I. R&D developments

According to a recent OECD report, more and more OECD governments are giving firms tax breaks to drive innovation while cutting their direct spending on business research and development (R&D). The importance of R&D to Ireland was highlighted in our recent Pre Budget Submission.

It is quite clear from the report that most OECD countries realise the importance of encouraging innovation by offering tax relief for businesses involved in R&D.

As mentioned in our Pre-Budget Submission Ireland will have to improve its R&D tax relief if it is to compete on a world stage.

According to the OECD press release:

• Spain, China, Mexico and Portugal provide the largest tax subsidies and make no distinction between large and small firms.
• Canada and the Netherlands on the whole continue to be more generous to small firms than large ones.
• Emerging economies, including Brazil, India, Singapore and South Africa, also offer a generous and competitive tax environment for businesses investing in R&D.

II. Changes to Model Treaty to deal with REITs

The OECD has published a discussion draft on the issues related to the application of tax treaties to Real Estate Investment Trusts (REITs), including suggestions for additions to the Commentary of the OECD Model Tax Convention. Comments on this discussion draft should be sent before 15 January 2008.

According to the OECD press release, this discussion draft is largely based on the report of an informal technical group of tax officials and experts from the REIT sector which was mandated by the OECD Committee on Fiscal Affairs to prepare such an analysis of the issues related to the application of tax treaties to REITs and to present suggestions for additions to the Commentary of the OECD Model Tax Convention.

III. IOM signs agreements with Nordic Countries

The Isle of Man has signed bilateral agreements with seven Nordic economies-Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden-on exchange of information for tax purposes.

According to the OECD, the agreements (which have brought to nine the number of such agreements entered into by the Isle of Man) mark a significant step forward in international efforts to implement standards of transparency and exchange of information in tax matters developed by OECD's Global Forum on Taxation.

IV. Attribution of profits to PEs

The OECD has published comments that it received on a discussion draft of Part IV (Insurance) of its Report on the Attribution of Profits to Permanent Establishments.

V. Economic survey of Switzerland

This survey suggests that Switzerland's heavy taxation of dividends generates incentives for tax evasion through the use of complicated corporate structures.