Dáil Éireann Debate, Thursday - 17 January 2013
13. Deputy Jonathan O'Brien asked the Minister for Finance if he has been requested by any European or international Government or institution to review this State's corporation tax rate and the tax treatment of royalties. [1793/13]
View answerI have not received any request from any European or international institution or Government to review either the State’s corporation tax rate or tax treatment of royalties. The Government's position on Ireland's corporation tax rate is very clear and well known to our EU colleagues and our international partners. The Taoiseach, myself and other members of the Government have repeatedly expressed the Government’s commitment to the retention of the 12.5% rate. I reiterated this commitment as recently as my Budget speech on 6th December last year.
In relation to the specific rules we have in Ireland that relate to the use of royalties, the Taxes Consolidation Act 1997 requires that a company’s trading profits be computed in accordance with generally accepted accounting practice subject to any adjustment required by tax law. In computing such profits, expenses that are incurred wholly and exclusively for the purposes of the trade are deductible. This includes royalties or licence fees paid for the use of intellectual property.
The tax code in Ireland contains transfer pricing rules that apply the OECD’s arm’s length pricing principle to trading transactions between associated companies and such rules are applicable to the use of royalties and licence fees.
These rules ensure that the profits chargeable to corporation tax in Ireland fully reflect the functions, assets and risks located here by a multinational groups and other associated companies.
Subsidiaries of multinational groups, whether located in Ireland or other countries, often incur certain bona fide expenditures, including royalty payments, to group companies in foreign jurisdictions for the use of intellectual property rights. Such payments represent the required remuneration of valuable intangible assets funded and owned outside the State.
Given the complex international dimension to the use of royalty payments, it is important that countries work together to examine these structures and to consider the interaction of international tax rules and their impact on the taxation of companies. In that context, I would highlight that Ireland is fully committed to working with international bodies to ensure fair play in international tax matters.
Ireland participates fully in both the OECD’s Forum on Harmful Tax Practices and the EU Code of Conduct Group. During the forthcoming Irish Presidency of the European Council, my Department intends working closely with the European Commission and other EU Member States to make progress on new EU proposals on tax evasion and aggressive tax-planning.
The tax system in Ireland has a positive international reputation based on transparency and the fact that it is applied equally and openly to all corporate taxpayers. The fact that Ireland has an extensive tax treaty network confirms our international standing. The January 2011 Global Forum Peer Review Report on Ireland’s legal and regulatory framework for transparency and exchange of information found that Ireland has an effective system for the exchange of information in tax matters and is fully compliant with OECD standards.
