Home > Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate. Office of the Revenue Commissioners: engagement [Gambling & Gaming].

[Oireachtas] Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach debate. Office of the Revenue Commissioners: engagement [Gambling & Gaming]. (14 Dec 2022)

External website: https://www.oireachtas.ie/en/debates/debate/joint_...


Chairman: I welcome Mr. Niall Cody, Chairman of the Revenue Commissioners, Ms Ruth Kennedy, commissioner, and Ms Angela O'Gorman, principal officer. We will start our meeting as usual with an opening statement from Mr. Cody and then members can engage with him on the content of that statement and possibly some other matters.

Mr. Niall Cody: Thank you, Chairman, for the opportunity to make my opening statement. I will begin with VAT on e-gaming. The regulation of gambling is currently provided for in the Betting Act 1931 and the Gaming and Lotteries Act 1956 and as the committee will be aware the Gambling Regulation Bill is currently before the Dáil. The operational aspects of gambling and gaming regulation are dealt with by a number of State bodies, including An Garda Síochána, the courts, and Revenue. Under VAT law, betting or gambling, including e-gambling services, are exempt from VAT, while gaming services are taxable at the standard rate of VAT, currently 23%. E-gaming is an electronic service, and under EU and Irish VAT legislation, VAT is payable by the service provider in the member state where the private consumer is established, has a permanent address or usually resides. This means that VAT is payable in Ireland by the providers of these e-gaming services at the standard rate. A non-established supplier can register for VAT in Ireland or will, more likely, register through the one-stop shop, OSS. This is an EU wide administrative simplification which allows a business engaged in these supplies to register in a single member state to file and pay its VAT liability for all member states through a web portal in the member state of registration.

Corporation tax receipts for 2021 were €15.3 billion, an increase of 29.5% on 2020. Receipts up to the end of November were €21.1 billion, up 56% on the same period last year. We have published detailed reports on corporation tax receipts every year since 2016 and will publish our next report next April. A key feature of the receipts is their concentration, with the top ten companies paying 53% of the receipts in 2021 and the top ten groups paying 56%. This represents a significant increase in the share paid by the top ten. The equivalent figures in 2019 were 40% and 43%, respectively.

Work is currently ongoing at the OECD on finalising the pillar 2 package of measures to address the taxation challenges arising from the digitalisation of the economy. Pillar 1 is a set of rules designed to ensure the largest and most profitable multinational enterprises pay tax on a certain portion of their worldwide profits in countries where the end consumers and users of their products and services are based. The detailed technical work which will determine the overall cost of this is ongoing. As key elements have yet to be agreed, such as the marketing and distribution profits safe harbour, which affects the elimination of double taxation, it is very difficult to estimate accurately the impact at this stage. The agreement will provide for the reallocation of profits to market jurisdictions such that multinational enterprises will pay a greater proportion of their tax in countries where their consumers and end users are based. The agreement will also provide for the removal of digital service taxes.

Pillar 2 is a series of co-ordinated rules which will ensure that in-scope groups pay at least a 15% minimum effective rate of taxation on their profits in each jurisdiction in which the group operates. While it will be optional for countries to implement the OECD rules, the European Commission has proposed a directive to make the application of the rules mandatory for EU member states. Based on the current draft EU directive, it is expected that pillar 2 will apply from 31 December 2023. The introduction of the pillar 2 rules will have impacts on both the Exchequer and in-scope businesses. However, it is too early to estimate reliably the impact of the global minimum tax as this will depend on ongoing technical negotiations and on policy decisions made by Ireland and other jurisdictions. 

Significant policy and detailed technical issues have yet to be agreed at OECD and EU levels. Our role in Revenue is to support the Department of Finance on the technical issues. When agreement is reached and policy decisions are made, there will be a significant legislative programme to give effect to the new rules. There will also be significant ICT developments to implement the changes over the next two to three years and significant consultation and engagement with business, representative bodies, software developers and agents to implement the changes. Implementing the new system will have significant resource implications for Revenue.

Moving to the Commission on Taxation and Welfare report, Revenue made a submission which focused on tax administration, reflecting Revenue's statutory remit as the body responsible for the administration of tax and customs and ensuring the fair and efficient operation of the tax system. The report provides a timely review of the tax and welfare system and provides a detailed framework to support policymaking for the medium term. Revenue will continue to support the Department in aspects of the recommendations which it chooses to take forward.

Chapter 17 of the report deals with modernisation of tax administration. I consider this chapter to be among the most important frameworks to signpost the direction we must travel to succeed in our vision to be a leading tax and customs administration. We strongly endorse the recommendations in chapter 17, and several initiatives are under way in Revenue which will help to implement the conclusions over time.

In addition to the implementation of significant changes arising from the international corporate tax agenda, which I have already touched on, there are a number of other key challenges facing Revenue in the coming years. We are in an unprecedented position, in that, as at the end of November, nearly €2.5 billion of tax debt was warehoused by businesses in the debt warehousing scheme. The effective management of this debt in the current economic environment is crucial.

The digital transformation and modernisation of tax administration, which is a key priority for Revenue, requires a continued refresh of technology to underpin it. Our investment in technology enables us to support Government policy in relation to the implementation of new schemes, such as the temporary business energy support scheme, and new taxes, such as the residential zoned land tax.

There will continue to be challenges arising from the UK exit from the EU both as businesses continue to adapt their supply chains to the very much changed trading relationship with the UK, including to regulatory changes on the UK side, and the supply chain pressures brought about by the Russian aggression in Ukraine. We must ensure we have the people and capability to continue to meet all evolving challenges and to deliver on our vision requiring a significant investment in people and making sure we are an employer of choice capable of attracting the talent and skills we need to continue to be a high-performing organisation.

I draw the committee’s attention to section 851A of the Taxes Consolidation Act and my obligation to uphold taxpayer confidentiality. Subject to this constraint, I am happy to answer the committee’s questions.

[For the full debate, click here for link to Oireachtas website]

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