Corporate Tax

EU plans present the corporate tax points the state will face within the coming months

Plans are in preparation to require large multinational companies to report profit and cost breakdowns by country in the EU. The details are currently being negotiated. The republic was one of a group of countries that were recently outvoted in an attempt to block the proposals. The reporting plan is an important step in itself, but it also highlights the political issues that the state will face in the coming months with regard to corporate taxation in general.

In a press conference on Friday, Evelyn Regner, an Austrian Socialist MEP who is on the European Parliament team and will negotiate with the European Commission on the implementation of the country-specific reporting plan, said that the proposal was the first step towards a minimum corporate tax rate at EU level. The republic has long resisted EU plans to harmonize corporation tax, in particular against longstanding proposals for a common and consolidated tax base.

Instead, the republic advocated the OECD’s corporate tax reform plans. This, too, poses potential challenges for Irish corporate tax revenues and for our entire tax system. However, the verdict of successive Irish finance ministers, including incumbent Paschal Donohoe, is that the state should better stick to the OECD process.

The explorations into country-by-country reporting seem to confirm this. If the OECD talks fail, the EU will push ahead with digital sales tax plans and possibly broader plans for corporate tax reform. It is more about where companies pay taxes than how much they pay. You also risk a violent US reaction and the possible resurgence of trade tensions that arose under former President Donald Trump. The state would be caught in the middle. The OECD process remains the best choice for Ireland.

The inevitable direction now globally is tighter scrutiny of multinational tax regimes. This is overdue – tax shifting had reached ridiculous levels with complex tax avoidance structures. The state treasury needs cash after the Covid-19 pandemic. And some of the big digital multinationals are in the line of fire over the power they wield over information. All of this poses a threat to Ireland. This can lead to changes in sectors such as the pharmaceutical industry in particular in the years to come. But the latest investment announcements from companies like Stripe and Intel also give cause for hope.

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