Ireland tweaks tax regime to divert avoidance criticism
The Irish government is set to make further changes to the country’s corporate tax regime as it seeks to align itself with a global initiative to clamp down on corporate tax avoidance, reports the Financial Times.
The change being considered will oblige companies that have global headquarters in Ireland to provide more information about their worldwide operations to the Irish tax authorities, which may then share them with other jurisdictions.
The government is expected to outline its intentions when the 2016 budget is announced on October 13. It comes as the OECD is expected on Monday to announce its final package of anti-tax avoidance measures under its “base erosion and profit shifting” (Beps) initiative, ahead of a conference of Group of 20 finance ministers in Lima.
The change would mark the third budget in a row in which the government has tweaked the Irish corporate tax regime as it seeks to shield from criticism Dublin’s headline rate of 12.5 per cent, one of the lowest in Europe.
If the measure is included in the finance bill giving effect to budget measures, Ireland would become one of the first countries to begin implementing the “country-by-country” reporting initiative. It is led by the OECD, and is due to take effect for the 2016 corporate reporting year.
The Irish corporate tax regime has come under attack in both the US and the EU. The European Commission has opened an investigation into a purported “sweetheart deal” between the technology group Apple and the Irish tax authorities. The commission claims that the tax arrangements between Apple and Dublin are tantamount to illegal state aid. It is also investigating Starbucks in the Netherlands, and Fiat and Amazon in Luxembourg.
The government has aligned Ireland closely with the OECD’s Beps initiative, which seeks to clamp down on egregious tax avoidance whereby multinationals move their taxable activities to low-tax or no-tax jurisdictions. During a visit to Dublin last month, Angel Gurría, OECD secretary-general, said Ireland was “a quite exemplary case” of adapting its corporate tax regime in response to international trends.
Introducing country-by-country reporting would mainly affect Irish companies with global operations. This includes food groups such as Kerry and Glanbia and industrial companies such as CRH, and a number of pharmaceutical groups that have redomiciled to Ireland in recent years.
They would have to provide the Irish tax authorities with details of revenue, employee numbers, assets, profits and taxes paid in other countries where they have operations, people familiar with the initiative say.
The finance ministry has started to eliminate a thicket of loopholes that sprouted around the 12.5 per cent headline rate over many years. The last two budgets have changed domicile rules for companies and begun closing the “Double Irish” loophole that enabled multinationals based in Ireland to pay minimal amounts of tax.
Tax experts say most companies operating in Ireland are resigned to the closing of loopholes and the implementation of initiatives such as country-by-country reporting, seeing it as the best way to safeguard the bigger prize of the 12.5 per cent rate. They are now turning their attention to the country’s high personal tax rates, which they say are undermining competitiveness and deterring “talent”.
The experts say the country-by-country initiative is mainly an administrative change that would result in higher costs for companies filing tax returns, and was unlikely to result in companies paying higher taxes, at least immediately. The initiative “is a bit of low-hanging fruit that can easily be done in the spirit of transparency — it’s an easy one for countries to agree to,” said a tax expert in Dublin. “Will it raise the tax take? No.”
