Tax strategy group eyes property funds, gambling and carbon tax

A review of how foreign institutional investors are impacting Ireland’s property market is just one of the areas to be considered later this month, along with betting duty, carbon tax and VAT, as part of the Tax Strategy Group’s pre-budget review.

The papers from the public-sector group, which publishes a number of reports each summer aimed at informing budgetary policy, are expected to be published at the end of the month.

One element of this year’s papers will be a review of real-estate investment trusts (reits), Irish real estate funds (Irefs) and section 110 companies as they invest in the Irish property market.

The proliferation of these funds by foreign investors to invest in Irish property assets has been the subject of controversy in some quarters, given their ability to sidestep Irish taxes. Recent figures show that despite amendments to the regime governing the use of these funds, the corporation tax yield from such structures has sharply decreased.

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Also on the agenda this year is a consideration of whether the Government should proceed with plans to remove the zero rate of VAT from food supplements. Last December, it was announced that the 23 per cent VAT rate would be applied on all food supplements from March 1st. However, the Government backed away from this date under pressure from the industry, and Revenue delayed the introduction of the VAT hike until November.

Carbon tax

The carbon tax is also up for consideration. While the tax was expected to increase from €20 to €30 a tonne in last October's budget, no change was made. Last month, the Department of Finance launched a public consultation on the options for use of revenue raised from such a tax increase.

It is expected that the results of this review, as well as a consideration of all options relating to carbon tax policy, including possible ring-fencing of revenue for specific purposes, will be reviewed by the strategy group.

The impact of changes made to the betting duty regime in last October’s budget will also be considered. From January, the rate of the duty rose from 1 per cent to 2 per cent, and there has been concerns that it has made it more difficult for independent bookmakers to compete with the larger players.

The strategy group will meet in mid-July with the papers expected to be published at the end of July or in early August.

Established in the early 1990s, the group is chaired by the Department of Finance, with membership comprising senior officials and political advisers from a number of departments and offices. Its research papers are used to inform budget strategy.