I propose to take Questions Nos. 270 to 272, inclusive, together.
I am advised by the Revenue Commissioners that in common with all of Ireland’s agreements for the avoidance of double taxation, the Ireland – Zambia Double Taxation Convention contains a provision which allows the tax authorities of the two jurisdictions to consult with each other under what is called the “mutual agreement procedure” when there are any doubts or difficulties in relation to the application or interpretation of the treaty. The relevant provision of the Ireland – Zambia Convention is Article XXI. While the Irish Revenue Commissioners cannot comment in relation to any specific case, they have informed me that the Zambian tax authorities have not expressed any concerns in relation to the application or interpretation of the Convention.
The Ireland - Zambia Convention sets out the “arm’s length principle”, which requires profits arising between connected parties, i.e. which involve the uses of transfer prices, to be computed in the same amount as would arise on foot of transactions between independent parties. This principle has continued to be an unchanging feature of the OECD and UN Model Double Taxation Conventions. It is not apparent, therefore, that there is any basis for linking concerns in relation to transfer pricing with the provisions of this Convention.
Specific transfer pricing legislation was enacted by Finance Act, 2010 and is contained in Part 35A of the Taxes Consolidation Act 1997. These provisions set out the rules that govern the application of the arm's length principle, mentioned above. The arm’s length principle and the related transfer pricing provisions must be applied to adjust any understatement of profit that would otherwise arise, so that the full arm’s length profit is taxed in Ireland. Companies within the scope of the Part 35A provisions must meet documentation requirements and have such documentation available to Revenue to demonstrate compliance with the legislation. The first corporation tax returns to which the legislation applied were for accounting periods ending on 31 December 2011 and these returns were received in September 2012.
In addition to the provisions mentioned above, the provisions of Chapter 3 of Part 33 of the Taxes Consolidation Act 1997 set out requirements to provide the Revenue Commissioners with information in respect of disclosable transactions. These are specified types of transactions one of the main purposes of which would be to provide a tax advantage. As with the tax codes of other countries, where anti-avoidance and disclosure provisions are intended to protect the domestic tax base, the provisions of Part 35A and Chapter 3 of Part 33 are intended to protect the Irish tax base.
Assistance to other countries in addressing suspected avoidance or evasion is provided internationally by exchange of information. All of Ireland’s double taxation agreements – including that with Zambia – contain provisions for the exchange, between the tax authorities, of information necessary to give effect to the agreement and to the domestic tax law of the Contracting States. Ireland has also negotiated over 20 Tax Information Exchange Agreements – implementing the OECD standard on exchange of information - with countries with which we do not have a double taxation agreement.
In addition, Ireland has signed up to the joint Council of Europe/OECD Convention on Mutual Administrative Assistance in Tax Matters. In response to a call from the G20 in 2009 “to make it easier for developing countries to secure the benefits of the new co-operative tax environment”, a Protocol was developed to amend this Convention to open it up to all countries. Ireland signed the Convention and the Protocol in June 2011. My Department also supports initiatives such as the OECD’s Tax and Development Programme and works with Irish Aid in this regard.