Dáil Éireann Debate, Thursday - 1 February 2024
84. Deputy Peadar Tóibín asked the Minister for Finance the amount and nature of all tax paid by domestic property funds and all foreign-owned property funds in Ireland and Irish real estate funds, real estate investment trusts, REITs, undertakings for collective investment in transferable securities, UCITS, and exchange-traded funds, ETFs, over the past ten years; and if he will make a statement on the matter. [4168/24]
View answerThe red carpet was rolled out by the previous Fine Gael Government, with the support of Fianna Fáil on many occasions, in the provision of tax advantages to REITs. The REITs swooped in. They bought land, apartments and houses, mostly cheaply from the National Asset Management Agency, NAMA, and they have extracted significant returns in that time, often while hiking up rents. Will the Government repeal the advantages REITS have in their business model around housing?
The Irish funding landscape has undergone significant change since the global financial crisis in 2008. In order to address the current imbalance between supply and demand of housing across all tenure types, the Government's Housing for All plan aims to significantly increase the supply of housing to an average of 33,000 units per year over the next decade. This is an ambitious plan which will provide increased housing supply and affordability. While the plan is backed by unprecedented State investment of more than €4 billion per annum, developing these homes will require a significant amount of capital and the Government cannot deliver on this programme alone. My Department estimated that more than €11 billion of development funding per annum will also be required from private capital sources. However, that being said, we have been clear that institutional investment should not displace home buyers in traditional estates where demand and viability is not an issue and the pathway to ownership for first-time buyers must be protected. The Government does not support the bulk purchase of residential houses by institutional investors. This is why the Government introduced a 10% rate of stamp duty on such purchases in mid-2021.
Furthermore, where such investment brings a profit, a fair share of tax must be paid and successive actions have been taken in recent years to provide for the collection of tax, including through the introduction of the Irish Real Estate Fund, IREF, regime in 2016 for funds invested in Irish property. This provides for both IREF tax at the point of distribution and for income tax at the level of the fund in certain circumstances. Certain categories of investors which are more generally exempted from tax, such as pension schemes, companies carrying on life business and charities, may be exempt from IREF withholding tax provided the appropriate declarations are in place. The details of IREF withholding tax and income tax paid by IREFs are published in Revenue’s annual corporation tax paper, the latest being for 2022 payments and 2021 returns, which is available on the Revenue website. For example, the combined IREF withholding tax and fund level income tax receipts in 2021 and 2022 were €53.8 million and €43.1 million, respectively.
The Government's policy has displaced families in the housing market. It has pitted these institutional investors against families. Many of these institutional investors come from abroad. They have far deeper pockets than families who are trying to buy homes. They have access to far cheaper finance than first-time buyers and, worst of all, they pay less tax than the families they are competing against. The Government has stacked the system in favour of institutional investors. It shocks me that by pursuing this policy, the Government has heaped demand on a sector that is already overheating, thus pushing up the price of houses and creating enormous power for these institutional investors, as they own significant chunks of property. One REIT is the biggest landlord in the State and having that level of power in the market gives it power over rents. It has gone beyond time for these vehicles. Whatever argument there was for them straight after the crash, it is not there now. Will the Government repeal the tax advantages?
As the Deputy will be aware, the Government is undertaking an overall review of the fund sector, including a review of many of the issues he raised today. I expect that work to be completed by the summer. I will have a report and that will feed into the budget process for 2025 and the finance Bill that will be brought forward later this year.
However, I will make an overall point that I touched on in my initial response. We are going to need an awful lot of capital in the coming years to build the homes we need. I put on record earlier that we estimate that we need approximately €11 billion of private capital to complement what the Government is putting in directly in various forms. As the Deputy will be aware, we are reviewing the national planning framework. We will almost certainly increase the housing targets and the amount of capital we will need to build the required homes will increase significantly further. We have to bear that in mind in all these debates and discussions and the policy decisions we make.
I understand that some international capital will be needed for the housing market. However, the key point we are trying to make is that giving international capital a competitive advantage over home owners in the housing sector has the effect of displacing first-time buyers and families from the housing sector. It is clear that the international investors have competitive advantages, including in having deeper pockets and access to cheaper capital and they are paying less tax than the people they are competing with for these houses. If they are to function, surely functioning on a level playing field would be the logical conclusion to achieving the potential for international capital without displacement of people. Right now, this Government has allowed for a sweetheart deal for those organisations in this State. That has serious negative ramifications. Aontú has brought forward a Bill to repeal the tax advantages REITs have. It has passed First Stage and I encourage the Government to allow it to proceed to Second and Third Stages within this Dáil.
I will examine the Bill the Deputy has brought forward. It is important to put on record that in the case of the IREF structure, approximately €170 million has been paid in IREF tax in the three years for which I have data here, 2019, 2020 and 2021. As the Deputy will be aware, in the past three years, some €40 million of tax has been paid in respect of the additional stamp duty of 10%. Revenue cannot disclose information in respect of REITs as we have only one REIT structure in the residential sector in Ireland at this point in time.
I invite the Deputy to make a submission. The deadline for the funds review has passed, but I will accept a written submission from the Deputy or his party on the funds review as the issues he has raised are currently being deliberated on by the Department. We held a public consultation and got approximately 190 submissions. I do not believe we received any from the Deputy, but I would be glad to receive one and will still consider his views.
