Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 22:

In page 29, between lines 2 and 3, to insert the following:“17. The Minister shall within 6 months of the passing of this Act, prepare and lay before Dáil Éireann a report on the ability of certain investors in Irish Real Estate Funds including pension funds and other investment funds to neutralise their tax liability in relation to either income and gains from Irish property held by Irish Real Estate Funds.”.

The Minister of State has dealt with amendment No. 24, although not completely to my satisfaction given the one-year lead-in period. That amendment is no longer being pressed as a result of the five-year dividend withholding tax exemption for non-resident investors in Irish real estate funds, IREFs, now being dealt with in the previous section.

There are a number of amendments in this grouping. To keep the debate focused, we should try to deal with them individually. Amendment No. 22 provides for a report to be laid before the Dáil within six months of the passing of the Act on the ability of certain investors in IREFs, including pension funds and other investment funds, to neutralise their tax liability in respect of either incomes or gains from Irish property held by such funds. This leads on from the conversations we had earlier in public and private sessions of the committee in respect of the make-up of a certain number of IREFs. Some would have a large involvement in pensions, both Irish and European institutional pension schemes and investors. We know that, as a result, pension funds investing in IREFs are able to avail of not paying any tax. We need to deal with that. I am asking that a report be brought forward on the options in dealing with it. Certain investors in IREFs, including pensions funds and international investors, can pay no income, corporation or capital gains tax on their income or gains from Irish property. Many feel that this is simply wrong.

For example, the IPUT fund has Irish property assets of €2.2 billion. AIB recently signed a 20 year lease with this fund, which is moving in from Ballsbridge to AIB's corporate headquarters in the centre of Dublin in 2019. The group's contracted annual rental return for 2017 is expected to be €102 million. However, 79% of this fund is owned by pension funds and institutional investors, meaning that the vast majority of its incomes and gains are not subject to taxation. That is a major gap. The fund has €2.2 billion in Irish property assets and a rental book of €102 million, yet 79% of its gains and income is not subject to Irish taxation. This goes back to the point about taxing property and the rights here in terms of such taxation and the benefits that arise from property.

We can look at these funds and examine who really benefits. Certain individuals benefit from them. The lawyers obviously benefit from the structures that are put in place. In terms of the number of staff this fund has, which one would think would be quite large given the turnover in annual rental income and assets of €2.2 billion, it employed 19 people in 2016. If we were to look at their pay bill, we would say it was large at €5.3 million. The average cost per employee is therefore about €279,000 per year. Certainly, they can afford to pay wages of that scale. The vast majority of the income and profits they are recording is not taxable. In respect of institutional investors, Irish institutional pension schemes make up 42% of the fund. European institutional investors make up 37% of it. Then we have Irish investment managers at 17% and Irish charities and universities at 4%.

I do not believe that is a healthy way to go forward. We need to consider issuing a report on how and whether we can bring in measures that would see an appropriate level of taxation of some of these funds, which would have within them investments from pension schemes and other institutional investors that are not subject to tax.