Ireland Seeks Comment on International Tax Strategy Plans

The Irish government is inviting businesses and practitioners to provide feedback on its plans to update its international tax strategy, including how Ireland should incorporate the OECD’s transfer pricing guidelines into national law and implement the European Union’s anti-tax avoidance rules.

The consultation, which runs until the end of January 2018, aims to “set out a roadmap for where Ireland is going between now and the end of 2020, and identifies concrete steps that we will take over that timeframe,” Finance Minister Paschal Donohoe said Oct. 10.

Ireland’s finance chief launched the widely anticipated consultation alongside the annual fiscal budget. The government announced immediate changes in the budget, including a new limit to the amount of income against which capital allowances for intangible assets businesses can deduct in a tax year, as well as an increase on stamp duty on commercial transactions.

The proposals act on recommendations made by Irish Fiscal Advisory Council Chairman Seamus Coffey last month to act on key elements of the Organization of Economic Cooperation and Development’s base erosion and profit shifting initiative and the EU’s anti-tax avoidance project.

“These highly technical areas have implications for every Irish business operating internationally,” Joe Bollard, head of iInternational tax at EY Ireland told Bloomberg BNA. “Therefore, the outcome of the consultation is important to maintaining competitiveness of Ireland’s regime.”

Kevin Doyle, a partner and international tax coordinator at Dublin-based BDO, agreed that the consultation shows that the government understands that “with so much change ahead, Ireland must compete, not only on the rate, but on the ability to offer certainty.”

Ireland’s international competitiveness revolves around its 12.5 percent corporation tax rate, the lowest among OECD nations.

Domestic Transfer Pricing Rules

Businesses are being asked for input on how to implement Actions 8, 9 and 10 of the OECD base erosion and profit shifting project, which would require revisions to transfer pricing rules in Ireland.

In its consultation document, the government is seeking comment on “what are the key considerations” when incorporating these actions into Irish law.

The government is also asking, as Coffey recommended in his report, how “domestic transfer pricing legislation should be applied to arrangements the terms of which were agreed before 1 July 2010,” and whether Ireland should introduce transfer pricing rules for small and medium businesses and if so, how.

Engaging With EU Tax Proposals

The document also seeks input from companies and practitioners on the second Anti-Tax Avoidance Directive agreed to by EU member states earlier this year. “This Directive significantly strengthens important anti-avoidance provisions to target hybrid mismatches and bring EU law more closely in line with the BEPS recommendations,” according to the document.

Questions include:

•  As Ireland already has a robust general anti abuse rule in place, what changes, if any, are needed to ensure this meets the minimum standard required by the Directive?
•  What are the key considerations regarding the implementation of controlled foreign company rules that must be introduced in domestic legislation by Jan. 1, 2019?
•  What are the key considerations regarding the implementation of the anti-hybrid rules that will be applied to intra-EU payments by Jan. 1, 2020?

Need for Global Consensus on Taxing Digital

In the update on Ireland’s International tax strategy, Donohoe also said global consensus was needed on how digital companies are taxed. “We do not support moving away from the consensus at OECD level which would result in double tax and significant uncertainty,” he said.

Donohoe also said that Ireland will continue to insist that all tax measures at the EU level require unanimity before they can be agreed, reflecting the fact that tax is a key member state competence.