Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

To deliver for the housing needs our country has now as well as for the housing needs that will grow into the future, we require the savings of other parts of the world to be invested in building homes in Ireland. That is because, given the size of our economy, the banks we have left, the youth of our population and the homes we will need, we will need savings from elsewhere in order to fund the construction of those homes. Those savings have a choice about where to go. They are not savings we should have any expectation will be used to build homes on our island, but they can have a role in ensuring more homes are available to rent and buy.

Why do I say this? Consider the projection of housing supply upon which Housing for All is based. For example, Housing for All states that, of the 34,600 homes that we will need to be built in our country by 2025, 18,200 for private rental use or private purchase will need to be delivered by the private sector. If we want to see that kind of growth in the amount of private capital that is invested in our country to yield homes that can be purchased or rented, we need to consider how savings from elsewhere can be funnelled into Ireland. This is what is at the heart of the debate on REITs and IREFs.

I understand how contentious this topic is and the strong views that Deputies have about it, but the debate on these funds and the role they play in Ireland has to be viewed in the context of the role the State is playing in the delivery of homes and the work that is being done through our local authorities and approved housing bodies in supplying homes for social use, public use and, critically, rental use. Look at the scale of what is now under way. By the second quarter of this year, 2,433 homes had been built by the Government through local authorities. Those homes have been built by a Government that knows the State has to play a role in directly building homes for those who need them. On top of that, approximately 1,200 homes were delivered through leasing arrangements and approved housing bodies to bring the total number of homes that became available for social use in the first six months of this year to 3,636.

This is relevant to our debate. I am not contending, nor is the Government saying, that there is a role for REITs and IREFs in meeting all of our country's housing needs. Rather, we are simply saying there is a role for savings in other parts of the world in delivering more homes in our country, be they pension funds in Europe or savings elsewhere, just as our savings and pensions are used and invested elsewhere by those who manage them.

Another contention is then made about how these REITs in particular are taxed. Various views and facts are put forward regarding where tax is paid on incomes. Tax is paid on a REIT when the income is distributed to the person who is investing in it. An Irish resident investor will pay the tax at 25%, and an institutional investor is liable for tax at 12.5%. That is where the tax is paid here in Ireland. At its point of distribution, it is also subject to a dividend withholding tax of 25%. If it then goes to an Irish investor, tax is paid at either 25% or 12.5%. Non-resident investors will pay tax in a way their jurisdiction deems they should pay tax on income that is distributed from an investment fund like a REIT. What is sometimes correctly said, is that a way of reducing the tax is through the various tax treaties we have with jurisdictions all over the world. That is the case. However, when those treaties are taken into account, the average rate of tax paid on income that is distributed from REITs to investors in other jurisdictions is around 15%. That is complex. It is not as simple a contention as saying a REIT does not pay tax and thereby creating the impression that no tax is associated with how income is distributed from a REIT to people who invest in it, but tax is paid. That is where the tax is paid.

It is the case, through treaties that we have with other jurisdictions, that the tax can be reduced, but that is not the same as saying no tax is paid when an investment is returned to somebody who is investing in it from abroad. There is a role and reason for these kinds of funds. This goes back to the point I made about how we are going to meet the housing need in a country of our size and scale, with the scale of the banking sector we have, with banks leaving, and the growing housing need. We are going to meet it primarily through the State building more homes directly for those who need them the most. Second, we are trying to grow and continuing to support a construction sector that is able to build homes affordably for those who want to purchase them. There is a role for savings and investments from other parts of the world in ensuring the housing need is met. Given the lengthy debate on these issues that took place on Committee Stage, I know these issues are well aired, but I will go back to what I said many times earlier in the discussion of the Finance Bill, I do not believe a report is the appropriate way to yield further information on this topic.

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