Stephen Donnelly, TD for Wicklow and East Carlow, has submitted a detailed proposal to target €20bn in future avoided taxes. Many so-called vulture funds are using a tax avoidance mechanism called Section 110 to pay almost zero Irish taxes on billions in profits. The matter has been highlighted by Deputy Donnelly over several months, and resulted in a draft amendment from Minister Noonan. Speaking from Wicklow, Donnelly said:
The full submission is available here
‘Minister Noonan’s amendment is welcome, but as it stands, it won’t work. Several important changes are need, or the €20bn in future taxes could still find its way out of Ireland. The sums involved are enormous, so it’s critical we get this right.
‘How big is €20bn? It could build the equivalent of 40 National Children’s Hospitals. It could end the scourge of child poverty in Ireland. It could pay for the new national fibre optic network…20 times over. It could reduce primary school class sizes from 28 to the EU average of 20…for the next 50 years. It could end the housing crisis by building 130,000 new homes.
‘I’ve sent the policy proposals to Minister Noonan and hope to meet with his officials in the coming days. It is imperative that these loopholes are closed down.’
Notes for editors:
- A small number of foreign investment firms (so-called ‘vulture funds’) have purchased approximately €40-45bn in Irish domestic assets in recent years, using loans and about €20bn in invested equity.
- Many of these firms are using ‘Section 110 SPVs’ to avoid Irish taxes on very considerable profits, with total potential tax avoidance in the region of €10-20bn (just for Section 110 SPVs – the figure rises when REITS, QIFs, ICAVs and other tax avoidance mechanisms are included).
- Two case studies are included in the appendix of the Policy Note, showing the scale of potential profits and tax avoidance.
- Large accounting firms have already assured clients that the Section 110 amendment will be surmountable, with 90-100% of existing tax avoidance still possible.
- The continued use of Section 110 SPVs (in the domestic economy), QIFs and ICAVs:
- Could materially damage Ireland’s reputation as a transparent, low-tax economy;
- Creates an uneven playing field for Irish businesses;
- Could cost the Irish State well in excess of €20bn in avoided taxes in the coming years.
- Minister Noonan’s amendment contains several loopholes, including:
- Allowing funds shelter all capital gains to date, and potential capital gains into the future;
- Allowing funds continue to use interest deductions from high-interest, non-banking sources.
- It also has the potential to legitimise Section 110 SPVs (and wholesale tax avoidance) in the domestic economy, for all non-property businesses.
- The Policy Note includes six proposals to shut down tax avoidance in the domestic economy, as follows:
- Explicitly rule out ‘mark-to-market’ relief in the amendment;
- Remove any deductibility for non-bank interest for Irish domestic vehicles;
- Remove Section 110 status for all economic activity in the domestic economy;
- Require all SPVs (and Irish zero-tax vehicles) to get prior Revenue approval;
- Mandate all Irish tax-free type vehicles, to publish their accounts on CRO;
- Create on-going Oireachtas oversight of tax avoidance.