Dáil Éireann Debate, Wednesday - 5 July 2017
21. Deputy Seamus Healy asked the Minister for Finance his plans to legislate before the summer recess to make certain that a tax-avoidance loophole cannot continue in view of the report in a newspaper (details supplied). [31794/17]
View answerSince 2011, up to 200 high net worth individuals, in other words wealthy and powerful people in society, including many household names, have been involved in a tax scam allowing them to avoid paying up to €500 million in tax. This involves the transfer of valuable rights attaching to shares in a company to shares owned by its members. I ask the Minister to put a stop to this once and for all by bringing in legislation before the recess to make sure this scam cannot continue.
I assume the Deputy is referring to a recent Circuit Court decision regarding the tax treatment of the transfer of share rights from a company to its shareholders. I am advised by the Revenue Commissioners that section 130(3)(a) of the Taxes Consolidation Act 1997 provides that the transfer of an asset by a company to its members constitutes a distribution for tax purposes. In regard to the case in question, the view of the Revenue Commissioners is that the transfer of rights attaching to shares owned by a company to shares owned by its members amounts to a transfer of an asset and, as such, is a distribution pursuant to section 130(3)(a).
Both the appeal commissioner and the Circuit Court have ruled in favour of the Revenue Commissioners and determined that the transfer of share rights is chargeable to income tax as a distribution in the way I have outlined. It is, therefore, considered by the Revenue Commissioners that the current legislation operates as intended and is sufficiently robust to provide for distribution treatment on such share rights transfers. The Revenue Commissioners will continue to challenge taxpayers who attempt to extract cash from companies in a tax-free manner.
The Revenue Commissioners carry out a robust programme of compliance interventions to minimise the burden on the compliant taxpayer and tackle the non-compliant taxpayer. This involves taking account of all risks that apply to a taxpayer across all taxes and duties. The role of the Revenue Commissioners is to recover any unpaid tax or duty along with interest and penalties.
The anti-avoidance units of the Revenue Commissioners specifically deal with the identification and challenging of aggressive tax-avoidance schemes in the way I have outlined.
I am simply not happy with the Minister's reply. My question relates to the future. We understand that this matter has been before the courts. The Circuit Court has found in favour of the Revenue Commissioners but we are aware that there is an appeal pending. We obviously cannot interfere with what happens in the courts but what happens in the future is not a matter for the courts; it is a matter for the Government. It is the responsibility of the Government to introduce legislation to ensure this loophole is closed, and closed for all time. I asked the Minister to do that again.
It is important to remember that the individuals involved are household names. They are very wealthy and powerful and are part of a group with significant financial assets, amounting to €37 billion more than at peak-boom levels. They have done very well out of the recession and the recovery. There is no doubt they have used their position in this regard effectively to be part of a scam against the State and the public generally.
The answer to the question is contained in the Deputy's own statement. Look at what happened. The Revenue Commissioners became aware of a matter and issued amended tax assessments in regard to it. A challenge was brought to the appeals commissioner and the Revenue Commissioners won. They were then brought to the Circuit Court, where they also won. There was a further appeal. That appeal was heard and the Revenue Commissioners won. Therefore, at each stage of this process when the Revenue Commissioners became aware of this issue and took action thereon, on which action it has been challenged, the law they have used and the way in which they have acted have been upheld. For those reasons, the Revenue Commissioners have advised me that no change to the law is needed as its position is being upheld. As the Deputy will be aware, in the Finance Acts 2012, 2013, 2014 and 2015, action was taken on the advice of the Revenue Commissioners and others to deal with the issue of tax avoidance.
Again, what I am referring to is the future. It is a matter for the Government to ensure that the activity in question is precluded in the future. The Minister referred to budgets in 2012, 2013 and 2014. Issues arose in those budgets since the profits of banks are now not taxable until 2047. The question of the taxing of vulture funds was addressed in those budgets. This matter needs to be tackled urgently. It needs to be dealt with through legislation and this should be done before the recess.
This matter is being tackled and dealt with by the Revenue Commissioners.
There would be a plausible case to make that the law needs to be changed if the Revenue Commissioners were losing the appeals or losing their case in the Circuit Court, but they are not. The law and the way the Revenue Commissioners are acting are being upheld by the recent rulings in the way that I have described to the Deputy. Since 2014, a number of taxpayers have settled their cases with the Revenue Commissioners in the particular area that Deputy Healy referred to. The yield to the Revenue Commissioners from those cases in tax, interest and penalties was €11.8 million. If at any point I am advised by the Revenue Commissioner on this or on any other matter that further legislation or a change in legislation is needed, of course I will consider it and bring it to the Oireachtas at the first possible opportunity. As the Deputy acknowledged himself in his question to me, the stance of the Revenue Commissioners has actually been upheld by each of the hearings the Deputy referred to.
