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Government signs OECD BEPS Multilateral Order to tackle aggressive tax planning by multinationals

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An Taoiseach, Leo Vardakar TD, has this week, on behalf of the Government, signed an Order that brings Ireland one step closer to ratifying the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (BEPS). The Convention, which aims to tackle aggressive tax planning by multinationals and facilitate businesses to operate internationally on a more level playing field also helps Ireland to remain competitive in attractive foreign investment here. The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe, jointly brought a memo to Government with An Tániaste, Simon Coveney TD on the matter this week.

The Programme for a Partnership Government states that Ireland will “engage constructively with any measures to work towards international tax reform” and “will work with our international partners in tackling aggressive international tax planning through the OECD’s Base Erosion and Profit Shifting (BEPS) initiative.” The move this week brings the Government a step closer to meeting that objective.

Welcoming the signing of the Order, Minister Donohoe said “This is an important step in our work to ratify the BEPS Multilateral Convention.  Once fully ratified this will introduce an important anti-abuse clause into our double taxation treaties, of which we have 74 in existence, and ensure that Ireland is meeting our commitments under the OECD BEPS project.  Ensuring that a more level playing field exists and that, by working together, appropriate standards are set internationally is key to tackling aggressive tax planning and ensuring that multinational corporations pay their fair share of tax. This progress marks another step in delivering the programme of corporate tax reform, which is detailed in Ireland’s Corporation Tax Roadmap, and which I published just last month, and points to the direction of travel set by the Irish Government in this area for the years ahead.”

Background Information

The Multilateral Convention was agreed in November 2016 following extensive discussions at the OECD.  Government approval to sign the Multilateral Convention was granted in May 2017 and Ireland signed the Multilateral Convention in Paris in June 2017 with more than 60 other countries. This is subject to ratification.

A key recommendation of the OECD BEPS project is that changes should be made to bilateral double taxation treaties to reduce the possibility of double non-taxation arising, while ensuring that treaties remain effective in eliminating double taxation. There are approximately 3,000 double taxation treaties in existence worldwide.  Ireland has 74 signed double taxation treaties.  Rather than updating these treaties individually through bilateral negotiations the Multilateral Convention provides a method for countries to update the application of their existing treaties to ensure the highest standards are met in respect of international tax planning. The Convention provides a mechanism for countries to transpose recommendations made by the BEPS project into existing bilateral tax treaties. It will modify the application of the majority of Ireland’s double taxation treaties to ensure that they are compliant with OECD BEPS recommendations.

The next step in ratifying the Multilateral Convention is the inclusion of the Order in primary legislation.

Finance Act 2017 made changes to the Taxes Consolidation Act 1997 to empower the Government to facilitate the ratification of the Multilateral Convention.  In September this year the draft Multilateral Convention to Implement Tax Treaty Related Measures Order 2018 was discussed at the Select Committee on Finance, Public Expenditure and Reform and was subsequently debated and approved by Dáil Éireann.  The Government has now made the Order and it is intended that it will be included in Finance Bill 2018 by way of a Committee Stage amendment.  Once the Order has force in primary law it can then be deposited with the OECD, completing Ireland’s ratification of this key element of the OECD BEPS project.

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