This article was first published in the Independent.ie on 6 October 2016; Minister must deliver certainty and fairness.

The Irish real estate market has undergone significant restructuring in recent years and today, the investor profile is dominated by large Irish institutional investors and international real estate funds. In 2016, long-term institutional funds replaced many of the early, more opportunistic buyers. This evolution is necessary and provides stability for the medium-term, however, one thing that has not changed is the market's dislike of uncertainty. The Minister for Finance recently announced a review of the taxation of funds in the Irish property market, which has certainly yielded a good dose of pre-Budget nerves.

Many investors will have used Irish regulated funds to make their investment. These are typically established as qualifying investor alternative investment funds or "QIAIFs" and are the main focus of the review.

Regulated Irish funds have been used for property investment in Ireland for at least 20 years. QIAIFs, which are regulated by the Irish Central Bank and report to the Irish Revenue Commissioners, are used by some of the largest participants in the Irish property market, undertaking activities such as home building, rental, retail, hotel and office development. Many Irish and international institutional investors are formed as QIAIFs, for instance, NAMA, which has utilised QIAIFs for projects on the South Docks in Dublin.

QIAIFs are generally exempt from Irish tax, which has been Government policy for many years. Instead of taxing the fund, investors are taxed in whichever country they happen to reside, therefore, Irish investors, for example, are typically taxed at 41%.

The Government clearly has the right to change the Irish tax rules, however, changes have to be introduced reasonably and in a manner which supports the domestic economy and gives investors certainty and fairness.

Sudden changes could have a damaging impact on the property market and ultimately the economy. International investors do not have to invest in Ireland - they choose to do so. In many cases they have raised funds, entered into contracts, financed themselves and based their investment on expectations that Irish law will continue to be stable and certain. We recognise the need for stability each year when the Minister restates our commitment to the 12.5% trading tax rate for companies. The need for stability is no less in the property sector.

Secondly, if there are changes, we should be slow to target investors who chose a well-regulated and long established Irish regulated fund. They may have saved no money by using a QIAIF. Real estate investment trusts (REITs) represented a possible alternative for larger investors and they are also generally exempt from taxation. Non-Irish holding companies would also have been an option, which investors could base in their home jurisdiction without paying Irish service providers.

There is a very credible argument that there should be no changes for funds which have already invested in Ireland and hold Irish property. Any changes should be limited and apply prospectively to future acquisitions of property in QIAIFs. This is not to be charitable. It is imperative that Ireland retains its reputation as a jurisdiction which attracts international investors and respects the need for them to be given certainty and stability.

Instead of selecting one area for specific treatment, perhaps it would be more beneficial if there were a broader review of the taxation of Irish property. A number of areas have been highlighted by the property industry in prior years, including the rate of capital gains tax, which is high relative to international standards, VAT on new homes and the seven year capital gains tax exemption introduced in earlier budgets. Although designed to encourage property transactions, this exemption now incentivises those who hold onto land rather than sell it to someone who might use the property more efficiently.

The Government could use the Budget on 11 October to reassert Ireland's attractiveness as a stable and balanced jurisdiction. It could equally commit itself to developing a system of property taxation which rewards investors fairly and ultimately provides the population with the houses, workplaces and accommodation that they need.

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