Vulture fund met finance officials ahead of tax loophole closure
A vulture fund that is suing dozens of Irish borrowers was among a group of financiers and hedge funds that met the Department of Finance ahead of plans to close a tax loophole.
Finance officials met three executives from CarVal, the American vulture fund that bought €2bn in Irish loans, before the Finance Bill was published to discuss closing the loophole that allowed foreign investors in Irish property to pay little or no tax.
Finance Minister Michael Noonan announced in his Budget speech last year that he was clamping down on foreign investment funds that used special-purpose vehicles, or Section 110 companies, that generate little or no taxable income, to buy cheap property loans in Ireland.
Documents released under the Freedom of Information Act revealed he allowed international and Irish investors to have their say on the planned tax changes before his Finance Bill was published.
The minister came under pressure to close the loophole after it emerged several vulture funds were paying little or no tax on the profits they made from buying loans.
However, his announcement caused disquiet among investors, who feared it would impact on bona fide investors and hurt Ireland's reputation.
The Irish Debt Securities Association offered to meet officials the day before the Finance Bill was published to give feedback on the legislation and to make any "simple and uncontroversial tweaks" that might help avoid practical problems. The offer was declined by the department.
The Irish Funds Industry Association, the representative body for the funds industry here, offered to "assist the department in drafting legislation" to deal with its concern that "some funds may be being used to avoid tax".
The association also raised concerns in an email to Noonan about making the legislation retrospective. Its chief executive Pat Lardner said "as the decision had already been taken to tax investments by funds in Irish real estate", he wanted to "ensure" the final rules were brought in "without causing further problems for the Irish funds industry" and for "Ireland's appeal as a place to do business".
The primary concern was to protect investment in Irish-regulated cross-border funds from being taxed.
Other investors who offered input included the boss of Australian investment firm AMP Capital, an investment fund that bid to buy the Mater Private last year, PwC, Bank of Ireland and AIB.
The Department of Finance said stakeholder engagement ensured the "complex" legislation targeted the issues raised in relation to the use of Section 110 regime while not damaging the use of the regime for the wider industry. As a result, a number of technical changes were suggested.