DUBLIN: After the European Commission ruling that multinationals received unfair tax benefits in the Netherlands and Luxembourg, Ireland is braced for an EC ruling on whether its taxation treatment of technology company Apple constituted state aid.
“I don’t know what the outcome will be, but this is the first time, as far as I am aware, that the commission is scrutinizing the revenue authorities in applying national laws rather than the scrutinizing national laws to ensure compatibility with regulations,” says Brian Keegan, Director of Taxation at Chartered Accountants Ireland.
Keegan believes that there are sovereignty issues at stake in the investigation of Ireland’s tax treatment of Apple.
“If an EU institution can overrule a decision taken by the revenue authorities in a country, this strikes at the heart of sovereignty. This could have implications that go far beyond Ireland and Apple,” says Keegan.
Ireland has often been accused of being a taxation soft touch, chiefly because of its 12.5% rate of corporation tax and the practice known as the “double Irish,” which allowed US multinationals such as Google and Microsoft to take advantage of the fact that companies incorporated in Ireland were permitted to be tax-resident in other countries.
The US definition of tax residency is based on where a corporation is registered. This meant that subsidiaries of multinationals could avoid tax in both Ireland and the US.
Although the 2015 finance bill put a stop to the practice, multinationals already established in Ireland will have up until 2021 to rearrange their tax affairs.
Keegan disagrees with the assertion that Ireland is a soft touch for multinationals.
We are accused of being a soft touch by countries with which we are in competition for foreign direct investment,” he says.
We have a corporation tax rate of 12.5%, but we do charge it. Countries with corporation tax rates north of 30%, have a raft of allowances and reliefs that mean they don’t charge that amount at all. Also when the big guns criticize us, the fact that we have a 25% rate on corporate investment income is overlooked.”
Countries, such as France actually collect less corporate income tax than Ireland, according to Keegan.
Figures in the Eurostat report, Taxation trends in the EU, bear this out. In 2012, Ireland ranks number 10 among EU member states whilst France was number 11 for the collection of corporate income tax as a percentage of gross domestic product.
