Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

Last week I outlined how a US vulture fund structured its Irish subsidiary, Mars Capital, to avoid paying taxes in Ireland on its Irish profits. I believe these vulture funds are about to pull off the largest avoidance of tax on Irish profits in the history of the State. The scale is likely to be in the tens of billions of euro in missed taxes. These are taxes being avoided by Irish companies on Irish domestic profits earned off the backs of distressed Irish families. Irish charities are being used to play a key part in this tax avoidance. Mars Capital is owned by a registered charity, the Matheson Foundation. The stated mission of the charity is to help Irish children to fulfil their potential. It contributes to causes such as the Irish Society for the Prevention of Cruelty to Children, ISPCC, Barnardos and Temple Street Children's University Hospital. The charity does not mention its ownership of Mars Capital. One reporter I spoke to believes that the charity might own more than 200 companies. At a time when public faith in the charity sector has been rocked yet again, a children's charity is being used to help a vulture fund avoid paying taxes to the Irish State on its Irish profits.

It is very effective. In spite of annual revenues in year one of over €14 million Mars Capital paid total corporation tax to the Irish State of €250. Companies such as Mars Capital are known as section 110 companies. Section 110 was introduced in 1997 to allow the International Financial Services Centre, IFSC, win global securitisation deals. These involve global companies structuring global assets in Ireland. Their profits were not earned here, so section 110 helps these companies avoid paying taxes here on those profits. The vulture funds are now using section 110 companies to avoid paying taxes in Ireland on Irish profits. Section 110 companies were not created to re-route Irish domestic profits to offshore locations. However, my understanding is that almost all of the vulture funds whose profits are generated in Ireland have section 110 status.

How big is the scale of the tax avoidance by these vulture funds? Irish companies typically pay approximately 30% tax on their profits, between corporation tax and dividends tax. Vulture funds typically target minimum returns on their Irish investments of 15% to 20% per year over seven to ten years. That means a €100 million investment by a vulture fund should generate €100 million in taxes for the Irish State.

To be clear, the level of taxes being missed by the Irish State is likely to be well over half of the total value of all of the distressed loan books sold by NAMA, IBRC and private banks.

Will the Government direct Revenue to cancel section 110 status for all vulture funds in Ireland? Will it provide Revenue with the extra resources to execute this quickly and to reclaim back taxes? Will it direct the Charities Regulator to pull charity status where that status is being used to help avoid Irish tax on Irish profits? Will it direct NAMA to not sell assets to vulture funds if these funds are structured to avoid Irish taxes on Irish profits?

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