Mr. Seamus Coffey:

Ireland gets much attention because of IP and the European Commission recently did a study that looked at the profit shifting mentioned by the Deputy. With royalty payments we are a standout case, particularly with outbound royalty payments relative to the economy. In transfer pricing we are a late arrival to the party and did not introduce it until 2010. Many of the transactions at the time were grandfathered. Over time our transfer pricing regime should improve. The review last year indicated that the new OECD transfer pricing guidelines should be incorporated into Irish domestic law, and if we are to do that we should do it no later than 2020. This will have a significant impact. There is much talk of the tax strategies that multinationals use, such as the "double Irish" etc., but by and large these are the interactions of various tax codes. Although we have claimed credit for abolishing the double Irish, we have not done so because we simply could not do so. Internationally, the transfer pricing guidelines can affect it.

If we introduce the new OECD guidelines, especially BEPS actions Nos. 8 to 10, inclusive, there will be a major impact on this. The argument Ireland has made up to now with these outgoing royalty payments is that once they leave Ireland they are paying for a service, and we do not look beyond the Irish jurisdiction. The Revenue Commissioners just look at what happens in Ireland and where the royalty payments go is of no concern to us. If we introduce these new guidelines, the Revenue Commissioners will have to look at where the payment is made and if the substance of the receiving company justifies the receipt of substantial royalty payments. If they do not have that substance, the Irish company will not get a deduction for the royalty payments made. The Irish company could still make it but in an Irish context it would no longer get the deduction. It is a change that would end these types of strategies. The royalty payments would no longer be eligible as a tax deduction in Ireland if and when we introduce BEPS actions Nos. 8 to 10, inclusive, in Irish legislation.