Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

Section 110 of the Taxes Consolidation Act 1997 sets out the Irish regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax neutral regime for securitisation and structured finance purposes.

Loan originations involve a section 110 company fronting for a foreign bank and either lending directly to larger more sophisticated borrowers, or immediately issuing newly made loans to smaller borrowers from the foreign bank. Provided the foreign bank is established in one of the countries with which we have signed a double tax agreement, no Irish tax would have arisen on its interest income had it lent directly to the Irish borrowers. As the original creditor, there can be no taxable capital gain on any subsequent sale of the loans. If the loan origination company is a qualifying company, within the meaning of section 110 of the Taxes Consolidation Act 1997, it can to operate in a tax neutral manner in Ireland using a section 110 company.

In respect of the Finance Act 2016 changes, the desire was to address behaviour and issues in the area of property and property-based loans. I acknowledge, however, that issues outside property are more complex and I want to ensure that section 110 operates in a proper manner. If concerns are raised about the operation of section 110 in the loan origination space, I will ask the Revenue Commissioners and my officials to investigate these concerns. I am not, therefore, in a position to accept the amendment.

I will make two points. First, neither I nor the Revenue Commissioners are engaged in any kind of engineering or drafting of legislation to allow companies or individuals to avoid tax we believe they should pay. Second, I know some of this was touched on yesterday with the Minister of State, Michael D'Arcy, but I am aware of all of the debate on, and changes which were subsequently made to, the Finance Bill 2016 with regard to section 110 companies and organisations as well as property transactions and lending in that regard. I am aware of concerns that have been raised recently, but the Revenue Commissioners have told me that its assessment is that no tax which could have been due has been lost in this space. However, if I receive any indication from the Revenue Commissioners or from my Department that is no longer the case and that issues are developing in the loan origination space which need to be addressed, I will look at those issues.

I will not comment on the information which the Deputy has offered in respect of an individual company because it is not appropriate for me to do so, but any companies in the loan origination space should be meeting their tax commitments in Ireland. If I receive any information to the contrary, I will consider the matter and engage with the Revenue Commissioners on it.