Michael D'Arcy (Wexford, Fine Gael) | Oireachtas source

The Finance Act 2014 amended the company residence rules in section 23A of the Taxes Consolidation Act 1997, to provide that an Irish incorporated company would be regarded as resident for tax purposes in the State. In essence, the change was designed to ensure that a company could no longer use an Irish label of incorporation without being tax resident here. As the previous Minister for Finance, Deputy Noonan, clearly stated at the time, the double Irish was not part of the Irish tax offering. It was just one example of the many international tax planning arrangements designed by tax and legal advisers to take advantage of mismatches between the tax rules in two or more countries. In many cases these were designed to exploit gaps in US anti-avoidance rules. Therefore, action was taken by Ireland in the Finance Act 2014 to amend our residency rules in the absence of US tax reform.

Recent tax reforms see the US asserting its global taxing rights, and this should put an end to the type of arrangements some multinationals were previously able to use to avoid tax. Those changes, combined with the widespread implementation of the BEPS recommendations, will have a major impact on the ability of multinationals to engage in aggressive tax planning. We are already seeing evidence of US companies paying tax in the US in respect of historic profits as a result of US tax reforms.

The amendment in the Finance Act 2014 was brought into effect for new companies incorporated after 1 January 2015. To ensure that this change did not negatively impact on other related group companies which have real and substantive operations in Ireland, a transition period until end 2020 was provided to give these groups a reasonable timeframe to plan and reorganise their business model to take account of this change. The ending of the double Irish has already been provided for in legislation and I consider the issue to be dealt with. Furthermore, as I have stated, the continuing process of international tax reform is proving effective in ensuring that multinational companies are subject to tax on their global profits. Therefore, I see no need to revisit the issue at this time, and I do not accept the Senator’s recommendation.