New rules force multinationals to breakdown income for taxes
Plans to require multinationals headquartered in Ireland to privately disclose their country-by-country activities will place a significant burden on the companies' resources, tax experts claim.
In the wake of sweeping plans to clampdown on global corporate tax avoidance, Finance Minister Michael Noonan yesterday confirmed country-by-country reporting obligations will be introduced in the Budget, which, under international guidelines, would involve multinational companies having to provide to the taxman sensitive data on revenue, earnings, profit and employee numbers.
He also said the proposed Knowledge Development Box, also due to be rolled out in the Budget, would be the first such patent box in the world to fully comply with new international rules.
The country-by-country measure is one of a number of recommendations published by the Paris-based Organisation for Economic Cooperation and Development (OECD) yesterday to clampdown on global corporate tax avoidance.
But tax experts have warned that while the OECD proposals may present an opportunity for Ireland in terms of investment, they will also place a considerable burden and cost on companies to comply.
"The proposals will likely effect in excess of 250 groups operating in Ireland, including both Irish headquartered and subsidiaries of foreign headquartered mulitnationals," said Peter Reilly, Beps (Base Erosion and Profit Shifting) policy leader with PwC.
"The guidance from the OECD is limited and as such it will be difficult for companies to understand the exact data which must be reported. Furthermore, from a systems perspective the required data may not be readily available in a consistent format across the group, which may, in some cases, result in a significant amount of labour hours to physically pull the data together."
Kevin McLoughlin, head of tax at EY Ireland, said that for businesses, the pace, volume and complexity of the tax change could create uncertainty and increased risk of tax disputes.
"The Beps recommendations also include significant new tax compliance obligations. Companies will need to invest in their tax function - both people and technology - to ensure they have the resources to meet these new demands."
Mr Noonan said the Government will legislate for both country-by-country reporting obligations, and the Knowledge Development Box, in Budget 2016.
"Ireland is committed to the Beps project and we will play a full part in its implementation. As a first step we will legislate for Country-by-Country reporting and introduce a Knowledge Development Box, which will be the first and only such box in the world that complies with the OECD's new standards," he said.
Tight government finances and media reports on the tax structuring used by some global companies have spurred significant public anger in Europe and the United States in recent years over tax avoidance.
The Beps package includes 15 recommendations including new minimum standards on country-by-country reporting, as well as minimum standards to curb harmful tax practices, in the area of intellectual property in particular and through the automatic exchange of tax rulings.
Deloitte Ireland's Lorraine Griffin said the measures were an "ambitious statement of intent", but that much work remained to be done.