Ireland risks losing out from EC digital tax push
Ireland risks losing out if the European Commission gets the go-ahead to impose a tax on digital revenues.
The Commission proposed in March that large companies with significant digital revenues in the European Union could face a 3pc tax on their turnover.
Cora O'Brien, policy director at the Irish Tax Institute (ITI), yesterday told an Oireachtas Committee on digital taxation that she believes there is a risk to Ireland under the proposal.
"We don't know the details," she told the Committee.
"It is likely there will be a shift in taxable base - if it is population-heavy Ireland will be lose out because we don't have a large population," Ms O'Brien said.
She also said that ITI was concerned that the EU would be moving unilaterally, rather than in co-ordination with the rest of the world, which could create protracted global tax disputes.
Ireland is understood to back key positions taken by the Organisation for Economic Cooperation and Development (OECD), including that a consensus should be built before individual countries and blocs impose new levies on the digital sector.
Ms O'Brien also said that EU companies could be adversely impacted if other non-EU countries apply similar levies in response, impacting the bloc's competitiveness.
She added that despite EU reassurances that it has considered the legal issues around the tax, legal challenges could be brought against the EU digital tax proposals under several headings. These could be on the grounds of discrimination, proportionality, and on the grounds that it is another turnover tax and therefore incompatible with EU law.
And she stressed that any new framework for taxation in a digital environment should not create double taxation for companies.
"However, double taxation will arise with a short-term levy that is not creditable."
In addition, Ms O'Brien said that a 3pc annual pan European levy could raise a number of administrative changes for tax administrations.
On the issue of tax sovereignty, Ms O'Brien warned that the long-term EU proposal was expected to form part of the EU's common consolidated corporate tax base (CCCTB) solution, and that any "measure that is a bridge to CCCTB creates concern about the loss of tax sovereignty".
She added: "I think the EU is quite upfront in terms of where it is going, and we would certainly be concerned about this direction."