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Dáil Éireann Debate, Thursday - 28 February 2019

Thursday, 28 February 2019

Ceisteanna (5)

Eamon Ryan

Ceist:

5. Deputy Eamon Ryan asked the Minister for Finance the analysis conducted on the possible implementation of a digital tax; and if he will make a statement on the matter. [10160/19]

Amharc ar fhreagra

Freagraí ó Béal (6 píosaí cainte)

I am very keen for the Minister, if he can, to share what analysis he will present in response to the OECD consultation document addressing the tax challenges of digitalisation of the economy. The digital tax is clearly centre stage for him, as a French Minister was here earlier in the week to discuss the matter. It is clear from the OECD that we will have to make a submission on the proposals for a digital tax by 6 March, which is next week. Whatever analysis the Minister has should be shared with the House and the process for our position should be transparent and open. I am keen to get access to that analysis.

The European Commission proposal for an interim digital services tax, which seeks to impose a 3% levy on the turnover of certain companies' digital activities, continues to be debated at a political level among member states. The Commission's own impact assessment of its proposed digital services tax estimated that the measure would yield approximately €5 billion per annum across all EU member states. If it is assumed that Ireland would receive a portion of the yield in proportion to Ireland's population, the estimated annual yield in Ireland from the EU proposal is €45 million. However, any such tax paid is likely to be deductible in calculating profits subject to corporation tax and this would reduce Ireland's corporation tax receipts disproportionately. Based on an analysis carried out by the Revenue Commissioners, introducing the EU digital services tax would reduce Ireland's corporation tax receipts by up to €160 million per annum, assuming full deductibility from taxable corporate profits for digital services taxes paid in the EU by companies taxable in Ireland. I shared this work with the Oireachtas Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach in May 2018.

This week I met the French Finance Minister, Mr. Bruno le Maire, who has been a leading advocate of the proposals in this area. I reiterated my principled concerns on the issue but we agreed that French and Irish officials would work closely together on the matter at OECD level. Ireland recognises that further change to the international tax framework is necessary to ensure that we reach a stable global consensus for how and where companies should be taxed. I remain convinced that the OECD base erosion and profit shifting, BEPS, inclusive framework is the correct forum for this work to be carried out.

The OECD paper mentioned by the Minister is probably the central point of the Department's approach to this. It has set out a range of measures in the digital tax area, including user participation, marketing intangibles and significant economic presence provisions. We must put in our part of the consultation next week and go to Paris on 13 March or 14 March to engage in a wider public discussion. We have a significant digital industry here and these are not just brass plate companies. Tens of thousands of people work in the area and the Government must get this right so we can look after their jobs. It must also get it right to achieve tax justice, as the current system is not just. These companies can get away with paying minimal or almost no tax, and that needs to change. This is the key document in terms of what happens next and we must present our comments by 6 March. Will the Minister share that analysis with the Oireachtas so we know what is exactly the Government's position?

My understanding is the consultation process is public and I will share that information, assuming it does not undermine our ability to project our interests within the OECD. When the work is complete, as it will be in the coming days, and when we share it with the OECD, I will share all I can with the Deputy and the committee. I do not see any reason I would be unable to share it at all, given that it is a public process. The deadline referred to by the Deputy is very much an early part of a process that will take quite some time. I know from dealing with finance Ministers in other parts of Europe that there are many different concerns regarding the work under way in the OECD. I expect it will take quite some time to make progress on this matter, even within the OECD.

I would be concerned if it were to take quite some time. Our reputation as a state depends on us being seen to be progressive and willing to take this action. There is major public disquiet throughout Europe and the world because these companies have engaged in tax avoidance to such scandalous levels. We need to act now. The Minister needs to start correctly. This is an early part of a consultation but that process will not take that long, as it is due to be signed off next year. We must know our position next week. I appreciate that this is a public consultation but I ask that he share the submission with other parties on the same day he sends it to the OECD in order that we can be fully informed.

I am keen to hear the Minister's views on transparency. There is a concern that this will eventually be settled within the G20 but that is not a transparent process. We do not have direct representation on the G20, although we are represented indirectly through the European Union. The experience in the past has demonstrated that there is a closed room and we might not necessarily have control of what is said and goes on. Is that how the Minister sees it? Will it be decided within the G20? Where will this be settled?

It will take some time to do this work because of the complexity involved in trying to move this forward on a global level and the highly technical nature of it. The current timeline has the objective of a final sign-off by the end of 2020 and, after that, it will take at least two years to consider how the roadmap could be implemented domestically and internationally. Those kinds of timings are broadly consistent with what happened with the OECD BEPS process. That is the reason for my comment on timing.

The Deputy had a question on where this will be signed off. It will be signed off within the OECD. There is a target in place to be able to share a report with the G20 before the summer on the likely direction of travel. The sign-off mechanism for this will be within the OECD, and that environment is very different from that of the European Union.

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