• OECD Secretary General Ángel Gurria visits Ibec
• Ibec Lecture delivered by Minister for Finance, Paschal Donohoe, TD
• Model of substance agenda is advanced
Ireland and Ibec have been early adopters of the OECD’s multilateral plan to reconfigure global taxation through Base Erosion Profit Shifting (BEPS).
In March 2018, OECD Secretary General, Ángel Gurria, visited Ibec and met with members where he re-emphasised that significant global changes require corporate taxation to be aligned with substance in the host country.
Adoption of BEPS is transforming the Irish business model. Substance is determined by both tangible and intangible assets held by corporations. Over many decades, Ireland has built up substance and now is home to world class company clusters forming sectoral hubs that have global footprints across the full lifecycle of business activities.
The process has resulted in Ireland attracting further business substance over the last half decade. The scale of this movement has been dramatic, with the value of corporate balance sheets in Ireland now in excess of €1 trillion and activity leading to a doubling in corporate tax revenue.
"Resource economies that find natural assets like oil have a huge opportunity to increase its society's productive capacity"
By their nature these are intangible assets, but they are also the modern-day equivalent of a natural resource find. Resource economies that find natural assets like oil have a huge opportunity to increase its society’s productive capacity through investment in education and infrastructure that build capacity and opportunity for future generations.
A short-term issue is that it boosts aggregate demand in the economy which puts pressure on existing national infrastructure and on labour requirements. The latter pressure pushes up costs, reduces productivity from rationing so that competitiveness becomes eroded.
As Secretary General Gurria pointed out, intangible assets might be even better than tangible ones, which are ultimately exhaustible, whereas intangibles from intellectual capital may be renewable, scalable and non-exhaustive.
In February, the Minister of Finance Paschal Donohoe delivered the Ibec Lecture in which he spoke about how through this ‘new, new economy’, Ireland could be transformed by these new resources but only if we invest wisely as set out in the Project 2040 National Development Plan.
To hear Ibec CEO Danny McCoy in conversation with Minister for Finance Paschal Donohoe click here.
To watch the Ibec Lecture delivered by Minister for Finance Paschal Donohoe click here.