There are some in the European Commission who would like to undermine our corporation tax offering, says Michael McGrath
THE European Commission decision on Apple has the potential to create very serious issues for the country and requires a careful but strong response.
With regard to the tax status and liabilities of Apple in Ireland, the commission’s ruling, announced by Margrethe Vestager, reached the conclusion that Ireland was solely responsible for the collection of tax on up to 60% of Apple’s global profits for a decade. This seems to run contrary to the various international tax reforms which link the payment of tax to where the value was created.
Ms Vestager’s decision also contradicts the view of her predecessor, that EU member states have a sovereign right to determine their own tax laws and that state aid cannot be used to rewrite those rules.
Clearly, the commission’s decision is an announcement of major importance, not only for the Irish exchequer and Apple, but also potentially for a range of international companies based in Ireland and employing tens of thousands of our citizens.
I note the repeated reassurances from Revenue and the Department of Finance that Apple did not receive any sweetheart deal on corporation tax. I am also conscious that Apple has made a very significant economic contribution to Ireland in the past 36 years.
There is no doubt that as a country we find ourselves in the middle of a wider strategic clash between the US and Europe. Those public representatives clamouring to accept the decision and its repercussions would be well advised to pause and consider the wider implications beyond the headline of a €13bn tax windfall that will remain out of reach for the foreseeable future, at least until various legal challenges are played out.
At the heart of Ireland’s economic development over the past 50 years has been our ability to attract foreign direct investment. Central to this has been our strong and unambiguous commitment to the corporation tax rate and the fair and consistent application of our system to companies of all sizes. This must remain the case.
There are many outstanding questions, which remain unanswered. The European courts may be the only place where clarity on these issues will be found.
From Ireland’s point of view, it is vital we have a corporation tax regime that is built on certainty.
We must, however, ensure that we remain as open as possible to foreign direct investment from US multinationals. They are a source of significant employment in Ireland, and provide considerable tax receipts to the exchequer every year.
FDI has been a central element of our economic strategy since the early 1960s. At present, nearly 200,000 people are employed by multinationals located in Ireland. While we will continue to support, and promote indigenous enterprises, our ability to attract investment from overseas must be protected.
Our country has been transformed by the likes of Google, Facebook, IBM, and Pfizer locating in Ireland. Fianna Fáil is committed to ensuring that those companies, and others, continue to see Ireland as a good place to locate and do business.
Our corporate tax rate is a vital part of Ireland’s attractiveness to foreign direct investment and driving on our indigenous industries. We have a strong record of fighting to protect the rate and securing it in negotiations on EU treaties. The commission has relaunched plans for a common consolidated corporate tax base, which is essentially a fresh route to removing sovereignty over setting national taxation rates. Ireland’s rate is transparent and fair.
As far as I am concerned, we will neither accept nor implement any increase in Ireland’s corporation tax rate.
So too, we should oppose and, if necessary, veto any measure to weaken or reduce national control of corporation tax rates.
Contrary to an often repeated myth that companies, especially multinationals, pay very little tax, exchequer figures for 2015 show that corporation tax brought in €6.85bn over the course of the year. That is €2.25bn more than 2014 and nearly double the amount collected in 2011.
It is noteworthy that the proportion of all taxes raised from corporation tax is substantially higher in Ireland than Germany. The activities of multinational firms also generate a range of other taxes including income tax, PRSI, universal social charge, and employer’s PRSI.
There are no special corporate tax rates in Ireland. Our tax rules are set out clearly in legislation and the rules are applied fairly to all companies, regardless of size. Other EU countries do not have the same level of transparency but are not subject to the same close scrutiny as Ireland. It will come as no surprise that there are some in the commission who would like to undermine Ireland’s corporation tax offering.
Ireland is attractive to multinationals for a range of reasons. The headline corporation tax rate is only one consideration in assessing a country’s corporation tax regime. Market access, a supply of skilled labour, and a stable regulatory environment are cited by multinationals as key reasons for locating here in addition to our tax regime.
Ultimately, though, we need to protect our interests and for that reason I agree with the proposal to contest and appeal this decision.
Michael McGrath is Fianna Fáil’s spokesman on finance
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