Oxfam Ireland has urged the Government to take immediate action to force multinational companies to publicly declare where they pay taxes.
The call comes after European Commission officials said that Starbucks and Fiat Chrysler must both pay back as much as €30 million in back taxes after it ruled that so-called "sweetheart tax deals" made by the companies with tax authorities in the Netherlands and Luxembourg were illegal.
Separately, Chartered Accountants Ireland questioned why it had taken the commission a year and a half to deliver the ruling and why the investigation into Apple, which was announced at the same time, has not yet concluded.
Brian Keegan, head of tax at the organisation said that in examining the conduct of revenue authorities in applying national laws, rather than scrutinising national laws to ensure compatibility with State aid, the commission was entering into new territory.
“It seems to us to be a serious matter for the commission to suggest that any revenue authority might issue any ruling which does not reflect economic reality. This is not merely about whether any particular company might owe more tax. It is in fact a challenge to established revenue authorities working within long standing law and internationally agreed guidelines,” he said.
"There will be wider consequences; the US Authorities have already signalled its concerns over these outcomes and said that retroactive taxes might be borne by US taxpayers. The US Treasury head of international tax Bob Stack is reported to have said that a purely prospective remedy would alleviate these concerns," Mr Keegan added.
Oxfam said the commission’s rulings highlighted a need for public tax reporting in order to end tax-dodging for good.
"We need to fix the toxic global tax system which allows companies to rig the rules, often at the expense of the ordinary people in the countries where these companies operate," said Oxfam Ireland chief executive Jim Clarken.
Minister for Finance Michael Noonan announced during last week's budget that Ireland will be one of the first countries to require companies operating here to declare to authorities how much tax they pay, and where. These new rules are being introduced in accordance with the recent recommendations of the Organisation for Economic Cooperation and Development (OECD).
However, Oxfam said it does not believe the new rules go far enough to tackle tax dodging.
“People have a right to know what tax multinationals pay. The Irish government moved in the right direction last week, but missed the opportunity to show real leadership by ensuring citizens are aware of exactly what companies earn where, what they owe where, and what they actually pay in tax,” said Mr Clarken.
Clampdown
Starbucks and Fiat are the first two companies facing repayment orders as EU regulators seek to clampdown on tax-dodging multinationals. The commission's ruling now sets up a showdown with Apple and Amazon, who are also embroiled in the investigation.
Both Starbucks and Fiat have both denied that they received state aid. Luxembourg’s finance minister also said his administration disagreed with the ruling ruled that the tax deal it struck with Fiat was illegal.
"Luxembourg disagrees with the conclusions reached by the European Commission in the Fiat Finance and Trade case and reserves all its rights," Pierre Gramegna wrote on Twitter.
The finance ministry added that it believed the Commission had not shown that Fiat received selective advantages with reference to Luxembourg’s national legal framework, saying the company had not received illegal state aid. “Luxembourg already notes that the European Commission has used unprecedented criteria in establishing the alleged State aid,” the ministry said in a statement.
The Dutch government said it was “surprised” by the commission’s decision on its tax deal with Starbucks and said it was convinced the arrangement was in line with international standards.
“The fact that the commission observes that there would be state aid in the Starbucks file raises a lot of questions,” the Dutch government. “The Netherlands is convinced that actual international standards are applied.”
Fiat “did not receive any state aid” and “any finding in this matter would be immaterial to the FCA Group’s reported results,” the company said in a statement. Starbucks meanwhile said it would appeal the commission’s decision.
“Starbucks shares the concerns expressed by the Netherlands government that there are significant errors in the decision, and we plan to appeal since we followed the Dutch and OECD rules available to anyone,” a spokesman for the coffee shop chain said.
Additional reporting: agencies
