Dáil Éireann Debate, Tuesday - 24 July 2018
201. Deputy Pearse Doherty asked the Minister for Finance if the decision by his predecessor to extend to 100% the value of intangible assets that could be used to write off profit was linked to the abolition of the double Irish; and if he will make a statement on the matter. [33155/18]
Amharc ar fhreagraMy predecessor as Minister for Finance made it clear on many occasions that the ‘Double Irish’ was notpart of the Irish tax offering. This arrangement was just one example of the many international tax-planning arrangements which have been designed and developed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. This is why my predecessor made amendments to Irish company residency rules in Finance Act 2014 to bring an end to this arrangement.
I recognise the importance of ensuring effective taxation of multinational companies and believe that this should be achieved through internationally-agreed solutions to counter aggressive tax planning. Ireland has fully engaged with international efforts to counter aggressive tax planning, through both the OECD’s BEPS project and the subsequent co-ordinated action at EU level leading to the agreement of the two Anti-Tax Avoidance Directives (ATADs). Work is ongoing in Ireland, and across Europe, to implement the agreed ATAD measures and other OECD BEPS recommendations.
As I have stated previously, capital allowances for intangible assets were introduced in Finance Act 2009 to support the development of the knowledge economy and the provision of high quality employment. When the capital allowances were introduced, to ensure that a measure of tax remained in charge annually, a restriction was provided to cap the amount of income that the allowances could be used against in any year at 80%. The restriction did not deny the use of the capital allowances, it merely lengthened the time period over which they could be utilised.
Ireland is not unique in providing capital allowances for intangible assets and the tax treatment of intangible assets is similar to the approach taken in other countries, such as the UK and the US.
In Finance Act 2014, the cap of 80% was increased to 100%, effective for accounting periods commencing on or after 1 January 2015. The rationale for increasing the cap was to bring the tax treatment of intangible assets into line with the tax treatment of similar assets in other jurisdictions and to enhance the competitiveness of the Irish regime for intangible assets to make Ireland an attractive location for companies to develop intellectual property. This was in recognition of the fact that investment and growth in OECD economies is increasingly driven by investment in intangible assets.
Noting a significant increase in the use of the capital allowances in 2015, the Coffey Review recommended that, to ensure some smoothing of corporation tax revenue over time, the 80% cap should be restored, and this recommendation was acted on in Finance Act 2017. Again the cap does not affect the overall capital allowances available but merely lengthens the time frame over which they can be used.
