Revenue to target tax of global giants
Taxman plans swoop on multinationals
THE head of the Revenue Commissioners, Josephine Feehily, is about to clamp down on a tax avoidance scheme which allows multinational companies to boost their profits by avoiding taxes in certain countries.
The scheme, which is known as 'transfer pricing', allows the multinationals to shift profits to companies within the same group that are based in low tax countries. By doing so, they avoid paying hefty tax rates on much of their profits.
"One of the risks we need to be conscious of is the risk of transfer pricing," said Ms Feehily. "This is why the Finance Minister introduced transfer pricing legislation last year. That legislation will enable us to look at doing a small number of transfer pricing audits later this year."
Some large multinationals have already run into trouble with tax authorities over transfer pricing. In the US, the drug giant, GlaxoSmith-Kline, paid US$3.4bn (€2.3bn) to the Internal Revenue Service a few years ago to settle a transfer pricing dispute.
Irish arms of American multinationals have also found themselves at the centre of international transfer pricing inquiries, according to Ms Feehily.
Separately, the low Irish corporation tax rate which has attracted many multinationals to Ireland could be undermined if the Common Consolidated Corporate Tax Base (CCCTB) -- a single set of rules that companies operating within the EU could use to calculate their taxable profits -- is introduced.
Ms Feehily believes that the CCCTB could make it harder for businesses in Ireland to manage their tax. "As an administrator, I can't find myself convinced by the administrative simplification argument that the European Commission makes about the CCCTB," she said.
"In fact, it seems to me that if a business is operating in five countries and they already have to deal with five tax systems, this would mean they'd have to learn six. To know whether you liked the CCCTB or not, you'd have to do the accounts both ways."
Sunday Indo Business