Ireland publicly commits to work with OECD countries on tax avoidance by multinational companies

It will also introduce measures as part of its latest budget to "ensure that Irish-registered companies cannot be 'stateless' in terms of their place of tax residency", according to the country's Finance Minister, Michael Noonan.

However, the country will not increase the low corporation tax rates that have resulted in several global companies using Ireland as a based for their European operations, according to a newly-published policy statement (17-page / 841KB PDF).

"Ireland's corporate tax system is open, transparent, and all the rules are clearly set down in our national law," said Noonan. "Our stable, low corporate tax rate is one of the cornerstones of our strategy for attracting foreign direct investment. It is a key factor in creating employment and generating economic activity."

Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said that the proposal could impact on a number of US multinationals which had "used companies which are incorporated in Ireland but managed and controlled elsewhere – and so tax resident nowhere".

"It's not yet clear how the Irish reform will work - it appears that companies will still be able to choose their tax residence," she said. "They have not gone as far as the UK, which has an automatic test of incorporation as well as a management and control test."

"The real 'elephant in the room' is the US tax system. Most countries base tax residence on the place of 'effective management', but the US stubbornly clings to an incorporation test. Given the current party political difficulties, real reform of the US system seems unlikely," she said.

The document sets out Ireland's "International Tax Charter"; a set of policy objectives and commitments covering how Ireland views and deals with a number of issues in relation to international tax policy. This includes its commitments to the development of automatic exchange of financial information between national tax authorities and country-by-country reporting; its desire to provide assistance in tax planning matters to developing countries; and how it will work with international bodies including the EU and the Office for Economic Cooperation and Development (OECD).

Over 1,000 international companies have successfully located in Ireland, according to the document; and these support over 285,000 jobs both directly and indirectly. Corporation tax in Ireland is charged at 12.5% on traded income, including worldwide foreign branch income and foreign dividend income of resident companies; and at 25% on non-traded and investment income. In 2009, an independent review of Ireland's tax system concluded that a "low, stable corporation tax rate" should remain a core aspect of the country's tax policy.

"Notwithstanding the evidence which shows that Ireland only engages in fair tax competition and complies with all relevant international rules, some company structures have been criticised as examples of legal but aggressive tax planning by international companies," the document states.

"Tax planning by companies relies to a great extent on mismatches between the domestic rules of different countries. It is clear that these issues cannot be addressed at national level alone – we need a co-ordinated international response. This is now being addressed in the OECD's 'Base Erosion and Profit Shifting' project, in which Ireland is taking an active part to find workable solutions," it says.

The OECD published its 'action plan' on base erosion and profit shifting (BEPS) in July at the request of the G20 group of the world's 20 most industrialised nations. The term refers to the practice of deliberately transferring profits from high tax jurisdictions to those with lower rates of tax. The plan proposes new global standards to prevent 'hybrid mismatches' in cross-border tax deductions, new double tax treaty provisions and stronger rules on controlled foreign companies, amongst other measures to ensure that large companies are unable to take advantage of gaps in international tax laws to avoid tax.