Brian Hayes (Dublin South West, Fine Gael) | Oireachtas source

I am pleased to introduce to the committee a draft Government order giving force of law to a new double taxation agreement with Ukraine and a draft Government order giving force of law to a tax information exchange agreement with Dominica. Double taxation agreements are widely regarded as critical pieces of fiscal infrastructure for developing substantial bilateral trading and investment opportunities by reducing tax impediments that might otherwise deter such cross-border activity. For a small open economy like Ireland that is so dependent on trade and investment with other countries, continuing to expand our network of international tax agreements is not only necessary but vital. Double taxation agreements facilitate trade and investment by providing greater certainty to taxpayers regarding their potential liability to tax in the foreign jurisdiction; by allocating taxing rights between the two jurisdictions in order that the taxpayer is not subject to double taxation; by reducing the risk of excessive taxation that may arise because of high withholding taxes; and by ensuring taxpayers are not subject to discriminatory taxation in the foreign jurisdiction.

Double taxation agreements provide benefits to both taxpayers and governments by setting out clear rules that will govern tax matters relating to cross-border trade and investment. Tax treaties ensure predictability and fairness in the tax treatment of taxpayers and spell out clearly defined provisions that facilitate companies investing and doing business overseas. This is achieved by allocating exclusive taxing rights to one country, or where both countries retain taxing rights, by requiring the country where the taxpayer is resident to grant credit against its tax for the tax paid in the other country.

Double taxation agreements cover direct taxes, which in the case of Ireland are income tax, corporation tax and capital gains tax. They are comprehensive in scope, covering both the taxation of companies and individuals and are in the main based on the OECD model tax convention.

Apart from relieving double taxation, double taxation agreements also include provisions dealing with non-discrimination in relation to taxation matters. They also have mutual agreement procedures which allow the tax authorities of both countries to consult each other in taxation matters affecting the agreement and provisions that allow for the exchange of information for the purpose of preventing tax evasion.

Ireland’s tax treaty network compares very favourably with the networks of other larger OECD countries and now includes most of the world’s major economies, accounting in aggregate for more than 80% of world GDP. The Irish treaty network has grown significantly in the past three years. We have signed comprehensive double taxation agreements with 69 countries, of which 64 are in effect. Negotiations for a new agreement with Thailand have concluded and should be signed shortly. The Minister for Finance and I will be ensuring we continue to prioritise the further expansion of our tax treaty network over the coming months as a central element of our integrated strategy for an export-led sustainable economic recovery for Ireland.

I assure members that the Department of Finance and the Revenue Commissioners will continue to liaise with business representative bodies in identifying other countries where tax agreements would assist Irish business. Of course, despite our best efforts, there are some key jurisdictions that we have yet to secure and we will continue all diplomatic efforts to bring these countries to the negotiating table.

I will now deal with tax information exchange agreements. Tax information exchange agreements, while serving a different purpose, are also important international agreements which strengthen the ability of the revenue authorities in both countries to enforce their tax laws and thereby encourage the development of closer economic relations between both countries in the future. We have concluded tax information exchange agreements with 22 jurisdictions, 17 of which are in effect. All of these are based on the OECD model TIEA. The model TIEA grew out of the work undertaken by the OECD to address harmful tax practices globally. The OECD model TIEA represents the international standard for effective exchange of information in tax matters. There has been a significant acceleration of the process of signing TIEAs between OECD countries and offshore jurisdictions over the past couple of years, mainly stemming from a threat by the G20 to blacklist jurisdictions that do not conclude at least 12 information exchange agreements.

The TIEAs will allow the Revenue Commissioners to directly request from foreign tax authorities information that is relevant to an Irish tax investigation, such as bank account information or company or trust ownership information. The agreements will greatly assist the Revenue Commissioners in tax investigations involving entities and bank accounts located in these jurisdictions.

Today’s consideration by the committee of these international agreements is an important step in their ratification process. Draft Government orders confirming and giving effect in Ireland to the agreements were laid before Dáil Éireann on 12 September 2013, in accordance with the provisions of section 826 of the Taxes Consolidation Act 1997. A resolution by Dáil Éireann approving the draft orders is required before the Government can make the orders. The proposal that Dáil Éireann approve the draft orders has been referred to this committee for its consideration. After consideration by the committee the draft orders will be referred back to the Dáil for approval, after which the Government may make the orders and the agreements will then be included in a Schedule to the Tax Acts by means of a section in the forthcoming Finance Bill. Thereupon, the Irish ratification procedures are completed. In the case of the bilateral agreements, as soon as both countries have completed their procedures, the agreements will take effect in accordance with their entry into force provisions.

I commend these draft orders to the committee and, if required, I will be happy to deal with any questions from members.