Dáil Éireann debate -
Tuesday, 23 Sep 2014

Vol. 851 No. 2

Topical Issue Debate

Corporation Tax Regime

Deputy Michael McGrath

I am glad the Minister for Finance is in the Chamber to deal with the issue of the OECD base erosion and profit shifting deliverables report 2014. I feel it is important to raise the issue in the Dáil at an early date. I am sure the Minister will agree that it is critical to provide certainty on Ireland's corporation tax regime. All of the main political parties in this House subscribe to the 12.5% corporation tax rate. However, as important as the rate itself is the corporation tax system, which is administered by Revenue and underpinned by legislation. There has been considerable speculation as to what the report means for Ireland in terms of changes the Minister might seek to make in the budget. I seek reassurance from him in regard to his intentions because we should be under no illusions - I am sure he is not - that Ireland is operating in a highly competitive environment when it comes to foreign direct investment. Ireland's corporation tax rate and system have been fundamental to our success in attracting inward investment over many years.

It has been clear for some time that our corporation tax system is in the spotlight and, in many respects, under attack. There was commentary, much of it inaccurate, at US Senate hearings and in the UK House of Commons, and a European Commission probe is ongoing into the treatment of one company by Revenue. It is important that Ireland moves in parallel with other countries. The OECD listed a number of countries as having harmful tax practices, but Ireland was not one of them. However, a head of steam appears to be building to the effect that Ireland will make a unilateral move on certain aspects of our system. The double Irish has been highlighted as a case in point. The questions I have to pose - I do not have all the answers - are what is the cost of doing nothing on the issue and what is the cost of acting on it. Would it be sufficient to signal a roadmap of changes that the Minister intends to make over the coming period in respect of our corporation tax offering?

It appears to me from my discussions with multinational companies, their representative bodies and their professional advisers that Ireland's corporation tax offering has become less attractive compared to the UK's offering in recent times. The UK authorities have upped their game considerably. I am getting that feedback from the companies concerned, and I am sure the Minister and his officials are getting similar feedback on the UK's move on the patent box, the reduction in its corporation tax rate and the manner in which it treats overseas profits from a corporation tax point of view. Ireland needs to play hard but fair, and Ireland needs to play to win when it comes to foreign direct investment. I am loth to see a situation in which we make unilateral moves before other countries change their systems. Compared to many other countries, Ireland's system is open, transparent and underpinned by legislation. The Minister knows full well the importance of the investment and employment that multinationals bring to this country. I want to see that supported and protected and if he is going to make any changes, they have to be in the context of an overall package of improving our corporation tax offering, such as in regard to the treatment of intellectual property and research and development. These issues are fundamental to companies seeking to invest in Ireland.

Minister for Finance (Deputy Michael Noonan)

I thank the Deputy for tabling this important issue for debate because the base erosion and profit shifting, BEPS, process and international tax generally have received significant media attention recently. Due to a need for a multilateral solution to this international problem, the G20 asked the OECD to report with recommendations on how to tackle aggressive and harmful tax planning. The resultant OECD project is known as the OECD base erosion and profit shifting project. When a company undertakes base erosion, it is attempting to reduce its taxable income and thereby reduce the amount of tax it has to pay. The practice of profit shifting is to move profits from one jurisdiction to another.

In July 2013, the OECD launched an action plan on BEPS, identifying 15 specific actions needed in order to equip governments with the domestic and international instruments to address these challenges. The BEPS project is not seeking to harmonise tax rates across its members as the action plan because, as it states, "tax policy is not only the expression of national sovereignty but it is at the core of this sovereignty, and each county is free to devise its tax system in the way it considers most appropriate". Further, the project is not opposed to tax competition in member states but instead opposes harmful tax competition adopted by jurisdictions. It is fundamentally important to distinguish between these two types of tax competition. For instance, a low rate of tax is a policy lever that can be used by countries, especially smaller, peripheral countries, that seek to attract foreign direct investment for growth.

Many of the BEPS actions are technically complex but at its heart BEPS is a simple concept with two key pillars, namely, to align more strictly substance and taxing rights, in other words, companies should be taxed where they have their substantive operations; and to address harmful tax regimes. This is in line with Ireland's overall strategy for attracting foreign direct investment. Ireland has not been and will never will be a brass plate location. We only have and want substantive foreign direct investment - the kind that brings real jobs. That is why I believe that the OECD BEPS project offers more opportunities for Ireland than risks. We have welcomed the first set of BEPS reports, which were released last week, because they are the first milestone in this two year process. The reports examine a number of different areas and the draft recommendations are very positive. As I noted last week, Ireland agrees in particular with the conclusion of the report on the digital economy that the sector should not be ring-fenced from the economy as a whole. There has also been good progress in the areas of coherence, substance and transparency, and while further work is required in some of these areas, the reports are a further step towards multilateral co-operation on countering base erosion and profit shifting by multinationals.

At 12.5%, Ireland has the lowest general corporate tax rate in the OECD. Corporate tax rates are a matter of national sovereignty. This Government is committed to maintaining the rate. Ireland's offering of a competitive corporate tax rate, the availability of skills and our reputation for being business friendly give us a huge advantage that other countries will struggle to match. As international tax loopholes progressively get closed down, our low general corporation tax rate will become even more attractive. Indeed, as we continue to improve our offering for knowledge-based investment, research and development, and intellectual property, I believe that over the coming years we can grow our share of FDI related investment. In recognition of the importance of the BEPS project, my Department held a public consultation on it earlier this year to start a national conversation on how Ireland should best position itself in a post-BEPS environment. We received a lot of very interesting responses which will feed into my deliberations for budget 2015. I plan to publish the results of this consultation in the near future.

Deputy Michael McGrath

All of us accept that change is coming to the international corporation tax environment. The question for Ireland is whether we anticipate those changes by seeking first mover advantage, if there is an advantage to moving first, or wait to see how other countries respond and move in step with them. I am concerned that, if Ireland moves unilaterally on the double Irish issue, the focus will move to other issues pertaining to our corporation tax regime in the absence of other countries making changes to their systems. We may lose a competitive edge and it would be the second significant change in 12 months to our corporation tax regime. The Minister dealt with the issue of stateless companies in last year's budget.

The issue of certainty is fundamental to corporation tax and inward investment decisions. My instinct is that Ireland should move on an agreed basis with other countries and be cautious about making any changes to our corporation tax regime. We should be under no illusions that behind all this international drive towards an improved corporation tax environment, other countries are looking at Ireland with envy because of the more than 150,000 direct jobs in multinationals here and the investment associated with that. They want our jobs and investment. It is an economic reality we must accept.

In the context of the consultation exercise and the report it is intended to publish, is the Minister considering changes in this area for the 2015 budget? I know the Minister cannot tell me what are the changes but is this very much a live issue in the budget deliberations?

Deputy Michael Noonan

As the Deputy has said, Ireland has been doing very well with foreign direct investment. Statistics indicate that we get slightly over 3% of all foreign direct investment that goes into the European Union, which is approximately twice the proportion of European GDP represented by the Irish economy. We are in a good position. We will have to defend resolutely our right to set our own tax rates, and nobody in any of the fora which have discussed these issues has suggested we would be compelled to move away from the 12.5% rate. That rate is the centre point, together with the availability of skilled young people to work in industry. We are largely an English-speaking country and, together with our proximity to the European Union, that is part of a package.

The Deputy is right to state that this is being discussed in the US Congress and the House of Commons. Ireland has suffered some reputational damage because of the focus on the "double Irish" system. The OECD has issued the first of a series of reports, with the chief executive of its tax division singling out Ireland again for special mention. There is no doubt we are under international focus but in preparing for the budget I will take into account everything the Deputy has said. He has put out the balances of advantage fairly in the House.

An Ceann Comhairle

As we have taken matters earlier than anticipated, Deputy McNamara is not yet present. I have asked that an SOS be made to him, so we might give him a few minutes if Deputies do not mind.

Sitting suspended at 4.35 p.m. and resumed at 4.45 p.m.

Accident and Emergency Departments Closures

Deputy Sean Fleming

I want to raise the very important issue of the future of the accident and emergency unit at Midland Regional Hospital Portlaoise. The Minister of State will be aware that the national director of acute hospital services published a report in which he said that the 24-hour a day, seven days a week accident and emergency unit in Portlaoise was "not clinically sustainable". His report went on to say that the department should be replaced by a medical assessment unit and local injury clinic operating during daytime hours only. He added that other services, such as day care surgery, endoscopy and a local injury unit should be developed to make up for the loss of emergency and surgery facilities, as happened after other hospitals closed their units.

The Minister for Health, responding to public pressure, said there were absolutely no plans to close the unit. I accept that but the question of downgrading the unit is in the offing. The report did not mention closing it. It referred to scaling it down and replacing it. The Department of Health’s submission to the Department of Public Expenditure and Reform, as part of the Government’s comprehensive spending review, suggested closing 24-hour services at five hospital emergency departments, including Portlaoise, if its budget were cut. The Department of Health has caused this scare. Maybe it is trying to frighten off the Department of Public Expenditure and Reform by saying if it cuts the budget it will close the accident and emergency unit.

That the Department is suggesting this possibility undermines the unit in Portlaoise hospital. There are 43,000 visits to the accident and emergency unit in Portlaoise every year. It is one of the busiest units in Ireland outside the capital city, according to the HSE report of activity to the end of July, published this month.

Deputy Brian Stanley

There is great concern about the Portlaoise hospital. As the previous speaker said of its workload, it is one of the busiest accident and emergency, maternity and paediatric units outside Dublin but it has one of the lowest budgets. Its budget is €10 million lower than that of Naas General Hospital. I am not asking the Minister of State to rob the hospital in Naas. I do not want her to rob Peter to pay Paul. Despite having a bigger workload it has a much lower budget than Naas General Hospital. This year it had a budget of only €44 million which is approximately €8 million less than it had a few years ago when its budget was in excess of €51 million. The budget just about covers the payroll. Despite the best efforts of management and staff the hospital seems to be always in a precarious situation. I recognise that the State has gone through a financially difficult period but the difficult situation at Portlaoise has been compounded by the constant stream of leaked reports that we do not have sight of. We read about them on the front pages of the newspapers.

A clinical report carried out by Dr. Ian Carter earlier this year was not published. It should have been and I ask that it be published. It recommended the closure of the 24-hour accident and emergency unit and surgical services.

Then we had the confidential Department submission, which suggested that if the Government went ahead with the planned budget cuts, 20 of the 150 beds at the hospital would be lost and the emergency department's opening hours would be confined to the hours between 9 a.m. and 5 p.m. The Minister, Deputy Varadkar, has said he has no plans to close the emergency department. That may be so, but will its opening hours be reduced so that it provides a nine-to-five service only? Accidents are not confined to the hours between 9 a.m.and 5 p.m. The staff and the community are being subjected to a relentless campaign of uncertainty. Further uncertainty is being created. Can the Minister of State give me an assurance that the accident and emergency unit and the surgical services at Portlaoise are secure and safe?

Minister of State at the Department of Health (Deputy Kathleen Lynch)

On behalf of the Minister for Health, I thank Deputies Fleming and Stanley for raising this issue. I think they will understand that the Minister, Deputy Varadkar, is unable to be here, unfortunately. As the Minister has previously said, there are no plans to close the emergency department at the Midland Regional Hospital, Portlaoise. Following the Chief Medical Officer's report last January on maternity services in the hospital and a visit to the hospital by the HSE national surgical clinical programme, the HSE undertook a performance diagnostic to ascertain the current performance status of the hospital in all aspects of service provision. The report identified a number of issues and made key recommendations with regard to control, leadership and clinical services at the hospital. The report suggested that some services in the hospital need to be reconfigured to ensure patients are treated in the most appropriate setting by specialist staff who can meet their needs. The over-riding concern is to address any patient safety and quality concerns that arise.

The HSE is working through an action plan with the staff in the hospital to stabilise and improve services at the Midland Regional Hospital, Portlaoise. Changes are required to enhance existing resources and structures at the hospital and to address clinical service deficiencies. A joint governance group has been established to ensure appropriate accountability and oversight of required actions and to incorporate the hospital into the existing governance structures within the Dublin and midlands hospital group, which includes St. James's Hospital and the Coombe, working in collaboration with the children's hospital group. A project team, which has been formed to support the work of the governance group, is in the hospital on a regular basis to support staff on the ground. Immediate actions to stabilise service provision include the appointment of an advanced nurse practitioner and the recruitment of a temporary consultant emergency physician to address the immediate senior decision-making issues within the emergency department. The filling of an additional physician post and replacement posts in endocrinology and care of the elderly is also being advanced.

The joint governance group will also examine the future service configuration at the Midland Regional Hospital, Portlaoise, including emergency department services. It will explore opportunities to develop services like endoscopy and day surgery. Any potential future reconfiguration of services will be undertaken in a planned and orderly manner. It will take account of existing patient flows, demands in other hospitals and the need to develop particular services at Portlaoise in the context of overall service configuration in the Dublin and midlands hospital group. Recent media reports on the wider issue - the retention of funding for 24-hour emergency departments and the current number of beds across the system - were based on information in the Department's submission to the Department of Public Expenditure and Reform under the Government's comprehensive review of expenditure exercise. This review exercise is carried out every three to four years. The last such review was completed in 2011. As the Department's submission under the current exercise is under consideration, it would not be appropriate to comment further at this point, other than to say it is currently not planned to implement measures contained in that submission.

Deputy Sean Fleming

The submission the Department of Health sent to the Department of Public Expenditure and Reform suggested that five accident and emergency departments, including the one in Portlaoise, should be downgraded. The Minister of State is saying it is not intended to implement that submission. The only logical thing the Department can do is publicly withdraw the submission that is the source of the problem in Portlaoise. The Department of Health caused the problem when it issued its submission. I was interested to note that the Minister of State's response did not refer to the appointment of a team of medical specialists by the former HSE national director of acute hospitals, Ian Carter, who commissioned the review we mentioned. The Minister of State did not deal with that. She mentioned all the good things that are happening but she ignored the report that questions the sustainability of the unit. She did not say the Department of Health should withdraw the submission it sent to the Department of Public Expenditure and Reform, given that it appears to have no intention of proceeding with it in any event. The problem is that the systematic cut in the budget over the past three years has undermined public confidence and the confidence of staff in the hospital in Portlaoise.

Deputy Brian Stanley

The Minister of State said that as the comprehensive review of expenditure is under consideration at present, "it would not be appropriate to comment further at this point, other than to say it is currently not planned to implement measures contained in that submission". We are concerned about the possibility that 20 beds will be withdrawn from Portlaoise hospital and the emergency department at the hospital will be closed or have its opening hours reduced. That is the issue. We are trying to emphasise that the figures show that the Midland Regional Hospital, Portlaoise is a busy major regional hospital in a strategic location. The Minister of State's statement does not give any comfort to me, to the staff of the hospital or to the community in County Laois. We have not been reassured that services at the hospital are safe for the future. Although she said "there are no plans" to close the emergency department, she did not give us a funding commitment. I want the Minister, Deputy Varadkar, to give us a commitment that the clinical review will be published and that core maternity, paediatric and surgical services will be maintained. Surgical services are necessary if maternity, paediatric and emergency departments are to be maintained. I want a commitment that Portlaoise hospital will have an adequate budget in 2015 to maintain those core services.

Deputy Kathleen Lynch

I do not think anything I might say would satisfy either Deputy. I am not certain that could be done in any circumstances, even if we had more than enough money to do everything we want to do. I do not know anyone who can say absolutely that something will not change in the future. If the Deputies know anyone who makes such statements, I suggest they should not believe him or her.

Deputy Brian Stanley

I am looking for a commitment for next year, 2015.

Deputy Kathleen Lynch

It is understood that the Midland Regional Hospital, Portlaoise is a very busy hospital. Part of the review took account of patient flow. Equally, the appointment of an advanced nurse practitioner and the recruitment of a temporary consultant physician in the accident and emergency department will help to address immediate senior decision-making issues in that department. An additional physician post and replacement posts in endocrinology and care of the elderly are also being advanced. I would not say that such actions are typical of a body that intends to close a hospital. Such measures have been taken by an organisation that is keen to ensure procedures and quality standards are maintained where that can safely be done. This is about shoring up a hospital that needs such support. Nothing I say will give the Deputies any reassurance. That is the job of the Opposition. I have set out the position as it stands. On behalf of the Minister for Health, I assure the House the intention is that patient safety will be paramount at all times when additional decisions are being made regarding the Midland Regional Hospital, Portlaoise. Considerable decisions have already been made.