EC plan on tax loopholes won't hit us - Government
THE Department of Finance said Ireland would not be hit by European Commission proposals to crack down on tax loopholes.
The commission proposed rule changes yesterday that will force companies to pay taxes on cross-border hybrid loan payments, so that firms don't use accounting loopholes to avoid taxation.
"This is not a situation that arises under the Irish tax code-- as Ireland (unlike most EU member states) has no exemptions for foreign income," a Department of Finance spokesman said yesterday. "We have a very broad tax base and tax is charged on all foreign income."
It was reported yesterday that the changes were aimed at countries such as Ireland and the Netherlands.
EU Tax Commissioner Algirdas Semeta said changes to the EU's parent-subsidiary directive would make sure companies pay tax in at least one country on hybrid-loan payments. The EU also wants countries to adopt a "common anti-abuse rule" to discourage aggressive tax planning. Hybrid-loan arrangements are financial instruments that have both debt and equity characteristics and can be used to minimise or avoid taxes, the European Commission said.
The proposal has the potential to raise "in the magnitude of billions of euro" in revenues for EU nations, Mr Semeta told reporters in Brussels yesterday. When asked what it would mean for Google, Amazon and Apple, whose tax strategies have attracted international attention, Mr Semeta said the plan would affect a range of companies.
The EU aims to have the new rules in place by December 2014, EU spokeswoman Emer Traynor said. The proposal requires unanimous agreement among nations to be enacted.
European laws currently allow subsidiaries in some countries to take tax deductions on loan payments to their parent companies, and EU law lets parent companies avoid taxes on dividends that they receive from their subsidiaries. The new plan would require companies to pay taxes on an incoming payment if it has been deducted elsewhere as a debt repayment, the EU said.
"These businesses need to make their fair contribution to public finances," Mr Semeta said in a statement. "We can no longer afford freeloaders who reap huge profits in the EU without contributing to the public purse."