Dáil debates

Tuesday, 17 June 2014

Ceisteanna - Questions (Resumed)

Taoiseach's Meetings and Engagements

5:50 pm

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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1. To ask the Taoiseach the position regarding his meeting with the OECD; and if he will make a statement on the matter. [8921/14]

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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2. To ask the Taoiseach if he will report on the meeting of the OECD in Paris on 6 February; and if he will make a statement on the matter. [8930/14]

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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3. To ask the Taoiseach if he will detail his conversations with OECD members at the Paris meeting in February on the issue of our corporate tax rate; and if he will make a statement on the matter. [8931/14]

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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4. To ask the Taoiseach the conversations he had with other leaders at the OECD meeting in February regarding tax optimisation by multinationals; and if he will make a statement on the matter. [8932/14]

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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5. To ask the Taoiseach if he will report on any bilateral meetings he held at the OECD meeting in Paris. [8933/14]

Photo of Joe HigginsJoe Higgins (Dublin West, Socialist Party)
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6. To ask the Taoiseach if he will report on the OECD meeting in Paris in early February; and if he will make a statement on the matter. [10469/14]

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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7. To ask the Taoiseach if he will report on the OECD meeting in Paris in February; and if he will make a statement on the matter. [24240/14]

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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8. To ask the Taoiseach if he discussed Ireland's corporation tax regime in the context of the OECD plans to tackle base erosion and profit shifting at the OECD meeting in Paris in February; and if he will make a statement on the matter. [24241/14]

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I propose to take Questions Nos. 1 to 8, inclusive, together.

On 7 February, accompanied by the Tánaiste, the Minister for Jobs, Enterprise and Innovation, the Minister for the Environment, Community and Local Government, the Minister for Social Protection and the Minister for Education and Skills, I undertook a working visit to the Organisation for Economic Cooperation and Development, OECD, in Paris. Our programme included a series of meetings with senior officials from the organisation, as well as a public event attended by the media.

The OECD’s Secretary-General, Angel Gurría, had previously visited Dublin in September 2013 to mark the organisation’s launch of its biennial economic survey of Ireland. At that time, we discussed Ireland’s economic prospects and exchanged ideas on how the OECD could more valuably contribute to the formulation of economic and social policy in the country. The working visit to Paris therefore allowed the Government to assess progress since then and to identify more specific areas where OECD expertise and analysis could assist the Government's continuing reform programme. We also touched on the importance of Ireland's exit without a backstop facility from the troika programme for both improving market confidence and securing more favourable borrowing rates.

The key focus, however, of the discussions on 7 February was on job creation and reducing unemployment, areas where the OECD has significant expertise and experience. The OECD’s view, which I share, is that Ireland has made important strides in this context, especially in terms of structural reforms, but that much more needs to be done. Its officials noted that youth unemployment remains a serious challenge and we must ensure that Ireland's workforce is increasingly equipped with the skills needed for a modern, 21st-century economy such as our own. We also had useful exchanges with the organisation’s experts on domestic labour activation strategies that can help jobseekers find suitable employment. The global economic situation has an obvious bearing on an export-driven economy like that of Ireland and I therefore was interested to hear the OECD’s views on the broader international economic environment. Its assessment was that the recovery of the global economy is progressing at a moderate pace but urgent action still is required to address structural weaknesses that remain from the crisis.

The OECD is well-known as an authority on tax issues and we had a short discussion with it on the efforts the organisation leads to combat international tax evasion and avoidance. Mr. Gurría welcomed the Government's support for the OECD's work on base erosion and profit shifting, BEPS, and for its co-operation with the OECD on tax matters. In light of the discussions in February, the Government is now working with the OECD to select specific projects and areas for further co-operation. Possibilities in this regard include enhancing the performance of the national innovation system, strengthening the Government's public supports for small and medium-sized enterprises, SMEs, and entrepreneurship, including a particular focus on access to finance, a renewed emphasis on the role of towns and cities in unlocking the economic potential of the regions and stronger co-operation in the area of public governance more generally, including through better regulation.

In an increasingly knowledge-intensive and inter-connected global economy, Ireland's long-standing membership of the OECD has never been more important. I am confident that our visit to Paris in February will provide the basis for a stronger level of co-operation with the organisation across all areas of public policy in the months ahead and beyond.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Eight questions in total have been linked to the Taoiseach's visit to the OECD in Paris. I put it to the Taoiseach that right now, there is something close to panic in Europe about the threat of deflation and its potential dramatic impact on growth. What is somewhat incredible is I have yet to hear from the Taoiseach a single word on the threat the impact of deflation across Europe represents for Ireland. When replying to me, can the Taoiseach explain why he has not made a public statement on this issue?

The OECD recently published an evaluation of the Action Plan for Jobs and the Government's press release in this regard probably was one of the most deliberately misleading, in a long line of over-hyped press releases, to which Members are used. I believe the Government press release stated the OECD had said the action plan was delivering tens of thousands of jobs but of course the OECD said no such thing. It stated directly that it cannot state how many, if any, jobs came from the action plan and that the improving international economy has been by far the biggest driver of jobs growth. However, this is what tends to happen with press releases. The OECD also criticised the lack of progress on youth unemployment, which is a particular scourge at this point in time, both in this country and across the European Union. What is important is to tell it as it is to people, because people are somewhat fed up with the over-spin on a general basis, because it does not accord with the daily realities they face in respect of employment, life, incomes and so on.

As for the corporation tax issue, I believe one must state in an assertive way that Ireland's corporation tax rules are in accordance with OECD guidelines on taxation. In his reply, the Taoiseach has stated the issue of corporation tax was discussed with the OECD. It appears to me that the OECD does not necessarily have a problem with Ireland's regime or framework. I put it to the Taoiseach that he has not been proactive enough in making the case definitively for retaining autonomy in setting our own corporate tax rate, as well as having flexibility in our tax structure in general, both in respect of inward investment and to encourage entrepreneurial activity. Does the Taoiseach accept that the disparaging references in the United States Senate and the House of Commons to Ireland's corporation tax regime have caused significant reputational damage to our tax system? In addition, does he accept they potentially have created challenges for Ireland in respect of foreign direct investment into the future, in that they are undermining certainty about our framework into the future? I put it to the Taoiseach that the Government has not treated this issue with the seriousness it deserves since the initial European probe was launched nine months ago. I believe the Government has been complacent and dismissive and I do not believe it has allayed the concerns of the European Union to prevent a formal inquiry.

One must repeat there are no special corporate tax rates in Ireland. There are rules on how taxable income is calculated to determine the figure to which the 12.5% rate is applied and they are set out clearly. The Taoiseach and I are both aware but I ask him to confirm that companies such as Apple, for example, eventually will pay 35% in corporation tax when global profits are repatriated to the United States. The problem for the United States is that companies are deferring indefinitely this tax by holding the money offshore and not repatriating it. Does the Taoiseach accept this is a United States problem, not an Irish problem? It is facilitated by an exemption granted by the United States, rather than by any provision in the Irish tax code. The headline corporation tax rate is only one consideration in assessing a country's corporate tax regime.

I ask the Taoiseach to provide details of the discussion he had with the OECD about the taxation question. I refer to BEPS - base erosion and profit shifting. I ask him to confirm that the international trend is to cut corporation tax rather than increasing it. I have noted what is happening in the United Kingdom with the patent box and its stated aim to reduce its corporation tax in an attempt to attract inward investment. Would he agree that a one-size-fits-all tax regime would not work for Europe? I refer to last week's press release from the Department of Finance which stated that the subject of transfer pricing up to 2010 was being examined and that the corporate tax rate was not being examined by the European Union. I ask him to outline to the House what has the European Commission told the Government in this regard. What does the Government propose to do in response to the EU probe?

6:00 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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What was the Deputy's initial question?

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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I asked about the action plan for jobs.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The Deputy remarked that I had not made a comment about something.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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I apologise. My first question was to do with the deflation threat to the Irish economy. There is panic across Europe about the threat of deflation-----

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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We will not go over the question again.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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-----but the Taoiseach has not made a statement about it.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The Minister for Finance has been active on this matter. It is clearly an issue and I expect it will be discussed next week at the European Council. I expect that Mr. Draghi will be in attendance at some stage during the course of that two-day meeting and that he will deal in some detail with the threat as he has outlined it.

Deputy Martin is well aware of the importance of the corporate tax rate as a cornerstone for investment in the country. I can confirm from my meetings last week in the United States that the line of investment into the country is very strong. It is not a question about the rate of corporation tax because that has never been questioned. There have been discussions in different member states and sectors about the fluctuation in rates. Britain has had discussions about this and the Prime Minister has commented about the outcome of his intention to make a decision about the corporation tax rate in Northern Ireland once the outcome of the Scottish referendum is known. The question has never been raised about the rate of corporate tax. The Commission has given notice of launching an investigation into a number of countries, the Netherlands and Luxembourg and, in the case of Ireland, in respect of Apple.

Last week I had a meeting with the senior personnel in Apple in California. This is about a specific technical issue, about a specific instance for a company, which is that any company is entitled to speak to Revenue in respect of the options that might be considered when making a decision to invest in Ireland. The question of the corporate tax is one of statute-based law and is not one that allows for specific deals for any individual company. This is an important point. The Government on behalf of the country will defend this very robustly in that our legislation is statute-based and we believe it is ethically implemented and that therefore it does not constitute a state aid. The announcement by the Commission is in respect of its intention to look at a specific issue of a technical nature related to one particular company and it is not dealing with the rate of corporate tax as it applies.

In reply to the Deputy's other question, I refer to the role of the OECD in respect of base erosion and profit shifting. Most companies that use these BEPS strategies to reduce the amount of tax they pay take advantage of mismatches or different rates and regimes between the tax rules in different countries, making it difficult for any single country to fully address the issue. There is a need to provide an international and a joined-up approach which would reinforce domestic efforts as well as protecting tax bases and providing comprehensive international solutions to the problem. That is where the OECD comes into play in that it is co-ordinating an international response to deal with these challenges through its BEPS project.

The OECD BEPS action plan published in July 2013 sets out 15 specific actions to deal with the problems of base erosion and profit shifting. The plan provides a timetable for the completion of these various steps spanning five separate areas, namely, the digital economy, coherence, substance, transparency and the formulation of a new multilateral instrument. The timetable for their completion is from September this year to December 2015. The fundamental goal of the project is to better align and the right to tax with real economic substance and activity. This issue of substance and taxation is a core pillar of the Irish taxation system. That is the reason the BEPS project is consistent with our tax strategy.

We fully support the important work of the OECD. This is an issue which is not limited to any one country, rather it represents a global challenge involving a wide variety of jurisdictions and companies and it accordingly requires a globally co-ordinated response such as that led by the OECD. We are committed to the process underway to ensure that what is termed the global architecture is fair and seen to be more equitable. We welcomed the original report in February 2013 which identified the problems and challenges. We fully support the action plan subsequently published in July 2013.

Deputy Martin also referred to the question of youth unemployment and youth employment which is an issue in a number of countries. The OECD published tailored recommendations for each individual country. A number of Ministers attended that meeting to meet with the specialists in each area. Depending on the nature of the conversation, they recommended schemes or activities to deal with youth unemployment in the various countries. For example, a comprehensive review of the apprenticeship system was undertaken and has been completed recently. It examined apprenticeship training systems with a view to providing an updated model of training that delivers the necessary skilled workforce to service the needs of a rapidly changing economy. That review was progressed by an independent group which has made a series of recommendations and which prepared a comprehensive framework for a future expanded system of apprenticeship in Ireland. It suggested that the current system could be expanded to a number of other industries, including the ICT sector. For example, I met two companies last week and both said that they could employ 1,000 software engineers in the morning if they were available but we do not have them.

The taxpayer provides substantial funding for the board of SOLAS to be delivered through the new educational opportunities structures. It is a question of how to structure the apprenticeship training schemes to provide for industries requiring large numbers of trained personnel. The group also made recommendations about the existing apprenticeship trades. It was suggested that programmes should provide for the integration of various skills such as literacy, numeracy, mathematics, science, ICT and that these should be designed to equip the participants for progression to the next level. The Minister for Education and Skills, Deputy Quinn and the Minister of State, Deputy Cannon, agree with this policy.

Deputy Martin asked what actions are being taken to address the skills gaps in higher education. The Government and the OECD both recognise the importance of ensuring that Irish workers have the necessary skills to deal in a modern 21st century economy such as ours. We have the highest rate of tertiary enrolment in the EU and at 45%, Ireland has the third highest proportion in the EU of higher education students studying science and mathematics and ICT. I acknowledge Deputy Martin's involvement when he was Minister for Education. It was a good policy.

6:10 pm

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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That is rare praise.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We will not rest on our laurels and for that reason we have targeted incentives to meet emerging skills needs. Some 1,500 ICT skills conversion places have been provided to date. Furthermore, 63% of demand for high level IT professional is being met from the higher education system through the implementation of the ICT skills action plan. In 2011, the corresponding figure was 45% and we have set a target of reaching 75% by 2018. In addition, 15,000 Springboard places have been provided since 2011 in areas of identified high demand from enterprise. The 2014 round of the Springboard scheme, which will incorporate the ICT conversion programme, will be launched by the Minister for Education and Skills, Deputy Ruairí Quinn, in June.

Employer satisfaction with graduates is assessed through the national employer survey, the next round of which is due this year. According to the 2012 survey, 75% of employers are satisfied with the skills of Irish graduates.

This morning, I met Mr. Liu Yunshan, a member of the Central Committee of the Chinese Communist Party, who invited 200 Irish students to visit China to participate in a language summer camp. China is expanding its investment in Ireland and the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, will shortly visit the country. I expect the Minister will also be in a position to announce the first round of investment under the China-Ireland technology group growth capital fund.

Having spoken this morning to representatives of some of the major financial institutions, it is clear that this sector, in which more than 35,000 people are employed, offers further opportunities. Those to whom I spoke noted a radical shift in Ireland in the recent period and pointed out that the quality of talent coming through the system is second to none. This is creating a ripple effect across Europe, with Dublin in particular holding a magnetic attraction for many young people because of the numbers of companies located here and the energy and creativity that flows from that.

While we have made significant progress on unemployment, the rate is still too high. Access to credit is a major issue and one which the Government seeks to address. Today, for example, we made a number of changes to the credit scheme introduced for small companies by the Minister for Jobs, Enterprise and Innovation in his action plan. As I have noted on a number of occasions, it is not for Governments to say how many jobs they create. The Action Plan for Jobs is a mechanism, if one likes, for easing the way to enable jobs to be created. Of the 60,000 jobs created last year, 40,000 were in companies that are less than five years old. This is indicative of the change that is under way.

Many of those who participated in the Enterprise Ireland boot camp and presented in the United States seeking investment from venture capital will sell exclusively on the Internet and they will not be restricted by any requirement to have a physical shop or the timelines that apply in such circumstances. Sales methods and demand and supply are changing radically.

The Government regularly engages with the OECD because it has a brilliant range of expertise available to it and is able to respond to specific queries on the design of schemes for young people that are appropriate to Ireland's circumstances, as opposed to those of Italy or Portugal, for example. The OECD wishes to continue with this type of engagement, which is done on the basis of catering for the changes that will take place in 18 months or five years and the requirement to structure our needs accordingly.

These are some of the issues that were discussed. The issue of base erosion and product shifting, BEPS, was also discussed and the Government fully supports the position being taken.

Photo of Gerry AdamsGerry Adams (Louth, Sinn Fein)
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I propose to concentrate on the way in which the tax regime here is being used by some multinational companies to avoid paying tax in countries in which they operate. The Taoiseach acknowledged that this issue was raised at the OECD meeting in February. It is another mark of the dysfunctional nature of the process of engagement in the House that we are dealing with questions dating from February.

In response to Teachta Martin, the Taoiseach stated that the corporation tax rate was not raised at the February meeting, which is welcome, and that this was a specific technical issue, which is more of a global problem than an Irish one. He also acknowledged that the issue was raised during his visit to California. The issue that captured the media headlines here and, I believe, in the United States, was the barbed joke made by California Governor, Jerry Brown, at an Enterprise Ireland event in San Francisco. The matter is, therefore, raised consistently.

I will outline some of the concerns that arise in this regard. At the end of September 2013, an Irish registered Google company had a revenue of €15.5 billion but paid only €17 million in corporation tax here. A US Senate hearing in Washington was also told that Apple had a special arrangement that provided a 2% tax rate and that one Irish registered subsidiary of the company had profits of €40 billion. The sums involved are substantial. The issue, which the Taoiseach described as technical, is that tax avoidance for multinational companies is facilitated through the funnelling of funds through this State into tax havens. I concur with the Taoiseach's previous comment that this State is not a tax haven. While his view is borne out, the fact that the money comes through Ireland means it is a matter of Irish tax law and enforcement in this State. I have other figures to hand but I am sure the Taoiseach has a sense of the issue in terms of royalties, licences and taxable profits that have been transferred out of the State.

This issue is pertinent not only to Ireland but also the developing world where people depend on corporation tax income to support vital public services. As the Taoiseach is aware, people are dying from hunger and experiencing poverty. I recall that last September, at a Clinton Global Initiative event in New York, the former US President, Bill Clinton, asked what major companies could do to support development in Africa. In response, Mo Ibrahim, a Sudanese-British mobile communications businessman and billionaire, argued that global companies should pay taxes in Africa and it was not acceptable that they do not do so. Ireland has issues in this regard in terms of State law.

The Taoiseach also referred to fairness. Where is the fairness in companies that make billions in Africa being able to funnel revenue through Ireland, thus avoiding tax in the country in which their wealth originates? Citizens, including Members of the Oireachtas, and small companies are correctly expected to pay tax, whereas multinational companies are being facilitated in avoiding paying tax. Sinn Féin's strong view is that the tax code must be organised in a fair and ethical manner.

The effect of this practice on the developing world means it is not merely a technical issue but an issue of tax justice. Surely Ireland cannot and should not be complicit in allowing money to be funnelled through this country in a manner that results in the developing world being robbed of income that could assist countries to emerge from poverty, save lives, prevent famine and be employed to promote economic growth and public services. I ask the Taoiseach to reflect on these points and respond.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The discussions were not about the 12.5% corporation tax rate in place here as corporation tax is a matter for individual countries. The rate we have set has been a cornerstone of our policy for a very long time.

I agree with Deputies Adams and Martin that the question of reputational damage is an issue. It arises from some of the comments made following the United States Senate hearings last year about this country being a tax haven when clearly Ireland does not qualify under any of the headings for tax haven status. It took a while to deal with that argument comprehensively and clearly. In view of reputational damage or perception of reputational damage, the Minister for Finance abolished the stateless concept in the budget last year. That was a clear decision to remove any perception of difficulty from an Irish point of view.

Governor Brown's comments in California arose at an occasion where quite a number of small Irish companies had gone through an analysis and presentation of their products and what they intended to offer and pitched to potential investors in California to invest in their businesses. Some of them were very exciting concepts designed here by Irish people. Governor Brown certainly has a sense of humour and, obviously, people can play words the way they want. He has transformed the Californian economy, where there was a $27 billion deficit, to a point where it is making serious progress, not, I might add, without taking significant and difficult decisions.

When Deputy Adams mentions companies paying the tax rate that applies here, it is important to state we do not have the brass-plate system in Ireland. For instance, I visited Apple in California last week. When one goes to its ultra-modern facility in Cork where over 4,000 highly-skilled people are employed one can understand the contribution it is making to the economy of Cork, both city and region, along with its presence in a number of other countries. Companies which employ significant numbers here pay the tax and their workers pay tax, but in the BEPS initiative the OECD is dealing with the 15 different areas internationally so that there can be an international response to have a fair system that everybody understands. We are participating fully, openly and comprehensively in that, and have done so from the outset.

Deputy Adams raised a number of interesting points about Africa. Prior to the Olympic Games, British Prime Minister Cameron called a meeting in London with a number of African leaders who spoke about discrimination against women and young girls, discrimination in education, corruption and the difficulties that many countries in the African continent experience. It is evident, if the population of Africa doubles in the next 20 years, as it probably will, that even if 10% of young males were to decide to emigrate from the African Continent, no country in Europe could withstand the scale of that pressure and it is necessary that democratisation and anti-corruption measures be put in place in Africa. A number of African leaders addressed the G8 summit in Lough Erne and what they said was startling in its effect in that companies, and in some cases countries, which do deals with phenomenal amounts of African land, supply all the legal requirements at the start of a contract but there is never an analysis as to the impact for the peoples, the tribes or the economies of the regions. The point was made by President Obama at that meeting that the G8 could supply expertise and experience in contract law and treaty agreements so that African countries or their regions would be able to avail of the best expertise on what they are being asked to sign. An example would be the rape of the land for mineral extraction to no benefit for the African people or the regional economies. Some of the leaders gave examples of where a truck-load of mineral clay or whatever driving 20 miles might be stopped 50 to 100 times for payment.

There is an issue here that goes to the heart of the matter, that is, corruption and greed. Clearly, significant amounts of money have been drifting into some bank accounts to the disadvantage of millions of people, tribes and local areas. That was an issue on which the G8 was to follow up, where expertise could be made available to countries and regions to state what they are being asked to do, what is the agreement that they are being asked to sign and how is it that there cannot be much greater benefit for the people and the area depending on the nature of the contract in place. I suppose, when the gentleman Deputy Adams quotes states that all companies should pay their taxes in Africa, perhaps that may be a reason that some do not. In any event, Ireland's participation and support for the OECD's work on the BEPS covering the 15 areas that I mentioned to Deputy Martin is something that we hope can bring about an international response to the different regimes that apply in different countries.

Ireland's participation in the OECD does not mean that we have to change our tax laws. The OECD does not have the power to do that. It is anticipated that the OECD analysis of BEPS will result in changes being made to the international taxation rule-book on which countries rely for international trade. We always have played by these rules and that is evidenced by the extent of the strength of the continued line of investment into the country. These issues are under active consideration. We participate in that, openly and fully, and we look forward to dealing with the response.

The Commission's investigation is not a global issue. The Commission's investigation here in Ireland is on a specific technical point for a specific company. That is not an issue that applies globally. The Commission has a slightly different investigation taking place in Luxembourg and in the Netherlands with other companies.

The bigger picture is how does one respond to the digital world having moved so far ahead of the legislative world that companies can move through different jurisdictions, regimes and tax operations before a baseline is reached. For us, with companies here in Ireland, there are no brass-plate operations. We believe strongly that, as ours is a statute-based law, it is not a state aid and it is ethically implemented. We work on that up-front basis with the OECD and we will defend our position strongly with the European Commission.

6:20 pm

Photo of Joe HigginsJoe Higgins (Dublin West, Socialist Party)
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The Taoiseach began by speaking about youth unemployment being discussed at the OECD meeting but he did not outline whether any concrete proposals came from the OECD regarding the scandal of the extent of youth unemployment throughout the European Union, particularly in the so-called peripheral states, the victims of austerity, where up to half the young people available for work are unemployed. Can he outline whether, apart from platitudes by the OECD establishment, there were any proposals for concrete investment in those societies that would lead to young people finding meaningful work and a decent future which the current system does not give them?

This also relates to the issue of corporation tax. I do not know if the Taoiseach reads the international financial press, but there have been articles about the massive extent of accumulated profits by major corporations that lie in banks and other financial institutions around the world. In the case of Europe, for example, an estimated €3 trillion is not invested by European corporations within the EU but is running around the banking system. That is because those corporations judge it is not sufficiently profitable for them to invest in infrastructure or new employment and jobs.

That begs the question of whether a different and new tax regime is needed, not just in this country but also throughout Europe. Those companies should be taxed at a much higher rate so that those funds, which in any case are earned by the hands and brains of working people around Europe, should be available for public investment, for example, in major infrastructural projects which are desperately needed in every European country. That would put literally millions of people to work.

Is that not a crying condemnation of the type of corporate tax regime that the Taoiseach and his Government insist on keeping in this country? The headline rate here is among the lowest in the EU. Nobody believes the Taoiseach or the institution of paid advisors when they say the effective rate is 11.9%. Everybody knows that there is a huge tax scam going on in this country as far as major corporations are concerned. Professor Stewart of Trinity College put the corporate tax rate between 2% and 3%, while Social Justice Ireland put it at 6.2%. If we are generous and say that the effective corporate tax rate is 8%, based on 2012 figures every percentage extra they would pay would be €525 million. Therefore if they paid the full rate of 12.5%, which is a derisory amount, it would be €2 billion extra.

Does the Taoiseach not agree that in a country that is crucified by austerity, where our people are hurting badly through massive extra taxation, property tax and the projected water tax, these funds should be taxed? Given the current situation, corporations should be made to pay. The Taoiseach's position in blankly stating that 12.5% is adequate as a headline rate and that corporations here pay about that rate, is completely unsustainable.

Does the Taoiseach not understand that an increasing subject of discussion, debate and controversy around the world, but particularly in Europe and the United States, is the growing inequality between the tiny elite, 1% to 5% of populations, at the top who continue to accumulate massive wealth even in years of austerity, while ordinary people suffer? Society and services are also suffering. Will it ever dawn on the Taoiseach to point out these issues at EU fora, rather than being part of the current establishment regime's thinking which is hugely destructive of society? It is giving rise to massive and growing inequality, and is actually criminal. Does the Taoiseach see no responsibility for the Irish Government there?

6:30 pm

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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I thank Deputy Higgins for his comments. I also thank him as I understand that he is going to be a member of the Oireachtas committee dealing with the banking inquiry. That will bring colour, influence and power to that committee. I wish him the very best with it, in his independence with the other members.

Photo of Joe HigginsJoe Higgins (Dublin West, Socialist Party)
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I will be insisting that the Taoiseach comes in front of it himself.

Photo of Micheál MartinMicheál Martin (Cork South Central, Fianna Fail)
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Does the Taoiseach have any comment on that?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We have no problem on that.

The question of youth employment was discussed at the meeting with OECD personnel. The details of this have been considered at length by the Minister for Education and Skills and the Minister for Social Protection. The OECD was critical of the Government regarding the lack of action concerning labour activation measures, as they call them. The EU and the IMF criticised us to some extent in this regard also. By and large, however, international organisations have been supportive of the approach taken by the Government to reduce unemployment and boost job creation. We always welcome advice, ideas and recommendations on how we might improve our performance in that context.

The Pathways to Work programme will remain a central feature of the Government's jobs plan in 2014. The OECD's input will have an important role as we refine that and examine it for the future. In late 2013, the OECD was commissioned to provide a commentary on Irish youth employment policies and to advise on the implementation of the EU recommendation about a youth guarantee for employment. That work was completed at the end of 2013 and was a helpful input into drawing up the youth guarantee implementation plan, which was approved by Government and published in January this year.

The OECD also regularly advised on aspects of Irish labour market policy, as was the case in its economic survey of Ireland published last year, and most recently in its review of the action plan for jobs. In that review, the OECD was positive in its assessment of labour market reforms but concluded that more needed to be done. There is nothing new about that. This view is shared by the Government, as evidenced by the additional measures being taken under the Pathways to Work 2013 programme. These include the extension of activation to those who are long-term unemployed and the continuing reallocation of staff to frontline activation work. Some 300 additional case officers were put in place in late 2013. All elements of the Pathways to Work programme will be reviewed and, if necessary, augmented and refined in Pathways to Work 2014 which is due around the middle of the year.

I have dealt before in detail with the question of the effective rate of corporation tax here coming down to 11.9%. The Deputy has estimated evidence to the contrary and we have discussed that before. The ones that really count, however, put Ireland's effective rate at approximately 11.9%, which is very close to 12.5%. It obviously depends on the statistics used. We are a small but important entity in a very big world where different jurisdictions, regimes and tax rates apply. Many companies are involved in multi-country situations, which is why Ireland has been up front in recognising that we need to deal with this in a fair and equitable fashion. That is why we contribute to the 15 sectoral committees the OECD is working on.

I am very happy to defend the Commission investigation into a specific technical issue relating to a specific company. It is fair to say that a great deal of international finance is sloshing around the system, much of which is available for investment. One of the problems about Ireland is that it has never produced the range of projects that would draw sufficient funds for investment in infrastructure. That is why I was glad to see that the Minister for Public Expenditure and Reform and the Minister for Jobs, Enterprise and Innovation were in a position to put together significant packages for investment through stimulus, whether for road developments, bundles of schools or the Grangegorman development in Dublin city centre. These major investment requirements will draw on elements of the finance that is out there.

Our position is that we are continuing to maintain our corporate tax rate and are dealing robustly with the Commission investigation. We will work upfront and comprehensively with the OECD and other countries. At the European Council meeting at which this was agreed last year, there was agreement from everybody, including countries that were silent on the matter in the past, that an international response is needed on the issue of tax regimes in different countries and the different rates that apply.

The projections for Ireland in the coming period are interesting. The unemployment rate is projected to decrease to 11.5% in 2014, 10.5% in 2015, 9.7% in 2016 and 8% by 2018. That is in keeping with the medium-term economic strategy that the Government published when we exited the programme of assistance at the end of last year. Our projections for growth and GDP and GNP are set out in the economic programme up to 2018. The emphasis this year is on construction, services and retail, as well as the efforts now being made by the Government to put together an exciting programme in respect of the construction to deal with housing, social housing and other infrastructures. I hope this will bring about significant job creation for people who are on the unemployment register and were previously involved in various aspects of the construction sector, and for those who come with new skills and new ways of dealing with this. That is all part of the fabric of the Government's work to create more jobs, increase income and continue to grow and strengthen our economy to make it easier for the Minister for Finance to meet the targets we have set ourselves of reducing the deficit to below 3% by 2015 and eliminating it by 2018. I do not accept the assertion of the independent Fiscal Advisory Council that the rate of projection we have is faster than the EU's. We set out our targets in the medium-term economic plan and we expect to be able to adhere to them.

6:40 pm

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I have just come from a meeting of the Joint Sub-Committee on Global Taxation, to which Professor Jim Stewart was giving evidence. He was asked by Deputies from various parties to back up his assertion that the real corporate tax rate in this country - the so-called effective rate - is only 2.2%. He was categorical about it. Whereas the Government claims the corporate tax rate is 11.9%, virtually every international commentator and a minority of us in this House say that is nonsense and that, in reality, these big multinationals are paying a fraction of that amount. Professor Stewart was absolutely clear in stating the figure was much closer to 2.2%. He pointed out that in Irish tax law - not American tax law or any other country's law - the norm is that if a company is incorporated in this country, it is deemed to be tax resident here and that foreign-owned companies are the only exception to that norm. It appears that a different set of rules is applied to foreign-owned companies. There is one law for Irish companies and another law for the multinationals.

That double standard in how we judge companies' liabilities for tax purposes allows them to shift massive amounts of profits abroad and to claim the profits are made in the Virgin Islands, the Cayman Islands or Bermuda when, as Professor Stewart pointed out, these companies have employees here in respect of whom they pay PRSI, they pay VAT and they occupy offices in this country. Somehow, they claim they are owned and controlled in Bermuda or the British Virgin Islands, where they have no offices or employees, and do not even have telephone numbers. The Revenue Commissioners simply conclude they are owned and controlled in the Cayman Islands or the Virgin Islands. He rightly pointed out this is not a reasonable assessment of where they are owned and controlled. In so far as one can reasonably allocate their profits, any reasonable person would say those profits should be allocated here. Irish tax law states that a company incorporated here is normally regarded as tax resident.

Is it not obvious that we are facilitating incredible tax evasion from these multinational companies? That option is not available to Irish companies and small and medium enterprises. It is solely available to enormously profitable multinationals. I would like to hear the Taoiseach's response to that. Professor Stewart was very convincing and he knew the Irish tax code very well. Perhaps the Taoiseach could explain further. Professor Stewart also suggested that while we may not be the only country that could be described as having features of a tax haven, we are in the same category as Luxembourg, the Netherlands and Switzerland, all of which are also being investigated for being tax havens or countries with the features of tax havens. The way in which we interpret and apply our tax laws is facilitating this.

The Taoiseach stated that we do not have brass plate companies. I discussed this subject with Professor Stewart in a telephone conversation, and he confirmed in his submission to the sub-committee and in a radio interview that one could wallpaper one's house with all the brass plate companies in the IFSC. He put flesh on the bones of that when he pointed out that there are €2.1 trillion in assets in the IFSC. He asked why these assets do not show up on the national accounts. If even 1% of these assets appeared on the national accounts, they would amount to €20 billion. As the assets do not appear in the national accounts, clearly the companies are not paying taxes on them in any substantial way. Is that not the definition of a brass plate company? I ask the Taoiseach to explain that to us. It strongly suggests that, contrary to his assertion, the IFSC is thronged with brass plate companies which have no real linkages with the Irish economy. We cannot claim they are making a great contribution at any level to the economy.

As Professor Stewart pointed out, they are here purely because it is easy to minimise tax liability in this State. In that sense we are again displaying features, as he put it, of a tax haven. The allegations being made against us have serious substance, although it is important to note they are not just being made against us, and they are also levelled at Holland, Luxembourg and Switzerland. We are at the top of the league table but in a race to the bottom on corporate tax issues and allowing multinationals to facilitate these practices.

6:50 pm

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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There is only a minute left.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Sure. I only got six or seven minutes but everybody else got 15 minutes.

Photo of Seán BarrettSeán Barrett (Dún Laoghaire, Ceann Comhairle)
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I only say that in case the Deputy wants time for an answer.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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How does the Taoiseach respond to these serious allegations, given the state of the public finances in this country?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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The Deputy is talking about different things. The Irish Financial Services Centre is a place with multinationals which employ significant numbers of people here. The allegation is always that a multinational based in Ireland, where people are employed, is not paying its fair share of tax. I do not doubt Professor Stewart's credentials at all and I will read his contribution with some interest.

We have been through the different definitions and criteria used for assessing the effective rate of corporation tax. When Ireland's case is laid out, the rate is approximately 11.9%. The Deputy and Professor Stewart are using a different set of criteria in ending up with 2.2%.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We use the Irish tax code.

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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If multinational workers assemble a product in Ireland but components come from a different country, the workers pay income tax. If the product is sold in Italy, would the VAT be paid in Italy and where would the intellectual property be vested? How would the corporate rate apply in respect of that intellectual property? It may well be vested in the United States or some other country.

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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What if it is in the Cayman Islands, which have nothing?

Photo of Enda KennyEnda Kenny (Mayo, Fine Gael)
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We will no doubt have another opportunity to discuss these issues. That is why Ireland wants to participate with the OECD in terms of the 15 sectors involved in bringing about an international response to this particular phenomenon. The Commission is dealing with a technicality in respect of a specific company. It is also taking in issues in Luxembourg and the Netherlands. We will defend our position very strongly as being statutorily based, ethically applied and not the equivalent of state aid. We will defend that position very strongly.

Written Answers follow Adjournment.