Tuesday, 15 June 2021

Questions (370)

Jim O'Callaghan

Question:

370. Deputy Jim O'Callaghan asked the Minister for Finance the position in relation to reports that the Irish affiliate of a company (details supplied) paid no tax in 2020 on profits of €260 billion; and if he will make a statement on the matter. [31575/21]

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Written answers (Question to Finance)

It is not appropriate for me to comment on the affairs of individual taxpayers and I do not intend to do so. I am aware that reports of this nature frequently refer to companies which were not Irish tax resident and as a result they were not subject to tax in Ireland. However taxation in other jurisdictions, in particular in the United States (US) following extensive tax reforms introduced there in 2017, is likely to have applied.

The so-called “Double Irish” exploited the different definitions of corporate tax residency in Ireland and the United States (US) while taking advantage of certain provisions of US tax law that allowed for a deferral of US taxation. It involved the use of an Irish incorporated company which was not Irish tax resident under Irish corporate tax residence rules and hence not within the charge to Irish corporation tax. In this context, it should be noted that Irish corporate tax residence rules were similar to those in the OECD’s Model Tax Convention on Income and on Capital.

In the absence of US reforms to address this issue, Ireland changed our corporate tax residence rules in Finance (No. 2) Act 2013 and Finance Act 2014. Thereafter, the US introduced the Tax Cuts and Jobs Act in 2017. It is my understanding that one of the anti-avoidance measures in that Act imposes a minimum tax rate on US multinational companies. The measure is referred to as “GILTI”, short for “global intangible low-taxed income”. It ensures that US multinationals pay tax on the income earned by US companies outside the US from intangible assets such as patents, trademarks, and copyrights. The actions taken by the Irish and US governments have therefore eliminated or significantly reduced the tax benefits to multinationals of using this type of deferral structure.

It is also important to highlight that reform of the international tax rules has been an ongoing process since 2013. Ireland has very much played its part in reframing these rules for the benefit of business and citizens, and we have proactively and diligently reformed our tax code in line with the new international norms. In this context, a lot has been achieved through the OECD’s BEPS process to address aggressive tax planning. We now have far more robust international tax rules and safeguards than existed a decade ago to prevent abuse, arbitrage, base erosion and profit shifting.