Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

I am pleased to be here to bring before the committee two draft Government orders giving force of law in Ireland to a new double taxation agreement with Kazakhstan and a new tax information exchange agreement with Macao. The double taxation agreement with Kazakhstan was signed by the ambassador of Ireland to the Russian Federation, Mr. Adrian McDaid, on 26 April 2017. The tax information exchange agreement with Macao was signed on 12 September 2016 by the ambassador of Ireland to the People's Republic of China, Mr. Paul Kavanagh.

Double taxation agreements are essential in order to allow Ireland to develop greater opportunities for international trade and investment by reducing the number of tax impediments that may inhibit cross-border activity. Ireland has signed 73 double taxation agreements, of which 72 are in effect. Ireland is a small country which is highly reliant on trade and investment with other countries, and our large network of tax agreements is very important in facilitating this. Double taxation agreements facilitate trade and investment in a number of ways. They provide greater predictability and fairness for taxpayers regarding their tax obligations in foreign jurisdictions and are key to the prevention of double taxation. This is achieved through the formal allocation of clear taxing rights to one of the countries or, if both countries hold taxing rights, by providing that the authority in the country in which the taxpayer is resident grants a tax credit for the tax paid in the other jurisdiction. Double taxation agreements reduce the risk of excessive taxation that may arise because of high withholding taxes and ensure that taxpayers are not subject to discriminatory taxation in other jurisdictions. They also facilitate mutual agreement procedures which allow the tax authorities of both countries to consult with each other in taxation matters affecting the agreement and include provisions that allow for the exchange of information for the purpose of preventing tax evasion. Double taxation agreements cover direct taxes - in our case, income tax, corporation tax and capital gains tax - and apply to the taxation of both companies and individuals. The double taxation agreement with Kazakhstan is comprehensive in scope and generally follows the OECD model convention. It provides that certain income arising in one contracting state and paid to a resident of the other contracting state is exempt from tax in the source state. Where income or gains remain taxable in both countries, the agreement provides that Ireland will grant a credit against its own tax for tax payable in Kazakhstan. The agreement similarly provides that Kazakhstan will allow a deduction against tax paid by a resident in Kazakhstan of an amount equal to the tax paid in Ireland.

To date Ireland has signed 26 tax information exchange agreements, of which 25 are in effect. These agreements require parties to exchange information where the information requested is "foreseeably relevant" to a tax investigation in the other state. The tax information exchange agreements concluded by Ireland are all based on the OECD model tax information exchange agreements. This model grew out of the work undertaken by the OECD to address harmful tax practices globally and now represents the gold standard. The agreements cover all taxes imposed by each state at the time of the agreement together with any identical or substantially similar taxes imposed at a later date. In the case of Ireland, this is income tax, including the universal social charge, corporation tax, capital gains tax, capital acquisitions tax and value added tax. The tax information exchange agreements are limited to exchange upon request; they do not provide for automatic exchange of information between states. Following ratification, discussions are expected to take place with Macao on how the agreement will be adapted to allow for automatic exchange. The automatic exchange of information between jurisdictions is now being provided for through the new OECD common reporting standard to which more than 100 other countries, including Ireland, have committed. The automatic exchange of information between tax authorities is a valuable tool in the fight against tax fraud and evasion and we look forward to its further implementation at an EU and global level. In August, the OECD-led Global Forum on Transparency and Exchange of Information for Tax Purposes awarded Ireland the highest international rating of "fully compliant" with international best practices on tax transparency and exchange of information. The OECD's global forum is a multilateral framework for tax transparency and information-sharing, within which more than 140 jurisdictions participate on an equal footing.

The outcome of the forum's review is a recognition of Ireland's continued commitment to the highest international standards in tax transparency.

Earlier this year, Ireland was among the first countries to sign the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. This important international agreement is commonly known as the BEPS multilateral instrument, MLI, and will bring Ireland's existing tax treaties into line with the OECD BEPS recommendations and ensure that they cannot be used for aggressive tax planning arrangements.

It is expected that the majority of Ireland's treaties will be modified by the MLI. However, Ireland is also implementing the anti-BEPS recommendations on a bilateral basis with a small number of treaty partners. As to treaty partners that are not signatories to the MLI, Ireland has written to them to discuss options for implementing the BEPS recommendations.

It is the Minister for Finance's intention to bring an order relating to the BEPS MLI to this committee as part of its ratification process sometime next year. In addition, there is a strong pipeline of new tax agreements coming down the tracks. Negotiations for agreements with Azerbaijan, Ghana and Turkmenistan have concluded and the Department of Foreign Affairs and Trade is working towards arranging the signature of these new agreements. Negotiations with a couple of countries have also concluded and permission to allow for their signature is in the process of being obtained. The renegotiation of the treaty with the Netherlands has also concluded. Ireland is negotiating new treaties with a number of countries while renegotiations are under way in respect of existing treaties in other cases, including that with the USA.

The Minister for Finance and I, as well as officials from the Department of Finance and the Revenue Commissioners, will continue to seek to maintain and enhance our tax treaty network. We continue to engage with stakeholders in identifying other jurisdictions where tax agreements would be beneficial for Irish business. We are also continuing in our efforts to open negotiations with other jurisdictions that we have, as yet, been unable to secure. These agreements will play a pivotal role in the strengthening of our economic recovery.

The committee's consideration 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 19 September in accordance with the provisions of section 826 of the Taxes Consolidation Act 1997. A resolution by the Dáil approving the draft orders is required before the Government can make them. The proposal that Dáil Éireann approve the draft orders has been referred to this committee for consideration and, after that consideration, the draft orders will be referred back to the Dáil for approval. After that, the Government may make the orders and the agreements will then be included in a schedule to the taxes Acts by means of a section in the forthcoming Finance Bill. At that stage, the Irish ratification procedures will be concluded. Once 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 answer whatever questions members may have.