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

Before I go into the nature of these protocols, I will deal with the Deputy's first question as to why these matters are being dealt with via bilateral amendment rather than through the multilateral instrument. It is up to the Isle of Man and Guernsey to outline why they believe it is in their interest to do it in this way but Revenue and my Department considered it and the view of my officials was that, given the focus we are putting on the implementation of the BEPS process, the best way to ensure compliance with our standards was to do this through protocols negotiated bilaterally. The recommendation of Revenue and my officials aims to deliver on the spirit of the kind of change we want to see. We believed a bilateral negotiation was the most effective way to proceed. It is not as clear to us as it normally would be whether the multilateral instrument would fully apply to the kinds of agreements we have with the Isle of Man and Guernsey because those agreements are quite limited. They really only focus on individuals whereas other double taxation agreements I have presented to the Oireachtas are broader and include corporate and business information and activities. These relate to individuals only. Because of that, and independent of the views of the other jurisdictions, we were of the view that we should do it bilaterally to deliver against the standards we believe are appropriate for the exchange of information between individuals.

To go on to what is included in the agreements between Ireland and the Isle of Man and Guernsey, the protocols aim to put in place required minimum standards to allow us to be confident that we are adhering to the BEPS process. The first provision, which is contained in the first article of both protocols, inserts a new preamble into the original agreements. This preamble contains an expressed statement emphasising the role of the treaty in combating tax abuse. The second minimum standard provides for an anti-abuse rule which denies treaty benefits in cases where obtaining that benefit was one of the principal purposes of the arrangement or transaction entered into. I understand that this is referred to as the principal purposes test and involves looking at what the purpose of the transaction is. That is contained in Article 3 of our Guernsey protocol and Article 4 of the protocol with the Isle of Man.