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

I thank the Deputy for tabling this important issue for debate because the base erosion and profit shifting, BEPS, process and international tax generally have received significant media attention recently. Due to a need for a multilateral solution to this international problem, the G20 asked the OECD to report with recommendations on how to tackle aggressive and harmful tax planning. The resultant OECD project is known as the OECD base erosion and profit shifting project. When a company undertakes base erosion, it is attempting to reduce its taxable income and thereby reduce the amount of tax it has to pay. The practice of profit shifting is to move profits from one jurisdiction to another.

In July 2013, the OECD launched an action plan on BEPS, identifying 15 specific actions needed in order to equip governments with the domestic and international instruments to address these challenges. The BEPS project is not seeking to harmonise tax rates across its members as the action plan because, as it states, "tax policy is not only the expression of national sovereignty but it is at the core of this sovereignty, and each county is free to devise its tax system in the way it considers most appropriate". Further, the project is not opposed to tax competition in member states but instead opposes harmful tax competition adopted by jurisdictions. It is fundamentally important to distinguish between these two types of tax competition. For instance, a low rate of tax is a policy lever that can be used by countries, especially smaller, peripheral countries, that seek to attract foreign direct investment for growth.

Many of the BEPS actions are technically complex but at its heart BEPS is a simple concept with two key pillars, namely, to align more strictly substance and taxing rights, in other words, companies should be taxed where they have their substantive operations; and to address harmful tax regimes. This is in line with Ireland's overall strategy for attracting foreign direct investment. Ireland has not been and will never will be a brass plate location. We only have and want substantive foreign direct investment - the kind that brings real jobs. That is why I believe that the OECD BEPS project offers more opportunities for Ireland than risks. We have welcomed the first set of BEPS reports, which were released last week, because they are the first milestone in this two year process. The reports examine a number of different areas and the draft recommendations are very positive. As I noted last week, Ireland agrees in particular with the conclusion of the report on the digital economy that the sector should not be ring-fenced from the economy as a whole. There has also been good progress in the areas of coherence, substance and transparency, and while further work is required in some of these areas, the reports are a further step towards multilateral co-operation on countering base erosion and profit shifting by multinationals.

At 12.5%, Ireland has the lowest general corporate tax rate in the OECD. Corporate tax rates are a matter of national sovereignty. This Government is committed to maintaining the rate. Ireland's offering of a competitive corporate tax rate, the availability of skills and our reputation for being business friendly give us a huge advantage that other countries will struggle to match. As international tax loopholes progressively get closed down, our low general corporation tax rate will become even more attractive. Indeed, as we continue to improve our offering for knowledge-based investment, research and development, and intellectual property, I believe that over the coming years we can grow our share of FDI related investment. In recognition of the importance of the BEPS project, my Department held a public consultation on it earlier this year to start a national conversation on how Ireland should best position itself in a post-BEPS environment. We received a lot of very interesting responses which will feed into my deliberations for budget 2015. I plan to publish the results of this consultation in the near future.

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