Róisín Shortall (Dublin North West, Social Democrats)
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237. To ask the Minister for Finance if he will outline the net economic or social benefit that Russian business entities provide to Ireland outside of a small group of specialised accountancy and legal service providers in view of the role section 110 companies have played facilitating these entities and their use by investors to reduce tax on Irish assets, namely, Irish property backed loans; and if he will make a statement on the matter. [14111/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I would first note that there is nothing specific in the Section 110 securitisation regime that is of particular relevance to Russian investors or originators, and such vehicles are fully in scope of the sanctions regime. 

Furthermore, Central Bank data shows that the direct exposures of the Irish Financial System as a whole to Russia are very small. A statistical release on the direct financial links to Russia by economic sector, issued on 4th March and incorporating the latest available data on financial services sectors, stated that, at end-2021, Special Purpose Entities (SPEs) had holdings of €37.1 billion of Russian-issued assets. There were 33 Russian sponsored SPEs identified with total assets of €35.5 billion, accounting for 8% of the non-securitisation SPE sector. Russian-issued assets held by regulated investment funds represented 0.3% of total assets held by regulated investment funds (or €11.5 billion in total). The exposure of on and off balance sheet financial assets and liabilities to Russian counterparties held by Irish authorised banks represented 0.1% of total (or €1.7 billion in total).  Russian-issued securities held by Insurance companies represented 0.1% of the sector's total assets (or €97 million in total).

Section 110 is intended to create a tax neutral regime for bona-fide securitisation and structured finance purposes.  Securitisation involves the creation of tradeable securities out of an income stream or projected future income stream generated by financial assets.  Securitisation allows banks to raise capital and to share risk, thereby supporting their lending to individual and business borrowers. In addition, by providing a repackaging and resale market for corporate debt, it lowers the cost of debt financing for businesses.  Such financing is useful for the productive economy as it can underpin the supply of finance to industries and companies in Ireland, Europe and further afield. 

Ireland is not unique in having a specific regime for securitisations. The importance of securitisation has been recognised by the European Commission through their work on the Capital Markets Union.  A main objective of the Capital Markets Union is to build a sustainable securitisation regime across the European Union. 

In terms of property, Section 22 of the Finance Act 2016 made an amendment to address concerns that some section 110 companies were being used to minimise the Irish tax exposure on Irish property transactions.  The core effect of the amendment was to remove the possibility for section 110 companies to use what are known as 'profit participating notes' to sweep Irish property or distressed debt profits out of the company in a way that ensures little or no Irish tax liability arises.

As illustrated by these amendments, my officials monitor the regime on an ongoing basis and, where issues of concern have been identified, I have taken steps to address them and will continue to do so in future where necessary.