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Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: The short answer is no, there is not.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: Loan originations involve the section 110 company fronting for a foreign bank and either lending directly to a larger, more sophisticated borrower or immediately issuing newly made loans to smaller borrowers from the foreign bank. Provided the foreign bank is established in one of the countries with which we have signed a double tax agreement, no Irish tax would have arisen on its interest...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: From what I understand, if the foreign bank is established in a country with which we have a double tax agreement, no Irish tax would have arisen on its interest income had it lent directly to the Irish borrower.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: Does the Deputy mean cases in which there is no tax agreement?

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: I am informed there would be no tax due in that situation, so it would not apply.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: In advance of the proposed changes being introduced to section 10 of the Finance Bill, Revenue undertook an examination of the financial accounts of a number of section 110 companies to determine the potential yield from any proposed changes. That is where the figure of €50 million in budget 2017 comes from. It is based on the analysis undertaken by Revenue. The figure is largely...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: Taxation changes change behaviour, and that would not be unusual in this area either. However, given the changes coming in and the size of the operation in so far as the mortgage book is involved, I think the €50 million figure was included as a conservative estimate. I do not think it is anticipated that it would be less than that.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: At this stage I cannot give that separation of figures because I am not sure-----

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: The figures that I have been given here were based on the work that Revenue did, as I read into the record. The figures are based on potential profits made on a sample of mortgages valued at circa €1 billion held by a number of section 110 companies that were examined. The results of the examination were then extrapolated to a potential mortgage book population of €20 billion....

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: I do not know if it is fair to say that. Obviously the relationship between the section 110 and what would become an IREF, what at the moment is an ICAV or a QIF, not everyone will be using a relationship there at all, and some will, so in certain instances one will not be able necessarily to disaggregate out the two as a result of that relationship. So, for example, where a section 110...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: Yes.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: Obviously the rate that is being introduced in section 110, in so far as what will be paid, that is the rate that will be applied under this amendment when it is introduced. In so far as what the effective rate might look like, no one is anticipating as low an effective rate as 2.5%. Again, it is difficult to discuss this with the committee without going through what different assumptions...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: It is prudent as well.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: No, that is not the message we want to send and that is not the purpose of the measure.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: I think everything else in the amendment sends out the signal that we do expect to collect significant tax from the measure and that is the important signal that should be sent. When it comes to planning expenditures for 2017 it is prudent to go with a conservative estimate of €50 million.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: The intention of the provision is to introduce an anti-tax avoidance measure to stop people avoiding paying tax. That is the primary purpose of the amendment. It is not necessarily revenue raising, although we obviously recognise that as people can no longer avoid the tax they will pay money into the Exchequer. That is the way we are proceeding on this. We will know if...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: My officials inform me that it is based on section 21 and section 22 and that while the section 22 amendment had not been published at the time, work was already under way on its scope in order that a calculation could be made on the back of the proposed amendment.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: That is absolutely crucial as far as our offering as an international financial services centre is concerned. It is a big part of what we do in the area of fund management administration. I think something like €2 trillion is administered through funds while a tiny percentage, 1% or 2%, is invested in Ireland itself. It is important we maintain this offering as part of our suite of...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: That is the case. I do not want to undermine the important work that has been done and discussing this publicly in the Oireachtas has been an important component of understanding what happens and ensuring our amendments are robust in dealing with tax avoidance. Revenue was looking at it before it began to be written about and it came to the Department with its concerns. My understanding is...

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach: Finance Bill 2016: Committee Stage (Resumed) (15 Nov 2016)

Eoghan Murphy: It will apply to any profits earned after 5 September 2016.