Thursday 28 July 2016

Ireland wary as EU announces its plans for 'fair and efficient' taxation

Sarah Collins in Brussels

Published 29/01/2016 | 02:30

European Economic and Financial Affairs Commissioner Pierre Moscovici. Photo: Reuters
European Economic and Financial Affairs Commissioner Pierre Moscovici. Photo: Reuters

Ireland will "actively engage" in talks on new EU corporate tax laws as long as they don't go any further than international standards.

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The European Commission yesterday tabled a raft of proposals to close loopholes allowing multinationals to shave up to €70bn from annual tax bills.

The Department of Finance said it "notes" the publication of the draft laws, which contain "a number of proposals aimed at ensuring fair and efficient taxation within the EU".

The draft rules will have to be approved by all 28 EU governments and examined by the European Parliament before becoming law, in 2018 at the earliest. The move follows the high-profile 'Luxleaks' scandal in 2014, when confidential tax deals between Luxembourg and over 300 multinationals were made public.

The EU proposals build on voluntary standards drawn up by the Organisation for Economic Cooperation and Development (OECD) to combat "base erosion and profit shifting" (Beps).

However, the EU's rules go further by introducing a "switchover rule" to curb tax exemptions on dividends and capital gains, and an "exit tax" for companies trying to shift high-value assets like patents to lower tax countries.

The EU also wants to beef up an OECD requirement for countries to share profit and tax information about multinationals operating on their territories, making it mandatory and automatic. "The priority for Ireland is to ensure that the EU approach to implementing Beps and tackling aggressive tax planning is consistent with the consensus reached at the OECD," said a spokesperson for the Department of Finance.

Most important for Ireland will be an "interest limitation" to discourage large groups from shifting profits around via inter-company loans and a "controlled foreign company" rule on how to tax income from subsidiaries outside the EU.

There is also a rule to end "hybrid mismatches" that allow companies to exploit differences in the tax treatment of certain income across countries, and a general anti-abuse clause to catch any tax loopholes that might crop up further down the line. Ireland already has both in place.

The Commission also wants the EU draw up a blacklist of foreign tax havens.

EU tax chief Pierre Moscovici said that he doesn't expect the Government here to have any reservations about the new rules given its enthusiasm for the OECD standards.

"I have had several occasions to emphasise how Ireland is implementing Beps measures now, and the way they're doing it is quite remarkable, and I can't see any reservations arising," Mr Moscovici told reporters in Brussels yesterday.

The rules do not affect Ireland's 12.5pc corporate tax rate - joint second-lowest in the EU, behind Bulgaria and the same as Cyprus - which has come in for criticism in Brussels circles, particularly since the crisis.

"Our idea is certainly not to impose any kind of corporate tax rate at the national level," Mr Moscovici said.

"And we are not going to tell this or that country, you cannot any more have, let's say, 12.5pc - I say that without any purpose - tomorrow," he added.

Irish Independent

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