The recent tax reform in the European Union means nothing to Ireland – yet.
The two main proposals announced yesterday by the European Commission will not go out until 2023, and are based on a global tax deal to be reached at the Organization for Economic Cooperation and Development (OECD).
“That’s kind of a wild card that’s been thrown into the mix,” said Gerard Brady, chief economist at Irish business association IPIC.
“The fear from the Irish point of view is that the European Union continues to push ahead with unilateral measures, which makes reaching an agreement in the OECD more difficult and may initiate a US trade or customs war.”
The Commission’s plan is to create a single corporate tax rulebook for the bloc, based on the “two pillars” of the OECD: a new method for calculating and sharing multinational profits, and a new tax rate with an effective minimum.
The plan is essentially a reworking of a bill known as the Common Common Tax Base (or CCCTB), which was officially postponed yesterday.
This time, however, the European Union intends to count intangible assets like intellectual property in taxable income.
It will be difficult to walk in Ireland.
Even if there is no agreement in the OECD, the government will be affected by the domestic tax agenda, which aims to bring corporate profits home and tax them at 21 per cent.
EU tax official Paolo Gentiloni said the EU will move forward by 2023 regardless of the OECD talks.
The European Union’s roadmap also pledges to impose a digital tax, tighten the screws on shell companies, and move to compel multinational companies to publish the “effective” tax rates they pay, country by country.
Vice President Valdes Dombrovskis told the European Union Irish Independent That the move was not an attack on the government’s 12.5% corporate tax rate.
“There are different tax rates for companies in the European Union, the European Union single market operates within this framework, so we don’t have it [the] Intention to coordinate or impose the same tax rate on corporations across the European Union.
“Therefore, there is room for member states to pursue different tax policies.”
The Treasury Department said Ireland “is focused on achieving a global deal”.