Wednesday 12 December 2018

Brussels says Ireland helping firms avoid tax with 'aggressive' planning

Pierre Moscovici. Photo: Reuters
Pierre Moscovici. Photo: Reuters
Donal O'Donovan

Donal O'Donovan

The European Commission has claimed that tax multinationals are continuing to use Ireland for "aggressive tax planning" and that funds routed through here as royalty and dividends payments may be being allowed to escape tax altogether, despite rules being tightened up in 2015.

The claim is included in the Commission's latest recommendations for Ireland, part of the post-crash system for monitoring economies in Europe. The Commission gives a largely-positive assessment of the Irish economy.

Brussels has clashed with a succession of Irish governments over various aspects of the Irish corporate tax regime - most publicly in the record €13bn tax bill the State has been ordered to collect from Apple, despite Ireland's insistence the technology giant had been fairly taxed.

The latest commentary around Ireland's tax regime will be seen as a shot across the bows of the Department of Finance that there won't be a let-up in pressure from EU Economy and Taxation Commissioner Pierre Moscovici.

The Commissioner is pushing two major taxes; a levy that will apply to large digital economy corporations, many with their European base in Ireland, and the so-called Common Consolidated Corporate Tax Base - a harmonised regime that would apply across Europe.

The Government here is an outspoken opponent of both schemes. The latest Commission report strongly implies Ireland is being used to cut companies' tax bills elsewhere.

"The high level of royalty and dividend payments as a percentage of GDP suggests that Ireland's tax rules are used by companies that engage in aggressive tax planning. Limited application of withholding taxes on outbound (ie from EU residents to third-country residents) royalty and dividend payments made by companies based in Ireland may lead to those payments escaping tax altogether, if they are also not subject to tax in the recipient jurisdiction," it said.

"As indicated in the 2018 euro area recommendation, the fight against taxpayer's aggressive planning strategies is essential to impede distortions of competition between firms, provide fair treatment of taxpayers and safeguard public finances," it states. Elsewhere, the Commission recommended closing out a procedure against excessive public spending in France - after nine years.

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