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Dáil Éireann debate -
Wednesday, 16 Dec 2020

Vol. 1002 No. 6

Investment Limited Partnerships (Amendment) Bill 2020 [Seanad]: Report and Final Stages

Bill reported without amendment and received for final consideration.
Question proposed: "That the Bill do now pass."

As with many of the things we are dealing with in this final week - we had discussions about the complexity of the previous Bill and the multiple issues introduced, some of them at the last minute - it is worth noting that this Bill deals with a significant matter relating to the financial vehicles through which the Irish and global super-rich get even richer. This very significant Bill being dealt with on the second last day of the Dáil in the dead of night effectively focuses on the enormous investment funds and one of the particular vehicles through which these enormous funds are invested in order to make money for very rich people indeed.

The scale of investment funds that are domiciled and administered in this country is staggering. At €4.9 trillion, it is an astonishing amount of money. Based on what I have read, the Bill was written by the investment fund industry. It is to facilitate the investment funds. While the Minister of State might say that the issues about beneficial ownership, in other words, finding out who the key investors in these investment funds are, is a progressive move creating greater transparency about who owns these funds, there is a threshold of 25% of the fund for the beneficial ownership register. As I understand it, we will not have full transparency about who many of the investors in these funds are because most investors in these funds will be below this threshold as they tend to have multiple investors with smaller percentages than that.

When the Bill went through the Seanad, Senator Higgins pointed out her concerns that the Bill might fail to align with objectives of the base erosion and profit shifting, BEPS, process. That base erosion and profit shifting leads to an enormous leakage of what should be taxable profits for different states because they operate through these multinational investment vehicles, often quite opaque vehicles in which nobody really knows who the investors are and there is very little oversight of these matters. Through various mechanisms, these funds pay very little tax. Our Government proactively facilitates this through various tax measures. Through legislation like this, it tries to encourage this type of investment here which is often effectively a way for the rich to launder their money, avoid tax and make more money.

It is worth flagging that because most people do not know about these things. When we say that there should be more money for Debenhams workers, for the health services or to pay student nurses, the Taoiseach often accuses us of economic fantasy, but it is precisely when we look at these areas, which often few people even know about, that we find these opaque financial vehicles the administration of which is located just down the road here in the Irish Financial Services Centre, where trillions of euro are washing through with very little tax paid. It is important to remark on that fact.

In that regard, it is worth noting that the Bill was introduced by Michael D'Arcy when he was a Fine Gael Minister of State. Shortly afterwards he went off to work with the body that lobbies on behalf of these investment funds, which was rightly remarked on as completely inappropriate. Despite the seriousness and the scale of money movement that will be facilitated by the Bill, pre-legislative scrutiny was waived at the request of Michael D'Arcy. After being the Minister of State who sponsored the legislation, he then went off to become a lobbyist for the very industry that will benefit from and which is promoting the sorts of measures that are contained in the Bill.

For years, successive governments have being promising to legislate to implement the recommendations of the Duffy Cahill report and to legislate to change the priority creditors to prevent a recurrence of what happened with Clerys, Vita Cortex and so on, but here we are with Debenhams, and strangely none of that has been done.

It has been mentioned and there are promises in the programme for Government, but it has not been done. This aspect has been done and got into legislation on the last night before Christmas. This is a priority. I refer to the legal mechanisms to facilitate more speculation for profit by super wealthy global investors.

I certainly have significant concerns regarding this endeavour. Frankly, I do not even fully understand these opaque instruments which are being used. Invariably, however, when we look at things such as section 110, and other similar aspects, such as Irish collective asset management vehicles, ICAVs, these are things touted by big accountancy firms as a means through which the rich can invest their money and pay little in tax because of loopholes provided in this country. It is important to remark upon that concern and to try to ring the alarm bells in that respect, although I am sure that at this deathly hour no journalists, or anybody else, will be watching. Nonetheless, for the record, it is important to signal that this is the dark financial side of how the system really works.

Ag an uair mhall seo den oíche, ba mhaith liom cúpla focal a rá fá dtaobh den Bhile fíortheicniúil seo, atá á phlé ag an earnáil seo le tamall maith. Cuireann sé iontas orm go bhfuil an reachtaíocht seo istigh i gclár oibre an Rialtais - ní hamháin an Rialtas seo, ach an Rialtas a chuaigh thart fosta. Tá a fhios againn gur tháinig an Bille seo os comhair na Tithe seo in 2019, agus thug an Rialtas úr an Bille isteach arís i mbliana.

Caithfear a rá go bhfuil go leor conspóide fá dtaobh den reachtaíocht seo. Nuair a bhí an tAire Stáit ag cur an Bille seo fríd Tithe an Oireachtais, go háirithe sa Seanad, agus ag labhairt faoin gá leis an Bhille seo ó thaobh earnáil na funds, ní raibh aon Seanadóir - nó aon duine sa Teach seo, go bhfios dom - ar an eolas go raibh sé réidh leis an Oireachtas a fhágáil agus go raibh sé chun dul i mbun oibre do na funds céanna mar CEO. Cuireann sé imní orm go raibh Seanadóir, a bhí mar Aire Stáit trí mhí roimhe sin, ag caint ar an reachtaíocht seo mar Sheanadóir agus nár chuir sé in iúl d'aon duine go mbeadh sé ag obair ar son an earnáil seo taobh istigh de sheachtain. Sílim nach bhfuil sé sin ceart ná cóir. Tá rialacha faoi leith againn i ndlíthe na tíre seo le cosaint a dhéanamh orainn sa chomhthéacs sin.

As I said, this Bill has been a long time in the making and it is definitely a burning priority for this Government, and not just for this Government but also for the previous Government. Despite all the major social challenges we have faced in recent years, this is the Bill which has made it to the front of the queue, not only in respect of the last Government but also of this one. I apologise, because I obviously missed the large demonstrations and protests outside the front of Leinster House by the funds industry, its managers, spokespersons and lobbyists. I also obviously also missed the large petitions, letters to the newspapers and concerns which were expressed in this regard, as well as the other campaigns on this issue. Perhaps, then again, I did not miss much of that, because we know that the Minister of State who was sponsoring this Bill in the last Government, ended up becoming the chief lobbyist for the funds industry, which this Bill will benefit, within three months of leaving office. It is unfortunate that this Bill going through the House tonight has been caught up in that type of controversy. It was completely inappropriate for that to happen.

Having said that, and to reiterate, I refer the Minister again to the example of the Governor of the Central Bank writing to the Minister for Finance in 2015. In that letter, it was stated that insurance companies, and senior officials in those companies, had provided deliberate false information to the Central Bank, but that it was not in a position to hold those companies and officials responsible to account because there was a lacuna in the law at that time. The Governor of the Central Bank asked for that law to be fixed. Five years later, that issue has not got to the top of the queue, the lacuna still exists and insurance companies are still lying to the Central Bank, the Government and, indeed, to consumers. The funds industry, however, has clear access to the corridors of power and to the ears of those who need to be told what to do and the priorities they must have.

We raised several issues regarding this legislation when it was going through the Dáil in 2019. One of our key concerns was in respect of beneficial ownership. I acknowledge that that issue is being addressed in this legislation, and it is welcome that these provisions are now in place in the second incarnation of this legislation. I will not go through the history of this area, as I spoke on Second Stage regarding the background to the funds industry. We appreciate that this industry creates substantial employment in this State.

Some sections of this 2020 Bill contain more detailed provisions than the original 2019 Bill, most notably, as I said, in respect of beneficial ownership. The Bill extends anti-money laundering beneficial ownership requirements to investment limited partnerships and to common contractual funds, and that is something which we argued for at that time. Now that this Bill has been disposed of, perhaps some attention might be focused, some three years later, this very month I believe, on the request from the Central Bank that individual senior bankers be held to account through a senior executive accountability regime, a regime which has existed in Britain for many years. Three years later, that has still not got to the top of the legislative queue. It still has not got the priority which would cause the Government to legislate for it, despite the fact that during those three years which have passed, we have found out that nearly every bank which sold a tracker mortgage in this State was ripping off its customers and basically stealing money from their accounts through overcharging them in the interest rate which those banks were legally entitled to charge. The cost of that rip-off was €1 billion. It was the biggest theft in the history of the State. Some 99 family homes were lost, as well as many private buy-to-let homes. Great misery was caused to those families. I have spoken to many of them about issues of mental health and family and marital break-ups. All of that has been a part of the tracker mortgage story and the tracker mortgage scandal. Despite all of the misery which was caused, however, the legislation the Central Bank sought has still not even been published by the Government. Nobody has lost their job, nobody has been held to account and the Central Bank has still not been given the tools it requested three years ago to ensure that it could hold individual bankers to account.

I refer to bankers such as those in KBC. The Central Bank announced it was issuing one of its largest ever fines against KBC. Despite KBC being instructed by the Central Bank to stop the harm it was inflicting on its consumers, it became clear to us and the public that KBC had continued to inflict that harm all through the tracker mortgage examination. That was not all, however, because KBC also continued to repossess the family homes of people who should not have lost them in the first place. I will leave it at that. I reiterate that this Bill is a better reincarnation of the one that came before it. It is technical.

My major point, however, concerns the priorities of the Government. There are many burning issues which I would rather be discussing. The last point I will raise concerns legislation which I tabled two years this month. In fairness, the Minister, despite opposition from Fine Gael at that time, supported that legislation to reduce the rate which moneylenders could charge in this State. Legally, they are entitled to charge up to 187% of APR and nearly another 100% interest in respect of collection fees.

That needs to be dealt with. I am sure that the Minister, in his support for that legislation, will also support it as it goes through the committee process in the coming weeks and months.

It is very late. If there are people at home who may be watching this debate at this hour of the night, I, too, am concerned about the priorities of this Government and successive Governments and the lack of legislation around banking. It is the Wild West out there as far as the banking sector goes. They banks can do what they like, and have done what they like and got away with it. Other legislation that is badly needed has not been brought forward. A former of Minister of State, who was pushing for this legislation, is now working for the banks, as is another former Minister of State, Brian Hayes. There should be a moratorium and a space of at least five years between people leaving Government and becoming gamekeeper turned poacher or poacher turned gamekeeper. It is horrible. We are where we are. That says it all. If it was 1 April that would say something.

This morning the Taoiseach told the House that we did not bail out the banks. That is something I voted for and I have apologised for it so many times. It is the biggest mistake I made in my life. Now, we find we did not bail them out at all. It was just our imagination that we bailed them out. We are paying back €6 billion a year. I do not know why we are paying it back. It is very strange.

I will allow Deputy Gould in but I need to be fair to the Minister of State, Deputy Fleming, and let him in.

I will be brief in speaking to this Bill and the priorities of this Government, in particular the priorities of Fianna Fáil and Fine Gael and, unbelievably, the Green Party. Today, the workers of Debenhams have been 251 days on picket lines. Nine years ago, Vita Cortex workers engaged in a sit-in for 131 days to get a fair redundancy. At that time, Fianna Fáil and Fine Gael told the Vita Cortex workers, "This will never happen again". Nine years later, Debenhams workers are being shafted because Fianna Fáil and Fine Gael will not bring in legislation yet we are here now at midnight discussing legislation for speculators, fund managers, the rich and the mega wealthy. What about the workers? What about the Debenhams workers and all of the other workers for whom Fianna Fáil and Fine Gael have done nothing?

Earlier today, the Taoiseach said that we did not bail out the banks. I do not know where he got that from. Maybe I have been on a different planet for years. Fianna Fáil and Fine Gael bailed out the banks but they never bail out the people. Ordinary people are struggling, especially now more than at any other time. It is about time that the Government brought forward legislation that makes a difference to ordinary people, makes their lives better, makes their families' lives better and makes our country better.

I welcome the opportunity to speak on this Bill and I thank the Deputies for their contributions to this Stage of the debate.

I want to put a few points on the record. I agree with Deputy Doherty that this legislation has improved from its original iteration in the previous Dáil in that there are greater procedures in place to identify the beneficial owners. Other than that, I disagree with everything that has been said in the past 20 minutes. It was said that this legislation is being rushed through the Oireachtas at a late hour. I want to inform Deputies who may not have been following what has been going on in regard to this legislation that this is the seventh session I have had in the Oireachtas on this legislation. I took it through Second Stage in the Seanad and on at least three occasions on Committee Stage, followed by Report and Final Stages. The Bill also went through Second Stage and Committee Stage in this House and we are here tonight dealing with Report and Final Stages. This is the seventh occasion in the past two months this Bill has been before the Houses of the Oireachtas. It is no way being rushed. This is the final leg.

I will now address the inaccurate, unfair and untrue statements about this legislation being a reflection of the Government's priorities. I want to tell the House about the Government's priority in regard to the legislation I have been dealing with directly since taking up office a few short months ago. In the past three months, in terms of the priority of the Department of Finance when it comes to legislation, the Bill was last in the queue before the Christmas recess. When I came into this office in July we dealt with the July stimulus package, which allowed people to access the emergency wage subsidy scheme, which followed on from the temporary wage subsidy scheme. Since September the Oireachtas has passed the following legislation from the Department of Finance, for which I have direct responsibility, namely, the Brexit legislation, which dealt with customs, VAT and taxes and the Finance Bill 2020, which concluded its passage earlier today in the Seanad, and introduced and put on a statutory footing the Covid restrictions subsidy scheme, CRSS, to help small businesses. That was our priority, in addition to the priority around the introduction of the emergency wage subsidy scheme. I also brought through the legislation dealing with the Credit Union Restructuring Board, which was an old organisation that reflected the difficulties the credit unions had in previous times and is no longer necessary. We dealt with that legislation here in recent weeks as well.

In the past couple of weeks, and as late as last Friday afternoon, we dealt with the Finance (Miscellaneous Provisions) Bill 2020, which dealt with allowing the credit unions to postpone their AGMs because of the Covid situation and provide for virtual AGMs where a local credit union wishes to do that. That legislation also makes special provision for the Minister for Finance to borrow funding for the first time ever directly from the EU to pay for the emergency wage subsidy scheme and the temporary wage subsidy scheme, which is all about people who are working in Ireland. Of the six Bills that I have been dealing with since I came into office, this is the only one that deals with the investment fund. Lest people forget it - they might not like to hear this - there are 50,000 people working in the financial services sector in Ireland and they are not all just down the road from here. Many of them are in major provincial towns around the country. If there are people here who have a problem with those 50,000 people being employed in that sector and they want to pick off those 50,000 people, they are free to do so but I will not have any hand, act or part in that.

On this legislation, it was the decision of the Joint Committee on Finance, Public Expenditure and Reform, and the Taoiseach that it not undergo pre-legislative scrutiny. There was no request from any Minister in that regard: that was the decision of the committee. On the comment that this is an opaque instrument, it is not opaque because we are passing in on the floor of the Oireachtas. As I said, this is the seventh or eighth time in the past two months this legislation has been discussed on the floor of the Houses of the Oireachtas. Nothing could be more open or more transparent. There are stronger provisions in this legislation in regard to establishing the identity of the beneficial owners behind these investments than are in place in any other country in Europe. In addition, everything in this legislation is in line with, and superior to, the anti-money laundering legislation that exists at European level. The Central Bank of Ireland is the regulator. None of these companies can conduct any business without prior approval from the Irish regulator, which is the Central Bank. It closely monitors this area. The Central Bank is deemed to be a strict regulator when compared to how countries across the globe and other EU economies regulate these funds.

All-in-all, this is important legislation. I accept it is being taken at a late hour but that is because of the amount of time spent on other Stages in the Dáil and the Seanad. We arrived here with good legislation. This legislation is so good that no Deputy from the Opposition felt the need to table any amendments to it. To me, that is an endorsement of this legislation and how it has been processed. I am not yielding on this issue. If amendments had been tabled to this legislation, we would not be dealing with it at this late hour. Following on from all of the discussion on various Stages in the Dáil, Seanad and committee, everyone was satisfied. Senator Higgins's point in regard to transparency was mentioned. Those who want to invest in any of the funds that come under this legislation must produce their PPS number before they can become an investor and if they are from outside the State, they must produce their passports.

There is, therefore, no question of fictitious people being able to invest in this fund. They will not get approval by the Central Bank unless they can prove who they are.

The issue of beneficial owners was mentioned. Every investor has to declare himself or herself and the investors have to be known. However, an investor can be deemed a beneficial owner if he or she invests more than 25%, or if he or she has much less than 25% but is deemed to be in a position of control of a particular fund even though nominally he or she might not have 25%.

This legislation is very strict and thorough. It has followed one of the most detailed scrutinies we have had through this Oireachtas in the past few months. It has been on the floor of the Oireachtas seven or eight times. Anyone who suggests we are rushing it through at a midnight hour has not been paying attention to what has been going on during the other seven debates up to now. If, after Committee Stage, the Bill required a lot of amendments, I would have been happy to leave this over until the new year. If people had indicated that there was much yet to discuss, had tabled amendments and wanted amendments discussed on Report Stage, I would have been very happy to postpone the Bill. When it was clear to me, having gone through those other seven discussions in the Oireachtas, that no further amendments or suggestions of improvements were coming through from any member of the Opposition, I made the reasonable assumption that there was a reasonable level of satisfaction with the legislation. That is why we are moving it here in a relatively short period. Essentially, all the issues have been well-ventilated, well-discussed, well-explained and well-understood by the Members who contributed in those debates over the past two months.

This legislation is an important step to maintain Ireland's place as the leading funds domicile in Europe. It fulfils a commitment in the programme for Government to progress the revision of the investment limited partnerships structure, which has been on the Statute Book for a number of years. This is an effort to improve the legislation that is already there and it will allow the Irish financial services sector to compete for some of the global private equity market that, to date, has chosen other European or global locations to base such investment funds. The anti-money laundering provisions and the common contractual funds contained in this Bill will make Ireland one of the most fit for purpose of any funds scheme operating in Europe. The Central Bank says it will implement this strictly and I will hold it to that. Other Deputies have said the Central Bank has not always done what it should do but this legislation is particularly strong in that people will have to prove who they are before they can invest.

It is good for Ireland that we can approach this legislation with proper controls in place to facilitate and hopefully increase employment in the financial services sector, above the 50,000 or so who already work in it. If Deputies have a problem with people working in the sector, that is their problem but I do not think the people employed in that sector would appreciate that. All in all, it is good legislation. It has been thoroughly debated through the Houses of the Oireachtas over the past two months and I commend it to the House.

Question put and agreed to.

A message will be sent to the Seanad acquainting it accordingly.