Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I am pleased to be here to bring two draft Government orders before the committee giving force of law in Ireland to a new replacement double taxation agreement with the Netherlands and a new protocol to the existing double taxation agreement with Switzerland. The new double taxation agreement with the Netherlands was signed by the Minister of State, Deputy O'Donovan, on behalf of Ireland and Foreign Minister Stef Blok on behalf of the Netherlands on 13 June 2019 as part of the state visit to Ireland of Their Majesties, the King and Queen of The Netherlands. The protocol to the double taxation agreement with Switzerland was also signed on 13 June 2019 by the Minister of State, Deputy D'Arcy, and the Swiss ambassador to Ireland.

As the committee will recall, arising from the OECD BEPS process, Ireland ratified the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting, BEPS, last year. The convention was discussed at this committee and in Dáil Eireann and was included in the Finance Act 2018. The BEPS multilateral convention updates the majority of Ireland's existing double taxation agreements. However, as was indicated to the committee last year, our existing double tax agreements with the Netherlands and Switzerland were not updated by the convention but will instead be updated bilaterally to reflect the BEPS changes. That is what these two agreements before the committee now seek to do.

We also indicated last year that the double taxation agreement with Germany will be updated bilaterally in due course. Discussions are at an advanced stage with Germany in that regard. As for those partner jurisdictions that have not yet signed the BEPS multilateral convention, Ireland has written to them to discuss options for implementing the BEPS recommendations. We are committed to ensuring that all of our double taxation agreements meet the minimum standards agreed in the BEPS process.

A common feature of both the agreement with the Netherlands and the protocol with Switzerland is the incorporation of strong tools for tackling tax treaty abuse and anti-avoidance measures. Both contain the minimum standards committed to during the OECD BEPS project as well as a number of measures that are recommended best practices under BEPS, as agreed bilaterally. The effectiveness of the anti-avoidance tools contained in the BEPS multilateral convention has already been demonstrated with the shutting down of the so-called "single malt" structure. The Maltese and Irish tax authorities signed a competent authority agreement at the end of 2018 that will achieve this by outlining the common understanding of both tax authorities as to how the changes introduced by the convention to the Ireland-Malta double taxation agreement will impact this structure.

Ireland first signed a double taxation agreement, DTA, with the Kingdom of the Netherlands on 11 February 1969. It is one of Ireland’s oldest such agreements. Throughout the past nine years Irish and Dutch authorities have been discussing replacing the existing agreement. In February 2017 discussions were held in Dublin to agree on how best to incorporate the BEPS-related measures into the replacement agreement, as agreed to bilaterally between the two countries. The negotiations were successfully concluded and that agreement is now before the committee.

The new DTA with the Netherlands performs two primary functions. First, the original DTA was agreed to 50 years ago in 1969 and the new agreement which is based on the OECD model tax convention modernises the double taxation relationship between Ireland and the Netherlands. Second, the replacement agreement contains a number of provisions to deal with BEPS which makes the new agreement fully compliant with the standards under the BEPS project. The primary changes in the agreement are, therefore, of an anti-avoidance nature. In particular, the new agreement includes a principal purposes test as agreed to under BEPS action 6. The test ensures any benefit under the double taxation agreement is denied if one of the main purposes of any arrangement is the avoidance of tax.

Similar to the agreement with the Netherlands, the primary purpose of the Ireland-Switzerland protocol before the committee is to update the existing Ireland-Switzerland double taxation agreement to incorporate on a bilateral basis BEPS-related measures. Ireland signed an agreement with the Swiss Confederation on 8 November 1966. It was updated in two protocols, signed in 1980 and 2014. Owing to procedural and legal issues in Switzerland which prevented it from modifying its double taxation agreements through the BEPS multilateral convention, it was agreed that the BEPS measures contained in the convention would be introduced bilaterally. The protocol contains the minimum standards to combat treaty abuse and improve dispute resolution. It also provides for arbitration when the two treaty partners are unable to reach a solution. As with the double taxation agreement with the Netherlands, the principal purposes test is incorporated in the agreement. In effect, the protocol changes the double taxation agreement in the same manner as if the agreement had been modified by the multilateral convention.

The DTA network is an important aspect of our competitiveness in attracting investment. In addition, the agreements are a cornerstone of Ireland's trade policy and stimulate trade and investment flows between countries. They provide for greater predictability and fairness for taxpayers in meeting their tax obligations and are key to the prevention of double taxation.

The benefits of double taxation agreements are well known, but concerns have been expressed that treaties may inadvertently facilitate aggressive tax planning. This concern was central to the BEPS project and the BEPS multilateral convention. Updating our existing double taxation agreements, whether via the multilateral convention or bilaterally, helps to ensure they cannot be used for aggressive tax planning. As has been shown in the competent authority agreement with Malta, the Revenue Commissioners will use the new provisions, where appropriate, to prevent aggressive tax planning. Ireland has been a strong supporter of the OECD BEPS process since its inception and continues to engage positively at EU and OECD level. Proactively updating double taxation agreements is a key example of that work.

If Dáil Éireann approves the making of the orders by the Government, I will include them in the Taxes Consolidation Act 1997 by way of an amendment in the upcoming Finance Bill. That will enable Ireland to complete the necessary notifications to finalise the ratification of both agreements. I commend the draft orders to the committee. I am happy to answer questions from the Chairman or members.