Micheál Martin (Cork South Central, Fianna Fail)
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171. To ask the Minister for Finance the actions that will now be taken before the OECD makes final recommendations on digital tax. [14155/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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The OCED Task Force on the Digital Economy Interim Report marks an important step in the ongoing work being undertaken by the Inclusive Framework on BEPS since 2015 and makes a significant contribution towards our understanding of the challenges arising from the digitisation of the economy and how the international tax system should adapt to address any issues arising. 

That the OECD has been able to publish the interim report earlier than originally anticipated bodes well for the timely publication of the Final Report in 2020, and helps reassure those who are doubtful of the OECD’s ability to deliver a globally agreed sustainable evidence based outcome. 

Ireland has been a committed participant in, and strong supporter of, tax reform efforts led by the OECD through the BEPS process.  We believe any policy approaches must focus on value creation – tax should be paid where value is created, not simply where a transaction happens and this view has been endorsed by the Report.  For new business models, the idea of value creation is not as simple as it is for manufacturing companies which is why the ongoing OECD analysis is so important.  

There is a clear consensus in that further consideration is needed of the key aspects of the existing tax framework, nexus and profit allocation rules that would consider the impacts of digitalisation. 

It also  clear from the Report that there is no consensus among the members of Inclusive Framework as to the merits of, or indeed need for, any interim measures to be introduced before the outcome of this further work. The report acknowledges that such measures are likely have adverse impacts on investment and growth and risk increasing double taxation and complexity for taxpayers and tax authorities alike.  For those countries who wish to persist towards implementing interim measures in advance of an agreed global approach, the Report has identified some hazards to be avoided so that the damaging effects are mitigated in so far as it is possible to do so.  

I share the view expressed in the Report that further analysis is needed to achieve a globally agreed, evidence based solution, sustainable in the long run and focussed on aligning taxing rights with the location of real substantive value creating activity.  It has long been our position that it has been the mis-match arising from different tax systems which has facilitated aggressive tax planning and the only sustainable way to address this is for countries to cooperate globally through the OECD.

Ireland will continue to actively engage with work in the area of the digital economy at both OECD and EU level.  As you are ware, the European Commission have also last week published proposals for two Directives in this area.  We have been a strong voice in the many tax directives that have been agreed at EU level in recent years and we look forward to critically assessing and discussing the Commission’s recent proposals with all Member States.