Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

It is not true the threshold is there because a threshold is required. This is not a true statement. A threshold is not needed. There is absolutely no reason to need a threshold. The Minister of State has not given a reason for having a threshold, bar that he does not want to discourage funds from investing in property. They can invest in property. Even if property makes up 1% of a portfolio, we must remember 1% could mean a property of several hundred million euro which could see gains of hundreds of million of euro. If 1% of a portfolio is in property, it should be taxed here and 20% dividend withholding tax should be paid by foreign investors. This will not scare the horses. It is what will apply for the majority of funds, as the Minister of State has said. A number of funds are not solely property based and have mixed assets in their portfolio, and new funds will come into the market and into operation with mixed portfolios. They will look at this legislation. If the Minister of State was to decide now what to do with regard to a fund, would he set up four different funds with investment in health, energy, property and the environment, or combine them into one fund and ensure the property part is below 25%? Of course this is how he would manage it. There is no reason for a 25% threshold. If we accept the principle that income deriving from property in the State should be taxed, then the 25% ratio should not exist.

With regard to capital gains tax, CGT, the IMF warned in September about ramping up commercial property as a result of these funds buying through tax-free vehicles. Moody's warned if the horses get scared and leave, we will have a serious problem in commercial property. I believe the reason the Minister of State is introducing the 5% is because if the funds did decide to leave, commercial property would be on the floor. Who would this affect? It would affect banks and NAMA. I am very clear on this. The fund industry overseen by the Government has allowed Ireland to be sold tax free. A total of 67% of commercial property has been bought by external investors, and more than 40% of commercial Dublin has been flipped over the past three years. Ireland has been sold under our feet, tax free, to these funds. The big benefactors are the funds, the banks, because commercial property has increased and therefore their books look better, and NAMA, which is eventually the State. CGT should apply to property regardless of the structure in which it is held. If it is not held in funds, CGT applies to it. We have allowed it not to apply only if it is held in a fund. The €10.6 billion of Irish real estate the Minister of State spoke about is a drop in the ocean regarding the quantum of assets, which are in the trillions regarding the funds. The intention was they would never be used to buy up Irish property. This is what was always envisaged. Therefore, why do we not apply CGT to the uplift in these funds?

If the Minister of State wants them to stay here and have a long-term investment, the five-year rule, if it is to be applied, should kick-off from now. This is typical of the Government. The crisis we have is in terms of renters. Therefore it will introduce this rule because it wants to help renters and the housing crisis. If this is genuine, it would state no CGT would apply if property is held from today on for five years, but this is not what the Government is doing. It is stating that if the property is held for five years, no CGT will apply, which means the fund that came in and bought €1 billion of assets four years ago or four and a half years ago in Dublin can sell in six months time with no CGT applying. This will not help the housing crisis in any way. The Government has moved on this, and I welcome the 20% withholding tax, but the Government needs to move further on CGT. The ratio issue makes no sense. There is no valid reason for a 25% ratio to be applicable. This is easily manageable as it is all computerised. Every part of this is available to fund managers on their systems. They can easily take the dividends from Irish property and segregate them from the rest of the portfolio, as they must do if they have 26% of a holding.