Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I acknowledge that there is progress here and I acknowledge the piece of work the Minister has done, which was as a result of an amendment I tabled to the Finance Bill this time last year. The year before, we had met departmental officials and they were very helpful in looking at the introduction of a dividend withholding tax at 20%. On many occasions, I have raised the issue of the tax that is being paid by these companies. While it is right that the Revenue advises the Minister on this, some of the filings of these companies are publicly available. It is very clear that some of these companies are paying effective rates of as low as 3%. My frustration is that we are always two years after the issue. This may be dealt with next year, but in the meantime, these funds are not sitting back but are gobbling up a huge amount of property and they have billions of euro of Irish property in them.

Later on, we will raise issues relating to the stamp duty effect.

Last year, in the Finance Bill, I argued for an anti-avoidance measure whereby a company that derives its profits from shares in property would not be able to avail of the 1% stamp duty rate. We understand, however, that the REIT involved in a sale will be able to do just that. This raises serious questions. While we are making some progress in this regard, time is of the essence because these guys do not sit around.

The Minister stated that we need to make sure that these entities pay the appropriate level of tax but what is the appropriate level of tax? These companies should pay capital gains tax and should not be exempt from the tax. That is a frustration for me. The exemption does not make sense, as the Green REIT sale brought into clear focus. All the gains the company made were to be valued on the day of the sale, which meant there were no gains whatever based on the acquisition value. It is not about whether these entities are subject to a tax rate of 20%. The question is what level of tax they pay. We can set the rate at 20% but these entities will not pay 20%. They are institutional investors, not Joe or Mary living in Blackrock, Gweedore or Caherciveen. They are institutional foreign investors. They do not pay income tax as we know it because they are not resident in Ireland. These institutional investors will be hit by the 20% dividend withholding tax but will reduce their tax bill, as the Minister has acknowledged, because of double taxation treaties.

How do we deal with that issue? We can increase the rate of tax and the Minister has increased the rate of tax to 25% and set out his arguments for doing so. There is no reason not to link dividend withholding tax with capital gains tax because these funds do not pay capital gains tax. Why is the dividend withholding tax not set at the same rate as capital gains tax, as Sinn Féin argues? That would not fully solve the problem because there are other ways in which these investors can reduce their tax bill and pay a lower effective rate.

There is a burning question in terms of policy. I spoke about the lobbying that took place at the time and how REITs were being sold. The impact can now be seen. The tax status of these funds are without doubt allowing them to push up property prices. There is no way that a company could afford to buy the type of property that these funds are purchasing in Dublin, for example, apartments costing in excess of €500,000, if it was not for the nature of the tax structure. It would otherwise be impossible and impractical to do so. It is not their fault they are doing this. It is our fault that they are doing it because, as a Parliament, we - again, I use the term "we" - are deciding to give them this tax benefit and structure. When these entities buy properties at such prices, they set a level in the market that others then chase. This is having a huge impact. It is wrong and does not benefit us. At the time, it was argued that these funds would help NAMA and allow for the ordinary Joe Soap to make safe investments in a diverse property portfolio. That has not happened. Instead, serious pressure has been put on individuals and Ireland's reputation has been damaged.

I welcome the amendment in terms of making sure that the companies which have to pay the tax are given reference numbers and so on. The level of tax, at 25%, is what we are discussing in this section. The Minister has argued that the rate should be aligned with corporation tax and USC. It should be aligned with capital gains tax. We are talking about property and these funds do not pay capital gains tax whereas all other companies have to pay capital gains tax.