Dáil Éireann Debate, Tuesday - 23 March 2004
11 Mr. O’Shea asked the Minister for Finance the progress that has been made by the Revenue Commissioners in their discussions with the Portuguese authorities with a view to closing off a tax loophole which allows those who sell off assets here to avoid tax by taking up residence in countries such as Portugal; and if he will make a statement on the matter. [8936/04]
Amharc ar fhreagraIn response to earlier parliamentary questions on this matter I stated that a first round of negotiations between the authorities in Portugal and the Revenue Commissioners for a protocol to amend certain provisions of the Ireland/Portugal double taxation convention was held in Lisbon in May 2003. I am informed by the Revenue Commissioners that although a further round of negotiations was scheduled to take place earlier this month the negotiations have had to be deferred until the week commencing 19 April 2004 as the Portuguese delegation was not available to travel to Dublin on the original dates. It is not possible at this stage of the negotiations to comment further on their likely outcome.
As I also mentioned in my previous replies to questions on this matter, section 69 of the Finance Act 2003 amended Irish domestic law to impose a charge to capital gains tax on an individual in respect of a deemed disposal of certain assets on the last day of the last year of assessment for which the individual is taxable in the State, prior to becoming taxable elsewhere, where the individual disposes of these assets while resident outside the State and returns to the State within five years. I announced this anti-avoidance measure in my 2003 budget on 4 December 2002 with effect from that date.
It is now high time for the Minister not only to review specific arrangements with countries like Portugal, but to review the regulations on non-residency. We have a situation where a prominent individual who went to live outside of Ireland for a number of years was put in a position where he was able to save millions of pounds in tax avoidance by acquiring Portuguese residency for a period of time. He then returned home to live in Ireland. It is a continuing scandal to compliant PAYE taxpayers that these individuals can live offshore and be non-resident, claiming residency in countries like Portugal, yet can still stay here for 183 nights a year. They can also stay here until midnight and leave just like Cinderella, especially if they have a private jet. They are at every race meeting and social function in the country. Would the Minister agree it is time to review the scandal of non-residency for these wealthy tax exiles who continue to live in Ireland for large parts of the year? Is the Minister not disappointed at the slow pace of progress with the Portuguese authorities?
I made a significant change in this area in the Finance Act 2003. On budget day, 4 December 2002, I announced a major change in this area. This is an anti-avoidance measure which I outlined to the Deputy in my reply.
We have double taxation agreements with 42 countries and a further eight are in the pipeline. The difficulty with Portugal relates to double non-taxation. At the time the Portuguese authorities did not have capital gains tax on certain transactions while most other countries do. I do not wish to comment on individual taxpayers. An individual has a right to live in any country he or she wishes, especially in the European Union. The changes made in December 2002 will ensure the Irish authorities get their fair share of euro.
On Committee Stage and other Stages, the Deputy raised the question of residency. I pointed out to her on previous occasions that the Fianna Fáil-Labour Government of 1994 made substantial changes to the residency rules. These changes took place following considerable negotiations between the partners in Government at the time. Prior to the Finance Act 1994, residency rules were very complicated and included a mixture of revenue and administrative practice and some legislative arrangements. The changes that took place are probably more severe than in any other EU country. I have no plans to review our residency laws.
