Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank the Senator. The Irish tax code taxes people on the profits they earn. Profits are calculated after taking account of deductions incurred wholly and exclusively in the course of the business from which the profits arise. The Irish tax code does not generally disallow a transaction with a connected person, simply because it was with a connected person, if that transaction is carried out on the same terms as a transaction with an unconnected person. Section 817C is a marked example of where the tax code does distinguish such transactions. The avoidance of this specific anti-avoidance provision can trigger the 30% tax avoidance surcharge that was introduced in the Finance Act 2014. Interest paid to a connected person is deductible only in calculating the profits of the trade where, on receipt, that interest would be part of the taxable profits of the trade of the connected person. The issue of interest deductibility is currently under review internationally; for example, in the context of the recent EU anti-tax avoidance directive. This directive, which was agreed by member states following the ECOFIN meeting of 17 June last, contains five significant corporate tax anti-avoidance measures, one of which relates to interest deductibility. Broadly, the interest limitation rule proposes that the tax deductions for interest a company can claim are limited to 30% of its earnings, subject to certain exemptions. The interest limitation rule must be implemented by member states by 1 January 2019. However, its provisions may be deferred until 2024 for countries that already have strong targeted interest rules. Therefore, I cannot accept the Senator's recommendation.