Thursday 20 September 2018

Ireland faces loss of €200m a year in EU move

Stock picture
Stock picture

Shona Murray

The European Commission yesterday launched proposals to levy a tax on around 100 major multinational tech giants - despite opposition from Ireland, the United States and the OECD.

Ireland faces a loss of around €150m-€200m a year in corporation tax income if the proposals come into force, according to Joe Tynan, head of tax at PwC Ireland.

That's because the digital turnover tax would be charged where customers live, so will mostly be collected by big countries, unlike corporation tax, which is charged on profits and paid where a business is headquartered.

Taoiseach Leo Varadkar has described the levy as a "knee-jerk measure just to be seen to be doing something sooner".

Joe Tynan, head of tax at PwC Ireland. Photo: Maxwells
Joe Tynan, head of tax at PwC Ireland. Photo: Maxwells

The Taoiseach claimed Germany, where he met Chancellor Angela Merkel on Tuesday, has reservations about the plan.

"I think it's fair to say that our positions were closer than I might have expected before I came here", said Mr Varadkar after an official visit to meet Mrs Merkel in Berlin.

"Certainly we both agree that it's important to get this right, and just introducing a short-term measure without fully thinking it through; without understanding the implications on how it might backfire, wouldn't be the right approach."

The Commission said an extra €5bn in tax would be raised, however that would eat into tech giants' taxable profits - including those taxed here.

The proposals can only be adopted with backing from all EU member states, making the Irish opposition potentially decisive.

The proposed tax is so selective that Google and Facebook, which make their money from online platforms and advertising will be hit, while Amazon will escape the levy altogether, Mr Tynan said.

The Organisation for Economic Co-operation and Development (OECD) said the decision to use "interim measures" to tax online firms could have "adverse consequences". The US warned the scheme would "inhibit growth and ultimately harm workers and consumers," even before it was announced.

However, the G5 group of France, Germany, Italy, Spain and the United Kingdom, said it welcomed the move. Those big countries stand to gain most from the focus on collecting the levy where customers live.

Finance Minister Paschal Donohoe said Ireland will work with others to "critically assess the proposals from the Commission", but noted the OECD views.

Under the scheme, the Commission intends to levy 3pc of revenue earned from certain digital activities that it thinks are missed under current international tax structures.

Revenue generated through targeted advertising is a particular focus.

The levy will also target sales from digital platforms that connect buyers and sellers - such as travel website Airbnb.

The Commission also wants EU states to get a cut of income from the sale of personal data.

Firms such as Facebook and Google with global annual revenues above €750m and taxable EU revenue above €50m, will meet the levy's threshold.

Critics say the plan will be seen as an attack on mostly US companies at a time of escalating trade tension.

But European Commissioner for Economics Pierre Moscovici said European, Asian and American companies will be affected - around 100 in total.

Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business