Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I am aware of the paper to which the Deputy refers. My officials and I have been considering it. First, I reject any assertion that Ireland is a tax haven. The report to which the Deputy refers does not provide a definition of "tax haven" and appears to assert that Ireland and many others countries are tax havens without providing any rationale for the assertion. In the report, the authors appear to use the terms "low-tax countries" and "tax havens" interchangeably. The inference that Ireland is a tax haven simply because of its longstanding 12.5% corporate tax rate is totally out of line with the long-established position that a low corporate tax rate applied to a wide tax base is good economic policy for attracting investment and supporting economic growth. The central analysis of the paper looks at links between the level of profit booked and the level of wages paid in a country. This creates the totally misleading impression that corporate profits are, or should be, linked directly to wage levels. In reality, corporate profits are linked to the outputs of investment in all income-generating activities such as investment in research and development, intangible assets, capital intensive machinery and investment in staff. A small country with high levels of high value-adding foreign direct investment relative to the size of the domestic economy will, of course, appear like an outlier in this type of analysis.

Nevertheless, I am cognisant of the problem of aggressive tax planning by large multinational companies and recognise the need for effective solutions. That is why Ireland is involved and participating fully in the OECD's base erosion and profit shifting, BEPS, process. Yesterday, the Government approved a memorandum on the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. The convention provides a mechanism by which to implement the recommendations of the OECD.

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