Seanad debates

Wednesday, 23 September 2020

Investment Limited Partnerships (Amendment) Bill 2020: Second Stage

 

10:30 am

Photo of Seán FlemingSeán Fleming (Laois-Offaly, Fianna Fail) | Oireachtas source

I thank Senators for their contributions and we can have a more detailed discussion on Committee Stage and Report Stage. I want to deal with some of the specific issues raised. Some Members raised similar issues but came at them from a different perspective.

Senator D’Arcy referred to the important issue of sustainable finance. This fund will help raise funds for sustainable climate projects. What is it all about? It helps to raise funds, manage funds and invest in funds related to sustainable financial products.

The issue of beneficial ownership has come up quite a bit in the context of the PPS cards. Senator D’Arcy asked about a situation where the person is not Irish and does not have an Irish PPS card, and this may also have been raised by Senators Gavan and Sherlock. The legislation allows a flexible method to be determined by the registrar in respect of an individual, for example, if the individual does not have a PPS number, he or she can verify details such as name and date of birth. If investors from another jurisdiction have no PPS number, it is important they can meet the verification requirements by producing their passport, so we know who they are. It is important we do not have people with PPS numbers all over the globe, so it is specifically provided for in the legislation that a person can produce a passport.

I now turn to the important issue of transparency. I accept it is a very long and detailed Bill. To clarify for those who have raised issues and for people watching, the proposed beneficial ownership amendments will enable the public to ascertain the beneficial ownership information of investors in these limited partnerships and will ensure the highest international transparency standards apply to investment limited partnerships. Simply put, a public register of the beneficial owners will be maintained by the Central Bank and any member of the public can walk in and inspect the register for a minor fee. It is like going into any planning office in the country in that a person can walk in and look at the public file on beneficial ownership. That public register is a phenomenally transparent example of how this can work, and it is important to stress that point. I have never in my life gone to the Central Bank to look at a public register, but I might do it to see how this works when it is up and running. In summary, people will have to produce their passport if they do not have a PPS number and there will be a public register available for public inspection, which is important.

On another point, in Ireland we are constrained by the number of banks. There are only a handful of small banks and many people in business find that, even if they have a good idea, for example, for a green project or in whatever other area, banks might only lend 50% or 60% of the funding and, sometimes, projects cannot get off the ground.At one time, banks used to lend 100% of the funding and that led to its own problems. Now they do not lend 100% of funding. These are non-banking sources of funds that people can invest in small and medium-sized businesses that would not have access to the required capital to get a project off the ground and where the banks are not willing or in a position to provide the funds for that. It is important that these funds are available here.

The sector has already been mentioned. It is well dispersed throughout the country. Obviously, much of it is in Dublin, but it is in Cavan, Cork, Drogheda, Dundalk, Galway, Kilkenny, Letterkenny, Leitrim, Sligo, Tipperary, Waterford, Wicklow and Wexford as well. It is all over the place.

On the over-reliance on this sector, my recollection is that 200,000 people are employed as a result of foreign direct investment in Ireland, of whom 45,000 are involved in the financial services sector. It is an area Ireland has particular expertise in. It is a significant, but not dominant, proportion.

Senator Ward mentioned bringing people into the country. When I met the chief executive of IDA Ireland last week to discuss the financial services sector, I was conscious of the people working from home. I asked how many people in the sector are working from home but are abroad. We have a good level of diversity of employees in the financial services sector - 25% or 26% - who are from other European countries or further afield and are working from home. That country may be 1,000 miles away. These type of businesses bring people into Ireland. They are paying the top rate of tax. It is one of the areas where taxation has held up because those companies, fortunately, are not dependent on the pandemic unemployment payment or the temporary wage subsidy scheme. One of the reasons the income tax receipts have kept up is that employees on high wages have been kept on the books and in employment. When we get the Covid situation to a level that people can work with, the main challenge will be to bring them back to Ireland. We do not want them staying in Spain, Portugal, Bulgaria or wherever they happen to be living at present. We have diversity. It brings people into Ireland. It brings income tax into Ireland. As I stated in my opening remarks, this particular sector provides €850 million in direct receipts to the Government every year.

In relation to the priority, two aspects were raised. I was asked why there is a rush. Another Senator asked why there is a delay. The Bill had almost gone through the previous Oireachtas but collapsed with the Government. It was one of the Bills that was in the system. The couple of months in between provided an opportunity to refine and improve it. We have a better piece of legislation here now. I understand people say there are other priorities. In this House, this entire legislation will take an hour.

The purpose of this legislation is not to help any of these businesses. The purpose of this legislation is to help Ireland to grow as an area where we can attract employment. People will get employment as a result of this new legislation and these new funds being in place. We are helping the Irish economy to recover by getting this legislation through. It is designed to help these businesses. It is designed to grow the industry in Ireland. That is an important issue to highlight as well. Those are the main points I would like to make.

I understand people have asked about the beneficial ownership. When I went into the Department and I was presented with this legislation and told that it was coming through, like the Senators and some other people, I wanted to know about the taxation situation in relation to these new investment limited partnerships. The investment limited partnerships authorised by the Central Bank after 13 February 2013 are treated as tax transparent. That means investment limited partnerships are taxed as if the partner or the investor directly holds the asset rather than the fund, and this is standard practice. Let me explain to the public. They think we are setting up a new corporate structure; we are not. It is only a contract between two persons. It does not have a legal identity. It is two persons, six persons or ten persons coming together to form a partnership. Each of the persons contributing to the partnership is liable for the tax in relation to any profits he or she makes as a result of his or her investment. There is not a partnership organisation, structure or body registered with the companies office or the Revenue Commissioners. It is only a legal contract between the two sides. The investors directly pay the tax wherever they are located in the world. That is important. It is a question I asked. I asked about the beneficial ownership because they do not even have to be from Europe. They could be from the United States or wherever.That is why we have to get proof of people's identity through their passports before they can invest. The tax treatment will not change.

The Ireland for Finance strategy was developed with the aim of creating employment and securing Ireland's reputation as a reputable and attractive location for the funds industry, which is subject to a robust and transparent regulatory regime. The Central Bank is a very highly regarded regulator internationally, but some people in the industry feel it sets the standards too high. If they do not like Irish regulation, let them go somewhere else. We do not want anything to do with them if they do not want to be subject to our regulations.

I welcome the opportunity we had today to discuss this Bill, which did not take long. This legislation will help to increase investment in the economy, thus creating employment. It will allow the sector in Ireland to compete for funds that have been going to other jurisdictions. I look forward to the co-operation of Senators on Committee and Report Stages.

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