It was reported in the past week or two, and perhaps earlier, that a company set up by Goldman Sachs - it is a crowd called Tramore Funding DAC, a special purpose vehicle that is just two years old and is due to disappear shortly - and which had purchased loan portfolios off banks generated €153 million in tax-free profits from its backers but, through "complex accounting procedures", managed to turn those profits into a loss and paid no tax whatever. Is the Minister aware of this? What does he think about such an extraordinary situation where those kinds of profits are not taxed?

I thank the Deputy. As he is aware, I am not in a position to comment on the activities of individual taxpayers. However, I can give the following overview of section 110 of the Taxes Consolidation Act 1997 as it relates to the securitisation of mortgages.

Securitisation allows banks to raise capital and share risk. By providing a repackaging and resale market for corporate debt it lowers the cost of debt financing. It is accepted that having the option of more diversified sources of financing is good for investment and business. It is also important for financial stability in the economy, as the ability to securitise loan books plays an important role in allowing banks to meet their capital requirement obligations and continue lending to businesses and individuals.

The role of securitisation has been recognised by the European Commission through its work on capital markets union. However, this regime is subject to several anti-avoidance provisions. For example, the Finance Act 2011 restricted the ability of section 110 companies to avail of a tax deduction for interest payments to connected persons in respect of profit participation notes. The Finance Act 2016 put further restrictions in place.

I am aware that there are competing concerns in this area. On the one hand, there are ongoing concerns regarding loan book sales and the appropriate levels of taxation. On the other hand, it is recognised that bona fide securitisation is important for both consumer lending and bank capital requirements. My officials, together with officials in Revenue, will continue to monitor the sector with a view to taking action if necessary.

The securitisation of loans helped to crash the entire global economy in 2008. The Minister would have to do a fair bit of convincing to persuade me or most people that it is not a very hazardous practice. It is absolutely unacceptable that outfits like Goldman Sachs can purchase these loan portfolios and set up designated activity companies, DACs, in this case Tramore Funding DAC, that can generate €153 million in profits and somehow turn that into a loss. This is not just about that individual company. This is how a huge number of multinational corporations manage to pay nothing like the 12.5% tax rate. They pay next to no tax, or none at all, by using accountancy tricks to write down profits and turn them into losses. The Minister is allowing this to happen.

In recognition of some of the issues raised by Deputy Boyd Barrett and others, important changes were made in Finance Acts in 2016, 2017 and 2019 to deal with taxation of income and of these vehicles. I am not in a position to comment on any individual transaction but I wish to emphasise that tax liability arises on the distribution of the income to noteholders.

I can only say that whatever efforts the Minister claims he is making have made absolutely zero difference to the capacity of big financial corporations and other multinationals to use networks of subsidiaries in this way. They can generate profits in one subsidiary and through distributions, royalties or payments of interest on loans from other subsidiaries they magically turn a profit into a loss on the balance sheet. They can therefore tell the Revenue that they did not make any profits at all, even though these practices are reported on and celebrated by the companies in question. They boast about the tax-free profits they are making. A 12.5% share of €153 million is a lot, and we got zero. The Minister and his Government are allowing this to happen.

I am commenting generally in my reply. Tax is due when income is distributed to noteholders in section 110 organisations. I want to ensure that the tax laws governing these entities reflect the important role of securitisation in enabling our banks to function and fund themselves efficiently while dealing with issues that have rightly been raised in this House. That is why changes have been made. Tax is not due on transactions inside these units. Liability arises when the income is distributed.