Derek Nolan (Galway West, Labour)
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117. To ask the Minister for Finance the steps Ireland has undertaken, and will undertake, to combat transfer pricing as a measure of tax avoidance; his evaluation on the effectiveness of any such measures; his views that the Revenue Commissioners have sufficient powers in this regard; and if he will make a statement on the matter. [27110/15]

Michael Noonan (Limerick City, Fine Gael)
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The term 'transfer pricing' describes the process by which members of a group of companies set the prices at which they pass goods, services, finance and assets between each other. There has been a substantial worldwide increase in trade in recent decades, much of which now takes place within multinational groups. Transfer pricing is a normal and necessary feature of transactions within large groups of companies.

Ireland introduced transfer pricing legislation in the Finance Act 2010. The legislation provides the statutory basis to challenge an understatement of profits for tax purposes as a result of abusive transfer pricing and there is an increasing focus by the Revenue Commissioners, as for tax authorities in other countries, on ensuring that multinational profits are not understated. Ireland's transfer pricing legislation is to be interpreted in accordance with the internationally recognised OECD Transfer Pricing Guidelines.

I am informed by the Revenue Commissioners that they have adopted a phased approach to the implementation of this legislation. The initial phase focused on requesting companies to undertake comprehensive Transfer Pricing Compliance Reviews. In 2015, Revenue has commenced risk-based audits specifically examining companies' transfer pricing arrangements. While the implementation of this legislation is still in a relatively early stage and Revenue will monitor whether any changes to the legislation may be necessary to address issues that may be identified, there is no concern that Revenue has insufficient powers.

At an international level, Revenue is closely involved in the G20/OECD BEPS Action Plan project. In particular, the outcomes of actions 8, 9, 10 are likely to result in significant changes to the OECD Transfer Pricing Guidelines. Actions 8, 9 and 10 seek to better align profits with the activities that create value with the objective of ensuring that profits are taxed in the jurisdiction in which they arise. Revenue also actively participates in the EU Joint Transfer Pricing Forum ("JTPF"), which assists the European Commission on transfer pricing tax matters. One of the issues currently being considered by the JTPF is the implementation of Country by Country Reporting (CbCR) at a European level. Ireland supports the implementation of CbCR and Revenue recognises that it will be a useful tool for transfer pricing risk assessment.

On foot of a commitment contained in the Road Map for Ireland's Tax Competitiveness which was published as part of Budget 2015, Revenue has also been allocated additional resources for its Competent Authority team dealing with transfer pricing issues. The Revenue officers concerned engage with treaty-partner country tax administrations where a company resident in that treaty-partner country considers that excessive transfer pricing adjustments are being sought in relation to transactions involving an associated company resident in Ireland. The Competent Authority team is also responsible for the negotiation of bilateral Advance Pricing Agreements ("APAs") which are a form of cooperative compliance by companies that serve to reduce the risk of abusive transfer pricing.