Company residence changes will not end international tax planning - Noonan

Minister for Finance Michael Noonan has said the changes to company residence rules that he is introducing as part of Budget 2014 will not "put an end to international tax planning" by large corporates but was "the right thing for Ireland to do now".

Mr Noonan was speaking at the Irish Tax Institute/Harvard Kennedy School global tax policy conference last night at Dublin Castle.

He said the changes were aimed at eliminating the “mismatch that can exist between tax treaty partners so that in certain circumstances a company can end up being stateless in terms of their place of tax residency”.

The Minister said “multilateral action from many countries working together in common purpose” was needed to put an end to this practice.

Mr Noonan said Ireland had not been asked to make the changes and the country was playing its part through the EU and the OECD base erosion and profit shifting project in addressing issues about international tax planning by multinational companies.

“I believe making this change now will provide global investors with clarity and confidence in our commitment to protect Ireland’s international standing and reputation,” he added.

Meanwhile, a leading figure on international taxation policy has defended Ireland’s right to set its own corporation tax rate and said the country does not operate an opaque system.

Matter of sovereignty
Pascal Saint-Amans, director of the Centre for Tax Policy and Administration at the Organisation for Economic Co-operation and Development (OECD), said the 12.5 per cent rate was a matter of the country's sovereignty.

Mr Saint-Amans welcomed the Government’s recent publication outlining Ireland’s international tax strategy.

Earlier this year Ireland attracted particular criticism from US law makers due to the level of tax paid out by an Irish subsidiary of Apple.

“I think Ireland is a very open economy and does play by the rules,” Mr Saint-Amans said.

In relation to a broader global culture of banking secrecy surrounding tax payments by companies, he said this had been addressed. “We have completely changed that environment. We now are at a juncture where exchange of information is the rule and bank secrecy for tax purposes is no longer acceptable. And Ireland has played a key role.

“Ireland has always been keen on transparency; there is no such thing as an opaque system in Ireland.”

Earlier this year the OECD reported to the G20 on the issue of base erosion and profit shifting, the legacy of which has been manifest in controversies involving multinationals paying little in tax despite reaping considerable profits.

'Social contract'
OECD policy is directed toward the elimination of both double taxation and double non-taxation, arising out of companies basing themselves across jurisdictions and ultimately taking advantage of a complex web of tax laws.

“I think the Irish people have made it clear that they are a sovereign people and 12.5 per cent is part of that social contract and it’s part of your sovereignty,” he said.

Meanwhile, the secretary general at the Department of Finance John Moran, outlined the Government's belief that restructuring the "hugely flawed" tax system in Ireland was key to sustaining economic growth as well as to revenue raising.

“Essentially our system was just too narrow. It wasn’t fit for purpose. It couldn’t react quickly enough to the sudden stoppage of, basically, property transactions,” he said.