Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I am precluded from discussing the tax affairs of a particular individual or company. However, I am aware of recent media reports which refer to the ways some companies structure their international tax affairs to minimise their tax costs and the fact that some of these reports make reference to Irish companies being part of these structures. I understand some of these reports have suggested some companies in multinational groups pay Irish corporation tax at rates significantly lower than 12.5%. I emphasise that such companies are not paying a low rate of Irish tax. All companies in Ireland pay the standard 12.5% rate on profits generated in Ireland. The reports concerned appear to have incorrectly attributed to Ireland profits that represent the return due to assets in other jurisdictions owned by group companies not resident in Ireland. It is incorrect to relate the 12.5% corporation tax rate to both the profits of the Irish-resident group companies and the profits of foreign-resident group companies which are not profits chargeable to Irish corporation tax. By mixing up the Irish profits and the foreign profits of multinational groups in this way, these reports can produce an average tax rate for the companies concerned that is lower than the 12.5% rate and an incorrect inference that the full Irish profits are not being charged.

Multinational groups, with subsidiaries in other countries as well as in Ireland, incur other bona fide expenditures. For example, licence payments which are paid to group companies in foreign jurisdictions for the use of intellectual property rights are properly deductible in computing Irish profits. If these licence payments are untaxed in the foreign jurisdiction, it will reduce the average rate of tax for the total profits of the Irish and foreign-resident subsidiaries when they are taken together. From an Irish perspective, we ensure the profits arising in Ireland are taxed at the 12.5% rate of corporation tax. We do not seek to charge profits properly attributable to other jurisdictions.

The ability of entities to lower their worldwide effective rate of tax using international structures reflects the global context in which Ireland and all countries operate. Differences arise in the legal and tax systems between countries. International tax planning takes account of these differences in national systems and rules. The only way to combat such arrangements is for countries to work together to examine these structures and consider how international rules can be amended to ensure fair levels of taxation.

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In this regard, Ireland participates fully in the OECD's forum on harmful tax practices and the EU code of conduct group. During the forthcoming Irish Presidency of the European Council my Department intends to work closely with the European Commission and other EU member states to make progress on new EU proposals on tax evasion and aggressive tax planning.

The tax system in Ireland has a positive international reputation based on transparency and the fact that it is applied equally and openly to all corporate taxpayers. The fact that Ireland has an extensive tax treaty network confirms our international standing. The January 2011 global forum peer review report on Ireland's legal and regulatory framework for transparency and exchange of information found that Ireland had an effective system for the exchange of information in tax matters and was fully compliant with OECD standards.

The job of the Government is to bring investment and jobs to Ireland and we have used the tax code and, in particular, our competitive corporation tax system to do so for more than 50 years. What companies do outside Ireland is beyond the scope of the Irish tax system. We cannot conclusively determine the effective rate of tax paid under international tax structures by reference to taxation in Ireland alone, but, as I have outlined, we continue to work with international bodies to ensure fair play.

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