Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance) | Oireachtas source

I recently heard an advertisement on Newstalk which greatly disturbed me. It stated whether the economy goes up or down one can make money. This follows quite a widespread pattern of advertisements on radio stations these days which speak about spread trading and how one can make money out of thin air. If one has a bit of money one can give it to firms which will gamble on one's behalf. They are very professional gamblers, and whether the economy is going up or down and whether people are miserable or happy there is always a way to make money out of the situation. I find this obscene. I find it almost beyond belief this is not banned, if not heavily regulated, after what happened to the global economy.

This is typical of the madness of the way in which the international economy works now, which lay at the back of the global financial crisis we had. Anonymous fund managers sitting behind screens in financial hubs operate as sophisticated gamblers, whether in London, New York or, as the Government is keen to develop, the Irish Financial Services Centre. There is not a lot of difference, if any difference, between this and people who study the form of horses and work out ways in which one is guaranteed to win. Anybody who knows anything about gambling, addiction and how the system works knows there are far more losers than winners.

Gambling on horses is at a relatively small scale, which perhaps impacts detrimentally in many cases on the individuals involved, but when one blows this up onto a large scale one realises the world economy works like a bookies but it affects the lives of millions of people and has the capacity to destabilise entire economies. Money can move at the flick of a switch from one place to another in a way which destabilises real economies and real things being made and produced, which are important and which society needs. These things are moved around and investment in them surges in one area and collapses in another because of decisions made by these funds which deal in hundreds of millions and sometimes billions of euro. They decide money can be made in one place or, because somebody else is losing money, they wait until the market collapses and move in to buy up everything so they can start another upward surge and sell before the whole thing goes belly-up again. This is what is going on and this was the background to the international financial crash.

For a very brief period there was talk of perhaps looking at it, wondering about the tooth and claw unregulated markets and perhaps thinking about regulation. Even when the likes of those of us on the left, who think there is a fundamental problem with operating an economy on this basis, asked whether lessons should be learned, people agreed they were in favour of more regulation and stated they would introduce measures for regulation. Some of these might almost appear to be convincing until one sees something like this or real estate investment trusts, REITs.

The press is not here now, but in two years time when it becomes a real problem or we discover something very serious is happening a journalist will develop an interest in it. At present nobody is here, and nobody really knows what these things are, but this is very important. We are speaking about an extraordinary €1.6 trillion in authorised funds domiciled in this country and €3 trillion in funds under administration. Mind-boggling amounts of money are being managed or channelled through the Irish financial services industry.

I will be happy to hear the Minister of State tell me I am totally wrong on this, but I had to look at KPMG's report on the ICAVs and to me they look like a means through which big investors can avoid tax and regulation, and we are trying to lure this type of business into Ireland. It is spelled out very clearly in KPMG's document:

As an ICAV will not be a PLC as defined by the Companies Acts, it will not have to comply with the provisions of those acts. As a result, administrative costs will be reduced and ICAVs will be future proofed against unintended consequences arising from changes in Irish and European company law.

Whoopee for the investors, who will be insulated from the law at Irish and European level and will face lower administrative costs because there will not be much regulation to deal with. This is with regard to trillions of euro. We are promoting this type of business so that big investors dealing in hundreds and millions of trillions can avoid the law and regulation.

The other big issue is tax. The KPMG document states:

The main advantage of the ICAV is that it will be able to make an election under the US "check the box" rules to be treated as a transparent entity for US federal income tax purposes. This will allow an ICAV to be treated as a "partnership" (if it has more than one investor) or a "disregarded entity" (if it has only one investor) for US tax purposes, and so allow US taxable investors to avoid certain adverse tax consequences which would normally apply to PFICs.

In contrast, an Irish fund established as a plc cannot use the “check the box” option because it is deemed to be a “per se” corporation.

This is, therefore, a way of avoiding tax. It goes on:

In addition, while an ICAV may elect to be treated as a transparent entity for US federal income tax purposes, it will, in general, be respected as a corporate entity in most other jurisdictions. This can be advantageous, as many jurisdictions provide for more favourable tax treatments in respect of dividends and gains on share transfers.

It is, therefore, about avoiding tax and about us creating conditions favourable to that sort of tax avoidance. It goes on:

The ICAV and Irish taxation

ICAVs also benefit from an attractive Irish tax regime which means:- no Irish income tax at the fund level

- no Irish withholding tax on all distributions to non-Irish investors...

- no transfer taxes on the issue, redemption or transfer of shares

- access to Ireland’s extensive double taxation agreements...

- exemptions from Value Added Tax...

I find it beyond belief that this is what we are up to. When the REITs thing came up two years ago, I was one of the few people - perhaps the only person - who queried it. We were giving tax incentives to these real estate investment trusts which came in when they saw the property market on the floor, something we paid for. They started buying up massive amounts of Irish property and gaining control of the Irish property market as a result of the crash. These are the same types of investors - maybe not exactly the same people but I suspect some of the same people - who got us into the mess in the first place, for which we have paid an extraordinary price. We are now facilitating them yet again with tax incentives and laws that permit this type of stuff.

It is madness. What is even worse is that we will not even impose a 0.1% financial transactions tax on these people. We are told they would run a mile from a 0.1% tax. That is the excuse for not doing it. We are told that all these guys would be frightened away if we put a 0.1% tax on them, which the European Commission estimates would raise between €490 million and €700 million. Let us call it €500 million on the conservative end, which happens to be the same figure as the water charges. Let us think about fairness. Is it fair on low and middle income families who have been hammered repeatedly by the universal social charge, pension levies, pay cuts and property taxes, many of whom are in poverty and literally do not know if they will be able to pay the bills? Is it fairer that we lash another €300, €400, €500 or €600 tax on them per year or that we put a 0.1% tax on all the trillions of euro going through the financial services sector, in this speculation and gambling sector? The answer to that question seems fairly obvious.

The Government claims it has no alternatives to imposing harsh austerity and that it hurts it more than it hurts the people, and so it has to do it. It does not, because it could just impose a tax of one tenth of 1% on this stuff and we could raise the same amount of money and probably more, but it will not even do that. Instead we are passing legislation that is about reassuring these guys that if they want to pay as little tax as possible and be subject to as little regulation as possible, Ireland is a good place to come. We are a haven for that kind of thing.

I would be very suspicious. I have no doubt the Minister of State will say it is all much more complicated than that and that I do not really realise how beneficial all this stuff is and that there are 1,300 jobs in the Irish Financial Services Centre.

See this speech in context