Michael McGrath (Cork South Central, Fianna Fail)
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70. To ask the Minister for Finance the status of discussions with the Brazilian authorities in relation to their decision to designate Ireland as a tax haven; his views on the implications of the decision for Irish businesses; and if he will make a statement on the matter. [39236/16]

Michael Noonan (Limerick City, Fine Gael)
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I was surprised and disappointed to learn in September that the Brazilian Federal Revenue Service had, without warning, added Ireland to Brazil's tax black list.  Being included on the list has a number of negative tax consequences including greater Brazilian taxation on flows of income from Brazil to Ireland.

A formal request for Ireland to be removed from the Brazilian list was submitted by Ireland to the Brazilian Federal Revenue Service on 27 September. This request also sought for the listing to be suspended to allow technical discussions to take place between officials.  This request remained under consideration by the Brazilian Federal Revenue Service until we received a response on 17 November. 

While the request was still under consideration, the Brazilian Federal Revenue Service made some changes to the operation of the listing. These changes were designed to remove the aviation sector from the scope of taxes imposed as a result of the listing.  This change means that withholding taxes are not included on the payment of aircraft lease rentals from Brazilian airlines to Irish aircraft leasing companies.

Unfortunately, the reply from the Brazilian Federal Revenue Service on 17 November rejected our request for the listing to be suspended.   Following further follow up discussions, the Brazilian Federal Revenue Service have agreed to meet a technical delegation from the Department of Finance and the Revenue Commissioners to discuss this issue.  Our Ambassador in Brazil is now working on scheduling this meeting as soon as possible.

The response received from the Brazilian Federal Revenue Service makes clear that Ireland has been included on the list because our statutory rate of corporation tax is below 17% which is the benchmark set under Brazilian law.  In our formal submission to Brazil we highlighted that Ireland also has a 25% corporation tax rate on passive income and a 33% rate on chargeable gains. We also stressed that the 12.5% rate has been settled policy in Ireland since 2003.  Ireland's corporation tax take has also typically been very close to the EU and OECD averages both in terms of corporate tax as a percentage of GDP and in terms corporate tax as a percentage of total tax revenue.  We believe it is inappropriate to include Ireland on a black list simply because we apply a low tax rate to a wide tax base which is fully in line with recommended OECD best practice.  We remain hopeful that discussions between Brazilian Federal Revenue Service and Irish officials will enable us to fully explain our corporate tax system and hopefully see Ireland removed from the Brazilian list.

I should also add that the response received from Brazil on 17 November makes clear that Brazil does not consider Ireland to be a tax haven.  I strongly reject any allegations that we are a tax haven. Ireland does not meet any of the international standards for being considered a tax haven.  Ireland is fully compliant with all international best practices in the areas of tax transparency and exchange of information.  Ireland's corporate tax policies are designed to attract real and substantive operations to Ireland.  Ireland has not been and will never will be a brass-plate location.  We only have and want real substantive FDI, the kind that brings real jobs and investment into Ireland.  

Ireland is an active participant in global work to reform the international corporate tax system.  We have implemented Country by Country Reporting, agreed the Anti-Tax Avoidance Directive and are working towards the implementation of the remaining OECD BEPS recommendations both domestically and internationally. On Budget Day, I published an Update on Ireland's International Tax Strategy which highlights our continuing efforts in this regard.