Averil Power (Fianna Fail)
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I tabled this matter to highlight the need for a public register of the beneficial owners of companies. Arguments for such a register were set very eloquently in The Irish Times last week in an article by Sorley McCaughey, the head of policy and advocacy with Christian Aid. The problem is that currently companies are able to use complex legal structures to separate their legal and beneficial ownership is such a way as to make it impossible for anybody to know who is the beneficial owner of the company, who is getting the money and who is pocketing the profits from the company.

The European Union is considering introducing measures in this regard. Discussions are ongoing in Brussels on the anti-money laundering directive and the Union is looking at the possibility of introducing a requirement across the Union for all member states to maintain public registers of the beneficial owners of companies. The reason I have tabled this debate is to ascertain from the Minister for Finance whether it is Ireland's intention to support that process and whether, in the interim, the Government will consider taking a step to introduce such a register ahead of any EU requirement.

The difficulty is that under the current system, money launderers, tax evaders and terrorist groups are able to rely on the secrecy that is provided by the complex network of trusts and shell companies to hide money and to hide the beneficiaries of profits. Christian Aid has pointed out the damage that this is doing to African economies. The African progress panel that was led by Kofi Annan estimated in its 2013 report that Africa loses twice as much in listed financial flows as it receives in international aid. Some estimates put capital flight at as high as €850 billion a year, depriving countries of vital capital and revenues. Much of this money flows out into shell or phantom companies. In the Democratic Republic of the Congo, for example, five mining contracts were awarded to anonymous companies in the British Virgin Islands, at a vastly under market rate and then sold on at market rate to major extractive companies. The estimated cost to the DRC was €1.35 billion, or twice the entire health and education budget of that country. The identities of those who own and benefited from the British Virgin Islands companies remain unknown to this day.

Public registers of the real and beneficial owners will address this problem. Not only will they provide a way to identify those who are profiting and hold them to account, but will also deter such practices. From Ireland's point of view, the introduction of such a requirement before it is enforced on us from Brussels would be another way for us to demonstrate our commitment as a country to promoting the highest levels of transparency in the areas of international finance and taxation and would seem to be a sensible position for us to adopt. The Department of Finance's recent publication on Ireland's international tax strategy talks at some length about our commitment to transparency and tackling tax evasion and justifiably points to some of the successes achieved in that regard under the European Presidency.

Taking this step now and introducing a public register of beneficial owners would be consistent with that policy and show we are serious about taking on the issue of tax transparency. The measure would only affect a small number of companies as the majority of companies in Ireland are small, family-owned companies with simple structures and where they are listed on the stock exchange, it is very clear who are their major shareholders. The issue I am concerned about affects approximately 1% or 2% of companies that use complicated structures to separate their legal and beneficial ownership. This is the type of practice we should not tolerate and should try to stop. France and Britain have already indicated that they support the introduction of a public register, regardless of whether it is introduced in the new EU money laundering directive. I urge that we do the same here.

I look forward to hearing the response from the Minister of State and hope he can indicate whether the Minister supports the proposal for this requirement at European level and whether Ireland will, like France and Britain, take the step of going ahead and doing it anyway, in the absence of any European requirement. We should do this as part of our overall commitment to showing we are serious about transparency in international finance and taxation.

Dinny McGinley (Donegal South West, Fine Gael)
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I thank Senator Power for raising this matter in the Seanad.

The proposed 4th EU anti-money laundering directive, currently being negotiated at the Council of the European Union, will update and replace the 3rd EU anti-money laundering directive and reflect the views of member states on the operation of the existing system. While the Department of Finance plays a lead role, the proposed 4th anti-money laundering directive covers a number of policy areas which come under the responsibility of a number of different Departments. The issue of beneficial ownership of companies is a matter of interest to the Department of Jobs, Enterprise and Innovation, which deals with company law matters.

The Minister for Finance advised me that he has consulted with the Minister for Jobs, Enterprise and Innovation, who has confirmed that there are a number of mechanisms already in company law through which beneficial ownership of shares can be identified. For example, any person with a financial interest in a private company may apply for a court order, under section 98 of the Companies Act 1990, to ascertain details of ownership of that company. Additionally, in regard to public companies there is a requirement, set out in Part IV, Chapter 2 of the Companies Act 1990, to disclose interest in shares when such interest reaches a specified percentage threshold.

Under section 14 of the Companies Act 1990, the Director of Corporate Enforcement may appoint inspectors to investigate and report on the membership of any company and otherwise with respect to the company for the purpose of determining the true persons who are or have been financially interested in the success or failure, real or apparent, of the company or able to control or materially influence the policy of the company.

At the European Council, Ireland has supported the Lithuanian Presidency approach in the proposed 4th anti-money laundering directive, which will require that member states ensure that the beneficial ownership information on companies incorporated within their territory is held in a specified location, for example, in one or more registries, or by means of other suitable mechanisms.

The issue of a public register for beneficial ownership has been discussed at ECOFIN and while there was support for beneficial information to be known and made available, there was majority support for the specific procedures and mechanisms around this to be left to individual member states. Negotiations are continuing on this proposed directive at the Council of the EU and due consideration will be given to this issue as part of the final agreement on the 4th anti-money laundering directive.

Ireland's International tax strategy, published on budget day, clearly sets out Ireland's policy objectives and commitments on a range of international tax issues, including countering tax fraud and evasion. This document includes Ireland's international tax charter which sets out the principles that guide Ireland's approach to these international tax issues. The charter includes commitments to both full exchange of tax information with our tax treaty partners and also commitment to automatic exchange of tax information in line with existing and emerging EU and OECD rules.

As the chairperson of the Revenue Commissioners stated, information, particularly third party information, is the lifeblood of tax administration. It is one of the most powerful tools in combating tax fraud and evasion. Automatic exchange of information between tax administrations is being heralded as the new global standard in the fight against tax fraud and evasion.

During Ireland's term as President of the Council of the European Union, work in the area of tax fraud and evasion was prioritised. Ireland brokered agreement by ECOFIN on comprehensive council conclusions on tackling aggressive tax planning, tax fraud and evasion. Progress was made on the negotiating mandate to align EU savings taxation agreements with non-EU jurisdictions, with the extended scope of the proposed revised savings tax directive. Ireland supports the global move towards automatic exchange of information and welcomes the work of EU to amend the directive on administrative co-operation in the field of taxation.

The issue of beneficial ownership is also linked to the country by country reporting issue. Ireland supports the G8 Lough Erne declaration on country by country reporting and ongoing work at OECD level on tax and development issues, including work on country by country reporting.

Ireland continues to support the anti-money laundering and anti-tax evasion agendas and promotes greater transparency across the financial services and tax areas. As outlined, Ireland supports the idea that beneficial ownership information should be known and due consideration will be given to the most appropriate mechanisms in light of our work in the various international fora and the final compromise agreed on the fourth anti-money laundering directive. Any legislative change which will reduce or eliminate corruption is clearly welcome. However, to be effective it must be properly targeted and proportional. Otherwise, innocent parties will have undue administrative burdens placed upon them and those who are breaking the law will remain unscathed.

Averil Power (Fianna Fail)
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I note the Minister of State indicated that Ireland supports the Lithuanian approach whereby each State would have a register of this type of information. It is crucial that any such register be public. He also indicated that the chairperson of the Revenue Commissioners stated that information, especially third party information, is the lifeblood of tax administration. Access to such information should not be confined to the shareholders of a company or people with an interest in it who can apply for a court order to obtain details about a company. The register must be made publicly available in order that any person with an interest in a company, for example, an individual who has heard that issues may have arisen in respect of a company, is in a position to obtain information about the company. Access to such information should not be limited to public officials or shareholders of the company. Any member of the public should be able to obtain such information. This is the best approach and the basis on which Revenue operates in many other areas. The same approach should be adopted in this area.

The only argument the Minister of State provided for not establishing such a register is the administrative burden that would arise from such a register. As I stated, the issue I raise does not affect the vast majority of companies and is confined to companies which have highly complicated structures, most of which are large multinational companies. Given the burdens placed on companies, I do not accept the argument that providing information on beneficial owners would add an unnecessary burden. The benefits in terms of transparency would be much greater.

This is a serious issue because developing countries are frequently deprived of resources as a result of corruption in the awarding of contracts and so forth. In many cases, it is difficult to ascertain which company benefits from the contracts. In addition, issues such as money laundering and the financing of terrorist organisations also arise. The benefits of a register far outweigh the administrative burden it would create. I ask that the Minister for Finance review the position because the Lithuanian approach, which is supported by Ireland according to the Minister of State, does not go far enough. I hope Ireland will be a world leader in this matter and take action ahead of the European Union, as Britain and France have done, rather than being dragged into accepting it.

The Minister of State indicated that Ireland has argued that it should be up to individual countries to decide how to proceed in their own jurisdiction. We have seen the problems this approach creates in respect of other aspects of taxation where one ends up in a race to the bottom. Let us put this approach behind us and instead lead the way on transparency and fairness in taxation systems internationally.

Dinny McGinley (Donegal South West, Fine Gael)
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I am inclined to agree with the Senator that transparency and openness are essential if we are to have an effective anti-evasion policy. The exchange of information between countries is also vital if we are to counteract tax evasion. This appears to be the approach being pursued. The Senator's comments and views will be conveyed to the Minister. I regret he is not present as he is otherwise engaged. I thank Senator Power again for raising the matter.