Pearse Doherty (Donegal, Sinn Fein)
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67. To ask the Minister for Finance the expected revenue in a given year from ending the tax deductibility of profit participating interest without exception and of management fees, respectively, for section 110 companies; if he will consider reviewing the taxation of section 110 companies; and if he will make a statement on the matter. [3099/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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Section 110 of the Taxes Consolidation Act 1997 sets out a regime for the taxation of special purpose companies set up to securitise assets. The tax provisions are intended to create a tax neutral regime for bona-fide securitisation and structured finance purposes. The section 110 regime enables noteholders to invest through one structured vehicle, without giving rise to an additional layer of tax as compared to a direct investment in the underlying assets.

Securitisation allows banks to raise capital and to share risk and, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing. It is accepted that having the option for more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy, as the ability to securitise loan books plays an important role in allowing banks to meet their capital requirement obligations and to continue lending to businesses and individuals.

I am advised by Revenue that It is not possible to identify the amount of tax that would be raised in any given year by ending the deductibility of the items identified by the Deputy. Any such estimate would be entirely hypothetical as it is not possible to determine whether companies would still avail of section 110 status should the deductibility of such items be withdrawn.

Department of Finance officials, together with officials in Revenue, continue to monitor the sector and the operation of section 110 on an ongoing basis, with a view to taking action should it be deemed necessary. For example, in 2019 Department officials prepared a report on Real Estate Investment Trusts, Irish Real Estate Funds and section 110 companies as they invest in the Irish property market. This report was presented to the Tax Strategy Group in July 2019 and informed the amendments to the section 110 regime introduced in Finance Act 2019. These amendments strengthened the significant restrictions to the deductions which a section 110 company can claim for payment of profit participating notes to a specified person. The amendments also placed the section’s main purpose test on an objective basis, which enables Revenue to more effectively challenge abuse of the legislation.