Tuesday, 1 October 2019

Questions (63)

Pearse Doherty


63. Deputy Pearse Doherty asked the Minister for Public Expenditure and Reform the rent paid by the Office of Public Works for the rental of properties (details supplied) in each of the years 2014 to 2018, inclusive, and to date in 2019; and if he will make a statement on the matter. [39622/19]

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Oral answers (6 contributions) (Question to Public)

The Office of Public Works, OPW, has paid Green REIT €10.5 million to rent 85 to 93 Lower Mount Street and €5 million to rent a property in Harcourt Street since 2014. Given the lenient tax structure and treatment backing up this international investors group, which is pricing families and domestic businesses out of the market, I ask the Minister why the Government, through the Office of Public Works, is renting properties in Harcourt Street and Lower Mount Street from Green REIT.

The Deputy's question asked me to make the levels of rent in those two properties available to the Dáil, which I have done.

In terms of why we are making use of those properties and paying those rent levels, it is because the OPW has judged that this is the best way of securing property for the State offices using these properties and that the rent is at a level it believes offers best value to the taxpayer.

The Minister needs to examine a number of issues before we dismiss the fact that we are pumping millions of euro into this company through rental income. The first aspect that concerns me is the sale of Green REIT itself, which is the landlord in this case. Under the Minister’s watch, Green REIT and its shareholders have enjoyed tens of millions of euro in tax being avoided through the sale of properties earlier this year under the capital gains tax, CGT, exemption. We now have Henderson Park, which will purchase the Green REIT shares. There is a loophole in the legislation which allows for it not to pay the 6% commercial stamp duty, which should be paid on commercial property and the sale of shares, but instead 1% on Green REIT shares will be paid in respect of this transaction.

This is despite the fact that Green REIT’s portfolio consists entirely of commercial property. Given that Green REIT was sold for €1.34 billion, this is a loss to the taxpayer, who has paid over €15 million in rent on these two properties. This comes to a loss of €67 million to the taxpayer because of this loophole. If the Minister will use public moneys to rent from Green REIT, will he at least ensure that the company pays its taxes? Will he give us a commitment that he will close down the capital gains tax exemption and fix the commercial property stamp duty loophole in the forthcoming finance Bill?

It would not be appropriate for me to comment on the rental or even the tax arrangements of any particular company or organisation in the State. However, this is an issue which I did investigate in the context of the tax strategy group papers we published during the summer. In these, we assessed the contribution entities like this are making to housing and commercial property output in the State and what is the information we can make publicly available regarding the levels of tax they are paying. However, it simply would not be appropriate for me to comment on any single organisation or company such as this, let alone the tax it pays.

I have already asked parliamentary questions on this matter. The replies are clear that Green REIT will not pay the 6% stamp duty on this transaction. Instead, it can avail of a loophole in the tax code that will allow it to pay 1%. The latter means that the taxpayer is being screwed over to the tune of €67 million on foot of this one transaction. This is a structure which does not pay capital gains tax on the disposal of assets. We also have limited taxes on these structures in the first instance. We know, for example, that rental income is paid out in dividends which are then paid to investors. The Central Bank believes that half of the total equity in Irish REITs is held by overseas investors. The dividend withholding tax - the introduction of which I argued for - is set at 20%. We know, however, that this is only a rate on paper because many of these companies, as a result of double tax treaties, can reduce their rate to on average 15% and, indeed, that many more can reduce it even further.

As far back as 2012, the Department of Finance was forecasting significant tax leakage as a result of the REIT structure. I have pointed out three different areas in which that leakage is happening. The Minister needs to close these loopholes in the finance Bill.

As a result of the debate I had with the Deputy on last year's Finance Bill regarding the level of tax associated with the organisations and companies in question, I put in place a process which led to the publication of the tax strategy group paper this summer. My strong view is that all companies, large and small, must pay a fair level of taxation. The Deputy knows I cannot comment on any particular organisation and the tax it pays.

The Deputy asked me for information regarding the rent from properties that this entity earns from the State. I have made that information available to him.