Economy

Ireland may soon run out of road on tax

OECD consensus looms as Irish Government grudgingly plays ball

Currently the tax big companies such as Facebook and Google pay largely depends on where their assets, employees and head offices are located. Illustration: Dado Ruvic/Reuters

Sat Feb 2 2019 - 06:05

The Republic could soon find itself in a cul de sac on tax. It has consistently said the OECD is the correct forum in which to resolve the vexing issue of multinational tax, not the EU. This is because reform under the OECD banner promised to be slow and modest in reach, a scenario that suited Ireland as host to most of the firms in the firing line. Brussels on the other hand is pushing for immediate and more stringent action, even mooting the idea of a digital sales tax to level the playing field, something Dublin vehemently opposes.

Safe in the knowledge that EU moves can be thwarted via the national veto and that consensus at OECD level seemed a long way off, Department of Finance officials slept easy in their bunks.

That was until this week when the OECD indicated that global agreement on changing the rules may soon be reached. In a policy note, the Washington-based think tank said US proposals to ensure companies pay taxes based on where they make their sales were gathering momentum and already had the backing of Brazil, China, India and other emerging economies.

Currently the tax big companies such as Google and Facebook pay largely depends on where their assets, employees and head offices are located.

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As host to the European headquarters of these companies and with a small local population, that system, or rather the status quo, suits us. The alternative, taxing these companies on the basis of where their sales are, would be a boon for bigger economies and could undermine the attractiveness of our offering. Tech companies are big investors here. Just last month Facebook announced 1,000 additional jobs for its Dublin campus, which already employs 2,200. Furthermore, at OECD level, the State doesn’t have a veto and may soon find itself isolated internationally if it finds the final agreement difficult to stomach.

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