I move:
That Dáil Éireann approves the following Order in draft:
Double Taxation Relief (Sea or Air Transport) (Finland) Order, 1967,
a copy of which Order in draft was laid before Dáil Éireann on the 17th day of July, 1967.
Copies of draft Orders relating to double taxation relief arrangements with three European countries were laid before Dáil Éireann on 17th July, 1967. One of these is an Agreement with Finland limited to the avoidance of double taxation on income derived from the business of sea or air transport. The other two are comprehensive Conventions with the Republic of Austria and the Swiss Confederation for the avoidance of double taxation of income generally. I think it convenient to take these draft Orders together.
The Conventions and the Agreement have been signed on behalf of the respective Governments. Before the arrangements enter into force, however, the necessary steps must have been taken under the laws of the countries concerned to give effect to them.
In this country the law provides that an arrangement entered into with a foreign government to afford relief from double taxation in respect of income tax, sur-tax, corporation profits tax and any taxes of a similar nature shall have the force of law here if the Irish Government makes an Order accordingly.
Prior to the making of such an Order, however, a draft must have been laid before Dáil Éireann and a resolution passed approving it.
Deputies will find the texts of the Agreement and Conventions scheduled to the draft Orders now before the House. The usual brief explanatory note is appended at the end of the Orders relating to Austria and Switzerland. For the convenience of Deputies, a separate memorandum has also been circulated with each draft Order explaining the articles in greater detail.
The Conventions with Austria and Switzerland follow the general pattern of modern double taxation relief agreements and incorporate, as far as possible, articles based on the models drawn up by the Fiscal Committee of the OECD. Apart from certain matters of detail, the provisions are similar to those contained in the conventions which this country has concluded with Sweden, Germany and Denmark and in the Convention with Canada which was recently approved by Dáil Éireann. The Agreement with Finland follows the general pattern of existing agreements with the Kingdom of Norway and the Republic of South Africa.
The Conventions with Austria and Switzerland will help to promote the development of trade with those countries. They are intended to encourage investment of foreign capital in this country and they represent a further significant advance along the road towards the elimination of double taxation. This is important from the considerations of encouraging foreign investment and of taking care of our own foreign financial and commercial interests.
The explanatory memorandum on the Convention with Austria has drawn attention to a feature which is of particular significance in this context. Austria will exempt from the Austrian corporation tax dividends paid by an Irish company to an Austrian company which has held 25 per cent or more of the share capital of the Irish company continuously for at least 12 months. This exemption will be granted whether or not Irish income tax has been deducted from the dividends. In this way, the benefits of the exports tax relief and the tax relief to industries set up in the Shannon Customs-free area are preserved for Austrian interests operating here through the medium of Irish subsidiary companies.
The Convention with Switzerland will have like beneficial effects. Its explanatory memorandum points out that Switzerland will exempt from the Swiss Federal Defence Tax dividends paid by an Irish company to a Swiss company if the latter company holds not less than 20 per cent of the capital of the Irish company, or if the holding is valued at an amount in excess of two million Swiss francs. Similar exemption from Cantonal tax is granted in many of the Swiss cantons. This exemption will be granted, as it will in the case of Austria, whether or not Irish income tax has been deducted from the dividends.
The purpose of the Agreement with Finland is set out clearly and concisely in Article 2. The exemption which will be accorded to Finnish undertakings under the Agreement will cover income tax, sur-tax and corporation profits tax and also any other tax on income which might be imposed in the future in this country. Irish undertakings will be exempt from equivalent taxes on income in Finland.
The Convention with Austria will enter into force upon the exchange of instruments of ratification. Upon entry into force, the Convention will have effect in Ireland, as respects income tax and sur-tax, for 1964-65 and subsequent years of assessment, and, as respects corporation profits tax, for any accounting period beginning on or after 1st April, 1964, and for the unexpired portion of any accounting period current at that date. It will continue in force indefinitely but may be terminated by either country giving notice of termination at least six months before the end of any calendar year.
The Convention with Switzerland also will enter into force upon the exchange of instruments of ratification. It will have effect in Ireland, as respects income tax and sur-tax, for 1965-66 and subsequent years of assessment, and, as respects corporation profits tax, for any accounting period beginning on or after the 1st April, 1965, and for the unexpired portion of any accounting period current at that date. It, also, will continue in force indefinitely but may be terminated by either country giving notice of termination at least six months before the end of any calendar year after the year 1971.
The Agreement with Finland will enter into force upon the exchange of notes indicating its approval by each country according to that country's legal procedure. It will then be effective in respect of profits earned as from the 1st January, 1967—the earliest date from which liability to tax might conceivably arise. It will thus put beyond doubt any question of possible tax liability for past years. The Agreement will continue in force indefinitely but may be terminated at any time by the Government of either country on giving six months' notice to the other Government.
