Introduction
I echo the Secretary General’s welcome to all those who have come for what should be a very interesting conference which we hope will spark some discussion and debate both today and into the future.
I would especially like to thank all of those who have agreed to speak including Dr Martina Lawless, Professor Steve Bond, David Bradbury, Tom Neubig, Dr Keith Walsh, Bart Kosters and officials from within my own Department. Many of these speakers have travelled from overseas to share their knowledge in the area of taxation and policy making and I am very grateful to them for making the time to be here with us today.
Last, but by no means least, I would like to thank the chairpersons for today’s three sessions, Professor Ron Davies of the UCD School of Economics, Professor Frances Ruane of the ESRI and Ann Nolan, Second Secretary of my Department.
Budgetary matters
My first objective when it came to the Budget was to give certainty – about the rate and the regime. Investors value certainty.
There’s a lot of uncertainty now, right around the world about what’s going to happen with Corporation Taxes.
There’s a whole programme being driven by the OECD, under the direction of the G20.
So all the main democracies are driving this now. And there will be change.
And people don’t know what the changes might be. But they now know what the corporate tax landscape in Ireland will look like.
And you will have noted that the main representatives of Industry welcomed the change because it gave them certainty about the Irish tax system.
Ireland’s corporation tax strategy in a nut shell is to play fair but play to win.
Ireland has a competitive corporate tax rate, which is applied to a broad base. The issue of substance and taxation is, and always will be, a core column of the Irish taxation system.
To best position Ireland’s taxation regime for a post BEPS era, I announced a number of changes to our taxation system on Budget day last week and also released a new Road Map for Ireland’s Tax Competitiveness.
This Road Map updates last year’s International Tax Strategy and contains a comprehensive package of competitive tax measures which will provide the foundations for Ireland to maintain and expand our position as a thriving hub for Foreign Direct Investment.
I also announced on Budget Day that Ireland’s company tax residence rules will be amended in the Finance Bill to provide that all companies that are incorporated in Ireland will be automatically tax resident here.
I do not claim that this change will bring an end to international tax planning. For that to happen, co-ordinated action by many countries working together will be required. But it will mean an end to the so-called ‘Double Irish’ tax structure. I would urge other countries to follow our lead in relation to the closure of these two tier structures.
In this regard I welcome the recent announcements by the US administration to counter the growing trend towards corporate inversions.
While my understanding is that such corporate inversions are entirely driven by push, rather than pull, factors – i.e. – tax issues in other jurisdictions rather than Ireland, they nevertheless can create negative perceptions. Let me be crystal clear, Ireland only wants foreign direct investment with real jobs and real substance.
The Road Map released with the Budget also sets out a number of enhancements to our regime. These included enhancements to the R&D regime, changes to our special assignee programme and increased resources for the Revenue Commissioner’s competent authority function.
I have also signalled the intention to introduce a Knowledge Development Box in Budget 2016, however, as I stated it will be necessary to ensure that such a regime meets with the standards to be agreed both by the OECD and the EU.
Commentary on today’s conference
Evidenced based policy making is central to the thinking within my Department. Last week, on Budget day, I released a comprehensive economic impact assessment of Ireland’s corporation tax policy. This consisted of a suite of 8 research papers which examine Ireland’s taxation policy in a number of different areas. The objectives of this comprehensive study were to answer three questions:
1. How important is foreign direct investment (FDI) and the foreign-owned sector to the Irish economy?
2. How important internationally is the corporation tax rate to FDI location decisions?
3. What are the current risks and opportunities for Ireland in an international tax policy context?
Presentations on many of these papers are at the heart of today’s conference and it is papers such as these which provide evidence for some of the policy decisions that have been made in Budgets past and present.
Plato once said – “A good decision is based on knowledge, not numbers” and while there are key numbers involved in our taxation system, 12.5 springs to mind, the knowledge behind these numbers is what’s important.
We have, for many years, stressed the importance of the 12.5% rate and have stood firm over its continued use. The economic evidence to support the importance of this rate, and the importance of the FDI sector to Ireland, has now been clearly laid out as part of our economic analysis. And you will hear much more about this over the course of today’s conference.
New Department of Finance / ESRI Research Tax Research Partnership
In this vein, I am delighted to be announcing today that my Department is finalising a new multi-year Joint Research Programme with the Economic and Social Research Institute on Taxation Policy and the Macro-economy.
Under this research partnership, economists in my Department will work alongside ESRI researchers on various new tax related research topics aimed at better understanding the links between the different taxation areas and economic performance.
By bringing together the knowledge and skills of the two organisations, it is expected that high-quality tax research will be produced which will provide the type of evidence needed for policy-formulation.
The then Economic Research Institute was established in 1960 by a group of senior academics and public servants, led by Dr T.K. Whitaker, at that time Secretary General of the Department of Finance. All those years ago that group of enlightened individuals identified the need for independent research to support economic policymaking in Ireland. Today we are seeking to follow in that fine tradition.
Once again, the aim is to provide the evidence base that will guide future tax policy decisions.
All of this research will be published and the individual projects will be overseen by an advisory group including independent experts.
Engagement with stakeholders, think tanks and international bodies is a key ingredient in sound policy making. In the last year alone my Department has undertaken seven separate public consultations on tax policy ranging from areas such as the spill-over of Ireland’s tax regime on developing nations to the OECD BEPS project.
Conclusion
In conclusion, I hope that I have set the scene for today’s conference and that you all enjoy the presentations which are to follow and, in keeping with the theme of open discussion, I urge you to get involved in today’s proceedings by asking questions.