Action plan targets Ireland’s low corporate tax regime
Politicians and business bodies have warned that changes to the tax system could threaten the 150,000 jobs generated by the 1,000 multinationals here, and affect 90% of exports worth €160bn to the economy.
However, as austerity bites, governments in many of the world’s biggest economies are eyeing countries like Ireland whose tax systems help some of the globe’s biggest enterprises to pay little or no tax.
The G20 tasked the OECD, which represents 60 developed countries, with delivering an action plan on tackling the problem, and it will be unveiled today in Moscow.
The Government has been very careful to say it will co-operate with any measures to ensure companies pay their fair share of tax, but say that it must be a worldwide effort and not single out countries such as Ireland.
A statement from the Department of Finance said it co-operated with the OECD on the plan and welcomed the approach, but acknowledged that it would mean major changes.
While Ireland’s low corporate tax rate of 12.5% has been in the crosshairs of countries such as France for some time, the OECD report is not expected to mention tax rates at all. Instead, it will focus on the various schemes and loopholes in countries, including the US, which allow giant companies based in Ireland, such as Google and Apple, to pay as little as 2.4% of their profits in taxes, and in some cases to avoid paying any.
Tom McDonnell, economist with the independent thinktank TASC, said it will attempt to clamp down on double non-payment and long-term deferral, and on schemes like the Double Irish and the Dutch Sandwich.
It will also try to close loopholes that allows transfer pricing that moves intellectual property rights from the US especially, through Ireland and to a tax haven like the Cayman Islands or Bermuda currently holding an estimated $2tn (€1.5tn) of profits.
One of the principles expected to be included in the report is that tax should be paid in the country where the value of a service or product was created.
The impact on Ireland would most likely be negative in the short-run, said Mr McDonnell.
The plan will be discussed by the G20 before their summit in St Petersburg in September and the OECD will hope, with the EU, to convince their members to make the changes by Sept 2015.
