Finance Bill ensures firms are resident for tax

The removal of a hugely controversial piece of tax legislation was outlined in the latest Finance Bill.

“Section 38 amends section 23A of the Taxes Consolidation Act 1997 to ensure that an Irish incorporated company cannot be ‘stateless’ in terms of its place of tax residence, as a result of a mismatch between Ireland’s company residence rules and those of a treaty partner country.”

Multinational companies were able to register entities in this country without making them tax resident. This was a vital component of a complex tax avoidance mechanism known as the “double Irish”. It came under huge criticism in the wake of US Senate hearings last June into the tax affairs of Apple.

The US tech giant had reduced its effective tax rate to roughly 2% by routing billions of dollars of royalty and intellectual revenue through these Irish entities to companies based in Bermuda that had a zero tax rate.

“As flagged in the budget speech, the concept of a ‘stateless company’ has effectively been brought to an end. It is a welcome development as it shows Ireland is committed to playing its part in global initiatives to eliminate certain tax anomalies,” said Peter Vale, a tax partner at consultancy firm Grant Thornton.

“In practice, the change is unlikely to impact on the tax position of the large multinationals operating in Ireland and will not yield additional tax revenues for the Exchequer. I also think it is unlikely to represent the thin edge of the wedge in terms of heralding further changes to the Irish tax system and thus should not create an undue amount of uncertainty amongst international investors.”

Meanwhile, officials who access information from taxpayers on behalf of Revenue which is not relevant to the official’s work will be in breach of confidentiality provisions.

Following recent concerns, the Finance Act will introduce the move to ensure that “external service providers” who may be employed by Revenue to carry out work are subject to the same confidentially rules as Revenue officers.

The Finance Bill also provides for the Garda Reserve’s €1,000 annual payment to be tax-free, while the controversial measure to replace the one-parent family tax credit with the “single person child carer credit” is likely to face amendments in the Dáil.

It means that from January 2014, if the parents of a child live apart, only one parent, the “primary carer”, can avail of the tax credit. Previously, both parents could avail of it.

The result of the changes mean the parent deemed to be the “non-principal carer” who currently claims the credit could end up paying an extra €2,490 extra in income tax a year.