On Casablanca, Clerys and Tax Justice

Andy Storey

Andy Storey is a lecturer in political economy at University College Dublin and a board member of human rights group Action from Ireland (Afri).


In the classic film Casablanca, French police captain Renault, acting on German orders, shuts down Rick’s saloon and casino, leading to the following famous exchange:

Rick: “How can you close me up? On what grounds?”

Captain Renault: “I’m shocked, shocked to find that gambling is going on in here!”

[A croupier hands Renault a pile of money]

Croupier: “Your winnings, sir.”

Captain Renault [sotto voce]: “Oh, thank you very much.”

Captain Renault [aloud]: “Everybody out at once!”

The government’s reported decision to close off a tax loophole that allowed “vulture funds” pay little or no tax through claiming Section 110 (of 1997 tax legislation) status (and making use of entities availing of charitable status to help them do it) has a similar ring of spurious outrage.

In my last column, I quoted minister Richard Bruton as saying that if the Revenue Commissioners had cause for concern about the use and abuse of Section 110 then they would act accordingly. Now it seems the government no longer needs to defer to Revenue or await its findings – it can pledge that the issue will be dealt with in the next Finance Bill.

We know that in January of this year Revenue had voiced concern about NAMA selling off large numbers of loans to companies claiming the controversial Section 110 status for the purposes of tax avoidance. And yet this did not make it a political priority for government, despite the potentially enormous loss of tax revenues involved.

Indeed, the independent.ie/business/irish/firm-that-part-funded-purchase-of-clerys-paid-214-tax-last-year-34971182.html">number of Section 110 entities active in Ireland stands at over 2,100, a three-fold increase since 2010.

So why is it only now that the government is “shocked, shocked” to discover that such dubious dealing is rampant?

Because Fine Gael needed backing for their Dail motion on the appeal of the EU commission’s ruling vis-à-vis the Apple tax judgement (which I will return to in a later column). And minister Katherine Zappone insisted her backing could only come at the price of a stated commitment to tax justice.

Hence the newfound urgency about addressing Section 110.

So are we now at the dawn of a new, squeaky-clean era of tax transparency and probity? Well, the government is appointing an “independent” expert to review the whole tax system.

But Minister for Finance Michael Noonan will both nominate the expert and set his or her terms of reference. So holding your breath for a radical shake-up is probably not a good idea.

Turning to more specific issues, one of the Section 110 bodies that has minimised its tax liability in Ireland in recent years is QREA.

This company helped to fund the purchase, and closure, of Clerys department store last year, unceremoniously throwing over 400 workers on the dole, with the state having to pick up the statutory redundancy bill. QREA, which manages €35 million of Irish assets, independent.ie/business/irish/firm-that-part-funded-purchase-of-clerys-paid-214-tax-last-year-34971182.html">paid just €214 in tax in 2015.

Inspectors of the Workplace Relations Commission continue to investigate the circumstances of the Clerys takeover.

Meanwhile, it was announced last month that a private company – building-restoration experts Lambstongue – has refused to work on the proposed redevelopment of the Clerys building unless the new owners meet with the laid-off workers. Lambstongue issued the following statement:

perhaps if the majority of construction companies took such a stance, vulture companies would think twice about treating ordinary workers in such a fashion, and the overall climate might change for the better.

Dublin City Council’s planning department has, apparently, been rather more supportive of the redevelopment, allowing the new owners to include the footpath and public road at Earl Place and Sackville Place in the redevelopment application, despite the objections of councillors.

At a higher level of government, an expert review has recommended a range of changes in the implementation of company and employment law to ensure that the events surrounding the closure of Clerys cannot be repeated.

The government has invited responses from interested parties to the expert report. Presumably, if political circumstances demand, a more urgent response will be forthcoming and the government will declare itself “shocked, shocked to find that the exploitation of workers and the maximisation of (largely tax-free) corporate profits is going on here”.

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