Pearse Doherty (Donegal South West, Sinn Fein) | Oireachtas source

I mentioned some of this during the debate on Second Stage so I will try not to repeat myself. We have seen REITs working in different jurisdictions, as outlined by the Minister. They worked particularly well in jurisdictions where the property market has not been operational or is on the floor. There is fear about the vulture capitalist element of REITs so we must me must be careful in how we deal with them, particularly given Ireland's completely distressed property market. Some amendments, dealing with asset testing, are to be welcomed but I am not sure they go far enough. I submitted a number of amendments, all of which have been ruled out of order. We are testing the water in a way that has not been done before in the State. It may work out, in which case it will be beneficial, but it may not work out. We have seen other states reviewing the operation of REIT and tightening their operation. More than likely, we will look to adjust REITs in the next year's finance Bill. One of my amendments provides that 85%, not 75%, of the activity should be based on property investment.

We should take into account three other issues. We have set out that 85% of profits from the REIT must be distributed to shareholders. This figure should be 90%, which is the figure operating in other jurisdictions. That should be the minimum distribution of dividend to shareholders. I am not sure why we settled on 85%. I have asked the question of the Minister's officials. If a REIT can operate at 10% retention of profits, a greater distribution of dividend makes it more enticing for people to invest.

With regard to the three-year grace period to comply with technical accounting requirements, we have a massive distressed property market. A year and a half ago, NAMA was presented with options for establishing REITs. The options had merit and NAMA indicated it would go with them. There is great potential for REITs in the country but a three-year grace period not to comply with accounting requirements is a lengthy period of time. I argue we should reduce that to a more limited timeframe. The other issue the Minister should examine concerns his suggestion that only 85% of profits are distributed to investors through dividends and, in the case of United States, the 15% retained is subject to corporation tax. We are not applying any tax to the profit retained by the REIT. I argue that we should apply corporation tax to the profit. A REIT is a company and an investment vehicle and that portion has not been transferred to shareholders. Corporation tax should apply and it is my understanding that it applies in the US, where REITs are well-established since the 1940s. Has the Minister considered this point?