State to shut controversial ‘vulture fund’ tax loopholes

The Government has committed to close off a number of controversial tax loopholes as part of a drive to ensure tax transparency and fairness in the wake of the Apple tax ruling.

The Department of Finance confirmed yesterday that a loophole in legislation dating to 1997 that has allowed vulture funds avoid tax by gaining charitable status will be closed off in the Finance Bill, to be published after the budget.

Provisions of the legislation, especially section 110 of the Finance Act 1997, have allowed such funds – which have acquired billions of euro of distressed debt and properties – to register as charities and minimise their tax bills to negligible amounts.

Their use of the legislation in this manner has also been examined by the Charities Regulator.

A spokesman for the Department of Finance said yesterday that the change, as reported by the Sunday Business Post, is being considered in the context of the Finance Act.

Fianna Fáil finance spokesman Michael McGrath said yesterday that he wrote to Michael Noonan and the chairman of the Revenue Commissioners last month, urging them to close the loophole.

“I wrote that the use of aggressive tax avoidance by the funds did not seem to be consistent with section 110..

“I would hope the Government is minded to shut it down.

Introducing legislation

“I also said that if Revenue was of the opinion it did not have existing powers to deal with this, legislation should be brought forward and that Fianna Fáil would be happy to support it,” he said.

The department is now examining the legislative option as a means of addressing the loophole.

It forms part of a broader move by the Government to repair Ireland’s reputation internationally after it was damaged by a series of controversies over its tax structure, not least by the European Commission ruling on Apple. In addition to a review of the corporation tax set-up, the Government has made a commitment to achieve tax justice, a key demand of Independent Minister Katherine Zappone.

An important concession achieved by the Minister for Children was that any tax opinion would be valid for a maximum of five years. This would represent a significant change.

Ministers from Fine Gael and from the Independent ranks agreed yesterday that internal communications between the dominant party and its Coalition partners needed to be put on a more structured basis, rather than the slightly informal nature of operations until now.

The Independent Alliance has appointed experienced lawyer Tony Williams as a special adviser and programme manager, and he will undertake that liaison work within government. The group is also expected to appoint a press officer this month to represent its views and position in government.

A Fine Gael Minister said yesterday the “mood music” this week was a measurable improvement from the tense exchanges that took place during the vote on the private members’ motion on fatal foetal abnormalities.

Apple ruling

Sinn Féin finance spokesman Pearse Doherty confirmed the party had tabled an amendment to the Government motion on its appeal of the Apple ruling, to be heard in the Dáil on Wednesday. The amendment calls on the Government to spend the €13 billion on essential services.

However, with support from Fianna Fáil and from Labour, the Government is expected to have a comfortable majority in the Dáil.