Enda Kenny (Mayo, Fine Gael) | Oireachtas source

I thank the Deputy as this is an important question for the country and for the future. When I attended the G8 summit in Lough Erne, County Fermanagh on behalf of the EU Presidency on the invitation of Prime Minister Cameron, I was struck by the debate that took place during the formal session of the summit about Africa and by comments from African leaders who were present. They made the point that countries and companies signed deals on mineral rights and so on in areas of Africa which have phenomenal natural resources and all the necessary advice was given at the outset about how they could and should operate but at the conclusion of a deal, the same level of legal or tax advice was not available. This has meant that huge swathes of tribal Africa and peoples of Africa are deprived of real benefit from many of the deals that are struck. It was on the basis of a recommendation by President Obama that the G8 agreed that in respect of many of the deals with African countries, we should be able to see to it that such expertise and analysis of deals and tax legislation, in particular, should apply in order that the benefit of deal for the extraction of minerals, for instance, would extend to the communities in which they are extracted. I recall clearly one of the African leaders pointing out that on a journey of 20 miles a lorry carrying minerals might be stopped 60 or 100 times to pay additional tolls.

I attended an OECD meeting with the Minister for Education and Skills and a number of others last week in respect of the BEPS situation which is being handled by Madame Navarro on behalf of the organisation. That arose because of the decision of the European Council last June when every country agreed that because this is an international question, it should be answered in an international forum and dealt with internationally. It is not a requirement on an individual country to respond to what is happening here.

Let us consider the position of a mobile entity which might have components manufactured or produced in the Far East, assembled in Ireland and then sold in Europe as a finished product. In that instance the intellectual property might be vested in another country. It is the connections between the different jurisdictions and the difference between the rates of tax that often apply here which sometimes give scope for comment. As is recognised by the OECD, the EU and the G20, international tax planning is an international matter. That is why Ireland fully participates in the BEPS process. There are 15 sectoral committees relating to that process and Ireland participates on all of them.

When one reads the reports on effective tax rates, one discovers that there is no single agreed methodology to calculate the tax rates of this nature that operate in any country. A number of different methodologies are put forward. The particular study to which the Deputy referred is based on US Bureau of Economic Analysis, BEA, data, which incorrectly count the profits of Irish-registered non-resident companies as being Irish. What this means is that the study included the profits of American companies that are not tax resident in Ireland. This country cannot tax profits that are properly attributable to other jurisdictions. Sometimes these things become mixed up and that results in a distorted version. As already pointed out and just as our income tax system does not levy income tax on Irish nationals who live abroad, out corporate tax system does not levy corporation tax on some Irish corporations which carry out their activities abroad.

A range of independent studies show the effective rate in Ireland as being very close to the main headline rate of 12.5%. The European Commission's 2013 edition of "Taxation Trends in the European Union" indicates an effective corporation tax rate for Ireland of 14.4%. The PricewaterhouseCoopers report shows an effective rate of 12.3% for Ireland. In response to the growing interest in this subject, the Revenue Commissioners now publish an additional explanatory note with their annual statistical report in order that everyone can see what is involved. For example, the 2012 report - which refers to the data for 2011 - indicates that aggregate net taxable profits, after taking account of various deductions, allowances, charges and reliefs, amounted to €40 billion, while the total amount of corporation tax payable on those profits was €4.2 billion. This means the total corporation tax payable - as a percentage of taxable profits - for 2011 was approximately 10.5%. While this is lower than the 12.5% rate, it can be attributed to the availability of some reliefs such as, for example, the double taxation relief and the research and development credit. While we do not generally refer to the Revenue's statistics as an effective rate, per se, they represent further evidence that companies actually pay very close to the 12.5% headline rate.

I note reports linking - in public perception - Ireland and tax haven countries. It has been agreed by everybody that Ireland does not comply with any of the four criteria that are applied in the case of tax haven status.

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