State regards 12.5% corporate tax rate as ‘sovereign right’

Simon Carswell

Washington Correspondent

The Government will take “very serious account” of suggested changes to tackle global corporate tax avoidance but the 12.5 per cent company tax rate will remain as a “sovereign right”, the Irish ambassador to the US told an investor conference in Washington.

Anne Anderson was speaking after the OECD recommended that governments curb schemes used by companies to avoid taxes by shifting profits, for example from intellectual property rights to shell companies in tax havens. The recommendations have major implications for big employers such as Apple and Google in Ireland.

The ambassador said the Government had “no difficulty” with the aim of the project to align business activity with taxation and were “enthusiastic and committed participants” in the process.

“We are very engaged and very alert, and very committed to taking serious account of what comes out,” she told the conference about investing in Ireland hosted by the US National Federal Trade Council, which advocates an open, international trading system.

Bill Reinsch, president of the council, told The Irish Times that he was worried the OECD's recommendations on "base erosion and profit shifting" might undermine the case for US investment in Ireland, where American firms account for 75 per cent of foreign direct investment.

Ireland would be "one of the first victims," he said, if the Congress stops US firms moving overseas through corporate inversions, a practice that drawing much political fire in Washington.

“The Irish need at this point to worry more about what is going on in the EU and pressure from other European countries on Irish tax policy than about anything Congress is going to do,” he said.

Chris Padilla, vice president of governmental programmes at IBM, said companies like his firm invest in Ireland for reasons beyond tax.

Care needed to be taken to stop the OECD project becoming an exercise by uncompetitive high-tax countries to get more tax competitive countries to raise their corporate tax rates, he said.

“That would be a mistake,” he said. “We all have to be on the look-out that the Beps process does not become hijacked by those who think governments just need to tax more because that is not what it is about.”

Ms Anderson expressed ambivalence with the title of the conference, “The Return of the Celtic Tiger,” saying that Ireland discovered too late that “a tiger can maul you as well.”

“If this tiger has returned, it is a slightly different animal - somewhat more controlled, somewhat more mature,” she said.