Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I move amendment No. 67:

In page 45, between lines 25 and 26, to insert the following: "Report on restoring cap on intangible assets

22.The Minister shall, within six months of the passing of this Act, prepare and lay before Dáil Éireann a report on restoring the 80 per cent cap on intangible assets onshored

between 2015 and 2017 that can be written off against profits at the rate of 100 per cent.".

I have raised this matter time and time again with the Minister. I am looking for a report, which is a mechanism the Opposition can use to propose amendments that will not be ruled out of order. In this case, the proposal relates to the restoration of the 80% cap on intangible assets that were onshored between 2015 and 2017 and that can be written off against profits at a rate of 100%. The amendment seeks a report on the implementation of an 80% cap on capital allowances that can be offset against profits accruing from intellectual property. This arises from recommendation No. 18 of Seamus Coffey's review of Ireland’s corporation tax code, which was commissioned by the Department of Finance:

In order to ensure some smoothing of corporation tax revenues over time, it is recommended that the limitation on the quantum of relevant income against which capital allowances for intangible assets and any related interest expense may be deducted in a tax year be reduced to 80%.

This policy was endorsed by Professor Stephen Kinsella, who is an associate professor of economics at the University of Limerick, in January 2020:

Sinn Féin have correctly identified that intangible assets are a key resource for the Irish economy in the 21st century. I argued for a rethinking of Ireland’s relationship with intangible assets some weeks ago, but more importantly, so did the Fiscal Council’s Seamus Coffey. Sinn Féin want to tax these intangible assets properly. Introducing an 80% cap on profits in intangible assets, particularly those on-shored between 2015 and 2018 by multinationals. This is an excellent idea that will result in some capital flight from the country, no doubt, but which will fund the Exchequer handsomely and help offset the inevitable loss of tax revenue from the introduction of new OECD rules on digital taxes.

We know that capital allowances for intangible assets are claimed under section 29(1)(a) of the Taxes Consolidation Act 1997. This section provides for the offsetting of capital allowances on the development or acquisition of a range of intangible assets against the income arising from the use of that intangible asset. Ireland’s national accounts have been impacted by a number of intangible on-shoring events in recent years, with profits generated by these intangible assets now included in gross measures of Ireland’s national income. Most notably of all, there was an increase in the stock of intangible assets in Ireland of approximately €250 billion in the first quarter of 2015, while the fourth quarter of the national accounts for 2016 showed investment in the acquisition of intangible assets of approximately €25 billion.

What we see here is a great onshoring of intangible assets. A change that was subsequently made in a Finance Bill a number of years ago does not capture intangible assets that were onshored in the period from 2015 to 2018, which is the crucial relevant period. As I have said, approximately €250 billion of intangible assets were onshored in one quarter of 2015.

This is an issue of fairness. It is also an issue of timing but it is more than that. Mr. Seamus Coffey elaborated on it in one of his blogs. There is a risk that by the time the tax is due - if a company has used up all its allowances such that the full tax is payable and intangible assets may not be written off against profits at a rate of 100% - the company may have restructured or, indeed, international taxation arrangements may have changed. Therefore, it is important that only 80% can be offset against the relevant profits in any given year, as opposed to the 100%, which rate is applicable only to the assets onshored during the relevant period. Obviously, if intangibles are onshored after that period, they would be subject to the 80% rate.

This is not an insignificant measure. Yesterday, the Minister for Finance lectured me on paying for public services and all the rest of it but this measure is the biggest example of how revenue can be generated at this time. A measure of this nature, proposed by the former chairman of the Irish Fiscal Advisory Council and the author of the key report on taxation commissioned by the Department of Finance, would yield in excess of €700 million in 2021. It is not insignificant. It is a very serious measure and it is worthy of consideration.

I have raised this proposal with the Minister for Finance on a number of occasions but he has obviously refused to accept it. People will draw their own conclusions. We have had reputational damage regarding this matter because it is all connected to some of the Panama leaks and various restructurings. When one door was closed to companies, they exploited the loophole under discussion. Based on all the responses to freedom of information requests I have received, nobody has ever argued for an increase of the rate to 100%. Based on all the documents I have got from the Department of Finance and from external sources who argued the rate should be increased from 80%, some of whom argued it should be increased to 90%, I have never been able to understand why the former Minister for Finance, Mr. Michael Noonan, increased it to 100%. The rate was reduced again to 80%, which is the appropriate rate. I believe the current Minister reduced it, but, crucially, when he did so, he left a gaping hole. In other words, the arrangement does not apply to onshored intangibles in the category I have mentioned.

The Minister has not argued recently that my proposal would amount to retrospective taxation because I believe that argument has been debunked, including by Mr. Seamus Coffey at the Oireachtas committee. It is nothing like retrospective taxation. We are not suggesting that additional taxes be imposed on companies that offset against profits in years gone by at the rate of 100%. What we are saying is that for 2021, 2022 and years thereafter, companies would not be allowed to offset at a rate of 100% when calculating taxable profits. Only the rate of 80% would apply.

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