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Reform Of Irish Revenue Rules 'The Right Thing To Do'

by Jason Gorringe,, London

06 December 2013

Proposed changes to Ireland's company residence rules will fail to stop international tax planning but do reflect the global move toward greater transparency, the Chief Executive of the South Africa Institute of Tax Practitioners (SAIT) has said.

In October, Irish Finance Minister Michael Noonan unveiled an international tax strategy statement alongside his 2014 Budget. It indicated that Noonan would introduce into this year's Finance Bill reforms to the company residence rules. The aim will be to eliminate any mismatches between tax treaty partners that can be used to allow companies to be "stateless" in terms of their place of tax residence.

Noonan later confirmed the initiative at the Tax Policy Conference hosted jointly by the Irish Tax Institute and the Harvard Kennedy School. He said that it would "provide global investors with clarity and confidence in our commitment to protect Ireland's international standing and reputation."

SAIT Chief Executive Stiaan Klue, who also attended the event, has since said that the overhaul is "the right thing for Ireland to do."

The ongoing row over base erosion and profit shifting (BEPS) has led to considerable interest in the tax practices of multinational corporations. The US Senate has been particularly vocal in its criticism of the Irish tax system, alleging that high profile firms have been able to abuse the rules, and pay little in tax, in spite of their reaping considerable profits.

As Klue explains, companies have been "able to take advantage of the complex web of international laws by basing their operations across a number of sovereign districts. A basic premise of sovereignty is that countries have the right to set the corporation tax rate. However, we are now at a juncture on the global scene, where exchange of information is the rule, and bank secrecy for tax purposes is no longer acceptable."

South Africa's tax laws are currently under review by the Davis Committee. According to the South Africa Revenue Service (SARS), the Committee is examining the role of the tax system in promoting growth, job creation, sustainable development, and fiscal self-reliance. Its work program prioritizes investigations into the appropriateness of the tax base and tax mix, and into the scale of BEPS activity.

An interim report is expected to be delivered to the Finance Minister later this month.

TAGS: South Africa | compliance | Finance | tax | investment | tax compliance | Ireland | tax avoidance | tax incentives | revenue guidance | law | Organisation for Economic Co-operation and Development (OECD) | corporation tax | ministry of finance | tax authority | multinationals | legislation | tax planning | G20 | revenue statistics | tax reform | standards | trade association | trade | Africa | Tax | Tax Evasion

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