Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

The reason behind section 110 was to provide for international securitisation. For example, Boeing builds planes. Airlines do not want to buy planes but they need to use them. There is an aggregator that allows planes to be bought by means of international investment money and then these plans can be rented out to airlines. Section 110 allows for this. The thinking in 1997 was that Boeing pays its taxes in America, the airline - let us say it is BA - pays its tax in the UK and the investors pay their taxes wherever they are based. Therefore, we have this box called section 110 that can take in the money, manage the asset and pay out dividends without the Irish Government applying withholding taxes. The rationale was that none of the value of those profits would be generated in Ireland and that, therefore, Ireland had no right to those profits.

If we take a loan book that is made up of Irish mortgages or Irish commercial loans, the logic I have outlined no longer applies and we are back to what the Minister for Finance stated was the position. He stated that profits generated by economic activity in Ireland must be taxed here. If, therefore, an Irish bank takes Irish mortgages - and the profits it is making are generated in Ireland - turns them into a security by means of a section 110 vehicle and it the latter on the Stock Exchange, it is doing so to avoid paying taxes. That is one issue. However, the issue the Minister of State and I are approaching from different perspectives is that of the vulture fund. The vulture fund has 10,000 mortgages. It can turn them into a security and list them on the Stock Exchange. It is then in a section 110 situation that is exempt from the provisions.

The official is shaking her head at what I am saying and, if what I am saying is not true, that is fine. However, I do not understand how it is not true. Perhaps the Minister of State can explain the position.