Speech to the Irish Times PwC Tax Summit

20th September, 2017

[Check Against Delivery]

Good morning ladies and gentlemen, it is very nice to be here. 


I am somewhat busy these days, as you can imagine, so it is nice to get out of the office and the meetings and get to events like this.


I am a little bit sorry that I missed the earlier sessions, though you will forgive me if I say that I probably already know much of what was discussed in the session before the coffee break that was titled “Budget Wishlist from Business”.


That Budget, as you are no doubt aware, is only three weeks away and I would like to speak a little, if I may, about tax matters both domestic and international.




The international tax landscape has changed dramatically over the past few years. 


The globalisation of trade and growing digitalisation of the economy are some of the reasons why some political leaders, commentators and the public are asking whether the international tax rules are effective and fair. 


This was very much to the fore when I met with my colleagues from other EU Member States in Tallinn at the weekend.


There was much talk of the digital economy, about which I will speak more, and the need for cooperation amongst countries to ensure everyone pays their fair share.


Ireland believes this as well.


But rather than seeing this solely through a European prism, we very much favour the OECD as the appropriate forum.


For example, the OECD’s BEPS project represents the single biggest change in the global corporate tax system in living memory. 


Ireland has been to the fore in progressing this work and was among the first countries to introduce country-by-country reporting. We were also among the first cohort of countries to sign the OECD Multilateral Instrument, introducing a range of reforms to the way tax treaties work.


At EU level, Ireland is fully on board with the Directives on Administrative Cooperation and the Anti-Tax Avoidance Directive. 


We will play our part in implementing these Directives, and we worked hard to shape them in a way that is consistent with our national interests. 



From the beginning, the key aim of the OECD BEPS project has been to better align the right to tax with real economic substance and activity. 


As such, the key outcomes of the BEPS project align with Ireland’s own long-term tax strategy.


In the face of an ever evolving international tax landscape and recognising the importance that business places on certainty, it is imperative that we maintain our commitment to sustaining an attractive and stable corporation tax regime. 


This will allow us to compete legitimately and to continue to promote genuine substantive investment.




When it comes to the digital economy, work on international tax reform is continuing.


But we cannot lose sight of the fact that what happens globally will affect us domestically. 


The current debate around the digital economy is a good example of this and the discussions in Tallinn were very useful in this regard.


We await the OECD report on the digital economy, which will be published in spring 2018, and which will provide the basis for an informed international debate. 

Because, as I said to other Ministers for Finance, it would be premature to take action without considering this OECD analysis.


I do not support the recent proposal to move ahead of the OECD process through the introduction of an equalisation tax based on turnover.   


A consistent global approach is needed, as these digital companies are global in nature.


Any solution must build on a shared understanding of where value is actually created by digital business.  


And applying different rules within the EU to what is being applied globally is likely to result in double taxation and greater uncertainty.   




On a related point, I am sure you have all read about the recent comments from President Juncker regarding his suggestion that voting rules at EU level might be changed in areas such as taxation, away from unanimity, towards qualified majority voting. 


Let me be clear, the Irish Government would not favour any such change. 


Our view is that tax is a matter of Member State competence and that unanimity should remain. 


This has been a long standing approach of Ireland, and indeed many other Member States, and there is and will be no change in that policy.




But it is not just in Europe where our attention should lie. 


I understand that the US administration intends to outline further details on its tax reform measures next week. 


It is expected that the legislative debate on the proposal will then begin by the end of October. 


While we await details, we expect the proposal to include further confirmation of a reduction in the US corporate tax rate. 


Regardless of the form that any eventual US tax reform takes, global business, from the US or elsewhere, will always want to have operations in the EU, and Ireland will remain very competitive and attractive as an EU location in which to invest and from which to do business. 


Ireland’s 12.5% corporation tax rate will continue to be competitive while also offering long-term certainty to international business. 


As always, we will remain alert and responsive to any changes in the US or global tax environment.




At home, we have made important changes but recognise that our system needs to continue to evolve to meet new challenges.


In recent years, Ireland has shown an ability to introduce difficult but necessary changes to our domestic regime, whether to address the double Irish structure, stateless companies or concerns about property funds.


In making these changes we have been able to preserve the core competitiveness of our corporation tax system and provide certainty to business.


Last week, I published Mr Seamus Coffey’s Review of Ireland’s Corporate Tax Code. 


This comprehensive review presents an overall positive message for our corporate tax code. 


It includes a number of recommendations to ensure that Ireland continues to meet the highest international standards. 


We have said in the past that we are committed to the BEPS project and to its implementation. 


Therefore, key areas such as our transfer pricing regime need to be updated. 


Furthermore, under the Anti-Tax Avoidance Directive we will introduce controlled foreign company rules and rules to address hybrid mismatches. 


The Coffey Review provides us with a roadmap to make these changes and to make them in the right way and in the right timeframe. 


We remain responsive to changing demands, but recognise the value of consistency in our core principles.


I know that businesses like your own value certainty, clarity and consistency. 


The Coffey Review emphasises the importance of all these and recommends pro-active consultation to ensure better-informed policy making. 


I intend to launch this consultation process on Budget Day. 


The cornerstone of our competitive offering remains our 12.5% corporation tax rate. 


Our rate is complemented by a regime that supports innovation and encourages growth. 


We have a best-in-class R&D tax credit and the recently introduced Knowledge Development Box – or KDB- is the first patent box in the world to conform to the OECD’s tough new international standards. 

The purpose of the KDB is to encourage Irish companies to develop intellectual property and thereby engage in substantive operations that have an additional benefit the Irish economy. 


The OECD rules also allow the KDB to be made available for smaller companies in respect of assets that are patentable, but not yet patented. 


However, certain changes to IP legislation were required before we could introduce this aspect of the KDB. 


I am pleased to say that these changes have now been made by the Minister for Business, Enterprise and Innovation under the KDB (Certificate of Inventions) Act 2017, which became law in May of this year.


Of course, there are a number of other ways in which our tax system is supporting jobs and growth in the economy:


  • We have supplemented our innovation regime with measures to attract highly mobile talent through the Special Assignee Relief Programme;
  • We have expanded the Foreign Earnings Deduction which supports Irish business in accessing foreign export markets;
  • We have introduced a reduced rate of capital gains tax for entrepreneurs; and
  • We are continually expanding our Tax Treaty Network.





One of the greatest political and economic events of our lives, alas, is the British decision to leave the European Union.


Brexit is and will be a hugely significant factor when considering Ireland’s competitive position for attracting investment and jobs.


The economic impact of Brexit will depend on the future relationship between the UK and the EU, especially regarding trade, financial flows, and the movement of labour.


The UK remaining in the Customs Union and the Single Market is the most complete and secure way to protect the open border. 


Anything else will be a dilution and we will therefore continue to advocate for this. 


The Government’s position in relation to the border with Northern Ireland in the context of Brexit is very clear. 


Continued freedom of movement, absence of a ‘hard’ border, and protection of the Good Friday Agreement are key objectives for the Irish Government. 


The arrangements that will apply after Brexit will depend on the outcome of negotiations between the EU and the UK and the Government is clear that any manifestation of a hard border would have very negative consequences. 

Clearly in this regard, the closer the trading relationship between the UK and EU the better.




Transparency and fairness are also key aspects of Ireland’s corporation tax policy. 


Our regime meets the highest standards in transparency. 


Only recently, Ireland was one of three jurisdictions to be awarded the highest international rating on tax transparency and exchange of information by the OECD’s Global Forum. 


Reputation is not only important to Ireland’s standing in the world and our ability to engage with other countries in a mutually respectful way. 


Reputation is also a proxy for certainty. 


By building our tax system around policies and principles that are recognised as best practice internationally, we can provide the stability and certainty that businesses at home and abroad are crying out for.





So, the Budget.


I will have the privilege of delivering my first Budget speech as Minister for Finance in three weeks’ time. 


I am aware that the personal tax burden is often cited as a barrier to growth and to foreign direct investment. 


In Ireland we have an extremely progressive tax system. 


We have made steady progress in reducing the personal tax burden in the last three Budgets with a particular focus on low to middle income-earners. 


It is only fair that in our tax system those who earn less, pay less tax. 


However we also need a tax system that supports work and encourages innovation. 


I have said already that a personal tax system that, through a combination of USC and the level of the standard rate cut-off point, starts taking nearly half of every euro earned by the time someone is earning an average wage is not fair, is not economically efficient and is not sustainable. 


That is why I have spoken of the need to move towards a system, in an affordable and sustainable way, where only those paying at least average incomes pay the top rate of income tax.


Not only would such a change be fair, but it would concentrate resources at those on middle to lower incomes, ensuring those who need tax relief the most, get it.


I will in the coming weeks speak to my colleagues in the Government and in the wider Oireachtas about how we can move, in the spirit of consensus, towards progress in this area, while also ensuring our other commitments in terms of tax and spending, as set out in the Programme for Government and the Confidence and Supply Agreement, are met.




For over 50 years we have been successful in developing indigenous business and attracting mobile foreign direct investment which has brought both employment and substantial investment to this country. 


A competitive corporate tax system and a progressive personal tax code have been fundamental elements of our strategy for recovery.


We will continue to take the actions needed to meet the highest international standards, while offering a competitive regime that builds our economy and provides jobs for our people.


Thank you.