Paschal Donohoe
‘We’re committed to corporation tax reform, but 12.5pc rate is here to stay’
IRELAND has made significant changes to its corporation tax code in recent years to ensure that the right amount of tax is paid by the right companies in the right places. Often we have received little acknowledgment of this.
By eliminating stateless companies and bringing an end to the so-called ‘Double Irish’, we have closed off gaps which inadvertently allowed companies to exploit differences in global tax rules to produce very low tax rates across their global operations.
We have made great strides to ensure a fairer and more transparent tax system exists here in Ireland, for businesses of all kinds. We are one of only 23 jurisdictions in the world to be fully compliant with new international best practice by the Global Forum on Tax Transparency and Exchange of Information and were one of the first to introduce country to country reporting, making it easier to track who is, and who isn’t, paying their fair share of taxes.
Ireland has had a robust corporate tax system and our longstanding 12.5pc corporation tax rate on trading income has been a cornerstone of our economic policy; one that has contributed to our economic progress, that offers certainty to business and which we will continue to robustly defend on all fronts.
Since independence, Ireland has always been firmly committed to international co-operation. From our membership the League of Nations, which secured international recognition for the new Irish State, to our membership of organisations such as the EU and the UN, we have always played to our strengths and treated our role on the international stage with the utmost seriousness.
Now, as we approach the centenary of the end of World War I, and the beginning of the modern international system that was created in its aftermath, we find we are at a very interesting and challenging time in the ongoing work of global tax reform. Recognising our commitment to international co-operation with our EU and OECD partners, last week I published a comprehensive roadmap on Ireland’s corporation tax policy.
‘Ireland’s Corporation Tax Roadmap’ takes stock of the changing international tax environment and looks at our plans in this space. It also follows on from the publication of the independent review of the Irish corporate tax system by Dr Seamus Coffey. So what is it all about? Firstly, it demonstrates the significant steps we have taken to date on international tax reform. This includes the introduction of substantial changes into domestic law and the contributions we have made to wide-ranging reforms at EU and OECD level. We have been more than playing our part and I believe this needs to be recognised at home and abroad.
Secondly, the roadmap provides certainty about our future direction. It reaffirms 11 clear commitments for further action and provides detail on the timing of those actions. For instance, in the next two years we will introduce a range of anti-avoidance tax measures as agreed at the EU and the OECD. The forthcoming Finance Bill 2018 will see the introduction of controlled foreign company rules and the ratification of the BEPS Multiof
lateral Instrument. This will be followed by legislation on exit tax, anti-hybrid mismatch rules, transfer pricing, and mandatory disclosure rules.
It also outlines Ireland’s commitment to continuing our engagement at international forums on work to prevent aggressive tax planning by multinational companies. Ireland has been subject to criticism for how multinationals located here have exploited mismatches in the international tax framework to achieve low tax rates across their global operations. I believe that the widespread implementation of the BEPS recommendations, which Ireland is committed to, combined with US tax reform, will have a major impact on the ability of multinationals to engage in aggressive tax planning. Our focus on this is unwavering.
The huge body of work required to implement these agreements cannot be understated. Nor can the scale of the commitment required from businesses to adapt to these new rules go unrecognised. The success of international tax reform will rest on the ability of countries to translate the newly agreed standards into clear and unambiguous rules that facilitate globalised trade while ensuring that tax is paid in the right place, for all types of business models.
Ireland is actively playing our part in the ongoing work to redefine the international corporate tax landscape. The roadmap gives a clear signal of that.
The value of a stable and consistent approach to corporation tax policy, both for the business community, for the Exchequer and for the citizen has long been recognised. The cornerstone of this policy in Ireland is our long-term and continuing commitment to the 12.5pc corporation tax rate, which will not be changing. It is also complemented by a consultative approach to policy making and a focus on supporting substantial business investment in the State. This helps generate the revenue we need to support the needs of our people and society’s increasing demands.
The roadmap clearly demonstrates Ireland is committed to corporation tax reform and to encouraging third countries to commit to implementing international tax best practices. It is in all of our interest to do so in consultation with our EU and other partners and through international agreements and co-operation. Our focus is on having a tax regime that is transparent, sustainable and legitimate. And on having that recognised throughout the world.