Leo Varadkar (Dublin West, Fine Gael)
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Question 180: To ask the Minister for Finance his views on replacing double taxation agreements with a system of unilateral tax credits; and if he will make a statement on the matter. [22531/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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Ireland has generous provisions in its tax code for granting relief from double taxation in respect of income of Irish residents that has suffered tax in a foreign country. Generally this allows for foreign tax paid by an Irish resident taxpayer to be credited against the Irish tax on the same income. Normally credit relief is only granted in respect of tax suffered in countries with which Ireland has concluded a double taxation treaty. The relief is granted based on the elimination of double taxation article in the relevant treaty.

In certain cases Ireland has gone further and provided unilateral credit for foreign tax paid in countries for which there is not a double taxation treaty in place. This is provided for in relation to certain foreign dividends and interest of Irish companies. There are also similar provisions covering foreign branch profits of Irish companies.

Granting credit unilaterally in respect of income from countries with which Ireland does not have a double taxation treaty in place would have Exchequer implications and this is a matter that would need to be considered.

More importantly, the granting unilaterally of benefits that are normally only given on a reciprocal basis in double taxation treaties may impact on the priority that non-treaty countries give to requests from Ireland to enter into negotiations for a double taxation treaty.