Key strands of the Organisation for Economic Co-operation and Development plan (OECD) to overhaul global business tax rules have run into resistance within the accounting and legal professions in Ireland.
A submission this week to the Paris-based OECD, made public on Thursday on its website, show how the body which represents the main Irish accounting bodies has claimed that core elements of the plan are “biased” against smaller states such as Ireland.
Earlier submissions by Dublin solicitors Matheson, legal adviser to many large multinationals with Irish operations, show that it too has taken issue with some of the OECD proposals.
The OECD initiative, which has big implications for Ireland’s corporate tax regime, follows a request from global political leaders for a worldwide plan to eradicate aggressive tax avoidance by multinational groups.
In a submission to Paris on Wednesday, the Consultative Committee of Accountancy Bodies – Ireland expressed “serious concern” about parts of the plan to prevent the abuse of tax treaties.
“To restate our position, [the] provisions are fundamentally biased in favour of larger countries and economies,” said the body, which represents 40,000 accountants attached to four professional groups.
“Countries like Ireland which depend on foreign investment will face much more restrictive conditions compared to larger economies,” it said of one provision to prevent treaty abuse.
Anxieties
The committee represents the interests of: Chartered Accountants Ireland; the Association of Chartered Certified Accounts; the Institute of Certified Public Accountants in Ireland; and the Chartered Institute of Management Accountants.
In a separate submission eight days ago to the OECD, the committee cited similar anxieties about proposals to prevent the artificial avoidance of “permanent establishment” tax status.
“We reiterate our concerns that changes to the definition of permanent establishment will unfairly impact economies with small domestic markets and any work carried out on this matter by the OECD must not facilitate challenges by larger nations to the taxing rights of smaller nations.”
Among a number of submissions to the OECD, Matheson said in April that proposals on mandatory disclosure rules would impose an “undue compliance burden” on taxpayers.
“Just because a transaction includes a ‘cross-border tax outcome’ should not automatically result in it being deemed to be an avoidance transaction or equivalent to an avoidance transaction for compliance purposes,” said Matheson.
“Commercial transactions are frequently entered into that give rise to a cross-border tax outcome where that outcome is not the main purpose or one of the main purposes of the transaction.”
The OECD will not produce final proposals to tackle base erosion and profit shifting practices until October but work has been under way since May to develop a multilateral instrument to modify bilateral tax treaties.
