Oireachtas Joint and Select Committees

Tuesday, 15 November 2016

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2016: Committee Stage (Resumed)

2:00 pm

Photo of Stephen DonnellyStephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

I fully support the policy intent, which is to apply withholding tax in circumstances where it should be applied but where it is either not being applied or being avoided at present. However, if one compares the new IREF world into which we are moving to that which existed in 2010, it would appear that a vast swathe of property investment is going to move largely outside the tax net. We all agree that anything in which pension funds invest is tax-free. Some of what life insurance companies invest in is tax-free. The reason this is important is because these funds are the majority purchasers of investment property in Ireland. The Minister of State referenced a tax avoidance issue at which the Department is looking and said that it applies to approximately 1% of the funds. This means that 1% of the funds are trying to do something they should not be doing and the Department is shutting them down, which is fine. When it comes to property investment, however, the pension funds and the life funds are the main investors, so we are taking this huge asset base and basically making it tax-free. That is my concern.

The third matter concerns investment undertakings. As I read the legislation - and I think there might be an answer to this - it appears to exclude the investment undertakings from withholding tax. It definitely excludes them from capital gains tax. Basically, no capital gains tax will be paid on Irish property anymore. The individual - the mom and pop who buy a one-bedroom apartment - will continue to pay it but once one reaches a reasonably small threshold, one will not have to pay capital gains tax anymore. This is a massive policy change. There seems to be a very serious exemption for pension funds and life insurance and the investment undertakings appear to be exempt from withholding tax. Is that the Minister of State's understanding of what the IREF does?

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