Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

I want to establish a baseline on which we would all work and will use an example to make it real because there is a lot of abstract stuff and acronyms. Let us somebody pays €10 million for a hotel and runs it for ten years, he or she has a trading profit of €1 million each year and then sells the hotel for €20 million. In other words, he or she has a total of €10 million in profits and a capital gain of further €10 million, giving a profit total of €20 million. In 2010 that is what would have been done by a property or a hotel company. The trading profits would be taxed at a 12.5% corporation tax rate, while capital gains tax would be applied to the €10 million capital gain from the sale of the hotel. The annual payments to the owners or shareholders of the company would have withholding tax applied, while the shareholders would pay income tax on the remaining profits, with a tax credit applied to the dividend withholding tax. That is how it works for anyone who runs a normal company such as a factory, but in the last Dáil new property funds came into existence, the collective asset management vehicles known as ICAVs and REITs. QIFs had been in existence, but they were not typically used for property investments. Instead of a person buying a hotel, he or she created a fund of €10 million to buy a hotel. Rather than being a company that owned a hotel, it was owned by a fund; therefore, no corporation tax and no capital gains tax was paid. For many, no withholding tax was paid. That is what we are addressing, but income tax was paid. Therefore, if the company was domiciled in Ireland and did not pretend to live in Portugal-----