I move amendment No. 1:
To delete all words after “Dáil Éireann” and substitute the following:
"welcomes the publication of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2015 Final Reports which outline an internationally agreed approach to combatting aggressive tax planning and harmful tax practices;
notes that:
— from the beginning, the key aim of the BEPS project has been to align the right to tax with real economic substance and activity and, as such, the BEPS project is one which aligns with Ireland’s own tax strategy; and
— the BEPS reports give countries the tools they need to ensure that profits are taxed where economic activities generating the profits are performed and where value is created, while giving business greater certainty by reducing disputes over the application of international tax rules;
believes the OECD BEPS recommendations provide the best solution to the global problems of base erosion and profit shifting;
further notes:
— the intention of the Government to introduce country-by-country reporting in line with the approach agreed in the OECD;
— the intention of the Government to introduce a Knowledge Development Box, which will be the first and only such box in the world that complies with the OECD’s new standards; and
— that changes to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations as a result of the BEPS project will ensure the better alignment of the taxation of profits with economic activity;
welcomes the participation of developing countries and regional tax organisations in the BEPS project work and their influence on the outputs of the BEPS reports, and further welcomes the OECD’s commitment to continue this engagement and to develop practical tool-kits to assist developing countries in targeting BEPS activities;
notes the Government’s intention to publish a spillover analysis of the impact of Ireland’s tax system, including the tax treaty network, on the economies of developing countries with Budget 2016;
recalls that Ireland has introduced changes to its corporate tax residence rules to ensure that they keep pace with international best practice;
notes that the 12.5 per cent corporation tax rate is a key element of Ireland’s corporate tax strategy together with our regime and our reputation and that the extensive research published with Budget 2015 shows how this has played a crucial role in attracting and retaining foreign direct investment in Ireland; and
welcomes the fact that:
— Ireland has been a world leader in the area of tax transparency;
— Ireland was one of the first countries in the world to sign a Foreign Account Tax Compliance Act (FATCA) agreement on automatic exchange of financial information with the United States of America;
— Ireland is a member of the Early Adopters Group, that have committed to early implementation of the new OECD standard on the automatic exchange of financial account information;
— Ireland was one of just 18 countries to receive the top rating as part of the Global Forum on Transparency and Exchange of Information for Tax Purposes peer review process of countries exchange of information legislation; and
— as an European Union (EU) member state, Ireland has also agreed to the EU Directives on automatic exchange on information within the EU and is committed to their transposition."
I thank Deputy Maureen O'Sullivan for tabling this timely motion. I look to forward to this debate because legitimate issues arise regarding aggressive tax planning as the Government and country recognise. Unfortunately, these legitimate issues tend to get lost in hyperbole and we must be careful to ensure that does not occur. We should also remember the value of attracting foreign direct investment, not only to Dublin where many of the multinational giants are located but to all of our constituencies and counties.
International financial services, one of the sectors for which I have responsibility, directly employs 35,000 people, of whom 12,000 are employed outside the greater Dublin region. Many of these jobs are in County Donegal, which is obviously doing something well in terms of having an attractive workforce that attracts companies to the country. Let us not ignore the reality that a large number of talented young Irish people are pursuing well-paid careers in a number of multinational companies.
The Minister has done more to reform the tax system and to implement a road map for tax competitiveness than any of his predecessors in recent years. He launched the road map for tax competitiveness last year and abolished the double Irish, as it became known. Despite opposition to its abolition from the Fianna Fáil Party, which called on him to await the outcome of the OECD's base erosion and profit shifting or BEPS process, the Minister decided to plough ahead. He also abolished stateless companies and the Department has been an active participant in the BEPS process at a political and official level. I acknowledge the great work done by our officials in that regard.
The international tax agenda has risen to the top of the agenda around the world. Achieving a fair international tax system is now correctly recognised as a global priority. While the Government agrees that many of the issues raised in the Opposition motion are important, we do not agree with the characterisation of the Irish corporation tax system. The amendment proposed by the Government sets the record straight in terms of the transparency and robustness of the Irish system, while giving due recognition to the important changes that have taken place in recent times and the further challenges that lie ahead and need to be addressed.
Yesterday, the OECD published its final base erosion and profit shifting reports. The BEPS reports are the culmination of more than two years of intensive consultation and negotiation involving OECD, the G20 and non-OECD countries. Ireland welcomes the publication of the reports and will now play an active part in the work to implement the recommendations globally. From the very beginning of this project Ireland has been a strong supporter of the OECD's work. Let us stop the nonsense of pretending we were dragged into the process kicking and screaming. Ireland has been a leader in this regard and we believe a multilateral response, such as that provided by the OECD, represents the best solution for dealing with aggressive tax planning.
In 2013, the Government published Ireland's international tax strategy. This policy statement set out Ireland's approach for dealing with international tax policy issues such as aggressive tax planning. This statement included Ireland's international tax charter, which outlines Ireland's policy objectives and commitments on international tax issues.
As I indicated, we published our road map for tax competitiveness last year. This has helped to place Ireland in a very strong position for the post-BEPS world. Ireland has also introduced changes to its corporate tax residence rules in recent years to ensure they keep pace with international best practice. The Government amendment highlights Ireland's commitment to dealing with these global problems.
The key aim of the OECD BEPS project has been to align the right to tax with real economic substance and activity. As such, the project is one which aligns with Ireland's tax strategy. We want companies to locate here and bring investment and jobs. Why else would we want companies to come here if not to deliver jobs, investment and euro to the economy? Jobs and investment are the cornerstones of our foreign direct investment policy, which precisely aligns with the entire purpose of the OECD BEPS process. From an Irish perspective, consistent international action to tackle aggressive tax planning is far preferable to countries doing their own thing and taking unilateral action.
The BEPS reports are comprehensive and the key outcome of the measures contained in the final reports is to give countries the tools they need to ensure profits are taxed where economic activities generating the profits are performed and value is created. In addition, the reports will give business greater certainty by reducing disputes over the application of international tax rules.
The BEPS reports do not affect Ireland's 12.5% corporation tax rate. The OECD has explicitly stated that taxation is at the core of countries' sovereignty and each country is free to set up its corporate tax system as it chooses, including charging the rate it chooses. The 12.5% corporation tax rate is critical to supporting our economic recovery and employment growth and a low corporate tax rate is a tool to address the economic limitations that come with being a peripheral country, as compared to core countries. Deputies need not take my word for that and can instead read the ESRI report published on budget day last year.
Focus will now shift to the implementation of the BEPS reports. Ireland is committed to the BEPS project and we will play a full part in its implementation. Our commitment to the BEPS project and tackling aggressive tax planning has been noted by the OECD Secretary General who recently cited Ireland as "a strong and exemplary case of adapting and adopting" to reform of the global tax regime.
As a number of Deputies noted, the most immediate action emerging from the BEPS process for Ireland will be the introduction of country by country reporting in line with the BEPS recommendations. As the Minister stated yesterday in Brussels, country by country reporting will be legislated for in this year's finance Bill, which will follow the budget next week. It is our intention to implement this proposal in a way that is absolutely consistent with the recommendations of the OECD. This will introduce a requirement for large multinationals to file reports of income, taxes paid and certain measures of economic activity on a country by country basis. The report is to be filed with the tax authority where the group parent is tax resident and then shared with other tax authorities. The reports provide a valuable risk assessment tool for tax authorities.
Country by country reporting has been described by some commentators as a "game changer" in tackling aggressive tax planning. On launching the BEPS reports yesterday, the OECD highlighted Ireland as one of the first countries to commit to implementing country by country reporting. Ireland's 2013 international tax strategy statement flagged our support for country by country reporting. Our early commitment to implement the OECD's recommendations is consistent with our long-standing policy of supporting increased openness and transparency in tax matters.
The motion asks that the information in country by country reports be made publicly available. The OECD is very clear on this point - to protect the confidentiality of potentially sensitive information the reports must not be made publically available. If a country breaches this confidentiality requirement, partner countries may suspend the exchange of information. This must be about global solutions.
It is important to note, however, that the European Commission is separately examining the issue of public country by country reporting. This would require companies to make information publicly available about its operations, activities and profits in each country in which it operates. The Commission recently held a public consultation on the issue and has commissioned an impact assessment. Ireland awaits the outcome of this assessment and will continue to actively engage in the debate on this issue at European Union level.
The second immediate outcome of the BEPS report, one which has also been noted by previous speakers, is the proposed knowledge development box. The box will be designed in full compliance with the OECD's proposals for such measures and the Minister has signalled his intention to introduce such a box in budget 2016. The knowledge development box will enhance the competitiveness of the Irish tax offering for intellectual property and ensure Ireland continues to be the location of choice for foreign direct investment that involves real employment and economic activity. It will provide a rate of tax for intellectual property income that is below the normal headline rate to encourage companies to locate high-value jobs that are associated with the development of intellectual property in Ireland.
The Government has committed that the knowledge development box will meet the standards agreed internationally for such incentives, which have been agreed as part of the BEPS process and endorsed by the European Union. It is important to note from a competitiveness, promotional and reputational point of view that the knowledge development box will be the first and only such box in the world that complies with the OECD's new standards. The legislation to enact the box is being finalised and will be included in the Finance Bill 2015.
The other key BEPS recommendations will be implemented either through a multilateral instrument which will be negotiated during 2016 or through changes to the OECD's transfer pricing guidelines. The multilateral instrument will seek to update global tax treaties in one go to ensure they meet the new global standards set out in the BEPS reports. The OECD's transfer pricing guidelines will be updated to ensure profits are properly aligned with the value created through underlying economic activities.
As Deputies will be aware, the European Union is also debating how BEPS recommendations can be implemented at EU level. The European Commission published a detailed action plan on corporate taxation in June, which contains a number of proposals, including an anti-BEPS directive and the relaunch of the common consolidated corporate tax base proposal. On the proposed anti-BEPS directive, Ireland supports the consistent implementation of BEPS recommendations across the European Union. A co-ordinated EU approach to implementing BEPS could ensure legal certainty and coherence in the Single Market and a strong common defence against profit-shifting out of the EU. However, as the Minister made clear yesterday, Ireland believes it is important that any anti-BEPS directive is consistent with the OECD BEPS reports and does not go beyond them.
As set out in the Government amendment, Ireland has been a leader internationally in the area of tax transparency. This morning in Brussels, European finance Ministers reached political agreement on the amendment to the directive on administrative co-operation, also known as DAC 3 as the directive is in its third iteration. When transposed, this directive will provide for the automatic exchange of information on rulings throughout the EU. This directive was a direct EU response to the scandal known as LuxLeaks.
Ireland has been fully supportive of the proposal from the beginning and we welcome today's agreement. The domestic Irish response to the LuxLeaks revelations was that the Revenue Commissioners decided to look at the material relating to Irish based entities and make inquiries to see if they could ascertain whether the Irish tax system was being abused in any fashion. I understand the Revenue Commissioners propose to write to the Department of Finance to provide it with a high level outline of the outcome of their inquiries, with a particular emphasis on highlighting any tax policy issues for Ireland that might be identified.
In relation to the issue of a register of beneficial ownership, the EU is also currently looking at proposals in this area. Article 30 of the recently published fourth anti-money laundering directive provides that information on beneficial owners of corporate and other legal entities must be held in a central register and accessible by certain persons. The Department of Finance is considering this article in the course of the transposition of the directive in conjunction with other Departments. A public consultation on the transposition of the directive will be held in the coming months and it is due to be transposed into Irish law by June 2017.
I turn to the ongoing state aid investigation being pursued by the European Commission and which has wrongly been referenced by some Deputies in the House this evening. Before I update the House on this matter, I reject completely the suggestion in the Private Members' motion that the investigation reveals a lack of transparency or accountability from the Revenue Commissioners to the Irish people. That is completely inaccurate. Ireland's Revenue Commissioners are statutorily independent and carry out their duties with the highest levels of integrity. If we impugn them in any way in that regard, it does not serve us well. Last year, the competition directorate of the European Commission announced its intention to open formal state aid investigations into tax rulings provided to a number of companies in various EU countries. The announcement is part of a much wider review of tax ruling practices being undertaken by the European Commission. Earlier this year, the Commission announced that it was broadening its inquiries to include all member states. As the Commission has noted, Ireland has co-operated fully with the process to date and we will continue to do so. I emphasise that while the Commission has opened a formal investigation in relation to one particular case involving Ireland, it has not made a final determination in the matter no matter how many times people repeat assertions to the contrary. Ireland provided a detailed and comprehensive response to the Commission investigation demonstrating that the appropriate amount of Irish tax was charged in accordance with the relevant legislation, that no selective advantage was given and that there was no state aid. Yesterday, the Minister for Finance, Deputy Michael Noonan, made it clear that if there is a finding against Ireland by the Commission, we will challenge it in the European Courts. We will defend this because we are in the right.
As the House is well aware, tax law in Ireland is created and enacted by the Oireachtas. There is no specific provision in Irish tax law for the issuing of binding tax rulings and such rulings are not provided under the Irish tax system. However, non-binding opinions on the application of tax law to specific transactions or situations are issued by the Revenue Commissioners. A Revenue opinion will give Revenue's view of the correct application of tax legislation to a particular transaction, activity or event. Revenue opinions are designed to provide clarity in relation to the applicable tax rules in circumstances where there might otherwise be uncertainty and to enable a taxpayer to file a correct tax return as required by legislation. Revenue practice and procedures for providing opinions are set out in published guidelines, which are available on Revenue's website. In responding to the Commission's state aid inquiries in relation to ruling practices and its request for details of advance opinions relating to corporation tax issued to companies, a total of 120 such opinions were identified on average for each of the years 2010 to 2012. This is a relatively small number in the context of the number of companies filing a tax return which we estimate is approximately 120,000. It shows that opinions are not a major feature of the Irish tax system. This is because Revenue provides a wide range of information in published tax briefings and guidance notes. A taxpayer should only require an opinion from Revenue where the issue is complex, information is not readily available and there is uncertainty in regard to the applicable tax rules.
I want to talk about engagement with developing countries. Ireland's "One World, One Future" policy for international development commits us to an all-of-Government approach to international development and recognises that the achievement of international development goals must be underpinned by the ability of all countries, including developing countries, to raise their own revenue. The OECD's BEPS process also sought to involve developing countries to ensure all viewpoints were considered. Developing countries and regional tax organisations have participated in BEPS project work and influenced the outputs of the BEPS reports. The OECD has made a welcome commitment to continue this engagement and develop practical toolkits to assist developing countries in targeting BEPS activities. On the domestic front, the Department of Finance committed in the document "Ireland's International Tax Strategy" in October 2013 to engaging with developing countries to assist them in increasing their domestic tax revenues in ways that are more efficient, fairer and which better promote good governance and equity. As part of this commitment, the Department of Finance is publishing a spillover analysis of the impact of Ireland's tax system, including the tax treaty network, on the economies of developing countries on budget day. Only one other country in the world - the Netherlands - has previously carried out a similar spillover analysis project. Last year, the Minister, Deputy Noonan, called on the OECD to adopt, at least in spirit, a 16th action in the BEPS project insisting that all countries undertake spillover analyses of how their taxation regimes impact the developing world. We reiterate our encouragement to all countries to carry out such an analysis.
The actions taken in recent years by Ireland and our involvement in international fora such as the OECD and EU mean we are well positioned for the post BEPS environment. Our next challenge is to implement the BEPS actions. Ireland will play its part, as it has done to date, in implementing the recommendations and contributing to solutions to these global problems. Global problems require global solutions and the multilateral approach adopted by G20 and OECD countries in dealing with these difficult policy challenges is a model for co-operation in today's globalised economy. I acknowledge, as the motion does, the work of Oxfam. I had the opportunity, as had many Members, to meet with Oxfam in recent weeks. It is doing an excellent job of highlighting many important issues including those which will be dealt with in the BEPS process as well as issues we need to deal with at European level. I am proud of the spillover analysis we are carrying out to check the impact of our own tax system on the developing world and I look forward to its publication. I encourage other countries to follow the lead of Ireland and the Netherlands in that regard.
Tonight's motion is really worthwhile in that it gives us an opportunity to have an extensive debate on a number of important issues. Nobody on this side of the House is trying to assert that everything is wonderful and that there are no challenges. It is absolutely the case that there are issues which need to be addressed in relation to aggressive tax planning and we believe the way to address them is a global process. It is through all countries sitting around a table and working out solutions rather than people taking unilateral action. We are proud to have played a leading role in that and to be involved in the first implementation of many of the actions. We look forward to progressing some of them through the Finance Bill and I look forward to the rest of the debate.
