Lobby group says tax loophole closure may dampen Nama sales

The lobby group for Irish professional firms that service special purpose vehicles (SPVs) – some of which were targeted this week by a tax loophole closure – has raised the prospect that the change may dampen the prices achieved in future asset sales by State agencies such as Nama.

Gary Palmer, chief executive of the Irish Debt Securities Association (IDSA), suggested the international funds that are heavy buyers of Irish property loan portfolios may factor in the closure of the tax loophole when pricing their bids.

Minister for Finance Michael Noonan announced, on Tuesday, the closure of a tax avoidance loophole for so-called "section 110" companies, including SPVs, that hold Irish property assets.

A tax-free regime for SPVs was created to attract international debt securitisation to Dublin.

Officials recently became concerned so-called “vulture funds” were using SPV structures to avoid tax on Irish property.

The issue was raised in the Dáil by Independent TD Stephen Donnelly, while concerns were also raised by Sinn Féin's Pearse Doherty.

Mr Palmer said the loophole closure affects only about 15 per cent of Irish SPVs, with the rest involved in the activities originally intended to benefit from the 110 regime.

“The integrity of those vehicles will remain intact,” he said.

“But how will [the loophole closure] affect the pricing of Irish property assets internationally? The market will decide the price, but will the price Nama gets tomorrow be different to what it could have got?”

Nama declined to comment. It is believed to have about €6 billion of Irish property assets remaining.

Mr Palmer also defended the use of charitable trusts to act as shareholders by SPVs, saying it is not for tax avoidance but to prevent a bankrupt SPV from bringing down the fund that owns the assets.

Opposition politicians have called on the Government to do more to ensure so-called vulture funds cannot continue to exploit loopholes to avoid tax.

Mr Donnelly welcomed the closure, but said the State should try to claw back taxes already avoided.

Labour leader Brendan Howlin said use of the the loophole "should have been stopped before now".