Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I want to discuss it a bit further. Until this Act is passed and signed into law by the President, a REIT can dispose of its assets to a buyer and those assets are valued at the market price on the day of the sale, meaning there is no gain within the REIT even though the REIT could have gained over a period of four or five years by up to 50%. That is wrong and we have decided to close it down. The same REIT can, however, sell its entire stock portfolio of commercial property at a rate of 1% and the Minister is allowing it, which is equally wrong and should also be closed down. The current rate should apply because these are unique structures which are carved out in our tax code for property. They are not like normal companies but are property related companies so commercial property stamp duty should apply to them. I gave the Minister an example of one transaction that is about to take place in which we are going to lose €80 million, even at 6% if the transaction takes place after the enactment of the Bill. If we did what I suggested, the Irish State would benefit by €100 million from the sale. There is a huge incentive for these types of structures to sell portfolios to avail of a 6.5% reduction in stamp duty for the purchasers.

The Minister states that it will be kept under review but there is a serious issue with these structures. I was of the view that the anti-avoidance tax measure which was introduced in budget 2019 would capture some of this but some people have expressed a concern over whether the Green REIT sale to Henderson Park is able to avail of the 1% rate. On my reading of the section it requires the development, refurbishment or construction of the asset and there are questions over whether the REIT did any of that. They could have done it in some cases and the higher level may apply to some of the portfolio but this is about companies which comprise commercial property and can avail of a reduced rate by selling shares. It means the buyer of the shares is acquiring all the assets and that is why the anti-avoidance measure in section 31C was introduced. We were concerned that, with the introduction of a 6% stamp duty rate, there was increased incentive for companies to wrap commercial property in a company structure and sell shares instead of selling property. The only reason the 6% rate is not applied to this or future sales is because our anti-avoidance measure stipulates that they had to develop the property. I argue strongly that this should not apply to structures that are solely set up for the purposes of acquiring property. They are different from hotels, shopping centres etc. and they have a totally different business model. The company which owns two or three hotels is different from a REIT or an IREF, the majority of whose value derives from the acquisition of commercial property and the income stream from that.