Anti Avoidance

The two specific measures introduced are as follows:

• One deals with arrangements whereby a dividend is paid in connection with a disposal of shares; and
• the other amends TCA97 s811A by offering a two year period by which the Revenue must deal with the transaction, but increases the surcharge from 10% to 20%.

Anti avoidance is very much a feature of this Bill, even where anti-avoidance measures with effective dates of 18 February were published on 14 February.

The proposed amendment to TCA97 s811A would suggest that the section as it stands isn't working to the satisfaction of Revenue. It's worth remembering however that in essence, s811A is a vehicle available at the option of the taxpayer to make a protective notification. If s811A isn't working, it might have been reasonable to expect that the solution lay in making it more taxpayer friendly.

When the amendments are boiled down:

• Taxpayers involved in avoidance are to be treated in the same way as taxpayers involved in fraud, when it comes to Revenue raising enquiries.
• The Appeal Commissioners, and indeed the higher Courts, will be required to adjudicate on the existence of grounds for considering that a transaction is a tax avoidance transaction, rather than whether a transaction is actually a tax avoidance transaction.

Taken as a whole, the proposed amendment displays a strange convergence in the approach taken to tax fraudsters and tax avoiders, except perhaps that you could never make a fraud charge stick just by “having grounds”.

Foreign Dividends

When queried by Committee Members on the scope of the Foreign Dividends regime in this year's Bill, the suggestion was that care had to be taken to preserve the 12.5% Corporation Tax rate, and that the limited benefit of the proposed legislation had to be seen in the overall package of tax business measures. Which is fair enough on the face of it. Except that because the 12.5% rate applies to all trading activities and is universally available, it's pretty much inviolable under existing EU Treaty arrangements.

Future Developments

The record of the Committee Stage debate suggests that there may be an amendment at Report Stage to address tax relief on training provided in the context of a redundancy package. The Minister for Finance also indicated that he was undertaking “a review generally of the research and development tax area this year.” He went on to say “We have only introduced it. We know there have been some problems every time. We had the idea of providing relief for incremental research above a certain baseline and we have been extending the years to baseline years and the period of years over which the base can acquire a tax relief in an effort to accommodate long lead-in times in terms of research for certain products. This is an increasingly competitive area, particularly for pharmaceuticals and high-tech industries.”