View from Dublin: Ham­mond’s dig­i­tal sales tax might be a prob­lem

Belfast Telegraph - Business Telegraph - - News - BY RICHARD CUR­RAN

For­get Brexit for a mo­ment. The British have in­ad­ver­tently caused fur­ther prob­lems for the Ir­ish govern­ment and its love af­fair with large global tech com­pa­nies.

In his Bud­get, British Chan- cel­lor of the Ex­che­quer Phillip Ham­mond, in­tro­duced a dig­i­tal sales tax of 2% on tech com­pany rev­enues in the British mar­ket.

This is sim­i­lar to the 3% dig­i­tal levy pro­posed by the EU on cer­tain rev­enues such as on­line ad­ver­tis­ing. The EU plan is strongly backed by France and the num­ber of coun­tries sup­port­ing it is grow­ing.

Up to now our Fi­nance Min­is­ter Paschal Dono­hoe has re­sisted the in­tro­duc­tion of the EU mea­sure. Ire­land’s quib­ble has been that it would be bet­ter to re­solve is­sues around how much tax tech com­pa­nies pay, through a wider global or OECD ini­tia­tive.

A 3% EU levy would sim­ply drive these com­pa­nies to some­where like, well the UK, af­ter Brexit. Ham­mond has now sunk a hole in that ar­gu­ment and it is be­com­ing more dif­fi­cult for the Ir­ish govern­ment to put up re­sis­tance.

Our al­lies in op­pos­ing the mea­sure are get­ting fewer with re­ports sug­gest­ing our po­si­tion is now only shared by Swe­den, Den­mark and Es­to­nia.

Throw in the un­wa­ver­ing sup­port from our EU col­leagues on Brexit (so far at least) and Dono­hoe may ap­pear iso­lated and even un­grate­ful in say­ing no to the tax when he sits down next week with his EU coun­ter­parts in Brus­sels.

The mea­sure would hit Ir­ish cor­po­rate tax take by a mod­est enough €160m a year.

But the Govern­ment is con- cerned this could be just the start and it could raise doubts in the minds of de­ci­sion-mak­ers in these tech gi­ants about what else might be com­ing.

If Dono­hoe is un­der pres­sure from other EU fi­nance min­is­ters on the is­sue, just imag­ine the pres­sure from tech com­pa­nies them­selves, who will want Ire­land to op­pose it and en­sure it is not an Eu-wide ini­tia­tive.

In truth, other coun­tries could just go ahead them­selves and ar­range some­thing sim­i­lar, so we don’t have a full veto.

The French are lead­ing the charge on this and it would be a big win for them, fur­ther ce­ment­ing the in­flu­ence of French pres­i­dent Em­manuel Macron at the EU ta­ble.

Dono­hoe could point to global com­pe­ti­tion for tech in­vest­ment and how it could go out­side the EU. This won’t be con­vinc­ing.

He could also point to how coun­tries like France are play­ing the tax card them­selves to win post-brexit jobs from Lon­don.

France and Italy are of­fer­ing the best deals on per­sonal tax­a­tion for Lon­don bankers to move there. France is of­fer­ing in­come tax breaks of up to 50% of salary for British bankers who move.

They will also ex­clude for­eign as­sets and prop­er­ties from their wealth tax.

A Lon­don banker earn­ing an an­nual salary of €1m could in­crease his take-home pay from €542,000 in Lon­don to €732,000 in Paris if he moved. The fig­ure for Dublin is €672,000.

When it comes to tech gi­ants and tax, the jig is up on this one. This isn’t about how much tax these com­pa­nies pay in Ire­land.

It is about how Ire­land has fa­cil­i­tated them in mak­ing sure they pay rel­a­tively lit­tle tax any­where. It isn’t just about dif­fer­ent coun­tries com­pet­ing to win FDI.

It is about al­low­ing those com­pa­nies to pay less some­where else and less than their fair share.

The best we can hope for is that Dono­hoe at least se­cures some­thing else in re­turn. Maybe an ex­tra cou­ple of bil­lion for the na­tional ru­ral broad­band plan? Af­ter all, that is how the EU works.

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