Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source

The purpose of the meeting is to consider the following orders referred to the sub-committee by the Dáil: Double Taxation Relief (Taxes on Income) (Kingdom of Belgium) Order 2014; Double Taxation Relief (Taxes on Income and Capital Gains) (Kingdom of Thailand) Order 2014; Double Taxation Relief (Taxes on Income and on Capital) (Grand Duchy of Luxembourg) Order 2014; Double Taxation Relief (Taxes on Income) (Botswana) Order 2014; and Double Taxation Relief (Taxes on Income) (Kingdom of Denmark) Order 2014.

I welcome the Minister of State at the Department of Finance, Deputy Simon Harris, and his officials. I congratulate him on his appointment. The last time I saw him he was sat directly in front of me but now he has moved into the big seats and I congratulate him. He is accompanied by Mr. Niall Casey, business taxation, and Mr. Gary Tobin, fiscal division, from the Department of Finance. I also welcome from the corporate and international division of the Revenue Commissioners, Mr. Eamonn O'Dea, assistant secretary, Ms Helen O'Grady and Ms Marta Alvarez. I thank them all for their attendance and assisting our consideration of the orders. Briefing notes have been provided by the Department.

If we can adhere to a reasonably strict schedule, the Minister of State will address the committee, after which each Opposition spokesperson can respond. We can then have an open discussion. Is that agreed? Agreed. I call on the Minister of State to make his opening comments and then I will call Deputies Michael McGrath and Pearse Doherty.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank the Chairman for his words of welcome. I very much enjoyed my time as a member of this committee and I look forward to working with colleagues in what will no doubt be a very busy period for this committee.

I am very pleased to be here today to introduce to the committee two draft Government orders giving force of law in Ireland to two new double taxation agreements, or DTAs, with Thailand and Botswana, and three draft Government orders giving force of law to three protocols to the double taxation agreements with Belgium, Luxembourg and Denmark.

The double taxation agreement with Thailand was signed on 4 November 2013 by the then ambassador of Ireland to Thailand, Declan Kelly. The DTA with Botswana was signed on 11 June 2014 by the then Minister of State, Deputy Joe Costello.

The protocol to the DTA with Belgium was signed on the 14 April 2014 by the former Tánaiste and Minister for Foreign Affairs, Deputy Gilmore, the protocol to the DTA with Luxembourg was signed on the 27 May by Mr. Diarmuid O'Leary, ambassador of Ireland to Luxembourg, and the protocol to the DTA with Denmark was signed by me on the 22 July in the Department of Finance's offices in Dublin.

Double taxation agreements are widely regarded as critical items of fiscal infrastructure for developing substantial bilateral trading and investment opportunities by reducing tax impediments that might otherwise deter such cross-border activity. For a small open economy such as ours, which is so dependent on trade and investment with other countries, continuing to expand our network of international tax agreements is not only necessary but vital. Double taxation agreements facilitate trade and investment by providing greater certainty to taxpayers regarding their potential liability to tax in the foreign jurisdiction; allocating taxing rights between the two jurisdictions in order that the taxpayer is not subject to double taxation; reducing the risk of excessive taxation that may arise as a result of high withholding taxes; and ensuring that taxpayers are not subject to discriminatory taxation in the foreign jurisdiction. These agreements provide benefits to both taxpayers and governments by setting out clear rules that will govern tax matters relating to cross-border trade and investment.

Tax treaties ensure predictability and fairness in the tax treatment of taxpayers and spell out clearly defined provisions that facilitate companies investing and doing business overseas. This is achieved by allocating exclusive taxing rights to one country or, where both countries retain taxing rights, by requiring the country where the taxpayer is resident to grant credit against its tax for the tax paid in the other country. Double taxation agreements cover direct taxes, which in the case of Ireland are income tax, corporation tax and capital gains tax. They are comprehensive in scope, covering both the taxation of companies and individuals, and are, in the main, based on the OECD model tax convention. Apart from relieving double taxation, the agreements also include provisions dealing with non-discrimination in respect of taxation matters. Furthermore, they include mutual agreement procedures that allow the tax authorities of both countries to consult each other in taxation matters affecting the agreement and provisions that allow for the exchange of information for the purpose of preventing tax evasion.

Ireland's tax treaty network compares very favourably with those of other, larger OECD countries. It includes most of the world's major economies and accounts, in aggregate, for more than 80% of world GDP. The Irish treaty network has grown significantly in the past three years. We have signed comprehensive double taxation agreements with 71 countries, of which 68 are in effect, and there is a strong pipeline of agreements coming down the tracks. The number of tax treaties has doubled in recent years. The Minister for Finance and I will be ensuring that we continue to prioritise the further expansion of our tax treaty network in the coming months as a central element of our integrated strategy for an export-led sustainable economic recovery for Ireland. I assure members that the Department of Finance and the Revenue Commissioners will continue to liaise with business representative bodies in identifying other countries where tax agreements would assist Irish business. Despite our best efforts, of course, there are some key jurisdictions with which we have yet to secure agreements. We will continue all diplomatic efforts to get these countries to the negotiating table.

The select sub-committee's consideration of the international agreements is an important step in the process towards their ratification. Draft Government orders confirming and giving effect in Ireland to the agreements were laid before Dáil Éireann on 22 September 2014 in accordance with the provisions of section 826 of the Taxes Consolidation Act 1997. A resolution by Dáil Éireann approving the draft orders is required before the Government proceeds to make them. The proposal for the Dáil to approve the draft orders has been referred to the select sub-committee for its consideration. When the select-sub-committee completes its deliberations, the draft orders will then be referred back to the Dáil for approval. Thereafter, the Government may make the orders and the agreements to which they relate will then be included in a Schedule to the Taxes Acts by means of a section in the forthcoming Finance Bill. At that point, the Irish ratification procedures will be complete. In the case of the bilateral agreements, as soon as both countries have completed their procedures, those agreements take effect in accordance with their entry into force provisions.

I commend these draft orders to the select sub-committee and I will be very happy to deal with any questions which members may wish to pose.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

I join the Chairman in congratulating the Minister of State and wishing him well in his new role. The matter before us is fairly straightforward but I would like to ask a couple of questions nonetheless. The Minister of State referred to the fact that there are a number of key jurisdictions with which we do not have DTAs. Will he provide examples of countries with which we do a significant amount of trade but with which we do not have double taxation agreements? Will the Minister of State also indicate whether, in general, such agreements are bespoke in nature? I accept that they run along the standard lines of the OECD template but to what extent must they be tailored to individual jurisdictions? One of the issues highlighted in the BEPS deliverables report issued by the OECD last week is the need for a single international legal agreement. Essentially, such an agreement would change certain elements of bilateral double taxation arrangements. Is the Minister of State in a position to provide an indication with regard to when this will take effect in the context of Ireland's negotiations to enter into double taxation agreements with other countries?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Deputy Michael McGrath for his kind words. I look forward to engaging and working with him on the occasions when I am before this select sub-committee. As outlined earlier, we have managed to get a number of taxation agreements over the line in recent years. We compare very favourably with larger OECD countries in that regard. South America is one location in respect of which there is a great deal of work outstanding. The country to which we attach priority in terms of negotiating a double taxation agreement is Brazil. Our officials and diplomats will continue to work through the relevant channels in respect of this matter. We tend to use the standard OECD template but, on occasion, both parties to an agreement are obliged to tweak this.

Work in respect of BEPS remains ongoing. Where we are eventually going to end up remains to be seen. Obviously, Ireland is actively engaged with the BEPS process. Work is under way on determining the scope of a multilateral instrument - this is being termed as an OECD convention - which would facilitate countries in signing up to measures on a multilateral basis. Ireland would be positively disposed to supporting such an agreement. We are of the view that this matter is quite complex from a legal standpoint and that it could take some time to resolve the various issues. We intend to continue the process of signing double taxation agreements while also fully engaging with the BEPS process. An OECD-style convention with multilateral agreements is on the table as part of that process. We will continue to monitor progress in respect of this matter.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

What do the three protocols before the select sub-committee involve and why are they necessary?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The existing treaty with Belgium is one of our oldest double taxation agreements and was signed in Brussels in 1970. The principal feature of the protocol to the agreement relates to an exchange of information. The protocol is designed to update the article in the existing treaty on exchange of information to ensure full conformity with the OECD standard. The 1998 OECD report, Harmful Tax Competition: An Emerging Global Issue, identified the effective exchange of information for the purpose of tax investigations as one of the key criteria in determining harmful tax practices. The protocol widens the scope of the provisions in the existing treaty in respect of the exchange of information, implements the recognised OECD standards regarding transparency and exchange of information, and reflects the commitment of Belgium and Ireland to implement those standards. The information exchange provisions are necessary to counter fiscal evasion. As the Deputy will appreciate, the flow of information between tax authorities is obviously an increasingly important weapon in the armoury of national tax administrations.

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

So the purpose of the protocols is to update the three agreements.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Yes. As stated earlier and in the interests of providing clarification, it would be necessary to update an agreement dating back to 1970 to bring it into line with the OECD template.

The protocol to the agreement with Denmark deals with the taxation of foreign employment income and it was signed by the Danish ambassador and me. Ireland's treaty with Denmark contains a rule - the only such rule in our treaty network - in respect of employment income which may be taxed in Ireland. Under this rule, employment income that may be taxed in Ireland is exempt from tax in Denmark. This means Denmark is deprived of the right to tax its own residents. There are specific implications for Denmark in this regard in the context of the taxation of airline crews.

The protocol to the agreement with Luxembourg relates to the exchange of information. We signed our existing treaty with Luxembourg in 1972 and we are now updating it to bring it into line with the OECD standard in respect of the exchange of information.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Ba mhaith liom fáilte a chur roimh an Aire Stáit. Guím gach rath air san am atá amach romhainn. Déanaim comhghairdeas leis fá dtaobh den oifig úr atá bainte amach aige.

I have just a couple of questions in respect of the double taxation agreements into which we are entering. The Minister of State indicated that the OECD's draft template is being used. Will he explain why the Government is not following the UN model, which would be of more benefit to developing countries such as Botswana because they would be able to impose higher rates of withholding in respect of dividends, interest and royalties?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I thank Deputy Doherty for his kind words. I look forward to working with him also.

It is the norm within the European Union that European countries follow the OECD model. That is not to say that we do not incorporate elements of the UN model. The fact that we are signing an agreement with a developing country like Botswana is a sign of this country's commitment to further engaging in trade relations with developing countries. I think we can all agree this is the best way to support the developing world. It is quite interesting to already see the amount of engagement between Botswana and Ireland. I think this taxation agreement will further help that. However, the OECD template is the norm in European countries.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

There is nothing to prevent the Government following the UN model. Did the Department or the Minister consider the option of the UN model?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Most of these were signed in advance of my appointment. I will examine this further and I will revert to the Deputy. I have continued to use the OECD model which has been the norm in Europe. I am happy to come back to him with a detailed note.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Would it be the Department's view that the UN model would be of benefit to Botswana as a developing country?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Department's view is that the OECD model is fit for purpose and it is the best practice across Europe. There are elements within the UN model which we have incorporated. These are what we consider to be the best practice elements of the UN model. Specifically, the whole issue of withholding tax on technical fees and a change of professional service fees of individuals. The model we are following is the OECD model but the models are not mutually exclusive. The OECD model has incorporated what the Government believes to be the better elements of the UN model. It is a genuine and legitimate point the Deputy raises and I am happy to revert in further detail on it.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I appreciate that.

The exchange of information has been referenced earlier in terms of the plans of the OECD. Those plans incorporate spontaneous information exchange and a move towards multilateral tax treaties. Why does the Government pursue bilateral agreements with countries that do not involve the spontaneous exchange of information?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Ireland is in favour of the exchange of spontaneous information. The OECD process is ongoing. The country will continue to fulfil its dutiful obligations to engage in double taxation agreements. It is important to note that Ireland has been proactive in its engagement in the OECD BEPS process and the OECD processes in general. The spontaneous exchange of information is something this country supports but the standards are not yet in place. It is an ongoing process and one which Ireland supports.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

The Minister of State mentions the standards are not in place. Is he saying no double taxation treaty has provision for spontaneous information exchanges that we can replicate?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

While the international standard has yet to be worked out, Ireland is a party to the OECD-Council of Europe multilateral convention on the exchange of information. Ireland has already signed up to the multilateral convention. There is ongoing work in terms of the OECD and further standards but Ireland is fully compliant with the existing multilateral convention at OECD level.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

My question is not whether we are compliant. Ireland has rightly supported the OECD plans for spontaneous information exchange. In the future, these double taxation treaties, which are intended to be multilateral, will have spontaneous information exchange. Today, what is presented to the committee does not include spontaneous information exchange. This is operating in other jurisdictions. Despite comments supportive of spontaneous information exchange from Departments and Ministers, why is it not included in double taxation treaties with these states given that it is possible?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

This is where confusion arises. It is already included in double taxation agreements as a result of Ireland's participation in the OECD multilateral convention on the exchange of information. As further standards develop, Ireland will be one of the first countries to adopt them. Ireland has shown good faith in this area. Ireland is already including the provisions in the multilateral convention on the exchange of information in our taxation agreements.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Is the current test not that the information is foreseeably useful in the future? It is not a case of spontaneous information exchange as envisaged by the OECD BEPS programme.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Spontaneous exchange is already happening under the existing treaties, both bilateral and multilateral. Furthermore, Ireland has joined the OECD early adopters group. Ireland has been leading the way on this and is ready to move on any further international standards. Currently, it would be wrong to give the impression that spontaneous exchanges are not already a part of existing bilateral and multilateral treaties.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Is the Minister of State telling the committee that spontaneous information exchanges are part of the agreement between Botswana and Ireland?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

On the Botswana agreement, where the information is foreseeable we are absolutely permitted to provide it.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

That is not the question. Clearly exchange of information is part of this double taxation treaty. Spontaneous information exchange is something different and something the OECD wants us to pursue. To put it simply, does this agreement comply with what is envisaged in the BEPS proposal on spontaneous information exchange?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Yes. We believe it does comply and that there is already provision within this to allow spontaneous information exchange. It is important to note that Ireland cannot move alone on all global taxation issues. Ireland is participating in the OECD process and, not only is it participating, but it has also shown good faith by joining the early adopters group within the OECD.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Can the Minister of State point out the article in the order which would allow that to happen?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Article 26 on exchange of information.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Where is spontaneous information exchange dealt with in Article 26?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Paragraph 1 of Article 26.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

I had thought from the Minister of State's replies there might have been a further provision. Article 26 provides - and this is the caveat - that competent authorities of the contracting states shall exchange such information as is foreseeably relevant for carrying out the provisions of this agreement or to the administration or enforcement of domestic laws. The BEPS programme - this is why I asked the Minister of State to judge this against what is envisaged under BEPS - envisages spontaneous information exchange, particularly in relation to multinational companies, although it is not foreseeably relevant for carrying out the provisions of the agreement. I contend it proposes something considerably in excess of what is contained in this double taxation agreement.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I take the Deputy's point. There is a distinct issue here on country to country reporting which is an issue Ireland supports and is actively supporting. The commentary in Article 6.1 clearly outlines that the country does not need to be asked for the information before the information is provided. I am satisfied that sufficient provisions are in place to allow for the spontaneous exchange of information. I also take the point that further standards are required at an OECD level on the spontaneous exchange of information. Ireland is playing a leading role in this. I am confident that sufficient provision is made to allow for information that has not been requested to be provided.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Is the same type of spontaneous information exchange included in other agreements with member states?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

That is correct in relation to all our other bilateral agreements.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

Is it the Minister of State's view, in terms of the OECD's plans on spontaneous information exchange, that Ireland complies with them entirely? Is it his view there will be no requirement to make changes as Ireland is doing this already?

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Yes. It is important to note that the articles we are inserting in our agreement are based on current OECD tax law. Obviously, we are engaged in a process at a time when a situation is developing and evolving. I am confident that the agreements we are asking the committee to ratify today and other international double taxation agreements which we as a country have put in place are in compliance with OECD tax law. I am also confident our officials and those with whom we sign the treaties have made as much provision as possible to allow for the exchange of spontaneous information while awaiting further standards. It is very much an evolving situation. It is difficult to know where it will all end. As of now it is an evolving situation. It is important to note, however, that the taxation agreements which we are asking the committee to ratify today are in accordance with current OECD tax law and, as outlined to the Deputy, Article 26.1 of the agreement with Botswana allows for the exchange of information that has not been requested previously, which information is, therefore, spontaneous.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

While I accept it is in compliance with international tax law, I would suggest it is not in keeping with the spirit of what has been agreed at the OECD in terms of moving towards greater spontaneous information exchange. I suggest that when Ireland signs up to it, there will be a requirement to change this article if we are still dealing at that time with double taxation agreements.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I take the point the Deputy makes. I must reiterate, however, that Ireland, the Government and the Department of Finance are committed to the OECD process and to playing a leadership role within it. We will keep matters under review as the situation evolves and is completed. We have been to fore on issues such as spontaneous exchange of information.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

That is not the case when the Minister of State brings before us treaties that do not include the spirit of what the OECD is looking for in terms of spontaneous information exchange. The Minister of State's commentary in terms of Ireland wanting to be a leader in this area and its having been to the fore on this matter would be matched if the agreements before us today were more robust in relation to spontaneous information exchange.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

I appreciate the Deputy's view. I believe it would be prudent for Ireland, before signing up to agreements incorporating such standards, to agree the standards first. Ireland is playing a lead role in the development of those standards.

Pearse Doherty (Donegal South West, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

It is leading and following at the same time.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Once in place, Ireland will continue to lead in this area.

Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source

The Minister of State committed earlier to the provision of some follow-up information. I would ask that that information be directed to the committee secretariat rather than individual members, which will ensure everybody receives a copy of it.

Simon Harris (Wicklow, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Yes.

Ciarán Lynch (Cork South Central, Labour)
Link to this: Individually | In context | Oireachtas source

I again congratulate the Minister of State on his appointment and thank him and his officials for attending today's meeting.