Only lawyers and accountants gain from Irish 'SPVs' - Central Bank
Trillions of euro parked in Irish-registered entities contribute little to the real economy other than the massive fees generated for professionals such as lawyers and accountants, according to new research by the Central Bank.
The work looked at Special Purpose Vehicles (SPVs), a structure favoured by a host of financial firms because they pay little or no tax. Irish SPVs hold €3.8 trillion in assets - 15 times the size of the Irish economy. The report found financial services sector professionals made €100m from the administration of SPVs last year, but that there was little wider contribution to the economy.
"The contribution from domestic SPVs to Irish GDP is very limited," the bank said.
"Their contribution arises indirectly through fees to resident professional services, primarily in the legal and financial sectors."
The bank said the estimated amount paid to Irish firms for their services was under €100m.
In the past such SPVs were largely a feature of the International Financial Services Centre (IFSC), holding mainly foreign assets.
However, the use of SPVs and other low tax structures has become politically charged in recent months due to their popularity with funds that have bought up tens of billions of assets here since the crash, often at knock-down prices.
Meanwhile, proposed changes to ensure some funds pay more tax do not go far enough and could lead to Ireland being branded a tax haven internationally, according to Independent TD Stephen Donnelly.
Mr Donnelly has written to the Minister for Finance, Michael Noonan, flagging his concern that firms could circumvent Government proposals to clamp down on the use of so called Section 110 companies, which again pay little or no tax.
The Wicklow TD argued that draft legislation proposed last month will have the opposite effect. The new plan "will legitimise broader tax avoidance by firms in Ireland", he said.
"Within 24 hours of the draft amendment being published, accountancy firms had issued advice to their clients on how the amendment could be dealt with," he said.
Last month the Government moved to close off provisions which have allowed vulture funds investing in distressed Irish property to pay close to zero tax on profits.