Finance Minister Michael Noonan told his EU counterparts in Brussels he would not sign up to the deal because it affects Ireland’s sovereign right to set tax rates.
“We want to make sure that the scope of what we’re suggesting does not inhibit legitimate investment which would create jobs and create wealth,” he said yesterday.
The anti-tax avoidance directive was tabled in January by the European Commission following a series of high-profile scandals that revealed how companies move profits offshore to legally avoid tax.
It builds on proposals by the Organisation for Economic Co-operation and Development (OECD) to combat “base erosion and profit shifting” (Beps), which were not legally binding.
France, Spain, the Netherlands, and Germany want to press ahead with an EU deal, but at least 10 countries, including Ireland, the UK, Belgium, Luxembourg, and several eastern European states, have raised objections. The draft needs unanimous support to pass.
The most controversial moves are curbs on firms shifting profits to foreign subsidiaries in tax havens — the famous ‘double Irish’ — or claiming tax exemptions on dividends moved from tax havens.
Under the rules, EU governments could claim back taxes from those companies if the foreign jurisdiction charges tax below a certain rate.
“Setting tax rates is a matter for member states’ competence,” Mr Noonan said.
“This would be to raise a flag again that Europe was seeking to move a major competence to the Commission from member states,” he added.
Dutch finance minister Jeroen Dijsselbloem, who chaired yesterday’s talks, said EU countries would have to “sacrifice some of our tax instruments that we so much cherish” in order to get a good deal.
“We need an effective deal, not just a deal,” he told reporters after the meeting.
Countries with large multinational sectors, such as Ireland’s, could be unnecessarily harmed by the deal, Fine Gael MEP Brian Hayes said.
“We have got to tease this out country by country,” he said. “Some countries are more exposed because of their level of foreign direct investment,” he said, adding it would be “crazy” for the EU to go beyond the OECD’s Beps recommendations.
EU governments block anti-tax dodging measures: https://t.co/wmKxmiI0UW @OxfamEU #endtaxhavens #ECOFIN pic.twitter.com/RzaUSRY557— Oxfam International (@Oxfam) May 25, 2016