I propose to take Questions Nos. 68 and 69 together.
Following the publication of the OECD BEPS reports in October 2015, a decision was taken at EU level to introduce the Anti-Tax Avoidance Directive (ATAD) as part of a package of measures aimed at ensuring a common and co-ordinated approach to the introduction of the BEPS anti-avoidance measures across the EU Member States.
The first ATAD, presented in January 2016 and agreed by all Member States in July 2016, provided for five separate anti-avoidance measures, one of which is an exit tax, to be transposed on an agreed schedule between 2018 and 2023. Member States must introduce the ATAD exit tax, or bring existing exit taxes into alignment with the ATAD exit tax where relevant, no later than 1 January 2020.
The objective of the ATAD exit tax is to impose a charge to tax when a company migrates out of a State while holding assets, or makes certain transfers of assets out of a State, in circumstances where those assets have increased in value and therefore hold an unrealised capital gain.
The potential yields of an exit tax from 2010 to date at the Deputy’s proposed rates ranging from 1% to 5% cannot be determined with certainty as such a calculation would require information on the unrealised gains, if any, latent within the value of assets transferred. Similarly, any potential future exit tax yield from assets on-shored in recent years would depend on the increase in value of these assets, if any, before any future transfer offshore.
However I would note that in many cases, intangible assets such as licence rights and patents in the pharmaceutical and high-tech sectors have a finite life-span and depreciate over their useful lives – for example over the period for which a drug is protected by a patent or the period until an IT sector IP asset is superseded by technological advancements. Depreciating assets of this nature are unlikely to give rise to an exit tax on migration.