Jim O'Callaghan (Dublin Bay South, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

370. To ask the Minister for Finance the position in relation to reports that the Irish affiliate of a company (details supplied) paid no tax in 2020 on profits of €260 billion; and if he will make a statement on the matter. [31575/21]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

It is not appropriate for me to comment on the affairs of individual taxpayers and I do not intend to do so. I am aware that reports of this nature frequently refer to companies which were not Irish tax resident and as a result they were not subject to tax in Ireland. However taxation in other jurisdictions, in particular in the United States (US) following extensive tax reforms introduced there in 2017, is likely to have applied.

The so-called “Double Irish” exploited the different definitions of corporate tax residency in Ireland and the United States (US) while taking advantage of certain provisions of US tax law that allowed for a deferral of US taxation. It involved the use of an Irish incorporated company which was not Irish tax resident under Irish corporate tax residence rules and hence not within the charge to Irish corporation tax. In this context, it should be noted that Irish corporate tax residence rules were similar to those in the OECD’s Model Tax Convention on Income and on Capital.

In the absence of US reforms to address this issue, Ireland changed our corporate tax residence rules in Finance (No. 2) Act 2013 and Finance Act 2014. Thereafter, the US introduced the Tax Cuts and Jobs Act in 2017. It is my understanding that one of the anti-avoidance measures in that Act imposes a minimum tax rate on US multinational companies. The measure is referred to as “GILTI”, short for “global intangible low-taxed income”. It ensures that US multinationals pay tax on the income earned by US companies outside the US from intangible assets such as patents, trademarks, and copyrights. The actions taken by the Irish and US governments have therefore eliminated or significantly reduced the tax benefits to multinationals of using this type of deferral structure.

It is also important to highlight that reform of the international tax rules has been an ongoing process since 2013. Ireland has very much played its part in reframing these rules for the benefit of business and citizens, and we have proactively and diligently reformed our tax code in line with the new international norms. In this context, a lot has been achieved through the OECD’s BEPS process to address aggressive tax planning. We now have far more robust international tax rules and safeguards than existed a decade ago to prevent abuse, arbitrage, base erosion and profit shifting.

Paul Murphy (Dublin South West, RISE)
Link to this: Individually | In context | Oireachtas source

371. To ask the Minister for Finance the reason the Revenue Commissioners view cohabiting couples as two individual single persons even those who have children together given that for the purpose of payments to families, the Department of Social Protection recognise cohabiting couples as a family unit (details supplied). [31576/21]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

In situations where a couple is cohabiting, rather than married or in a civil partnership, each partner is treated for the purposes of income tax as a separate and unconnected individual. Because they are treated separately for tax purposes, credits, tax bands and reliefs cannot be transferred from one partner to the other.

The basis for the current tax treatment of married couples derives from the Supreme Court decision in Murphy vs. Attorney General (1980). This decision was based on Article 41.3.1 of the Constitution where the State pledges to protect the institution of marriage. The decision held that it was contrary to the Constitution for a married couple, both of whom are working, to pay more tax than two single people living together and having the same income.

To the extent that there are differences in the tax treatment of the different categories of couples, such differences arise from the objective of dealing with different types of circumstances while at the same time respecting the constitutional requirements to protect the institution of marriage. Cohabitants do not have the same legal rights and obligations as a married couple or couple in a civil partnership which is why they are not accorded similar tax treatment to couples who have a civil status that is recognised in law. Any change in the tax treatment of cohabiting couples can only be addressed in the broader context of future social and legal policy development in relation to such couples.

I have been advised by Revenue that from a practical perspective, it would be very difficult to administer a regime for cohabitants which would be the same as that for married couples or civil partners. Married couples and civil partners have a verifiable official confirmation of their status. It would be difficult, intrusive and time-consuming to confirm declarations by individuals that they were actually cohabiting. It would also be difficult to establish when cohabitation started or ceased. There would also be legal issues with regard to ‘connected persons’. To counter tax avoidance, ‘connected persons’ are frequently defined throughout the various Tax Acts. The definitions extend to relatives and children of spouses and civil partners. This would be very difficult to prove and enforce, in respect of persons connected with a cohabiting couple where the couple has no legal recognition. There may be an advantage in tax legislation for a married couple or civil partners as regards the extended rate band and the ability to transfer credits. However, their legal status has wider consequences from a tax perspective both for themselves and persons connected with them.

Furthermore, the difference in tax treatment for married couples is not confined to Income Tax, and is also a feature of other tax heads, such as Capital Acquisitions Tax. Therefore, any changes in the tax treatment could only be considered in the broader context of the tax system and future social and legal policy development more generally, given that the legal status of married couples has wider consequences than from a tax perspective.

The arrangements and associated legislation for the purposes of payments or allowances under the remit of the Department of Social Protection in relation to married couples, civil partners and cohabiting couples are a matter for the Minister for Social Protection and her Department.