No formal EU inquiry into Irish tax affairs yet - commissioner

The European Commission has "not yet formed a view" that Ireland is giving special tax treatment to certain companies operating here, the European Commissioner for Competition Joaquín Almunia has told Fianna Fáil.

Mr Almunia added that the commission had “not initiated a formal investigation” into these allegations, which emerged last year.

In a letter to Fianna Fáil's finance spokesman, Michael McGrath, dated February 3rd, Mr Almunia said: "Let me clarify that the Commission is at this stage only gathering information about certain administrative practices in the area of corporate taxation, amongst others in Ireland."

Gathering data
He said the commission was obliged to "gather all necessary information to either rebut or confirm" the allegations that had been made against Ireland's corporate tax regime.

Mr Almunia said it was the commission’s “duty” to investigate any allegation that a member state might be conferring an unfair advantage to certain companies in a way that could distort competition in the common market.

But he stressed that the commission “is not questioning the Irish corporate tax rate of 12.5 per cent, nor alleging that Ireland is a tax haven”.

In September, it emerged that Brussels was investigating Ireland over its tax deals with multinationals.

It was reported that the commission had asked the Government to explain its system of tax rulings and give details of assurances given to several specific companies. Luxembourg and the Netherlands are also under investigation.

At the time, the Department of Finance said: “Ireland operates an open, transparent and statute-based taxation system”.

Mr McGrath wrote to the commissioner on January 21st and expressed his concern that the EU’s review of these tax issues could damage Ireland’s international reputation, particularly among multinationals who are key employers here.

“It is also extremely important that the preliminary investigation currently under way is concluded as quickly as possible so as to remove any suspicion surrounding the Irish corporation tax system,” Mr McGrath added.

In response, Mr Almunia said: “I fully understand that the perception of uncertainty in respect of corporate tax treatment is a concern to you and your party.

"Therefore, I agree with you on the importance to rapidly proceed with the inquiry. Having full clarity of the facts is essential for the effectiveness of the review and the speed of the process."

Speedy review
Speaking to The Irish Times last night, Mr McGrath welcomed Mr Almunia's confirmation that Ireland was not a tax haven and that our corporate tax rate was not being questioned but restated his call for a speedy conclusion to the EU's review.

“I’m very disappointed that the European Commission has still not set out any timeline for completion of the preliminary investigation given that it was confirmed publicly last September,” he said, adding that it was important for Ireland that a “definite timeline” be communicated.

Ireland’s corporate tax rate made the headlines again this week when it emerged in a new study that US multinationals reported paying tax rates of 2.2 per cent in Ireland during 2011.

A research paper by Prof James Stewart, associate professor in finance at Trinity College Dublin, also challenged Government claims that effective corporation tax rates in Ireland are just below the headline rate of 12.5 per cent.