Ireland ‘not undermined’ by EU tax swoop

Wide-ranging tax rules designed to recoup much of the estimated €70bn multinationals underpay in the EU each year will not adversely affect Ireland’s attractiveness to foreign direct investment, according to state and private tax experts.

Ireland ‘not undermined’ by EU tax swoop

Ireland’s implementation of new, similar recommendations from the OECD to reduce tax minimisation and avoidance was described as “quite remarkable” by European taxation commissioner Pierre Moscovici.

An analysis of the tax loopholes in each EU country showed that Ireland was not quite the international delinquent it has often been portrayed as, having fewer loopholes than the EU average, as revealed in the Irish Examiner last week.

The study identified 34 tax measures that allow multinationals pay around 30% less tax than domestic business.

The Netherlands had the most loopholes at 17, followed by Belgium with 16.

Thirteen countries had more than Ireland’s 10, with Germany and France having eight loopholes and Denmark the fewest at four.

However, the measures were not of equal value and further analysis is being still carried out.

The Dutch government, which holds the current EU presidency, has said it wants to have the package agreed by the end of July, but Government sources said they did not believe this would be possible as each country has a veto.

No two countries’ tax regimes are the same and the measures would not slot into any country’s system — each would require different modifications and new rules.

Accountants KPMG said it believed that “the proposed measures should not undermine and may enhance the attractiveness of Ireland’s 12.5% corporation tax regime”.

It said some of the measures are in line with the Irish regime, some of which have been recently introduced, including increased transparency — introduced in January on foot of the OECD guidelines — the ‘knowledge box’ devised along the OECD’s recommendations, and OECD transfer pricing rules.

Head of tax Conor O’Brien, however, picked out interest deductibility as a potential problem.

“There is unlikely to be unanimous support for a complete surrender of national sovereignty,” he said.

Interest deductibility is seen as one of the major ways of profit shifting to avoid tax.

And accountants BDO said compliance costs will fall more heavily on SMEs than bigger firms.

According to the leftist GUE group MEP Fabio De Masi, a leading member of the Parliament’s TAXE committee, the EU proposals are weaker than those agreed at OECD level on interest limitation and will not change this practice much.

There is no suggestion that countries have to change or harmonise their tax rates.

The commission will make proposals on the long-delayed Common Consolidated Corporate Tax Base and the less ambitious Common Corporate Tax Base in the autumn.

However, this proposal may depend on how much progress they make on the tax avoidance package.

It emerged yesterday Italy believes Google evaded €227m in taxes between 2009 and 2013 and could hit the US internet giant with hefty punitive fines.

Separately, EU competition chief Margrethe Vestager said she is ready to investigate Google parent Alphabet’s £130m (€171.1m) tax deal with the UK.

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