Eamon Quinn: Government continues to fight to retain control over corporate tax regime  

Eamon Quinn: Government continues to fight to retain control over corporate tax regime  

The State has long pushed back against any attempt by the European  Commission to encroach on its right to set corporation tax rates. Picture: PA

Apple's tax affairs with Ireland sparked controversy long before the European Commission ruled four years ago that Ireland had struck sweetheart tax deals and ought to retrieve €13bn in back taxes, plus interest, from the phone giant. 

However, a successful appeal brought to the EU General Court by the Government and Apple means that Ireland didn't break state-aid rules and that the huge tax pot will be staying with Apple after all. 

For the Government, yesterday's ruling is only a break from its growing battles over multinationals and taxation.

The State has long pushed back against any attempt by the European  Commission to encroach on its right to set corporation tax rates.      

However, Finance Minister Paschal Donohoe, although welcoming the ruling, warned yesterday that new global ways of taxing the digital giants would inevitably bring iIreland's competitive tax regime back under the focus.                     

And a new potentially lethal threat has emerged from left field in recent days as the commission proposes new ways to get the agreement over taxing digital giants by means that appear to weaken the national vetoes of EU members over their corporate tax affairs.   

Controversy surrounding Ireland's taxation of foreign companies isn't new. In 2011, Taoiseach Enda Kenny clashed with former French president Nicolas Sarkozy, who wanted Ireland to raise the 12.5% corporation tax rate in return for the country getting more favourable bailout terms. 

The controversy over Apple's tax affairs and Ireland was first sparked in Europe but by Washington legislators.         

When Apple CEO Tim Cook and his two senior colleagues were questioned by a US Senate sub-committee in 2013 the headlines generated in the world's business press were unsettling from the perspective of Ireland.

Some US lawmakers repeatedly characterised Ireland as a tax haven claiming behemoth Apple channelled billions of dollars of revenues from most places in the world outside north America through two Irish incorporated companies. 

The charge sheet was that Apple paid little to the US in taxes on over half of its haul in global revenues.

Mr Cook put up a credible performance. Apple said it was the 35% corporate tax rate levied in the US that was the source of the problem. He said the Irish companies and holding company were long established and set up decades before the iPhone was even thought of. 

Revenues going through the Irish companies had already been taxed somewhere in the world, said the top Apple executives.

At the time there was no consensus between the US lawmakers whether the tens of billions of corporate dollars officially left
un-patriated by many US companies constituted a problem in the first place for the US.

That was to change with the election of president Donald Trump whose corporation tax cuts helped US multinationals to repatriate billions back to the US.                                

The US hearing nonetheless thrust Ireland back into the international spotlight and the US business newspaper headlines were not friendly to Ireland. Apple’s submission to the Senate hearing mentioned the country a dozen times, and referred to its key Irish subsidiaries or the Irish tax codes a further 20 times or so.  

Subsequent Irish budgets closed some of the most egregious aspects of corporate tax procedures. Without fanfare in the budget speech itself, in late 2013, former finance minister Michael Noonan addressed the issue of 'stateless' companies under Irish tax law. It was a sign of Irish concerns about potential reputational damage following the US Senate hearing. Ireland had effectively been bracketed alongside Europe’s mountainous and island tax havens.

Mr Noonan went on, in 2014, to announce the phasing out over a number of years of the 'double Irish' tax arrangements used by many other multinational companies. 

Ireland was also engaged in the initiative driven by the world’s largest industrialised economies, run by the Paris-based Organisation for Economic Cooperation and Development, designed to reform the world’s tax system. 

The Department of Finance had repeatedly said Ireland had little to fear from the Group of Eight major economies initiative under the umbrella of the OECD’s so-called Base Erosion and Profit Shifting project. The setting of corporate tax rates remains in the hands of sovereign governments.

In many ways, the international tax debate has come full circle.

In summer 2014, Brussels regulators announced the opening up of formal investigations into corporate-tax deals supposedly struck in Ireland, Luxembourg and the Netherlands. 

The Commission went on, unsuccessfully so far,  to refine its long-standing common consolidated plan to tax company profits on the basis of where companies generate their sales, and not on the basis of country of incorporation. 

It also wants to tax the digital giants. The challenge for Ireland remains that of keeping sovereignty over its corporation tax.                            

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