DUBLIN: A Dublin firm set up during the crash by US hedge fund, Davidson Kempner, to pick up distressed financial assets across Europe paid just $125 in corporation tax last year on income derived from assets valued at $8 billion.
Accounts filed for Burlington Loan Management, which owns diverse assets such as stakes in failed Icelandic banks and loans secured on the Titanic Quarter in Belfast, show it had virtually no taxable income in 2015.
It was structured so that its profits would be wiped out by interest repayments to other entities abroad that have links to the US hedge fund. Burlington’s accounts list $192 million in “investment income” and about $500 million in “gains on derivative contracts”, but these were wiped out by the interest payments, leaving it with taxable income of $375, the same as 2014.
Burlington is a Section 110 special purpose vehicle (SPV), which are complex “brass plate” structures that were recently at the centre of political controversy following allegations in the Dáil that they facilitate wholesale tax avoidance by so-called “vulture funds”.
Ireland’s SPV regime was originally designed to attract global securitisation vehicles to Dublin’s financial district. However, Social Democrats TD, Stephen Donnelly, recently alleged in the Dáil that SPVs were also being used to avoid tax on activities undertaken in Ireland. He cited the repeated investigation of the sector by The Irish Times.
The accounts for Burlington show that Irish assets account for 20 per cent of its $7.6 billion of “financial assets”, or roughly $1.52 billion.
About 19 per cent of its assets are listed as being in the UK, with 5 per cent in Iceland, 15 per cent in Germany, and the rest spread globally. Its investments include loans linked to the Belfast-registered Titanic Quarter, facilities that were due to expire at the endof 2016. It has also invested in the bonds of Icelandic banks, Glitnir and Kaupthing, and loans from Spain’s so-called “bad bank”, Sareb.
