Thursday 23 February 2017

'EU scheme could slash Ireland's tax base in half'

Donal O'Donovan and Sean Duffy

Seamus Coffey has warned EU plans could devastate Ireland’s tax base
Seamus Coffey has warned EU plans could devastate Ireland’s tax base

European Commission plans to standardise the way corporation tax is calculated and paid across the EU could destroy Ireland's tax base, a senior economist has warned TDs and Senators.

UCC economist Seamus Coffey was giving evidence in front of the Oireachtas Finance Committee on European Commission plans to introduce a Common Consolidated Corporate Tax Base (CCCTB) .

The Government is opposed to the plans, which include making companies pay tax in countries where sales are made rather than where businesses are controlled.

In Ireland's case it would undermine the competitiveness of the 12.5pc corporate tax rate that has helped make the country a favourite European base for US multinationals.

Changing the rules would dramatically undermine the tax base here, Mr Coffey told the Committee.

"It is not unduly pessimistic that Ireland could lose up to 50pc of our current Corporation Tax base if the CCCTB is to be introduced," he said.

Corporate tax receipts this year will be more than €7bn and are an increasingly important part of the overall State finances.

As well as seeing companies based in Ireland pay some of the tax currently paid here elsewhere, the changes would influence corporate behaviour including where firms set up, he said.

The changes proposed by Brussels could also see some Irish firms pay less tax, using new loopholes not currently available, including writing off entertainment costs, he said.

In its submission to the Committee the Irish Tax Institute said allowing the CCCBT to go ahead would entail a loss of sovereignty for Ireland.

"Countries need the flexibility to adapt their tax policy if problems arise or individual circumstances change. One of Ireland's unique strengths is that we can adapt quickly to change when the need arises. This has served us well and is not something to surrender lightly."

Meanwhile, at the Dáil Budgetary Affairs Committee, the Irish Fiscal Advisory Committee (IFAC) has said that budget overruns next year will mean that the Government will not be left with any fiscal space in 2018.

IFAC officials told the Oireachtas Select Committee on Budgetary Oversight that latest calculations show a difference of €600m between the council's estimates and the Government's over spending in 2018.

The revised IFAC estimates call into question the Government's decision to exceed spending guidelines outlined by the IFAC and the European Commission prior to Budget 2017. IFAC chairman, Prof John McHale, said there was a danger that the public finances could be allowed to deteriorate while the country retains a high level of debt.

Irish Independent

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