Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I acknowledge the Minister’s collection of the data and I acknowledge also that it was an amendment that I put down in the Finance Bill and the Minister accepted that he would do that, which I welcome. I also acknowledge that there were changes last year. The point I have been making is that in years prior to that, we have been putting data on the record, have had debates on the Finance Bill, have been going through the accounts of some of these structures and have been showing that the effective tax rate they were paying was so small. We have been showing how the Irish collective asset-management vehicle, ICAV, model was used by an individual on the €85 million sale of a property so that no capital gains tax would be paid. This is what I have been talking about. There has been something of a struggle to get us to move on Irish real estate fund, IREFs, and real estate investment trusts, REITs. IREFs are a somewhat newer concept. This again goes back to the point where we are having these arguments every year with some progress being made. There is a concentration as to the REITS and as to where they have their properties. They do not have properties in Collooney in Sligo or in Gweedore but they are buying up apartments in Dublin and in areas where there is a lack of supply.

The Minister has made a point here which I just disagree with, which is that these apartments would not be built if not were not for REITs. We had a whole discussion this morning about the lack of supply and the fact that there is a demand there. REITs are able to outbid others because of the tax structure that they have. That is the reality. It is the most favourable tax structure if one wants to buy and dispose of property in an area. That is the reality. There is no capital gains tax on any income or any disposal or corporation tax on any rental income. Let us think about that and of all of those people who are being fleeced by some of the highest rents in the State. No corporation tax is paid on that rental income within the REITs. People are not just being screwed over in their rents but these entities do not pay corporation tax on that rental income due to the distributions and it all depends on who the investors are in the REIT and where they are located as to whether they pay tax here at the marginal or standard rate of tax and whether one is an international investor and non-resident and would be therefore subject to the dividend which will go to a tax rate of 20%, which is still a huge benefit for the person. That is the problem here. This is not just an issue of taxation and of these structures and being able to benefit and again from the system. This is deliberate. Can the Minister tell me or the finance committee, hand on heart, that these structures do not have a competitive advantage in the purchase of Irish property in this State because of their tax structure? He cannot.

There were a number of reasons REITs were introduced, including to provide a diverse spectrum of investment and allow people to invest in property without a concentration of that investment. The tax structure was the key benefit. If one looks at any accountancy firms prospectuses and looks at their examples of REITs or IREFs, one’s attention is not drawn to the risk of the investment, it is to the tax structure. That is the point and what these are.

These are efficient tax structures for funds and REITs that allow for a competitive advantage in order to buy up Irish property. Funds and REITS have grabbed that advantage with both hands and have made massive amounts of money because they came here when property values were low and are now disposing of properties when prices are high. They paid no capital gains tax on these disposals. If a company has a second property or has a property associated with it, residential or commercial, it has to pay 33% capital gains tax on that disposal. These structures have been devised and the Minister stands over them. He should not do that because it is simply wrong.