Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

In advance of the proposed changes being introduced to section 10 of the Finance Bill, Revenue undertook an examination of the financial accounts of a number of section 110 companies to determine the potential yield from any proposed changes. That is where the figure of €50 million in budget 2017 comes from. It is based on the analysis undertaken by Revenue. The figure is largely based on the potential profits made on a sample of mortgages valued at circa €1 billion held by a number of section 110 companies that were examined. The results of the examination were then extrapolated to a potential mortgage book population of €20 billion. The key assumption that underlies the figure is that only normal trading deductions were allowable, such as interest charged at the normal third party market rates in calculating the taxable profits, that is, that no deduction for profit-participating notes would have been availed of.

As the Deputy is aware, the original proposal for section 110 was published on the Department's website in September. The amendment was then redrafted and extended for inclusion in the Finance Bill, as initiated, to ensure the proposal was as targeted as possible. Legislation is now also being introduced in section 22 for funds involved in property. As I said earlier, the two issues are separate, but a number of structures involve the use of both section 110 companies and funds. The figure of €50 million does not take into account any potential behavioural changes following both amendments to section 110 and the amendments proposed for the Irish real estate fund, IREF, regime. That is how the figure was calculated. Other potentially higher figures have been put into the public domain, but as far as our planning for the finances for 2017 is concerned, it is better to go with a conservative number. It would probably be imprudent to spend on the basis of a figure which is anticipated but not yet realised.