Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I tabled an amendment to section 21 that would have followed through on issues I raised during the earlier budgetary process to the effect that this measure, which allows for a capital allowance to be set off 100% of the profit recorded by a trading company, would revert to the pre-2014 position where only 80% would apply. I welcomed the pre-2014 position. I will go into details in terms of the motivation for the changes at that time. It is my view that this should apply from now, and to capital allowances that have been onshored in the past number of years. The Minister is of the view that the cap applies to capital expenditure incurred by a company on or after 11 October 2017. I understand it is a policy choice, that there is no legal reason the Minister has to do this.

It is only fair to acknowledge the sterling work that Mr. Seamus Coffey has done on this in his report on corporation tax that was commissioned by the Minister following last year's budget. I am sure the Minister has read the report. Mr. Coffey wrote a blog which detailed the amount of revenue that has been lost and that will be lost in this tax year as a result of the measure the Minister is introducing only applying from 11 October this year. Mr. Coffey argues strongly that there is no reason for that to be the case. He makes the point that if the Minister did not apply this grandfathering effect, the amount of revenue that could be collected in 2018 would be €1 billion as opposed to the €150 million the Government is expecting. Mr. Coffey also draws attention to the fact that the onshoring of these assets, mostly intellectual property, has resulted in increasing our GNI, which, as a result, has increased our contribution to the European Union, and the portion of the increase resulting from the onshoring of these assets equates to €200 million. He makes the easy calculation that in ten years we will pay approximately €2 billion more to the European Union as a result of the onshoring of these assets and the conclusion being drawn is that we will not be taxing these during this period. I am sure the Minister will say that this is deferred tax etc., but that is not necessarily the case. That is only the case if the companies still exist in their current tax structure form at the point when all of these capital allowances are used up. There is no certainty whatsoever that many of these highly mobile companies will have the same structure at that point in time and, therefore, will pay an increased level of taxes. There are a number of companies that we could look at which have left these shores in the past, and that is where the Minister could get seriously caught out. I cannot understand why when the author of the report, although he has not called for that, has made it clear that he sees no reason. He makes it clear that if there are other companies willing to come here and if the Department expects €150 million to be recouped from this then obviously people are still willing to come and invest in us.

Second, I have deep suspicions, as I said on budget night, about how this happened. Before the Paradise Papers were released, I had serious concerns about how this happened. The Paradise Papers only strengthen my suspicions. The history of it is that in 2013, in the Finance Bill, the Government decided to end the stateless status following huge international pressure. I, myself, was pursuing the Minister's predecessor with regard to this issue about stateless companies. He kept on denying that we had the ability to end it. I wrote legislation and pointed out the provision in the Act that needed to be changed. That is exactly what happened in the Finance Bill in 2013 but, crucially, the effect of this only came into effect over a year later, on 1 January 2015. Then we had the double Irish, which was closed down in the Finance Bill of 2014. The former Minister, Deputy Noonan, told us that this was a mismatch between two tax codes, which is technically true, that we did not have the ability to close it down unilaterally, and that the only problem with the double Irish was that it had "Irish" in its name - that was the phrase the former Minister used on the floor of the Dáil. Lo and behold, as a result of pressure, international and domestic, we had the double Irish closed down. As the Government closed down that loophole, however, it made a conscious decision to change how capital allowances could be written off against profits. Up until then, a level of profits could not be written off as capital allowances - it was 20% and 80% was the threshold - but the Government decided to increase it to 100%. The Government knew that as a result of changing the residency status within our tax codes there would be onshoring of intellectual property, IP. We now know what happened. We see, from the 26% growth rate and so-called leprechaun economics, that hundreds of billions of euro worth of intellectual property was onshored in the State.

We now know from the Paradise Papers that during that period when the Government was ending the stateless rule - when we questioned the Minister on this we were told that to his knowledge only three companies were stateless - that of the three Apple subsidiaries based in Cork that has no tax residency here or anywhere in the world, two ended up in Jersey and one became an Irish resident company. One of the Jersey companies, Apple Sales International, ASI, which had the rights to the intellectual property of Apple which was worth about €170 billion sold those rights to Apple Operations Europe, AOE, which is the Irish resident company, and as a result of that it is able to use its capital allowances to write off against any profits in this State for a long period.

How does this affect us? Apple confirmed yesterday that all sales outside of the Americas are being registered through an Irish company in Cork. The value of those sales is €119 billion. Apple confirmed that. That was the same position prior to 2015 when we ended the stateless designation of those companies. In 2014 they were stateless and had no tax residency so even though all this money went through a company which recorded a turnover or sales of €119 billion they did not have to pay tax because they were not tax resident here or anywhere else and that is subject to the European Commission's infringement proceedings. When we made them stateless, and now Apple have confirmed that all those sales are still being recorded in this State, one would imagine that we would be in receipt of a massive windfall of corporation tax from Apple. That has not happened. Apple paid €1.5 billion, it tells us, over the last three years in taxation. Some of this is on the public record and we know that a certain part of the company paid €430 million, but where is the tax from the new company that is no longer stateless that now has sales recorded of €119 billion? It does not exist because even though the company is no longer stateless, the loophole, a measure the Minister's predecessor introduced, allows it to write off all these capital allowances, the intellectual property that was taken onshore, against all its profits. Things had come to a point where no one could accept that any company could have no tax residency anywhere in the world so the Government closed that door on Apple but it gave them 13 or 14 months to get its act in order, which it did. It went to Appleby, got its structure in place, sent the two companies to Jersey, registered one in Ireland, took the intellectual property over and then it used the capital allowances to pay no taxes.

That the Government did that at that particular time is deeply suspicious. I want the Minister to put on the record all the engagements which he, his predecessor and their officials had with Apple during that period. I want him to tell us the lobbying by any individuals regarding the onshoring of intellectual property. For instance, the head of tax in Allergan, a company based in County Mayo - an individual who has been reported in the context of the Paradise Papers but is not himself involved in the Paradise Papers, he is mentioned in the side reporting of the papers - lobbied the Government and talked about how, with the changes to tax residency, there needed to be certainty as a result of onshoring of intellectual property. That is the point that I made at the beginning. There is no way that the Minister or the Department did not know that a change of tax residency rules would result in an onshoring of intellectual property and, as such, I seriously question the Government's motivations, or the motivations of its predecessor, for closing what was a stateless company which was frowned up internationally and then opening a loophole to effectively give the same company an ability to continue not paying tax on sales in excess of €100 billion.