The three big trends we’re seeing in the corporate tax world in 2021 are the growing power of the EU, the impact of Brexit and tax disputes.
In just a few years we have gone from having a minimal EU contribution to taxes to a situation where Brussels is making significant tax changes for businesses.
It is true that EU countries still have tax sovereignty, but we are now seeing important tax laws and other tax initiatives constantly coming from the EU, of which the Apple case was just one example.
For example, Ireland will implement the interest cap rules next year due to the EU tax avoidance directive. This will limit the amount of interest that large companies can deduct and is one of the biggest corporate tax changes in the last 20 years.
This will affect a number of sectors – multinational corporations, real estate companies, aircraft leasing and financial services companies.
Another EU measure is DAC6 reporting, an obligation for consultants and companies to report certain cross-border transactions to EU tax authorities that may involve tax planning. Britain scrapped it immediately the day it left the EU, which probably says something about it.
All of these tax measures add complexity for companies doing business in the EU.
I hope that the EU as a whole can remain competitive compared to other parts of the world such as the US and Asia.
India, which is notoriously tough on tax issues, for example, applies its interest cap rules only to related party debts, while the EU also applies them to external debt.
For its part, the US has relaxed its interest rate cap rules to support the business of walking Covid-19, the EU has not.
The OECD is currently leading the introduction of a global tax on digital services that will allow countries to tax some of the profits of large online businesses where their customers or users are located, as opposed to their headquarters.
Ireland has seen a huge surge in corporate tax revenues from these companies in recent years, so some of that tax would be shifted away from Ireland and at a time when we need it most. Depending on the approach taken by the Biden administration, we can assume that this will gain momentum this year. The Maples Group filed with the OECD on the matter and attended their online meeting earlier this month. I assume that any agreement at OECD level will be implemented here through new EU legislation.
We’re seeing Brexit driving business to Ireland, where the UK may previously have been the only EU presence for a company. Really, every company that does business or invests in the EU must have an EU base. We advise financial services companies on establishing substantial, regulated companies, including senior executives in the C-Suite.
There are obviously practical challenges moving employees here currently due to Covid-19, but this is happening and local hires are being made from our extensive talent pool.
Manufacturing, grocery, and retail companies are also setting up physical hubs here to address supply chain challenges.
Tax authorities around the world have become more confident in investigating and questioning the affairs of large companies.
We have seen this trend have increased significantly in Ireland lately, due to the fact that large international companies are now here, which in turn leads to tax disputes ensuing.
The Revenue Commissioners have shown they are ready to take over large international businesses, and the sums are staggering.
In 2018, Revenue issued a tax assessment for an Irish subsidiary of Perrigo Company plc, a US-listed international health care company, for EUR 1.64 billion and in 2019 a tax assessment for pharmaceutical company Takeda for EUR 398 million. EUR out.
Our tax litigation practice consists of tax and litigation attorneys. We have advised on a number of important cases, most recently with a financial services firm in the high court. Very often we have been called in by the taxpayer company’s board of directors as a “second pair of eyes” and as a matter of corporate governance to work with the original tax advisor.
I am also the chairman of the Irish Debt Securities Association, which represents the international securitization industry in Ireland.
Ireland is one of the leading jurisdictions for international securitization firms in Europe and an integral part of Ireland’s international financial services offering with over 3,000 jobs in the sector in Ireland.
The European Commission has endorsed the importance of securitization in Europe as an important alternative to bank-based finance and to improve the resilience of the financial system, which of course is particularly relevant today given the enormous financial resources needed to grow the economy in Europe after Covid19 .