Thursday 14 December 2017

Noonan must see the writing on the wall by now

THE House of Commons engaged in its usual school-boy jeering as UK Chancellor George Osborne stood up to announce his autumn statement.

Any officials in the Department of Finance watching Mr Osborne out of the corner of their eye probably felt like jeering as well as the chancellor made it crystal clear that the UK and other large countries plan to target transfer pricing rules, which allow Irish-based multinationals to avoid paying taxes in many other countries.

This is not good news for Ireland and created a sombre backdrop to Finance Minister Michael Noonan's own Budget speech delivered two hours later.

Mr Noonan is a smart man who must see the writing on the wall by now. He can huff and puff about the sanctity of our corporation tax rate, but he knows that the real issue is the transfer pricing, which allows companies to avoid tax by all sorts of complex manoeuvres that are presently legal but could easily be made illegal with the stroke of a pen.

Mr Osborne said that he was working with the Organisation for Economic Co-operation and Development (OECD) to tackle what he sees as a problem for the UK. This should not be news to Mr Noonan but it is yet another reminder that the halcyon days of low corporation tax and unsupervised transfer pricing are over.

The OECD is taking the lead role in fighting tax evasion in Europe, according to the think tank's director of tax policy, Pascal Saint-Amans.

The think tank has even gone as far as establishing a locked database detailing some of the world's most sophisticated tax schemes to allow government tax authorities to privately share revenue-shifting schemes they encounter. That will give ammunition in the new year to stamp out many of the multinationals' tricks.

It is early days but history may yet conclude that Mr Osborne's budget ended up having a greater and more deleterious impact on the Irish economy than Mr Noonan's Budget.

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