Taoiseach defends corporate tax policy at OECD

Taoiseach Enda Kenny, Tánaiste Eamon Gilmore and the four Cabinet Ministers who flew on the government jet to Paris yesterday did not see a single member of the French socialist government.

Instead, they spent the day at the Organisation for Economic Co-operation and Development, that hotbed of liberal economics, at a sensitive time in Franco-Irish relations. The US internet giant Yahoo had just announced it is transferring financial operations from France to Ireland.

Asked about Yahoo’s defection, President François Hollande said “we must act” against “big companies who move to countries with low corporate tax”. He promised to raise the subject with President Barack Obama in Washington next week.

French discontent
Mr Kenny was repeatedly asked about Yahoo's move to Ireland, French discontent and the OECD's attempts to close corporate tax loopholes through its "Base erosion and profit shifting" (BEPS) project.

Yahoo was doubtless influenced by “the clustering impact of companies involved in the information technology sector [which] creates its own energy and its own dynamism,” Mr Kenny said. “With all the major players involved in Ireland, Yahoo decided it was a prudent thing for them to do.”

Threats to data security from French intelligence were reportedly a factor in Yahoo’s decision. “The regulatory system in Ireland is a model that could be used in any European country,” Mr Kenny said. “This is important for people to understand, that data is collected, that data is safe-guarded.”

The Taoiseach distinguished between Ireland’s low, 12.5 per cent corporate tax rate – effectively 11.9 per cent – and profit shifting and tax avoidance schemes such as the “double Irish” and “Dutch sandwich”, which BEPS seeks to eliminate.

Mr Kenny stressed Ireland’s full participation in BEPS, saying there must be “an international response to an international phenomenon”. Because of “a perception of reputational damage”, the Minister for Finance had declared his intention “to abolish the stateless concept in Ireland”, he added.

Grace Perez-Navarro of the centre for tax policy at the OECD said BEPS will not affect corporate tax rates. “Every country has a sovereign right to have its own tax rate, so I don’t think Ireland has to worry about that.”

The OECD is trying to close loopholes, which will require changing tax treaties and passing domestic legislation “to ensure there are not abuses where income goes untaxed anywhere,” Ms Perez-Navarro noted.

In any case, Ireland receives no revenue from profits that transit the country through the “double Irish” strategy. “It’s in Ireland’s interest to attract businesses that create jobs and businesses that pay their 12.5 per cent corporate tax.”