Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

I have made these points previously but it is clear the Minister is still hellbent on allowing hundreds of millions of euro in tax to go unpaid as a result of the onshoring of intellectual property. Mr. Seamus Coffey's report, on which he did excellent work in flagging up this issue, was interesting and embarrassing for the Government. What was more embarrassing, however, was Mr. Coffey's blog in which he asked why one would allow a 100% cap for intellectual property that had been already onshored. This is not like our previous conversation about retrospective taxation because the capital allowances in question must be used year after year. We are not arguing that capital allowances used prior to 2017 would have a different rate applied to them but that from this point onwards, a company would be able to use only 80% against its tax liability. This does not deal with the issue. That is not an issue of the core retrospection of taxation.

Mr. Coffey made clear that €850 million in revenue will be lost to the State as a result of a couple of words the Minister is willing to insert in this Bill, for whatever reason. The Minister informs us the Government does not do tax policy for individual companies. In this case, the policy is not designed for an individual company because a group of companies, albeit a small one, will benefit. There is serious suspicion about the reasons this has been done. I would like to know which companies, groups or representatives of groups the Department and Minister consulted on this amendment and section. All this information should be placed in the public domain because transparency is needed.

This tax measure will allow well known multinational companies such as Apple to pay very little tax on substantial sales they are recording in this State. Let us examine precisely what is being done here. Until 2015, Apple recorded all of its sales outside the Americas in Ireland. It did this through a stateless company. As a result, even though all the sales were being recorded through a company in Cork, which had no employees or management structure, it did not pay tax on these sales because the company was not tax resident here or anywhere else in the world. This loophole was closed down in 2014. We learned in the Paradise Papers that Apple subsequently changed its structures and Apple itself told the media two weeks ago that all of its sales outside of the Americas continue to go through an Irish company. This time, however, the company is tax resident, which means Apple must pay taxes arising from these sales in Ireland. This is what happens normally across the world. Whether a company is producing widgets in a factory in Mayo or crisps in Gaobh Dobhair, it pays taxes in the country in which it is tax resident. Why then have Apple's taxes not increased significantly? The reason is that when the tax residency laws were changed in 2014, the Government set a timeframe for implementing the change and introduced the 100% cap. As a result, the company in Cork which now owns the intellectual property of Apple, which bought it from the company that is offshored on the Isle of Man, now holds these capital assets that it can write off against its profits. That is what is happening here.

I am sure the Government will argue that the measure results in the deferment of tax and that once the capital allowances are paid, the companies in question will have to pay additional taxes. There is no guarantee that when that time comes, these companies, given their current structure and form, will be resident here, will still have their current structures or will have profits that are taxable. Some of the intellectual property, particularly that which is based on patent protections, may generate profits while such protection lasts but will evaporate when the patent protections expire.

This is a core issue involving €850 million of tax foregone. As has been pointed out, the increase in intellectual property also impacts on gross national income and results in an increase of €200 million in our annual payment to the European Union. Despite this, the Government has decided not to tax this intellectual property because it was onshored heretofore. This is the wrong policy.

I have no doubt Fianna Fáil will support the Minister on this issue. It is not a case of trying to screw Apple or the multinationals but an issue of achieving tax fairness. I am not asking the Minister to change the rates that applied ten, seven or five years ago. My argument is that if capital allowances are to be used against profits that are generated by a company in 2018, 2019 or 2020, a cap of 80% should apply. What the Minister is building into the Bill is a 100% cap for profits that are generated in future, which is not acceptable.

We have all seen the manoeuvres and tut-tutting Ministers engage in concerning tax schemes, such as the so-called single malt. Earlier this week, we were told the Government was examining the single malt. The scheme is not new as it has been on the radar for some time. A report by Christian Aid brought the issue into the public domain in a very understandable way. As I stated, however, the single malt was raised directly with the previous Minister for Finance by my colleague, Matt Carthy, MEP, a year and a half ago in the European Parliament. It is Government policy and when the public finds out about it and anger spills over at some point, the Government tut-tuts and states it is focusing on the issue and will make a change in the next finance Bill. It then introduces this type of scam - it cannot be described as a loophole if it is, like this one to apply a cap post-2018, deliberately inserted in the finance Bill.

This is not a minor issue. Many of the provisions we have discussed cost significant amounts of money and can result in significant losses to the State. The chair of the Irish Fiscal Advisory Council, the person who the Government asked to carry out a report on corporation tax, is telling us the State will lose €850 million per annum as a result of this measure and argues there is no reason the cap cannot be applied to intangible assets that have been onshore until now.

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