Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome Mr. Keegan and Mr. McCaughey to the meeting. I should declare an interest in that I am a member of Chartered Accountants Ireland. However, I assure the witnesses this will not colour my questioning. Members have heard two quite contrasting presentations from the two witnesses in attendance. Mr. Keegan has presented quite a black-and-white picture that companies incorporated in Ireland and which are resident here by virtue of the management and control test are subject to the 12.5% rate on their worldwide income and he defends the current regime quite strongly. Mr. McCaughey presents quite a different scenario and puts a lot of emphasis on profit shifting and transfer pricing. I wish to tease out this issue because it really forms the nub of the debate.

Everyone accepts that Ireland's system, in which the profits of companies resident here are taxed here and so forth, is all above board and is quite clear cut. The issue that has dominated the debate concerns the movement of profits, that is, the shifting of profits from one jurisdiction to another to gain the maximum tax advantage. I wish to try to go through this issue. On the second page of his presentation, Mr. McCaughey made the point that because of our corporation tax rate of 12.5%, Ireland is an attractive destination for companies legally moving their profits here through transfer pricing arrangements in order that those profits ultimately reside here and are subject to our corporation tax rate. Is there evidence for this or are there other jurisdictions in which the tax regime is even more favourable? I thought the bigger problem was that Ireland is a link in the chain and is used as a channel through the royalty payment for intellectual property to result in profits ending up in jurisdictions that are commonly known as tax havens, even if they do not meet the OECD definition. I refer to countries in which there is little or no corporation tax, whereas Ireland has a rate of 12.5%. Is the bigger problem that Ireland is a link in a chain and is used to channel profits to the Cayman Islands, Bermuda and so forth or is it that profits are brought to Ireland through transfer pricing to avail of the 12.5% rate? Are they both issues or is it clear cut as to which of them is a bigger problem from the witnesses' point of view?