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Corporation Tax

Dáil Éireann Debate, Thursday - 16 July 2020

Thursday, 16 July 2020

Questions (3)

Pearse Doherty

Question:

3. Deputy Pearse Doherty asked the Minister for Finance his views on recent findings regarding the effective rate of tax paid by certain companies here; and if he will make a statement on the matter. [16465/20]

View answer

Oral answers (6 contributions)

The report published by the OECD last week, which the Minister just mentioned, found that the effective tax rate paid by companies in the State was 12%, which is close to the statutory rate of 12.5%. Some will question the report but this comes at a time when our tax arrangements in this State are under intense scrutiny. Yesterday, the European Commission announced a series of tax proposals to tackle what the Commissioner for Economy described as aggressive taxation. I ask the Minister to respond to these proposals. In particular, how does the Government view them? Does it see them as an attempt to impinge on tax sovereignty and an encroachment by the Commission in areas of domestic policy?

Companies in Ireland are mainly taxed at the standard corporation tax rate of 12.5%. Different methodologies are used and while some of them lead to different claims regarding our tax rate, it is important to look at recent work done by the Revenue Commissioners, which published an updated analysis of returns filed in 2018. They noted that the effective rate of tax paid by all companies in Ireland is 10.6%, while it is 11.3% for the top ten companies and 10.8% for the top 100. It is important to put those facts on the record of the House because those are the effective rates of taxation for companies in Ireland, as published by our own Revenue Commissioners. As the Deputy acknowledged, this tallies with the work of the OECD, which found we have an effective tax rate of approximately 12%, which is in line with our nominal tax rate of 12.5%.

As for Deputy Doherty's further question, I am going to be studying carefully what Commissioner Gentiloni published yesterday, though the formal communication of the detail of his statement has not reached Ireland as of yet. Looking at how decision-making processes work in respect of taxation is an initiative which has been pursued at other points. I continue to be of the view that taxation is a matter that must be dealt with by unanimity in the European Union but I am aware of the ongoing debate on the taxation of global companies. I do not often get the chance to point to the kind of change we have made in the past but I might be able to do it later on. Change is coming. It is going to matter for Ireland and we need to ensure it is as fair as possible for our country.

The Minister and myself differ on many issues, particularly on aggressive tax planning and loopholes that need to be continually closed and monitored in our own tax code. However, we do agree on the principle of sovereignty and of tax sovereignty in particular. Yesterday, the European Commissioner of the Economy, Paolo Gentiloni, wrote in the Financial Times:

we must stand ready to activate all existing policy levers to protect our single market. That includes exploring how to make full use of EU treaty provisions that let taxation proposals be adopted not by unanimity but by qualified majority, in agreement with the European Parliament.

Yesterday, the Commission also published a series of tax policies for what it calls fair and simple taxation and there has been an ongoing effort by a number of member states to undermine the idea of taxation by unanimity. This appears to be a serious attempt. I ask the Minister to respond to the Commissioner's comments on moving from unanimity to qualified majority voting, whatever about the policy proposals, in the Financial Times.

I have already relayed to the House my views on unanimity and the need for national sovereignty regarding particular tax matters to continue to be recognised by the European Union. I will continue to hold that view in the future, as I expect this House will as well. In fairness to the Deputy, while he may have raised questions regarding the speed at which change has been brought in and the motivation for that change, he has interrogated me on and at times welcomed the changes that have been made in recent finance Bills dealing with international taxation. This Government and the previous one brought in decisions like changing our transfer pricing rules, dealing with hybrids and aggressive tax planning and the sharing of information between countries to deal with that. We have a track record of making changes. I reaffirm my view on national sovereignty but I note the debate on international taxation will continue. I say that in recognition of the fact that the stance I have taken on dealing with the taxation of one company was recognised by the European General Court yesterday.

Yesterday, Ireland was also fined €2 million for the Government's failure to transpose an anti-money laundering directive on the preferential ownership of shares, which I raised with the Minister a number of years ago. However, that is not the key issue here and there are much more serious ones at play. One of the policies mooted by the Commissioner and the Commission is the triggering of Article 116 for tax policy purposes. That article allows the Commission to move against member states that distort market competition. The clear aim of this proposal is to circumvent the principle of unanimity to effect and determine tax policy through qualified majority voting. This has the potential to seriously impact smaller nations, undermining the principle of sovereignty. What is the Minister going to do to ensure Article 116 does not affect our right as a sovereign nation to set our own tax policies? Does he propose to use his position as chair of the Eurogroup to ensure the Commission does not encroach on national sovereign competitiveness?

I will use my role as the Minister for Finance for Ireland to pursue what I believe are longstanding clear matters for our national interest. That is what I have done in recent years and it is what I will continue to do. I will respond at another point to the ruling concerning anti-money laundering, but in the brief answers I have given to the Deputy, I have pointed to that vast amount of change that has happened in our corporate tax code to deal with aggressive tax planning and practices that I know need to change.

This has happened in Ireland and it has been led by this and the previous Government. We have made significant changes in our corporate tax policy to ensure that issues that were of concern to many have been dealt with while, at the same time, protecting the concept that taxation can be part of the competitive model of a small open economy. That is work that I have done and it is work that I plan to continue.

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