Fury as firm that bought PTSB loans exempted from tax
PEARSE Doherty has launched an angry tirade against Permanent TSB after it emerged the company which bought €890million of the bank’s loans will be exempt from tax.
The Sinn Féin finance spokesman accused PTSB of deliberately exploiting a loophole in laws introduced in 2016 to crack down on tax avoidance by such firms – which was denied by the bank’s boss, Jeremy Masding.
PTSB has retained 5% of the loans, which it says it is required to do by law, but this move has exempted the vulture fund from paying any tax on its profits.
‘This really p **** s a lot of people off,’ Mr Doherty thundered at yesterday’s Oireachtas finance committee.
‘The profit made from this securitisation vehicle will be tax-free,’ the TD added.
Officials from PTSB and Pepper Ireland, which will take over the day-to-day manthat agement of the loans, refused to name the people behind Glenbeigh Securities – the financial vehicle that will take the profits from the loan sale.
That’s because both had signed non-disclosure agreements, the committee heard.
PTSB is selling the loans to Glenbeigh, which will then issue bonds. PTSB has said it will retain 5% of the bonds, and that the rest will go to the purchaser of the loans.
‘You’ve established it in a way that you won’t pay a penny in tax,’ Mr Doherty said. ‘Under the legislation we spent weeks and weeks on in relation to closing loopholes so that funds like this would actually pay tax on interest, you have found the way round it.’
When bank bosses initially dodged the question on tax, Mr Doherty read a passage from their prospectus which clearly stated that PTSB would retain an ‘economic interest for the purpose of securitisation’ and that the loan vehicle was ‘therefore exempt from the documented deductible restrictions’.
Mr Doherty said: ‘You won’t admit something that is in black and white – because the public are outraged at what PTSB has done. And this is a double outrage, the fact that you’re now offloading these mortgages to a vehicle, which you will benefit from as the CEO of the bank, to a vehicle that has circumvented our tax codes. Legally, but it’s done that way.’
Mr Masding confirmed that the buyer of the bad loans would be exempt from tax, but denied accusations that PTSB brought this about deliberately.
Mr Masding replied: ‘In summary, your comments around the section 110 tax status in the prospectus are correct. I do want to bifurcate any perception the committee might have that the bank took the 5% to take advantage of that. It didn’t; it has to take the 5% in order for it to be valid.
Mr Masding accepted that customers ‘felt let down’ by the sale, but said PTSB had decided it was the ‘least-worst alternative’ to reducing its levels of non-performing loans in order to keep the bank afloat.
Finance Minister Paschal Donohoe was informed of the planned sale, and consented in writing at the end of November.
Last month, he sought to reassure the people affected that the Central Bank’s code of conduct on mortgage arrears would be ‘upheld rigorously’.
Yesterday, Mr Doherty described the Finance Minister’s decision to sign off on the sale as a ‘new low in Irish banking’.
‘The public are outraged’