Attempts by Minister for Finance Michael Noonan to close loopholes that allowed so-called vulture funds to avoid tax on profits will not have an impact, according to a report by the new Oireachtas budgetary committee.
The committee also said it intends to carry out an “extensive review” of whether the money the State collects in corporation tax is sustainable.
The committee, established after the general election as part of reforms to the budgetary process, has produced its first report ahead of next week’s budget.
The report deals with broad budgetary and economic issues and held hearings in recent weeks with Mr Noonan, Minister for Public Expenditure Paschal Donohoe, leading economists and others.
Controversial
Mr Noonan last month announced new rules to close off a controversial loophole that allows so-called vulture funds to avoid tax on profits made buying and selling Irish property assets.
The rules came into effect immediately upon their announcement. Mr Noonan published a proposed amendment to section 110 of the Finance Act 1997 to be included in the Finance Bill, which will be published after the budget.
Section 110 has allowed foreign investors to acquire billions of euro of distressed assets in Ireland without having to pay tax on profits made from their sale, using legislation originally intended to allow for the flow of international funds through the IFSC.
In its report, the committee said it was aware of these changes but said it “remains concerned that the amendment will not have an impact” and said it will work with both Mr Noonan and the Revenue Commissioners to bring in further measures to ensure appropriate tax is paid by so-called vulture funds.
Committee chairman, Fine Gael TD John Paul Phelan, said: "The operation of vulture funds, who have bought up distressed assets from banks here, are a cause for concern as they are paying little or no tax on the profits and capital gains being made from their activities here.
“We need to close loopholes such as the operation of Section 110 and the Committee will work closely with the Minister on this issue.”
The report also calls for a withholding tax, a tax essentially levied on dividends at the rate of 20 per cent, to be applied to such vulture funds.
On the issue of corporation tax, the committee says it will “conduct a review . . . when the Revenue Commissioners have assessed the 2015 tax returns”.
