Irish Section 110 SPV, Vultures, Tax Haven, Orphaning Scam

Hmmm… I see I could be coming out on the wrong side of history here :open_mouth:

I acknowledge the problems I see are a matter of debate.

The White House has come out and said that this ruling is an unfair ruling, against international tax practice, which has the potential to effect an appropriation by the EU of taxes due the USA. Follow the link for a podcast whether the White House spokesman’s remarks can be heard podcast.c-span.org/podcast/WT20160831.mp3. As I understand it, this is because our tax code treats the income earned outside Ireland as being a matter for other countries to tax. The US tax systems recognises that income earned int he USA can be taxed in the USA, and operates a deferral system. That system may not be effective but they see that tax and its collection as their bailiwick and so does Ireland. the EU is threatening the USA that the EU will not accept the deferral system and the EU will pocket the tax on income earned in the USA if the USA doesn’t.

For Ireland to accept the Commission ruling without appealing would, to my mind, effectively make us party to the Commission ruling thereby putting Ireland (and Ireland alone of all the EU member states) in a position of direct defiance of the United States Executive. This would have to substantially increase the risk Ireland being targeted by the US authorities, which would make US companies less likely to locate here.

The other difficulty is that Ireland effectively being party to the Commission ruling is that it makes the Government party to a decision which over-rules the Irish Revenue Commissioners. This would mean that Ireland is not standing over the actions of the Revenue Commissioners and accepts that the Revenue Commissioners were engaged in the provision of illegal state aid. This is what a lot of people believe but it would be shocking for our Government to say it because the Revenue Commissioners are part of the Irish State for which the Government has responsibility.

An admission by our Government that the Revenue granted illegal state aid would almost certainly be seen as an admission that our Government, which Revenue should be independent of, colluded with Revenue in providing this illegal state aid, whether true or not. This could be read to accept that we have a culture of institutionally corrupt behaviour in relation to international tax. No official or politician in another country could argue against Ireland being subjected special rules for tax havens, and any companies operating in Ireland being subjected to additional scrutiny and audits. This could seriously prejudice our inward investment.

Now, people can say they believe there was collusion and/or that they think we are a tax haven and/or that they don’t believe these will be the consequences. People are entitled to their opinions. The problem for the Government is that they risk severely damaging our economy and martyring our nation in protest at the behaviour of international corporations. This is folly in circumstances where tax competition is rife and the only fair and safe way of reigning it in is through countries coming together to reach agreements to move in lock step without seeking advantage.

The EU institutions have failed Ireland many times recently, and have shown that they have no problem serving the political agendas of the larger states who have usurped and bullied the Commission in many respects. The only protection for smaller states is the law. If we don’t stand up for ourselves we can expect to be continually trampled upon.

There is a debate to be had. While cynicism about anything any Government says may be popular, I think people need to stop shouting the Government down and to take a long cold look at this.

For the record, I am no fan of this FG Government or the Department of Finance, both of which entities I consider largely useless.

It’s a tragedy there wasn’t a 12 month delay between the Section 110 scandal (and it is a scandal), and the Apple ruling.

I’d say the Section 110 focus will just drift off now, as Ireland munches it’s hang-sangwiches in front of the telly hearing about Apple…

I’d say some people in the Dept of Finance and Revenue are very f#cking relieved Apple came up when it did.

On the other hand, some of the people who were involved in both issues are feeling a bit sweaty. But most of them probably settle down when they think of the zero-accountability culture and the whopper pension coming down the line.

Too true FTber, however have a look at this piece of analysis thepropertypin.com/viewtopic.php?p=889565#p889565
(WARNING: strong stomach advised, you may not like what you find).

Is the statement from the charity regulator saying they’ll look at 110 recipients relevant? It reads like a sop…

The act is actually coming into force this week??

The Charity Regulator could close it off quicker . I would start with the industrial scale funny business down in Matheson.

broadsheet.ie/2016/07/14/mar … -tax-bill/

There are rather a lot of funnys in the Matheson Foundation.

irishtimes.com/business/fina … -1.2756124

Right from the horse arse mouth comes this description of what the Matheson Foundation is:
matheson.com/about-us/matheson-foundation

**If you were in any doubt about how the system works, the Irish Charities Regulator just affirmed it: **

Charities Regulator to review Charities Holding Shares in special purpose vehicles on Trust
charitiesregulatoryauthority.ie/en/CRA/02-09-2016%20Special%20Purpose%20Vehicles.pdf/Files/02-09-2016%20Special%20Purpose%20Vehicles.pdf

Key points here:

  1. Won’t be a statutory investigation in case someone says something that might be found out not to be correct later (oops). Can’t have someone going to jail for that - I play golf with these guys. Pat Hickey’s Rio ticket investigation is more likely to go statutory (over a couple of hundred grand in kick-backs), than a domestic Irish tax avoidance scheme that runs to billions ?

  2. Despite Stephen Donnelly showing Matheson’s charities own 100% of the equity in Mars Capital Ireland (which should help Mars avoid over €80bn in Irish taxes), the Irish Charities Regulator is going to conduct a full and lengthy (again non-statutory, just in case they stumble into anything iffy; like reading the Sunday Business Post articles) investigation, which should at least carry on after Noonan has retired (which is coming soon).

  3. The key “out” in the Charities report will be from the very first line in their remit - “Liaising with other State bodies and agencies”. This is not the Criminal Assets Bureau / Fraud Office, but the Dept of Finance and IDA, who will tell the CR to back off (it is all for the “green jersey”). Will also give the CR scope to lengthen the time period of the investigation further in back and forward correspondence between these departments.

  4. And of course, in the Charities Regular’s desperation to pull the “green jersey on” (it is probably his first major “investigation” and he doesn’t understand the need to at least seem “forceful” to the animals in case they suspect foul play), we have the following lovely addition:

Like watching the judge wink at the defendant as he walks into the room.

Enjoy the tea and biscuits in the Mathesons, A&L Goodbody (and probably Dillon Eustace).


By the time this report gets done (c. +2 years), another “loophole” will have been readied by the Dublin IFSC law firms (one which doesn’t rely on Section 110s having to publish company accounts) to over take the Charity tax avoidance structure. Although, given the apathy of the Irish public, it may not even be needed.

We will go on, we must go on …

We the animals, will return to our work:

Revenue review completed. Changes to be in budget. Noonan anxious to publish proposals asap. Hand wringing whether changes can be applied to existing entities. CRA having a look at the use of charities.

fora.ie/vulture-fund-ireland-ta … 7-Sep2016/ not much info other than whats been said already

Revenue aware of NAMA sales to Section 110 companies
rte.ie/news/2016/0906/814471 … -nama-foi/

Can someone explain one thing for me please? As I understand it, in order to avail of S110 you have to have a profit in the first place. These funds have spent lots of money and bought lots of property. Are they making profits on their entire transactions already, or are they getting relief on the profits from the sales of individual properties while still holding much of their portfolio?

I’m not sure I put that well above. If I spend €100m on a portfolio and sell off part of it which cost me €9m for €15m then I have made a profit of €6m on this transaction. However, I’m still not in profit for the entire enterprise until I sell another €85m worth of properties.

I assume they can just revalue their portfolios to generate a nominal profit without disposing of the assets.

Thanks for all of the information Observer and others.

What would the implications of the Government closing this “loophole” (if indeed Revenue giving you their blessing to ignore the spirit and the letter of the law can be described as a “loophole”) be for arrangements already entered into?

i.e. Can the “vulture funds” be told that taxes will apply to all profits accrued from now on? Or are we going to be told that this would be unconstitutional…or worse, “would irreparably damage the reputation of Ireland Inc.”?

From my understanding of Observer’s posts, the very narrative that this is a “loophole” that requires closing should be challenged? It was a failure to comply with / apply the law as it stands, no?

Anto,

If you or I owned the company as Irish individuals you would realise a profit of 6M - you reduce the loans by 9M and increase cash by 15M, the difference is the profit which goes to reserves after paying tax of 750k.

The S 110 companies make no profit (sorry 1k). They reduce loans by 9M and increase cash by 15M and show income of 6M. Then they charge 6M as costs to the company from some non-Irish company. That charge does not have to be based on economic reality of the transaction.

Think of the whole thing as being akin to what Apple are doing to the whole EU via Ireland.

So this is just getting in front of the story and preparing an “as soon as it came to light we acted, and sher there’s no point crying over spilt milk” response.

When in reality Revenue and the Minister for Finance not only knew at the time about this particular interpretation of the laws in question (an interpretation so far from the spirit of the law, or any precedent, as to amount to a breach of the law), but actively assured the vultures that the law would not be applied?

Observer (or anyone else in the know), is it accurate to describe this interpretation (or application) of Section 110 as availing of a loophole?

Section 110 was created to be a “giant loophole” as such (allow Dublin IFSC lawyers do whatever they wanted to help clients structure their global securitization deals as no Irish tax was going to be forthcoming).

The Irish Revenue’s anti-avoidance laws were there to stop domestics using Section 110 (again, if Revenue had deliberately worded the Section 110 leglislation to explicitly block them from the domestic economy, they US IRS would have claimed that the Section 110 vehicle was not really an Irish Resident company (shades of Apple here), and prosecuted.)

The scandal, is that Irish Revenue, then dismantled their own anti-avoidance laws, to allow the Section 110s operate indiscriminately in the Irish domestic economy. There is now no need for any Irish company with assets near €10m to pay any Irish corporation or withholding tax. All Irish domestic profits, using Section 110, can be sent to Cayman.

I have explained, in other posts how to do this, including some high-end houses:

Section 110 Example: Strawberry Hill House, Vico Road, Dalkey, Co Dublin
thepropertypin.com/viewtopic.php?p=888842#p888842

Hope that captures the “subtle” trick that the State has done here to do us out of (another) c €20bn in taxes.

The Vulture Fund scandal is worse than Apple, as there aren’t even any jobs from it ?

I’m not saying Revenue are corrupt, but if you wanted to create a corrupt tax system you would:

(a) allow a large grey economy to develop whereby most people break the law either directly or by enabling others (e.g. cash transactions)
(b) set up a system of rules which can be applied subjectively
(c) pass laws which enable and enforce secrecy

This combination means gives you the means to pass favours, suppress whistleblowing, thwart oversight and punish dissenters, and this is exactly what we have.

What does that mean though?

Does the State plan on collecting any tax from the companies (or their charity SPVs) who have already purchased hundreds of billions of Euros of loans / property at rock bottom prices (having been advised that they would not be taxed on the profits they would make) or not?

If not he can piss off.

Is that to say that they aren’t really addressing the elephant in the room? A little hard to follow, but that’s what I took from it.

The word for today is “loophole”, not collusion between state and vulture funds. OK. everyone on message? Right-e-oh.

Todays other word is “perceived”, as in . . . “to address the perceived misuse of section 110”, because it’s not an actual misuse, at all, at all.