Taoiseach reassures Facebook over corporation tax at Davos

Thursday 23 January 2014 21.49
Taoiseach Enda Kenny said that Irish people are pragmatic, productive and never afraid of hard work
Taoiseach Enda Kenny said that Irish people are pragmatic, productive and never afraid of hard work

Taoiseach Enda Kenny has reassured Facebook that Ireland's corporate tax rate would not change.

Mr Kenny this morning met Facebook's COO Sheryl Sandberg at the World Economic Forum in Davos.

Afterwards, Mr Kenny said: "I confirmed to Sheryl Sandberg that Ireland's corporation tax of 12.5% would not be moving, not be moving up, not be moving down. 

"Investors like certainty and clarity in this regard.

"I have to say that Ms Sandberg expressed herself very satisfied with the engagement of Ireland in terms of regulations and in terms of the model that Ireland has put in place as being a model that can stand for all other countries.

"For Facebook, for Sheryl Sandberg - she has been a very strong proponent of Ireland, she sees the IDA model of investment in the country as being spectacular, that is evidenced by their decision to move to a new 120,000sq ft unit later this year."

There have been moves at international level to tackle so-called harmful tax practices operated by some countries to the advantage of some global corporations such as Facebook.

Such scrutiny is, however, not expected to target Ireland's traditionally low corporate tax rate.

When asked if the so-called 'Double Irish' tax avoidance arrangement would become unsustainable in the context of moves by the OECD to tighten up transnational tax schemes, Mr Kenny said it was not a matter for Ireland alone.

He said the issue was subject to changes in US law and that Minister for Finance Michael Noonan had made changes in the October budget to "enhance" Ireland's tax reputation.

Under existing arrangements, such as the Double Irish, corporations can lower tax liabilities using payments between related entities in a corporate structure.

This is done so that the burden falls on the firm resident in the lower tax country - such as zero tax jurisdictions in the Carribean - rather than in the higher tax country.

Ireland does not impose taxes on revenue relating to subsidiaries of Irish companies that are located elsewhere. 

Facebook, Apple and Microsoft are thought to avail of this tax arrangement, which is regarded as separate to Ireland's general corporate tax rate of 12.5%.

The OECD has been working on 15 areas of international tax practices, particularly those which relate to income generated within the digital economy and where issues such as intellectual property, royalties and business models can have a complex bearing on how much - or how little - big corporations pay in tax.

The OECD is expected to make proposals to the G20 group of countries in September, which could impact upon the operation of the Double Irish system.

Earlier, Mr Kenny said that Ireland, having exited the bailout, still faces challenges.

But he said that Irish people are pragmatic, productive and never afraid of hard work. 

Speaking this morning in Davos to CNBC, he said he believed the story of Ireland over the last three years is a story the country intends to continue for the time ahead. 

"We recognise fully the scale of the challenges facing our people, and still facing the Government in terms of rectifying our public finances, restructuring our banks, and opening the doors of opportunity," the Taoiseach said.

He said Ireland would not be complacent and that Europe still has quite a number of challenges to deal with.

There are still hills to be climbed, he said, adding that "many of them are very challenging for our people".

Asked about how the business community views the recovery, Mr Kenny said that there is no room at all for complacency. 

The Taoiseach said that from a European perspective there are geopolitical issues facing Europe over the next decade that need to be focussed on. 

He said Europe also needs to look at where the union is headed, and how small and big countries can follow the fundamental principles of why the union was set up, to work together in the interests of the 500 million population. 

"You have to have a vision of the bigger picture, and the bigger picture is that Europe is one of the most important trading blocs on the planet, and we need to realise its potential. That can happen through courage, clarity, decisiveness, and political decisions that matter," he stated.

Meanwhile, Minister Noonan, also speaking in Davos today, said: "We will continue to grow the economy and create jobs.

"On the spreads our ambition is to be part of the north European high credit rating group of countries and we are moving into that space now and we'll take every economic and fiscal action that's necessary to stay in that position."

Mr Noonan was asked his views on comments by an economist at Deutschebank who said that Ireland would need more public money in order to meet international standards in capital and rumours of a potential "bail-in" in Irish banks - the remaining parts of which are in public hands.

Mr Noonan said: "We always have these crazy rumours circulating. Any time there is talk about money there is always a minority who take an exaggerated view.

"But we had an asset quality review just before Christmas and the advice from that was that the banks need extra provisioning and that is being put in place but they do not require extra capital.

"We will wait now for the stress tests in the autumn with the general round of European banking stress tests."

Mobile firms will compete with banks - Denis O'Brien

Separately at Davos, Denis O'Brien told news agency Bloomberg that mobile-phone firms will compete "in the medium-term" with banks in taking deposits from customers.

He said central banks were working with banks to try to stop this kind of development, but that telecoms companies would "absolutely" compete with banks as payment processors in the future.

He said Digicel had invested in a US company that had the technology for "diaspora payments" to South American and Caribbean countries.