Dáil debates

Tuesday, 10 October 2017

Financial Resolution No. 3: Intangible Assets


10:45 pm

Photo of Pearse DohertyPearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I know Deputy Calleary has raised the issue of the costings of this measure. The budget book shows that €150 million will be gained as a result of reverting to the 2014 position. I find it interesting that the Department was able to come up with such a figure with such accuracy. When I asked a parliamentary question, which was answered just a couple of days ago, the Department could not give any figures in this regard. One would imagine it would have been able to give more concrete information because it would have had more data. At that time we asked for it to be reinstated and retrospective and we knew, as the Department knows, that capital allowances for intangible assets increased over the 12 months in 2014 from €2.7 billion to €28.9 billion. There are serious questions as to the sequencing of all this.

It should be remembered that this was at a time when I and others were arguing that the Government needed to close the double Irish. To refresh Deputies' memories, the previous Minister, Deputy Noonan, said the only thing wrong with the double Irish is that it had "Irish" in its title, that it was completely outside the control of this Legislature to close that loophole. Lo and behold, when more and more pressure was put on him, when the international spotlight was put on us regarding how we were allowing for this tax loophole in our own tax code, the former Minister finally moved and closed the double Irish. However, when he did so, he opened up another massive loophole at the same time in 2014. He changed the amount that could be used against intangible assets from 80% up to 100%, which means one could write off 100% of one's properties against intellectual property, IP. It should be remembered that these companies, many of which had been availing of the double Irish, are household names. Apple, for example, is one of the major beneficiaries of this change introduced in 2014, together with other multinational companies when they onshored massive amounts of IP to Ireland. This is why we had leprechaun economics, as it was called. All this IP was taken onshore and it was shown that our GDP increased by 26%. There are questions surrounding this, and I have my own suspicions as to whether this was a wee cosy arrangement done with the multinationals to close down one loophole because of the international pressure, including from Sinn Féin and others, being put on the Government and to provide these companies with a nice sweetheart deal to allow them to take all this IP onshore and write down their tax liabilities to single digits. According to the Comptroller and Auditor General in his report just a couple of weeks ago, 13 of the top companies in this State pay an effective tax rate of less than 1%. It is through these mechanisms, things that the Government deliberately put into the tax code, that they are able to do that, and that is what this is about.

How is the Department able to confirm a figure of €150 million when just two weeks ago it was not able to give any figure? I would like an answer to that. Will the Minister explain why he is not capturing this tax? These are capital allowances that will be claimed year after year. This is not about collecting tax in other jurisdictions. The IP is in this State, the profits are being recorded in this State, and capital allowances are put against those profits to write down their tax liability to negligible numbers. I have those questions, I have my own suspicions and we will deal with this in greater detail when the Finance Bill comes through. However, I am deeply disappointed. One of the big problems here is that Opposition Members cannot table amendments that could result in a cost to the Exchequer. This was a sensible amendment coming from Sinn Féin that this should be applied not just to IP taken onshore from today but also to the tens of billions of euro in IP that has been brought onshore in recent years. Again, we always know who wins in these scenarios, namely, the big multinational companies with which the Minister and the Government consult before they introduce these types of measures on budget day. We know it is the bankers who will benefit, because they will not pay any tax, and the big vulture funds. The arrangement between the Government and Fianna Fáil about the capital gains allowance, the seven-year exemption, is a con job. It should be remembered that there are people who will be selling commercial property next year, and this is not vacant land because this applies to office blocks, hotels and so on, who will no longer be liable to 33% on the gains they made as a result of the measure the Government is bringing in. This is despite the fact we know the land hoarding is going on not because of the seven-year capital gains tax rule, and I am sure Fianna Fáil knows that as well, but because of a different measure that this Government introduced last year in the Finance Bill, facilitated by Fianna Fáil, and that is the five-year exemption from CGT.

We have heard a lot about NAMA, for example, and the document that was released through a freedom of information request about the 50,000 units that could be built on NAMA lands. It is claimed by Fianna Fáil, and indeed the Government now, that the barrier for this is the seven-year CGT exemption. Do they think we are fools? The CGT exemption did not apply in the first year of those sales for a start and did not apply in the past three years. Some 80% of the lands that were sold by NAMA were outside the scope of the CGT. Then we are told by Deputy Cowen and others that it was vulture funds that bought the land and the CGT exemption applies to them. Vulture funds do not pay CGT within the funds because of the tax code in this State. The only tax they pay is a tax that I forced the Government to introduce, namely, dividend withholding tax. The reason it is now more profitable for those companies to hold on to vacant sites is, as the Minister's officials told him before the Finance Bill was signed into law last year, that the Government built in a measure in the funds whereby it is now more profitable to hold lands that were sold to vultures from NAMA for five years. I am therefore deeply suspicious of the type of measure the Minister is introducing. I would love to see €150 million additional brought in through this measure but I would like to see the hundreds upon hundreds of millions if this measure were not capped at being introduced at midnight tonight.

Before we vote on the resolution, will the Minister tell us how the Government was able to come up with this figure and what is the genuine reason for not applying the measure to intellectual property that was onshore before? Will he tell us who the tax advisers were and the multinational companies the Government consulted before the resolution was brought before the House?


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