Professor Frank Barry:

When I called the OECD report a damp squib, it was prior to the recent G20 meeting which everyone anticipated would come up with dramatic policies. Clearly, if it is not in the interests of the US to institute dramatic change, it will not happen. I do not have high hopes that the OECD will introduce dramatic changes. It certainly will not introduce them without US support; perhaps it will do some tinkering at the margins. The White House statement from the Obama Administration in 2009 threatened to introduce all kinds of radical policies but they went nowhere. I see paralysis at the heart of the US position as preventing action at a global level.

What we can do ourselves is a big debate among academics who work in the area. Committee members will probably have seen newspaper reports of studies which state we receive only a tiny proportion of the corporate taxation revenues we are due. Revenue economists disagree vehemently with this and state that studies such as these include as taxable profits in Ireland a whole chunk of profits which are not taxable in Ireland, namely, profits spent paying royalties to where the intellectual property is located. If the intellectual property is located outside Ireland we cannot tax the revenues paid for it as it is a cost to the company in Ireland. There is a separate line of thought, with which committee members are probably familiar, that we do very well in terms of corporation tax rates compared to most of the rest of the OECD. Generally, corporation tax rates as a share of GDP in Ireland are higher than the OECD or EU average. As a share of GNP they would be far higher. We do not too badly in collecting corporation tax.

The difficulty with trying to take unilateral action is that other countries are hovering and waiting to see whether Ireland makes a mistake. The Netherlands always keeps a close eye on Ireland; when we change our laws it changes its laws also. It is like a football match. In recent years, the UK introduced the patent box, which offers an effective rate of 10% corporation tax. It is a competitive battle and we must be very careful in what we do because other countries will be waiting to exploit any leeway we give them.