Stephen Donnelly (Wicklow, Social Democrats) | Oireachtas source

As today's debate concerns tax avoidance that should never have been facilitated by the Irish State, I will first address yesterday's announcement regarding tax avoidance by vulture funds. Yesterday's ruling is a welcome first step. I acknowledge the fine journalistic efforts that contributed to this, including by Mark Paul, Dearbhail McDonald, Joe Brennan, Jack Horgan-Jones and RTE's "Prime Time" team.

I would also like to acknowledge the work of Deputies across the House in getting this first step agreed, including Deputies Pearse Doherty, Michael McGrath, the Minister, Deputy Katherine Zappone, the Minister for Transport, Tourism and Sport, Deputy Ross, and the Minister for Finance, Deputy Noonan. It is, however, a very small first step. Already this morning Ireland's tax experts are sharing bulletins on how this amendment can be dealt with. One expert with whom I spoke this morning believes that they can get around about 90% of this. In other words, of the current tax avoidance that is going on that this amendment seeks to stop, the best guess is that approximately 90% can continue, based on the current amendment. For example, the amendment allows vulture funds to avoid considerable capital gains tax by marking their assets to today's market prices rather than the purchase prices. The amendment still allows very high interest costs to be deducted from taxable revenues or profits with arms-length loans. The amendment considers only real estate transactions when it should consider all assets generating economic activity in Ireland. In particular, it must consider profits from unsecured loans and rental income. The whole area of real estate investment trusts, REITs, must be looked at in the same vein. Finally, the amendment provides for no retrospective consideration of taxes. If that is legally permissible, it is something we should certainly consider.

I note the commitment from the Minister for Finance to changing his proposal based on further debate in this House. Based on the initial responses today from some of Ireland's leading tax houses and from lawyers and accountants, significant further debate and changes will be required to what was proposed by the Minister yesterday. To help inform this debate, I ask the Ministers for Finance and Public Expenditure and Reform to seek opinion from several sources on the draft amendment, specifically addressing two questions. First, using a test case such as Mars Capital, to which I have referred in the Chamber previously, the Government must show how this proposed amendment shuts down all of the tax avoidance and how it will ensure that every euro generated in Ireland is taxed. Second, the Government should seek opinion on how the current proposed amendment can be worked around, because that is exactly what a bunch of very clever lawyers and accountants have been doing from very early this morning. I ask that the Government seek opinion not just from the Department of Finance but also from the Revenue Commissioners and from some of the firms that specialise in tax rules. I look forward to significant further debate on this topic.

On the Apple ruling, it is clear that Ireland's tax laws have facilitated very large and unwelcome tax avoidance. It is also likely, however, that Ireland would receive a very small portion of the €13 billion, plus interest, that is on the table. Apple already pays corporation taxes here on its Irish activities, so if the €13 billion plus interest were to be divvied up according to where the economic activity occurred that led to those profits - an accepted principle all round - it is very hard to see where our claim on that would be. On top of that, as we know, the European Commission is already encouraging other EU member states to look for a slice of the apple.

While the argument that there is €13 billion on the table for Ireland to take is weak, so too are most of the reasons being put forward for an appeal. First, nobody is suggesting that the Revenue Commissioners have done anything wrong or illegal. They enforce law passed by this House. That is their job and that is all they have done. Second, it is very hard to see how foreign direct investment would be affected by the absence of an appeal. The Commission's ruling applies to one company, retrospectively, and to a loophole that no longer exists. Apple continues to invest in Ireland and Ireland is fully signed up, as it should be, to the OECD's BEPS process. We certainly need clarity for foreign investors. However, Marian Harkin, MEP, has pointed out that the Government could seek such clarity from the European Court of Justice without an appeal and get such clarity in less time and with less expense than an appeal would take.

The third reason being offered is that not lodging an appeal could harm Irish-US diplomatic relations. Again, it is very hard to see how that stacks up. If the Commission's ruling applies to Apple's profits that have been taxed nowhere, it is not as though the US is losing out on that. Apple has tried to pay taxes nowhere on those profits. If it came to it, obviously the decision is not Ireland's; it is a European Commission decision. The fourth reason put forward is that not lodging an appeal could threaten our corporation tax position, be it our rate or our regime. This deserves very serious consideration but it also demands a very high level of proof, much higher than that which has been provided so far. The Government has a letter from the European Commission from 1997 stating that our corporation tax rate falls absolutely outside EU competition law. It would appear that there is no threat in that regard because it would require a unanimous vote or decision of all EU member states to bring our 12.5% rate within a different competency, and that is not something that is going to happen. What of the risks to our corporation tax regime? Rulings and investigations such as this have been going on all the time. There have been 400 state aid cases involving Ireland since 2000 and 225 cases involving tax advantage across the EU. Many of the Irish cases involved situations where a tax advantage was given to a particular sector. In spite of all of this, there has been no suggestion that these investigations have threatened our tax regime.

Is Ireland's corporation tax rate or regime being threatened? We do not know. Are we setting a dangerous legal precedent? We do not know. Are we looking for €100 million or €13 billion? We do not know. Are we likely to get it? When are we likely to get it? How likely is an appeal to succeed? We do not know. We are being asked to discuss very complex issues involving large amounts of money as well as international relations without the information we need. The Belgian Government took two months before it launched an appeal in a similar situation. We have two months left before we need to lodge an appeal. There is no need for us to proceed right now. We have two months to discuss this in detail and that is what we should do. On that basis I will be abstaining from the vote tonight.

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