deputy Burton, please. With respect, speak through the Chair and allow the Minister of State to respond.

It is as if the Labour Party had never been there at all.

On a point of order-----

Did Deputy Burton only beam down last week? Well done to her.

The Deputy is being goaded by the Minister of State.

I am not going to go into who was in government at the time when all these decisions were made. The Labour Party was in power when the 2014 decision was made. Fianna Fáil was there beforehand, when Brian Lenihan brought in the amendment.

That was on my proposal.

There was a lot of that. Now Deputy Burton is goading me, because when she was in Cabinet, she approved taking it out.

At least we got the levy.

You have a minute and a half left, Deputy Doherty.

We will not go there, because whatever happened in the past is in the past. The question is what we do from here on. We all have the facts before us. We all know that these banks are super-profitable. We all know that the State requires additional revenue. It is not as if we are not subject to pressures.

This is not actually about taxing the banks more. It is about taxing the banks fairly.

They will be still able to use these losses and carry them forward, albeit over a longer period. The key issue is that they will start to pay tax at an earlier point. That is what this is all about. As I stated, the Minister of State did not offer any justification for refusing to accept the amendment. While there may have been justification for the current arrangement in 2014, I do not see any justification for it at this point, particularly in respect of Allied Irish Banks and Bank of Ireland.

As Deputy John McGuinness stated, the amendment would commit the Minister to preparing a report. A technical paper is being done and the amendment would go one step further by having a report prepared.

On a side issue, I agree with Deputy McGuinness that the Minister, Minister of State and their officials - I do not criticise the officials for doing their job - should not meet vulture funds or their agents if they refuse to come before the Houses of the Oireachtas.

They should not sip tea or drink coffee with vulture funds that are unwilling to accept invitations to appear before the finance committee.

We have not met them.

We should make clear to them that there will be no engagement.

We have not met them.

Amendment put:
The Dáil divided: Tá, 29; Níl, 49; Staon, 36.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Connolly, Catherine.
  • Crowe, Seán.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Fitzmaurice, Michael.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Kenny, Martin.
  • McGrath, Mattie.
  • Mitchell, Denise.
  • Munster, Imelda.
  • Murphy, Paul.
  • O'Reilly, Louise.
  • O'Sullivan, Maureen.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Ryan, Eamon.
  • Smith, Bríd.
  • Stanley, Brian.
  • Wallace, Mick.

Níl

  • Bailey, Maria.
  • Breen, Pat.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Flanagan, Charles.
  • Griffin, Brendan.
  • Harris, Simon.
  • Harty, Michael.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kenny, Enda.
  • Kyne, Seán.
  • McGrath, Finian.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Ross, Shane.
  • Stanton, David.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Niall.
  • Cowen, Barry.
  • Curran, John.
  • Donnelly, Stephen S.
  • Dooley, Timmy.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • Lawless, James.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • O'Callaghan, Jim.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Rourke, Frank.
  • Ó Cuív, Éamon.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Aengus Ó Snodaigh and Pearse Doherty; Níl, Deputies Joe McHugh and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 43:

In page 41, between lines 35 and 36, to insert the following:

"Use by Multinational Companies based in Ireland of "Single Malt" tax avoidance system

25. The Minister shall, within 6 months of the passing of this Act, prepare and lay before the Oireachtas a report analysing the use by Multinational Companies based in Ireland of a system known as "Single Malt", which directs profits to countries with which Ireland has a double taxation agreement but that do not have any corporation tax, and the impact this has had on returns to the Irish Exchequer.".

This amendment relates to research carried out by Christian Aid, which has pointed out that, following the announcement by the former Minister for Finance, Deputy Noonan, in October 2014, that he was ending the double Irish tax scheme by making it a requirement for a company registered in Ireland to also be tax resident, a new scheme was soon developed, which Christian Aid has coined the "single malt", which provides the exact same tax avoidance benefit as a double Irish scheme.

As Members will be aware, although the former Minister, Deputy Noonan, stated that he had abolished the double Irish scheme and used strong language when he stated that abolishing the ability of companies to use the double Irish will help tackle aggressive tax planning by multinational companies, he forgot to add that he would allow companies already using the double Irish scheme to continue to use it until 1 January 2021 and he gave companies which were not availing of it a three-month window to get set up before the rules kicked in - nice concessions, if one can get them.

As Deputy Noonan was announcing this change, tax advisers in the United States were already promoting the new single malt structure. A note, written in October 2014 by a tax expert in a well known US tax firm following the announcement, states:

This does not mean the objective [of the double Irish] cannot still be achieved in other ways. Ireland has an extensive treaty network. At least two of these treaties contain management and control residency standards and are with countries that have similarly low tax rates. Specifically, it is possible to form an [Irish non-resident company], as under existing structures, with its management and control in Malta. ... that company should be treated as a resident of Malta, and not Ireland ... Malta does not impose any tax on royalties derived from patents, trademarks, or copyrights (resident non-domiciled companies also are exempt from Malta tax on foreign source income that is not remitted to Malta.) And since Malta is an EU member state, royalties paid from an Irish company to a Malta company should not be subject to Irish withholding tax. Thus, this Malta company should provide essentially the same benefits as [a] Bermuda company ... Alternatively, the [double taxation] treaty between the United Arab Emirates (UAE) and Ireland likewise has a management and control standard, and the UAE does not impose corporate income tax. The Ireland-UAE treaty also exempts royalty payments from withholding tax.

Thus, notwithstanding the Irish proposal, it should still be possible to achieve the same results using a company managed and controlled in Malta or the UAE, rather than in a Caribbean nation.

It is a bit scary that Ireland currently has 73 double taxation treaties with other countries and more are currently being negotiated. In its report, Christian Aid pointed out that Ireland's double taxation treaties with other countries override Irish domestic tax law.

I have debated the role double taxation treaties play in tax avoidance with the former Minister on many occasions. During the 2016 Finance Bill debate, when it was announced that a withholding tax of 20% would apply from next year on certain property distributions from Irish funds to non-resident investors, Members pointed out that it looked doubtful that the rate of 20% withholding tax could even be applied to the majority of these non-resident investors.

The Department of Finance confirmed to me that non-resident investors may seek relief from the newly enacted 20% withholding tax if they are resident in a country with which Ireland has a double taxation agreement. The Minister for Finance, Deputy Noonan, made the point to me at the time that non-resident investors may be also able to seek relief from the dividend withholding tax if they are resident in a country with which Ireland has a double taxation agreement. That is a standard feature of double taxation treaties and is based on the OECD Model Tax Convention. He added that he was sure that I was familiar with the notion that one does not pay tax twice in different jurisdictions on the same profit. Tax is paid once and where there are double taxation agreements the tax is paid in the country in which the person is tax resident. If a person pays the tax in the other country he or she gets a credit against his or her tax liability in the country of residence. The problem with that agreement, as a briefing note from a US tax firm points out, is that Ireland has tax treaties with countries such as the United Arab Emirates, which has no corporation tax, which is currently involved in the bombing of Yemen and where it is very easy to set up a brass plate company. Christian Aid has made the point that although companies using the double Irish scheme can continue to do so until 1 January 2021, a preliminary search of the Irish and Maltese company registries shows that at least four multinationals have already established holding structures with Irish registered but Maltese tax-resident companies.

The amendment calls on the Minister to lay before the House, within six months, a report analysing the use by multinational companies based in Ireland of a system known as single malt, which directs profits to countries with which Ireland has a double taxation agreement that do not have any corporation tax and the impact this has had on returns to the Irish Exchequer. I ask the Minister to give the amendment serious consideration.

Deputy Wallace has made most of the salient points already but Christian Aid - and Gerard McSorley, in particular, who phoned me recently to brief me on this - deserves a lot of credit for a very good paper exposing this new tax avoidance structure using the double taxation treaties between ourselves and Malta. I would just add two points on that. First, Mr. Eddie Hobbs phoned me recently. I would not be on his political page on many things but he phoned me to point out that one of the things we should be doing is penalising accounting and consultancy firms that are in receipt of public contracts who are knowingly and on a very significant scale advising corporations and wealthy Irish individuals who can no longer avail of the double Irish or other tax avoidance mechanisms to go to Malta. They are advising them to set up in Malta so that they can continue to avoid tax. That is what some of these accountancy and consultancy firms are doing, firms that are in receipt of public contracts on a regular basis. Our tax code - I cannot quote the exact section but I am sure the officials will know it- states that any measure that is taken for the specific purposes of avoiding tax is not allowed. Even without specifying exactly what that is, one is not allowed to do something for the specific purposes of avoiding tax according to our tax code. We should act against firms based here that are doing this and ban them from getting public contracts. Why on earth would we give public contracts to accountancy and consultancy firms that are simultaneously advising rich corporations and individuals how to avoid paying taxes that are owed to the Irish people and the Exchequer?

My second point is on the fact that we have another double taxation treaty in this Bill. We called a vote on it, much to the bewilderment I suspect, of many in this House. Deputies were asking a few weeks ago why we were opposing a motion for a double taxation treaty with Macau. Most people do not even know where Macau is located. Macau is one of the biggest tax havens in Asia and this Bill provides for a double taxation treaty with Macau. What is that about? We did not get much justification for that. Is this going to be yet another mechanism for these guys to use the relationship between our tax code and that of another tax haven like Macau to avoid paying tax? I would certainly like an explanation as to why that is contained in this Bill. Why is the Government pushing a double taxation treaty with a known tax haven? Deputies simply have to google "tax haven" and "Macau" and they will get reams of information about how Macau's main business is being a tax haven. The Bill is riddled with this kind of stuff.

I commend Christian Aid and other development agencies such as Trócaire and Oxfam who have been working over a long period to develop tax justice in the developing world. They are working hard to ensure that taxes are collected, particularly in countries that are resource rich and whose main products are exported without processing. In many developing countries, between corruption and co-operation via various locations around the world, people are left in extreme poverty because there is no international will to address it. I worked in the developing world for a considerable period, specifically in eastern and southern Africa and I am a realist. I know that this can happen only through international co-operation over a long period of time. Organisations like Christian Aid have done sterling work in bringing to our attention the impact of tax agreements which were not designed with the developing world in mind but which have terrible consequences for people living in extreme poverty in a range of different countries. If we want the world economy to grow and people to prosper in Europe, Africa and Asia, then taxation is one of the issues that must be addressed but international organisations like the UN and the OECD are the only realistic way of doing it.

I would like the Government to think about this amendment again. The request here is for a report. What is threatening about a report? The aim is to address issues that many people in Ireland would deeply support, regardless of whether they are political. From that point of view, the Government should reconsider its position of extreme opposition to the idea that we would consider reports which set out what is happening in the context of issues that are very dear to the hearts of Irish people. Irish people want to see those countries which are struggling with extreme poverty helped.

Our development aid programme currently stands at more than €600 million, as the Minister is aware, and does excellent work. If he saw where the money goes, I think he would give some consideration to producing the report because it can only help us all to make better decisions and to find a way of helping countries to develop and meet the UN minimum development goals, provide schooling for girls, for example, help tackle malaria and so on.

In regard to the paper Christian Aid has produced, Ireland has to ask itself questions at this point, such are the rate and pace of developments at the moment in international tax, and such is the awareness globally, particularly in Europe, of some countries benefitting unfairly vis-à-vis other countries. That includes us being taken advantage of, as well as cases where we are seeking tax advantages. In the context of Brexit, change is coming down the road, whether we like it or not, and it is going to be very difficult change. In recent replies to me on the double taxation agreements, the Minister and his officials have acknowledged that we have currently paid back approximately €600 million in taxes which are deemed recoverable in respect of Irish adjustments. The Italian Government is developing particular models that will be used to ensure that countries get minimum tax recovery in regard to activities broadly taking place in their jurisdiction. We also know that, in terms of the double taxation agreement and other arrangements that exist with India, claims that may be as high as €300 million are currently pretty much conceded, although the Minister could tell us more. Therefore, who are we fooling? Even yesterday, the British Tories, with many of whom Fine Gael has good relations, or more specifically, Philip Hammond, the Chancellor of the Exchequer, had a specific section in the budget speech dealing with digital taxation, which is also going to the address this issue.

What is wrong with providing a report? We should not even have to put down amendments about these reports. It is an insult to the idea of an open democracy. This information should be available. We should be able to make arrangements and have debates and discussion whereby we can grow our economy and have a fair taxation system but it should not be a case of beggar my neighbour.

At an earlier stage of the debate I praised the work of Christian Aid in regard to bringing this back into the public debate. The Irish Times carried the story prominently and it would not be the first time The Irish Times has reported on the issue of the single malt, although not giving it that title. More than a year ago, on 8 November 2016, the Minister's predecessor was before the European Parliament. At that time, my colleague, Matt Carthy, MEP, put to him very clearly that not only was he not closing the double Irish quickly enough, and we heard about the tail that is allowed until 2020, but that there is availability to companies within our tax code to continue using that type of structure and this is because our network of tax treaties overrides domestic law. Despite the change to the legislation which ended an automatically-created tax residency for companies here despite their claims they were managed and controlled in another jurisdiction, wherever we have a tax treaty with a country that still calculates tax residency on the basis of management and control, that would override on this issue. Those countries include Malta, where the title "single malt" comes from, but also include Panama, Hong Kong, the United Arab Emirates, Netherlands and Belgium, which are other vehicles that could be used in this regard, given the double taxation tax treaties we have with those jurisdictions.

It was interesting that when Matt Carthy put that to the Minister's predecessor, his response was that this was very unpatriotic and he should wear the green jersey. That was the former Minister's response to the fact there is a major loophole, whether intentional or unintentional, in our tax code that has allowed large companies to continue to use the double Irish. The Minister's predecessor has acknowledged the reputational damage this has done to Ireland. He was not really concerned about losing tax revenue and all the rest, but about the reputational damage. Let there be no doubt that, as we close one loophole and create another door, or do not close the door, this reputational damage is going to continue.

Christian Aid has identified that, for example, four multinationals are using the single malt and it names one of them as Microsoft. I am not sure if that is the case. I am sure Christian Aid's information is solid and I understand the company has not distanced itself from that claim.

The real question is what the Government is going to do about it. The other point is that this is not new, which is the point I have been trying to make. We have been raising the issue of the double taxation treaties and the fact the double Irish has not been closed and is continuing to be availed of. As I said, when Matt Carthy raised this at the European Commission, the response from the then Minister was a typical response from him, if the House does not mind me saying it, namely, the only problem with the double Irish is that it has the word "Irish" in it. It was a case of, "We cannot end the issue of stateless companies because it is about Americans and other jurisdictions". It is always this defensive, "nothing to see here" approach.

Deputy Mick Wallace is 100% right. This is quite technical stuff. It is probably a failing of those of us on the Opposition benches but if we were able to articulate this in such a way that the public understood what is actually going on here, there would be massive anger at the Government. It is unbelievable what is happening. It is not a case of the Government having a look at this to see what is happening. The Government knew well this was going on for a couple of years. This is the standard response of Government, namely, to continue until it comes to a point where pressure is heaped on and it then acts in the smallest way. Then, when it does act, it has the brass neck to stand up and say, "Look at us. Aren't we great? Didn't we end the double Irish? Didn't we end the stateless companies? Didn't we do this and that?", while forgetting all about this type of session, where myself and others have been basically demanding that the Government does this before we lose our international reputation.

I am proud of my country, I love my country, but I do not love some of the stuff that is happening in my country. I do not like the fact we are being criticised internationally, and they are right, in regard to how our tax code is allowing companies to abuse international tax practice. This is not just about us losing revenue; this robs everybody, including the Third World. It robs services, resources and revenue and it creates additional wealth for those at the very top, those at the peak.

The Minister has facilitated this. It is State-sponsored tax avoidance signed into law by the Minister, Deputy Donohoe. He can sign it out of law, which is what I am asking him to do.

We need to get to grips with some of this issue. We dealt with it before - we do not need the €850 million in tax, so just leave it to one side because it would affect the likes of Apple and so on. What of the section 110 companies and loan originators? Do not worry about that - we are getting €250, which is better than nothing, and they employ 43 people down the road. Forget the fact that they are making millions of euro in profit lending to Irish society. The Minister does not want us to focus on this issue because it has been standard practice in Fine Gael and Fianna Fáil for a long while, but it is time to call a halt. International pressure will continue to be put on this country and we will lose other battles as a result.

I am aware of the publication of Christian Aid's report on tax, which highlights a potential aggressive tax planning structure that it believes has been used by some multinationals. The report alleges that Ireland's corporate tax residence rules and our tax treaties facilitate this structure.

Our tax residency rules were amended in 2013 and 2014 to shut down known aggressive tax planning structures. Those rules are now fully in line with international best practice and are similar to the rules in other countries, such as the UK. Similarly, the corporate tax residence rules in our bilateral tax treaties are fully in line with long-standing OECD and UN recommended best practice. Additionally, the Finance Bill will begin the process of ratifying the BEPS multinational instrument, which will introduce important anti-avoidance clauses into Ireland's tax treaties.

My understanding is that the structure referred to in the amendment is designed to avoid the operation of US anti-avoidance rules rather than to reduce the amount of tax payable in Ireland. Of course, the US tax reforms currently being discussed in America could end such structures that seek to abuse US tax rules.

The issue of aggressive tax planning by multinational companies is a global problem that requires a global solution. I agree with Deputy Burton that dealing with this issue through fora such as the OECD is essential. I have not commented on any individual company that is named in the papers that have been released, including the most recent disclosure, but I contend that a general lesson has emerged from the papers. Within hours of a country making a movement on its tax policies, large companies will compare that change versus existing policy in other countries. By examining the mismatches or opportunities created between policy in, for example, Ireland and policies elsewhere, including different levels of corporation tax, opportunities for planning are created. I am committed to addressing this issue through the OECD.

Where it is in our power to act, we have taken action. I have cited examples. Similarly, the ratification of the BEPS multilateral instrument to amend tax treaties and the implementation of other actions will go a long way towards shutting down aggressive tax planning. I have asked my Department to revert to me on this matter and to inform me of what action is needed to deal with it bilaterally or on a domestic level. When I receive that information, I will decide whether further action is needed. I do not want to see continued growth in the kinds of practice that undermine the legitimacy of the collection of taxation on a national or global level, but change like this has to happen in a co-ordinated manner. If Ireland makes changes on its own, the problems and the opportunities will shift elsewhere.

For Members' information, we have 26 remaining amendments to consider, 15 being ruled out of order. We have just taken over 30 minutes to deal with this important matter. Were we to take the same time to deal with each of the other amendments, we would need an additional 13 hours to consider the Bill.

The Minister's defence of what he admits is aggressive tax planning is that we could lose out if we change something. We are discussing a race to the bottom in terms of how tax is collected from those who can best afford to pay it. The Minister asserts that we are fully in line with international best practice. When we argue in the House about how Shannon Airport is allowed to be used as a forward base for US military purposes, I sometimes hear the argument that other Europeans are working with the Americans as well and that the Americans are our friends. It is almost as if the fact that they bring arms, bombs and so on through to destroy places like Yemen is none of our business.

Deputy Pearse Doherty mentioned that we were robbing the Third World with our behaviour. ActionAid Ireland made the same point recently, namely, that the Irish double taxation treaty system was depriving low-income countries of vital revenue. According to it, multinational "companies from wealthier countries have a rapidly increasing presence in" low-income source countries where the relevant economic activity takes place, but the source country's ability to tax foreign multinationals is restricted in most of Ireland's tax treaties with lower to middle-income countries, thereby undermining their taxing rights.

We will not start discussing climate change again, but we need to play a better role. What we are doing in terms of the taxation of large companies leaves much to be desired.

I wish to correct the record. I mentioned that I was talking to Mr. Gerard McSorley, who is a fine Irish actor, but I was actually talking about Mr. Sorley McCaughey of Christian Aid, who authored that good paper.

The game is up on the "race to the bottom" role that Ireland has played. The noose is tightening. Frankly, it is about time the Government got with the programme. We can argue about what happened previously, and we should when it comes to the changes made in 2014, but we must give up this stuff. It is not sustainable in the future and is robbing the majority of the world's peoples of incomes that are owed to them and that they need to make society function.

I do not know which writer with Rolling Stone described Goldman Sachs as a giant squid wrapped around the face of humanity sucking it dry. These corporations are another instance of that. It is what they are doing. As Oxfam has pointed out, the consequence of that has reached the extraordinary level of the world's nine richest people, most of whom are the CEOs of these very corporations, now having more personal wealth than the poorest half of the planet. It is literally the 1% and the 99%. That is where we are going and we should play no part in it, and it is shameful that we have been. Let us do something about this.

The Minister did not answer the question about Macau.

Last year, I asked the Minister whether he would meet Christian Aid and people like Mr. Jim Clarkin, CEO of Oxfam Ireland, and Mr. Sorley McCaughey, who is involved in writing materials on, and is part of many international networks dealing with, the issues in question.

I understand some officials from the Department and possibly the Revenue Commissioners met people from Christian Aid. It is quite important that the Minister meets them. Ireland is currently on a long campaign to gain a seat at the UN. We have done that successfully in the past, partly because our contribution to the developing world, in terms of development aid, has been very significant in money terms, as have the contributions of Irish people through the decades, including missionaries from Ireland in earlier decades.

In the context of their legacy, I ask the Minister to meet Christian Aid. He is meeting bankers and everybody who represents the other side of the argument. What would be wrong with meeting the authors of these reports? I would like a commitment from the Minister on that, if possible.

The manner in which companies can shift their profits from one jurisdiction to another, whether from Ireland to the Cayman Islands, Bermuda or countries with which we have a double tax treaty, such as Malta, the United Arab Emirates and many others, is an issue which comes up time and again. It is done through the mechanism of transfer pricing, intellectual property, IP, and related royalty payments.

I understood that through the OECD base erosion and profit shifting, BEPS, process we would have new rules around transfer pricing and it would be much more difficult to shift profits in the same manner. Instead of shifting profits to traditional tax havens where there is no tax, it appears that profits are now being shifted to countries, including those in Europe, which apply very little tax to companies and their activities.

We are always informed that expanding our network of double taxation treaties is a positive thing and good for trade and commerce between countries because it facilitates exports and imports and so on. However, the suggestion now is that double taxation treaties are, in effect, resulting in an extremely aggressive tax avoidance mechanism. The Minister needs to address that. The issue of the place of effective management and the management and control test, whereby an Irish company can be incorporated here but deemed to be resident in a country with which we have a double taxation agreement, comes back to the issue of profit shifting, something which companies seem to be able to do very easily using transfer pricing and IP.

I would like to know a lot more about how Revenue applies internationally accepted OECD transfer pricing rules governing how royalties are calculated in terms of payment for IP and how that can result in profits being transferred from one company in a group in one country to another company in a group in another country where there is much more favourable tax treatment. Companies seem to be able to move profits to wherever they want.

I have no interest in Ireland being part of a race to the bottom. I want Ireland to have a tax code which is competitive and addresses issues which are part of the growing consensus on how taxes should be collected globally, and that is what we have. I reiterate that we have made many significant changes to date and are committed to making more. The foundations for making some of the additional changes have been laid down in the Finance Bill.

On the questions which have been put to me, it is possible that some of these practices are now being generated by companies comparing our tax code not only against jurisdictions which perhaps have no taxation systems at all but lower levels of taxation than we do in respect of corporate profitability.

On questions put to me directly, Deputy Boyd Barrett referred to the agreement in respect of Macau. It is only an information exchange.

On double taxation treatments, the broad point that should be made is that they are designed to make sure that activity is only taxed once but that it is taxed. Double taxation treatment treaties allow Irish companies to have economic activity abroad on which they pay taxes here in Ireland. That is a very valuable element of double taxation treatment.

I will meet Christian Aid.

LinkedIn recently opened a 17,000 sq. m building in Dublin as the company's headquarters for Europe, the Middle East and Africa. The Taoiseach was present at the opening and said, "The Government is committed to maintaining our stable and competitive corporation tax regime, and our strong incentives for research and development, so we can continue to attract and retain inward investment and create high-quality jobs".

It appears that our corporation tax rate is not what is attractive for LinkedIn but, rather, our 73 double tax treaties. In March 2017, LinkedIn registered LinkedIn IP Holdings. The company is registered in Ireland, its place of business is an office in Valletta in Malta and the company's registered secretary is a Maltese national. It can, therefore, avail of the benefits of the double taxation treaty between Ireland and Malta even when the double Irish is finally phased out.

The Minister said he is not interested in a race to the bottom. I do not think he has had the time to read it yet, but I recently gave him The Darker Nations by Vijay Prashad. He will probably get to read it after the election during Christmas.

Maybe during Christmas.

It would give the Minister a global understanding of the impact tax arrangements, such as those in Ireland, can have on countries less well-off than ourselves. I again plead with the Minister to accept the amendment. We are seeking a six-month review, which is worth doing.

Amendment put:
The Dáil divided: Tá, 30; Níl, 49; Staon, 34.

  • Boyd Barrett, Richard.
  • Brady, John.
  • Broughan, Thomas P.
  • Burton, Joan.
  • Collins, Joan.
  • Connolly, Catherine.
  • Crowe, Seán.
  • Cullinane, David.
  • Daly, Clare.
  • Doherty, Pearse.
  • Ellis, Dessie.
  • Ferris, Martin.
  • Fitzmaurice, Michael.
  • Funchion, Kathleen.
  • Healy, Seamus.
  • Kenny, Martin.
  • McGrath, Mattie.
  • Martin, Catherine.
  • Mitchell, Denise.
  • Murphy, Paul.
  • Ó Caoláin, Caoimhghín.
  • Ó Snodaigh, Aengus.
  • O'Brien, Jonathan.
  • O'Reilly, Louise.
  • O'Sullivan, Maureen.
  • Penrose, Willie.
  • Quinlivan, Maurice.
  • Smith, Bríd.
  • Stanley, Brian.
  • Wallace, Mick.

Níl

  • Bailey, Maria.
  • Breen, Pat.
  • Brophy, Colm.
  • Burke, Peter.
  • Byrne, Catherine.
  • Canney, Seán.
  • Cannon, Ciarán.
  • Carey, Joe.
  • Corcoran Kennedy, Marcella.
  • Coveney, Simon.
  • D'Arcy, Michael.
  • Daly, Jim.
  • Deasy, John.
  • Deering, Pat.
  • Doherty, Regina.
  • Donohoe, Paschal.
  • Doyle, Andrew.
  • Durkan, Bernard J.
  • English, Damien.
  • Farrell, Alan.
  • Fitzgerald, Frances.
  • Fitzpatrick, Peter.
  • Griffin, Brendan.
  • Harris, Simon.
  • Harty, Michael.
  • Heydon, Martin.
  • Humphreys, Heather.
  • Kehoe, Paul.
  • Kenny, Enda.
  • Kyne, Seán.
  • McGrath, Finian.
  • McHugh, Joe.
  • McLoughlin, Tony.
  • Madigan, Josepha.
  • Mitchell O'Connor, Mary.
  • Murphy, Dara.
  • Murphy, Eoghan.
  • Naughten, Denis.
  • Naughton, Hildegarde.
  • Neville, Tom.
  • Noonan, Michael.
  • O'Connell, Kate.
  • O'Donovan, Patrick.
  • O'Dowd, Fergus.
  • Phelan, John Paul.
  • Ring, Michael.
  • Rock, Noel.
  • Ross, Shane.
  • Stanton, David.

Staon

  • Aylward, Bobby.
  • Brassil, John.
  • Browne, James.
  • Butler, Mary.
  • Byrne, Thomas.
  • Cahill, Jackie.
  • Calleary, Dara.
  • Casey, Pat.
  • Cassells, Shane.
  • Chambers, Jack.
  • Chambers, Lisa.
  • Collins, Niall.
  • Cowen, Barry.
  • Curran, John.
  • Donnelly, Stephen S.
  • Haughey, Seán.
  • Kelleher, Billy.
  • Lahart, John.
  • MacSharry, Marc.
  • McConalogue, Charlie.
  • McGrath, Michael.
  • McGuinness, John.
  • Moynihan, Aindrias.
  • Moynihan, Michael.
  • Murphy O'Mahony, Margaret.
  • Ó Cuív, Éamon.
  • O'Dea, Willie.
  • O'Keeffe, Kevin.
  • O'Rourke, Frank.
  • Rabbitte, Anne.
  • Scanlon, Eamon.
  • Smith, Brendan.
  • Smyth, Niamh.
  • Troy, Robert.
Tellers: Tá, Deputies Mick Wallace and Clare Daly; Níl, Deputies Joe McHugh and Tony McLoughlin.
Amendment declared lost.

I move amendment No. 44:

In page 41, between lines 35 and 36, to insert the following:

“Losses forward for financial institutions

25. The Minister shall within six months of the passing of this Act, prepare and lay before the Oireachtas a report on the potential impacts of restricting loss relief brought forward for financial institutions in Ireland.”.

This amendment was not discussed with amendment No. 42 but the subject matter is essentially the same and the Minister has committed to providing what he calls a technical paper. We are looking for a report but we will split the difference. The Minister stated the technical paper will be before the Committee on Finance, Public Expenditure and Reform, and Taoiseach by June and will examine the options and implications of restricting the loss relief carried forward by the banks. I will accept that assurance and withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments Nos. 45 and 46 are related and may be discussed together.

I move amendment No. 45:

In page 41, to delete line 39, and in page 42, to delete lines 1 to 4 and substitute the following:

“25. (1) Section 29 of the Principal Act is amended in subsection (1A)(c)(i) by inserting “or other assets (apart from relevant assets)” after “money”.”.

These amendments relate to sections 25 and 27 of the Bill as amended on Committee Stage. They were included in the Finance Bill to strengthen the existing capital gains tax anti-avoidance measures in sections 29 and 980 of the Taxes Consolidation Act 1997 in respect of the exclusion from the charge to capital gains tax for non-residents who dispose of shares or securities that derive their value from Irish land, provided they are quoted shares. However, following publication of the Bill it was pointed out that there are likely to be unintended consequences arising from these amendments as they affect bonds as well as shares. It has now been ascertained that they could impact negatively on some financial services activities because having a capital gains tax charge on debt is out of keeping with international norms. For this reason, paragraphs (a) of section 25(1) and section 27(1) of the Bill as amended on Committee Stage are being deleted. Given the issues raised and potential unintended impact, it was not possible to develop an appropriate solution in the time allowed. It was, therefore, considered more prudent to delete rather than amend the relevant provisions. The Department of Finance and the Revenue Commissioners will revisit the specific anti-avoidance issue with a view to it being considered for inclusion in the Finance Bill 2018.

It was very difficult to hear the Minister of State. I do not want him to repeat what he said but I ask him to clarify why the requirement in the original amendment, which is an anti-avoidance measure and stipulates that, for non-residents to get the capital gains tax exemption, shares had to be actively and substantially traded on a stock exchange, is being deleted and whether that weakens the Bill rather than strengthens it?

The focus of the amendment introduced in the Finance Bill was to prevent the exclusion for unquoted shares whose value is derived from land in this country applying where a company obtains a so-called soft listing. Gains in respect of sales of such shares by a non-resident person are not currently liable to capital gains tax. The words "actively and substantially traded" were included in the amendments in the Finance Bill to ensure that shares that are listed on a stock exchange but not actively traded, that is, where there is no change in the ownership of the shares, would not qualify for the exclusion in sections 29 and 980 for quoted shares.

Concerns were raised with Revenue that the proposed changes would have a negative impact on the ability of Irish banks and other financial institutions to securitise debt, issue covered bonds and raise finance generally. The term "shares" is limited to shares that are actively and substantially traded on a stock exchange. Section 29 and 980 of the Taxes Consolidation Act 1997 define shares as including stock or security. The view of Revenue is that loans secured on land and estates generally constitute an interest in land for the purposes of section 980 of the Taxes Consolidation Act 1997 and are regarded as securities for the purposes of that section. It was considered that bonds issued by securitisation companies backed by commercial and residential mortgages could be caught by the new provisions as they may not be actively traded. In addition, covered bonds are issued by Irish financial institutions and backed by Irish commercial and residential mortgages. It is unclear whether those bonds are traded in sufficient quantities to satisfy the "actively and substantially traded" test.

As regards bank debt, it is arguable that all Irish bank debt is backed by Irish property and Irish-secured debt. Such bank debt would previously not have been caught by sections 29 and 980 of the Taxes Consolidation Act 1997 as they are listed. Although the bonds are listed, trading in them is often infrequent as they are generally held as long-term investments.

As regards the reference by the Minister of State to securitised debt in respect of bonds, I am concerned in regard to financial companies and that, because mortgages are a form of debt, this could facilitate the securitisation of mortgages in a possibly very socially undesirable way. When this was first adopted in America, it led to sub-prime lending. I do not want to go over old ground but Members have not received the Minister of State's briefing notes and it is very difficult to absorb everything he reads out. In terms of unsecuritised debt, will that apply to venture funds and financial and banking companies and will it include mortgage debt such as that which Members are familiar with and concerned by? If so, I ask the Minister of State to outline what the implications will be.

It is impossible to figure out the consequences of the amendment. As I said, I noticed that the phrase "substantially traded on such stock exchange" was being deleted from the amendment, which is why I raised the issue, and now it has been pitched in that it is to do with securitisation and mortgage-backed securities and so on. The Deputy has spoken about what the former Minister for Finance, Deputy Noonan, said when we dealt with intellectual property being onshored and the impact that had. I ask the Minister of State that either he or his successor ensures that briefing notes on ministerial amendments to future finance Bills are circulated to Members before Report Stage begins.

I cannot give that commitment. As Deputy Doherty knows, I am the junior Minister in the Department of Finance.

On every occasion when we have raised the issue of reports during this Report Stage debate we have committed to trying to make sure each report is available in good time so the members of the Oireachtas Joint Committee on Finance, Public Expenditure and Reform or spokespersons will have the reports concluded and people can make a determination prior to the budget. I cannot give that commitment. It is not within my gift.

The amendment would have impacted on normal business activity. The Revenue Commissioners are saying to me, as the Minister of State with responsibility for financial services, that it is too big a risk to take. We think the right thing to do is to delete the sections and revisit this in the Finance Bill 2018. If anything is happening that is not as we would expect we can move more quickly.

It appears that if Deputies have not had sight of briefing documents in respect of amendments that the Minister of State is bringing forward which have not been considered on Committee Stage, it would be reasonable in future to have a brief available for Members. It certainly would allow matters to be considered here and maybe abbreviate the contributions that are necessary because Members have not been briefed in advance.

The Minister gave our committee a commitment that we would receive the notes of the matters raised on Committee Stage before Report Stage. I understand that they were being prepared during today but as of today I have not received them. I was told that during the course of today we would receive them. There are matters coming up in amendments that we asked about and we were told that the information would be made available. It is not good enough that as committee members who went through Committee Stage we still do not have those reports.

Amendment put and agreed to.

I move amendment No. 46:

In page 42, to delete lines 26 to 29 and substitute the following:

"27. (1) Section 980 of the Principal Act is amended by inserting the following after subsection (2):".

Amendment put and agreed to.

Amendments Nos. 47 and 71 are related and will be discussed together by agreement.

I move amendment No. 47:

In page 43, between lines 34 and 35, to insert the following:

"29. The Minister shall within six months of the passing of this Act, prepare and lay before the Oireachtas a report on the possible extension of the Capital Gains Tax Relief for farm restructuring to Stamp Duty.".

I welcome the Minister's amendment because we have sought progress on this issue. We highlighted to the Minister and the Department the existing section 604B, which gives relief from capital gains tax for farm restructuring. We made the case that it is logical to us that if a farm restructuring is being conducted and qualifies for capital gains tax relief there should be a corresponding or commensurate relief in respect of stamp duty. I acknowledge the work of Deputies McConalogue and Cahill on this issue. We welcome the Minister's amendment. It is real progress in that it will be a 1% rate of stamp duty where the purchase and sale meet the test of the farm restructuring, certified by Teagasc and so on, in terms of the conditions that normally apply to the existing 604B relief.

I concur with Deputy Michael McGrath. We looked for this concession because if a farmer qualified for capital gains exemption it made no sense to be paying stamp duty at the higher rate.

The land structure in this country is unique in that over 70% of farms are fragmented. For viability in the future consolidation has to be welcomed and encouraged, if at all possible. This capital gains exemption was brought in several years ago where farmers were selling a portion of their farms and could prove to Teagasc that it was for the purpose of consolidation because they were purchasing land nearer the main farm holding. This amendment is welcome and will help the viability of farming in the future. We welcome the amendment.

I too welcome this amendment and commend Deputies Michael McGrath, McConalogue and Cahill. I thank the Government for facilitating this too.

We all know how invaluable the agricultural sector is to this economy and that farms need to grow to sustain their produce. It is important that they are allowed to progress. Farming is modernising every day without the hindrance of further taxes. It was the first sector the previous Government depended on to revive the economy when it came to power in 2011. A couple of years later there was volatility when farmers came under pressure with the drop in prices. Anything that helps them progress, develop and modernise has to be welcomed. I thank my party for pushing this agenda.

I welcome the proposal on the stamp duty consolidation relief for farmers because if a farm is scattered over a wide area it is much more difficult to operate the enterprise. Only once in a lifetime will the neighbouring farm come up for sale and give the farmer the opportunity to consolidate the holding and pull it together. The capital gains tax relief exists for someone selling the outside farm to buy the nearby land. It makes sense to have something similar for stamp duty. It is even more important with the proposed increase in stamp duty. Great credit is due to the phenomenal work that Deputies McGrath, McConalogue and Cahill have been doing to push this forward. We definitely need to see it progress.

I concur with my party colleagues about the importance and rationality of this amendment. When the budget was published, several issues arose about the stamp duty increase, in particular the inconsistency and lack of logic in applying a higher level of stamp duty to land consolidation movements and transactions when at the same time there was a capital gains tax relief. It did not make sense.

My colleague Deputy Cahill was to the fore from the outset in identifying that inconsistency and pushing this matter. I commend Deputy Michael McGrath who, with Deputy Cahill and me, met Department officials to highlight that. I commend the Minister of State and the Minister for seeing the rationale behind this, changing and amending it. With such fragmentation in our farming units it makes sense to try, through the taxation system, to facilitate the consolidation of farms into more united units to promote more efficient farming. This measure will assist in that.

Deputy Mattie McGrath and I put down an amendment on Committee Stage to highlight this problem and said that many farms were fragmented. In fairness to the Minister he asked us to withdraw the amendment and said that he would table an amendment on Report Stage and I acknowledge what he has done because this is very important for the farming community. I hope that people who are interested in farming, when other amendments come forward such as keeping the stamp duty for agriculture, will be as enthusiastic and make sure we get what is needed for the farming community across the country.

It was necessary. It might have been an oversight, but we put down an amendment and the Minister said he would sort it. I commend him on doing so.

I also welcome this move and, as Deputy Fitzmaurice has done, compliment Deputy Michael McGrath, along with his colleagues, Deputies Cahill and McConalogue, for pursuing this. We had this amendment before the finance committee and debated it with both Ministers, and the Minister, Deputy Donohoe, said he would consider it. It now has been dealt with and that is very welcome. The Minister of State is familiar with farming in Wexford where there is fairly good land, and similarly in my own area, but there are many farms which are very fragmented.

I also thank the Minister, Deputy Ross, for withdrawing the statutory instrument on tractors travelling on the roads. It has gone through officially today. Tractors have to travel on roads because farms are fragmented. We do not all have grey Fergusons and Fordson Dextas. We have modern tractors which can carry proper, safe loads and which have safe breaking systems which travel fast. I am not saying they should travel at a fast speed, but common sense needs to prevail. Farms are fragmented and have been since the days of the Land Commission and the division of the big estates. A great job was done then but unfortunately the smaller landholdings are being amalgamated into big estates once again, but in a different guise. That is a matter for a different amendment, and in my county especially no one can get a bloody patch of land apart from one business. It is very necessary because farms, farm families and farm enterprises are under enough pressure without this and everything else that is coming down the line. The change is welcome and will benefit the agriculture industry.

Deputy Michael McGrath has proposed that I prepare a report within six months of the passing of this Finance Bill on the possible extension of the capital gains tax relief for farm restructuring to stamp duty. He stated on Committee Stage that, while he had framed his amendment in the form of a report, he hoped there could be a Report Stage amendment that would put into effect a stamp duty relief.

This matter of a stamp duty relief for farm consolidation was also raised by Deputies Fitzmaurice and Mattie McGrath on Committee Stage where I indicated my intention to bring forward an amendment on Report Stage. At the time, I was not in a position to give a commitment as to the form that relief might take.

I have since examined the matter and am guided in bringing forward my amendment by a previous stamp duty relief that applied and by the capital gains tax relief that currently applies.

My amendment will allow a farmer to claim relief from stamp duty where he or she both sells and purchases land for the purposes of consolidating an existing farm holding. For the relief to operate, there must be both a sale and a purchase of land within a period of 24 months. Where other qualifying conditions are satisfied, stamp duty will be paid only to the extent that the value of the land that is purchased exceeds the value of the land that is sold. A reduced rate of 1% will be charged on the excess, if any, of the purchase value. If the sale takes place before the purchase, relief will be given at the time of purchase. However, if the purchase takes place first, stamp duty will have to be paid but can subsequently be refunded when the sale takes place.

When the stamp duty relief previously applied, a maximum period of 18 months was allowed between a purchase and a sale. I am increasing this period to 24 months in line with the capital gains tax relief. The rate of stamp duty that previously applied in relation to the relief was the standard rate. The standard rate is now 6% but I have decided to apply a lower rate of 1%.

A number of qualifying conditions must be satisfied before the relief can apply. The most important condition is that Teagasc must issue a certificate stating that a sale and purchase or an exchange of farmland was made for farm consolidation purposes. This is the certificate that is currently required in relation to the capital gains tax relief. The criteria to be used by Teagasc for this purpose and the information to be supplied to Teagasc are contained in guidelines published by the Minister for Agriculture, Food and the Marine.

A purchaser of farmland must retain ownership of the farmland for a period of five years and must use the land for farming. Where any part of the land is disposed of before the end of this five-year holding period, the stamp duty relieved can be subsequently recovered by Revenue, or partly recovered as appropriate. The relief will apply in relation to instruments conveying or transferring land that are executed on or after 1 January 2018 and on or before 31 December 2020. Because I will need to seek state aid approval for this relief from the EU Commission, I have to make the commencement of the new provisions subject to a ministerial order that will be made when such approval is obtained.

I trust that my proposed amendment will address the concerns that motivated Deputy Michael McGrath to propose his own amendment. In view of the nature of my amendment, I do not propose to accept his amendment and agree to the preparation of a report on a stamp duty relief for farm restructuring.

Amendment, by leave, withdrawn.

I move amendment No. 48:

In page 46, to delete lines 36 to 40, and in page 47, to delete lines 1 and 2 and substitute the following:

31. (1) Section 613 of the Principal Act is amended—

(a) in subsection (1) by inserting the following after paragraph (c):

“(ca) any sum obtained by means of compensation under the 2017 Voluntary Homeowners Relocation Scheme administered by the Commissioners of Public Works in Ireland under section 2 of the Commissioners of Public Works (Functions and Powers) Act 1996;”

and

(b) in subsection (7) by inserting the following after paragraph (a):

“(aa) No chargeable gain shall arise on a disposal of land (including a right of turbary) to the Minister referred to in paragraph (a) where that land has been acquired by that Minister for the purposes of granting a right of turbary to an individual who—

(i) is entitled to compensation under the scheme referred to in paragraph (a), and

(ii) enters into an agreement with that Minister in respect of that land (or any estate, right or interest in or over that land).”.”.

Amendment agreed to.

Amendment No. 49 is out of order.

Amendment No. 49 not moved.

I move amendment No. 50:

In page 47, after line 35, to insert the following:

“34. The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report regarding the reduction in the qualifying period from 7 years to 4 years for the Capital Gains Tax exemption available under section 604A of the Tax Consolidation Act and the proposal to limit the reduction in the qualifying period to land only.”.

We discussed this on Committee Stage, and I bring forward the same amendment here. I have serious concern about what the Minister is doing with the seven year exemption on capital gains tax. Given the housing crisis, I am open to the idea in terms of land, and development land particularly, but I have serious concern that the Minister is now proposing to give a capital gains tax exemption for buildings, including multi-million euro hotels and office blocks bought in Dublin that were planned to be sold next year and that will now not have to pay 33% capital gains tax on the uplift of the profits. That is why I have put down this amendment. I will not push it but I ask the Minister, his Department and the Revenue Commissioners especially to keep a close eye on this and monitor the tax foregone as a result of bringing forward this threshold on properties rather than land which has the potential to be developed.

Before moving on to address this amendment, I must provide the following clarification to the House.

On 9 November, the Select Committee on Finance, Public Expenditure and Reform and the Taoiseach considered section 28 of Finance Bill, 2017 as published. As part of that process, there was discussion on an amendment to section 28 of the Bill as it then stood which had been put forward by Deputy Doherty. When reviewing the record of the debate, officials became aware that the advice that was provided to me during the debate in respect of legal advice received from the Attorney General’s Office was incorrect in that it conveyed a misunderstanding of the advice given by that office. This caused me to make what I now understand was an incorrect statement, that is, that I received legal advice from the Attorney General’s Office to the effect that it was not legally possible to exclude buildings from the scope of the exemption provided for in the Finance Bill.

While legal advice had been received from the Attorney General’s Office in relation to the existing relief in section 604A, that advice did not indicate that it would not be legally possible to exclude buildings from the scope of the exemption provided for in the Finance Bill.

Having clarified the position, I will now turn to amendment No. 50 in the name of Deputy Doherty. His amendment seeks a report to be prepared on the reduction in the holding period from seven years to four years within six months of the passing of the Act. As has been indicated in the past, in replies to a number of parliamentary questions, there is no information available on the number of properties purchased during the qualifying period. It is unlikely to be possible to ascertain the number of persons who will avail of the relief in the six-month period after the Bill is signed into law, and it is not clear as to the basis for such a report.

The Deputy’s amendment also raises the issue of limiting the reduction in the qualifying relief to land only. A number of reasons give rise to the requirement that in amending section 604A that buildings should not be separated from land. While it is likely that free standing buildings can be defined and determined in law, that is, a building with some minor curtilage attached and land can also be defined, a difficulty can arise where buildings and land occupy the same site.

The effect of Deputy Doherty’s proposal would be to require that, where land and buildings occupy the same site, they would have to be treated separately for the purposes of this relief. The land could now benefit from the CGT relief as amended but any building on that land would not qualify until it has been in ownership for the full seven-year period. It is likely that land and buildings sharing the same site have been purchased as one lot. It is also likely that owners want to dispose of such land and buildings as a package rather than separately. It may be that there are more buildings than empty land on specific sites and the reverse on other sites. It would be difficult for sellers and, indeed, purchasers to value the land where there is a different timing of the tax treatment between the land and buildings on one site. Different tax structures for buildings and land can raise complex issues with respect to the allocation of value between the two because disposals usually reflect transactions in which the land and the structures on it are disposed of as a unit. The different treatment would be likely to impact on the possible disposal and the value of such property where there was both land and buildings on it.

As the CGT relief applies across all the European Economic Area, to exclude buildings from the scope of the exemption introduced in the Finance Bill 2017 would be problematic, particularly given the difficulty of verifying the accuracy of the information provided by taxpayers. That difficulty is mitigated by having land and buildings included as part of the change to the relief, which gives rise to no definitional problems. The provisions of the Interpretation Act, which defines the term "land" as including houses and buildings on land, would also make limiting the scope of the amendment to land more complex. There is, in this context, a concern that while a definition of buildings was possible it may not be possible to adequately define all buildings so as to make a clear distinction between land and buildings in all cases. In addition, with urban areas being most in need of increased housing stock and some of the best located potential urban development land being on brownfield sites occupied to some degree by buildings, excluding them from the scope of the amended relief would potentially serve to exclude some of the land most suited to development in urban areas. Including land and buildings in the amendment links to the policy on the increase in vacant site levy to 7% from 1 January 2019 which is intended to encourage owners of properties to develop vacant sites or buildings not in use. Not including buildings in the CGT exemption, as is being suggested, could hinder the success of this policy.

It is worth noting that this exemption was introduced at the same time as the reduction in the rate of stamp duty for commercial property. In deciding to make this change to the CGT relief, I also considered it appropriate to make the change to the stamp duty treatment of commercial property. Ultimately, it is necessary to end reliefs when they are considered to have achieved their objective rather than prolonging their life unnecessarily. The issue now is the timing of revenue foregone. It is worth noting that with all schemes such as this there will be dead weight and with a general provision such as this it is difficult to avoid. The price of improving the operation of the property market is the relief on the gain made. The state of the economy when this relief was introduced in the 2012 budget is different to the position at present.

The proposed change by Deputy Doherty would only alter the timing of the relief and not whether the relief would apply. Businesses or individuals who can benefit from the relief are likely to take the availability of the relief into consideration in any decision they make on the disposal of their property. A separate treatment of land for the purposes of the CGT exemption could give rise to issues of valuation and possible legal uncertainty. It would also be contrary to the policy aim of getting land and buildings into the market. The proposed change would at best only alter the timing of the relief and not whether the relief would apply. Sellers will clearly take the existence of the relief into account in any decision they make on the disposal of their land or buildings. For the reasons I have outlined, I cannot accept this amendment. I am glad to have had the opportunity to amend the record of the House.

I support the amendment. The Minister has summed up the complete bind of the Government to a free-market approach to resolving the housing crisis. The Minister accepts that there is a dead weight and a bunch of speculators who will not have to pay tax that they otherwise would have paid but takes the attitude we can do nothing about it if we want to release land onto the markets in order that homes can be built on it. However, if the Government had that money, it could use it to build homes directly. That would be a far more direct way of doing it rather than throwing tax expenditures at a very small number of people at the top of our society and hoping it filters down in the form of increased house building. The change by the Government is an admission. Although we did not hear it from the Minister, it is an admission that this Fine Gael policy contributed to massive land hoarding and the housing crisis. The reason for it was to stop vulture funds flipping properties quickly and, therefore, showing up the fire sale that had been pursued by NAMA and what a good deal they had got at the expense of the public.

I do not think the change from seven years to four years resolves the issue, however. I agree that it can mean for some that they will sell ahead of when they otherwise would have sold. However, if they hang on for seven years, they can still have the benefit of the exemption. They can continue to hang on for seven, eight, nine or ten years and get the benefit of the exemption. If I recall correctly, in the budgetary documents a cost of zero is outlined alongside this measure. That just cannot be accurate. As the Minister stated, at the very least there is some dead weight involved. At the very least there are people who plan to sell buildings or land next year. They were going to swallow the cost of the capital gains tax but now will still sell but will not pay the tax, and the public will lose out as a consequence.

The change since Committee Stage in the Minister's response about whether there is a legal impediment to this differentiation seems to me to be significant. It is fair enough that the formulation of "land" may be imprecise because property is built on land. However, is it not possible to come up with a legal definition of vacant land? That is land that has nothing built on it. That is the only place the argument can be made about whether there is an incentive to get building land onto the market. Is it not possible to come up with such a definition and therefore limit the benefit of this tax expenditure to those parcels of land which may actually provide new housing?

I thank the Minister for correcting the point that was made at the select committee. It probably just adds to the argument I was making about the need to split up "land" and "buildings". What I heard from the Minister were a lot of challenges but no reason it cannot be done. My point is that this is not just a matter of timing. Commercial buildings in Dublin will be sold next year for other reasons relating to the portfolio or the need to reinvest money, etc. Those buildings will be sold and it will have been planned to pay 33% CGT on the capital gains. As a result of this amendment, those concerned will now walk away without paying that tax. That is huge. It is absolutely huge. We are talking about buildings that were bought in or about 2012 and are being sold in 2017 and 2018. In some cases, there will have been a 100% uplift. It is a massive amount of money. I do not want a report. We can forget about that. What I want is for the Government to carve out those types of commercial buildings and to ensure that land is released for development purposes, which is what we really want.

On the issue of the definition of "buildings" and "land" and so on, the hotel and the car park might not be deemed "land" but there might be land at the back of the hotel, etc.

All of those issues can be resolved. If there had been willingness, those issues could have been resolved. Maybe it is too late given the late stage we are at in dealing with the Finance Bill. I must flag, however, that the approach being taken is wrong. The Department, through a direction from the Minister, should have stipulated that the CGT four-year exemption should only have been for land. As with the I-RES, we were able to create a whole new definition of companies that hold property. We could have done the same thing for those assets that would comprise land alone. That is my main concern. That is why I want a report and monitoring. I want to see the impact of somebody selling a hotel. We do not see the impact but people will seriously benefit from my amendment financially.

I will most certainly be monitoring the impact of this change because it is an important policy change. Unlike Deputy Paul Murphy, I believe in the value of a mixed economy.

There is not much mix, is there?

There is a mixed economy. Next year, we will see both public and private housing delivered, although we need more supply.

I believe in ensuring we have the right policies in place at each point in the development of the housing market. This is why the change is the right one to make. It has the objective of trying to increase supply. I have explained to Deputy Doherty why we cannot separate the definitions of "land" and "building". It is not a matter of there being no will. Significant issues arise in respect of separating the definitions. If I were to try to make the separation, it could actually undermine the implementation of this policy. I expect the policy to have a material effect next year. As I said, I will most certainly be monitoring its impact in 2018.

I want to pursue this issue but it is important that the Department and the Minister carry out monitoring. I hope the Minister will be able to provide us, through the Revenue Commissioners, with some type of report or data, even if not complete, that would be sent to the finance committee or budgetary oversight committee in advance of next year’s budget to give us some indications or trends. Thus, there would be more than just a ministerial assessment of this measure.

Amendment put and declared lost.
Debate adjourned.