Jonathan O'Brien (Cork North Central, Sinn Fein)
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To ask the Minister for Finance if he has been requested by any European or international Government or institution to review this State's corporation tax rate and the tax treatment of royalties. [1793/13]

Michael Noonan (Limerick City, Fine Gael)
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I have not received any request from any European or international institution or Government to review either the State’s corporation tax rate or tax treatment of royalties. The Government's position on Ireland's corporation tax rate is very clear and well known to our EU colleagues and our international partners. The Taoiseach, myself and other members of the Government have repeatedly expressed the Government’s commitment to the retention of the 12.5% rate. I reiterated this commitment as recently as my Budget speech on 6th December last year.

In relation to the specific rules we have in Ireland that relate to the use of royalties, the Taxes Consolidation Act 1997 requires that a company’s trading profits be computed in accordance with generally accepted accounting practice subject to any adjustment required by tax law. In computing such profits, expenses that are incurred wholly and exclusively for the purposes of the trade are deductible. This includes royalties or licence fees paid for the use of intellectual property.

The tax code in Ireland contains transfer pricing rules that apply the OECD’s arm’s length pricing principle to trading transactions between associated companies and such rules are applicable to the use of royalties and licence fees.

These rules ensure that the profits chargeable to corporation tax in Ireland fully reflect the functions, assets and risks located here by a multinational groups and other associated companies.

Subsidiaries of multinational groups, whether located in Ireland or other countries, often incur certain bona fide expenditures, including royalty payments, to group companies in foreign jurisdictions for the use of intellectual property rights. Such payments represent the required remuneration of valuable intangible assets funded and owned outside the State.

Given the complex international dimension to the use of royalty payments, it is important that countries work together to examine these structures and to consider the interaction of international tax rules and their impact on the taxation of companies. In that context, I would highlight that Ireland is fully committed to working with international bodies to ensure fair play in international tax matters.

Ireland participates fully in both the OECD’s Forum on Harmful Tax Practices and the EU Code of Conduct Group. During the forthcoming Irish Presidency of the European Council, my Department intends working closely with the European Commission and other EU Member States to make progress on new EU proposals on tax evasion and aggressive tax-planning.

The tax system in Ireland has a positive international reputation based on transparency and the fact that it is applied equally and openly to all corporate taxpayers. The fact that Ireland has an extensive tax treaty network confirms our international standing. The January 2011 GlobalForum Peer ReviewReport on Ireland’s legal and regulatory framework for transparency and exchange of information found that Ireland has an effective system for the exchange of information in tax matters and is fully compliant with OECD standards.

Michael Moynihan (Cork North West, Fianna Fail)
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To ask the Minister for Finance his plans to tighten existing revenue rules in relation to tax exiles; and if he will make a statement on the matter. [2026/13]

Michael Noonan (Limerick City, Fine Gael)
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The Programme for Government indicated that, as part of its fiscal policy, the Government will ensure that “tax exiles” make a fair contribution to the Exchequer. I have already removed the “citizenship” condition for the Domicile Levy to ensure that individuals can not avoid the levy by renouncing their citizenship. The first year for which the changes apply is tax year 2012; the levy payment for that year is not due until 31 October 2013.

The measures in recent budgets to increase the tax take from high earners will also have an impact on so-called “tax exiles”.

Apart from the Domicile Levy, the taxation of individuals in the State is broadly in line with the system prevailing in most other OECD jurisdictions, that is to say —

(a) individuals who are resident in the State for tax purposes are taxable here on their worldwide income; and

(b) individuals who are not resident for tax purposes pay tax here only on income arising in the State and on income derived from working here.

A public consultation on tax residence rules was undertaken in May of last year, as part of the Programme for Government commitment to prepare for possible further changes in this area in 2013.

This consultation process has now concluded. A total of eight submissions have been received and these have been published. There was some comment among some submissions regarding possible impact of changes to the residence rules. The present rules are considered clear and workable and the clarity, certainly and stability of our domestic tax regime enables us to compete effectively in the international economic context.

Significant concern was expressed regarding potential impact on Foreign Direct Investment, and that such changes could inhibit investment in Ireland, and result in a loss to the Exchequer rather than raise money. Concerns were similarly expressed about changing the rules with a view to dealing with a small number of cases, and that for a likely small additional yield generated a disproportionate effect could result on a larger proportion of non residents, and bring the Irish tax regime out of line with international standards.

The present rules are considered to be consistent with international practice and in particular with OECD standards. It is the view of the Government that our interests would be best served by operating our residence rules within the best practice guidelines of the OECD.

I am considering the comments made in the submissions in deciding whether to amend the residence rules at this time. As with all tax items, the matter is kept under review. The level and timeframe of any taxation changes in this area will be determined in the context of Budgets over the lifetime of the Government.