I propose to take Questions Nos. 77, 91, 94 and 127 together.
I want to make it clear that we do not have a special low corporation tax rate for individual companies. Ireland’s tax system is statute-based so there is no possibility of individual special tax rates for companies.
However, I am aware of recent media reports which refer to the ways that some companies structure their international tax affairs to minimise their tax costs, and the fact that some of these reports make reference to Irish companies being part of these structures. By mixing up the Irish profits and the foreign profits of multinational groups, such reports can produce a global tax rate for the companies concerned that is lower than 12.5% — and an incorrect inference that the full Irish profits are not being charged.
All companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%.
The profits charged in Ireland fully reflect the functions, assets and risks located here by a multinational group. The payments to the non-resident company represent the required remuneration of intellectual property assets funded and owned outside the State and its tax payments are properly reduced in these circumstances by reference to expenditure incurred for the purpose of its trade. Ireland cannot expect to receive or retain the remuneration of these assets.
The ability of entities to lower their global rate 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. What companies do outside of Ireland is beyond the scope of the Irish tax system. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to taxation in Ireland alone.
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. Ireland remains fully committed to this approach to ensure fair play in international taxation. In this regard, Ireland is participating in projects at EU and OECD level which aim to address international tax issues.
Further, as part of the Irish Presidency of the EU, we were able to demonstrate our willingness to take the lead and made significant progress on a number of key files in the area of tax evasion and tax fraud. We were able to bring a number of these to a successful conclusion:
- At the June Ecofin meeting we agreed a VAT anti-fraud package to combat sudden and massive VAT fraud.
- In May, significant progress was made on widening the scope of the EU Savings Directive which involves automatic exchange of information between tax authorities, an important step forward in an area where progress has been stalled for a number of years.
- And also in May we brokered an agreement among EU Finance Ministers to set up a roadmap on aggressive tax planning and good governance.
All these achievements were acknowledged as significant, no less than by EU Tax Commissioner Algirdas Semeta last week when he referred to our “very successful Presidency” from a tax perspective.
My Department has been actively engaged in the OECD Base Erosion and Profit Shifting (‘BEPS’) project. Following our invitation, the head of this project, Pascal Saint-Amans, spoke at our Tax and Economics conference last month and spoke very positively about Ireland’s support for the BEPS project. An Action Plan on BEPS will shortly be published: this Action Plan will be the main toolkit of the global effort to tackle this global issue. This is the appropriate forum in which to consider any potential changes to the Irish corporate tax system. My officials will take this under consideration as part of the regular Budgetary and Finance Bill process.