Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

It was acknowledged on Committee Stage that the provision whereby the IREFs, or the funds, to use that term generally, that hold assets for five years and are then exempt in terms of the application of withholding tax to any chargeable gain was a policy decision. It is not something from Revenue; it is an issue of policy and was decided upon by the Government. As the Minister knows, fund investors have a pretty short-term horizon when they consider an investment. They do not look at ten to 15 years, but more probably at three to five years. The argument that has been put forward that giving them an exemption that kicks in after five years does not really cost them anything in the sense that they would probably hold the assets for about that period of time anyway, and certainly not for considerably longer. Therefore, I believe the Minister does need to set out the rationale behind the provision.

Is it because funds invested in Ireland are based on structures which were enacted in this House that essentially exempted them from tax and, as a result, the Minister is moving the goalposts, which happens every year in the budget to ordinary citizens when tax rates change? Even transactions that took place some time ago but perhaps have not yet crystalised in a gain would be subject to any changes in rates and so on, which are decided upon at budget time and enacted. Or, is it because the Minister believes that this is the right policy going forward? Does he believe that this is the right policy to attract investment into Ireland? How does he square that with the position facing ordinary Irish investors who do not establish as a fund or who do not set up a fund structure? They are subject to the capital gains tax regime in the same way that anybody else is in terms of a chargeable gain. I believe the Minister does need to set out the rationale and logic for that, because this is a significant public policy issue. The funds are now here. They have bought huge swathes of commercial real estate in particular and are looking to cash in. We need to have clarity on what is the policy and the rationale behind it.

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