New EU plans for a so-called consolidated tax base has the potential to be much more costly to Ireland than the billions it's slated to lose under ongoing global reforms, warns UCC economist Seamus Coffey, who is one of the the country’s leading corporate tax experts.
The European Commission set out its stall this week and proposes to go even further than the Organisation for Economic Co-operation and Development, by pitching a new version of a common consolidated corporate tax base that has long been bitterly opposed by Ireland.
In a 14-page document entitledwhich was prepared for the European Parliament, the commission proposed an allocation of the pooled corporate taxes for all large companies among the EU 27 states. The plan goes beyond an overhaul of taxing of digital multinationals such as Apple, Amazon and Google, proposed by the OECD.
It seeks what it calls a business in Europe framework for income taxation, which is widely seen as its third attempt in 15 years to build consensus for a common consolidated corporate tax base but now under a different name.
The Government has estimated the OECD reforms will knock at least €2bn a year (and possibly up to €4bn) it collects from corporate taxes and the business in Europe framework for income taxation plan by the EU now “has the potential to have a much more detrimental effect on corporate tax on Ireland”, Mr Coffey said.
Mr Coffey is a former chair of the Irish Fiscal Advisory Council and has written major reports in recent years for the Department of Finance on the implications of the reforms of taxing multinationals will have on the exchequer.
The exchequer relies on corporate taxes to raise almost €12bn a year, which accounts for a record 20% of all its annual tax receipts. Most of the €12bn is accounted for the profits of a handful of multinationals, which the Government won’t identify by name.
Mr Coffey said part of the business in Europe framework for income taxation plan by setting a common set of rules may benefit Ireland but that the pooling of corporate taxes in the EU-27 and allocated as part of a formula “is a threat”.
He said previous iterations of the EU plan failed to get enough support and the focus will fall on Germany’s position for whether the commission makes more progress this time.