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

The corporation tax paid by some large multinational corporations and the rate at which they pay that tax is an issue that has attracted a lot of public and media attention recently. Every country in the world has its own particular tax system. These systems have been put in place and developed over the years to reflect their own circumstances. Some multinational corporations, with the assistance of legal practitioners and tax advisors, have exploited the differences in these systems to their own advantage. What is evident is that these corporations can organise their company structures to such an extent that they are able to minimise their corporate tax liabilities while still acting within the law.

In recent days, national and international attention has turned to Ireland, our competitive corporate tax rate and the tax arrangements employed by some multinational corporations based here. I want to reiterate some points that are very important to the debate. First, I want to make it clear that we do not have a special low corporation tax rate for multinational companies. Ireland's tax system is statute-based, so there is no possibility of individual special tax rates for companies. All companies resident in Ireland are chargeable to corporation tax at the 12.5% rate on the profits that are generated from their trading activities in Ireland. A higher 25% rate applies in respect of investment, rental and other non-trading profits. Chargeable capital gains are taxable at the capital gains tax rate of 33%.

I want to make it clear that the tax rates being quoted publicly this week are, emphatically, not the rate of tax paid by such companies, or by any company on its Irish activities. Having examined the document produced by the US Senate sub-committee, it appears the rate that is being quoted is calculated as follows: the tax charged in Ireland on the branch activities in Ireland of companies that are not resident here, on the one hand, is divided by the entire profit of the companies concerned, as if they were resident here, which they are not. It is clearly wrong and misleading to attribute this rate of tax to Ireland. Companies which are not tax-resident in Ireland are no more chargeable in Ireland in respect of their entire profits than they are in the US, and these company profit figures should not be used to assert special tax rates that simply do not apply here.

Second, the ability of multinational entities to lower their aggregate global tax payments using international structures reflects the global context in which Ireland and, indeed, all countries operate. This is an issue that we cannot solve on our own, and in a time when citizens are being asked to dig deeper into their pockets, Governments around the world are now taking co-ordinated action to ensure these corporations pay their fair share of taxes. I would like to reassure the House that Ireland has been proactive and has already taken the lead on many of these global issues. For example, the Irish EU Presidency is making significant progress on a number of key files in the area of tax evasion and tax fraud, and we hope to bring them to a conclusion in the coming months. Along with EU Commissioner for Taxation and Customs Union, Mr. Algirdas Semeta, I sent a joint-letter to the Finance Ministers of the other 26 EU member states in April outlining seven key areas where concrete action can be delivered in the short term. Significant progress on the seven priorities set out in the joint-letter was made at the May ECOFIN and further progress is hoped for at the June ECOFIN. In addition, Ireland is participating in the OECD's "Base Erosion and Profit Shifting" project, and the action plan on the topic is due to be published in July.

Both the OECD and the EU work has clearly demonstrated that this is a global problem which cannot be solved by one nation or even one continent acting on its own. It is, therefore, unfortunate that Ireland has been singled out in this way.

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