Ireland to lose out in shake-up of taxing digital multinationals  

plans have long been seen as a threat to the amounts the Irish exchequer collects in corporation tax from multinationals. Picture: iStock

Ireland will be among a handful of European countries to lose out in plans to shake up the way multinationals are taxed around the world, according to a key report from the Organisation for Economic  Co-operation and Development (OECD). 

The 280-page report is the latest by the OECD prepared for the G20 group of the world’s most powerful economies on ways for countries to tax multinationals.

The OECD is trying to build a consensus around taxing the digital service giants, which include Google, Facebook, and potentially parts of Apple’s service operations. It is also seeking to strike an agreement to set a minimum rate of corporation tax.

Implementing a minimum level of corporation tax could release an additional $100bn (€85bn) in revenues for governments around the world, while a further $100bn could be released under new ways of taxing the digital multinationals.

However, the plans have long been seen as a threat to the amounts the Irish exchequer collects in corporation tax from multinationals. 

The report classifies Ireland as being among a group of European jurisdictions that attracts a large amount of foreign direct investment. This group of “European investment hubs” also includes Guernsey, Cyprus, Gibraltar, Hungary, and the Isle of Man, as well as Jersey, Luxembourg, Netherlands, and Switzerland, according to the OECD.

The OECD says many economies will likely potentially tap more corporation taxes, but that the investment hubs would likely lose out.

“In contrast, investment hubs would lose tax base in the reallocation, reflecting that a significant share of residual profit is currently located in investment hubs,” the report said.

“Tax base gains are largest among jurisdictions with higher rates [20-30%, and even more above 30%], while jurisdictions with lower rates [10-20%, and even more 0-10%] tend to lose tax base,” according to the OECD report.

UCC economist Seamus Coffey, a former chair of the Irish Fiscal Advisory Council, said concerns for Ireland remain about the amount that the Government will potentially lose from taxing digital multinationals. Picture: JML Photography

UCC economist Seamus Coffey, a former chair of the Irish Fiscal Advisory Council, said the report by the OECD secretariat is still far from securing key support of the US.

Mr Coffey said that concerns for Ireland remain about the amount that the Government will potentially lose from taxing digital multinationals. However, it does not mean the Government’s corporation tax haul falls by a ruinous amount.

Digital multinationals will continue to pay corporation taxes to the Irish exchequer, and the proposals exclude manufacturing giants, he said.

“Given the political will for change, we would expect a significant drive over the coming months for agreement to be reached,” Peter Vale, partner at Grant Thornton Ireland, said.  

For Ireland and other countries, “the next few months of public consultation will be critical for businesses to have their say”, said Peter Reilly, tax policy leader at PwC Ireland.

“Ireland must continue to constructively engage with the OECD to ensure that, as the proposal develops, we maintain a corporate tax system that is fit for purpose and at the forefront of global standards,” he said.