Tuesday, 9 November 2021
Department of Finance
119. To ask the Minister for Finance his views on whether Ireland’s tax system is consistent with Ireland's stated commitment to equitable development and working with poorer countries to move beyond a reliance on aid given the recent revelations by an organisation (details supplied) regarding the tax avoidance activities of a company which show definitively that taxable profits are being siphoned from poorer countries such as Nepal and Ethiopia; and if he will make a statement on the matter. [45481/21]
159. To ask the Minister for Finance the plans his Department has to address the apparent tax avoidance identified in research by an organisation (details supplied); and if he will make a statement on the matter. [54116/21]
I propose to take Questions Nos. 119 and 159 together.
As I stated previously in a prior parliamentary question 45726/21 in September.
I am aware of recent media report regarding a publication concerning the tax arrangements of an individual taxpayer. From the outset, I must state that it is not appropriate for the Minister for Finance to comment on the tax affairs of individual businesses.
I am informed by the Revenue Commissioners that Revenue uses a range of resources to identify instances of tax avoidance, which would include tax avoidance arising from the arrangements described in the Agreement between the Competent Authorities of Ireland and Malta.
Those arrangements involved an exploitation of a mismatch of Irish and Maltese rules in relation to company residence and domicile, which could have led to income falling out of charge in Ireland and in Malta, resulting in double non-taxation of the income concerned. I cannot comment on the arrangements of any specific taxpayer. However, arrangements as described in the Christian Aid report are not arrangements that involve a mismatch of residence and domicile rules that would lead to double non-taxation, through amounts falling out of charge in both Ireland in Malta.
The purpose of the Ireland-Malta Competent Authority Agreement was to deter the arrangements described in the Agreement. The Christian Aid report appears to confirm that the Agreement was effective in achieving that purpose— and I am informed by the Revenue Commissioners that they have not identified information that would suggest otherwise. As regards those arrangements or any other aggressive tax planning, I have repeatedly stated that I will not hesitate to propose legislation to address tax avoidance, where it may not be possible to address arrangements within the existing code. The Revenue Commissioners liaise with my Department on that basis, in relation to potential loopholes they identify.
The Revenue Commissioners cannot comment directly or indirectly on the arrangements of a specific taxpayer. I am informed by the Revenue Commissioners – as a general statement and without their reference to, or implication in respect of, any specific case – that they do not provide confirmations or opinions to taxpayers on matters in respect of which they suspect there may be a tax avoidance purpose.
Revenue is strongly committed to identifying and challenging tax avoidance, including schemes that would seek to rely on Ireland’s Double Taxation Agreements. Revenue has reviewed Ireland’s Double Taxation Agreement (DTA) network in relation to the possibility of arrangements, similar to those addressed by the Ireland-Malta Competent Authority Agreement, being implemented using a different DTA. Specifically, Revenue has considered Ireland’s DTA with the United Arab Emirates (UAE), which has been cited in that regard.
I am further informed by the Revenue Commissioners that, in the absence of a generally-applicable corporate tax in the UAE, the UAE DTA contains provisions designed to prevent companies from qualifying as residents of the UAE for the purposes of the DTA. While Revenue will remain vigilant for indications of avoidance, they consider that DTA has been designed to prevent such possible use and that the risk of implementation of arrangements, similar to those addressed in the Competent Authority Agreement with Malta, is low in relation to the UAE DTA and other DTAs designed for restricted application.
For my part, I have repeatedly demonstrated that I am committed to taking action to ensure the Irish tax code is in line with new and emerging international tax standards as agreed globally. The January 2021 Update to Ireland’s Corporation Tax Roadmap highlights the actions that have already been taken and will continue to be taken in this process of corporation tax reform.
In this respect, it is important to remember that in recent Finance Acts, the Oireachtas has;
- substantially progressed transposition of the Anti-Tax Avoidance Directives through the introduction of Controlled Foreign Company rules, and anti-hybrid rules;
- introduced defensive measures against listed jurisdictions through enhanced Controlled Foreign Company Rules;
- updated transfer pricing rules;
- introduced legislation for OECD BEPS measures on mandatory disclosure rules; and
- substantially widened the scope of the Exit Tax regime — with the result that, on the migration of a company from Ireland to another country of residence, the increase in the value of assets to the date of the company’s departure will be chargeable to Irish tax.
It should also be recognised that Ireland has a longstanding General Anti-Avoidance Rule, which goes beyond the standard required in the EU Anti-Tax Avoidance Directives.
Further, in the Finance Bill 2021, we will complete the transposition of the Anti-Tax Avoidance Directives, with the introduction of interest limitation rules and anti-reverse hybrid rules. It is intended that these rules will take effect from 1 January 2022.
This reform is not complete. As set out in the update to the Corporation Tax Roadmap, there are commitments over the coming years to introduce a series of measures to further reform our corporate tax code, including through the introduction of measures to apply to outbound payments, further measures in regard to listed jurisdictions, as well as publishing a tax treaty policy statement with a particular focus on developing countries.