Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

This section deals with section 110 companies. The Commission on Taxation and Welfare recommended a review of the tax treatment of section 110 companies and the Minister committed to that in his budget speech. Such a review is long overdue and Sinn Féin has been calling for one year after year, most recently in June 2021. These calls have been repeatedly ignored by the Minister and his Government. There is a sound reason for the tax review. As I said, just as the Minister is exiting the door of the Department of Finance, perhaps he is seeing the light with respect to some of the mistakes that have been made.

There is good reason there needs to be a review of section 110 companies and their tax treatment. We have seen some of the media commentary in recent times. Mark Paul in The Irish Timeslast year reported that three vulture funds connected with Goldman Sachs paid no corporation tax in 2019, despite the fact that they collected €390 million from their portfolios in the same year. The Minister knows that for years he and his party, Fine Gael, have allowed vulture funds to buy up distressed mortgages, to engage in aggressive tax avoidance and to reduce their tax liabilities to zero, despite making huge profits. That has resulted in a huge loss of revenue to the State.

In 2016 I presented a detailed submission to the then Minister for Finance, Michael Noonan, on the changes we needed to see in respect of section 110 companies and tax avoidance practices. I acknowledge that in 2019 some changes were made. Those changes took effect only in 2020. We now need to evaluate their impact in restricting the ability of these funds to write off income against certain interest payments. We need to see how effective they have been in tackling aggressive tax avoidance. There are serious gaps in that regard. Over 2018 and 2019, for example, a subsidiary of vulture fund Cerberus called Promontoria (Oyster) Designated Activity Company was able to reduce its tax liability by €27 million by writing off its income against asset management fees, despite the fact that those fees were paid to a company affiliate in the Netherlands. One arm was paying the other arm, in a way, to reduce the company's tax liability.

We know that the tax code continues to allow these funds to use complex tax and company arrangements to reduce their tax liability against the interests of the Irish taxpayer. I welcome the fact that the Minister is finally committing to review this. The action we should see will be left to his successor, if he is to have a successor in the Department of Finance following the changeover in the Government at the end of the year.

May I ask the Minister about the section itself? It deals with a change in respect of the activities on which VAT is charged and the deduction of VAT incurred on a management charge. Does it deal with management fees and the writing off of section 110 income against management fees or does it apply just to VAT?