A planned crackdown on tax avoidance by multinationals in EU countries could work in part to Ireland’s advantage, according to some tax experts. However most doubt that many of the measures will be agreed and say that any further move to a common corporate tax base – a possible follow up to the plan’s announced on Thursday – would be dangerous for Ireland.
The European Commission plan, which will need to be backed unanimously by the EU member states if it is to become law, attempts to tackle the practice of companies reducing their tax bill by moving profits to lower-tax jurisdictions and curbs the amount of interest repayments on loans companies can claim.
KPMG said the proposed measures could enhance the attractiveness of Ireland's 12.5 per cent corporation tax regime, and said the country was already "highly compliant" with many of the proposals, including increased transparency, patent boxes – special tax measures to encourage research .
“Corporation tax regimes in some other countries have sometimes been based on opaque rulings and special regimes. These types of regimes are becoming increasingly unacceptable to international policy makers and will have to be reformed while the Irish regime continues to be ‘best in class’ ” said Conor O’Brien, partner and head of tax at KPMG in Ireland. Any likely agreement was likely to be neutral of positive for Ireland,he said.
National sovereignty
Director of the Irish Tax Institute Cora O'Brien said for some parts of the proposals, it was only a starting point to get agreement between EU states.
“There is no doubt that change is on the way and multinationals will be watching very closely. What we are seeing today are proposals, however the aim is to get agreement to turn them into EU law in this area,” she said.
“Some of the proposals such as country by country reporting, where there is already consensus, are likely to become law very quickly.”
Brian Keegan, head of taxation at Chartered Accountants Ireland agreed that the measures allowing information sharing between Revenue authorities could well be passed, but said he doubted that more far-reaching measures would be.
Peter Vale, tax partner at Grant Thornton said the measures could be viewed as the "softer" bits of the Base Erosion and Profit Shifting (BEPS) project, leaving out controversial plans on harmonising how taxable profits are allocated across EU countries, known as common consolidated corporate tax base (CCCTB).
“CCCTB is probably the most dangerous piece of legislation from Ireland’s perspective as it would severely reduce the benefit of our low tax rate and reduce our attractiveness for foreign investment,” he said.
Kevin Doyle, tax partner at BDO, warned that the measures, if passed, could increase compliance costs for SMEs that were operating across national borders. He said there was now an element of “tax uncertainty” facing companies as they waited to see what would be agreed.
Oxfam Ireland said the measures to address tax avoidance didn't go far enough in ensuring full transparency, saying the plan was only a first step. It called for country-by-country reporting to be made publicly available, warning that developing countries are the ones hit hardest by tax avoidance.
