Benefits of 'double Irish' replacement tax in doubt
Published 31/07/2015 | 02:30
A new corporate tax package aimed at holding onto multinational employers after the controversial 'double Irish' is scrapped may not deliver as planned, experts have warned.
Only companies that undertake research and development in Ireland will benefit from a tax scheme announced in Budget 2015, which was presented as an incentive to replace the controversial 'double Irish' tax loophole.
Technology giants that do their cutting edge development in Silicon Valley in the US, for example, won't benefit.
The news comes as a parliamentary committee in Brussels said Ireland and other countries being investigated over alleged unfair tax breaks given to big business should not benefit from windfalls if back-taxes end up being paid as a result of the EU probes.
Instead, the EU should consider changing the law so that money is shared among neighbouring nations that played by the rules, according to the draft by a special committee on tax rulings in the European Parliament.
Any change would come too late for current European Commission probes into possible illegal aid to Apple in Ireland, Starbucks in the Netherlands and Amazon.com and Fiat in Luxembourg, however.
The Department of Finance has been holding public consultation on the planned Knowledge Development Box (KDB) - a tax package that would slash the tax rate to as little as 5pc on the profits of qualifying companies.
Michael Noonan announced plans for the KDB last year, after bowing to international pressure to phase out the 'double Irish', a scheme used by a number of multinational companies to reduce their tax bills by billions of euro by shifting cash around the globe.
Yesterday the Department of Finance said guidelines set down by the OECD - which coordinates tax rules for developed countries - will limit the scope of the planned KDB.
"From an Irish perspective, while acknowledging the valid points raised in our consultation which have also been reflected in our discussions at the OECD, there is no flexibility beyond the approach agreed at the OECD," the Department said in papers posted online.
Peter Vale, a tax accountant at Grant Thornton, said the new relief, due to be legislated for by the end of the year, will not be as attractive as first hoped.
Almost one in 10 workers here works for an overseas employer and there are fears that tighter tax rules will make the country less attractive.
The KDB was supposed to address that but employers group Ibec said it is not clear from the latest proposals that the Government will introduce the "best in class" regime promised.
"A lot of business is somewhat concerned that when the announcements are made that they're not going to deliver on the aspirations set out," Ibec chief economist Fergal O'Brien said.