Call for Covid-19 subsidy ban for firms paying dividends

Companies that took taxpayer-funded payments to cope with the pandemic and then paid dividends to their shareholders should be banned from availing of further State subsidies, according to a Government TD.

Jim O'Callaghan, Fianna Fáil TD for Dublin Bay South, made the call after The Irish Times revealed that the company which distributes Mercedes-Benz cars in Ireland received almost €1.8 million in pandemic wage subsidies last year. It paid a similar amount in a cash dividend, also last year, to an offshore company controlled by the family that owns the business.

O'Flaherty Holdings, which is owned by the O'Flaherty family through MML Holdings, made operating profits of almost €10 million in 2020. It paid the dividend to Hailstone Holdings, a company registered in the Isle of Man.

A spokesman for the company suggested it was coincidence that the taxpayer subsidy and the dividend were near-identical amounts. He was unable to provide a statement from the company following a request for comment to chief executive Paddy Finnegan on the appropriateness of accepting taxpayer cash while sending dividends to the Isle of Man.

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Wage scheme

Last year, Mr O'Callaghan asked Minister for Finance Paschal Donohoe whether companies in the State's flagship employment wage subsidy scheme (EWSS) were banned from paying dividends. Mr Donohoe replied that he was "advised by Revenue that the issue of what dividends a company may or may not be in a position to pay to shareholders . . . are matters that are outside the remit" of the scheme.

The Department of Finance on Tuesday declined to comment on the O'Flaherty Holdings dividend. It said the wage subsidy scheme, which has so far paid almost €5.7 billion to employers, "incorporates compliance measures" and it referred to a statement last week by Mr Donohoe. However, the EWSS includes no compliance measures for dividends.

The Revenue Commissioners said the payment of dividends is “not a matter covered in the overarching legislation” that backs up the wage subsidy scheme. “The . . . payment of dividends by companies claiming Covid supports is a tax policy matter,” it said, referencing the Department of Finance.

State assistance

Mr O’Callaghan suggested companies that took subsidies and then paid dividends were not following the “spirit” of State assistance schemes.

“The terms of the schemes should be amended to ensure that no dividends can be paid out by companies that are in receipt of pandemic supports,” he said.

He said if cash could not be clawed back retrospectively, then companies that took supports and paid dividends should be “precluded” from future support.

Some European countries attached dividend bans to state pandemic supports. A directive in March 2020 from the finance ministry in Austria banned applicants for state aid from paying dividends until March 2021. A French €3 billion aid scheme that received European Union approval also included a dividend ban.

Some Irish companies, such as stockbroker Goodbody and building materials company CRH have returned taxpayer subsidies paid earlier in the pandemic.