Vulture funds using ‘shadow’ lobbying system, Burton says

Lobbying legislation must be strengthened to prevent vulture funds from “flying under the radar” through contact with junior officials, the Dáil has heard.

Labour finance spokeswoman Joan Burton called for Department of Finance officials at assistant principal and higher executive officer grade to be considered "designated officials" to ensure lobbying on tax matters, particularly by vulture funds, could no longer be "hidden in the shadows".

She also suggested that in at least one case letters from a vulture fund directly to Minister for Finance Michael Noonan were not declared.

And she asked the Government to introduce a standing commission on taxation so the State could be constantly vigilant and on the watch for new tax avoidance creations.

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Tánaiste Frances Fitzgerald told the Dublin West TD "If what you are describing as a shadow system is out there, well clearly it needs to come out of the shadows."

Ms Fitzgerald said the last government introduced lobbying legislation because such contacts were going on behind the scenes. That government decided more transparency was needed and legislation was implemented.

“If there is further work to be done on this that can happen,” she said.

Ms Burton raised the issue as she noted a report that law firm and tax adviser Matheson had abandoned the use of three charities that helped firms including vulture funds to avoid tax on billions of euro.

Investigation

She referred to an investigation by The Irish Times showing intense lobbying of the Department of Finance by vulture funds, "trying to ensure that changes to our law didn't inconvenience their elaborate tax avoidance structures".

Ms Burton said “the statutory lobbying register seems to show an awful lot less activity. And the lobbying returns for September to December 2016 show that only a small portion of those meetings were required to be declared.”

She believed that “much of the lobbying by these companies was carried out with junior officials so that is flies under the radar”.

“It is clear that lobbying rules in relation to tax matters need to be strengthened so that all activity is captured,” she added.

And she said that in a number of cases it could be that vulture funds avoided any necessity to declare their interaction by channelling their contact to more junior officials, contact with whom did not have to be declared.

Ms Fitzgerald pointed to the Government’s action in relation to so-called section 110 cases to make profits from investments in Irish property-related loans taxable.

This follows reports that vulture funds earning millions of euro paid virtually no tax.

Nama

Ms Burton noted that the National Asset Management Agency would pay an extra €158 million in tax on profits made by the agency from the sales of property held through section 110 companies.

She asked how much the Government expected to collect from other companies following the rule changes.

The Minister said the legislation on lobbying was very recently introduced. “I’m sure it will be reviewed and its effectiveness looked at,” she said.

She added: “If there are gaps then clearly that needs to be examined. And if changes are needed to the legislation for that to happen, that can be looked at.”

Ms Burton said there was a shadow lobbying situation in Ireland where very clever people were operating to seek tax advantages and “this makes our tax system more unequal than it needs to be.

“If we want to make our society more equal we have to have a situation where lobbying is properly accounted for.”

She claimed: “People are flying under the radar and lobbying in the shadows.”

The Minister said if Ms Burton had information about this shadow lobbying she should make it known to the Minister for Finance.