Dáil Éireann Debate, Tuesday - 24 January 2023
153. Deputy Neasa Hourigan asked the Minister for Finance his plans to bring forward legislation to address tax avoidance where it may not be possible to address arrangements within the existing code; and if he will make a statement on the matter. [2981/23]
View answerSignificant work has been, and continues to be, done to ensure the Irish tax code is in line with new and emerging international tax standards.
The January 2021 update to Ireland’s Corporation Tax Roadmap highlights the actions that have been taken and will continue to be taken in the process of corporation tax reform, adding to the significant level of reforms Ireland had already undertaken.
In this regard, legislation has been enacted by the Oireachtas in recent Finance Acts in respect of:
- defensive measures against listed jurisdictions through enhanced Controlled Foreign Company Rules,
- the application of the Authorised OECD Approach for the attribution of profits to branches
- updated transfer pricing rules, and
- mandatory disclosure rules.
Following the signing into law of Finance Act 2021, Ireland has now completed transposition of the EU Anti-Tax Avoidance Directives (ATADs), as follows:
- A new Exit Tax and Controlled Foreign Company rules were introduced in Finance Act 2018, and our General Anti-Abuse Rule already met the required standard.
- Anti-Hybrid rules were introduced in Finance Act 2019. and
- Anti-Reverse Hybrid rules and an Interest Limitation Ratio were introduced in Finance Act 2021.
As set out in the update to the Corporation Tax Roadmap, there are commitments to introduce a series of measures to further reform our corporate tax code including possible actions in respect of outbound payments from Ireland. A public consultation has been completed regarding the potential introduction of measures to apply to such payments, including to jurisdictions on the EU list of non-cooperative jurisdictions for tax purposes and no or zero tax regimes.
In October 2021, Ireland was among almost 140 jurisdictions that agreed, through the OECD/G20 Inclusive Framework on BEPS, a two-pillar solution to address tax challenges arising from the digitalisation of the economy.
- Pillar One will see a reallocation of a portion of taxing rights on profits of large multinational corporations to market jurisdictions, i.e., countries where the end-consumers and users of products and services are based. It applies to multinational groups with turnover in excess of €20 billion annually and profitability greater than 10%. The threshold will be reduced to €10 billion after 7 years.
- Pillar Two will see the adoption of a new global minimum effective tax rate of 15% applying to multinational groups with global revenues in excess of €750 million.
Pillar One will be implemented through an international agreement known as a Multilateral Convention (MLC). Work on the detailed provisions of the MLC to implement Amount A of Pillar One and its Explanatory Statement is ongoing at an international level.
Council Directive (EU) 2022/2523 will give effect to Pillar Two across all of the EU, including Ireland. The Directive was agreed in December 2022 and requires implementation by 31 December 2023. Legislation will be brought forward to transpose the Directive in Finance Bill 2023.
Work is continuing at the OECD on finalising the two-pillar solution. Officials from the Department of Finance and Revenue are actively engaged in all aspects of that work.
It should also be recognised that Ireland has a longstanding General Anti-Avoidance Rule, which goes beyond the standard required in the EU Anti-Tax Avoidance Directives and serves as a deterrent for tax avoidance behaviour. Taxpayer behaviour is continuously monitored by Revenue and if, as part of a compliance review, possible non-compliance with relevant legislation is identified, Revenue undertakes appropriate compliance interventions. In addition, should any deficiencies in the legislative provisions be identified, they will be brought to the attention of my Department.
Revenue is strongly committed to identifying and challenging tax avoidance, including schemes that would seek to rely on Ireland’s Double Taxation Agreements such as the exploitation of a mismatch of Irish and Maltese rules in relation to company residence and domicile, which could have led to income falling out of charge in Ireland and in Malta, resulting in double non-taxation of the income concerned. In November 2018, Ireland entered into a Competent Authority Agreement (CAA) with Malta under the Ireland-Malta Double Taxation Convention to deter these arrangements. As a result, section 23A(2) of the Taxes Consolidation Act 1997, which can result in a company incorporated in Ireland being regarded as not tax-resident in Ireland, will not apply to an Irish-incorporated but Malta-managed company in the circumstances outlined in the CAA. Accordingly, under section 23A of the Taxes Consolidation Act 1997, such an Irish-incorporated company will be resident in Ireland and the relevant payments to it will come within the charge to Irish corporation tax.
As regards this type of arrangement, or any other aggressive tax planning, I will not hesitate to propose legislation to address tax avoidance, where it may not be possible to address arrangements within the existing code.
