Government to probe how our corporation tax hits third world
IRELAND'S corporation tax system is to come under the microscope once again, with the launch of a new probe by the Department of Finance into how our tax regime affects the developing world.
A public consultation process and report will be completed as part of what is known as 'spillover analysis' – research into what impact, positive or negative, our tax system has on weaker economies.
The influential OECD, IMF and charities around the world have called for countries to undertake spillover analysis as standard when introducing major tax changes.
News of the study follows a period of unprecedented global focus on tax systems and corporate tax evasion, with Ireland accused of unfairly enticing investment away from other countries with a low corporation tax rate of 12.5pc.
Irish charity Christian Aid, which will be heavily involved in the new research project, has been particularly vocal on issue of corporate tax avoidance, accusing Irish-headquartered drug firm Shire of the practice yesterday. It estimates that developing countries lose about €160bn a year from companies who shift their tax base to low- tax jurisdictions to save money.
"It's no longer acceptable for big companies to aggressively avoid tax, whether in Ireland or in developing countries, which we estimate lose some $160bn a year to tax dodging by multinational companies" said Sorley McCaughey, Christian Aid's head of advocacy and policy. "Companies must demonstrate that they have adequately assessed and mitigated reputational risks arising from their tax practices."
The public consultation and resulting report launched yesterday by the Department of Finance is not expected to prompt immediate legislation.
The project is instead aimed at adding to the research on this topic and fostering debate.
Ireland will be one of the first countries to take this step.
The Netherlands has done something similar; its Ministry of Foreign Affairs published a study on the effects of Dutch corporate tax policy on developing countries last November.
A study released by auditing firm KPMG yesterday, meanwhile, found that Ireland's corporation tax is the fourth lowest in the world and the lowest in the EU – though Irish people pay unusually high top marginal rates of income tax.