Multinational tax issue ‘must be addressed’, conference told

The tax affairs of Apple and Google, both of whom use Ireland as key components of their global structures, were cited at the opening session in Paris today of a conference on tax and the digital economy.

Representatives of Google, Microsoft, and Ebay joined experts from the big four accountancy firms, business lobby groups, civil servants from tax and finance administrations of the developed nations, trade union representatives and non-government organisations, to discuss possible changes to the global tax system.

The meeting is part of the Base Erosion and Profit Shifting project being run by the Organisation for Economic Cooperation and Development for the G20. Proposals for altering the global tax system are being prepared for G20 finance meetings in October of this year and 2015.

The popular view is that multinationals are not paying tax and it is an issue that has to be addressed, John Evans, general secretary of the Trade Union Advisory Committee said at the outset of the meeting, citing recent reports on the tax paid by Apple and Google. He said his organisation represented 60 million union members.

He said the issue of multinational taxation is being raised in by members in the context of widespread austerity measures and unions are saying their members should wait to see the result of the OECD project.

He said we were living in a new economy and need new thinking.

However Carol Klein, of the Business and Industry Advisory Committee, said that while it was the case that the modern economy was a digitalised economy, it was also the case that all companies are traditional too in that they have to develop products that customers want, find those customers, and deliver their products.

Addressing the idea that the digital economy tended to produce monopolies or oligopolies, she said the volatility that was a feature of the digital economy meant that such developments were less common than they were in more traditional sectors.

She also said it was not the case that digital companies were more mobile. She said they could select where they would establish themselves based on criteria such as tax rates and other costs, but once established it was not so easy to move. The people who run the companies won’t want to move, she said.

A number of contributors welcomed suggestions from the OECD team examining the digital economy issue that it may not be possible to introduce new rules specific to the digital economy, as the economy generally has become digitalised.

They suggested that the more general rule changes being examined by the OECD will address most of the issues that are causing concern about technology multinationals.

Co-chair of the meeting, Robert Stack, a senior civil servant from the US Treasury, asked if it was the case that digital companies can use intangibles to more easily relocate their sources of profit.

Tax representatives from India and Italy both made the point that the issue was not so much whether there should be special rules for the digital economy, but whether some companies now had business models that managed to avoid the international tax principles that currently exist.

It was not necessary to ring-fence the digital economy in order to introduce new rules that addressed these issues, said Francesco Bungaro of the Italian Ministry of Economy and Finances. The French representative agreed.

Mr Stack said it might be impossible to write rules for a sector of the economy that is hard to identify, but it might be possible to identify characteristics of the digital economy that could be subjected to new rules.

The OECD group examining the digital economy will meet privately today and tomorrow, and again in May, in order to complete its work. It has reached a critical stage in its work, the meeting was told.

Ireland was represented at today's meeting by Alan Carey and Caitriona Crowley, director and assistant director respectively at the International branch of the Revenue Commissioners.