Finance Bill 2010: Committee Stage (Resumed).

NEW SECTION.

I move amendment No. 79:

In page 147, before section 112, to insert the following new section:

112.—The Minister shall by regulations, based on the anticipated level of additional VAT income resulting from the application of VAT to public authorities, provide for a corresponding reduction in VAT on meals in restaurants and similar establishments and on hotel and similar accommodation with effect from 1 July 2010.".

Since the European Commission accepted the argument put forward by France to the effect that the VAT element on labour services could be reduced, there are notices outside almost all cafés in France — particularly those in parts of the country frequented by tourists — which indicate that if a cup of coffee previously cost €2, it now costs in the region of €1.80. The tourism sector here has just had an extremely bad year and there is not much of a feel-good factor in respect of it. Those who operate restaurants have been put to the pin of their collars in an attempt to try to survive. Unfortunately, many restaurants are going to be obliged to close.

In such circumstances, if there is a net VAT surplus resulting from the imposition of VAT on local authorities — which the Minister suggests must be done — we should recycle that surplus and try to use it to provide a boost to a sector which is facing into great difficulties, which employs many people and which is vital in the context of bringing in foreign exchange earnings from tourists, etc. I am interested in discovering whether the Minister would be prepared to consider my proposals in this regard. I and members of other parties have put forward such proposals on a number of occasions.

Other countries are taking action in this regard. They are providing a stimulus by ensuring that people enjoy reductions on the price of a cup of coffee or a meal. This only applies in respect of the labour element. Given that latter is a significant element of the cost in restaurants, I would like the Minister to give careful consideration to the amendment. If he accepted it, this would give a boost to the tourism sector and send out a positive message about Ireland.

There is merit in the Deputy's proposal and I am interested in hearing the Minister's response.

The amendment proposes to ring-fence the revenue, which is generally not the done thing in respect of the application of VAT on services. The merits of the amendment are that there should be some form of concessionary arrangements with regard to the application of VAT to the tourism sector. Restaurants and hotels are experiencing major difficulties. This is also the case in other sectors of the economy. The reduced rate of VAT of 13.5% already applies in Ireland. This compares favourably with the United Kingdom's treatment of tourism and catering services. In that jurisdiction, the standard VAT rate of 17.5% applies. The rate in Ireland is, therefore, lower than that which applies in the United Kingdom. It is worth framing the debate on this matter in that context.

Applying a lower rate in respect of restaurants and hotel accommodation would require a reduction in the 13.5% rate across the board on all goods and services to which this rate applies — this would be extremely costly to the Exchequer — or, alternatively, we could consider the introduction of a second reduced rate dedicated to the hotel and restaurant sector. A 1% reduction in the current reduced rate would cost approximately €250 million in a year. The alternative of introducing a dedicated lower rate for the restaurant and hotel sector would lead to pressure from other sectors.

The potential impact of any reduction in VAT on the price paid by the consumer should be considered. In May 2009, the EU Council of Finance Ministers adopted a proposal — following many representations from France in respect of this matter — which expanded the list of goods and services under the EU VAT directive to which a reduced rate of VAT could be applied. That decision provided for restaurant and catering services to be included in Annexe III of the VAT directive which lists those goods and services to which a reduced rate, as low as 5%, may be applied by member states.

On foot of the decision by the Council, France, for whom this has been a long-running issue, immediately reduced its VAT rate on restaurants on the expectation that prices charged to consumers would reduce significantly, that wages would increase and that jobs would be created in the sector. However, it has been reported the outcome has been disappointing. Restaurant prices in France fell only marginally, despite the significant drop in the rate of VAT being applied.

I will keep the position under review but at this stage I am not convinced by the arguments in favour of the proposal. It must be remembered excise duties on alcohol products were reduced by approximately 20% which will assist both hotels and restaurants.

As it is difficult to word acceptable amendments to the Finance Bill, I must point out the French provision applies to labour content. The way it was structured was to give an incentive in employing more people in restaurants. The Minister knows well there are many people at both the front and back of house in a restaurant. A message must be sent out to the tourism industry that we are generating value for money. I am aware other sectors may seek this provision but I couched it in the context of the Commission's decision and the long campaign by France to have it accepted.

The cost of a restaurant meal is considered extremely high by visitors from France, Germany and the Continent. I accept the restaurant industry is making many attempts to provide value for money offers such as early bird menus. Given that many of them are caught up in expensive leases for their premises, their costs are crippling. We need to create some positive messages to stimulate activity in the restaurant sector both domestically and for the tourism industry.

Amendment put and declared lost.
Section 112 agreed to.
SECTION 113.

Amendments Nos. 80 to 83, inclusive, are related and may be discussed together by agreement.

I move amendment No. 80:

In page 149, line 7, to delete "and".

The first and third amendments correct drafting errors.

The second amendment is necessary to delete a comma which had the effect of allowing an exemption to apply in the wrong circumstances.

The fourth amendment relates to the margin scheme to sales of vehicles and its retrospective operation.

Amendment agreed to.

I move amendment No. 81:

In page 149, line 42, to delete "stock-in-trade," and substitute "stock-in-trade".

Amendment agreed to.

I move amendment No. 82:

In page 149, between lines 48 and 49, to insert "and"

Amendment agreed to.

I move amendment No. 83:

In page 150, line 24, after "paragraph (a)” to insert “or section 12B(11)(a)”.

Amendment agreed to.
Question proposed: "That section 113, as amended, stand part of the Bill."

I received a representation concerning second-hand agricultural machinery from the Farm Tractor and Machinery Trade Association, FTMTA. Dealers in this area claim this provision has had an adverse impact on their trade. They claim UK dealers do not have this problem as the majority of UK farmers are VAT-registered and the dealer can claim the VAT element of the trade as an input credit. Has this problem been brought to the Minister's attention?

Up to now all member states applied the margin scheme to second-hand vehicles with the exception of Ireland and Denmark. When the margin scheme was introduced under the relevant directive in 1994, Ireland, following strong representations from the industry, negotiated a derogation which applied until December last.

Under the new margin scheme, dealers may experience a cash flow shortage change where they will be no longer entitled to claim VAT input on the purchase of a second-hand vehicle. This will be compensated for by transitional measures. In this respect, second-hand vehicles or agricultural machinery acquired by dealers before 1 January 2010 and resold after 1 July 2009 will be taxed on the wholesale price. There is no claw back of VAT in the case where such vehicles or agricultural machinery are sold at a loss.

In addition, as part of the transition measures, in the case of agricultural machinery purchased from 1 January 2010, dealers will be entitled to claim VAT input credit on these vehicles for six months up to June 2010 at a reducing scale.

Moving the VAT margin scheme brings the VAT treatment of second-hand vehicles or agricultural machinery in the State into line with the treatment applied in the majority of member states.

The allegation is that business is migrating away from the Irish sector as a result of this provision. Could the Minister provide a briefing on the matter?

One of the problems is that most UK farmers are VAT-registered and, therefore, it is more attractive to sell in the United Kingdom because the VAT can be claimed back. In this jurisdiction, the majority of agricultural producers are not VAT-registered and, therefore, there is not the same incentive to trade-in an agricultural vehicle.

Is there any way of dealing with that? What is the Minister's take on it?

My take is that as the majority of our agricultural producers do not register for VAT, accordingly they cannot claim for it.

The UK dealer can get the advantage of the VAT relief.

Yes, because the UK farmer would be registered for VAT.

Is that the attraction of doing a trade-in outside of this jurisdiction?

Question put and agreed to.
SECTION 114.

I move amendment No. 84:

In page 150, lines 48 and 49, to delete "stock-in-trade," and substitute "stock-in-trade".

This is another technical amendment involving a comma.

Amendment agreed to.
Section 114, as amended, agreed to.
Section 115 agreed to.
SECTION 116.

I move amendment No. 85:

In page 151, to delete lines 12 to 15 and substitute the following:

" "(d) This subsection, other than paragraph (e), does not apply on or after the date of the passing of the Finance Act 2010.

(e) Where on the date of the passing of the Finance Act 2010 a taxable dealer has a means of transport in respect of which prior to that date the taxable dealer had not claimed deductibility in the circumstances referred to in paragraph (c), then, when that taxable dealer supplies that means of transport to another person, that supply shall be treated as a supply of margin scheme goods for the purposes of section 10A and section 10A(14)(b) shall apply for the purpose of the calculation of the profit margin (within the meaning of section 10A) in relation to that supply.”,

and".

This amendment again relates to the margin scheme for second-hand means of transport. Provision was made for demo models but there is an omission in relation to demo models that are removed from stock-in-trade before the enactment of the legislation, but not sold under after its enactment. Therefore the Bill has to be amended to provide for those specific vehicles.

Amendment agreed to.
Section 116, as amended, agreed to.
Sections 117 to 122, inclusive, agreed to.
SECTION 123.

Amendment No. 86 is in the name of the Minister and amendment No. 87 is related. Amendments Nos. 86 and 87 may be discussed together by agreement.

I move amendment No. 86:

In page 156, lines 18 and 19, to delete all words from and including "(renamed" in line 18 down to and including "Act)" in line 19 and substitute the following:

"which is renamed "Schedule 6" by virtue ofsection 125”.

The first of these amendments is technical and the second is to correct a typographical error.

Amendment agreed to.

I move amendment No. 87:

In page 156, line 37, to delete "shops" and substitute "staff shops".

Is that Schedule in section 123 something the Minister will have a look at afresh on Report Stage, for example the organisation of exhibitions and things like that as being deemed to be VATable?

Are we on section 123?

Yes, the Schedule. Is not that the one about the public bodies? In the event, the Minister might amend that on Report Stage.

These are the mandatory areas.

Is it not about the organisation of exhibitions? It seems somewhat unusual to say they are competing.

Generally, in fact, and not just local authorities.

When supply of water is referred to, of course, it is exempt under a separate provision, which is very misleading in the legislation. In effect, we are transposing one instrument of European law, which says that in principle the supply of water, gas, electricity and thermal energy "is an activity subject..." and then there is a separate provision of EU law saying that it is not.

Amendment agreed to.
Section 123, as amended, agreed to.
SECTION 124.

Amendments Nos. 89 to 91, inclusive, are related and will be discussed together, by agreement.

I move amendment No. 88:

In page 161, lines 17 and 18, to delete all words from and including "Entering" in line 17 down to and including "by" in line 18 and substitute the following:

"Supplying insurance and reinsurance services, and supplying related services by".

This again relates to the existing Schedules in the VAT Act, but rearranges the items to coincide with the corresponding items in the EU VAT directive. This is part of the process of preparing for the consolidation of the VAT Act.

As regards the exemption for certain Islamic financial products, in Islam one is supposed to give a certain amount to charity, good causes and the poor. If the Minister is providing older people with refuse services and so on, could they not be exempted from the VAT charge on the principle that this would be in accordance with Sharia?

That is very creative.

I do not think that is in this actual section, or is it?

I do not want to delay the business of the committee.

It applies where the Sharia services would correspond to the financial services listed elsewhere in the paragraph. There is a list of financial services that are exempted, activities for example such as issuing stocks, arranging for, or underwriting, issues of shares, debentures etc., operating deposit and savings accounts as well as dealings in currency. The exemption in relation to Sharia compliant funds applies where comparable non-Islamic financial products would qualify for the VAT exemption. Therefore, it is a VAT exemption in relation to financial products, which is extended by analogy to comparable Sharia instruments.

Amendment agreed to.

I move amendment No. 89:

In page 161, to delete lines 20 to 27 and substitute the following:

"(2) For the purposes of this paragraph ‘related services', in relation to insurance

services, includes—

(a) collecting insurance premiums and selling insurance, and

(b) handling claims and providing claims settlement services where the supplier of the insurance services delegates authority to an agent and is bound by the agent’s decision in relation to claims.”.

Amendment agreed to.

I move amendment No. 90:

In page 175, line 18, to delete "or".

Amendment agreed to.

I move amend No. 91:

In page 178, line 10, to delete "an existing hiring" and substitute "a previous hiring".

Amendment agreed to.
Question, "That section 124, as amended, stand part of the Bill", put and agreed to.
Sections 125 to 128, inclusive, agreed to.

Before we move on I have to advise the committee of my intention to table two amendments in the area of VAT on Report Stage. The first concerns a technical amendment recommended by the Chief Parliamentary Counsel and the second is an anti-avoidance measure.

SECTION 129.

Question proposed: "That section 129 stand part of the Bill."

In relation to this section which is to do with conveyance in consideration of debt, or perhaps on the earlier sections, the Minister's predecessor introduced section 110 to the Finance Bill 2007, which was to close a loophole in relation to stamp duty avoidance by developers, whereby contracts were rested or licences were allocated to build so the payment of stamp duty was avoided by the property not being conveyed, or the conveyance not being completed. As the Minister's predecessor used to say, "It not therefore being stamped, and stamp duty not arising..." — or alternatively shares in the company being transferred, and that being subject to 1%.

Perhaps the Minister can confirm that the NAMA process is heavily bogged down because so many property based transactions were never completed in terms of title being conveyed because of the use of this avoidance mechanism. After a long campaign, the Minister's predecessor, Deputy Brian Cowen, agreed that this was the wrong form of tax avoidance and available only to developers at a time when young couples were paying 9% on second-hand houses in towns and cities. Now that it is such a significant difficulty in respect of NAMA and the completion of title, does the Minister ever intend to bring it into force or will it lie in abeyance forever as a section of the Finance Bill which was never commenced? Can the Minister comment on the alternative to completing the conveyance of the properties, if those properties are to go into NAMA? The report from the stockbrokers commissioned by the then Minister for Finance suggested that the cost to the Exchequer of this avoidance of stamp duty was very high. It now seems, however, that it has also mired the NAMA process in even greater difficulties than could have been anticipated. Where does it stand now? In the context of NAMA, how does one complete the transfer of title, given that this section 110 was never actually commenced?

Most of the questions the Deputy has raised have nothing to do with section 129. The purpose of section 129 is to amend section 41 of the Stamp Duties (Consolidation) Act 1999 by substituting a new section to prevent avoidance of stamp duty in particular circumstances, which involve the artificial switching of consideration into debt, which in reality still represents shareholders' votes. Section 129 is an anti-avoidance measure dealing with company share, stamp duty schemes. It is understood that the Revenue Commissioners have encountered transactions involving the disposal and acquisition of shares which have been packaged in such a way that part of the consideration of these transactions is being converted into debt. The debt then escapes the charge to stamp duty, which represents a loss of taxation to the Exchequer in respect of those share transactions. It was never the intention of the existing legislation to permit that. There has always been some stamp duty planning concerning company shares, but this measure will prevent the use of debt to set up artificial transactions for those purposes by artificially saddling companies with debt to avoid the payment of stamp duty. That is the purpose of section 129.

The Deputy also raised the wider question of NAMA and the resting in contract issue, which does not specifically arise under this section but I am happy to deal with it. As regards loans being transferred to NAMA, if a loan has been issued to a developer but the developer has not taken full legal title, the security for that loan could be affected. For example, the failure or omission to register or stamp a document has an impact on the evidentiary value of the title being offered by a particular person. Therefore, that in turn impacts on the valuation process prescribed by NAMA. As Deputy Burton is well aware, each loan eligible for transfer to NAMA will be valued individually with the value placed on the loan taking account of the underlying security to the loan. In other words, any doubts or defects in the underlying security affect the value placed on the loan by NAMA. I do not agree with the Deputy's assumption that NAMA is bogged down with these matters — far from it. The valuations are proceeding expeditiously.

The more general question the Deputy raised was the stamp duty resting in contract issue. My predecessor decided not to commence the original provision following a report from Goodbody Economic Consultants that its introduction might damage the property market. The provision was revised in the Finance (No. 2) Act 2008 but was still subject to a commencement order. My Department has been in consultation about the possible impact of the measures in certain cases. I am not in a position to give a clear date for the commencement of the provision.

The reason I raised it under this section is that this section is basically concerned with closing off avoidance mechanisms. Section 110 was probably the greatest ever avoidance mechanism as regards resting in contract. I am interested to know how it will work if the Minister does not commence section 110. Unless most or all of the developers or companies which hold the properties that were subject to the avoidance mechanism are in receivership — which, I suppose, many of them are — and therefore subject to the orders of the court, I cannot see how a company can move on unless the issue of title is addressed. I am not a lawyer, but it seems difficult to me. If it comes to selling those properties subsequently, how does NAMA sell a large Glass Bottle Company site in the Ringsend area without having any title to it? How can NAMA even convey it to a local authority for a public park if it does not have any title to it? Given the requirements of the Stamp Duty Act, I do not understand how it would work, unless the Minister proposes retrospectively to sanction all those actions by the developers. Does the Minister have a plan for dealing with this issue? When the State receives this parcel where a title is not complete, how do all the firms of accountants and lawyers — the people getting €240 million in fees — sign off on a good title on the transfer of the loans? It seems to me to be quite a difficult thing to do.

I am no expert in this field, but as I understood it, the sort of thing that was going on was that one gave a developer a licence to develop. One retained ownership of the land and was then able to sell it free of stamp duty. Presumably therefore the bank only had possession of the licence as security. Has this loophole effectively undermined the quality of the security that banks hold? Will it have a knock-on effect for us when we come into possession of those loans under NAMA?

We are now discussing NAMA rather than the Finance Bill, but I always enjoy discussing NAMA and I am not resisting the questions. Stamp duty is a duty on instruments, not transactions. That is fundamentally important. The effect of non-compliance with stamp legislation is that the instrument cannot be produced in court. It does not affect the validity of the property transactions, for example, in the case of a document which is stampable as a property transaction. It does not affect the validity of the transactions affected in relation to the property. I do not have the NAMA legislation to hand, but clearly NAMA would be exempt from having to stamp documents were it giving title. The question of the impact of non-stamping of instruments of title which are tendered as part of the security which they are obtaining is a matter for the valuation process. That is the key point concerning the NAMA implications of this.

As regards the resting in contract issue, which Deputy Burton also inquired about, the practical reality is that the various transactions were planned because it is a duty applied to instruments, rather than to transactions. Various instruments were unstamped and therefore stamp duty was not payable upon them. There would be severe financial implications for the hotel sector in particular were we to insist on the stamping of all these documents now. That is the factual position concerning the non commencement of the legislation.

Could the Minister carry that slightly further? Are those hotels a bit like in "Jarndyce and Jarndyce", for the rest of the duration?

Dickens was a long way from NAMA.

Does the Minister remember that in that case the creditors lost everything and it all went to pay the lawyers?

I do not think that is the case. In this case the point is that the titles may be unassailable, but their evidentiary character is weakened by the non-stamping of the document. That is the position.

We are talking about a bust and about trying to get economic activity moving again. Whatever about the provisions on Sharia finance or Sharia ownership, we have a certain legal structure in this country in regard to ownership, which can often make matters quite difficult. Even in the case of an old ruined cottage, somebody will come from somewhere and say "Hold on, I have an interest in it."

No. The issue is the effect of the non-stamping of the instrument which, in general, is that the document cannot be produced in court. It does not affect the validity of the underlying title to the property. That is the key point. In regard to the specific issue of commencing the resting in contract provision in section 110, it can be commenced once we have worked through the issues surrounding the losses in the hotel sector.

Question put and agreed to.
SECTION 130.

I move amendment No. 92:

In page 181, line 32, to delete "267O" and substitute "267N".

The purpose of this amendment is to correct an incorrect reference to a section.

Amendment agreed to.
Question proposed: "That section 130, as amended, stand part of the Bill".

As this relates to technical issues in the EEA and to levies and so on, what is——

We are on section 130, which concerns Sharia finance.

Yes. First, as it relates to the International Financial Services Centre, does the Government have a position in Europe with regard to the introduction of a charge on financial instruments modelled somewhat on the Tobin tax? Second, there is a clearly a move within European regulation to move to a common base of certain levels of financial charges and to the development of provisions in regard to losses in the banking sector. Has the Minister taken a position on behalf of Ireland?

In regard to the Tobin tax, the position is that, again, the issue has been raised and discussed at European meetings. It would require a multilateral approach by many different states, and many states larger than Ireland have raised practical objections to the implementation of such a tax on banks on a global basis. We have followed the debate and, to date, we still have to take a position on it.

Question put and agreed to.
Section 131 agreed to.
SECTION 132.

I move amendment No. 93:

In page 182, subsection (1)(b), line 46, to delete “25 June” and substitute “25 July”.

The purpose of this amendment is to correct an incorrect date in the definition of "due date" from 25 June to 25 July in respect of the quarter ending on 30 June.

Amendment agreed to.
Section 132, as amended, agreed to.
Sections 133 and 134 agreed to.

Amendment No. 94 cannot be moved as it was already discussed with amendment No. 16a.

Amendment No. 94 not moved.
Section 135 agreed to.
SECTION 136.
Question proposed: "That section 136 stand part of the Bill."

Is there a significant issue with recovering overpayments of gift tax or other capital taxes, which presumably does not occur very frequently? Why should there be a four-year time limit? The volume of these taxes is not enormous. When one considers that bank losses and construction industry losses can be carried forward forever, what is the position if somebody who overpays through a mistake on their own part or, as is more likely, where their legal advisers overpay? What is the reasoning behind the four-year time limit?

That is the standard limit, as I understand it, in regard to revenue taxes and sums owed to the Revenue in that there is a four-year time limit for claiming them. While that is the general position, there is no equation between that and losses being carried forward for tax purposes. They are completely different circumstances in the tax code. What is under consideration here is the time limit within which a mistaken repayment can be claimed, which is a legal right the taxpayer has. The question then arises as to the extinguishment period. I assume an analogy is drawn with statutes of limitation and a four-year period is prescribed.

Question put and agreed to.
Section 137 agreed to.
NEW SECTION.

I move amendment No. 95:

In page 185, before section 138, to insert the following new section:

138.-(1) Section 82(1) of the Principal Act is amended by inserting the following after paragraph (c):

"(ca) the receipt by a person of an award from the competition ‘Your Country, Your Call’ which was launched by the President on 17 February 2010,”.

(2) This section applies to gifts taken on or after 17 February 2010.".

The amendment inserts a new section to the Bill. A charity known as An Smaoineamh Mór, of which the President is the patron, will hold a competition entitled "Your Country, Your Call". This competition was launched on 17 February and two prizes of €100,000 each will be awarded to the winners of the competition. The amendment ensures that the awards to the two winners will be exempt from gift tax.

A blog which ran last year called "The Big Idea", attracted thousands of very good ideas in terms of innovation, enterprise and all the rest, and it was totally free. I have a slight reservation about this competition. It is run by the President, which will ensure it will get a huge boost and will be recognised and promoted virtually everywhere, and that is fine and perhaps makes it worth the €200,000 to promote the endeavour. However, a simple blog attracted thousands of ideas that are still there, if people want to look at them. Of course, no one will get €100,000 for making it happen.

Can the Minister identify how much the State is contributing to the cost of the programme?

I understand it has put €300,000 towards the implementation phase.

From which Department will that come?

It will come from the Department of Enterprise, Trade and Employment. It is not reflected in this year's Revised Estimates. It is an ongoing commitment which will be reflected next year in the Estimates provision.

Is it €300,000 per year? Is it €300,000 in total?

No, it is €300,000 in total, as I understand it.

Amendment agreed to.
Section 138 agreed to.
SECTION 139.

Amendments Nos. 97 to 99, inclusive, are consequential on amendment No. 96. Therefore, all four amendments may be discussed together by agreement.

I move amendment No. 96: In page 187, between lines 24 and 25, to insert the following subsection:

"(2) Subsection (1) shall not apply where a liability to inheritance tax arises by virtue of the fact that a person referred to in paragraph (a) of that subsection has not disclosed that he or she has received a taxable gift or a taxable inheritance prior to the taxable inheritance or taxable inheritances, as the case may be, consisting of property referred to in subsection (1)(a) and the personal representative or solicitor referred to in section 48(10), as the case may be, has made reasonable enquiries regarding such gifts or inheritances and has acted in good faith.”.

These are technical amendments.

Amendment agreed to.

I move amendment No. 97:

In page 187, line 25, to delete "(2)" and substitute "(3)".

Amendment agreed to.

I move amendment No. 98:

In page 187, line 35, to delete "(3)" and substitute "(4)".

Amendment agreed to.

I move amendment No. 99:

In page 187, line 36, to delete "(2)" and substitute "(3)".

Amendment agreed to.
Section 139, as amended, agreed to.
Section 140 agreed to.
NEW SECTIONS.

I move amendment No. 100:

In page 193, before section 141, to insert the following new section:

141.—(1) Part 33 of the Principal Act is amended by inserting the following after Chapter 2:

"Chapter 3

Mandatory Disclosure of Certain Transactions

817D.—(1) in this Chapter, unless the context otherwise requires—

‘the Acts' means—

(a) the Tax Acts,

(b) the Capital Gains Tax Acts,

(c) Part 18A,

(d) the Value-Added Tax Act 1972, and the enactments amending or extending that Act,

(e) the Capital Acquisitions Tax Consolidation Act 2003, and the enactments amending or extending that Act,

(f) the Stamp Duties Consolidation Act 1999, and the enactments amending or extending that Act,

(g) the statutes relating to the duties of excise and to the management of those duties, and any instruments made thereunder and any instruments made under any other enactment relating to tax;

‘disclosable transaction' means—

(a) any transaction, or

(b) any proposal for any transaction,

which—

(i) falls within any specified description,

(ii) enables, or might be expected to enable, any person to obtain a tax advantage, and

(iii) is such that the main benefit, or one of the main benefits, that might be expected to arise from the transaction or the proposal is the obtaining of that tax advantage, whether the transaction or the proposal for the transaction relates to a particular person or to any person who may seek to take advantage of it;

‘marketer', in relation to any disclosable transaction, means any person who is not a promoter but who has made a marketing contact in relation to the disclosable transaction;

‘marketing contact', in relation to a disclosable transaction, means the communication by a person of the general nature of the disclosable transaction to another person with a view to that person or any other person considering whether—

(a) to ask for further details of the disclosable transaction, or

(b) to seek to have the disclosable transaction made available for implementation, and ‘makes a marketing contact’ shall be construed accordingly;

‘PPS Number', in relation to an individual, means the individual's personal public service number, within the meaning of section 262 of the Social Welfare Consolidation Act 2005;

‘promoter', in relation to a disclosable transaction, means a person who in the course of a relevant business—

(a) is to any extent responsible for the design of the disclosable transaction,

(b) has specified information relating to the disclosable transaction and makes a marketing contact in relation to the disclosable transaction,

(c) makes the disclosable transaction available for implementation by other persons, or

(d) is to any extent responsible for the organisation or management of the disclosable transaction;

‘relevant business' means any trade, profession, vocation or business which—

(a) includes the provision to other persons of services relating to taxation, or

(b) is carried on by a bank (within the meaning of section 124(1)(a) of the Stamp Duties Consolidation Act 1999), and for the purposes of this definition—

(i) anything done by a company is to be taken to be done in the course of a relevant business if it is done for the purposes of a relevant business referred to in paragraph (b) carried on by another company, where both companies are members of the same group, and

(ii) ‘group' has the meaning that would be given by section 616 if in that section references to residence in a relevant Member State were omitted and for references to ‘75 per cent subsidiaries' there were substituted references to ‘51 per cent subsidiaries', and references to a company being a member of a group shall be construed accordingly;

‘relevant date', in relation to a disclosable transaction, means the earliest of the following dates—

(a) the date on which the promoter has specified information relating to the disclosable transaction and first makes a marketing contact in relation to the disclosable transaction,

(b) the date on which the promoter makes the disclosable transaction available for implementation by any other person, or

(c) the date on which the promoter first becomes aware of any transaction forming part of the disclosable transaction having been implemented;

‘specified description' has the meaning assigned to it by subsection (2);

‘specified information' means any information specified in regulations made under section 817Q;

‘specified period' means the period of time, or time, specified in regulations made under section 817Q;

‘tax' means any tax, duty, levy or charge which, in accordance with the Acts, is placed under the care and management of the Revenue Commissioners;

‘tax advantage' means—

(a) relief or increased relief from, or a reduction, avoidance or deferral of, any assessment, charge or liability to tax, including any potential or prospective assessment, charge or liability,

(b) a refund or repayment of, or a payment of, an amount of tax, or an increase in an amount of tax refundable, repayable or otherwise payable to a person, including any potential or prospective amount so refundable, repayable or payable, or an advancement of any refund or repayment of, or payment of, an amount of tax to a person, or

(c) the avoidance of any obligation to deduct or account for tax, arising out of or by reason of a transaction, including a transaction where another transaction would not have been undertaken or arranged to achieve the results, or any part of the results, achieved or intended to be achieved by the transaction;

‘tax reference number', in relation to a person, means—

(a) in the case of a person who is an individual, the individual’s PPS Number, and

(b) in any other case—

(i) the reference number stated in any return of income form or notice of assessment issued to the person by the Revenue Commissioners, or

(ii) the registration number of the person for the purposes of value-added tax;

‘transaction' means—

(a) any transaction, action, course of action, course of conduct, scheme or plan,

(b) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable or intended to be enforceable by legal proceedings, and

(c) any series of or combination of the circumstances referred to in paragraphs (a) and (b), whether entered into or arranged by one person or by two or more persons—

(i) whether acting in concert or not,

(ii) whether or not entered into or arranged wholly or partly outside the State, or

(iii) whether or not entered into or arranged as part of a larger transaction or in conjunction with any other transaction or transactions, and any proposal for any transaction shall be construed accordingly.

(2) (a) For the purposes of this Chapter, unless the context otherwise requires, a reference to a specified description shall be construed as a reference to a class or classes of transaction which are specified in regulations made under section 817Q.

(b) A class of transaction referred to in paragraph (a) and which is specified in regulations made under section 817Q shall fall within at least one of the categories of transaction referred to in paragraph (c).

(c) The categories of transaction referred to in paragraph (b) are as follows:

(i) a transaction where, but for the provisions of this Chapter, a promoter or person would, or might reasonably be expected to, wish to keep the transaction or any element of the transaction (including the way in which the transaction is structured) which gives rise to the tax advantage expected to be obtained, confidential from—

(I) the Revenue Commissioners, or

(II) any other class of person prescribed under section 817Q for the purposes of this subparagraph, for any purpose prescribed by regulations made under section 817Q;

(ii) a transaction in relation to which a promoter, whether directly or indirectly, obtains from or charges to, or might reasonably be expected to obtain from or charge to, a person implementing, or considering implementing, such transaction, fees that are to a significant extent attributable to, or to any extent contingent upon, the obtaining of a tax advantage;

(iii) a transaction which involves standardised or mainly standardised documentation, the form of which is largely determined by the promoter and which require the person implementing the transaction to enter into a specific transaction, or series of transactions, that are standardised, or substantially standardised, in form;

(iv) a transaction, or any element of such transaction (including the way in which the transaction is structured), which gives rise to a tax advantage of a class or classes prescribed in regulations made under section 817Q for the purposes of this subparagraph.

817E.—Subject to this Chapter, a promoter shall, within the specified period after the relevant date, provide the Revenue Commissioners with specified information relating to any disclosable transaction.

817F.—Any person who enters into any transaction forming part of any disclosable transaction in relation to which

(a) a promoter is outside the State, and

(b) no promoter is in the State,

shall, within the specified period after so doing, provide the Revenue Commissioners with specified information relating to the disclosable transaction.

817G.—Any person who enters into any transaction forming part of a disclosable transaction as respects which neither that person nor any other person in the State has an obligation to comply with section 817E or 817F shall within the specified period after so doing provide the Revenue Commissioners with specified information relating to the disclosable transaction.

817H.—(1) Any person who enters into a transaction forming part of a disclosable transaction as respects which the promoter, by virtue of section 817J, does not comply with section 817E, shall within the specified period concerned after entering such transaction, provide the Revenue Commissioners with specified information relating to the disclosable transaction.

(2) A promoter who by virtue of section 817J does not comply with section 817E shall inform each person to whom the promoter has made the disclosable transaction available for implementation of the obligations placed on that person by virtue of subsection (1).

(3) A promoter who by virtue of section 817J does not comply with section 817E shall inform the Revenue Commissioners accordingly within the specified period.

817I.—(1) Where the Revenue Commissioners have reasonable grounds for believing that—

(a) a person is the promoter of a transaction that may be a disclosable transaction, or

(b) a person has entered into a transaction that may form part of a disclosable transaction, which if it were such a transaction would require the person to comply with section 817G, the Commissioners may by written notice (in this Chapter referred to as a ‘pre-disclosure enquiry’) require the person to state—

(i) whether, in that person's opinion, the transaction is a disclosable transaction, and

(ii) if in that person's opinion the transaction is not considered to be a disclosable transaction, the reasons for that opinion.

(2) A notice under subsection (1) shall specify the transaction to which it relates.

(3) The reasons referred to in subsection (1)(ii) (in this Chapter referred to as a ‘statement of reasons') shall demonstrate, by reference to this Chapter and regulations made under it, why the person holds the opinion that the transaction is not a disclosable transaction and, in particular, if the person asserts that the transaction does not fall within any specified description, the reasons shall provide sufficient information to enable the Revenue Commissioners to affirm the assertion.

(4) For the purposes of this section, it is not sufficient for the person to state that they have received an opinion given by a barrister or solicitor or a person referred to in subparagraph (i) or (ii) of section 817P(5)(a) to the effect that the transaction is not a disclosable transaction.

(5) A person to whom the Revenue Commissioners have issued a notice under subsection (1) shall comply with the notice within the period of time specified in the notice, not being less than 21 days from the date of the notice, or such longer period as the Commissioners may agree.

817J.—Nothing in this Chapter shall be construed as requiring a promoter to disclose to the Revenue Commissioners information with respect to which a claim to legal professional privilege could be maintained by that promoter in legal proceedings.

817K.—(1) Where a person has provided the Revenue Commissioners with information in purported compliance with section 817E, 817F, 817G or 817H(1) and the Commissioners have reasonable grounds for believing that the person has not provided all of the specified information, the Commissioners may by notice in writing require the person to provide the information, specified in the notice, that the Commissioners have reasonable grounds for believing form part of the specified information.

(2) Where a person has provided the Revenue Commissioners with specified information in compliance with section 817E, 817F, 817G or 817H(1) the Commissioners may by notice in writing require the person to provide such other information about, or documents relating to, the disclosable transaction, as the Commissioners may reasonably require in support of or in explanation of the specified information.

(3) A person to whom the Revenue Commissioners have issued a notice under subsection (1) or (2) shall comply with the notice within the period of time specified in the notice, not being less than 21 days from the date of the notice, or such longer period as the Commissioners may agree.

817L.—(1) Where the Revenue Commissioners have reason to believe that a person is a marketer in relation to a transaction that may be a disclosable transaction, the Commissioners may by >written notice require the person to provide the Commissioners with the name, address and, where known to the person, the tax reference number of each person who has provided that person with any information in relation to the transaction.

(2) A notice under subsection (1) shall specify the transaction to which it relates.

(3) A person to whom the Revenue Commissioners have issued a notice under subsection (1) shall comply with the notice within the period of time specified in the notice, not being less than 21 days from the date of the notice or such longer period as the Commissioners may agree.

817M.—A person who is a promoter shall, in relation to each disclosable transaction in respect of which specified information has been provided by that promoter under section 817E, provide to the Revenue Commissioners—

(a) within the period of time set out in regulations made under section 817Q, and

(b) at such times falling after the end of that period as may be set out in those regulations, the name, address and, where known to the person, the tax reference number of each person to whom that person has made the disclosable transaction available for implementation (in this Chapter referred to as the ‘client list’).

817N.—(1) Where a promoter provides the Revenue Commissioners with specified information relating to a disclosable transaction and the client list in respect of that disclosable transaction, the provision of that information shall, as respects any person included on the client list who implements the transaction, be wholly without prejudice as to whether any opinion that the disclosable transaction concerned was a tax avoidance transaction, if such an opinion were to be formed by the Revenue Commissioners, would be correct.

(2) Where a person, other than a promoter, provides the Revenue Commissioners with specified information relating to a disclosable transaction the person shall be treated as making that information available wholly without prejudice as to whether any opinion that the disclosable transaction concerned was a tax avoidance transaction, if such an opinion were to be formed by the Revenue Commissioners, would be correct.

(3) Where a person provides the Revenue Commissioners with specified information relating to a disclosable transaction, the provision of that information shall not be regarded as being, or being equivalent to, the delivery of a protective notification by that person in relation to the transaction for the purposes of section 811A.

(4) Nothing in this Chapter shall be construed as preventing the Revenue Commissioners from—

(a) making any enquiry, or

(b) taking any action, at any time in connection with section 811 or 811A.

817O.—(1) A person who fails to comply with any of the obligations imposed on that person by this Chapter and any regulations made under it shall—

(a) where the failure relates to the obligation imposed on a person under section 817H(2), 817H(3), 817I, 817K(1), 817K(2), 817L or 817M, be liable to—

(i) a penalty not exceeding €4,000, and

(ii) if the failure continues after a penalty is imposed under subparagraph (i) to a further penalty of €100 per day for each day on which the failure continues after the day on which the penalty is imposed under that subparagraph, and

(b) where the failure relates to the obligation imposed on a person under section 817E, 817F, 817G or 817H(1), be liable to—

(i) a penalty not exceeding €500 for each day during the initial period, and

(ii) if the failure continues after a penalty is imposed under subparagraph (i) to a further penalty of €500 per day for each day on which the failure continues after the day on which the penalty is imposed under that subparagraph.

(2) In subsection (1)(b)—

‘the initial period' means the period—

(a) beginning on the relevant day, and

(b) ending on the day on which an application referred to in subsection (3) is made;

‘relevant day' means the first day after the specified period.

(3) (a) Notwithstanding section 1077B, the Revenue Commissioners shall, in relation to a failure referred to in subsection (1), make an application to the relevant court for that court to determine whether the person named in the application has failed to comply with the obligation imposed on that person by a section referred to in subsection (1)(a) or (b), as the case may be.

(b) In paragraph (a) ‘relevant court’ means the District Court, the Circuit Court or the High Court, as appropriate, by reference to the jurisdictional limits for civil matters laid down in the Courts of Justice Act 1924, as amended, and the Courts (Supplemental Provisions) Act 1961, as amended.

(4) A copy of any application under subsection (3) shall be issued to the person to whom the application relates.

(5) The relevant court shall determine whether the person named in the application referred to in subsection (3) is liable to the penalty provided for in subsection (1) and the amount of that penalty, and in determining the amount of the penalty the court shall have regard to paragraph (a) or (b) of subsection (6), as the case may be.

(6) In determining the amount of a penalty under subsection (5) the court shall have regard—

(a) in the case of a person who is a promoter, to the amount of any fees received, or likely to have been received, by the person in connection with the disclosable transaction, and

(b) in any other case, to the amount of any tax advantage gained, or sought to be gained, by the person from the disclosable transaction.

(7) Section 1077C shall apply for the purposes of a penalty under subsection (1).

(8) Section 1077D shall not apply for the purposes of a penalty under subsection (1).

817P.—(1) The Revenue Commissioners may, by notice in writing, make an application to the Appeal Commissioners for a determination in relation to any of the following matters—

(a) requiring information or documents to be made available by a person in support of a statement of reasons (to the effect that a transaction is not a disclosable transaction) given by that person to the Revenue Commissioners in compliance with a notice under section 817I,

(b) requiring information, that the Revenue Commissioners have reasonable grounds for believing form part of the specified information relating to a disclosable transaction, to be made available by a person to the Revenue Commissioners, following the failure of the person to comply with a notice under section 817K(1),

(c) requiring information about, or documents relating to, a disclosable transaction to be made available by a person to the Revenue Commissioners, following the failure of the person to comply with a notice under section 817K(2),

(d) that a transaction is to be treated as a disclosable transaction, or

(e) that a transaction is a disclosable transaction.

(2) On the hearing of an application made—

(a) on the grounds referred to in subsection (1)(a), the Appeal Commissioners shall determine the application by ordering if they—

(i) consider that the information or documents should be so made available, that the information or documents should be so made available,

(ii) consider that the information or documents should not be so made available, that the information or documents should not be so made available,

(b) on the grounds referred to in subsection (1)(b), the Appeal Commissioners shall determine the application by ordering if they—

(i) consider that the Revenue Commissioners have reasonable grounds for so believing, that the information be so made available to the Revenue Commissioners,

(ii) consider that the Revenue Commissioners do not have reasonable grounds for so believing, that the information not be made available to the Revenue Commissioners,

(c) on the grounds referred to in subsection (1)(c), the Appeal Commissioners shall determine the application by ordering if they—

(i) consider that the information or documents (or, as the case may be, a part of that information or some of those documents) should be so made available, that the information or documents (or, as the case may be, a part of that information or some of those documents) should be so made available,

(ii) consider that the information or documents should not be so made available, that the information or documents should not be so made available,

(d) on the grounds referred to in subsection (1)(d ), the Appeal Commissioners shall determine the application by ordering if they—

(i) are satisfied that the Revenue Commissioners have taken all reasonable steps to establish whether the transaction is a disclosable transaction and have reasonable grounds for believing that the transaction may be disclosable, that the transaction is to be treated as a disclosable transaction,

(ii) are not satisfied that the Revenue Commissioners have taken all reasonable steps to establish whether the transaction is a disclosable transaction or have reasonable grounds for believing that the transaction may be disclosable, that the transaction is not to be treated as a disclosable transaction,

(e) on the grounds referred to in subsection (1)(e), the Appeal Commissioners shall determine the application by ordering if they—

(i) are satisfied that the transaction is a disclosable transaction, that it is a disclosable transaction,

(ii) are satisfied that the transaction is not a disclosable transaction, that it is not a disclosable transaction.

(3) For the purposes of the hearing of an application made on the grounds referred to in subsection (1)(d)—

(a) reasonable steps may (but need not) include the making of a pre-disclosure enquiry or the making of an application by the Revenue Commissioners on the grounds referred to in subsection (1)(a), and

(b) reasonable grounds for believing may include—

(i) the fact that the transaction falls within a specified description,

(ii) an attempt by the promoter to avoid or delay providing information or documents about the transaction on foot of a pre-disclosure enquiry or on foot of a determination of the Appeal Commissioners following the making of an application by the Revenue Commissioners on the grounds referred to in subsection (1)(a),

(iii) the failure of the promoter to comply with a pre-disclosure enquiry or a determination of the Appeal Commissioners following the making of an application by the Revenue Commissioners on the grounds referred to in subsection (1)(a), in relation to another transaction.

(4) An application under subsection (1) shall, with any necessary modifications, be heard by the Appeal Commissioners as if it were an appeal against an assessment to income tax.

(5) (a) On any application, the Appeal Commissioners shall permit any barrister or solicitor to plead before them on behalf of the Revenue Commissioners or the other party either orally or in writing and shall hear—

(i) any accountant, being any person who has been admitted a member of an incorporated society of accountants, or

(ii) any person who has been admitted a member of the Irish Taxation Institute.

(b) Notwithstanding paragraph (a ), the Appeal Commissioners may permit any other person representing the Revenue Commissioners or the other party to plead before them where they are satisfied that such permission should be given.

817Q.—(1) The Revenue Commissioners may, with the consent of the Minister for Finance, make regulations—

(a) specifying a class or classes of transaction which are to be transactions of a specified description for the purposes of this Chapter,

(b) prescribing a class of persons referred to in section 817D (2)(c)(i),

(c) prescribing a purpose referred to in section 817D(2)( c)(i),

(d) prescribing a class or classes of tax advantage for the purposes of section 817D(2)(c)(iv),

(e) specifying the information to be provided to the Revenue Commissioners by a person in relation to a disclosable transaction (in this Chapter referred to as the ‘specified information’),

(f) specifying the period of time within which, or time by which, as the case may be, the information referred to in paragraph (e) shall be provided to the Revenue Commissioners (in this Chapter referred to as the ‘specified period’),

(g) specifying the period of time within which, or time by which, as the case may be, any other information required to be provided to the Revenue Commissioners under this C hapter, is to be provided,

(h) specifying the circumstances in which a person is not to be treated as a promoter in relation to a disclosable transaction, and

(i) specifying the procedure to be adopted in giving effect to this Chapter, in so far as such procedure is not otherwise provided for, and providing generally as to the administration of this Chapter including—

(i) the form and manner of delivery of information to be provided under the regulations, and

(ii) such supplemental and incidental matters as appears to the Revenue Commissioners to be necessary.

(2) (a) In relation to regulations made pursuant to subsection (1)(a), the regulations may specify the circumstances in which the regulations—

(i) shall apply, or

(ii) shall not apply, to a particular class of transaction.

(b) The circumstances referred to in paragraph (a) shall be specified by reference to the categories of transaction referred to in section 817D(2)(c).

(3) Every regulation made under this section shall be laid before Dáil Éireann as soon as may be after it is made and, if a resolution annulling the regulation is passed by Dáil Éireann within the next 21 days on which Dáil Éireann has sat after the regulation is laid before it, the regulation shall be annulled accordingly but without prejudice to the validity of anything previously done under the regulation.

817R.—The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by this Chapter and regulations made under it to be performed or discharged by the Revenue Commissioners, and references in this Chapter to the Revenue Commissioners shall with any necessary modifications be construed as including references to an officer so appointed.".

(2) (a) In this subsection, “disclosable transaction”, “promoter” and “relevant date” have the same meaning as in Chapter 3 of Part 33 of the Principal Act, as inserted by subsection (1).

(b) Subsection (1) shall apply—

(i) to a promoter in the case of—

(I) any disclosable transaction in respect of which the relevant date falls on or after the date of the passing of this Act, and

(II) any disclosable transaction in respect of which the relevant date falls on or after the date of the passing of this Act (where that relevant date is determined on the basis of whichever of the dates referred to in the definition of "relevant date" in section 817D(1) of the Principal Act, is the earliest of such dates falling on or after the date of the passing of this Act), and

(ii) to a person referred to in sections 817F, 817G and 817H(1) of the Principal Act who enters into any transaction forming part of a disclosable transaction where the whole of the disclosable transaction is undertaken on or after the date of the passing of this Act.".

This important amendment is being inserted into section 141 which at present deals with the domicile levy. It introduces a new mandatory disclosure regime for tax schemes which have characteristics that indicate they may be abusive. The new approach will require promoters to give details of such schemes to the Revenue Commissioners shortly after they are first marketed or made available for use. In certain limited circumstances the obligation to disclose will fall on the users of such schemes.

The primary purpose of the new disclosure regime is to constitute what can be regarded as an effective early warning system by obtaining information on aggressive tax avoidance schemes at an early stage before a loss of taxation becomes apparent. The Government can decide, if appropriate, to close such schemes down before they can do significant damage to tax revenues. Mandatory disclosure will provide the Revenue Commissioners with an important instrument to tackle tax avoidance schemes that are leading to a significant loss of taxation revenue.

The need to challenge aggressive tax avoidance reflects a growing concern in this State and throughout the world regarding the sheer scale and cost to the state of aggressive tax avoidance. Let us be clear, it is not the intention of the rules to prevent tax advisers advising clients in the normal way about their tax affairs and the various legitimate tax incentives provided for in the tax code. That is entirely acceptable tax planning and will remain so. Rather, the amendment is directed at the type of aggressive tax planning and the unintended use of legislation which distorts markets, is economically unproductive and breaks the fundamental link between economic productivity and reward. That type of behaviour, by threatening tax yields and undermining the fairness of the tax system, is essentially anti-social. In the current economic climate, when people are losing jobs, facing significant reductions in pay and welfare provision and an increase in taxes, this behaviour is especially invidious and cannot be permitted to go unchecked.

Other jurisdictions such as the United Kingdom, South Africa, New Zealand, Australia and the United States all have running though their legislation a common purpose, namely, the need to know as early as possible the details of schemes they may not consider acceptable. Timely information is crucial to combating tax avoidance. It is only where schemes are known that they can be challenged and, where appropriate, existing legislation amended or new legislation introduced to deal with them. The earlier in the life cycle of a scheme that the tax authorities learn about it, the more effectively it can be closed down before it inflicts significant fiscal damage.

In seeking to obtain early information on tax avoidance schemes through this new mandatory disclosure regime, what is being done here in Ireland is what has been done in one form or another in many other jurisdictions. In this light, and given the propensity of a minority of tax advisers to devise and market aggressive tax avoidance schemes, a natural response is to introduce a duty on those persons to report such schemes to the Revenue Commissioners as soon as may be after they are devised so that the Government and Revenue are in possession of sufficient information to decide whether or not to close them down.

Under the new disclosure regime promoters of schemes that have as a main benefit the obtaining of a tax advantage and which match certain features set out in the legislation will be required to disclose them to Revenue within tight time limits. The features concerned include wishing to keep the transaction confidential from Revenue, the ability to demand a fee which is linked to the tax advantage or contingent on the advantage secured, transactions that are largely standardised in terms of documentation and steps that have to be undertaken, and transactions that give rise to particular types of advantages. The disclosure will have to be made at the earliest possible time which, depending on the type of scheme and the circumstances, will vary from the time it is first marketed to the time it is made available to a person for use to shortly after the time it is first implemented by a scheme user.

Promoters will be required to divulge to the Revenue Commissioners at regular intervals the details of those to whom they have made a scheme available for use. In certain limited circumstances the users of such schemes will be required to provide the information, including, for example, where the promoter is offshore, where the promoter claims legal professional privilege or where the user has entered into a scheme not involving a promoter, such as an in-house scheme. Significant penalties will apply where a person fails to meet his or her obligations under the regime, and the courts will be given powers, with flexibility, as to the level of penalty that applies.

I stress that disclosure of the details of a scheme does not affect the tax treatment of particular transactions or is not in itself self-incriminating. The consequences of disclosure are twofold. First, the Government and the Oireachtas can consider their options. Second, in respect of individual users of a disclosed scheme, Revenue may decide that the details of the scheme requires that its users be identified and an attempt made to nullify the tax consequences in the normal way through the general and existing anti-avoidance provisions.

The primary legislation we are discussing today, while setting out the broad outlines of the scheme and the policies and principles underpinning it, is essentially enabling in its effect. The new rules apply from the enactment of the legislation but actual compliance with the rules can commence only after the regulations are made. Those regulations, which will be made by the Revenue Commissioners, with my consent, will set out aspects of the regime in more detail, including the time periods within which disclosure must be made, the information to be provided, the manner in which it is to be provided and further details of the classes of transactions that are intended to fall within the disclosure regime. It is not the intention that ordinary, everyday tax advice will come within the regime, nor will the legitimate use of various tax reliefs and incentives be jeopardised. To this end the regulations will include clear guidance so that normal tax advice planning and tax mitigation activities will not be affected by the disclosure rules.

My intention is to ask the Revenue Commissioners to publish the regulations in draft form as soon as possible after the Finance Bill is signed into law so that those affected or who are concerned that they may be affected, along with the representative bodies, can have their views known and expressed.

Tackling tax avoidance is a difficult endeavour because in reality it is a symptom of the tax system we have. As long as there are complexities in the system, tax advisers and taxpayers will seek to exploit those complexities. Some degree of tax avoidance or tax mitigation is therefore inevitable. As in most areas it is a matter of striking the right balance so that taxpayers can carry on their business and lives without undue interference by the State while ensuring that the State can secure the revenues needed to provide for the needs of citizens. What is proposed here is well balanced and I commend it to the committee.

I seem to recall that we discussed a measure of a similar nature some years ago. I was under the impression that it had been adopted.

I understand it was not proceeded with at the time.

The Minister's predecessor decided he preferred the softly softly approach. We had a long discussion on the matter, and the record will show that.

I have no problem with this proposal in principle. The issue is to give fair signal as to how this will work so that people do not inadvertently stumble into breaking this law and attract the associated penalties. In the case of any pre-existing avoidance schemes, are the promoters operating those schemes now obliged to notify them to the Revenue Commissioners or do the new provisions apply solely to newly-developed schemes?

Another point on which I am unclear is that this provision appears to be focused on promoters of the schemes. Do people who self-medicate in respect of tax avoidance, to coin a phrase, fall outside the scope of this measure? I refer to scenarios in which people may stumble upon their own tax avoidance schemes. While ignorance is never a defence before the law, I refer to those who make normal returns in the context of identifying avoidance. How is it intended to inform people of the new obligations they must undertake in this regard? I am uncertain whether any debate took place on this proposal before the Committee Stage amendment was tabled. It is the kind of undoubtedly justified extension of Revenue powers that probably deserves a period in which practitioners could become familiar with it to enable them to point out to the Oireachtas whether it contains elements that might create unfairness, in order that Members at least would have a chance to consider such elements. To what extent has the Minister consulted with the professions on this measure in order that members can be satisfied that it is both robust and reasonable and proportionate with regard to the exposure the taxpayer is suffering?

The Minister should indicate whether he has been in discussions with or has received representations from tax practitioners, representative organisations such as the Irish Taxation Institute or Chartered Accountants Ireland, firms of accountants and so on? His predecessor proposed and provided for the introduction of a similar measure in the same way as he did in respect of section 110. However, he pulled his punches, presumably because——

Is this relevant to this particular amendment?

My point is that members have been here before with this discussion. Promises were made regarding artificially-manufactured tax avoidance schemes that were overly aggressive and hundreds of speeches were made in this respect by the chairman of the Revenue Commissioners and by the former Minister for Finance to various bodies. Consequently, members backed off. Has the Minister had discussions with or received representations, correspondence or whatever from bodies such as the Irish Taxation Institute, individual practitioners, advisers, likely promoters and so on in this regard? Is the nub of this proposal that a firm of accountants or lawyers, which comes up with a scheme such as the use of charitable status, henceforth will be obliged to clearly advise the Revenue Commissioners? In many jurisdictions, one is obliged in good faith to submit the details of the scheme in question and have them examined and tested. The Minister should indicate what representations, if any, he has received in respect of this provision.

This is a very lengthy amendment. While the Minister spoke about regulations, they obviously will refer back to the primary legislation and it will be important for the Minister to clarify whether consultations have taken place with relevant bodies. Why is this provision being brought forward this year? Has there been a particular instance of a tax avoidance scheme that has cost the Revenue Commissioners significant moneys? What has been the loss to taxpayers from tax avoidance schemes that have come to the Revenue Commissioners' attention in 2009? Does the Minister propose in effect to put in place a pre-clearance regime for all tax schemes? What are the current penalties that exist? I note that under the proposed new section 817O, the Minister intends to impose a penalty not exceeding €4,000, depending on which particular section applies, followed by further daily penalties of €100 or €500 during the initial period. What existing penalties would apply, were it to come to light that a particular scheme involved tax avoidance that was contrary to current tax law?

I suspect this amendment has been introduced because the Government needs additional revenues and this is one way to so do. That said, I welcome it as a beginning. While I do not believe it will lead to tax justice, as the €200,000 levy, for example, is not nearly enough, this constitutes a beginning. It probably represents a tenner to modest people such as the Chairman or me. I hope I do not downgrade the Chairman's status when I place him in that category. At least this is a good start. I would have liked to have seen additional taxation measures, such as, for example, the introduction of a third tax band. While such a measure also would have brought in substantial income to the Exchequer, I await the Minister's response.

I do not intend to enter a general debate with Deputy Morgan as we have had a very civilised encounter thus far in respect of the Finance Bill. I must question how much additional revenue additional tax bands would bring in at this stage of our national economic development. However, Deputy Burton first raised the question on representations in connection with this matter. I had very few representations about the matter until I announced my intention to introduce this legislation. Since then, there has been a growing volume of representation about it. It is my intention to commence the regulations and I do not believe one can draw an analogy with section 120 on the resting in contract provisions. One major difficulty with the resting in contract provisions and with the provisions pertaining to what is described as the tail for the property tax reliefs being phased out over a number of years, is that individuals have entered transactions on the faith of the stamp duty arrangements or have made acquisitions on the basis of the former property reliefs that now are being repealed. Clearly, there would be major commercial and economic implications were one to summarily repeal them.

This particular proposal is sensible and it is appropriate at this stage of our development to engage with the professions and to publish the draft regulations. I will adopt regulations, following that consultation, which will raise the standard of ethics in respect of tax avoidance measures for all the reasons set out in my introduction to this measure. Unless Revenue has a timely advance notice of what is at stake, moneys can be lost to the Exchequer. As for dealing with some of the aforementioned anti-avoidance measures, I understand this legislation alone contains 19 specific measures. Deputies asked how much has already been lost to the Exchequer through the fact that schemes have been implemented and have worked. There always will be a loss to the Exchequer in the absence of some element of prior disclosure because without it, Revenue, the Minister and the Oireachtas can only act after the event. Consequently, it is important to have a dialogue before such events happen and that what is acceptable and what is utterly unacceptable is clearly differentiated. This is the purpose of the statutory scheme and there is every intention to engage constructively with the profession and to commence it. This is an appropriate time to do so.

Deputy O'Donnell raised the question as to whether this effectively will constitute a pre-clearance regime. No, it is an intelligence gathering scheme for the Revenue Commissioners. When a disclosure is made, the Revenue Commissioners will not make any comment. Schemes will be disclosed in generic form and it will not be necessary to make disclosure of specific transactions. Moreover, it is not intended that there will be some form of prior clearance. However, it constitutes an early warning system for the Revenue Commissioners.

While I do not disagree with the concept because a properly compliant system obviously is desirable, am I to take it from the Minister's comments that under the legislation, the proponents of any scheme that is brought forward will be required to give prior advance notice to the Revenue Commissioners?

As I outlined previously, a clear distinction can be made in respect of tax minimisation. The nature and gravity of the schemes is a matter that must be worked out in the regulations themselves.

However, that is what the Minister is veering towards.

Has the Minister a timeframe? Regarding the measures incorporated in the Finance Act by the previous Minister, can the Minister says these were inoperable or were most of them never commenced? On their introduction in 2007 and 2008 Deputy Brian Cowen spoke with personal confidence that, having dished out warnings to tax advisers, they would come forward and would have a greater level of communication with the Revenue Commissioners about mitigation schemes. Presumably that did not happen. I am not clear that legislation was ever commenced or implemented. The high net worth division was set up for individuals with a high level of avoidance but that was a different matter. What is the timeframe for this?

First, the Deputy is referring to the protective notification regime introduced by my predecessor in the Finance Act 2006. On its first introduction, eight notifications were made but none were received in 2007. Following an enhancement of the regime in 2008, 63 notifications were made. A significant number of those related to the same scheme. In 2009 this dried to a trickle of just four protective notifications. The hope was that protective notification would act as an early warning system of aggressive and abusive schemes but the reality is that it has produced disappointing results. The low take-up does not indicate there is no avoidance activity in the jurisdiction. As Minister, I must consider the whole issue and decide how we can develop a more constructive relationship with tax practitioners as well as the more fundamental public interest of ensuring the taxpayer is protected in respect of this matter. The scheme before the Deputies will allow me to draw up effective regulations to have a proper early disclosure arrangement. It is my intention to commence regulations this year. I will provide a reasonable period for consultation on the matter but I intend to commence whatever regulations are required on foot of these statutory provisions — in the event they are enacted by the Oireachtas — this year.

Does the Minister agree this is a significant change in that the Minister is introducing a system whereby all schemes must communicate with Revenue before they are commenced?

It is a significant change and one I pondered on and reflected on for some time before including the provision in the Finance Bill. It is important that Ireland is seen as an attractive location for investment and responsible tax planning in connection with investments. Having said that, I also examined the position that obtains in other countries and there is nothing unusual about schemes of this type in international contexts. It is a growing international trend and Ireland should be part of it.

What views have the bodies the Minister consulted with taken?

I am looking forward to intensive consultations with the bodies but the decision in principle to have such a scheme has been arrived at, subject to the consideration of committee members.

The amendment makes sense and will enhance the ability of the Revenue Commissioners to build a profile of the type of schemes devised by tax practitioners. The knowledge pool developed as a result of the amendment will feed into future legislation. It is always a game of cat and mouse between Revenue Commissioners and tax advisers. This will provide an early warning system of the type of initiatives they are coming up with. These are legal in order to minimise tax liability and I am sure we will be here next year building on some of the knowledge acquired through this initiative. I welcome it in that sense.

Does the Minister have a target number of schemes he would like to examine in a year?

It is about eliciting information; there is no target number of schemes. It is a fair question as to what proportion of all schemes should be considered.

I think we can move on here.

This is fundamental. As we speak, people are consuming the draft version of the Bill in order to provide schemes. Poorer people must pay more tax because rich people can use these schemes to mitigate tax to an extraordinary degree. The last report of the Revenue Commissioners stated that 20 people with an annual income of over €2 million each per annum had an average tax rate of under 9%. People with an annual income of €2 million ought to be paying a significantly higher sum. That included DIRT, which the scheme advisers encouraged them to pay on appropriately invested deposits in banks. There is much codology about this but the net result is that most ordinary people pay a lot of tax in order to provide an attractive setting for people to avoid tax. Whatever happened when the country was taking in a lot of tax money, it is now very tight and we need everyone to make a contribution.

Is Deputy Burton welcoming the scheme?

I welcome the scheme but I would welcome its implementation even more. Unless it is implemented, this is like a large red light for practitioners over the period of consultation to get schemes in before the gate closes. Like the closing of section 110, which never happened, and which encouraged totally reckless and ridiculous behaviour, we must now pick up the pieces. The warnings that turn out to be soft warnings act to encourage those who aggressively oversell tax avoidance schemes. That is the reality in my experience.

Will the Minister publish the submissions received from various interested parties on the Department's website or circulate them to committee members so we can be advised of the concerns about these provisions?

We are seeking consultation at this stage. We received very limited representation. Clearly the public character of the consultation process is something I must reflect on. Is Deputy Burton conveying a request from the committee that it should be in public?

This should be published because it is not a well-known area even though it has implications for tax collection.

Deputy Burton inquired about disclosure figures under the UK scheme since 2004. Disclosures in the UK are running at approximately 100 per year. The UK disclosure regime has been successful in targeting aggressive tax avoidance schemes and closing them down. In the UK the potential loss to the Exchequer is much greater than here. There is always a degree of imitative behaviour with regard to the UK. The UK Government has used information from its disclosure regime to introduce a range of anti-avoidance measures every year since 2004. Information from disclosures has informed 49 anti-avoidance measures in the UK, which has blocked off over £12 billion in avoidance opportunities. I emphasise avoidance opportunities, and not lost tax, on the main direct taxes in that jurisdiction since 2004. It is clearly a significant weapon.

Perhaps she should not engage in a discussion on codology because we must still discuss the domicile levy. I point out that 4% of taxpayers pay almost 50% of income tax in this State.

We will discuss the domicile levy next.

Section 141 relates to the domicile levy.

The Deputy has tabled an amendment.

Amendment agreed to.

I move amendment No. 101:

In page 193, before section 141, to insert the following new section:

141.—The Minister shall within one month from the passing of this Act prepare and lay before Dáil Éireann a report on the provisions of the Taxes Acts which have not been brought into operation due to the failure by the Minister to make a commencement order, and particulars of whether and if so when such an order is intended to be made.".

I brought this amendment to the attention of the Minister earlier. It proposes that the Minister bring before the Dáil those sections of the Taxes Act which have not been brought into operation. While section 110 of the Act is particular, I do not know if the Minister would regard the sections to which he referred as not having been brought into operation or whether there was simply no response. The Taoiseach, when he was Minister for Finance, decided to leave these sections largely voluntary in nature. In that sense, I do not believe he fully commenced what had been set out.

There is no reason section 110 should not be commenced or the Minister should not produce a report. The Minister indicated that his main concern about the section related to the debacle in the hotel industry. In that context, given the parallel provisions relating to private hospitals, is it not crazy to continue the private hospital arrangements? The Minister is seeking to have four more private hospitals established in circumstances in which existing private hospitals cannot survive owing to oversupply in the sector. This oversupply has been caused by a substantial increase in the number of private hospitals related to tax breaks rather than the intrinsic business of the sector. The hotel sector also experienced oversupply for the same reasons.

Will the Minister indicate whether he will commence section 110? Will he elaborate on its impact on the hotel industry? In the light of its effects on that sector, why does he propose to continue the private hospital and co-location provision? Given that this measure will rob the general hospital system, including private hospitals which could otherwise survive, why add to the mess?

The Deputy asked three questions. First, on the section proposed in the amendment, she can seek the information by parliamentary question. It does not require the Minister to lay a report before the Houses to indicate what has or has not been commenced. The use of the word "failure" in the amendment is a judgment call. As to whether there is a failure, I assume Ministers do not commence legislation because they have reasons not to do so.

On the two wider questions the Deputy raised, while we have visited the subject of resting in contract, I will return to the matter. Clearly, certain transactions took place in the development of the hotel industry where the person who had acquired the land opted not to register his or her title. That is the risk such persons took and were free to take under stamp duty legislation. The effect of changing this retrospectively would place an enormous financial burden on the hotel sector and result in the premature closure of a large number of hotels. If the Deputy would be prepared to take responsibility for such a development if she were in office, that would be fair enough, but I am not prepared to do so.

On the other question on the hospital sector, as I stated yesterday, the reliefs have been abolished. What remains is the working out of the relief for those who have availed of and made investments on foot of it. It would cause financial jeopardy for existing private hospitals were the investments which were recognised in the tax code not to be facilitated. The Deputy can check this out.

The Minister should consult a good stockbroker for advice.

The Deputy must have a better one at her disposal than I do.

I refer to people who have been involved in the hotel business for generations and have reasonably sound hotels, including new hotels that are well run as a business proposition. If one reads any of the reports, including one produced by a former expert of the Minister, Dr. Peter Bacon, one will see that they all agree the oversupply of hotel rooms currently stands at approximately 20%. The distorting effects of this oversupply on the general industry are making it extremely difficult for those involved in the business for the long term as opposed to those who invested in the business to avail of a tax break.

The Minister should commission Dr. Bacon to study the private hospital sector. Private hospitals are being kept alive by the National Treatment Purchase Fund. There are too many such hospitals and they will bust VHI because the volume of procedures continues to increase, as do VHI costs. While approximately 50% of the population have insurance policies with VHI, the figure will decrease. The Minister must appoint a panel of experts to seriously examine the private hospital initiative because the end result impacts not only on existing private hospitals but also on public hospitals which are being forced to contract out procedures through the National Treatment Purchase Fund and lose funding as a result. The position is crazy and requires examination by an economist. I would welcome a decision by the Minister to appoint someone to examine the economics of the matter. Why should we tax incentivise the building of more hospital rooms?

We have tax incentivised that which has been built. That is the issue in relation to private hospitals.

I am not aware of any co-located hospitals having been built anywhere. Where are they located? The Minister for Health and Children is pressing ahead with at least four such projects purely on ideological grounds and 11 or 12 such hospitals are in the pipeline.

The pipeline has to qualify as a pipeline for tax purposes.

Unless I am mistaken, none has been built. I have not seen any hospitals built under this initiative, although I have seen some site clearance. Have any such hospitals been built?

Amendment put and declared lost.

Amendments Nos. 102, 103, 106, 108 to 114, inclusive, and 116 to 124, inclusive, are related, consequential and, in some cases, alternative to each other and will be discussed together.

I move amendment No. 102:

In page 193, between lines 40 and 41, to insert the following:

" ‘discretionary trust' means any disposition whereby, or by virtue or in consequence of which, property is held on trust to apply, or with a power to apply, the income or capital or part of the income or capital of the property for the benefit of any person or persons or of any one or more of a number or of a class of persons whether at the discretion of trustees or any other person and notwithstanding that there may be a power to accumulate all or any part of the income and for the purposes of this definition ‘disposition' includes any disposition whether by deed or otherwise and any covenant, agreement or arrangement whether effected with or without writing;".

The amendments relate to section 141 which provides for a domicile levy to be charged on an individual who is Irish domiciled, an Irish citizen, has worldwide income in excess of €1 million and Irish located capital greater than €5 million and whose liability to Irish income tax in a relevant year was less than €200,000. The amount of the levy is €200,000 and payable annually where the conditions are met. Irish income tax paid by an individual is allowed as a credit against the domicile levy and the valuation date is 31 December each year. A number of amendments relating to section 141 are in my name. Deputies will be aware that the Budget Statement indicated that the measure was being introduced with the intention of ensuring wealthy Irish domiciled individuals made a contribution to the State during these times of economic and fiscal difficulty.

Amendment No. 108 contains anti-avoidance provisions designed to prevent individuals from transferring Irish-situate property to spouses, minor children, discretionary trusts or other entities. The absence of these provisions would render section 141 largely ineffective, as it stands, because it presents avoidance opportunities which the amendments will close off.

Amendments Nos. 102, 103 and 106 contain definitions which relate to the anti-avoidance provisions in amendment No. 108. Amendment No. 113 is a technical amendment to clarify the way the credit for income tax paid will work.

Amendment No. 114 substitutes a new section 531AF for the existing section 531AF to clarify the matters that may be included in the return to be delivered by taxpayers to Revenue under this section. The new section provides that a relevant individual is obliged to deliver a full and true return on or before 31 October in the year after the valuation date, that is, 31 December each year, together with the payment of domicile levy, of all such matters and particulars in relation to the determination of liability to the levy as the Revenue Commissioners may require.

Amendment No. 114 also substitutes a new section, section 531AG, in Part 18C of the Taxes Consolidation Act 1997 which is being inserted in the Taxes Consolidation Act 1997 by section 141 of the Bill. The new section provides that the Revenue Commissioners may give an opinion to an individual who is considering making a significant investment in the State as to whether the individual is likely to be regarded as being domiciled in and a citizen of the State in a relevant tax year. There is no obligation on the Revenue Commissioners to give such an opinion, but a statutory basis for the giving of the opinion is provided for in the legislation.

The other amendments renumber sections and subsections as a result of the insertion of the new provisions and correct drafting errors.

The anti-avoidance measures were essential because, as this proposal was originally presented, it seemed so leaky that it would have been a very simple matter to alter the test relating to Irish-located property with a value greater than €5 million. The Minister has obviously made the provision more watertight. How many fall into the category of being liable for this tax, as estimated by the Revenue Commissioners, and how much is it intended to raise?

Will the Minister outline exactly who will fall within the terms of the provision? The definition of "domicile" ought to be explained more clearly in order that we will have an understanding of to whom the Minister intends to apply it. Why has he narrowed the definition of "Irish-located property"? It seems, effectively, that the family home is the trigger because investments in companies which are trading are excluded. I do not quite follow the logic of the Minister.

What alternatives has Minister considered to deal with this issue? There is a genuine concern that people ought to be making a contribution and I worry that this provision gives the appearance of doing something rather than actually being effective. In the United States the view is taken that if one holds a US passport, one is liable to pay US tax. It is much more straightforward. I am interested in knowing what other options were considered to deal with this issue. It is a genuine issue which comes up every year in the Finance Bill and has so far defied the finding of a satisfactory solution. It is a running sore for those who believe some individuals are in a position to be in Ireland endowing this, that and the other cause but not paying taxes. It does not seem in any way to be a reasonable or sensible system of taxation.

I support this concept. It is a good idea to try to extract some form of contribution from Irish people who are non-tax-resident. However, the way in which this is being presented is wrong. It actually sends a message that if one invests in Ireland, even though one is non-resident, one will be penalised. I do not think it is unfair or unreasonable to charge a levy of €200,000, but we should not disincentivise further investment in the country. We need people to invest in Ireland and spend a lot of time trying to encourage non-Irish people to invest here. However, there is also the Irish Diaspora, the members of which should be encouraged to invest here. If we create an incentive by giving people something — that is, by paying €200,000 — we will have a far better response than if we adopt an attitude that those who invest here must pay €200,000 but that if they have less than €5 million, we will not worry about them. In other words, one can have worldwide income in excess of €1 million but that if one makes an investment of €4.5 million in Ireland or no investment at all, one will not have to pay anything. This is despite the fact that one could have an income of €200 million worldwide. It does not make sense. Because of the way this is presented, if people get angry, they can find ways and means of wriggling out of it. We should be saying, "Ireland needs you." If people have money, we should be encouraging them to give it to us. I would even go as far as to say that if, instead of asking for €200,000 a year, we were to settle for a lump sum of €5 million and give clearance for a certain number of years, we might attract some revenue. That would be workable. People abroad who have a genuine interest in Ireland would be prepared to contribute. We must be seen to apply different treatment to those who, as I said last year, make their money and leave because they do not want to pay tax — who never contribute anything to the country — and those who are located abroad for business reasons but still have a particular interest in this country and wish to continue investing in it. We should be encouraging them to invest more.

There is a simple way to create an incentive for those who are prepared to invest here: we should do away with the look-back rule that was changed last year. If a person pays the €200,000 levy, the figure of 180 days should apply, but if a person is not contributing, he or she should be stuck with the existing regime. That would be a fair incentive and would also make sense. If people have business interests here, the longer they stay in Ireland, the more money they are likely to spend here. If we cut the time they spend here by 40 days, that equates to 40 days on which there would be no spending. It is reasonable to say that if one has business interests here, one needs more time here than somebody who just goes back and forth at his or her leisure. I support the concept behind the levy and if it is presented in the right way, we can persuade people to co-operate. If somebody is non-resident and left the country many years ago, he or she may qualify to pay the levy but may not know about it. How will we get that message across?

I ask the Minister to clarify one more matter. If one is a European citizen, working and living within the European Union and paying one's taxes within a certain country, will this levy apply? If so, it could be contrary to EU law. I am not promoting the concept, but these questions need to be answered. Although I support the concept behind the levy, it should be presented in a different way. If people who have investments in this country pay their cheques, they should receive extra days; those who do not have investments or interests here should be able to stay for fewer days. That is the way to approach the issue. People who have the money will sign off without having to go through the rigmarole of the Revenue Commissioners checking their incomes. Let people sign a cheque every year and send it in. I am convinced they will do this if we create an incentive for them to do so. That is the one thing that is missing from the scheme and I ask the Minister to give it serious consideration. Perhaps on Report Stage he might come back with some adjustment to give a different picture of what could happen. I am certain there are people who have a genuine interest in this country and have many investments here and who would like to help out. However, it is like all of us, we like to feel appreciated and by giving something one would get more.

Will the Minister say how many representations he received in respect of establishing this scheme? Will he publish the contacts, representations, memos or whatever he received? If I am not mistaken, this scheme appears to be rather closely modelled on the old British scheme in that it seeks a payment. The Minister may correct me if I am wrong, but as I understand it, if someone is within the remit of this scheme and has, say, an annual income of €1 million worldwide, he or she would pay a levy of 20% but if such a person were paying Irish income tax, he or she would use that as a credit against the €200,000. This seems to be very minimalist. I imagine some of the people affected by this would be very keen to have this measure included. The ending of the Cinderella rule has been an inconvenience to several people because more compliance or information is required. There is also the issue of the families of such people in Ireland. Does the Minister have an estimate of how much he expects this group of very privileged people to contribute? These people have done very well – and well done to them – but whether for ideological reasons or otherwise they are remarkably reluctant to contribute income tax in the way other people do. We are at a point now where many ordinary people pay a relatively high marginal rate of tax. There are very privileged people who perhaps for reasons of ideology are very reluctant to contribute.

The Commission on Taxation proposed a new approach to the definition of a tax exile, relating to where such people had a significant centre of location. A recent case in the United Kingdom has unfolded where the judge specifically referred to the centre of gravity of the life and interest of the tax exile in question. The United Kingdom is trying to get people in this position to contribute more in general taxation. Does the Minister consider that he has adopted the Commission on Taxation's proposals in this regard? Does he have any estimate of the likely level of contribution? In view of the fall in property values and so on, how many people does the Minister anticipate will be affected by this section?

What is the position for non-domiciled Irish citizens who receive some form of trading income here, for example, rental income? Such people are already in the tax system as it stands and they must file some form of return. What about those outside the jurisdiction who have a house here? Let us suppose such people do not file a return as such because they simply keep a home here. How will the Minister enforce this legislation? How did the Minister derive the limit of €1 million worldwide income and located property greater than €5 million? With the changing value of property the worth of such people could go below €5 million in a given year. The original legislation refers to Irish property and its valuation in respect of an individual and this reference means all property situated in the State. It refers to but does not include shares in a company which are used wholly or mainly for the purposes of carrying on a trade or trades. These are shares which derive the greater part of their value from subsidiaries.

The Minister tabled amendment No. 103 which refers to a foundation as any legal entity established through which an individual disposes or transfers assets. Amendment No. 108 refers to an entity as including all assets and properties which an individual has disposed of or transferred to foundation for less than market value on or after 18 February. Does this mean assets will now include shares in a company? Does it override the original provision?

That is not intended.

Will the Minister explain the basis of the amendment referring to a foundation, which means any legal entity? How does this interact with the specific reference on page 194 to Irish property and what is exempted? I seek clarification on that point.

A number of matters have been raised. I will start with those referred to by Deputy Bruton, who opened up the debate. He stated that the base in respect of the income in the State appeared to be very limited. In fact, all non-trading income in Ireland qualifies. Non-trading property does not qualify, but all non-trading property in Ireland qualifies in the computation of the property threshold. I am sorry I used the word income initially. All non-trading property qualifies. That is important because it is a wide, basic definition.

Beyond that, Deputy Bruton contented himself with commenting that this matter had been a running sore and that in the United States passports were used. I will deal with each matter. It is a running sore in part because of the amount of inaccurate information constantly circulated about the subject. For example, for the 2007 tax year, the latest year for which tax figures are available, some 7,228 non-resident individuals filed Irish tax returns in respect of their Irish-sourced income or income derived from working here. To describe those 7,228 individuals as tax exiles creates a running sore for Ireland. Many are individuals perfectly entitled as non-resident individuals to comply with Irish tax requirements and file an Irish tax return in respect of their income derived from working here. It does not necessarily mean because they have filed a tax return that they are automatically tax exiles. The total amount of tax paid by these persons was €43 million in that year.

Many of the individuals among that cohort of 7,228 state on their tax return that they are non-resident in the State and do not have an Irish address. Many of these non-residents are foreign nationals or have a foreign domicile and many of the non-resident Irish citizens or Irish domiciliaries included in this figure may have become non-resident for reasons unrelated to taxation but may have retained Irish investments such as rental property. Irish people leave Ireland and settle in other countries and are entitled to do so. It does not mean they should automatically be characterised as part of a block of 7,228 tax exiles. Individuals leaving the State to date are not required to give reasons for leaving the State. There is no legal obligation, unlike some other countries in the past, to give a reason for leaving Ireland. That is the position in respect of these individuals. It is simply inaccurate to suggest, as has been suggested on repeated occasions in this debate, that 6,000 individuals are tax exiles. Some non-residents have an Irish tax liability. It is simply not true to say that all or most of them are Irish domiciled individuals who have moved out of Ireland for tax reasons.

The second point raised by Deputy Bruton was the question of the United States practice and that there must be a simple solution to the issue raised. The United States uses citizenship as a basis of taxation and as the connecting factor. For us to do so would be extraordinarily difficult. It would mean that we would apply our tax laws in Northern Ireland to all residents born there to whom we attribute citizenship and that, of itself, would create an immediate class in excess of half a million potential taxpayers with whom the Revenue would have to deal extra-territorially. That is before one considers the generous attribution of citizenship which takes place in our nationality and citizenship code, which allows nationality by descent to the grandchild as well as the child on the submission of the appropriate declaration by the citizen.

There is a wide category of persons in North America and Europe who are subject to Irish tax requests. I recall visiting France on St. Patrick's Day to promote Irish interests there and discovering there are 50,000 Irish citizens there. Deputy Barrett referred to the need to generate goodwill among Irish people living abroad. I cannot believe generating a tax return for 50,000 individuals in France or 500,000 individuals in Northern Ireland would generate very much goodwill for this State or collect very much revenue. I do not think citizenship is available to us as a basis for taxation because there is a fundamental distinction between a small country like Ireland with a very large number of expatriates and a large country like the United States which has a commanding presence in the wider world and whose expatriates necessarily tend to have a far closer connection with their mother country than many of ours do.

Deputy Barrett intervened and was concerned about dangerous messages in this area for non-residents. That is why a specific provision is included in the Bill in order that Revenue can give an advisory opinion to someone regarding his or her Irish citizenship or domicile. I was anxious, in terms of attracting investment to Ireland, to ensure in this provision that large numbers of persons around the world who are not Irish domiciliaries or citizens can be reassured that the mere purchase of assets within the jurisdiction does not make them the subject of the domicile tax. That is an important issue and one which has been addressed with an express statutory power conferred on the Revenue Commissioners. Otherwise, tax practitioners may write text books suggesting Ireland may be a place where anyone in the world could be taxed if he or she decided to buy an item of property here. It was important to put that beyond doubt in the primary legislation. We have gone very far in this debate but it is important that we work out the implications of it.

As I understand it, Deputy Barrett's essential argument was that in return for paying some money, an additional amount of days should be made available to those who are paying the money. It is not possible to view Revenue law in that way. The current arrangement regarding days is founded on international conventions and takes the not irrational period of a half a year as the appropriate period of time to determine whether a person is or is not in the State. A previous Government introduced a rule which provided that a day of departure would not be reckoned, which was repealed. One can argue that it has opened up a potential injustice not in the context of the day of departure, but in the context of days of departure and arrival. In aggregate terms, there are some individuals who, in fact, do not spend substantial periods of time in the State which are now reckoned for that purpose because of the division of the particular days. Even if one were to examine a proposal in that regard, it would have to have some definite limitation imposed upon it.

I am afraid I have to interrupt as there is a vote in the Dáil.

I have not dealt with Deputy Burton yet.

Does the Minister wish to return to finish section 141?

I am in the hands of the committee. As I understand it — I am subject to correction by Deputies — it is the last major issue of substance in the Bill.

I have one amendment at the end which is not contentious.

We will suspend and resume to finish section 141. We can decide what to do after that.

Sitting suspended at 8.35 p.m. and resumed at 8.50 p.m.

The Minister was responding to Deputy Burton.

I had dealt with the points raised by Deputy Bruton and Deputy Barrett so I was dealing with Deputy Burton's questions on the whole subject of the domicile levy. First of all, I had no representations about this subject. I received no representations prior to the budget speech and I have received no representations since the speech about this particular matter. It is not modelled on any United Kingdom scheme. It is, as one of my predecessor's would say, an Irish solution to an Irish problem. In regard to the income tax credit, if someone is paying income tax within the jurisdiction, it——

That Irish solution was clingfilm and it did not prove very enduring.

It lasted about 12 years. If this one lasts as long it will be quite enduring in this context.

In regard to the income tax credit, if income tax is paid then it is credited against the payment. On the issue of an estimate of income, it is difficult to arrive at any estimate of income because a very large number of the 7,228 identified in 2007, or the 6,000 that are referred to regularly in press bulletins, are genuine individuals who do not have residence in Ireland and, therefore, are not liable to pay tax here and have very little connection with this country.

The Commission considered the position relating to vital interests and I examined the requirement in this regard, which relates to the conventions — as they operate between states — that already exist in respect of residency. It is not a standard which has any great precision. What has been arrived at here has far more precision in the context of the categories of domicile and citizenship, which are clear-cut in nature. The fact that citizenship is included means that the vital character of the interest is clearly demonstrated.

Deputy O'Donnell inquired about foundations, which are widely defined as entities known as establishments or trust enterprises where the legal ownership passes to a person. These entities can be established under the laws of countries such as Liechtenstein, Switzerland, the Netherlands, Belgium, France, Austria and Germany. The word "foundation" is included in the anti-avoidance provision for that reason.

The Deputy also inquired about Revenue's powers in respect of a person who has property in the jurisdiction but who has no apparent income. The Revenue is satisfied that it is wide-ranging powers to deal with instances where it believes a person is not revealing any information relating to offshore property and income. There are a number of mechanisms available to it.

It is a question of balance with regard to how one prescribes limits. If, for example, a lower capital limit were to be introduced, a person who simply happens to have a residence here but who is clearly working elsewhere could encounter serious difficulties under Irish tax law.

Shares in a company which is wholly or mainly for the purpose for carrying on a trade remain outside the remit of this provision.

Yes. Such shares do not constitute wealth, they are investments.

We are seeking to tax people who are domiciled here and who are Irish citizens but who are living abroad.

No, they are tax resident abroad.

I apologise. That was a slip of the tongue. If we consider the matter in reverse, has the possibility of encouraging people who are Irish domiciled and Irish citizens but who are tax resident abroad to invest here been considered?

That matter is always under examination. The Revenue is being given power to issue opinions in order that non-domiciliaries and non-citizens can rest assured in respect of their position here. The requirements are cumulative. One must be a citizen and be domiciled here. The two are not separate.

Has the possibility of encouraging investment on the part of Irish citizens who are living abroad or who are domiciled here been considered, particularly in the context of bringing a flow of funds back into the economy?

That matter is always examined in the consideration of the taxing statutes. However, it is dependent on the particular provision. We are referring here to income tax, corporation tax and the main rubrics of taxation as well.

In the overall context, has consideration been given to introducing specific measures to encourage people to invest here?

I do not know what the Deputy has in mind. Is he suggesting that these people should be granted a tax holiday?

No, I am not. I am suggesting that there is a lack of investment in this country at present and that there are many people living abroad who have funds available to them which could be invested here. This is just something which might be considered.

It could always be considered. As I sense it, however, the trend among members of this committee is against tax reliefs. If the Deputy wants to encourage such investment here, tax reliefs would have to be provided. That would be the easiest way to attract the funds to which he refers.

What is the position in respect of family trusts and individuals who fall within the terms of this provision? A number of high-profile individuals have shaken the dust of Ireland off their feet since the collapse in the property market. These individuals have gone to live in Switzerland — this is particularly true of one prominent person who would be known to many of those present — and various other destinations, including Monaco, for the duration. Some of these people, or their investment companies, are heavily embroiled in NAMA. What is the position in this regard? Are these people in a position to become tax exiles in Switzerland while their interests here are being dealt with through NAMA? I do not know if those to whom I refer are trying to escape Revenue, the banks or both.

The Deputy raises two issues. First, family trusts will be captured by the anti-avoidance measure in the amendment before the committee. Second, it is clear that high-profile individuals travelling between countries in the European Union or the European economic area, EEA, have freedom of mobility. NAMA, the Government or the Oireachtas cannot interfere with their rights in this regard. In the context of their exercising their right to travel, we are trying to work through the tax implications here. The key issue relates to the underlying sums they may owe NAMA if their assets are transferred to it. In the context of the legislation under which NAMA was established, an extensive discussion took place with regard to the enforcement measures that would be available to it.

In one high-profile case, an individual left Ireland a number of months ago and has taken up residence in Switzerland. This person is mentioned as a prominent investor in deal relating to the Irish Glass Bottle Company site and a number of other deals. The declarations indicate that this individual is becoming a non-resident for tax purposes. I do not know whether this was previously the case but the man in question is certainly indicating that he is so now. What is the position with regard to such an individual?

As the Deputy is aware, this section does not relate to any particular individual. She should not refer to any person, either by name or in such a way as to make him identifiable.

A number of individuals have declared that they are becoming non-resident for tax purposes. What are the implications of this for NAMA? I had been of the view that there were certain commitments, information, etc., in respect of the latter which——

We are not discussing NAMA.

I am not clear how this relates to the Finance Bill. The difficulty with this entire debate is that people are free to move around the European Union and, indeed, the rest of the world. Tax law attaches consequences to the decisions individuals take with regard to how they move and where they move. I appreciate that the Chairman does not wish the committee to be drawn into a debate on NAMA. However, I am not aware that a person's place of residence has any relevance in respect of NAMA. A person either owes the agency money or he or she does not. Irrespective of where such a person resides, he or she owes that money and it can be collected in whatever way possible.

Am I correct to say that debts relating to properties are not taken into account? If one owns a property that is worth €5 million but to which debts of €2 million are attaching, one does not deduct that €2 million and state that one's net property value is €3 million. The net property value is €5 million.

Debts do not apply. I appreciate that the Minister probably wants to conclude our deliberations on the Bill for this evening. However, I wish to refer to a matter I raised earlier. I am not concerned about people who fled the country in order to avoid paying tax. I am, however, concerned about genuine individuals who have business interests across the globe, some of which happen to be located in this country. For whatever reason, those to whom I refer find it more convenient, and not necessarily for tax reasons, to live outside the country. These people are more important that those who have "done a runner".

I want to ensure that people who have business here are encouraged to extend and keep their business here. If they pay their €200,000, or whatever is required, perhaps an option of a lump sum, so be it. We should incentivise such people to do their business here in some comfort without feeling they are a plague on Irish society. That is the way we must look at things. As the Minister said, the world is a small place now. People live all over the place. In the European Union every citizen has the right to travel and settle in any of the 26 other member states. That is the reality. I want to encourage people who have ties and business interests in this country to keep them here, extend them and keep investing. They should be encouraged to invest in items such as Government stock and other schemes. That is important to this country.

The message I tried to put across today is that we should not make these people feel unwelcome. I have no time for those people who take the short cut when they have made a lot of money in this country and then forget about the place. I am not at all interested in them. I am interested in those people who have a keen interest in this country but who, for business reasons, find it more convenient at this time to locate and run their businesses in another country. However, that does not mean they do not want to be based in Ireland. We should be seen to incentivise them and tell them they are welcome. We can ask for their cheque and we will get €200,000 for doing nothing. To me, that is basic common sense.

We shall move to the amendments. Amendment No. 102——

Will the Minister indicate whether he will consider doing something about that on Report Stage?

I am not sure what I am being invited to consider.

I have given the Minister one idea, namely, he should give some extra time to allow people do their business here in the way they used to.

The former arrangement regarding the day of departure was open to abuse because of the extension. If somebody left the jurisdiction at 11 o'clock at night, for example, or arrived at that time, the amounts of time involved were such that there was a complete disproportion. Extra days were earned. Because Deputy Barrett raised the issue, I will examine whether we might consider aggregating not only days of departure but days of arrival in terms of the period spent outside the jurisdiction and whether that can be reckoned for any purpose. However, there would have to be a very definite ceiling placed upon it.

The arrangement the Minister is offering to tax exiles is an extraordinarily generous one. Most of these people are very grateful to him for the arrangement.

That gratitude has not been expressed to me.

Let me make my point. For these people, a row back on the Cinderella rule would be a bridge too far. The Minister must bear in mind that very ordinary people in ordinary jobs with ordinary mortgages pay their tax and contribute. They might not love doing this but they do it and they are taking big hits at present. There is a balance to be struck and that balance is that when people are fortunate through their own hard work and acumen to have made so much money it is not unreasonable to ask them to contribute in Ireland if they wish to live in this country. That is the essence of a republic. They are getting a very generous deal here. We will not know until it starts to work but I have not heard a peep from any of them other than to express significant pleasure at the thought of this offering.

The Deputy and I have heard nothing from these individuals. Let us deal in facts, not intimations of significant pleasure that do not exist.

That is the indication. These individuals are not behind the door in letting their views be known through a variety of sources. So far we have heardnada in terms of commentary and that speaks for itself.

I do not know the individuals Deputy Burton is discussing. I am not talking about any particular person but I know people who have substantial business interests in this country who wish to extend those interests. For business reasons they live abroad. They are not tax cheats but decent ordinary people doing their business. On at least one occasion, as I happen to know, the change in the rules has significantly affected the way in which they do their business. They have options. Ultimately, people have options.

Yes, they can leave the country.

They can leave and they can reduce their assets and we would get nothing. All I am saying is that the people who do nothing, who do not invest in this country, will not come to pay this sum of €200,000 even though they may have made €100 million here. The idea is absurd. One might have no assets in Ireland but might have €10 million in annual income and yet not pay a penny here. If one has business interests in the country one has to pay €200,000. That does not make sense to me. That is neither right nor left thinking. It is just daft. The person who provides jobs and invests in this country will be asked to pay €200,000 while the person who does nothing and has no investments of any kind does not pay anything. It is crazy stuff.

I gave my view on this. I agree with the Minister that at least there is a beginning here. Let us hope he can do more.

Amendment agreed to.

I move amendment No. 103:

In page 194, between lines 4 and 5, to insert the following:

" ‘foundation' means any legal entity, wherever established, to which an individual disposes of, or transfers, property, irrespective of—

(a) how that entity is described in the place of establishment, and

(b) the name by which that entity is called in the place of establishment;”.

Amendment agreed to.
Amendments Nos. 104 and 105 not moved.

I move amendment No. 106:

In page 194, between lines 30 and 31, to insert the following:

" ‘minor child' means a child who has not attained the age of 18 years and is not and has not been married;".

Amendment agreed to.
Amendment No. 107 not moved.

I move amendment No.108:

In page 196, between lines 2 and 3, to insert the following:

"(2) Subject to subsection (3), for the purposes of the definition of ‘Irish property' in subsection (1), an individual shall be deemed to be beneficially entitled in possession on the valuation date to—

(a) all property situate in the State which the individual has transferred to his or her spouse or minor children, for less than market value, on or after 18 February 2010,

(b) all property situate in the State which the individual has disposed of, or transferred, to a discretionary trust, for less than market value, on or after 18 February 2010, and

(c) all property situate in the State which the individual has disposed of, or transferred, to a foundation, for less than market value, on or after 18 February 2010.

(3) (a) Subsection (2)(a) shall not apply to a maintenance arrangement (within the meaning of section 1025).

(b) Subsection (2)(b) and (c) shall not apply to a discretionary trust or a foundation, as the case may be, which is shown, to the satisfaction of the Revenue Commissioners, to have been created exclusively?

(i) for purposes which, in accordance with the law of the State, are charitable, or

(ii) for the benefit of one or more named individuals and for the reason that such individual, or all such individuals, is or are, because of age or improvidence, or of physical, mental or legal incapacity, incapable of managing that individual's or those individuals' affairs.".

Amendment agreed to.

I move amendment No. 109:

In page 196, line 3, to delete "(2)" and substitute "(4)".

Amendment agreed to.
Amendment No. 110 not moved.

I move amendment No. 111:

In page 196, line 10, to delete "(3)" and substitute "(5)".

Amendment agreed to.

I move amendment No. 112:

In page 196, line 14, to delete "(4)" and substitute "(6)".

Amendment agreed to.

I move amendment No. 113:

In page 196, lines 26 and 27, to delete all words from and including "before" in line 26 down to and including "payable" in line 27 and substitute the following:

"at the same time as, or before, domicile levy for that year is paid".

Amendment agreed to.

I move amendment No. 114:

In page 197, to delete lines 9 to 26 and substitute the following:

531AF.—(1) A relevant individual shall, as respects a tax year, on or before 31 October in the year after the valuation date, prepare and deliver to the Revenue Commissioners a full and true return, together with the payment of domicile levy, of all such matters and particulars in relation to the determination of liability to domicile levy as the Revenue Commissioners may require.

(2) A return under this section shall—

(a) be in such form as the Revenue Commissioners may require,

(b) be signed by the relevant individual, and

(c) include a declaration by the individual who signed the return that the return is, to the best of that individual’s knowledge, information and belief, correct and complete.

531AG.—(1) On an application to the Revenue Commissioners by an individual who is considering the making of a significant investment in the State, they may give an opinion to the individual as to whether or not, in the tax year in which the application is made, the individual would be likely to be regarded as an individual to whom paragraph (a) of the definition of ‘relevant individual’ in section 531AA(1) applies.

(2) An application for an opinion under subsection (1) shall be in such form and contain such information and particulars as the Revenue Commissioners may require in relation to such an application.

(3) Nothing in this section shall be construed as obliging the Revenue Commissioners to give the opinion referred to in subsection (1).".

Amendment agreed to.
Amendment No. 115 not moved.

I move amendment No. 116:

In page 197, line 27, to delete "531AG" and substitute "531AH".

Amendment agreed to.

I move amendment No. 117:

In page 198, line 1, to delete "531AH" and substitute "531AI".

Amendment agreed to.

I move amendment No. 118:

In page 198, line 16, to delete "531AI" and substitute "531AJ".

Amendment agreed to.

I move amendment No. 119:

In page 198, line 23, to delete "531AJ" and substitute "531AK".

Amendment agreed to.

I move amendment No. 120:

In page 198, subsection (2)(a), line 27, before “is” to insert “of the Principal Act”.

Amendment agreed to.

I move amendment No. 121:

In page 198, subsection (2)(b), line 30, before “is” to insert “of the Principal Act”.

Amendment agreed to.

I move amendment No. 122:

In page 198, subsection (2)(b), line 31, to delete “subparagraph (iii)” and substitute “subparagraph (iiia)”.

Amendment agreed to.

I move amendment No. 123:

In page 198, subsection (2)(c), line 33, before “is” to insert “of the Principal Act”.

Amendment agreed to.

I move amendment No. 124:

In page 198, subsection (2)(d), line 36, before “is” to insert “of the Principal Act”.

Amendment agreed to.
Question proposed: That section 141, as amended, stand part of the Bill."

Amendment No. 114 states that on application to the Revenue Commissioners, an individual who is considering the making of an investment in the State can seek an opinion. However, subsection (3) states, "Nothing in this section shall be construed as obliging the Revenue Commissioners to give the opinion referred to in subsection (1)". It seems to be a bit contradictory. One can set out a case, but at the end of it all one will not get an opinion. What is the point of going in in the first place?

A person cannot go into the High Court and ask it to compel the Revenue to give him or her an opinion. That is the effect of the drafting.

Someone may be invited in to talk to the Revenue Commissioners, but at the end of it they are not prepared to give a result.

I will have a look at it.

I thank the Minister.

Question put and agreed to.

As agreed, we will now suspend the sitting and resume at 10.30 a.m. tomorrow. The Minister will not be with us tomorrow so I would like to thank him for his detailed, open and wide-ranging replies. I congratulate him on putting together a fine Finance Bill.

I thank members of the committee for their assistance and for the quality of the debate. Most of the amendments tomorrow are technical in character.

I must signal my intention to bring forward amendments on Report Stage on the withholding tax, outbound royalties, removing or transposing from the NAMA legislation to this legislation Revenue powers regarding information for individuals and companies — the EU is unhappy with NAMA having this power and prefers the Revenue to have it — and providing for a bilateral loan agreement with the IMF.

I propose that our consideration of the legislation should resume at 10.30 a.m. tomorrow. Is that agreed? Agreed.

Progress reported: Committee to sit again.
The select committee adjourned 9.30 p.m. until 10.30 a.m. on Thursday, 25 February 2010.