Neale Richmond (Fine Gael) | Oireachtas source

I welcome the Minister of State to the House to discuss this very important matter. As he is aware, in September the Brazilian tax authorities issued normative instruction 1658/2016, adding Ireland to its list of designated tax havens also known as the blacklist. The change came into effect on 1 October. Ireland joins the illustrious company of states such as Panama, Monaco and the Isle of Man on the blacklist and, needless to say, such classification is damaging to our international reputation. The category that includes Ireland has countries that have no tax, that hide banking or trade information or that have a corporate income tax rate of less than 20%. This is unwelcome news, considering the increased international scrutiny this year already as a result of the Apple tax ruling and the startling GDP results. With Brazil being one of the top ten economies in the world, this is seriously problematic for the Ireland-Brazil trading relationship and poses significant challenges to Irish exporters, particularly in the post-Brexit world.

Any transactions involving entities resident in Ireland are now subject to greater Brazilian tax regulation, including mandatory transfer pricing rules for any transaction involving goods, services and rights, even if between non-related parties; stricter thin capitalisation rules; stricter tax deductibility rules that require detailed identification of the effective beneficiary of payments made; and the fact that transactions with entities resident in countries on the blacklist are subject to increased holding taxes of 25% instead of the regular level of 15%. The ruling has particular effect on three key areas where Ireland and Irish companies in particular have a strong strategic interest, namely aircraft leasing, agriculture and insurance.

Over 60% of commercial aircraft in Brazil are leased through Ireland and the country has, rightly, developed a reputation as the international hub for aircraft leasing. This decision, if it is not reversed, will likely have a negative effect on this area. The European Union is currently preparing details of a trade deal with Brazil and the wider Mercosur region. While offering potential benefits, this deal is of particular concern to the Irish beef industry. This recent ruling will greatly undermine Ireland's negotiation stance entering these talks. The ruling is also having major effects on the insurance sector, where there are a number of Irish companies active in Brazil. They are unable to enter any new business while contracts with an automatic renewal clause can only be renewed for one more year as of the suspension date.

I am aware that the Irish ambassador to Brazil met representatives of the Brazilian revenue service to refute these allegations and seek Ireland's removal from the blacklist. A formal request for Ireland to be removed from the Brazilian list was submitted on 27 September. However, it appears there has been no official response as of yet from the Brazilian authorities to our request to be removed from this blacklist. For the reasons outlined, it is imperative this is changed as soon as possible.