OECD: Ditching ‘double Irish’ a smart move

The OECD has hailed the Government’s decision to abolish the controversial ‘double Irish’ tax avoidance programme as "a very smart move" and said it had no concerns that it would take six years to fully phase out the scheme.

The international economic think-tank has also thrown its initial support behind the Government’s so-called ‘knowledge box’ initiative, aimed at attracting technology and intellectual property developers here in return for a lower corporate tax rate.

Speaking yesterday after the close of the two-day OECD Forum on Tax Administration (FTA) meeting at Dublin Castle, Pascal Saint-Amans, head of the organisation’s centre for tax policy and administration, noted that the BEPS (base erosion and profit sharing) programme of incoming new international tax policy changes would have “neutralised” the ‘double Irish’ anyway. However, he said the move by Finance Minister Michael Noonan to signpost its abolition in last week’s budget announcement was “a very smart move in anticipation”.

Mr Noonan said the tax device — which allows multinationals to lower their corporate tax liability by shifting income to a lower-tax country, such as Ireland — would be closed to new entrants/users from next year and would be phased out for existing users by 2020.

Mr Saint-Amans said that BEPS was about closing loopholes in the international tax framework, and that the Irish Government taking the initiative on the ‘double Irish’ question was “good news” and proves that Ireland was “fully participating” in the process. He added that the move sent “a very positive signal” to OECD partner countries and to multinational businesses.

“Multinational companies need to be competitive on a sound basis and not through tricks,” he said, while also noting that what Ireland needed more of were real jobs and investments, rather than just letterbox companies.

Mr Saint-Amans also conditionally welcomed the Government’s proposed ‘knowledge development box’ by saying that “supporting innovation through tax incentives is good”.

While the European Commission is currently looking at such schemes, in various countries to see if they breach state aid rules, Mr Saint-Amans suggested that all issues should be ironed out before the Government launches its version next year.

The Government is set to open a public consultation on the new policy and could set a tax rate of as low as 6.25% for participants in line with some European nations and lower than Britain’s 10% rate.

Even though Ireland could benefit from attracting firms from Britain through a lower tax rate, Edward Troup, the British revenue service’s tax assurance commissioner and the incoming chair of the FTA said that if the new initiative was transparent there would be no issue and it would rank simply as fair competition for investment between two countries.