Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

Deputy Richard Boyd Barrett asked why we had this provision in place. Some 38,000 people are employed in the financial services industry in Ireland. It is a sector that is expanding and we think it will expand rapidly in the short to medium term because of the relocation of activity from the City of London as a consequence of Brexit. Section 110 of the Taxes Consolidation Act 1997 is intended to create a tax neutral regime for bona fide securitisation and structured finance purposes. This is regarded as an essential component of a modern financial services industry. It was introduced to match what was happening in other jurisdictions such as Luxembourg and other financial services locations such as the City of London in order that we could build a financial services industry in Ireland and provide good employment for a cohort of people with suitable business qualifications.

The securitisation mentioned which allows banks to raise capital and share risk by providing a re-packaging and resale market for corporate debt lowers the cost of debt financing. That is how it works in practice within the financial services industry. As I said, Ireland is not unique in having a special securitisation tax regime. Other EU countries such as the United Kingdom and Luxembourg also have special securitisation tax regimes which allow for tax neutral structures. It is accepted that having the option to have more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy. It was introduced to provide the kind of levers of policy that other financial services industries in other jurisdictions across Europe had in order that we could build up that sector of the economy which was very weak in the early 1990s.

When it was originally introduced, section 110 was intended solely for use in the way I have described, namely, for the securitisation of financial services. It was never intended that it would cross over into facilitating a reduction in tax due on property transactions. We are trying to exclude the unintended uses of section 110, while maintaining it as a very important lever of policy for the financial services industry. It is within that space that the difficulties arise because we want to take out what we consider to be an unintended consequence used for tax avoidance purposes, while maintaining the section to pursue its original intention.

Revenue disagree with the calculations of Deputy Stephen S. Donnelly. I have a note that I can read or give to him. Revenue argues that he is basing his figures on a sum of €40 billion, but that figure is grossly over-inflated. By the end of 2015 NAMA had overseen loan sales with a nominal value of just €20 billion. It is also stated the Deputy is assuming a higher interest rate than would be customary and that it is highly unlikely that companies are earning greater than a 10% yield. In its calculations Revenue would have allowed for standard trading deductions, including an interest deduction based on a reasonable commercial return. The Deputy does not seem to be allowing for the normal deductions. Revenue has given a list of possible deductions it would allow. I have no expertise in this matter; I am simply passing on information provided by Revenue. I hope the Deputy is right as I could do with an extra €900 million next year as the demands are opening up.

We can give Deputies notes on all of the answers, but given the time restrictions, I cannot give them to them across the floor of the House. I understand Deputy Stephen S. Donnelly received reasonably good answers from the Minister of State, Deputy Eoghan Murphy. He can engage privately with the officials.

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