Tuesday, 21 September 2021
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
2. To ask the Minister for Finance his views on the activities of certain companies (details supplied) in respect of corporation tax; if he will act to amend the Ireland-Malta tax treaty to ensure that companies can no longer use tax shelters outlined in a recent report to minimise their corporation tax bills; and if he will make a statement on the matter. [44846/21]
5. To ask the Minister for Finance his views on the impact of the competent authority agreement entered into by the Revenue Commissioners and the Maltese tax authorities in shutting down the structure known as the "single malt"; if he or his officials were at any time aware that the single malt structure was still in use despite the provisions of that agreement; and if he will make a statement on the matter. [44867/21]
We should all be shamed by what we read last week. After the Minister learned of the single malt tax dodge in 2018, he moved to close the structure down. The Minister said in 2018 that the Ireland-Malta tax agreement would "eliminate any remaining concerns about such structures". Thanks to Christian Aid, we now know a knock-off version of the single malt is still available. Did the Minister know that Irish-registered companies could still move profits to Malta to avoid corporation tax after the 2018 agreement was signed? Is the Abbott case, which was reported last week, news to him and are there more?
I propose to take Questions No. 2 and 5 together.
As is always the case, I have to emphasise that it is not appropriate for me to comment on the tax affairs of an individual business. I am advised by Revenue that the competent authority agreement with Malta, to which the report refers, was clearly set out as addressing arrangements that would otherwise exploit mismatches between the two countries' rules - specifically their rules on company residence and domicile. The objective of the competent authority agreement was to counteract arrangements that sought to take income out of the charge to tax in Ireland, on the basis that a company was not resident for tax purposes, in Ireland and out of charge to tax in Malta, on the basis the company was not domiciled in Malta. This competent authority agreement addresses issues in which there is a mismatch of residence and domicile provisions, which could otherwise result in double non-taxation.
I am advised by Revenue that this competent authority agreement provision is operating as intended and companies should not be able to avail of double non-taxation, on the basis of a mismatch of residence and domicile provisions. The report provides no evidence that the competent authority agreement was ineffective in achieving this objective. I have repeatedly demonstrated that I am committed to taking action to ensure the Irish tax code is in line with new and emerging international tax standards. The January 2021 update to our corporate tax roadmap outlines actions that have already been taken. The Deputy will be aware as to what many of them are, from the anti-tax avoidance directive, ATAD, work to control foreign company rules, updated transfer-pricing rules and the substantial widening of the scope of the exit tax regime.
It should also be recognised that Ireland has a long-standing general anti-avoidance rule, which goes beyond the stand required in the EU ATAD. It is intended, in the upcoming finance Bill, that we will complete the transposition of the anti-tax avoidance directives with the introduction of interest-limitation rules and anti-reverse hybrid rules. It is intended that these rules will take effect from 1 January, but this work is not complete. As I have set out in the update to the corporate tax roadmap, I am committed to taking many other actions.
I find it hard to understand or accept that the agreement is working in the way in which the Minister intended.
The Minister of State, Deputy Fleming, responded to me in the Dáil last week and informed me that "One case is being discussed and the Revenue is keeping a close eye on that". What precisely was meant by that? Can the Minister confirm to the House that there are no other company structures taking advantage of the kinds of arrangements of which we were made aware last week? Companies will say that they are lawfully exploiting these kinds of arrangements. I do not believe that was the Minister's intention in 2018. When he learned of this case last week and when he was advised by Revenue, as he has been, about the nature of this case, did he move to contact the Maltese authorities to tighten up this loophole? In my view, it needs to be tightened. Christian Aid warned of the possibility of these kinds of structures being enabled continuously, even post the 2018 agreement, but that advice does not seem to have been taken. I would be interested to see if the Minister could establish that there are not more companies taking advantage of this. Will he move to tighten up these arrangements?
We know that some of these large profitable companies will organise their tax affairs in a way to limit their tax liability. In 2017, after parliamentary questions and campaigning by Christian Aid, the Minister called out aggressive tax planning and closed it down as a result of the agreement. The problem is that while the agreement appears to be working in terms of what is in it, it is narrowly defined and therefore there is this cat and mouse game. They have found a way around it. There is a complex arrangement in terms of the acquisition of Alere into three incorporated companies here but tax resident in Malta and so on. The money goes around in a carousel and no tax is paid and now there is a situation where there is a dodge of €477 million that is avoiding being taxed. When this comes to light, and surely Revenue has seen this because there are only four Irish companies that have been incorporated in Malta since that period and these are the four companies in question, surely there must be knowledge. What I want to know from the Minister is how come we are not shutting this down? I can understand the cat and mouse game that goes on but once we become aware we need to shut it down. Can the Minister please reassure us that this will come to an end? I know the Minister cannot mention companies and he is restricted in that regard but we need reassurance that this is going to stop.
I thank the Deputies. Deputy Doherty touched on a point I was going to make to Deputy Nash regarding information that was contained in the Christian Aid report. That report noted that since the changes were made by me and accepted by the Dáil in November 2018, only four companies have been incorporated in Ireland with a place of business registered in Malta. The measures that I brought in have had an effect and have played a key role in changing a behaviour that I described at that point as not being acceptable. I am not aware of any further such behaviour but of course I will be receiving an update from the Revenue Commissioners on this issue and if there is further action that I need to take on this matter, I will do so.
I would be interested in establishing, insofar as the Minister can, what kind of prior knowledge Revenue had of this kind of arrangement? Has it signed off on it? Generally speaking, to the best of my knowledge and experience, Revenue would have knowledge of arrangements of this nature. Given the scale of the company, one would imagine Revenue keeps a very close eye on these kinds of operations. Can we be absolutely reassured that there are no other firms incorporated in Ireland using these kinds of structures to dodge and avoid their corporation tax bills either in Ireland or elsewhere? The Minister is right; Christian Aid does acknowledge in its report that the competent authority agreement has worked effectively, to a point, in that it appears there are only a small handful of companies taking advantage of these kinds of arrangements now. However, should we tolerate four companies taking advantage of this kind of arrangement? I do not think so.
As the Minister said, I have acknowledged the fact that the agreement does work to a certain point. All the four companies are Abbott subsidiaries so surely someone is looking at this. Does the Minister dispute the findings of the Christian Aid report? The key thing here for me - and let us be clear about this - is that Abbott broke no law. It wants to reduce its tax liability. Revenue can say that is in compliance or it could have said that the anti-avoidance measures could take precedence here. When a company finds a way around something, the Minister or the Department should be alerted. Was the Minister aware of such a structure being in existence? Will he put on the Dáil record what measures he is going to take? The budget is coming up in a few weeks. Can the Minister give us assurances that if a company has found a way around the Irish-Maltese agreement, that will be expanded to make sure new arrangements are brought into its scope?
The Christian Aid report shows that the number of companies that have been registered in Malta since the measures I brought in took effect is small. Was I aware of this behaviour? No, I was not. Will the Revenue Commissioners be informing me of the detail of the affairs of any one taxpayer? No, they will not. They will advise me on the generality of any matter. As to me laying out on the floor of the Dáil what I am planning to do to deal with any potential concerns regarding tax avoidance, that would only create the opportunities for those measures to be avoided. I am not going to, nor would I ever, lay out in detail any anti-avoidance measures I am going to put in place for the simple reason that if one lays out that detail and gives enough notice of what is going to happen, it creates the very kinds of opportunities that the Deputies appear to be united in wanting to prevent companies taking advantage of. I was not aware of this matter and I will of course, through the Revenue Commissioners, receive advice on the generality of it and whether any action is needed. However, I am not going to communicate any action that I may or may not take because I want it to be effective if I deem that action is needed.