Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

I am proud to co-sponsor the motion. The charity sector, as I am sure we all agree, plays a crucial role in Irish society and we, as legislators, must ensure that it is well governed and regulated. We owe that to those who use the services which charities provide, to those who work for charities and, indeed, to those who donate to charities, be it their time, expertise or money. For the charity sector to be effective, it must command public trust. Fundraising Ireland calculates that the revelations on CRC and Rehab alone accounted for an 11% drop in total donations. Most recently, we have had the debacle surrounding Console.

I would like to raise another aspect of the charity sector that has the potential to further erode public trust, namely, the use of charities by certain companies in order to avoid paying taxes in Ireland. Last week, I raised the case of Mars Capital. The company is being used to invest what the Minister, Deputy Noonan, describes as funds managed by Oaktree Capital.

This is a US firm that buys distressed debt and bought many thousands of Irish mortgages. Mars Capital's accounts show that for an investment of €80 million it expects to see a return of almost €400 million. Net of costs, this suggests that Mars Capital should be looking at approximately €300 million in profits. These profits are made by buying an asset in Ireland, managing that asset and taking in hundreds of millions in capital and interest payments from Irish families, which should rightly be taxed in this country, with the benefit going to the Exchequer and the Irish people. However, because of how the finance structure has been set up, this €400 million that Mars Capital will pull in, in return for its €80 million investment, will be paid onwards to an unknown company in an unknown location.

We know that Oaktree Capital has funds that specialise in European distressed debt - exactly the type of debt that Mars Capital has bought - and we know these funds are located in the Cayman Islands. We know the corporate tax rate in the Cayman Islands is 0%. If Mars Capital is moving the €400 million to the Cayman Islands, or anywhere out of Ireland, then Mars Capital, despite perhaps having earned profits to the tune of approximately €300 million, will actually declare very little profit in Ireland to be taxed. In fact, in its first year in operation it is shown to have received more than €14 million in revenue, but by the time it had made payments to this unknown company, in this unknown location the total amount of corporation tax it ended up paying last year was €250.

What I did not refer to last week was the ownership structure of Mars Capital, which is why it is very relevant to the charities sector and the motion before the House. It turns out that Mars Capital, which is managing an asset worth approximately €155 million, has three shares. Each of these shares is in the ownership of a charitable trust. One share is owned by Badb Charitable Trust, one share is owned by Eurydice Charitable Trust and one share is owned by Medb Charitable Trust. What do we know about these three charities? Thanks to the reporting of Mark Paul of The Irish Timesand others, we know quite a bit. We know that all three are controlled by one of Ireland's top corporate law firms, Matheson, which describes itself as the law firm of choice for international companies and financial institutions doing business in and through Ireland. The word "through" is very important. We know that Badb, Eurydice and Medb all have charitable status and so are tax-exempt. We know they own a lot of companies registered in Ireland, including Mars Capital. We know the companies that the charities control have billions of euros in assets and we know - astonishingly, in my opinion - that the stated principal activity of these charities, which own companies controlling billions of euro worth of assets in this country, is to raise cash for good causes. This is not the charities' attempt at irony, or a suggestion that to help hedge funds avoid paying tax in Ireland is a good cause. It turns out that these charities actually receive charitable donations. In 2014 they received more than €300,000 in charitable donations. In same year, these charities contributed more than €300,000 to good causes in Ireland. Let us think about this for a second. We have three charities owned or controlled by a corporate law firm. These three charities mysteriously own companies in Ireland controlling assets worth billions of euro. For some reason, they are also taking in €300,000 in charitable donations and then donating this money. The question many of us must ask is why Irish charities are being made the shareholders of firms that are legally avoiding paying taxes in Ireland. What possible reason does Mars Capital, a distressed debt company, have for issuing its shareholding to three charitable trusts? The answer, I would suggest, is to avoid paying tax.

Charitable status should not be available to hedge funds, debt collectors or so-called special purpose vehicles, and it should not be available to companies operating in the shadow banking sector in Ireland with the specific aim of avoiding the payment of taxes due in this country. Irish charities such as Bedb, Eurydice and Medb, which receive donations, should not own companies controlling assets worth billions of euro to help them avoid paying taxes. It may be legal, but I suggest to the House that it should not be legal. It deprives the State of very valuable taxes, which, ironically, the State could use to provide some of the public services that the real charities have stepped in to provide. Critically - and this is the reason I raise this in the context of tonight's motion - having legally recognised charities that operate in this way results in a significant erosion of public trust in the sector.

I know that officials in various Departments have raised concerns about what is happening. I suggest, as we give the charity regulator the legal powers and resources it needs, that it should also look at charitable trusts in Ireland that are in fact receiving donations and making contributions, but which appear to have been set up expressly to help firms avoid paying taxes to the Irish State.

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