Baroso critical of Irish taxation study

EUROPE-wide rules on taxing companies is necessary to improve the EU’s economy, Commission president Jose Manuel Barroso said just days after the Government submitted a study saying it would not benefit Ireland.

The Commission says it does not accept the conclusions of the study drawn up by accountants Ernst Young for the Department of Finance and says some of the figures are out of date.

Tax Commissioner Algirdas Semeta says he is finalising his own impact study and his spokesperson said it will show that contrary to Ireland’s fears, it will benefit the economy.

“The Commission would not agree with the doom and gloom of the report, such as job losses. We believe it would be positive for employment and some of the assumptions are based on out of date figures.

“The Commission would like Ireland not to prejudge the proposal that he hopes to publish in the first half of this year and asks Ireland to keep an open mind,” said his spokeswoman Emer Traynor.

Mr Barroso made his strongest case yet for harmonising the way in which companies tax liabilities are estimated, known as common consolidated corporate tax base (CCTB), when he set out the annual priorities for EU growth yesterday.

“We are going ahead with CCCTB, it makes sense... it‘s good for growth …it is part of reinforcing our economic governance and will address some of the economic imbalances all over Europe,” he said.

It would not harmonise tax rates but would mean a company with branches in several EU member states could make just one tax return, submitted to the country where they were headquartered.

Their liability would be calculated on the basis of the European formula and the tax receipts divided between the members states on the basis of where the labour is located, where sales are made and where the capital is based.

Capital would be both tangible such as buildings, and intangible which could cover royalties received on goods such as music. This could be an important issue for Ireland that attracts many multinationals because of the lenient way it treats royalties.