THE EU Commission dismissed Irish concerns about new taxation rules as it published draft laws to harmonise Europe’s corporate tax base.
The plan is designed to reallocate tax receipts to countries in which they firms do business. It would lessen scope to maximise the profits that companies record in Ireland, dimming the lustre of the Government’s disputed corporate tax regime.
Taxation commissioner Algirdas Semeta said Irish criticism was based on false assumptions about the initiative as he published legislation to establish a common consolidated corporate tax base (CCCTB) in Europe.
“I don’t understand why some of us are so worried about it,” he said.
Mr Semeta was responding to questions about an Ernst & Young study for the Department of Finance which warned that the tax base plan will slow Ireland’s recovery, eliminate jobs and curtail foreign investment.
The commission conducted six separate studies to ensure the system was fair, he said.
“Of course I respect the study of Ernst & Young but . . . I couldn’t agree, for example, that CCCTB would lead to a reduction of foreign direct investment in Ireland or any other member states; on the contrary,” he said.
While a senior commission official conceded that the draft legislation could have a “very minor negative effect” on EU GDP, that assessment took no account of an anticipated increase in cross-border investment.
Taoiseach Enda Kenny, under Franco-German pressure to yield corporate tax concessions in return for lower interest on bailout loans, last week described moves to create a new base as a “back door” route to tax harmonisation.
Dublin’s initial response to the legislation was frosty, but it was not rejected outright.
“We remain sceptical about many aspects of CCCTB but we will work constructively with the commission and other member states on the issue,” said a spokeswoman for the department.
Mr Semeta said he does not intend to harmonise corporate tax rates in the new system, which would introduce a common European formula for the calculation of tax on the profits of firms operating in more than one EU state.
But Mr Kenny’s administration has adopted the same stance on the tax base as its predecessor, which saw risks that the initiative will tarnish the allure of Ireland’s generous corporate tax regime.
Mr Semeta noted that companies’ participation in the initiative would be entirely voluntary.
“The CCCTB will make it easier, cheaper and more convenient to do business in the EU,” he added.
The proposed common European consolidated corporate tax base formula would give equal weighting when calculating where tax is paid to the location of tangible assets, labour and sales in European countries.
