Saturday 18 November 2017

Triple threat to our low rates as EU targets Irish 'tax sovereignty'

Transparency call: Moscovici. Photo: Reuters
Transparency call: Moscovici. Photo: Reuters
Donal O'Donovan

Donal O'Donovan

The Irish strategy of boosting jobs by acting as a low tax bridge between US corporations and the EU is facing an unprecedented combination of threats, just as the fallout from Brexit rattles the domestic economy.

Brussels' top economic official has told the Irish Independent that "tax sovereignty" will ultimately be vested at EU level, while Donald Trump has vowed to ship jobs and tax income back to America during his presidency.

In Brussels, Commissioner Pierre Moscovici said that his push for a Common Consolidated Corporate Tax Base (cccbt) is a response to public demand for action.

"We are in a new world where people want transparency and want the multinationals to pay their fair share of tax where they take profits," he said. "We are really, I think, not trying to act against national tax sovereignty but to create a European sovereignty in this matter."

The Commissioner for Economic and Financial Affairs, Taxation and Customs is one of the EU's most powerful officials. If he's successful and tax authority shifts from Dublin to Brussels, it will end Ireland's often controversial but legally protected ability to use independent tax powers to attract US multinationals to set up here when they enter the European market.

The EU push includes having big companies pay tax in territories where they make sales instead of at a global or regional level. That would leave Ireland, as headquarters for a significant number of large multinationals, worse off.

Any major changes at EU level need support from all member states, but Ireland has historically relied on support from the UK in the horse-trading on tax issues at the European Council, but it is set to exit the Union.

The rapidly unravelling global political environment means the Government in Dublin now faces a potentially bruising war on at least three fronts, including the fallout from June's Brexit vote in the UK.

The Governor of the Central Bank, Philip Lane, told members of employers' group Isme yesterday that Brexit is now the biggest threat to small business.

Meanwhile, Mr Trump's senior economic adviser Stephen Moore this week said they will slash corporate tax rates to bring jobs and money "home" to the US.

He predicted "a flood of companies leaving Ireland and Canada and Germany and France."

The Trump plan is to slash US corporation tax to 15pc from 35pc, the highest in the developed world.

However, the US Ambassador to Ireland, Kevin O'Malley, said he doesn't believe Mr Trump's election as president will lead to a mass exodus of American business from Ireland.

Speaking to the Irish Independent, he said: "If you think that Ireland is a tax haven, then you might be concerned about a lower tax rate. But I don't believe that.

"If, like me, you believe that these companies are here because of the Irish workforce and they're doing well here - there is no reason for them to leave."

Some of Ireland's biggest employers include Apple, Microsoft and Google. There's an estimated $1.3trn of cash held outside the US by American corporations, according to a report this week by Moody's.

A tax cut or tax amnesty by the new Trump administration could see much, or even all of that money flood into the US. Even at a reduced rate, the one-off gain would be huge.

Read more: Is EU putting our 12.5pc tax rate under siege? It's sure starting to look that way

Read more: EU harmonisation push tipped to shrink Irish corporate tax take 

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