Ms Kate Levey:

On behalf of the Revenue Commissioners, I thank the committee for the invitation to assist members in considering the corporate tax reform package published by the European Commission on 25 October 2016. I will use this short opening statement to outline Revenue's role in tax policy and to highlight briefly the elements of the Commission package that focus specifically on the administration of the tax system, which is Revenue's core business.

In addition to our administrative role, Revenue assists the Department of Finance in the formulation of tax policy by providing advice and technical tax expertise. Our experience of administering the tax system enables us to advise, in particular, on the practicalities of proposed measures, including avoidance and evasion risks in particular and how they might be mitigated. As regards our international role, Revenue participates in discussions on a broad range of tax and customs matters at fora such as the EU, the OECD and the World Customs Organisation, contributing to the formulation of broader international tax policy.

Each of the three proposals put forward by the European Commission will be discussed in detail at the relevant Council working group at the EU. Revenue participates in these discussions with our colleagues from the Department of Finance, providing the necessary support on technical and administrative implications. In the event the directives are agreed, Revenue will also have an important role in transposing tax directives into domestic legislation.

With regard to the European Commission's package, the proposal to address hybrid mismatches and the two draft directives proposing the CCCTB are predominantly policy-related and my colleague from the Department of Finance, Mr. Hession, has outlined the main features of each. I want to briefly highlight one particular administrative aspect of the consolidation proposal. Under this proposal, multinational groups would deal with a single tax administration in the EU, referred to as the principal tax authority or one stop shop. This would be based in the member state where the parent company of the group is resident for tax purposes, and if the overall parent company is outside of the EU it would be based in the member state of an alternative nominee within the group. While the consolidation element of the proposal will not be brought forward for discussion unless or until the common base is agreed, Revenue will have a particular focus on this administrative aspect.

The third element of the package, the proposed directive on double taxation dispute resolution mechanisms in the EU, aims to improve dispute resolution between tax authorities in situations of double taxation of business income. By way of background, double taxation arises when tax is imposed on the same income by two or more countries. Double tax treaties between two countries set out the taxing rights of each jurisdiction in an effort to avoid such double taxation. "Competent authority" is a term used in tax treaties. It refers to the body responsible for trying to resolve any issues or disputes that arise with the applicable treaty. In Ireland, Revenue is the competent authority. Due to an increase in the complexity of international trade, there has been an increase in the number of disputes being referred to competent authorities in recent years. While most disputes can be resolved by considering the relevant treaty directly, double taxation may still remain where two countries disagree on the interpretation or application of a treaty provision.

The OECD and the EU have focused for a number of years on improving what are referred to as the mutual agreement procedures in tax treaties, commonly referred to as MAPS, in an effort to improve dispute resolution processes. Arbitration is one of the most powerful tools for dispute resolution in circumstances where tax authorities fail to reach agreement. Mandatory binding arbitration gives taxpayers a guarantee that their case will be resolved within a set period. As a result, taxpayers and their representatives are advocating the introduction of mandatory binding arbitration. Ireland has already expressed support for the OECD BEPS initiative, which would see mandatory binding arbitration under double tax treaties introduced next year. In addition, the existing EU arbitration convention already provides for a mandatory binding arbitration mechanism in the narrower category of transfer pricing disputes between EU member states. The European Commission has now put forward this proposed directive to improve existing arbitration convention mechanisms in terms of access for taxpayers, coverage, timeliness and conclusiveness.

Revenue’s role in negotiating disputes with other countries is important to ensure the appropriate allocation of profits between Ireland and our treaty partners. In budget 2015, the Minister for Finance provided for increased resources for Revenue's competent authority function to ensure we are equipped to deal effectively with disputes with other tax authorities and we welcome any improvements to the international framework for addressing such issues, including the proposed directive.

We are happy to assist the committee in any way we can in its consideration of the corporate tax reform package presented by the Commission.