New OECD proposals on corporate tax will hurt smaller markets, expert warns
NEW OECD proposals on taxing hi-tech multinational companies will fundamentally change their business models, Chartered Accountants Ireland warned yesterday.
It said plans to alter the way these global firms are taxed would only benefit large countries with large markets.
The Paris-based economic think tank has published a draft discussion on companies operating in the digital economy.
Proposals include redefining when and where a company is liable for tax. For example, it suggested a company would have a presence in a country even if it only had a "significant digital presence".
The Chartered Accountants Ireland said this would mean that if a company collected data in a country but had no physical presence there, the fact that it was collecting data would be a sufficient reason to impose tax.
Tax director Brian Keegan said the proposals, if adopted, would move company profits away from where value is created, in countries like Ireland, to locations where products are sold – principally the major European countries.
"This would be akin to taxing our agriculture exports where they are sold, rather than where they are grown," Mr Keegan said.
"Ireland is a major exporter of information and communication technologies. From the OECD's own figures, Irish exports in the sector constitute 12.7pc of the world market, and we rank second only to India in terms of market share.
"Accordingly, if these proposals were to be adopted, Ireland could be the biggest loser in terms of our corporation tax take."
The Chartered Accounts is urging businesses in Ireland to make their views known before April 14.
"It is vitally important for Irish business to engage with this process and point out the flaws in the OECD reasoning," he said.
The OECD's proposals, which form part of its wider examination into base erosion and profit sharing, can be found on the OECD's web page.