Mr. Gary Tobin:

Of course. I thank the Chairman and the committee for the invitation to attend. As the Chairman stated, I propose to refer to some key points in my opening statement to speed things along and allow as much opportunity as possible for the committee to ask questions.

I am joined today by Mr. Eamonn O'Dea, assistant secretary in the Office of the Revenue Commissioners, who will be answering questions with me. We will be talking today in general terms as we are precluded from discussing the affairs of any individual taxpayer. As the committee will appreciate, policy matters are a matter for the Minister for Finance and as we are only four weeks from the budget there may be some tax policy issues that I am unable to elaborate on at this time.

The tax arrangements of some multinational corporations have received a good deal of attention in recent times. It is now a mainstream issue of interest. Tax planning by multinationals has evolved to take advantage of the differences between jurisdictions' tax codes which provide opportunities for some multinational corporations to reduce their tax liabilities. Some of the international rules are also perceived as being outdated. It is recognised as a complex global problem. The opportunity for this type of arrangement has come about because of the change from traditional business models to the new models involving integrated global supply chains and the digital economy, where national borders become less relevant and the location of profit generation becomes more difficult to specify or identify.

The task facing tax policy makers and legislators throughout the world is to put the appropriate rules in place to ensure as much consistency as possible which, in turn, will provide tax authorities as well as international companies with a greater degree of certainty with regard to where and how income should be taxed.

The OECD is regarded as the pre-eminent authority on tax policy for international business. Policymakers face an increasingly difficult balancing act in the current environment. They must design tax rules which stimulate economic growth on the one hand while also managing to increase tax revenues. Tax policy is also at the core of national sovereignty and each country is free to devise its tax system in a way it considers most appropriate. OECD studies have indicated that international competitiveness concerns and pressures are felt in all countries. In addition, OECD research has shown that corporate taxation is the most harmful to economic growth prospects.

The base erosion and profit shifting project was born at OECD level backed by political stimulus. The G20 leaders meeting in Mexico in June 2012 explicitly referred to the need to prevent base erosion and profit shifting. The project has continued to be politically endorsed at the highest level internationally. In July the OECD's Pascal Saint-Amans told this sub-committee about the OECD plans for this project over the next two years, so I will not dwell on it here.

In summary, international tax policy has always been complex and challenging, and an evolution in business models has heightened this complexity. There is a consensus that the global system needs fixing, which the OECD will look at and make recommendations. It will then be up to countries to consider the impact of the recommendations on their domestic systems.

Ireland fits into the global architecture on two levels. First, it participates in international forums, such as the OECD and, second, by reflecting internationally agreed principles in our domestic system, where appropriate. For example, Irish transfer pricing rules are based on the OECD global standard, and Ireland has full exchange of tax information with our tax treaty partners through our double taxation agreements and more than 20 tax information exchange agreements which are based on OECD model agreements. The recent OECD global forum peer review report on Ireland's legal and regulatory framework for transparency and exchange of information found that Ireland has an effective system for the exchange of information on tax matters and is fully compliant with OECD standards.

Ireland also recently pushed for the international tax reform agenda during our EU Presidency. We were also one of the early movers on new international initiatives on exchange of tax information, being only the fourth country in the world to have signed a Foreign Account Tax Compliance Act, FATCA, agreement with the US, which we did in December 2012.

Aggressive tax planning by companies relies to a great extent on mismatches between the domestic rules of different countries. It is clear, therefore, that these issues cannot be addressed at national level alone and a co-ordinated international response is needed. Ireland has been supportive of efforts at European and OECD level to develop this response.

The European Commission is reviewing the different tax ruling procedures in various EU member states to assess their ruling practice under EU state aid rules. Ireland is co-operating fully with the Commission in this exercise. It is important to state clearly for the committee that no formal EU state aid inquiry has been launched by the European Commission on this issue and that the European Commission is asking various member states to provide information. In other words, this is not a county or company-specific issue. According to an article in last week's Financial Times, a Commission spokesperson said that they were simply gathering information. Ireland, as is the case with all member states, receives queries from the Commission on various issues, including tax. We always co-operate fully with such requests. In the majority of cases, such requests do not result in formal state aid inquiries. The essence of state aid is to aid a particular sector or type of investor. The Irish rules do not do this. As has been mentioned, Ireland does not do special tax rate deals with companies. We operate an open, transparent and statute-based system.

Throughout its recent Presidency of the EU, Ireland has been at the forefront of actions seeking to combat aggressive tax planning. We are also fully supportive of the OECD's base erosion and profit shifting, BEPS, project and will continue to work with our international partners to ensure fair tax competition. Given the OECD's pre-eminent role, its base erosion and profit shifting project represents the most effective global response to the international tax issue, and BEPS will be the main toolkit of the global effort to tackle these issues. We will participate fully in the various groups that are pushing forward the actions in the OECD's Action Plan on Base Erosion and Profit Shifting and we will consider the potential impact of the output of that work on our domestic tax system.

That concludes my opening statement. My colleague, Mr. O'Dea, and I will do our best to answer the committee's questions.