Eoin Hayes (Dublin Bay South, Social Democrats)
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As this is my first time speaking in the House, I want to start by thanking the Minister of State and the many Members of the House from all parties and none who have been so welcoming to me since the start of the Dáil term. While friendships may be tested through the course of political life, I hope I can earn and keep the respect of my colleagues, as I promise respect for them and for the mandate entrusted to me by the Irish people and by Bunreacht na hÉireann. It would be remiss of me not to thank also the more than 100 ardent campaigners and supporters who helped to get me elected, many of whom are here today. In particular I thank my campaign manager Kieran Clarke, and the two campaigners, constituents and members of my party, Amy and Paul, who have joined my staff. I was and am so lucky to be surrounded by such great friends and family. In particular I thank my mom and dad, Morina and Eamon, who have been the most loving and dedicated parents I could have asked for, and my partner Triona, who has been the greatest joy and most solid rock I have ever had. Lastly, but most importantly, I owe a profound gratitude to the thousands of constituents in south Dublin city who honoured me with their vote and the great privilege of representing them here. It has been deeply humbling to receive a mandate from my peers in the pursuit of a better country, guided by the principles of social justice and progressive politics. I take up the mantle with deep reverence for the trust they have placed in me and the encouragement they have given me since I have been elected.

Earlier this month, the Business Post published the work of a research team in UCD led by Professor Aidan Regan revealing what they called a $1 trillion tax mirage, which they said was a conservative estimate by the way, in the domiciling of intellectual property assets by multinationals in Ireland to seek to exploit preferential tax rates on their global profits. To put this in context, it is altogether likely that the value of this multinational intellectual property exceeds the entire net wealth of Irish households, most recently estimated at approximately €1.23 trillion, including approximately €900 billion in housing assets. The authors of the report called it a paper-based prosperity which was fundamentally distortive to the Irish economy. I do not think anyone who has looked seriously at the tax mirage identified in this investigation can feel anything other than a horrifying sense of déjà vu. It appears that the accusation of Nobel laureate Professor Paul Krugman of "leprechaun economics" with regard to Fine Gael in the 2010s still applies.

For the person sitting at home and perhaps watching these proceedings, what does this fundamental distortion mean? What is the actual danger to the Irish economy and society? The same report identified this tax mirage as the main driving force in the rise in corporate tax receipts in the post-crash period. It was a rise from approximately €4 billion in 2013 to €21.4 billion in 2022 or from 4% of the State's budget to approximately one fifth. To put that in further context, given that Revenue has estimated that half of our corporate taxes are attributable to about ten companies, at the stroke of a pen in one foreign boardroom the State's coffers could lose approximately €1 billion. Such a loss of income to the State would be serious. One billion euro is about the size of our entire climate action budget or the annual capital expenditure of the HSE. That is just one boardroom. If all the multinational companies, say at the instigation of a US Administration, were to restructure their IP holdings, the damage could be in the tens of billions of euro. To put that in context, the total reduction in real voted Government expenditure in the middle of the financial crisis from peak to trough over multiple years was €10 billion, and I have not even spoken about tariffs.

Will the Minister of State recognise this existential threat to our financial viability and economy? Will he tell the House what the Government is planning to do to mitigate or manage this incredible concentration of risk in the public finances?

Robert Troy (Longford-Westmeath, Fianna Fail)
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I congratulate Deputy Hayes on making his maiden speech in the Dáil. I did not expect to be saying that at this stage. However, I congratulate him and his supporters who join him today.

As a small open globalised economy that is home to substantial levels of foreign direct investment, elevated levels of intellectual property, and by extension capital allowances associated with that intellectual property, are inevitable. The development, enhancement and exploitation of this intellectual property in Ireland forms a key part of the activities of multinational enterprises in Ireland and especially so in the IT and pharmaceutical sectors. Capital allowances associated with such activity are an ordinary part of any corporation tax system.

The OECD Base Erosion and Profit Shifting, BEPS, project introduced rules to better align substance and intellectual property. As a result, Ireland has seen a significant increase in onshoring of intellectual property in recent years, as multinational enterprises aligned intellectual property previously held offshore with the substantive economic activities that take place here, including the hundreds of thousands of jobs in these sectors in Ireland. Ireland was not the only country to benefit from intellectual property onshoring since the BEPS actions were agreed in 2015. Groups also onshored intellectual property to the US and to other jurisdictions worldwide where they have located substantial operations.

Recent articles highlight the exposure for the Irish economy of the recent onshorings, not least the vulnerabilities and concentration of risks associated with our corporate tax receipts. This Government and successive Ministers for Finance have been cognisant of these risks. While these revenues are welcome, they may well be transitory and cannot be relied on to fund ongoing spending commitments, which the Government has recognised through the establishment of two long-term funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. It is important that we continue to support the establishment and growth of domestic businesses to improve the resilience of our corporate tax revenues.

Ireland's corporate tax policy, and broader industrial strategy, has consistently focused on attracting real and substantive investment that brings jobs and real activity to Ireland. The elevated level of intellectual property in lreland is a natural outcome of having the substantial operations of many of the world’s leading multinational companies with investments here. This investment creates real and substantive employment and economic activity in the State. The IDA has indicated that employment by its client companies is in excess of 300,000 people, with more than 110,000 people employed in the information and communications services sector and more than 109,000 in modern manufacturing alone. This demonstrates the real economic activity taking place which is underpinned by the elevated levels of intellectual property which is exploited, developed and enhanced through those Irish entities. Ireland has fully implemented agreed new international tax standards, including transposition of the anti-tax avoidance directives, implementation of the BEPS action plan measures, and implementation of the OECD Pillar Two minimum tax agreement. Ireland's tax rules are in line with international norms.

We have been, and continue to be, an attractive location for foreign direct investment as evidenced by the good jobs provided by multinational enterprises in the State. Tax is only one element of this story, with other factors such as: a young, educated workforce; political stability; a common law legal system; access to the EU market; ease of doing business; tax certainty; and pro-business regulation also being key features.

Eoin Hayes (Dublin Bay South, Social Democrats)
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The Minister of State referenced a lot about substance and substantive positions and I am quite disappointed with that reply. I am not talking about BEPS agreements or Pillar Two or the OECD agreements. I am talking about intellectual property and the legal architecture that underpins it.

As far as I can tell, on the record of this House, this is the first time this report and the risks it highlighted - a potentially catastrophic decline in the State's resources - are being discussed. There is something deeply problematic about that. A few weeks ago Pat Leahy in The Irish Times quoted a Government official saying that there is no sense that the political system understands the danger we are in. If we need any proof of that, look no further. I am quite confused by the Government's position. On one hand, it projects an image of a prudent steward of the State's coffers, saying that corporate tax receipts will come down, but in the next breath, it dismisses concerns, regarding the change in exposure in IP holdings, saying the substantial operations, as the Minister of State just said, are located here. Which is it? Does the Minister of State actually know? In the Apple case, the Government argued the opposite. GNI* was instituted because GDP does not reflect reality.

We are not the only country, but we are perhaps the most significant country to be taking advantage of these kinds of legal structures. Notably, the Government's Central Statistics Office underestimated corporate tangible assets by one third less than this report. Can the Minister of State now give the public assurances the Government is taking this seriously and that it will act expeditiously, even if he does not have the full information?

That brings me to a broader point and question on the Irish economy. It is not simply a matter of rainy day funds. As a political system and as a country, we need to recognise that the tariff threats from the Trump Administration are an emergent feature of a shifting global trend in trade relations and the world economy. We need to reinvent industrial policy, making strategic investments that will allow for a less turbulent outlook. We need to invest in indigenous businesses and see a step change in State capacity and economic interventions. Only then, will we have the stable public finances and resilient economy and society the citizens of this Republic deserve.

Robert Troy (Longford-Westmeath, Fianna Fail)
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I find it somewhat bizarre that the Deputy is critical that this is the first time this is being raised in the Dáil when he has been here six months himself and this is the first time he spoke.

Jennifer Whitmore (Wicklow, Social Democrats)
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That is low, Minister of State.

Gary Gannon (Dublin Central, Social Democrats)
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He made more sense than the Minister of State after six months.

Robert Troy (Longford-Westmeath, Fianna Fail)
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Regardless, as I mentioned in my opening statement, capital allowances for intellectual property are a normal part of any tax system. The tax system provides relief in the form of capital allowances against trading income for capital expenditure incurred on the provision of intangible assets for the purposes of trade, both acquired and internally developed. IP allowances may only be deducted from income generated by those assets and a cap applies. A maximum of 80% of relevant profits may be offset by capital allowances in any year, which is below the EU average of almost 82%. Intellectual property is an important aspect of any modern multinational enterprise, but especially in the IT and pharmaceutical sectors, as the Deputy is no doubt aware.

Recent years have seen a substantial period of reform through the OECD BEPS programme which has resulted in real changes to global multinational activities, with firms moving away from locations with little substance to key centres in their value chains including Ireland, as activity in tax havens is wound down. Ireland has continued to implement many reforms to our tax systems in recent years, including the introduction of the EU anti-tax avoidance directive and defensive measures on outbound payments and we are fully compliant with the OECD standards of transparency and exchange of information about tax measures. Ireland has been to the forefront in implementing the OECD international tax agreement which seeks to address the tax challenges arising from the digitisation of the economy. Ireland has implemented the agreed OECD Pillar Two minimum effective taxation rate of 15% and we remain deeply engaged in the ongoing work to finalise Pillar One of the agreement. Our long-standing position remains that the international tax system needs to keep pace with how business is now conducted globally.

Verona Murphy (Wexford, Independent)
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Before I move to the next Topical Issue, I welcome members of the Garda Síochána Retired Members Association from Donegal who are here in abundance at the behest of our former Minister, Deputy McConalogue. I welcome everybody here today.