Dáil Éireann Debate, Wednesday - 25 February 2004
159 Mr. R. Bruton asked the Minister for Finance if he has acted on the recommendations of the OECD reports on harmful tax competition; if he has satisfied himself that no provisions of Irish tax law fall foul of the criteria set out by the OECD; and the extent to which Ireland participates in the various fora of the OECD on harmful tax competition. [6310/04]
View answerThe OECD report, Harmful Tax Competition: An Emerging Global Issue, published in 1998, established an international framework to counter the spread of harmful tax competition. The report focused on geographically mobile activities, such as financial and other service activities. It adopted certain criteria for determining whether preferential tax regimes in OECD member countries were harmful as well as guidelines for addressing such harmful preferential regimes. Under the guidelines, member countries were asked to refrain from adopting new measures or extending the scope of or strengthening existing measures that constitute harmful tax practices; review existing measures for the purpose of identifying those that constitute harmful tax practices; and remove the harmful features of any harmful preferential regimes within five years.
To carry out its work on identifying harmful preferential tax regimes, the OECD requested that each member country perform a self-review of its preferential tax regimes by reference to the relevant criteria.
Ireland has participated fully in the OECD harmful tax competition project and has completed a self-review of the four relevant regimes: international finance services centre, the Shannon Airport zone, foreign dividend exemption and foreign branch profit exemption. There are no outstanding issues in regard to these regimes.
Finally, the harmful tax competition work is carried out principally through the forum — working group — on harmful tax practices, a subsidiary body of the Committee on Fiscal Affairs. Officials from the Department of Finance and the Revenue Commissioners serve on the steering group of the forum, along with Government representatives of France, Japan and the United States.
160 Mr. R. Bruton asked the Minister for Finance if the EU has adopted position papers on the harmonisation of corporate tax regimes; if the Government has carried out an evaluation of the regime here as a basis for defending the rights of member states to develop their own corporate tax regimes; and if he will make a statement on the matter. [6311/04]
View answerIn 2001, the European Commission issued a communication setting out its strategy in the company taxation area. Its strategy is a twin track approach of targeting particular obstacles in the short to medium term by taking a direct approach to each of the issues and finding a specific answer to the problem; and adopting a longer term comprehensive measure, a proposal for a common consolidated corporate tax base for companies for their EU-wide activities. In 2003, the Commission issued a communication which updated developments on the 2001 communication.
We have no particular difficulty in addressing the removal of tax obstacles to trade where these are shown to exist. We do not go along with tax harmonisation or with proposals for a consolidated tax base. In our evaluation, and in my experience, the best way to defend a member state's right to pursue its own tax policies appropriate to its needs is to retain the requirement for unanimity on all tax issues when they come before Council.
161 Mr. R. Bruton asked the Minister for Finance if he has conducted an evaluation of the corporate tax regimes of the new entrants to the EU; the key areas in respect of which they differ from the regime here; and his views on whether any of these provisions constitute harmful tax competition. [6312/04]
View answerDuring the accession negotiations, the accession states committed themselves to the principles of the code of conduct, adopted in December 1997, and to introducing only new measures that are in conformity with those principles. The Deputy will recall that the code of conduct is a political agreement designed to curb harmful competition in business taxation. Once measures were identified as being harmful under the code, then the measure had to be rolled back subject to an agreed time frame for transitional arrangements.
As part of the accession process the EU Commission reviewed the corporate tax regimes of the ten accession states. In doing so, the Commission used the same criteria as that applied when the corporate tax regimes of the existing member states were reviewed under the code of conduct process. The findings of the Commission were then considered by the member states and Council agreed that a number of the 30 regimes identified have harmful features which must be rolled back.
From 1 May 2004, the accession states as full members of the Union will be members of the code of conduct group. It is anticipated that work will continue in that group.
What is clear is that each member state as well as the accession states has different corporate tax regimes. One of the key areas in which they differ is in their corporate tax rates. While we have always played our part in the evaluation of other corporate regimes we have also stated that the rate of tax applying is not a valid criteria. We believe that the issue of all tax rates is a sovereign matter for each member state to decide, so long as the underlying regime is not harmful. This has long been Ireland's position and will remain so.
