Dr. Jim Stewart:

I thank the Senator for asking very interesting but rather challenging questions. She is right that the issue of beneficial ownership is very difficult, particularly the supposed ownership by a charitable trust or a trust. This is a legal fiction because the firm is tightly controlled. It might be tightly controlled by the trust deeds. It can be described as an orphan structure as it has no parent or subsidiaries that try to restrict it in what it may do. Nevertheless, I have noticed that lots of the section 110 aircraft leasing firms have a financial deficit. For 2020, out of the 171 firms examined, 23% had a financial deficit of 10% or more. How do they continue to operate if they are effectively insolvent? It is understood that the control company will step in to provide funds to the firm. The problem is that there is a legal fiction that such firms are independent. They are actually part of a group and the group advises a way of efficiently financing the firms in an equitable and cheap way.

There is an issue about raising funds and then the purpose for which they are used. That is a serious issue, particularly for the Russian-financed firms, where funds were raised and used for military expenditure by certain banks in the IFSC. We do not know how much, but we know it was a certain amount. Again, that is a problem with the use of funds by section 110 companies. How can one police what happens to the funds? Are the funds used in a way that is compatible with Irish laws and international laws?

There are huge issues with the financing of these firms and how they are structured. The structure of firms' assets is constantly changing. Finance constantly evolves in terms of tax incentives and market conditions. One must be constantly vigilant as to how these firms raise funds and how they are being used. It is a problem that there are too many tax incentives - in section 110 about aircraft leasing and in other areas. It is difficult to justify these tax incentives given the costs of the tax reliefs not so much to Ireland - they might be tax neutral in Ireland - but to other countries, which they cost a lot in terms of tax reliefs and a lack of taxable income.