DUBLIN: Ireland found itself surrounded by supporters, for the first time, on the issue of corporate tax rates, during an informal meeting of EU finance ministers.
Finance Minister Michael Noonan was not present, as he returned to Dublin early, but the head of the Central Bank, Patrick Honohan and a number of the Government’s tax experts attended.
Usually, nobody mentions tax rates, other than to complain about the low rates in some countries, notably Ireland’s 12.5%, partly because the setting of tax rates is a national competence over which the EU has no say.
However, the reality is that some big countries, and especially Germany and France, have been promoting policies at EU level that would eventually effect the tax rates applied by different member states.
With proposals on Base Erosion and Profit Shifting (BEPS) due from the OECD later this year, and with the European Commission due to relaunch the Common Consolidated Corporate Tax Base in June, the issue is now coming to the surface.
The ministers gave the political green light also to tougher new rules that say every country must immediately communicate the tax arrangements they reach with big companies.
Ireland has removed some of the incentives for companies to set up a base in the country — such as allowing them to be ‘stateless’ for tax purposes, or avail of the ‘double Irish’ that led to huge criticism from fellow EU members. And while the Department of Finance is co-operating both with the OECD and the various EU committees working on tax issues, they are very wary of tax harmonisation being introduced by the back door.
There was no big showdown at the weekend meeting in Riga as ministers discussed what are complex technical issues, but two faultlines appeared openly for the first time.
One was on the issue of tax harmonisation. Countries including Belgium, Malta, and the Netherlands, said that as small countries they needed advantages to attract business and since the euro rules do not permit many of the usual incentives to be used, tax was the only “tool in their arsenal”.
