Wednesday 20 February 2019

Other EU countries looking at lower tax rates to get competitive advantage - Paschal Donohoe

  • Number of EU countries are considering lowering their corporate tax rates to try and get a competitive advantage - Finance Minister
  • Speaks as Ireland's corporate tax regime has come under siege as potential Brexit chaos looms
Paschal Donohoe. Picture: Gerry Mooney
Paschal Donohoe. Picture: Gerry Mooney
Gavin McLoughlin

Gavin McLoughlin

A number of EU countries are considering lowering their corporate tax rates to try and get a competitive advantage, Finance Minister Paschal Donohoe has said.

It is a sign of the competitive pressure Ireland amid upheaval in the international tax landscape.

Polish Prime Minister Mateusz Morawiecki yesterday made an emotive plea for reform - saying EU "tax havens" should be abolished in a thinly veiled swipe at Ireland.

But today Mr Donohoe said some EU countries recognise the benefits that lowering corporate tax can bring.

"There are other countries who are now debating with themselves should they be lowing their top line corporate tax rates, and they can see the competitive benefits that that can bring, "he said,  adding that "there's always questions and tension as countries compete with each other".

In a panel discussion yesterday Mr Donohoe ruled out cutting Ireland's 12.5pc rate any further, saying this country would not be part of any race to the bottom. Making a decision to cut the rate would attract international criticism, given the way our treatment of big companies has been received in some quarters.

Mr Donohoe was speaking at the World Economic Forum in Davos where he has been seeking to round up support from other countries ahead of an important international tax reform process.

The process is being run by the Organisation for Economic Co-operation and Development (OECD), which is seeking to find a way of effectively taxing big tech companies.

"While I can't give a commitment to what our final view is going to be because we're at the start of the process, we achieved a huge amount on corporate tax reform through the OECD, and I'm committed to trying to do the same now on the issue of digital taxation," Mr Donohoe said.

He said he didn't want to outline any 'red lines' but that he would be concerned about any change that would mean companies are taxed according to where their users are based. That would hurt Ireland because of its small population.

Ireland has consistently said the OECD is the right forum to resolve tax matters rather than the EU. But at OECD level Ireland doesn't have a veto and could find itself isolated internationally if it can't sign up to a final agreement.

"We will be putting all of our efforts into coming up into a platform that we can agree to," Mr Donohoe said.

"What I've been doing while I've been [in Davos] is I've been meeting the finance ministers of lots of other small open economies and we've been reviewing the common ground that we have, and we've been looking now at how we can work to protect the interest of exporting countries. And particularly countries that export services, as we work through the process.

"I think this process could take anywhere between 18 and 24 months. But it will be a very important process for Ireland as the last one was."

Ireland is sensitive to changes in the regime as tech companies are big investors here, and might decide to leave if our system becomes less attractive.

Asked about trying to balance the need for support on Brexit with the desire to maintain our tax sovereignty, Mr Donohoe said there was a group of EU countries who backed Ireland's position that unanimity should be needed for EU tax changes.

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