EU puts Irish tax back on radar

By Eamon Quinn

The Government could do more to close off loopholes that multinationals use to avoid paying tax, the European Commission has said in a report that again thrusts Ireland back in the spotlight over the tax affairs of foreign-owned firms.

In its latest report, the commission urges the Government to broaden the tax base to offset the exposure of finances to volatile corporate revenues which depend on a handful of multinationals.

Highlighting cuts in the income taxes in recent budgets, the commission said that revenue-raising measures such as the hike in commercial property transaction tax, announced by Finance Minister Paschal Donohoe last October, was pro-cyclical and cannot be relied on when the economy turns down.

It said there is some evidence that parts of Ireland’s corporate tax regime, including charges allowed for intellectual property, were overly “aggressive” and favour multinationals.

And further changes in the global tax rules to restrict tax structures used by multinationals, as well as Brexit, could deliver economic shocks to Ireland.

“As shown in a study, Ireland’s high inward and outward FDI (foreign direct investment) stock can only partly be explained by real economic activities taking place in Ireland,” said the commission.

“The high level of dividend payments and, in particular, charges for using intellectual property suggest that the country’s tax rules are used by companies that engage in aggressive tax planning,” it said.

Banks have the room to tackle their elevated levels of non-performing loans by writing down debt and by striking sustainable debt deals, it said.

On other taxes, the Government should scrap the different tax levels levied on petrol and diesel.

It repeated the findings of its earlier reports that the “affordability” of housing was a matter of concern, but again said prices “did not seem overvalued”.

Overall, the report is upbeat on the outlook of the economy. Predicting GDP growth of 4.4% this year and 3.1% in 2019, the economy “continues to grow at a solid pace” while “domestic activity continues to thrive”.

And it said the State performs well against the EU social scorecard even though the “healthcare and homelessness show significant room for improvement”, and the healthcare system is costly.

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