Vulture funds ‘use charity to avoid tax’

Vulture funds are using charities to avoid paying tax in Ireland, potentially costing the exchequer up to €20m a week, it has been claimed.

Social Democrat TD Stephen Donnelly made claims in the Dáil that, in one situation, a company was promoting helping children but also involved in avoiding paying huge sums of tax here.

Tánaiste Frances Fitzgerald said Revenue, the Department of Finance, and the charity regulator would look at how ‘vehicles’ or structures are investing in property or abusing a charity status.

Mr Donnelly described how a US vulture fund had set up its Irish subsidiary, Mars Capital, to avoid paying taxes in Ireland on its Irish profits. This mirrored other cases.

“I believe these vulture funds are about to pull off the largest avoidance of tax on Irish profits in the history of the State. The scale is likely to be in the tens of billions of euro in missed taxes,” said Mr Donnelly, speaking under Dáil privilege.

He described how Mars Capital, a mortgage company, was owned by a registered charity, the Matheson Foundation. The charity’s mission was to help Irish children to “fulfil their potential”.

It also contributed to causes such as the Irish Society for the Prevention of Cruelty to Children, Barnardos, and Temple Street Children’s University Hospital, TDs heard.

The company, through the charity, was not paying tax on its profits here under a corporation tax loophole called section 110, said Mr Donnelly. In one year, it had paid a total €250 on profits of €14m, the Dáil heard, made from buying up distressed mortgages.

“At a time when public faith in the charity sector has been rocked yet again, a children’s charity is being used to help a vulture fund avoid paying taxes to the Irish State on its Irish profits,” said Mr Donnelly.

He went on to say that he understood almost all of the vulture funds whose profits are generated in Ireland have section 110 status.

“How big is the scale of the tax avoidance by these vulture funds?” he asked.

Such actions were costing the taxpayer potentially €20m a week, he added.

Tánaiste Frances Fitzgerald said officials from the Department of Finance and Revenue were currently examining the use of certain physical vehicles for property investments.

Should investigations uncover tax avoidance schemes or abuses, then “appropriate action” would be taken including legislative change.

Ms Fitzgerald said separately that she had asked the charities regulator to examine Mr Donnelly’s concerns.


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