In October 2015 my Department published the results of a Spillover Analysis research project, investigating what effects, positive or negative, the Irish tax system may have on the economies of developing countries.
Ireland has a long history of providing overseas aid and assistance to developing countries, and I am pleased to be taking a lead in this new area of research we are only the second country in the world to undertake a Spillover Analysis project of this nature. As recognised in Ireland's International Tax Strategy, published in October 2013, the ability of developing countries to raise domestic tax revenues will be a key factor in allowing them to exit from a dependence on Official Development Assistance.
My decision to commission this Spillover Analysis was prompted by calls from non-governmental organisations for all developed countries to consider the potential impacts of proposed changes to their tax systems on developing countries, as recommended in a 2011 report by the IMF, OECD, UN and World Bank to the G-20 Development Working Group.
The analysis completed on behalf of my Department by research consultants IBFD is significantly broader in scope, and is in effect a baseline analysis of Ireland's treaty network, tax system, and trade and capital flows with developing countries.
The element of the project analysing trade and capital flows was limited to direct flows between Ireland and the developing countries, and so does not capture transactions in longer supply chains where another developed country has the direct contact with the developing economy. The combined efforts of many countries, assessing their direct flows to and from developing countries, will be required to form a full picture of how developing economies are affected by other domestic tax regimes. It is for this reason that I proposed during the BEPS process that the OECD should adopt, at least in spirit, a 16th BEPS Action that insists on all countries undertaking a similar Spillover Analysis.
It is my hope that, in addition to providing a roadmap for best practice in Ireland's future interactions with developing countries, the Spillover Analysis will be a model for other countries to follow in conducting such analyses.