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Special Committee Corporation Tax Bill, 1975 debate -
Wednesday, 25 Feb 1976

SECTION 104.

Question proposed: "That section 104 stand part of the Bill."

This is a section which empowers an inspector by written notice to request information to enable him to implement the provisions relating to close companies and it requires companies and individuals to supply the information.

Does it apply to professionals, such as accountants, solicitors? It obviously does.

The obligation lies on the company to supply the information.

It goes on in sub-section (2):

If for the purposes of this Part any person in whose name any shares are registered is so required by notice in writing by the inspector, he shall state whether or not he is the beneficial owner of the shares and, if not the beneficial owner of the shares or any of them, shall furnish the name and address of the person or persons on whose behalf the shares are registered in his name.

This is to deal with cases where a nominee holds the shares.

I suppose that battle has been fought and lost already. A solicitor holding shares now must disclose this information.

That is the position under the existing law.

I would have less objection to a solicitor having to disclose the beneficial ownership of shares in his name if people want to appoint him as a trustee or something of that kind on their behalf. They would have to accept that he could not personally be expected to pay tax, for example, on shares registered in his name of which he is not the beneficial owner. It would be very unfair to him. He would not wish, for his own benefit, not to disclose the actual beneficial ownership of the shares. What I particularly object to, although I do not know if it arises specifically under this section, is the legislation which exists to force solicitors to disclose things—not of that kind—but to disclose the confidential affairs of a client and similarly, of course, with accountants.

The only information he requires is the name and address of the person on whose behalf these shares are registered. Then the inspector would pursue his claim for tax against the person who is the beneficial owner of the shares. The tax liability of the person in question, the control over a company, and so on, would all be matters which could not be determined until the actual beneficial owner was disclosed. The provisions of the Income Tax Act, 1967, are similar. Paragraph (11) of Schedule 16 states:

Any person in whose name any shares of a company are registered shall, if required by notice in writing by the Revenue Commissioners, state whether or not he is the beneficial owner of those shares, and if not the beneficial owner of those shares or any of them shall furnish the name and address of the person or persons on whose behalf the shares are registered in his name.

Perhaps arising out of this broader issue, in the case of bearer securities, and bearer bonds, if the Irish Revenue authorities in pursuance of the exercise of their responsibilities, extract the name of a non-resident to whom bearer bonds have been issued, does that information remain with them? Are there any circumstances in which they might disclose it to other Revenue authorities?

Offhand the Revenue Commissioners cannot envisage any case where there would be such——

There used to be a sound old maxim in the old days that the Revenue authorities of one country would not enforce the revenue laws of another. Broadly speaking, is that still the principle?

A lot of sound maxims have gone by the board.

In pursuance of this section, the Irish Revenue Commissioners will only use this information for their own purposes?

They will use it for their own purposes. There may, of course, be obligations under double taxation agreements for the passage of information.

I can understand that, but otherwise?

Otherwise, no. Consideration is being given at the moment in the European Economic Community to an increased flow of information between the Revenue authorities——

Good God.

An issue upon which there is disagreement is the extent to which such information, if given, could be used in different countries. There are different approaches to it. Ours is probably the most conservative.

Subsection (4) refers to bearer securities issued by a company. Could I inquire from the Minister whether there is any authority under our Companies Act, 1963, to have the sort of situation one has in relation to Australian mining companies whereby no register of members as such is kept and bearer certificates bearing no name are issued.

I am unable to answer that, and my advisers likewise.

I believe there is no provision under our company law or under British company law. You never see either an Irish or a British company issuing bearer certificates. Each public company in Ireland and Britain has to maintain a register of members. Unfortunately for a very large number of people in Limerick and Galway, the same does not apply in Australia and Canada. Enormous losses were suffered by many people who could ill-afford to suffer those enormous losses.

How could you not ill-afford to suffer enormous losses?

You could suffer a bigger loss than I could. Subsection (4) refers to bearer securities. I take it this only applies to Australian and Canadian mining companies or any other companies who may issue these securities.

This would be a close company. In fact, it has to be resident here. This would envisage Irish companies issuing bearer securities but having the names and addresses of the people to whom they have issued.

That would pre-suppose that there is power under the 1963 Act to issue securities of this kind. It would be a great help if we knew whether there was.

I will look at this. I am not certain whether such power exists.

In fairness, if an Irish company is to be caught under this subsection, the very nature of the bearer certificates, or warrants, is that the company itself genuinely does not know who the beneficial owners are because the owner is the holder for the time being and, even if you steal the warrant or certificate, so far as the company is concerned you are the owner if you have it in your physical possession.

We must remember that we are dealing with a close company and not one where transactions will take place unbeknownst to the people in control of the company. It is not like a public company where there might well be some transactions which occurred without the knowledge of those managing the company. The last paragraph of sub-section (4) says what securities are. They include promissory notes or other instruments evidencing indebtedness issued to a loan creditor of the company.

It does clearly include the sort of bearer certificate to which Deputy O'Malley referred. It also has implicit in it the fact that the company must know the name and address of the person to whom the bearer certificate is issued.

That is not an unreasonable assumption in the case of a close company.

It opens up an interesting area. If a company here issues a bearer security to a named person and that is subsequently transferred by a simple physical transfer, an Irish company, at that stage, only knows the person to whom it issued it.

That would be the only information the company would be required to furnish. The inspector might then make his inquiries and find that the securities had travelled further.

The subsection speaks only of the persons to whom the securities were issued and the respective amounts issued to each person. Yet they can be transferred by the simple passing of physical possession.

They may be pursued through clause (b). It says:

any person to whom securities were issued as aforesaid, or to or through whom such securities were subsequently sold or transferred, to furnish him with such further information as he may require with a view to enabling him to ascertain the names and addresses of the persons beneficially interested in the securities.

I think the bearer securities are a very bad job. I know it is not within the scope of this Bill and does not come within the Minister's portfolio—I think it is Industry and Commerce. If there is power under the 1963 Act to issue them, that power should be done away with in the light of recent events.

Question put and agreed to.
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