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Companies Bill 2012: Report Stage (Continued)

Tuesday, 25 March 2014

Dáil Éireann Debate
Vol. 835 No. 1

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(Speaker Continuing)

[Deputy Peadar Tóibín: Information on Peadar Tóibín Zoom on Peadar Tóibín] The current proposals mean that a company must conduct some activity in the State. I believe this provision was established in 1998 and the idea was to stop the brass-plating of firms in Ireland. However, the Minister of State will understand that a loophole exists, which allows a company to be registered here but to be tax-resident in another state. This is where one comes to the idea of Irish-registered non-resident companies. A major worry for me is that shockingly, the Government does not have available a figure on how many such firms are in existence and one cannot manage if one cannot understand what are the figures. Tax residence is determined by where a company is managed and controlled from, and this simple amendment effectively means that a company registered in the State must also be managed and controlled in the State and must be tax resident in the State and make annual returns. If the Government is committed to dealing with the issue of tax avoidance, this is a great opportunity to so do.

It is important that Ireland does so for a number of reasons. Ireland's standing has reduced quite significantly internationally as a result of the understanding many countries have on the level of effective corporation taxes that firms pay. While the Minister of State might shrug and believe it is a matter of perspective, there are metrics and surveys to show that Ireland and the International Financial Services Centre in particular have fallen in standing as a result of the current scenario. The second important issue in this regard is that some of the details have shown that for some of these firms, effective tax rates can be between 1% and 6%. Given that most of the people for whom Members work, that is, the Irish public, pay taxes far in excess of this rate, it seems logical and fair that highly profitable firms which are registered here also would pay taxes commensurate with the level of profits they make. I ask the Minister of State to use this opportunity finally to close this loophole.

Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock At the outset, I do not propose to support these amendments. This series of amendments proposes to insert the words "managed and controlled" into sections of the Bill. When one considers it, the objective appears to be to cause all companies registered in Ireland to be tax resident in Ireland. One must think carefully about this and neither I nor the Minister, Deputy Bruton, is in a position to consider the full impact or consequences of any change to tax law because such an exercise, for the purposes of this Bill, comes within the remit and the function of the Minister for Finance. Moreover, the proposed amendments are illegal under both European Union and international law. The provisions would fall foul of the European Union law on freedom of establishment, which is a core aspect of European Union law. Compliance with this is monitored closely by the European Commission and Ireland recently has been required by the Commission to change a provision of Irish law, which requires that at least one director of an Irish company be resident in Ireland. This provision, as proposed, would go much further and effectively would require all management activities to occur within the State. This clearly would be a hindrance to cross-border trade within the European Union and would trammel significantly the ability of a company from another European Union member state to establish itself in Ireland. Furthermore, the proposal would put Ireland in breach of obligations under double taxation agreements with other countries. This is completely unprecedented and would be highly prejudicial to Irish commerce and to Ireland's reputation internationally. Consequently, for these reasons I will not be accepting these amendments.

Deputy Peadar Tóibín: Information on Peadar Tóibín Zoom on Peadar Tóibín The Minister of State observed it is under the remit of the Department of Finance to focus on this issue. He also stated this amendment could do damage to Ireland's interpretation. I do not know whether the Minister of State has been watching the same television shows or reading the same newspapers as have I, because Ireland's reputation internationally has been trammelled. While this issue may be under the remit of the Minister for Finance, it is within the remit of the Government and this amendment provides the Government with an opportunity to resolve the issue.

Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock As one Government Minister among many, we have spent considerable time over the past three years in travelling abroad and encouraging investment. I recently have returned from the mid-west of the United States, where Ireland's reputation regarding the potential for foreign direct investment is very strong. A clear message is coming from the United States of America, to name one country as an example, that there is a clear intent on the part of companies to explore the options of investing in a country like Ireland. Specific meetings have been held with specific target companies through IDA Ireland, companies have been brought out through Enterprise Ireland and no one I have met has mentioned anything about our reputation. The opposite is the case and while I would be interested to see the set of metrics to which the Deputy has access - if there are reputational issues - when it comes to a decision by a company to invest in Ireland, based on the companies that have been attracted here even over the past 24 months, it is clear there is significant interest in Ireland in respect of inward investment and creating jobs.

  Amendment put and declared lost.

Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock I move amendment No. 5:

In page 77, line 35, to delete “licensed bank” and substitute “credit institution”.

  Amendment agreed to.

Deputy Peadar Tóibín: Information on Peadar Tóibín Zoom on Peadar Tóibín I move amendment No. 6:

In page 79, line 13, after “administration” to insert “, management and control”.

  Amendment put and declared lost.

Acting Chairman (Deputy Peter Mathews): Information on Peter Mathews Zoom on Peter Mathews Amendments Nos. 7, 9 and 218 are related and may be discussed together.

Deputy Sean Sherlock: Information on Seán Sherlock Zoom on Seán Sherlock I move amendment No. 7:

In page 83, to delete lines 23 and 24 and substitute the following:
“(3) In subsection (2), “person” means, for the purposes of paragraph (b) of it, the company referred to in that paragraph.”.

The purpose of amendment No. 7 is to correct the incorrect cross-reference in subsection (3) from paragraph (b) to (a). The purpose of amendment No. 9 is clarification. Deletion of the word "it" and its replacement with "the company" makes it clearer that the company shall notify the registrar of the authorisation of a person as being entitled to bind the company in the prescribed form. The function of amendment No. 218 is to clarify to whom the notification requirement applies. Section 1081 restates section 229(1) of the 1990 Act. The obligation to notify the Stock Exchange under section 229(1) only applies where shares have been purchased either by the company that issued the shares or by a company that is that company's subsidiary.

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