Closing tax EU loopholes ‘will not affect Ireland’

EU laws to stop countries tax dumping should not affect Ireland and its multi-nationals, the chair of the Oireachtas finance committee has said.

Under the rules, every country will have to inform all other EU member states about the tax arrangements it makes with companies using so called tax rulings.

This will allow tax authorities to see if a company is evading tax though profit shifting by channelling money, for instance, through a company in Ireland.

This is a constant complaint by Berlin in particular, which says it is losing tax income because companies that carry out most of their business in Germany divert profits through Ireland.

The net is gradually closing in on companies using such loopholes, however, and on countries such as the Netherlands, Luxembourg, and Ireland that use such sweeteners to attract multinationals.

The European Commission is devising rules to eliminate secret tax deals by having greater transparency and possibly have companies publish information about their profits and where they pay tax.

Commission tax director Valère Moutarlier told politicians from national parliaments. including from Ireland. that they want to ensure companies pay tax where their goods or services are actually produced.

They also hope to move ahead with the long-debated Common Consolidated Corporate Tax Base that would allow companies with branches in various member states to fill out just one tax return, and have the taxes allocated to the countries depending on where its goods were made and sold, rather than where it was headquarters for instance.

“We will deliver a Commission initiative by summer to take a fresh look at the taxation of companies as part of fair competition,” said Mr Moutarlier, adding many practices were legal but no longer acceptable.

The Commission is cooperating with the OECD that at the behest of the G20 is working on plans to prevent base erosion and profit shifting globally and which is due to be finalised later this year.

Dr Liam Twomey, the chairman of the Oireachtas finance committee, says that Ireland has nothing to fear from the new rules. “First, we do not give tax rulings, only opinions that interpret the existing legislation. We don’t do what Luxembourg does agreeing a tax rate of 5% for example,” he said.

In this way, he maintained, Ireland was different to other countries whose tax rulings the Commission is investigating. The Government was also abolishing the ‘double Irish’ that allowed companies move money through the country and eventually into tax havens paying little or no tax.

However, the European Commission maintains that Ireland’s tax opinions given to companies are the same as the tax rulings under investigation in other countries, and points out that this is the basis of their investigation into the deal done with Apple.