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

Section 110 of the Taxes Consolidation Act 1997 sets out a regime for the taxation of special purpose vehicles set up to securitise assets. Securitisation is useful, both for banks in freeing up capital to allow them to continue to lend to all taxpayers and for the productive economy, as it can underpin the supply of capital marketing finance to industry and companies in Ireland, Europe and further afield. We are not unique in having a specific regime for securitisations. The importance of securitisation has been recognised, for example, by the European Commission through its work on capital markets union, a main objective of which is to build a sustainable securitisation regime across the European Union.

Section 110 companies can only hold certain qualifying assets. Real property is not an asset a qualifying company can hold. However, it can hold loans and other financial assets that derive their value therefrom. Following concerns raised by the Revenue Commissioners and subsequently Deputies at this committee about the use of section 110 companies to hold debt secured on Irish property, the Finance Act 2016 made changes to the taxation of section 110 companies to ensure the profits which derived from Irish land and buildings were subject to tax in Ireland.

These changes took effect from 6 September 2016. With regard to the specifics of the report proposed by the Deputies, I am advised that Revenue does not and could not collect the type of information that would be required to calculate the tax that would have been paid had section 110 not existed. That is for two reasons. In the first instance some of the business carried on through section 110 companies simply would not be carried on here or would have been carried on differently. There is no method to take account of how behaviour would have changed had the regime not been existed. Second, in the case of activity that would have taken place in Ireland, absent section 110, the hypothetical alternative tax would depend on exactly what the underlying business was and how it might otherwise have been funded - as a company, a partnership or investment fund, for example. Any of those estimates would be highly subjective and could not be presented as an accurate assessment of the tax impact of section 110. I therefore cannot accept the Deputy's amendment but I can accept that Revenue continues to keep the activities of the section 110 companies under review. Where Revenue identifies misuse of the regime it will continue to bring them to the attention of my Department and I will act to close any gaps identified.