EU commissioner Margrethe Vestager’s statement on Tuesday, concerning state aid to Apple, is a crucial escalation in an investigation that began several years ago. Predictably, the political response here, in some quarters, has been to call for further investigation.
The EU Commission’s state aid investigation was prompted by matters brought into the public domain by the permanent subcommittee on Investigations of the US senate, in May 2013. Back then, the senate subcommittee compiled a report highlighting Apple’s structure in Ireland.
Public tax investigations often start with politics and politicians. That’s not unique to the US. In this country, the DIRT enquiry, in 1999, was the work of the Public Accounts Committee of the Oireachtas. Taxpayers expect to have their affairs handled confidentially, and revenue authorities worldwide are secretive about the taxes they collect. We don’t have the full details of the commission’s decision on Apple, because of concerns over confidentiality. All that is in the public domain is the gist of the findings, as outlined in Ms Vestager’s press conference.
There is a predictable knee-jerk reaction from the political classes in clamouring for transparency. Remember the Panama leaks, in April this year, and the publication of files suggesting that secretive offshore financial vehicles were in widespread use? That led to the publication, in the UK, of return-of-income details from senior politicians, including the then PM, David Cameron, and the current opposition leader, Jeremy Corbyn. A feature of the US election debate is whether or not presidential hopefuls, Donald Trump and Hillary Clinton, should publish their tax returns. Now, the call is for greater transparency by multinationals.
Revenue have the right to obtain any information they like from any taxpayer, including a multinational, by force if they consider it necessary.
However, different constraints apply to what Revenue can do with taxpayer information. They have a duty of confidentiality and can only release information outside of their office under strict conditions. Leaking information that can be linked to, or can identify, a taxpayer outside of these conditions is one of the few situations in which a Revenue officer can be convicted and fined under the Taxes Acts.
Revenue have often refused to give the political system details of taxpayer activity. This was highlighted most recently when Revenue wrote to the Minister for Finance, Michael Noonan, to explain why corporation tax receipts had increased in 2015, but gave no indication of which companies, or even which types of company, were responsible for the increase.
Ireland is part of an OECD system known as “country-by-country” reporting. The idea is that multinationals make reports of how much they earn in each country and how much tax they pay there. Country-by-country reporting has been brokered by the OECD and supported by most of its member countries. When revenue authorities know where multinationals generate profits and pay taxes on them, the shifting of money around the globe to defer or extinguish tax is much less likely to happen. Here in Ireland, there is legislation to facilitate country-by-country reporting. The first exchanges of data by Revenue with their counterparts abroad are likely within the next year.
While there is support for making such information available to revenue authorities to help police the system, some countries, including the United States, have balked at the idea that multinational tax-and-profit analysis would be made public. Any calls here, from any side of the political spectrum, for public enquiries or parliamentary debates into the affairs of any taxpayer, must be seen in this light.
Public debate on the cross-border taxation of companies, over the past several years, has already led to significant changes in Irish tax law and practice. The most obvious example of reform was the abolition of the so-called Double Irish structure two years ago. That structure permitted the long-term deferral of corporation-tax liabilities in some circumstances. It is being progressively phased out. Another is country-by-country reporting.
This kind of tax reform will continue and should be enhanced by public debate. But there is no point in anyone calling for any type of committee, or investigation, that will immediately be thwarted by the domestic obligations of taxpayer confidentiality on the part of the Revenue, or obstruction in the home countries of the multinationals concerned. We need sensible discussion, not knee-jerk calls for enquiries.