Jim O'Callaghan (Dublin Bay South, Fianna Fail) | Oireachtas source

Before I speak on the Paradise Papers, on my behalf and on behalf of Fianna Fáil, I welcome the joint report published this morning by the negotiators on behalf of the European Union and the United Kingdom. It is a very contentious issue, but I welcome the fact the report has indicated that the position of Ireland, as a result of the decision of the United Kingdom to leave the European Union, is unique. I welcome the fact the agreement recognises the significance and achievements of the Good Friday Agreement, or Belfast Agreement as it is referred to in paragraph 42. Now we should proceed to the second phase of these negotiations which, being realistic, are probably going to be more complicated than the first phase.

In respect of the Paradise Papers, many of us in the House may have studied Paradise Lostwhen we were doing English in the leaving certificate. The first lines refer to:

man’s first disobedience, and the fruit

Of that forbidden tree, whose mortal taste

Brought death into the world,

Mr. Milton did not go on to refer to the other disobediences, but if he had referred to the second, third or fourth, I would say he would have got to tax evasion, because it has been with us for as long as there have been any records of societies or states for the purpose of trying to regulate affairs. If we go back to ancient writings we see that tax collectors were never really treated with much praise and they were generally treated with contempt. For as long as we have been on this planet and for as long as there has been tax collection, there have been efforts by individuals to evade their tax.

What we are talking about in the Paradise Papers is not tax evasion. We are talking about tax avoidance. It appears from the Paradise Papers that we have not been able to identify examples of illegality, but this does not mean we should not be making efforts as a country to try to change our laws to ensure this type of very aggressive tax avoidance is stopped. We should be able to stop it.

There is a broad breath in terms of tax avoidance and what it involves. On one level, people working here who are self-employed are perfectly entitled as a means of tax avoidance to write off against their tax any expenses which are wholly and exclusively for the purpose of their employment. People can also avoid tax by reference to any contributions they make to private health insurance or to pensions. What we are speaking about in the Paradise Papers is tax avoidance at a completely different level. The tax avoidance identified in these papers involves people moving their assets and money to faraway locations out of the jurisdiction for the purpose of avoiding tax. This is what makes it particularly galling to the ordinary taxpayer. The average PAYE worker has no opportunity to move his or her money to exotic offshore locations. Their tax is taken straight out of their pay packet. Hard-working self-employed people throughout the country know that no such opportunity exists for them to move their funds to Jersey or the Isle of Man, although it is probably a misnomer to refer to the Isle of Man or Jersey as places of paradise. In general, the reference to paradise is places in the Caribbean.

It is also worth pointing out that people in this country who have been paying income tax over the past number of years have borne the brunt of the crisis in our national accounts. We have seen in recent years the burden on income taxpayers has risen. In 2007, it was under 29% of our total tax burden and almost 40% of the total tax this year is from income tax. It increased by more than 11% from 2007 to 2016. In 2007, income tax took in €13.6 billion while in 2016 it took in €19.2 billion. This is an extra €5.6 billion in income tax taken from people's working payments and the load on them is increasing. It is important to note these figures for the purpose of this debate because it is the regular income taxpayers who are paying higher tax, while a very select few are willing and able to move their funds offshore to avoid paying tax here.

We can understand why people get frustrated and angry when they read in newspapers about the great and the good, whether it be actors, artistes or people who are ostensibly in favour of every right-on cause, and they find out that in fact the cause in which they seem to be primarily interested most of all is saving themselves paying tax. It is unusual that people who have an awful lot of money seem to be particularly greedy when it comes to holding onto all of that money.

It should also be pointed out that the vast majority of taxpayers in this country, whether they are rich or poor, are very happy to pay tax. They recognise it is part of the social contract that exists. They want to be part of a community. They recognise their taxes are relevant and necessary to support hospitals, schools and the gardaí. It is important in this debate that we do not convey the impression a significant number of people in this country go out of their way deliberately and aggressively to avoid tax.

It is the function of the Department of Finance and the Revenue Commissioners to close off loopholes in the tax code. As I have said before, apparently no laws were broken in the cases revealed in the Paradise Papers, but it is important that we continue to close off those loopholes to ensure this aggressive form of tax avoidance is not permitted. As legislators we have to ensure the mechanisms and resources are available to the State to ensure these loopholes are closed off.

However, we cannot underestimate the challenge we are facing in that it is very difficult to stop individuals or businesses from moving their capital offshore. One of the functions in being a member of the European Union is to ensure there is free movement of capital within the Union, but there is also, to a certain extent, free movement of capital beyond it which is difficult to regulate. However, we should recognise that our objective must be to ensure we try to close the loopholes that permit aggressive tax avoidance, as I think the Minister has recognised. We are also not in the business of lecturing people about their tax affairs. People are free to do what they wish within the law. However, we believe those who live and work in Ireland should pay their taxes here, although there are always mechanisms by which people can get beyond this.

One of the most disturbing aspects of the Paradise Papers is the role played by the two most senior banks in this process, namely, Bank of Ireland and Allied Irish Banks. It is clear from the Paradise Papers that both facilitated the moving of funds to offshore locations. It appears that AIB moved funds offshore with the express intention of hiding that information from the Revenue Commissioners. If that is the case, it is absolutely unacceptable that a bank that required billions of euro of taxpayers' money to be bailed out should engage in this activity or has engaged in it in the past. To the average taxpayer, such behaviour is completely unacceptable. People have endured higher taxes as a direct result of financial assistance being provided to keep the banks afloat and it is now very difficult for them to hear that the same banks are facilitating tax avoidance. Some questions remain for Allied Irish Banks to answer. It is unclear whether it eventually co-operated with the Revenue Commissioners and provided the information for which it was asked as part of the investigation that commenced in 2004. While the operations outlined in the Paradise Papers appear to have come to an end, both AIB and Bank of Ireland need to confirm this and that there are no similar operations today.

There are also revelations in the Paradise Papers about Apple's tax structure. They have come at a very bad time. Clearly, there is a concerted effort on the part of some of our friends in Europe to undermine our industrial strategy and the revelations in the Paradise Papers are likely to be used by those countries that are seeking to challenge our 12.5% corporation tax rate. The papers reveal how Apple changed its tax structure after stateless companies were outlawed in budget 2014. We now know that Apple has three Irish incorporated companies, two of which are tax resident in Jersey, while the other is tax resident in Ireland.

The issues outlined in the Paradise Papers must be seen in the context of what was happening both in Ireland and globally at the time. The double Irish regime was closed in budget 2015. At the same time, Ireland signed up to the base erosion and profit shifting process and the 80% limit on capital allowances for intellectual property was removed. With all of this change globally and in Ireland, a truly massive amount of intellectual property was moved to Ireland. According to answers to parliamentary questions, a staggering €300 billion worth of assets was placed onshore in Ireland. This led to the remarkable and unprecedented increase of 26% in GDP in 2015. We know that in 2016 the European Commission decided that Apple had received state aid from Ireland. Fianna Fáil disagrees with this decision. We do not believe Apple received preferential tax treatment and support the Government in its appeal. The revelations in the Paradise Papers do not change our assessment of the validity of that appeal. We believe it is very important that, as a country, we defend our 12.5% corporation tax rate. We do not support the European Union's common consolidated corporate tax base proposal. We do not believe tax harmonisation across Europe will solve the problem. It will be solved by aggressively closing loopholes which permit tax avoidance. We firmly believe corporation tax sovereignty is what the people signed up to in the Lisbon treaty.

Ireland cannot be a global taxman. Any solution to this problem must be global in nature. It is simply naive to think Ireland on its own can resolve the issue. As I mentioned, companies will always find ways to lower their tax bills and if we close loopholes in isolation, they are likely to respond by moving their operations elsewhere. It is for this reason we support the base erosion and profit shifting, BEPS, process, but it may not solve the problem. Perhaps another BEPS process might be required. It is at this level that Ireland can make a positive impact. In working constructively with our international and European counterparts we must collectively arrive at a resolution of this issue. The Fiscal Monitor published earlier this week showed that corporation tax receipts were nearly €400 million ahead of budget. Of the entire tax take, according to the the 2016 figures, 15.4% comes from corporation tax. In 2016 over 40% of the corporation tax revenue came from only ten multinational companies. This represents a figure of approximately 6% of entire tax revenue and it comes from these ten groups. It, in turn, translates into nearly €3 billion in tax revenue. The changes in budget 2018 in restoring the 80% limit are likely to add to the concentration issue. We agree with the changes made, but it is important for us to recognise this. If we make radical changes off our own bat, we could very easily jeopardise this very important revenue stream. In recognising this, we called for the establishment of a rainy day fund which, as we proposed, would receive some of the corporation tax receipts. This was in recognition of the fact that our corporation tax receipts might perhaps prove to be unsustainable.

The Paradise Papers are a very stark reminder that, as legislators and a country, we need to remain vigilant when it comes to tax avoidance. People will always react to changes to the tax code. As I said, tax avoidance is as old as tax itself. I am confident that the Revenue Commissioners will take a rigorous approach when it comes to the Paradise Papers, but we need to ensure they have the resources and tools necessary to tackle some of the issues highlighted. Both the Oireachtas and the Government need to examine the tax code continually and ensure loopholes will be closed.

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