Michael McGrath (Cork South Central, Fianna Fail)
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98. To ask the Minister for Finance the details on the OECD tax treaty; the multilateral instrument signed in June 2017; the details on its potential implications for taxpayers; the number of tax treaties in negotiation at EU or OECD level; the number of tax treaties currently in negotiation with other countries; the process followed to ensure that tax treaties are in Ireland's long-term best interests; the detail of engagement with outside groups; and if he will make a statement on the matter. [30697/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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Ireland signed the Multilateral Instrument (commonly referred as to the MLI) on behalf of Ireland on June 7. Ireland was one of 76 countries that participated in the signing ceremony in Paris with 67 of those countries signing the MLI.

The purpose of the MLI is to enable existing tax treaties to be modified in order to implement the tax treaty-related measures that were agreed as part of the OECD Base Erosion and Profit Shifting (BEPS) project.  The measures comprise minimum standards, to which all countries participating in the BEPS project committed, as well as optional best practices.  At the signing ceremony in June, Ireland indicated its provisional approach to the options provided for in the MLI.  My Department published a summary of this provisional approach which is available on the Department of Finance website. The full detail of Ireland's provisional approach has been published by the OECD, along with the provisional approach of each signatory country.  Ireland will have to confirm its final binding approach to the options in the MLI when it is ratified in Irish law.  It is intended that the first steps to ratify the Instrument would be taken as soon as possible with a view to completing the ratification process during 2018.

Ireland has 72 tax treaties in effect and the MLI will enable the majority of these treaties to be updated to ensure that they are compliant with the BEPS recommendations, without the need for separate bilateral negotiations for each treaty concerned.  However, no treaty will be changed until both Ireland and the relevant treaty partner have each fully ratified the MLI under domestic law.  Also, a provision of a treaty cannot be changed unless both treaty partners agree to the amendment by making matching MLI choices in relation to the provision.  Because of this, the potential implications will vary from treaty to treaty.  However, the principal MLI changes include:

- introducing general anti-avoidance clauses into tax treaties;

- preventing differences in countries’ tax laws being exploited by hybrid mismatch arrangements;

- new rules on how much presence a company must have in a country to create a taxable presence there; and

- allowing a taxpayer to seek mandatory binding arbitration if the two countries that are parties to a treaty cannot agree on how the treaty should be applied in the taxpayer’s particular case. 

Some 50 of Ireland’s treaty partners signed the MLI on June 7 in Paris.  Approximately 10 treaty partners are not yet members of the group that developed the MLI.  Also, a small number of Ireland’s treaty partners have expressed a preference to implement the anti-BEPS minimum standards by way of bilateral protocol, instead of through the MLI.  I am informed by Revenue that negotiations are ongoing with two OECD countries that are co-signatories of the MLI, to agree protocols to implement MLI measures for existing treaties, and that this number will rise if other treaty partners’ domestic ratification procedures require the agreement of a protocol.

Tax treaties are bilateral agreements which are negotiated between individual countries rather than being negotiated at OECD or EU level.  Renegotiations of existing treaties with three OECD countries are underway. These general renegotiations may result in the implementation of anti-BEPS measures bilaterally, instead of through the MLI.

With regard to the extension of Ireland’s tax treaty network, a first round of negotiations has been held in 2017 with one European country and efforts to initiate negotiations with other countries are ongoing. Two other negotiations with non-European or OECD countries are at a very advanced stage.  Additionally, Government approval has previously been granted to sign three additional new treaties which have not yet been signed. Finally, a new treaty with Kazakhstan was signed on 26 April 2017 but has not yet been ratified by the Oireachtas.

The basis for Ireland’s treaty negotiations is the Irish model treaty, which is based on the OECD model treaty but also includes provisions of particular relevance to Ireland’s interests.  This Irish model is updated as necessary. The general approach to treaty negotiations is to work in a spirit of cooperation to build a treaty that is fair, workable in practice, and beneficial to both sides.  Treaty negotiations are confidential and this limits the scope for the engagement of outside groups in the process. Notwithstanding this general limitation on engagement with outside groups, the publication of a new US Model Treaty enabled my Department to undertake a consultation process in 2016 in advance of the ongoing renegotiation of Ireland’s tax treaty with the United States.