Ireland wants to play fair and "play to win" in relation to international competition for inward investment, the Minister for Finance, Michael Noonan, said in his budget speech.
In a reference to recent controversy over the existence of an Apple subsidiary in Ireland that was not resident anywhere for tax purposes, Mr Noonan said it was Ireland's position that there could not be "stateless Irish companies" in terms of tax residency. He said a measure to be contained in the Finance Bill would ensure this.
The measure being proposed by Mr Noonan will address the controversy over the Irish Apple subsidiary, which was incorporated in the late 1970s, and will have little or no impact on more recently established Irish subsidiaries of global technology companies.
Earlier this year US Democrat, Senator Carl Levin, said the Irish Apple subsidiary had achieved the "holy grail" of tax avoidance by not being tax resident anywhere. He said the company had avoided huge amounts in tax as a result. The Irish government disputed evidence heard in Washington that Apple had negotiated a "special deal" with the Irish government.
The head of tax with EY Ireland, Kevin McLoughlin, said it was his understanding that the measure proposed by Mr Noonan would be very targetted. Until the proposed bill was published next week, it would be hard to know what options affected companies would have, he said.
Under current Irish tax law, Irish registered companies that are managed and controlled from other jurisdictions, are not tax resident here. Such companies, resident here but controlled and managed from offshore locations such as Bermuda and the Cayman Islands, form part of the international tax structures of major multinationals such as Google and Microsoft. Although they may pay no corporation tax, they are not "stateless" in terms of tax residency and are outside the scope of the measures proposed by Mr Noonan. A spokesman for Mr Noonan's department confirmed this was the case.
Mr Noonan said it was important for Ireland to protect not just its corporation tax rate, but also its reputation in matters of international taxation. He said Ireland wanted to be part of the solution in relation to aggressive international tax planning, which was a global issue. He said the country’s position was set out in a new tax strategy document published along with the budget.
The documents states that Ireland participates constructively in international fora in relation to tax matters, and in particular with the EU and the Organisation for Economic Co-operation and Development. The latter organisation is currently involved in a project aimed at countering what it calls tax base erosion.
An International Tax Charter in the Irish strategy statement commits Ireland to actively contribute to EU and OECD efforts to tackle harmful tax competition. The commitments include one towards the removal of any measure contained in national legislation which is found to be harmful.
The charter also says Ireland will engage contructively and respectfully with developing countries in relation to tax matters, including the promotion of so-called “country by country” reporting.
The latter is a policy whereby a multinational’s accounts would give more information as to its activities in various countries, even if the profits from those activities flowed to a headquarters company based in a country such as Ireland. There has been much debate over recent years about developing countries not receiving any corporation tax receipts from the activities of multinationals in their jurisdictions.
The strategy document says Ireland is open for business and committed to continuing to compete fairly to attract foreign direct investment.
