Brendan Howlin (Wexford, Labour) | Oireachtas source

I move amendment No. 2:

To insert the following new section into the Resolution after section 628:"Report on Exit Tax

A628A.The Minister shall within one month from the passing of this Resolution prepare and lay before Dáil Éireann a report on the number of companies that have been liable for the provisions of sections 627 and 628 of the Taxes Consolidation Act 1997 in each of the last 5 years inclusive of 2018; the total revenue raised in each year under these provisions; and the additional revenue that could be raised in 2019 if the Exit Tax was chargeable at a rate of 33 per cent.".

I have been dealing with budgets for a long time in this House. When I saw the financial resolutions there was something unusual. They are normally in the ministerial pack which is circulated during the course of the Minister's speech. They were not but I found them later. Two of the resolutions, this one and the next one, are unusual in that they do not need to be passed tonight. The idea of the financial resolutions is that there is usually a degree of urgency about a matter, such as a tax increasing from midnight for a particular and urgent reason.

Serious questions must be asked as to why this measure is tabled for tonight and not, in the normal way, in the Finance Bill, where there would be reports, teasing out, Committee Stage debate and all of that. That is not happening on this resolution. The capital gains exit tax is being reduced in this proposal from 33% to 12.5%. The Minister's own budget book tells us that this will actually not raise any money. If we look at the financial tables, it says zero for this tax. If this is not really used and there is no impact on revenue, as the Minister is telling us in the published tables accompanying his budget speech, then leaving the rate at 33% would not impact on revenue unless there is something we are not being told.

This tax measure is aimed at ensuring patents, intellectual property and other assets cannot be moved abroad to no tax locations so as to avoid tax. That is good. The budget document states that this change is part of Ireland's commitment to implementing the anti-tax avoidance directive. We have no issue with that. We support it and these rules are long overdue. The Labour Party has called for a standing commission on taxation for exactly these reasons. The question should be asked as to why the rate is being cut by nearly two thirds. There is no explanation for that. If this is never used, as would be implied by the zero impact on revenue, it has no impact and will not raise any additional money, as the budgetary documentation seems to imply, then why should the rate not be set at 33%? I refer to it not just being set but maintained because that is the rate.

Chartered Accountants Ireland published a useful note on its website on 1 October last. It says regarding the exit tax that Ireland currently has rules that provide for an exit tax. To give people an understanding of what we are talking about here, that is where the Irish tax-resident company moves its tax residence away from Ireland, broadly, and that exit event triggers a deemed deposal of assets at market value for capital gains tax purposes, resulting in the potential normal capital gains tax of 33% applying. There are some exemptions to the rule and in practice it is not a significant issue for most Irish tax-resident companies. That is what the Chartered Accountants Ireland publication says. Under the EU's anti-tax avoidance directive, the existing rules will be tightened significantly, making it more difficult to escape the Irish tax charge on migration of tax residence. This could be assessed as making it more difficult to move valuable assets such as intellectual property out of Ireland but will possibly encourage existing groups to stay. That could be seen as a positive move.

In reality, anything that reduces flexibility for existing groups or potential groups of new investors is not a good thing. All EU countries, however, will be obliged to introduce similar rules by January 2020 at the latest. There we have the nub of it. Under Article 5 of the anti-tax avoidance directive, we are obliged to have a measure compliant with the directive by January 2020. We have plenty of time to do this. We could do it in the convenience of the Finance Bill when we can go through this in some detail and not deal with it in 40 minutes with no notice and no background papers. That is why I have tabled the amendment seeking at least, if it is passed tonight, a report on it within a month. I am conscious of time but I want to say a few other things about it.

First, it begs the question of why the urgency. The Minister might give us some indication of why this midnight stroke of a pen approach to this long debated, and long in gestation, but distant timeline of January 2020 needs to be done suddenly and urgently tonight. It is unusual for such a major tax change, that apparently according to the documentation will have no impact on revenue, to be rushed through via budget resolution. In my long experience here, the normal way to deal with this matter would be by way of a proposal in the Finance Bill.The original sections 627 and 628 were anti-tax avoidance measures. They set a tax rate of 33% for capital gains that will accrue because this is, by the definition of the current law, a capital gain that will accrue. It is now envisaged that capital gains would not be taxed at the capital gains rate of 33% but would actually be taxed at the corporation tax rate of 12.5%. Why is that? Why is that neutral in respect of the volume of money that it will generate?

Why has the Department of Finance not published a tax expenditure report? What is proposed is a major change and it requires a budget resolution. Will we be sitting here in the future wondering why there was a windfall or a loss associated with this particular measure in respect of which we have no background information? I imagine most people in the House are not that familiar with it. Does the Minister know why this measure must be adopted tonight? Will he tell us? Are large technology companies planning to bring intellectual property into Ireland? Are they planning to do so tonight and is that the reason for this being done now? We need to know the answers to those questions before we are asked to vote on what is proposed. The industry has been lobbying for a reduction in capital gains tax to 12.5%. These are matters that should be dealt with properly in the context of the finance Bill.

A Department of Finance report published last month states:

Specifically, the ATAD exit tax regime seeks to tax unrealised capital gains where a taxpayer transfers its residence, transfers assets from its head office to a permanent establishment, or vice versa, in another territory, or transfers the business carried on by a permanent establishment to another territory, to the extent that the country from which the assets or business are transferred loses the right to tax the transferred assets or business following the transfer.

Member States must introduce the ATAD exit tax, or bring existing exit taxes into alignment with [that particular] tax where relevant, no later than 1 January 2020.

Why is this being done tonight? I have many more questions to ask, but I want to allow other people to come in on this. Perhaps the Minister can give a very simple, straightforward explanation that will avoid the need for me to ask further questions.

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