Dáil debates

Thursday, 3 July 2014

Ceisteanna - Questions - Priority Questions

Corporation Tax Regime

10:40 am

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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3. To ask the Minister for Finance the steps being taken to ensure that Ireland's economic interest is protected during the European Commission investigation into possible breaches of state aid rules in respect of Apple's operations here; and if he will make a statement on the matter. [28667/14]

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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Will the Minister update the House on his Department's response to the European Commission's investigation into the questions of state aid surrounding Apple?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Last month, the European Commission announced its intention to open formal state aid investigations into a number of companies in EU member states. This announcement was part of a much wider Commission investigation that had been ongoing for some time into tax rulings and patent boxes in different member states. I am sure the Deputy has already noted the announcement made in respect of the Netherlands and Luxembourg and that Vice President Joaquín Almunia stated in his press conference that a number of other countries were also being examined.

We understand that the Commission has a job to do in investigating potential state aid. Ireland has co-operated fully with the process to date and will continue to do so. However, I assure the Deputy that protecting Ireland's economic interests is foremost in our considerations on this issue. We will provide a detailed, technical legal rebuttal to the Commission's position and, if necessary, defend our position in the European courts.

It is important to emphasise that the Commission has only opened a formal investigation at this stage and has not made a final determination on state aid in respect of Ireland. For state aid to exist in this case, less tax must have been charged to the company than should have been applied and this must have distorted competition within the Single Market. Our response to the European Commission will be clear - the appropriate amount of Irish tax was charged, no selective advantage was given and there was no state aid.

It is also important to emphasise the single focus of this investigation. It relates to this company and this company alone. The Commission has been clear that it is not investigating the 12.5% rate of corporation tax or the Irish tax system. In fact, Commission Vice President Alumina emphasised this point at the press conference he held to announce these investigations. There are no wider consequences arising from this investigation in respect of the Irish tax system or foreign direct investment, FDI.

Additional information not given on the floor of the House

Given the importance of FDI for the economy, members of the Government and officials from various Departments and agencies have taken care to highlight the position of the Commission that I have just outlined. Our message to anyone who is considering investing here is that we have a fair, open and transparent corporate tax regime,and that Ireland remains an attractive, competitive and safe place to invest.

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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What is the likely timeline of the investigation into Apple? Given the fact that there is about to be a changeover in the Commission, will the investigation continue afterwards? The Minister was correct to state that it was only into one company, but he knows that an adverse finding in this case would have implications for all of our multinationals and, most importantly, our ability to attract inward investment. I get a sense that the Government is sleepwalking through this issue. It is nine months since the initial probe was launched and we are now into a formal probe. Has the Minister received any informal indication that other companies may be investigated?

In the commentary in the US, particularly as it approaches election season, Ireland regularly comes in for disparaging and uninformed remarks from politicians in Congress.

Will the Minister confirm that our corporation tax arrangements and rules are in accordance with the OECD guidelines on taxation?

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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They are, and no one is putting pressure on our rate. There are three issues with our corporation tax - the rate, which is 12.5%; the regime, comprising the rules and the system; and our reputation. The concern must be about the reputational issues. As the Deputy stated, ill-founded comments are frequently being made in the international media and it is difficult to chase them down and catch up when a mistake is made.

On the assumption that the investigation moves from the informal stage to the formal one, that will happen in a week or two. Subsequently, though, the process may take quite a while. If the issue ends up in the courts, we are talking about somewhere between three and five years.

It is not true to say that there will be knock-on effects. There is a single allegation that Ireland, particularly the Revenue Commissioners in their treatment of Apple, provided what is deemed to be state aid. The investigation is ring-fenced around Apple.

They are not investigating any other companies at present. The Deputy is correct in that we cannot sleepwalk into these things and we have to ensure we position ourselves properly, which we are doing, because in parallel to all this there is a major piece of work taking place at OECD level with which we are co-operating and which we are watching very carefully.

10:50 am

Photo of Dara CallearyDara Calleary (Mayo, Fianna Fail)
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My contention is that the Minister did sleepwalk into it and has said there will be no knock-on effects. If this continues for three to five years, and one is in the inward investment business in, say, Singapore or Scotland, after September, of course they will be hawking around to potential clients who may be looking at Ireland or elsewhere outside the EU and spinning that this process will affect their ability to invest in Ireland and affect Ireland's ability to attract these companies. Our hands will be constrained in respect of attracting inward investment if this continues for five years. I know these are the European rules but if this is a European Union that says it is pro-enterprise and allows an investigation into one company, as specified, to potentially last that long, that is not pro-enterprise. For as long as this is happening, our ability to attract inward investment will be constrained. It may not be done formally. The Minister knows that the informal way of doing this is that international investment companies will seek to attract investment into their countries while undermining our ability to do that as long as this is going on.

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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The Deputy misunderstands my position. He asked a precise question about how long the investigation process into Apple, initiated by Commissioner Almunia and his staff, would take. I gave the Deputy a timeline on that. That does not mean the Irish authorities will stand idly by and wait until the end of the process before doing anything. In last year's Finance Bill we took the first step in regard to changing the status of companies that, from a tax point of view, are not resident anywhere, and we published a discussion paper a couple of months ago which is providing the basis for a discussion. We have taken the top tax practitioners in the country, who deal with all the multinationals, into our confidence and have briefed them fully, on a confidential basis, on the implications. We also have direct conversations with some of the big investors. At present we are in a pretty good space but we are not making light of this. I see it as an issue that needs to be dealt with at a policy level but getting the timing right and matching it to events as they occur, both in the competition authority in Europe and in the OECD, is important. It is aligning everything so that we can make the moves that may be necessary without any damage to reputation.