Wednesday, 27 February 2013

Questions (77)

Peadar Tóibín


77. Deputy Peadar Tóibín asked the Minister for Finance his views that businesses operating in the domestic economy would benefit from effective tax rates as being paid by multinationals in this State. [3227/13]

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Written answers (Question to Finance)

All companies in Ireland pay the standard 12.5% rate on their trading profits which are generated in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits and profits from certain petroleum, mining or land dealing activities. I am aware of recent media reports which refer to the ways that some multinational companies structure their international tax affairs to minimise their tax costs and I understand that some of these reports have suggested that some companies in multinational groups pay Irish corporation tax at rates that are lower than 12.5%.

At this point it is important to state clearly that such companies are not paying a low rate of Irish tax – as already stated all companies in Ireland pay the standard 12.5% rate on their profits which are generated in Ireland. The reports concerned appear to have incorrectly attributed to Ireland profits that represent the return due to assets in other jurisdictions, owned by group companies that are not resident in Ireland.

The ability of multinational entities to lower their world-wide rates of tax using international structures reflects the global context in which Ireland and indeed all countries operate. Differences arise in the legal and tax systems between countries. International tax-planning takes account of these differences in national systems and rules. The only way to effectively deal with such arrangements is for countries to work together to examine these structures and to consider how international rules can be amended to ensure fair levels of taxation.

In this regard, Ireland is participating in projects at EU and OECD level which aim to address these issues. The Deputy may be interested to note that the work being undertaken by the OECD as part of their Base Erosion and Profit Shifting (BEPS) project, makes explicit reference to how harmful international tax practices may lead to multinational companies having a competitive advantage over companies operating mainly on the domestic level. Irish officials have been actively involved in the BEPS project and have recently attended and contributed to meetings on this issue. In our current role as President of the EU Council, Ireland has invited the OECD to participate in an upcoming discussion on BEPS by high level officials.

There is broad agreement internationally that responses to the tax practices of transnational, indeed global, corporations requires international coordination of policy, legislation and tax administration. This level of coordination is necessary because the concerns arising are typically the result of the interaction of the tax regimes across countries in which multinationals operate — rather than the law or practice of any individual country.

As I have highlighted, the only way to effectively address this issue is at the international level and the appropriate action is being considered in this regard. Ireland remains fully committed to this approach to ensure fair play in international taxation.