Tuesday, 13 October 2020
Financial Resolution No. 4: Corporation Tax
I propose to speak on Financial Resolutions Nos. 5 and 6.
Financial Resolution No. 5 is an anti-tax avoidance measure. It provides that section 541 of the Taxes Consolidation Act 1997, that is, Act No. 39 of 1997, be amended with respect to disposals made on or after 14 October 2020, by insertion of a new subsection (6A). The purpose of this amendment is to correct an anomaly recently identified by the Revenue Commissioners whereby the same foreign currency transfer between accounts held by the same person has the potential to create significant capital gains tax, CGT, losses which could then be used to offset CGT gains, even though there is no economic loss.
It is not possible to cost this matter accurately other than to say that one example of which the Revenue Commissioners are aware to date involved the transfer of sterling between different accounts generating a CGT loss of approximately €3 million. Our concern is that if this anomaly is not corrected, it may facilitate the generation of further CGT losses, thus reducing overall tax revenue, whereas these losses did not really occur.
Because of the nature of this tax anomaly, a financial resolution is considered necessary. In order to provide certainty and to avoid creating any window of opportunity for the avoidance of transactions, we would like this to be done before business tomorrow morning.
Financial Resolution No. 6 is an amendment to section 629 of the Taxes Consolidation Act 1997 and relates to interest and deferred payments of the exit tax. The resolution provides for a technical amendment to the exit tax regime for companies introduced in budget 2019 as part of our commitments under the EU anti-tax avoidance directive, ATAD. The exit tax provisions impose a charge to tax on unrealised gains arising where a company migrates its residence or transfers assets offshore such as it leaves the charge to Irish tax. In accordance with ATAD, companies have the right in certain circumstances to pay the exit tax in equal annual instalments over five years and interest applies over the period of deferral.
This provision makes a technical amendment to the interest charging provision to ensure that it operates as intended and this change is being introduced by financial resolution to bring immediate clarity to this charging provision. I commend it to the House.