Companies that took taxpayer-funded payments to deal with the pandemic and then paid dividends to their shareholders should be banned from taking advantage of more government subsidies, according to the state’s TD.
Jim O’Callaghan, Fianna Fáil TD of Dublin Bay South, made the call after The Irish Times revealed that the company that distributes Mercedes-Benz cars in Ireland received nearly €1.8 million in pandemic wage subsidies last year. It paid a similar amount in cash dividends, also last year, to an offshore company controlled by the family that owns the business.
O’Flaherty Holdings, which is owned by the O’Flaherty family through MML Holdings, posted an operating profit of nearly €10 million in 2020. It paid dividends to Hailstone Holdings, a company registered in the Isle of Man.
A company spokesperson noted that it was a coincidence that taxpayer benefit and dividend payments were nearly identical. He was unable to provide a statement from the company after a request for comment to CEO Paddy Finnegan regarding the appropriateness of accepting taxpayer money while sending dividends to the Isle of Man.
Last year, Mr. O’Callaghan asked Finance Minister Paschal Donohue if companies in the state’s leading Employment Wage Support System were barred from paying dividends. Mr. Donohoe responded that « he has been advised by Revenue that the question of dividends which the company may or may not be in a position to pay to shareholders . . . is outside the scope of the ‘Scheme’. »
The Treasury Department on Tuesday declined to comment on O’Flaherty Holdings’ dividend. She said the wage support scheme, which has so far paid nearly 5.7 billion euros to employers, « includes compliance measures » and referred to a statement last week by Mr Donohoe. However, the EWSS does not include any dividend compliance measures.
The Revenue Commissioners said the payment of dividends « is not a matter covered by the blanket legislation » that supports the wage support system. “The . . . , referring to the Ministry of Finance, said that the payment of dividends by companies claiming Covid is supporting a tax policy issue.
Mr O’Callaghan noted that companies that receive subsidies and then paid dividends do not follow the « spirit » of state aid schemes.
« The terms of the schemes should be modified to ensure that no dividends can be paid from companies receiving pandemic support, » he said.
He said that if the cash cannot be recovered retroactively, the companies that received the subsidy and the dividends paid out should be « prevented » from future support.
Some European countries have attached dividend bans to government support for the epidemic. A March 2020 directive from Austria’s Finance Ministry banned applicants for state aid from paying dividends until March 2021. A €3 billion French aid plan that won EU approval also included a dividend ban.
Some Irish companies, such as stockbroker Goodbody and building materials company CRH, have reinstated taxpayer benefits paid earlier in the pandemic.