Tax Avoidance

Dáil Éireann Debate, Thursday - 28 April 2016

Thursday, 28 April 2016

Questions (35)

Seán Fleming

Question:

35. Deputy Sean Fleming asked the Minister for Jobs, Enterprise and Innovation his views on a professional service surcharge that can be charged to companies on top of their corporation tax rate, where clients of the IDA Ireland, IDAI, or Enterprise Ireland, are trading internationally with professional services, and these services are delivered abroad, the general message appears to be that the corporation tax rate is 12.5% but some clients may have to pay the additional rate; if this matter is highlighted by IDAI, given its level of knowledge on this; if he considers it reasonable that the IDAI is pushing the 12.5% rate whereby the Revenue Commissioners are looking for a surcharge on top of that; and if he will make a statement on the matter. [8707/16]

Written answers

Minister for Jobs, Enterprise and Innovation

The professional services surcharge to which the Deputy refers is one of a number of longstanding anti-tax avoidance rules relating to close companies. According to the Revenue Commissioners, a close company is a company that is under the control of five or fewer participators or is controlled by any number of participators who are directors.

I understand that the close company surcharge applies in respect of investment income – such as interest, dividend or rental income – which is not distributed to the company shareholders within 18 months of its year-end. Its primary purpose is to counter attempts to avail of lower company taxation rates on personal income.

IDA Ireland supported companies do not generally fall into the category of closed companies. The close company surcharge is therefore not an issue that is frequently raised by the Agency’s clients.

With regard to Ireland’s competitive rate of corporation tax of 12.5%, this has been an important part of our industrial policy since the 1950s. It remains a cornerstone of the Government’s strategy to sustain an enterprise friendly environment that will foster further economic growth and job creation.

In terms of foreign direct investment (FDI), it is important to note that tax is only one of many reasons why companies choose to locate themselves here. Ireland has many other attributes that make it so attractive to FDI, including a highly educated workforce, the ease of doing business and the fact that we are the only English-speaking country in the Eurozone.