I have been very clear 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. A certain, stable, and globally agreed international tax framework is vital to facilitate cross border trade and investment.
In this regard I welcome the G20 Finance Ministers’ commitment to achieving a consensus based solution to addressing the tax challenges arising from digitalisation, and their endorsement of the OECD BEPS Inclusive Framework as the correct forum for this work to be carried out.
When I look at the proposals currently being discussed at OECD I believe that proposals examining the issue of where companies generate their value, and whether new concepts of value creation need to be recognised, might provide a basis upon which a sustainable agreement could be found at the OECD.
It is my belief that any such solution should be grounded in the principle that corporate tax should be paid where value is created in accordance with the well established arm’s length principle. However, there is scope for a possible broadening of the concept of value creation that recognises that some value may arise from scale, from brands or from access to markets.
Any change should be moderate and based, to the greatest extent possible, on existing transfer pricing rules which are deeply embedded in the international tax framework. The bulk of profits must remain taxable in exporting countries under the existing corporate tax framework. This can help to ensure that such countries are not disproportionately impacted. Any proposal which would disproportionately benefit large countries at the expense of smaller ones is not sustainable. Proposals which are focused on providing certainty into the medium term for governments and for business are much more likely to be acceptable to the international community.
Ireland will continue to engage positively in the discussions at OECD and remains open to solutions which respect our right to compete fairly and which respect the legitimacy of Ireland’s longstanding 12.5% corporate tax rate.