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Financial Resolution No. 4 - Corporation Tax: Motion (Continued)

Tuesday, 13 October 2020

Dáil Éireann Debate
Vol. 999 No. 2

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(Speaker Continuing)

[Deputy David Cullinane: Information on David Cullinane Zoom on David Cullinane] That could have been used to better support our hospitality sector, spend more on public housing stock or for better services in health and other areas.

It is the same with Financial Resolutions Nos. 5 and 6. They are also important measures. Over recent budgets, and again this evening, we have pointed out that the special assignee relief programme, SARP, allows high-income employees, on salaries of up to €1 million a year, to reduce their income tax bills by up to €111,000 each year. That reduces their tax rate down to 28%, while many workers on middle incomes pay tax at 40%. These types of tax relief should, therefore, be reduced.

We have seen a drip feed of measures, such as these, in the last several budgets. I welcome them and they are a welcome departure from the rhetoric we used to get from Fine Gael in recent years. It used to be a case of depicting the sort of tax avoidance measures that were in place as not existing, not being there or that we were reading too much into the situation. We were not, we have been vindicated and we welcome the Tánaiste, Deputy Varadkar, and his party having a late conversion to closing these loopholes and that they are, at least, making some effort to do so. I congratulate my colleague, Teachta Doherty, and others, who have been putting the Tánaiste and his colleagues under pressure on this issue.

An Ceann Comhairle: Information on Seán Ó Fearghaíl Zoom on Seán Ó Fearghaíl Does the Minister, Deputy O'Gorman, or the Tánaiste wish to contribute? We will hear the Tánaiste first and then the Minister, Deputy O'Gorman.

Deputy Leo Varadkar: Information on Leo Varadkar Zoom on Leo Varadkar I take it that there are no objections to Financial Resolutions Nos. 5 and 6, which are anti-tax avoidance and technical measures. The same goes for Financial Resolution No. 4, to which Deputy Cullinane referred. To avoid any confusion, this is an anti-avoidance measure and a technical measure. The Government is proposing and supports it, and it is very much in line with what we have been doing in recent years, whether that is abolishing the concept of stateless corporations or removing the double Irish. There is no conversion. In the different Governments of which I have been a member, going back to 2011, we have always sought the close tax loopholes. When clever tax lawyers find ways around our tax laws, we then find clever ways around them. Deputy Howlin can attest to that, so there is no conversion here at all. We have been doing this since 2011.

What Deputy Doherty proposed was quite different. It was an additional tax of €720 million on multinational corporations. We are not proposing that tonight. That would be a very different proposal and it is one with which I respectfully disagree. Why do I disagree with it? It is because I think we should have learned something from the past 12 years. We are experiencing the second recession in 12 years. This is a very different type of recession but one thing has been constant in these two recessions, and that is that the strength of our multinational corporations has helped Ireland recover.

The first recession concerned a banking crash and a construction and property bubble that went bust. We were lifted out of that recession by our multinational corporations, which kept employing people, exporting and paying taxes. I refer also to other traded sectors, such tourism and agri-food. The reason why our economy has only shrunk this year by about 2%, which is much less than other countries, is because of the strength of our multinational corporations, such as the technology companies, the pharmaceutical companies and the medical device companies.

Those are the companies that have been making a lot of money during this period because people have needed their services. If it was not for those companies, and the taxes they pay and the people they employ, we would be in a much worse position today. If Sinn Féin was in office, leading a Government, or if we had a Government of the left in Ireland, I have no doubt but that our country would be less attractive to those companies and that they would be elsewhere. With them would go the investment, the jobs and the taxes, and there would be less money for health, education and everything else that we found money for today.

Deputy Roderic O'Gorman: Information on Roderic O'Gorman Zoom on Roderic O'Gorman I will try to address some of the issues raised by Deputies. Following on from what the Tánaiste has said, these measures are in the context of wider reviews of corporate tax regimes and the wider process of ongoing corporate tax reform in recent years. This has been taking place internationally and at a European and OECD level. A part of those endeavours has involved an examination of capital allowance measures.

In that context, Revenue officials here conducted an informal review of the publicly-available information and data concerning tax bases in different jurisdictions, and examining, in particular, tax reliefs for intangible assets in 15 other countries. That was designed to ascertain a degree of best practice across those countries, and it identified that the Irish IP allowance regime was more restrictive in comparison with other jurisdictions in some respects. Regarding the operation of the balancing charge mechanism, however, which we are talking about this evening, it was identified that the Irish regime in this regard was less restrictive than most, but not all, of the comparator countries. The main reason for that was that, at present, where an intangible asset is disposed of after more than five years, it is then outside the scope of a balancing charge.

The Minister is moving to address that situation through this resolution and to ensure that Ireland's IP allowances are consistent with international best practice. As a result, section 288 of the Taxes Consolidation Act 1997 is to be amended to provide that all assets acquired after tonight will be fully within the scope of the balancing charge rules. The measure we are introducing, therefore, will bring certain disposals into the charge to tax, so this is broadening out that applicability.

Deputy Paul Murphy asked if this will lead to a significant increase in revenue. It is not expected that there will be, given the current profile of claims demonstrated by Revenue data. The Revenue understands that the type of intellectual property typically situated in Ireland includes items such as patents on pharmaceutical products, and the value of those types of assets declines as the patent runs out and the asset is depreciated in the company's accounts. As we are extending this measure to IP older than five years, the values of those patents probably will have declined at this stage and that is why it is understood that there will not be a significant financial revenue windfall from this measure. The primary reason this measure is being introduced, however, is to ensure that our tax regime for intellectual property, as part of our broader tax regime, will remain competitive, legitimate and sustainable.

An Ceann Comhairle: Information on Seán Ó Fearghaíl Zoom on Seán Ó Fearghaíl Deputies Paul Murphy and Cullinane are indicating again. I take it they want to make additional points. I call Deputy Paul Murphy.

Deputy Paul Murphy: Information on Paul Murphy Zoom on Paul Murphy Yes, but only briefly. I thank the Minister, Deputy O'Gorman, for that explanation, which satisfies me in respect of Financial Resolution No. 4.

I will make a brief point in response to what the Tánaiste has said. I refer to the idea that loopholes are just found by very smart lawyers and then are very quickly closed by the Government, as it moves to stop any kind of tax avoidance. That is patently ridiculous and is not what happens. That is like the Cayman Islands claiming to have slipped and fallen, and then accidentally having become a tax haven.

The loopholes are created. We have a budget today which has measures extending a very definite loophole, namely, the knowledge development box. That is what that initiative is; it is a loophole for corporations to avoid and minimise their taxation. That is a fact, and the double Irish was similarly created. It is clearly part of the unfortunate developmental model being pursued by Fianna Fáil and Fine Gael to position Ireland in a particular role in a chain of global tax avoidance. It is not the Cayman Islands, it is something different, but Ireland very definitely plays a role in major multinational corporations minimising, to an extreme degree, the amount of tax that they pay. In the process, those corporations are robbing not just the people in this country but people around the world, including those in some of the poorest countries on the planet.

That is not an accident but a conscious policy being pursued by the Government. The Tánaiste is correct in stating that that is a policy that a Government of the left would bring to an end. Such a Government would also insist, at a minimum, that the corporations pay the taxes that they are supposed to and, yes, it would increase the amount of tax paid by those multinational corporations, rather than hitting ordinary people. The Tánaiste thinks that is a political choice that just cannot be made and that is crazy. He thinks it is, however, okay to cut the PUP. He does not think there is a problem with doing that, but he does think that it is impossible to go after the corporations and the massive profits that they make.

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