Dáil Éireann Debate, Tuesday - 20 March 2018
62. Deputy Joan Burton asked the Minister for Finance if his attention has been drawn to a study (details supplied) regarding the use of section 110 tax relief in a location; his plans to address the matter on foot of the study; and if he will make a statement on the matter. [11749/18]
Amharc ar fhreagraSection 110 is intended to create a tax neutral regime for bona-fide securitisation and structured finance purposes. It has been part of our corporation tax code since 1991, with significant amendments in 2003. Securitisation involves the creation of tradeable securities out of an income stream or projected future income stream generated by financial assets. The transaction can involve the use of a special purpose securitisation vehicle to facilitate the transaction and issue the securities.
Securitisation allows banks to raise capital and to share risk, and by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing.
The section 110 regime was designed to improve Ireland’s offering as a location for the conduct of financial services. It has achieved that broad goal and the financial services industry now makes use of these vehicles as a support to financial intermediation. Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield.
Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union. This is a European Commission initiative to mobilise capital in Europe. A main objective of which is to build a sustainable securitisation regime across the European Union. The Capital Markets Union specifically states how alternative sources of finance are more widely used in other parts of the world, and the widely held view is that should play a bigger role in providing financing to companies that struggle to get funding, especially SMEs and start-ups.
Section 22 of the Finance Act 2016 made an amendment to section 110 of the Taxes Consolidation Act 1997 to address the concern that some section 110 companies were being used to minimise the Irish tax exposure on Irish property transactions. The core effect of the amendment is to remove the possibility for section 110 companies to use what are known as 'profit participating notes' to sweep Irish property or distressed debt profits out of the company in a way that ensures little or no Irish tax liability arises.
In relation to the study provided, the Department of Finance is not in a position to comment on individual taxpayers.
