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Financial Resolution No. 2: Capital Gains Tax

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Financial Resolution No. 2: Capital Gains Tax

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Financial Resolution No. 2: Capital Gains Tax

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Deputy Richard Bruton

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Snippet Contents:

This is a new tax. It is the first time there will be a tax of this general nature applying to people who decide to move intellectual property but not realise those gains. This is a tax on exit, not a capital gains tax on a disposal. If a company exits, it has not realised the gain. It does not have disposal proceeds from which to pay a 33% rate. That is the reason it was thought reasonable to apply the corporation tax rate of 12.5%. We do not tax people on unrealised gains in our tax code. That is not the way in which capital gains tax applies. CGT applies when a disposal has been made and proceeds have been generated and tax is collected from those proceeds. In this case, what is being proposed is an exit tax on a company opting to move intellectual property out of the jurisdiction. It is being introduced as a new tax measure that is believed to be in accordance with the provisions of base erosion and profit shifting reports intended to help combat that sort of behaviour. It is an anti-avoidance measure.
Allow me to put this in another way. Suppose we did what the Deputies suggested and, having signalled the introduction of this tax, waited for several weeks and allowed companies to reorganise their affairs and not pay the exit tax. Would the Deputies not subsequently argue that it is a crazy approach to introduce an exit tax designed to change behaviour and the way companies move intellectual property around and then flag it and wait for people to decide whether to avoid the implications of this tax?
What the Minister is proposing here is prudent. The measure, which would be effective from tonight, will give certainty. It will not lead to gaming of the regime by people seeking to artificially move assets ahead of an anticipated rate. It is being set in a way that is reasonable, given that these are companies not realising cash from which to pay. This is an exit tax and it is being levied at the same rate as corporate tax. Other countries that have applied this exit tax are using their corporate tax rate as well.
This is a correct measure. It is part of the approach which has been outlined in Ireland's corporation tax roadmap, whereby we are progressively dealing with elements of our tax code that have been subject to aggressive tax planning by companies. Deputies are aware of the changes that have been made in respect of the double Irish, non-resident companies and so on. We are prudently and properly moving to ensure that our tax code continues to be robust, defensible and correct in the way it is applied. We do not want any suggestions that harmful tax competition is involved. This is a legitimate tax. We are taking steps in a timely way, rather than leaving it to the last moment. We are doing it in a way that is fair and reasonable and taking the precaution of moving and agreeing it tonight in order that we are not exposed to potential aggressive tax planning on this particular measure.