The purpose of the meeting is to introduce three draft orders, each dealing with a new double taxation convention and to provide the committee with whatever assistance we can in this regard.
The double taxation conventions we are discussing are between Ireland and Canada, Greece and Iceland, respectively. Before turning to each in detail I wish to say a few words in general about double taxation conventions.
The main purpose of a double taxation convention is to avoid taxation of the same income or gains in both countries without any relief given in the other country. Double taxation conventions achieve this object by either allocating exclusive taxing rights to one or other country for particular items of income or gains, or, where both countries wish to retain taxing rights, by requiring the country where the taxpayer is resident to grant credit against its tax for the tax paid in the other country.
Double taxation conventions are generally comprehensive in scope and in the main follow the OECD model tax convention. They apply to taxes on income and capital gains imposed by each country. In the case of Ireland, the Office of the Revenue Commissioners with its relevant counterparts in the overseas jurisdictions negotiate all our conventions. Ireland currently has 42 double taxation conventions in place and in recent years we have been actively seeking to expand and modernise our treaty network, thus facilitating overall economic activity.
On the procedures, I will outline briefly what has taken place in the case of the three conventions before us today. During 2003, the Government signed all three new double taxation conventions. The Canadian convention was signed on 8 October 2003. When it comes into force, it will replace the existing convention with Canada, which has been in force since 1966. The Greek convention was signed on 24 November 2003 and the Icelandic convention was signed on 17 December 2003. Ireland has not had double taxation conventions with Greece and Iceland and the recently signed conventions are welcome additions to our treaty network.
Once the conventions are signed both parties must ratify them in accordance to their own rules of procedure. Today represents an important moment in our ratification process. Once ratified by both parties the convention comes into force on 1 January of the year following the year of ratification. In the case of these three conventions, this should be 1 January 2005, although this will depend on progress made by our three partners.
Draft Government orders confirming and giving force of law in Ireland to the conventions were laid before Dáil Éireann on 2 November 2004 in accordance with the provisions of section 826 of the Taxes Consolidation Act 1997. A resolution by Dáil Éireann approving the draft orders is required before the Government can make the orders. The proposal that Dáil Éireann approve the orders has been referred to this committee for consideration.
I refer to the existing conventions. The existing convention with Canada has been in force since 1968 and is one of Ireland's oldest double taxation agreements. The new convention modernises the current agreement between Ireland and Canada and better reflects the current tax policies of both countries, as well as incorporating changes that have been made in the OECD model tax convention. This is a significant development as substantial trading and investment links exist between Ireland and Canada. Putting in place a modern tax treaty is an important contribution to the maintenance and development of these economic relations.
The conclusion of a tax treaty with Greece is very important in the context of Ireland's EU relations as Greece is one of the last EU countries with which Ireland does not currently have a double taxation agreement. The new convention is expected to have a positive impact on trade and investment between both countries. I am particularly pleased to bring forward this convention as negotiations for a double taxation convention with Greece have been ongoing for several years.
Iceland is a member of the European Economic Area, EEA, and the convention with Iceland complements existing tax agreements that Ireland has with other EEA members, including Norway and Switzerland. It is expected that the convention with Iceland will have a positive impact on trade and investment between Ireland and Iceland by substantially reducing fiscal obstacles. Although trade between our two countries is small in the overall context, given Iceland's membership of the EEA and the OECD, it is appropriate at this stage for this agreement to be brought forward.
In general terms, all of these conventions provide for reduced source country taxation of dividends, interest and royalties. In other words, a rate of tax lower than what currently exists will be applied once the conventions are in place. This will significantly reduce fiscal barriers to investment flows between Ireland and each of the countries concerned.
Other provisions of the conventions deal with, inter alia, the taxation of business profits earned by an enterprise of one country in the other, employment income earned by individuals resident in one country and working in the other and pensions paid from pension plans in one country to individuals resident in the other.
Other important articles in the conventions include the non-discrimination provisions, which protect nationals of each country from discriminatory tax provisions in the other country and the exchange of information provisions necessary to counter tax evasion. All the main Departments have been consulted and none has expressed any dissatisfaction with the terms of the various conventions.
I therefore commend to this committee these important new additions to Ireland's network of double taxation agreements. I am happy to discuss the various issues that may arise in respect of any of the conventions in more detail.