Oireachtas Joint and Select Committees

Wednesday, 6 November 2019

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

Finance Bill 2019: Committee Stage (Resumed)

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein)
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I thank the Minister for his reply, in respect of which there are two issues arising. It is not a theoretical cashflow issue. Rather, it is a cashflow and it does bring in €750 million. To suggest that it is theoretical is to suggest it is not there when it is there. If we decide to amend this, there will be an additional €750 million that can be accrued to the State coffers next year. The Minister is correct that this may be a timing issue but he failed to mention that there is no certainty in this area. For example, company A can reduce its tax liability by claiming 100% of the intangible assets that were on-shored at a specific period or to use them to write down its tax bill. At a point in time when those credits are all used, the company's tax liability will increase, but there is no certainty that the structure of that company in, say, eight years' time, will be same or the company will still be resident in Ireland. There is a risk. That risk could be minor if we are talking about small change, but we are not. We are talking about a cashflow for the State of €750 million per annum. Therefore, there is a risk here and it should be identified. It has been identified by Mr. Coffey who produced the report and the recommendations for the Department of Finance. The risk is real.

Let us say, for example, that Vodafone pulled out of Ireland. If it were able to carry forward 100% of intangible assets, by the time all of the credits were used and it was eligible to pay proper tax, it would no longer be here to pay that tax and we would have lost money. Any of these companies can restructure. In one case, we are talking about a multibillion euro company. It is advantageous for companies to change their structure for taxation purposes, which could leave us, at a point, looking back at money forgone because while we thought the issue was a timing one, the structure is no longer the same in regard to how companies are taxed in this jurisdiction. It is far more than a timing issue. If there was a guarantee that everything would remain the same forever and a day, then it is a timing issue. There is an argument also that timing is important for us. Having €750 million of additional tax revenue in ten years' time will be good, but is it more important to have it now. There is an issue in that regard given all of the pressures that exist now. I strongly believe that this was the wrong course of action. I acknowledge that the Government has moved to reduce the rate from 100% to 80% but, in doing so, it has allowed huge amounts of intangible assets that have been on-shored still to be used against tax liabilities of certain companies at the rate of 100% and that will be possible for the next number of years. This should stop.

Taking the example of company A and company B, next year company A will be restricted to 80% and company B will be able to use 100%. That is unfair in my view. The only reason one company will be able to reduce its tax liability further is that the assets were on-shored at a previous date. We are not talking about retrospective taxation. Rather, we are talking about future taxation. I strongly argue that there is a legitimate reason to examine this issue again in terms of timing. As I said, if we were secure in this committee that there would be no changes to the company structure in five, six, seven, eight, nine or ten years' time, we could have a debate on timing and whether it is better for the State to have the cashflow at this point in time or later, but it reduces the effect of what I would be arguing for. The real risk is that company A could, in five or six years' time, have a completely different tax structure and future meetings of this committee will be discussing the fact that, as a result of that tax structure, we will have lost revenue that could have accrued to the State at that point in time.