Tax haven list ill timed
IT was looking until very recently as if 2016 couldn’t actually get any worse for watchers of all things corporation tax.
That was until UCC economist Seamus Coffey gave evidence this week to the Oireachtas Finance Committee on European Commission plans to introduce a Common Consolidated Corporate Tax Base (CCCTB).
Coffey told the committee that plans to standardise the way corporation tax is calculated and paid across the EU could actually destroy Ireland’s tax base.
Our low corporation tax rate of 12.5pc is a key plank of government policy for economic growth and is one of the main reasons US multinationals locate here and often base their European operations here.
Receipts from corporation tax this year will be more than €7bn and the contribution to the economy is likely to be much higher when you consider how workers in these firms spend in their local communities.
While the European Commission’s focus is not on the actual rate, the plans would mean companies paying tax in countries where sales are made and not where the businesses operate out of — in the latter case Ireland.
The Government has said it will engage in negotiations with the European Commission but it would obviously have reservations about any move that would intrude further into corporation tax policy.
Coffey said that it was not unduly pessimistic that Ireland could lose up to 50pc of our current Corporation Tax base if CCCTB was introduced.
In addition, in its submission to the Committee, the Irish Tax Institute said if CCCTB plans get the green light, this would essentially mean a loss of sovereignty for Ireland. Unfortunately, the pressure on our corporation tax policy is set to continue into 2017.
Stateside President-elect Donald Trump has promised to cut the tax to 15pc in a bid to woo back multinationals and while this has been dismissed by many as ‘election talk’ we have yet to see whether he actually puts a plan in place.
And in the UK, following on from Brexit, Prime Minister Theresa May has pledged to cut its rate to the lowest in the G20 countries.
To put the tin hat on it, a report from Oxfam earlier this week ranked Ireland in the top 10 tax havens for big business.
Ireland came in as the sixth worst country for helping corporations to avoid billions of euros in tax bills each year.
Oxfam highlighted profit-shifting, sweetheart deals and a lack of effective tax rules as influencing the damning score.
Top of the list of offenders was Bermuda which was ranked the top of 15 countries.
It was followed by the Cayman Islands and the Netherlands.
Ireland’s position in sixth place comes ahead of any negotiations the Government may have with the Commission next year on the introduction of CCCTB,
Featuring on lists like this at a sensitive time is not only a PR nightmare but it could also weaken our hand in upcoming discussions.