Enda Kenny (Mayo, Fine Gael) | Oireachtas source

The discussion which took place at the European Council was constructive and positive in the sense of reflecting an understanding that the world has changed utterly in the way multinational companies do business in different jurisdictions. From our perspective, I stated before I entered the meeting that if the matter arose, I would deal with any issues of transparency or accountability in respect of Irish tax law in so far as corporate tax rates are concerned. I also stated that no special deals were done with any individual company and that this is because our rate of 12% has been set out in law. The latter has been deemed to be an effective rate of 11.8% or 11.9% by the World Bank.

The issue which arises relates to how to deal with this matter. Clearly, it cannot be dealt with by any individual country. That is why Ireland was the fourth country to sign up with the US in respect of the sharing of information. Ireland has participated very strongly in the analysis carried out and group hearings held by the OECD. Ireland wants to be at the forefront in the context of individual and collective decisions by countries to put in place a new international code in respect of tax. The Minister for Finance, Deputy Noonan, and EU Commissioner Šemeta recently sent a joint letter to the Finance Ministers of the other 26 member states in which they outlined seven different areas where concrete action can be delivered in the short term. Four of those have been adopted and significant progress has been made in respect of the others.

Deputy Higgins will be aware of the OECD's four indicators in respect of what constitutes a tax haven, namely: having no taxes or only nominal taxes; a lack of transparency; an unwillingness to exchange information with the tax administrations of OECD member countries; and an absence of substantial activity in the country concerned. It is clear that many of the multinationals which have been mentioned in the recent past employ substantial numbers of people - on high wages - in this country. In addition, there is no question with regard to the substance or extent of activity in the Irish economy. As already stated, this matter will not be resolved by an individual country. However, it is being dealt with by the OECD - at European level - through the base erosion and profit-shifting process. This is the appropriate mechanism and we fully support it.

The Deputy referred to the hearings which took place in the US Senate. The relevant report was clearly written to address concerns regarding the US taxation system as distinct from any other. Its final sentence reads "Congress can change those incentives by closing offshore tax loopholes and strengthening U.S. tax law". This emphasises that the central issues addressed in the report are specific to US as opposed to Irish tax law. While the report's central focus concerns perceived problems in the US tax system, it does contain some misleading and some inaccurate references to the Irish tax system. As the Deputy pointed out, there are references in it to a special rate of less than 2% being negotiated with the Irish Government. It is not possible to negotiate a particular rate in Ireland which deviates from the two main statutory rates of 12.5%, for trading income, and 25%, for non-trading income. There are no special rates for particular companies or types of companies. For trading companies, taxable profits are calculated under domestic rules which are based on internationally accepted principles that are themselves mainly influenced by the OECD.

The Deputy also referred to the double-Irish mechanism. The profits charged in Ireland reflect the functions, assets and risks that are located here by multinational groups. Payments to non-resident companies represent the expected higher remuneration of extremely valuable assets owned outside the State. Ireland could not, therefore, expect to retain the remuneration of these assets.

See this speech in context