Finance Minister Michael Noonan said Ireland has little to fear from attempts by the world’s richest countries to get multinationals to pay more tax, reiterating that the country’s headline 12.5% rate is not under threat.
However, some independent observers say Ireland will, in time, face more competition, and its success in attracting large foreign direct investments will remain under scrutiny.
The OECD yesterday issued its final report on ways to reform the global tax structures.
Large companies have aggressively planned their tax structures for years and many pay very little tax despite the huge profits they generate across the globe.
Since the global financial crisis, Ireland’s tax regime has increasingly attracted unwelcome attention because so many foreign firms are based here.
The OECD plans will mean that multinationals will have to disclose more information about their tax structures.
However, Mr Noonan said the “comprehensive” base erosion and profit-shifting (BEPS) report from the OECD will give certainty to Irish authorities and firms.
“As a first step we will legislate for country-by-country-reporting and introduce a ‘Knowledge Development Box’, which will be the first and only such box in the world that complies with the OECD’s new standards,” said Mr Noonan.
Ireland’s offering to attract investment is now enhanced, because the BEPS report bolsters companies who bring jobs and make meaningful investments, said the IDA.
Accountancy firm PwC said tax authorities around the world will have greater insight into multinationals, and put an end to the practice of some companies funnelling revenues through tax havens, but “as a country attracting investment based on real substance, real activity and real jobs, the new rules have the potential to be positive for Ireland”.
Tax advisers Grant Thornton welcomed the proposals, but said they will likely threaten Ireland’s competitiveness as more countries reduce corporate tax rates.
“The reduction in the UK’s rate has allowed the UK offer a much more compelling proposition to overseas investors and we are likely to see other countries follow suit,” it said.
Advisers Deloitte said Ireland will now face more competition and will need to ensure that export-led growth by Irish business abroad is not unduly impacted.
Accountancy firm EY Ireland said firms will need to invest in people and technology to ensure they meet the new compliance obligations set to be introduced by BEPS.
Oxfam, which has campaigned for multinationals to pay more tax, said the report was a good start but that the OECD needs to insist companies pay tax where they do business. It said that many loopholes remain.
“As these final set of OECD proposals are implemented, it will remain important for Ireland to do so in a manner that further enhances the country’s reputation globally,” said the American Chamber of Commerce Ireland.
Chambers Ireland claimed the report reaffirmed the legitimacy and transparency of Ireland’s corporate tax structures and bring certainty to multinationals.
Business group Ibec also said the country will benefit, but again called on the Government to review personal taxes to attract multinationals.
Fianna Fáil said the Government “needs to ensure that these changes are not implemented in a manner that will seriously disadvantage Ireland”.
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