Dáil Éireann Debate, Tuesday - 9 November 2021
83. Deputy Mairéad Farrell asked the Minister for Finance the measures he is taking to improve regulation in relation to tax fraud schemes and to ensure that scandals such as in a recent case (details supplied) do not reoccur in view of Ireland’s role in same; and if he will make a statement on the matter. [54359/21]
View answerI am aware of the matter that the Deputy has raised as this has been a widely published scandal within the EU. I also note that the Deputy raised this issue last week at a meeting of the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach at which representatives from the Central Bank of Ireland provided some details on the topic.
On the specific case mentioned by the Deputy in relation to dividend arbitrage schemes, my officials have been informed by the Central Bank of Ireland that they cannot comment on individual cases but that they can confirm all of the funds referenced in the recent media reports have been revoked and are no longer in existence.
In terms of the broader regulatory environment, the Central Bank of Ireland, as the independent regulator of financial services providers and financial markets in Ireland, is committed to effective supervision in keeping with their mandate to both protect investors and the integrity of the market, as well as safeguarding financial stability.
At the authorisation stage of an investment fund, the Central Bank assesses a number of areas when considering whether the asset composition of a proposed fund is appropriate. Since 2019, all funds seeking to undertake atypical strategies, must make a pre-submission to the Central Bank and receive pre-clearance.
In terms of ongoing supervision, the Central Bank is rigorous in its assessment of risks having regard to the evolving market and risk landscape. Ensuring that funds can clearly demonstrate their compliance with their legislative and regulatory obligations is integral to this process.
Another important development are the steps that we are taking to ensure the introduction of a Senior Executive Accountability Regime (SEAR), which places obligations on firms and senior individuals within them to set out clearly where responsibility and decision-making lies. Legislation is required and drafting is advancing. Such developments will lead to the further development of a resilient and trustworthy sector, in which firms and individuals adhere to a culture of fairness and high standards.
With regard to taxation, the European Securities Markets Authority (“ESMA”), launched a formal inquiry concerning dividend withholding tax reclaim schemes in July 2019. The Central Bank of Ireland, in consultation with the Revenue Commissioners, contributed to this process. ESMA’s main conclusion was that Withholding Tax (WHT) schemes are to be primarily considered as a tax related issue and that a legislative and supervisory response should be sought within the boundaries of the tax legislative and supervisory framework. The key recommendation in the report, within the remit of financial services legislation, is that EU National Competent Authorities (NCAs) for securities markets should be empowered - through amendments to EU legislation - to share information received from other NCAs with national tax authorities, to assist in the detection and prosecution of illegal withholding tax reclaim schemes.
