Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

That is fine.

Before the debate was adjourned last night, I was talking about investment funds and welcoming the fact that my proposal for a 20% withholding tax had been agreed to by the Government and included in the Finance Bill. However, I have concerns about the fact that capital gains tax will not be applied to any uplift in the value of property acquired by funds if they hold that property for five years. This will allow a huge amount of Exchequer revenue to go uncollected. I gave examples last night, including that of the commercial office sector in Dublin which saw an uplift in property prices last year of 22.4%. Since mid-2012, residential property prices have increased by 42% in the capital and by an average of 32% outside it from the end of 2013 to date. Notwithstanding the major uplift in the value of property, capital gains tax, at 33%, will not be charged if the funds hold the properties for five years. The proposed five-year window will allow funds to leave town tax-free and with huge gains even earlier than would have been allowed had they bought in this window under section 604A of the Taxes (Consolidation) Act. Section 604A allows for capital tax-free gains on Irish property bought between December 2001 and 31 December 2014 if held for a period of seven years. Furthermore, the proposed five-year holding period provided for in the Finance Bill is open ended. While I opposed it when it was introduced and while it is seriously flawed, led to price inflation and is criticised all round for continuing too long, it is at least the case with section 604A that it allows for the gradual application of capital gains tax where property is held for longer than seven years. The new proposal in the Finance Bill makes no provision for the gradual application of capital gains tax.

I have serious reservations about the threshold of 25% which the Government has put in place in respect of the measure. A minimum of 25% of a fund's portfolio must consist of Irish domiciled property. My concern is that the threshold could lead to funds diluting their holdings with other business assets or international property resulting in their not meeting the threshold and, thus, avoiding tax. That would mean losses for the Irish public. For example, a fund with 30% of its portfolio consisting of property holdings might take in an asset which is not property such as a French airline, with the result that the property proportion would fall to perhaps 24%. Therefore, there would be no payment of withholding tax whatsoever. If one looks at these funds, one sees that a number of them have the ability to do this. Some of them have substantial Irish property holdings, but they also have holdings in companies such as Virgin, which means that they could dilute the property component. A number of the funds which are domiciled here have significant holdings of property in other jurisdictions. It is a concern we need to tease out.

I am not sure if the confusion about section 110 has been caused deliberately, but section 110 and qualified investor alternative investment funds are two completely separate structures, as the Minister of State and his officials know. It is important to say this because sometimes they are rolled into one. Section 110 does not deal with the funds industry. It is a separate section and I welcome it. I am glad that the Government has taken my advice about the removal of the proposed marked-to-market measure in the original Government amendment. It is welcome that it was proposed in the way it was. It was a good move by the Minister and his officials to allow us and others to suggest changes. These changes will take effect in the Finance Bill. However, I will wait to see if there is substance to the new amendment. I am aware of intense lobbying on the amendment and the one relating to the funds industry and very dubious as to whether the people concerned have the national interest at heart. Through freedom of information requests, I have seen the correspondence between Department of Finance officials and the industry on the structure of the amendments. It is the same group of lawyers and accountants who saw the opportunity provided by section 110 and funds to help their foreign clients to avoid billions in Irish taxes in return for a couple of million of euro in fees. I am always very concerned when someone goes to the poacher for advice on these matters. I do not question the Department's integrity on this issue or that of its officials and we will tease it out in more detail on Committee Stage. I am also conscious that the Government has included an expected yield of only €50 million from both measures, which leaves further questions as to whether there are more loopholes in them.

Overall, the move is to be welcomed.

The Bill gives people who have engaged in tax evasion until 1 May 2017 to get their houses in order and allows them to make a voluntary disclosure regarding tax evasion involving offshore income or assets. That entitles them to mitigated penalties and to avoid criminal prosecutions by coming forward to Revenue voluntarily. We now have the information to catch these people, but we are letting them put their hands up and not face prosecution if they come forward sooner rather than later. That is not the type of enforcement or punishment we should be considering for this type of tax evasion. The deadline is set in the context of extra information that Revenue has at its disposal from closer co-operation and worldwide information exchanges on the tax affairs of Irish individuals in foreign jurisdictions. The deadline is in advance of the greater clampdown on offshore assets next year by the Revenue Commissioners. I question the accommodating approach for people who have broken the law.

With regard to the deadline of 1 May, I request that the Government remove the option for mitigated penalties and no criminal prosecutions by ending any option for preferential treatment and pursue people with the full rigours of the law, in particular in light of the extra information the Revenue Commissioners now have at their disposal. We no longer need people to come forward and make declarations because we now have co-operation with other jurisdictions to capture people. Disturbingly, there was no question of the full rigours of the law not being imposed last week on an individual who engaged in a peaceful protest at the age of 15, yet the full rigours of the law will not be used when it comes to tax avoiders in the State, unlike other criminals who get amnesty after amnesty and chance after chance to put up their hands, admit they were bold boys and girls and carry on.

Brexit seems to be the magic word in the Finance Bill, in that it appears in the Fine Gael and Fianna Fáil cheat sheets. We have been told that this is a Brexit-proof budget and there is not enough Brexit-proofing in the budget. It is one of the most obvious sham fights we have to put up with. It is connected to my earlier point. Fianna Fáil did not even produce an alternative budget so we have no idea what it wants in the Finance Bill regarding Brexit-proofing. The only idea it has is that a Minister should be appointed to deal with the issue.

If we need to include provisions on Brexit in the Finance Bill, let us do so and have a real and genuine debate because the issue affects everybody. If one came from out of town and read this Bill, would one notice Brexit was an issue and Ireland could be seriously impacted as a result? One would not because the budget is no more Brexit-proofed than any other. One of the major concerns we have are Border communities and cross-Border trade. There are no extra supports for cross-Border trade or institutions in the Bill - it is hollow on these issues.

Two of the most questionable measures which must be classified as a zombie initiatives are SARP and the living city initiative. The SARP scheme is a scheme about which I am deeply uncomfortable. Some people have quietly derided the Minister for Jobs, Enterprise and Innovation, Deputy Mary Mitchell O'Connor, for her plan to introduce a tax break for high earning immigrants, yet I am sure the same people would be out in force to support the continued existence of the SARP scheme. It was due to expire in 2014. At that point it had failed to create the jobs we were told it would. A small number of very wealthy people got a tax break and nothing else changed. A review was held by the usual suspects, like IBEC and KPMG, and they made submissions stating that it was a great idea. It was extended. It is still not working, but it will be extended again.

In 2014, 302 people benefitted to the tune of €5.9 million from the scheme, 43 of whom earned salaries in excess of €375,000. We were told that 124 jobs were created as a result. That means every year the State is paying €47,580 to create these jobs. We would be better off employing those people; it would be cheaper and we would not be providing €5.9 million of a tax break to people who are extremely wealthy. This scheme was dreamt up by accountants to allow very wealthy people to pay less tax. There is no way to verify any of the jobs that have been created as a result and it should be allowed to die a graceful death.

I would like to raise other issues in the Bill on Second Stage, but will not have the opportunity to do so because of the time. My colleagues will speak on some of the issues, including the living cities initiative, capital acquisitions tax, the dwelling house exemption and section 46 of the Bill which, it is to be hoped, will clamp down on the abuse by certain chicken farmers of the flat VAT rate available for farmers. We will deal with these issues in greater detail on Committee Stage.

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