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In his recent address to the Irish Tax Institute, Ireland’s Finance Minister, Paschal Donohoe, outlined views on critical tax issues such as the country’s low corporate tax rate, the impact of US tax reforms, and digital taxation.
Corporate tax rate
Donohoe said that Ireland’s 12.5 percent rate “remains a cornerstone of the [country’s] corporation tax offering and that will not be changing during my term as Minister.” He said that the policy of having a low rate and a broad base “is founded on sound economic reasoning” and that “all the evidence and analysis shows that we collect every cent of corporation tax due in this country.”
The Minister said that “there is more to Ireland’s position on corporation tax than a committed defence of our rate.”
He added: “In recent years we have been on a path of modernizing our system to meet the best international standards, while also playing our part in shaping the direction of international policy making. Ireland has played a full part in early delivery of key base erosion and profit shifting (BEPS) proposals.”
Ireland has implemented a country-by-country reporting requirement (BEPS Action 13); and its “knowledge development box” is the first OECD-compliant “patent box” in the world (BEPS Action 5). Ireland is also among the first countries to sign the OECD’s Multilateral Instrument to implement tax treaty-related BEPS measures.
Changing international tax environment
Donohoe said that the international tax environment has “never been more changeable.”
He said: “For many years the prospect of US tax reform was considered a perennial uncertainty. Even late last year, some people were telling me that it would never happen. They said that the numbers simply didn’t add up, either in Congress or on the books. But they did.”
The Minister said that the Government will ensure that Ireland “is ready and positioned to compete whatever the outcome.”
He said: “Of course, I am not ignoring the concerns that remain about how the reforms might affect some companies and their future investment decisions. Nor am I underestimating the very real concerns around WTO compliance and other international obligations. However, for many years, we have argued that companies pay their fair share of tax in Ireland, but that we cannot be held responsible for taxes that are properly due and payable elsewhere. We have found it hard to get that message through at times and our reputation has suffered – unfairly – as a result.”
The Minister added: “Now, deemed repatriation means that the US is calling in its taxes. Companies will be required to pay hundreds of billions of dollars in US tax liabilities, dating back to 1986. This is a vindication of what Ireland has been saying for many years. Though others have called on Ireland to claim these taxes, we have always been clear on what was Irish and what was not. The global collection of taxes that are not due to us is important.”
In his address, Donohoe said that “the digital tax debate has brought together many of the most important issues in international tax, such as questions about how value is created, and the underlying tension between residence and source taxation.”
The Minister said he welcomes the work being done by the OECD in this area and looks forward to the forthcoming report on digital taxation in April.
“This will provide the blueprint for how we build a global consensus in this area. The European Commission will shortly bring forward its proposals, but it will be for the member states to decide on any course of action. I will be coming to table looking for the EU to align with the OECD and to ensure European competitiveness,” he told the audience.