Oireachtas Joint and Select Committees

Monday, 16 November 2020

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach

Finance Bill 2020: Committee Stage

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I will start by welcoming the figures the Minister provided because I do not think he has put them in the public domain before. The figure of €65.04 million represents a dividend withholding tax rate of 18.4%, which is significant progress and something to be welcomed. When I argued for the introduction of a dividend withholding tax in respect of these funds, I stated that it should be initially introduced at a rate of 20%. The percentage should have increased after that point and now is the time for us to consider increasing the rate.

My concern is whether there is a level playing field or a particular advantage for REITs and IREFs in the State as a result of the tax code. There is. The tax structures provide an advantage for these investors to buy up Irish property. As a result of the fact that their tax liability is lower than other structures, such as companies or individuals who have been involved in these property transactions, they are able to bid more for houses.

They are able to push up house prices. That is not a good situation. We need to look at this.

I have tabled an amendment to introduce a surcharge on funds which buy up domestic property. Other countries are trying to restrict funds from buying up domestic property. We need to try to get that into the hands of first-time buyers and people who want to get on the property ladder. Some people will argue that there is a role for these types of entities and all of the rest, and I am not arguing against that, but they should not have specific tax structures.

The Minister said now was not the time to address this. I would argue the complete opposite. This is long overdue. The fact that these funds do not pay capital gains tax on disposals is wrong. The fact is that an IREF or REIT pays no capital gains tax on a disposal. Due to property price increases over the past number of years, there are significant gains in respect of the assets these firms are disposing of.

In a perfect scenario we would be able to show that the distribution to shareholders and the tax that they pay on the dividends they get would be equal, but that is not the case because we know that, in the main, institutional investors are investing in these structures. I have gone through the structures of investors in great detail. Many are non-resident and, therefore, they are captured in the likes of the dividend withholding tax rate of 20%.

Our capital gains tax rate is 33%. I have not heard from the Minister why he does not want to deal with this issue. Is he aware that other jurisdictions are introducing surcharges on funds that are buying up domestic property? Why does he have an aversion to this idea? Some progress has been made, but people have been dragged kicking and screaming along the way. Everything that we are doing is always a wee bit too late.

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