Government warns EU against tougher tax rules

The Government has warned the European Union not to attempt to go beyond plans published on Monday that seek to lay down new global rules on taxing multinationals.

In its report, the Organisation for Economic Co-Operation and Development said governments were “conservatively” losing $240 billion (€213 billion) annually from aggressive tax planning by multinationals.

Speaking in Luxembourg, Minister for Finance Michael Noonan warned the EU against plans favoured by the European Commission to lay down tougher rules.

In the first major overhaul of global tax rules in nearly a century, 60 OECD states have agreed to improve transparency rules, close loopholes and restrict the use of tax havens.

Welcoming the Base Erosion and Profit Shifting (Beps) report, Mr Noonan said the OECD proposals would “play to Ireland’s advantage”, despite fears it could provoke a flight of multinationals.

However, he warned new EU corporate tax moves must not go beyond the proposals agreed at OECD level, amid expectations the EU may introduce its own directive on combating aggressive corporate tax planning.

‘Bells and whistles’

“We would be very interested in ensuring that what has been decided at the OECD is the policy, and that there aren’t bells and whistles which will work against our interest, added on by the commission,” Mr Noonan said.

EU sources told The Irish Times the commission was likely to move forward with its own directive on tackling Beps as some of the work has already been completed at EU level. Unlike the OECD rules, EU directives are binding on member states.

The Government is staunchly opposed to any move to revive the EU's Common Consolidated Corporate Tax Base proposals on corporation tax, a key priority of EU economics commissioner Pierre Moscovici.

OECD director Pascal Saint-Amans said the Beps proposals were not a threat to Ireland’s ability to attract foreign direct investment and said they could even lead to multinationals booking more profits here that would be subjected to Irish tax. He said the OECD had no issue with Ireland’s 12.5 per cent corporation tax rate.

Resistance

The Beps plan is likely to provide the template for the global tax rules that will operate for decades to come. However, it is only now entering its implementation phase, with many of the measures meeting resistance, not least from major economies such as the US and Britain.

Governments find themselves continually pressed to make their economies more attractive to multinationals, while also coming under pressure from electorates outraged at the tax practices of corporations such as Amazon and Google.

OECD secretary general Angel Gurría said aggressive tax planning by multinationals was depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more opportunities for all. “But beyond this, Beps has also been eroding the trust of citizens in the fairness of tax systems worldwide.”

The president of the Irish Tax Institute, Mary Honohan, said Ireland was well placed to compete within "the changed tax landscape", while Lorraine Griffin of Deloitte said Ireland would need to "stay ahead of the curve" as the process unfolded.

Sorley McCaughey of Christian Aid said that while the OECD had correctly analysed the problem, it had produced a "sticking plaster solution" that did not adequately address it.