Promising to keep 12.5% tax rate avoids wider issue

Here we go again. The great diversionary tactic used by Irish politicians in the corporate tax debate is being wheeled out – yet again. Speaking in Limerick on Monday, Minister for Finance Michael Noonan informed us that the Irish 12.5 per cent corporation tax rate was not under threat. The rate could almost be put on the Tricolour, he said, and he would be " confirming" it yet again on budget day. Taoiseach Enda Kenny has made similar comments.

In doing this, they are trying to distract from the real pressure points on Ireland over taxation. Even the French have got tired of targeting our 12.5 per cent corporation tax rate, according to the OECD director of tax policy, Pascal Saint-Amans, who was speaking in Dublin on Monday. The problem isn’t our 12.5 per cent rate – it is other aspects of our tax system which have helped international firms, mainly from the US, avoid tax.

Many in the frame

Ireland is not the only country in the frame here – even the US itself is there – but as the home to the European headquarters of many US multinationals, and the country chosen for a number of controversial tax inversions, we cannot escape our share of the spotlight.

The battle here will lie in the application of new international tax rules, in the European courts over Apple and in complex areas of transfer pricing and international accounting. There are few soundbites here. What there will be are intensely complicated arguments over technical bits of tax law – which will have a fundamental impact on the way we pitch for and attract foreign direct investment in the years to come.

The 12.5 per cent tax rate will stay. But there will be a focus on the way the Irish system is structured and how the rules will apply. In years to come tax will be a much less important card to play when trying to win investment, for the simple reason that, one way or another, the international moves underway will level the tax playing field.

The Apple judgment is just a sign of things to come, at least in its clear signal that the days of easy tax deals for multinationals – whether they are judged legal or note – are coming to an end.