Valerie Flynn
IRELAND’S BIGGEST LANDLORD is lobbying to be part of the new government-backed savings and investment scheme promised by Minister for Finance Simon Harris.
Ires Reit has argued that stock exchanged-listed corporate landlords known as real estate investment trusts (Reits) should be made an investment option for individuals who take out the new accounts.
There is currently only one Reit in Ireland, Ires. There were others, but they have sold to private owners and come off the stock market.
Ires told The Journal that retail investors, renters and “society more broadly” would benefit from its inclusion in the new state-backed personal investment scheme that Harris has said should be up and running next year. The scheme has been billed as a corrective to the current punitive taxation regime undermining investing by Irish savers.
One financial adviser has disagreed with Ires’s arguments.
Ralph Benson of online investments and pensions adviser Moneycube said if Ires gets its way, “ordinary punters who can’t afford houses” would end up “pumping more money into a fund that increases rental accommodation in the Irish market and decreases their ability to buy houses”.
Ires both buys and builds apartment blocks. It is renting out over 3,600 houses and apartments across the state – a portfolio worth €1.2 billion. The proportion of new homes coming to the open market in Ireland is falling, with institutional investors and the state, and state-backed housing charities, owning more and more new homes.
Earlier this year, Ires bought 77 apartments in Naas, Co Kildare, with the Dáil hearing that individuals and families who were hoping to buy one of the homes were left disappointed. However, Harris told the Dáil at the time that private investment is needed to fix the housing emergency and boost supply.
Benson added that it is good financial practice to diversify investments, so Irish savers should look for ways to invest in companies that are not based here and not based on property (since many people’s wealth is already tied up in property via their house) when the new government-backed scheme starts.
“Our wealth is intimately connected to stuff that happens on this rainy island. One of the upsides of this new thing should be that people start to own a little bit of Tesco, a little bit of Bank of America – there’s a big bad world out there and a lot of that has been kept away from investors in Ireland. It would be great if this thing changed that a little bit,” Benson said.
The current tax regime for investment has made it unattractive for Irish people to invest in exchange-traded funds (ETFs) and other similar funds. ETFs are one of the easiest ways to cheaply invest in a globally diverse portfolio, and they are very popular in other markets such as the UK.
Meeting with Department of Finance
Ires chief executive, Eddie Byrne, and company secretary, Anna-Marie Curry, met Aidan Murphy, a senior official in the Department of Finance, and Clare Mungoven, a special adviser to Harris, to discuss their proposal. The meeting was disclosed on the lobbying register.
Ires Reit said it has proposed a mechanism whereby it could be included as an investment option for the new savings and investment accounts. At present, retail investors cannot invest directly in new issues of shares by Reits, Ires said.
(However, anyone who wants to can already buy and sell already issued Reit shares on the secondary market.)
Ires argued that adding Reits as another investment option would benefit holders of the new accounts as they seek to get “better financial outcomes from their savings”.
Ires argued that there would also be a benefit to the housing sector, as domestic savings would be “channelled towards investment in much-needed new housing accommodation, to the benefit of renters and society more broadly”.
Many details of the new government savings and investment scheme are not yet clear, including whether Reits will be included
Harris has said an annual flat-rate tax will be levied on the value of assets held, above a certain tax-free threshold, with no entry and exit taxes.
The Department of Finance said in a statement that the new scheme will follow European Commission recommendations to increase the availability of savings and investments accounts across the EU, with accounts that offer the opportunity to invest in shares, bonds and funds known as Ucits, including ETFs.
The accounts will be “simple, accessible, tax-efficient, easy to administer, transparent on fees and portable across borders where possible”, the department said.
“The government will ensure that it best fits the Irish economy and the needs of Irish households.”
Policy options are currently being worked on by officials ahead of the October Budget, to allow the accounts to be offered next year, the department said.
Economists have warned that Harris’s proposal will benefit the wealthy and create a hole in the tax base.
Benson said the government seemed to want to announce a “new thing” rather than merely reforming taxes such as capital gains and “deemed disposal”, whereby investment in many funds and in life assurance is taxed every eight years.
He added that savers may pay have to pay tax to take their money out of existing investments to put it into the new structure.
What is a Reit?
Reits were legislated for in Ireland in 2013, with the aim of facilitating investment in rental property by removing double taxation on property investment via a corporate vehicle.
Reits are exempt from corporation tax on income from rent and on property sales, and from capital gains tax on property sales. However, shareholders are liable for tax on dividends. Reits are obliged to release 85% of rental profits each year as shareholder dividends.
Reits are required to list their shares on a recognised stock exchange. There are also legal requirements on the diversity of ownership, and on the amount of property they must hold.