Joan Burton (Dublin West, Labour)

With the stroke of a pen the taxpayer would have been in for a bounty of tens if not hundreds of millions from the period after the tax loophole was closed down.

This is not stupid. If the Minister knew anything about tax, this is one of the most famous cases of tax avoidance during the height of the Celtic tiger. The Minister's predecessor, the Taoiseach, Deputy Cowen, commissioned a special study by a firm of stockbrokers which came up with the figure of €252 million in cost for one year alone. This is not something I researched on my own but is a matter I pursued in the House month after month for several years.

A few hundred million euro might be a drop in the ocean when it comes to closing a €20 billion deficit but it would keep special needs assistants in our children's classes or would restore the traditional Christmas welfare payment. It is highly ironic that the Taoiseach's and Fianna Fáil's decision not to close the loophole has come back to bite the ordinary taxpayers yet again as this and other tax loopholes now frustrate the operations of NAMA, the passage of loans and underlying properties and titles. The Minister must make a clear and honest statement to the House on this matter.

Sections 55 and 56 of the Finance Bill are anti-avoidance measures to target what is described, properly, as aggressive capital gains tax avoidance schemes where no real economic loss has occurred. Much as I hate to say to the Minister that I told him so, I could not help but notice the banner headline in the Sunday Business Post last weekend. This tax loophole cost the Exchequer €400 million in lost revenue. The Department of Finance seems to have realised that investors were exploiting weaknesses in Irish law to generate fictitious losses against which they could set off actual capital gains from their investments in shares, property and other assets. This complex manoeuvre involved the creation of back to back derivative contracts linked to the value of Irish Government bonds. As the gain and the loss cancelled each other out, there was no net loss. The gain was not taxable but the loss could be set off against gains on other investments.

These transactions have no legitimate rationale and were designed for the singular purpose of avoiding tax. With €400 million already down the Swanee as a result of this loophole, closing it in this Finance Bill is a case of shutting the stable door after the horse has bolted. Due to the fact that property and share prices have been sharply down over the past two years, there is now little need to manufacture fictitious losses to avoid paying capital gains tax. This loophole was closed off in the UK some years ago and was, therefore, well flagged to the tax authorities in Dublin. However, Fianna Fáil took no action to save ordinary taxpayers from being ripped off by people who specialise in helping very wealthy people to avoid tax, while taxes and levies on people on the lowest level of income are significantly increased by the Government. Few people are showing profits these days, as evidenced by each month's Exchequer returns. The question the Minister must answer is why he has waited until the loophole is largely defunct before closing it off. All loopholes are not treated in an equal manner. Not all have been closed off, only the ones that can no longer be used to avoid tax. Talk about a joke.

Following a long campaign by the Labour Party on the issue, the Minister has finally delivered a levy of €200,000 on tax exiles. However, it remains to be seen how many of the almost 6,000 tax exiles, as identified by the chairperson of the Revenue Commissioners when she appeared before the Committee of Public Accounts, will be affected by this. I have read the two pages of the Bill dealing with the definition of domicile. However, as an accountant, I suggest the section offers wide scope for the use of professional advisory services to mitigate its likely impact.

The introduction of tax structures to facilitate Sharia law-based lending is largely a measure designed to facilitate activities in the IFSC. This is one of a number of measures to make investing in the IFSC more attractive from a tax point of view. If the Minister is doing this, it behoves him to ensure adequate regulatory arrangements are in place, given the destruction of our reputation as a result of what happened in the case of Depfa Bank. It had a significant number of non-executive Irish directors on its board up to the time it was sold to Hypo Bank.

The episode concerning this particular bank and the losses it sustained caused tremendous damage to our reputation in Germany. These losses were subsequently incurred by German taxpayers and the German Government had to bail out the bank. With regard to the Minister's proposals for the IFSC, where are the corresponding regulatory arrangements that will ensure that what happened in the case of Depfa Bank, and subsequently Hypo Bank, which has been so damaging to our reputation, will not happen again? Is the Minister sending out or willing to send out a broad signal that the IFSC is not specialising in some kind of tax avoidance, but that it wants to specialise in legitimate and lucrative financial services?

We should bear in mind that hedge funds and international financial institutions are involved in a major shorting exercise against the euro, in an effort to weaken it and many eurozone economies as a consequence. Therefore, we need to discuss how we will balance legitimate commercial advantage to draw businesses to Ireland against our regulatory reputation as not being a fly-by-night location or, as described by The Wall Street Journal some time ago, the wild west of international finance capital down on the Liffey. The Government has not yet addressed that issue.

Section 24 is the major Green Party input to the Bill. It provides that the windfall tax, introduced as part of the NAMA Act, will be extended from just rezoned land to cover land subject to material contraventions by a local authority. In almost all jurisdictions, an 80% tax is a joke. If people are subject to a significant tax rate of 80%, they are usually rich enough to be able to pay tax advisers to mitigate, if not totally avoid, the 80% rate. Given the state of the property market, this provision is purely notional. I am interested to know whether the Minister anticipates any tax flow from this measure. Hypothetical, punitive tax rates are a joke. This measure is a joke and is, obviously, the fig leaf for the Green Party in the Bill.

In contrast, the thorny issue of the significant tax losses being accumulated by banks and property developers as a result of the property crash, which they can set off against future tax liabilities, is not addressed at all in the Bill. In the debates on the previous Finance Act, on the budget and on several other occasions, the Minister promised he would address this issue.

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