• Tax Yield (Continued)
• Tax Code

Deputy Richard Boyd Barrett:   Either the Minister is not examining the issue seriously or he is being disingenuous. I cited an example of one of the country's most profitable companies paying a corporation tax rate of 0.5%. It was well publicised. Is it not of concern that the tax forgone to the State is approximately €90 million at a time when Ministers are considering imposing further brutal attacks on people in the coming budget?

Another set of figures show that total profits in Ireland amounted to €51 billion in 2008, but that the effective tax rate across all corporations was 10%. If the Government increased that rate to 12.5%, an extra €1.25 billion would accrue to the State. Is this not a problem that the Minister should examine? Does it not concern him that multinational corporations are getting away with murder and not even paying the derisory 12.5% corporate tax rate at a time when cruel austerity is being imposed on people who cannot afford it?

An Leas-Cheann Comhairle:   I will allow Deputy Pearse Doherty to ask a brief question, as we have gone over time.

Deputy Pearse Doherty:   Without going into the details of any company, the Minister is well aware that the "double Irish" practice exists. Companies set up secondary Irish companies, register in tax havens, base their intellectual rights there and pay a dividend from the Irish resident company to the tax haven resident company. It is not that they are paying less than 12.5%, but the companies' overall profits are being siphoned off to secondary companies that do not pay tax. They do not do this to avoid paying tax in Ireland, but to avoid paying tax in America, as the interaction between the two companies are not taxed when the profits are repatriated. The Minister, President Obama and the American Administration are well aware of this and we need to be careful so that profitable companies cannot avail of tax loopholes of which the Department is well aware and to which it has turned a blind eye. What contact has the Minister had with the American Administration? Prior to the last presidential election, there was discussion of clamping down on this practice. Changing the American tax code would make attracting American multinationals to Ireland difficult. The Minister needs to tread carefully. While it may be the case that companies are paying tax of 12.5% on the profits registered in Ireland, the Irish tax code allows the "double Irish" practice to exist.

Deputy Michael Noonan:   My understanding of what Deputy Boyd Barrett describe as the "double Irish" is that while it exists, it cannot be remediated by changes in Irish tax law. Our law applies a rate of 12.5% to the profits of corporations in Ireland. If the situation is to be changed, it is other countries' tax laws that need to be amended, in particular American laws, but it is not within my remit to do so.

Deputy Richard Boyd Barrett:   What about raising the effective tax rate?

Deputy Michael Noonan:   The Deputy is on his own. All of the other parties in the House agree on the 12.5% rate.

Tax Code

 7. Deputy Mick Wallace   asked the Minister for Finance   his views on a memorandum prepared for the US Senate Permanent Subcommittee on Investigations which states that Microsoft used Irish subsidiaries to reduce its US tax bill by $2.43 billion in 2011; and if he will make a statement on the matter. [42321/12]

Deputy Michael Noonan:   I am precluded from discussing the tax affairs of any particular individual or company, nor can I discuss the tax administration regimes established in other jurisdictions. However, I advise the Deputy in general terms that a recently published report of the United States Senate Permanent Subcommittee on Investigations of their hearings on offshore profit shifting and the US tax code gave prominence to the tax arrangements of two US multinational corporations, both of which have operations in Ireland. The report finds that US multinational corporations are able to reduce their tax liabilities significantly by legal international tax planning arrangements - there was no allegation of fraud or evasion - and makes recommendations on how US tax law could be improved.


Ireland is rightly not mentioned as a tax haven in the report. The international community does not regard Ireland as a tax haven. Ireland has a comprehensive taxation system covering income, capital and indirect taxes. Tax treaties with the United States and many other countries confirm our international standing. The January 2011 global forum peer review report on Ireland's legal and regulatory framework for transparency and exchange of information found that Ireland had an effective system for the exchange of information in tax matters and was fully compliant with OECD standards.


Ireland is bound by the same rules on state aid, the code of conduct on business taxation and rulings of the European Court of Justice as all EU member states. Ireland does not support harmful tax competition. Ireland continues to participate fully in the EU code of conduct group, which addresses harmful tax competition, and in the OECD forum on harmful tax practices.

Deputy Mick Wallace:   This is almost the same subject matter as that of the last question. The Minister is probably familiar with research conducted by Mr. Colm Keena. In The Irish Times last week, he showed that Microsoft reduced its US tax bill by more than €1.8 billion in 2011 by using Irish subsidiaries. The company has two branches in this country. Microsoft Ireland Operations Limited, which employs 650 people, showed a profit of $2.2 billion and paid an effective tax rate of 7.3%, amounting to $3.3 million per employee. Microsoft Ireland Research, which has 390 employees in Ireland, had a profit of $4.3 billion on which it paid an effective tax rate of 7.2%, amounting to $11 million per employee. According to Dr. Sheila Killian of Limerick, "[I]t is tempting for multinational firms which have a subsidiary there, and another in a high-tax country to use aggressive transfer pricing practices to shift income into Ireland, where it will face a lower rate of tax". THis makes Ireland a tax haven.


Problems are coming down the tracks. I do not know whether the Minister has time for bedtime reading, but a new book, entitled The Betrayal of the American Dream, makes for powerful reading. The situation will not stay the same. America is running into serious problems because of its tax laws. The Minister is correct, in that America will need to change its laws to stop significant tax avoidance. He pointed out that much of what is involved is lawful. I will quote from the book-----

An Leas-Cheann Comhairle:   No, we cannot allow quotes. I will revert to the Deputy.

Deputy Michael Noonan:   This is undoubtedly an interesting topic, but both questions are based on a US report on US tax law. It is not a report on Irish tax law. The report notes that there is nothing illegal about this tax planning arrangement and does not identify any failing in Ireland's tax code. This kind of taxation arrangement is run from the US code, not the Irish code, and it is not for us to remediate. We cannot. It is America's tax code that allows for this tax planning.

It is a complicated practice, as everyone knows. For example, the transfer pricing rules of America's Internal Revenue Service, IRS, as well as the rules preventing the deferral of US tax and royalty payments and certain other incomes are relevant to non-US subsidiaries of US multinationals undertaking to share the cost of US research and development. This ensures that highly valuable intangible property is partly owned outside the US. Cost saving arrangements in respect of the development of new products typically enable non-US subsidiaries to sell the new products in non-US markets without triggering immediate charges to US tax. US tax on profits of foreign subsidiaries with such arrangements is deferred indefinitely until the profits are repatriated by dividends or otherwise to the US parent company. That is a US arrangement, not an Irish one.

Our arrangement is transparent. We have a low corporation tax rate to which Fianna Fáil, Fine Gael, Sinn Féin and the Labour Party subscribe. The 12.5% rate is an incentive to attract inward investment. It works. However, we are not operating a tax haven. No one has ever suggested that we are.

Deputy Richard Boyd Barrett:   I suggested it.

Deputy Michael Noonan:   We are a respectable, tax compliant country with a transparent arrangement. It is a part of public policy to have a low rate.

An Leas-Cheann Comhairle:   Deputy Wallace is next, although I nearly called him "Minister".

Deputy Mick Wallace:   The book to which I referred reads: "... the ruling class is defined by its ability to move money beyond the reach of government supervision. This has been accomplished in various ways, but the most important is arguably the establishment of a belief that government has no business in business". We need to change how the world works. The Minister believes that, as with the financial transaction tax, we cannot make a change unless the British do so as well.