I thank the Chairman for the opportunity to address the committee. I welcome the officials from the Department of Finance and the Revenue Commissioners and thank them for their work on this matter.
I am pleased to introduce four draft Government orders giving force of law in Ireland to new double taxation agreements with Germany, Saudi Arabia, Armenia and Panama, and two draft Government orders giving force of law to tax information exchange agreements with Grenada and Vanuatu, which I understand is in the South Pacific.
I will begin by saying a few words about the double taxation agreements and will then deal with the exchange agreements. Double taxation agreements are widely regarded as critical pieces of fiscal infrastructure for developing substantial bilateral trading and investment opportunities by reducing tax impediments that might otherwise deter such cross-border activity. For a small open economy like Ireland, dependant on trade and investment with other countries, continuing to expand our network of international tax agreements is not alone necessary but vital. Double taxation agreements facilitate trade and investment by providing greater certainty to taxpayers regarding their potential liability to tax in the foreign jurisdiction, by allowing taxing rights between the two jurisdictions so that the taxpayer is not subject to double taxation, by reducing the risk of excessive taxation that may arise because of high withholding taxes and by ensuring that taxpayers will not be subject to discriminatory taxation in the foreign jurisdiction. Double taxation agreements provide benefits to taxpayers and governments by setting out clear rules that will govern tax matters relating to cross-border trade and investment.
Tax agreements ensure predictability and fairness in the tax treatment of taxpayers and spell out clearly defined provisions that facilitate companies investing and doing business overseas. This is achieved by allocating exclusive taxing rights to one country, or where both countries 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 agreements cover direct taxes, which in the case of Ireland are income, corporation and capital gains taxes. They are comprehensive in scope, covering both the taxation of companies and individuals and are, in the main, an OECD model tax convention. Apart from relieving double taxation, double taxation agreements also include provisions dealing with non-discrimination in relation to taxation matters. They also include mutual agreement procedures which allow the tax authorities of both countries to consult with each other in taxation matters affecting the agreement and provisions that allow for the exchange of information for the purpose of preventing tax evasion.
Ireland's tax treaty network compares favourably with the networks of other larger OECD countries and now includes most of the world's major economies, accounting in aggregate for more than 80% of the world's GDP. The Irish treaty network has grown by almost 50% in the past three years. It is an astonishing achievement that during the course of the past three years there has been a large increase in the number of treaties put in place. We now have signed comprehensive double taxation agreements with 65 countries, of which 56 are in effect. Negotiations on new agreements with Egypt, Thailand, Ukraine and Uzbekistan have concluded and should be signed shortly. Negotiations on new agreements with Azerbaijan, Jordan, Qatar and Tunisia are at various stages and negotiations for a revised treaty with the Netherlands will commence next week.
The Minister for Finance and I will ensure that we continue to prioritise the further expansion of our tax treaty network over the coming months as a central element of our integrated strategy for an export-led, sustainable economic recovery for Ireland. I want to assure members that the Department of Finance and the Revenue Commissioners will continue to liaise with businesses and representative bodies to identify other countries with whom tax agreements would assist Irish business. Despite our best efforts, we have yet to secure some key jurisdictions. We will continue all diplomatic efforts to get these countries to the negotiating table.
I will now deal with the tax information exchange agreements. Tax information exchange agreements, while serving a different purpose, are also important international agreements which strengthen the ability of the revenue authorities in both countries to enforce their tax laws and thereby encourage the development of closer economic relations between both countries in the future. We have now concluded tax information exchange agreements with 19 jurisdictions, all of which are based on the OECD model. The model grew out of the work undertaken by the OECD to address harmful tax practices globally. The OECD model now represents the international standard for effective exchange of information in tax matters. There has been a significant acceleration of the process of signing these agreements between OECD countries and offshore jurisdictions over the last couple of years, stemming in the main from a threat by the G20 to blacklist jurisdictions that do not conclude at least 12 information exchange agreements. The TIEAs will allow the Revenue Commissioners to directly request from their authorities information that is relevant to Irish tax investigations, such as bank account information or company or trust ownership information. The agreements will, therefore, greatly assist the Irish Revenue Commissioners in tax investigations involving entities and bank accounts located in these jurisdictions.
Today's consideration of these agreements by the sub-committee is an important step in the ratification process. Draft Government orders confirming and giving effect in Ireland to the agreements were laid before Dáil Éireann on 25 November last, 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 draft orders has been referred to this committee for consideration. Following consideration by the sub-committee, the draft orders will be referred back to the Dáil for approval, following which the Government may make the orders and the agreements will be included in the Schedule to the taxes Act, by reference to a section in the forthcoming Finance Bill. If the sub-committee, following consideration, approves these orders and informs Dáil Éireann of that fact we can then proceed to include them as part of the Finance Bill which will come before Members during the first quarter of next year. From a scheduling perspective, it is important, following agreement of the sub-committee to the motions, that these be put in place.
I commend the draft orders to the sub-committee. I am happy to take questions from members in regard to the countries mentioned in the orders and on any matters they would like to raise.
