Corporate tax regime to face renewed scrutiny

Ireland’s corporate tax regime is to come under renewed scrutiny next week as EU finance ministers sign off on a proposal obliging member states to reveal information on tax rulings offered to companies.

EU finance ministers meeting in Luxembourg on Tuesday are expected to reach political agreement on the automatic exchange of tax rulings, a proposal launched by the European Commission earlier this year in the wake of the Luxembourg Leaks scandal. The proposal will oblige states to share details of their tax rulings – essentially letters of comfort offered to companies by tax authorities – with other member states, as part of a broader move towards greater corporate tax transparency across the EU.

Tackling loopholes

Minister for Finance Michael Noonan is expected to attend the meeting, which will take place a day after the OECD reports on its Base Erosion and Profit Shifting (BEPS) initiative, a proposal designed to tackle loopholes that allow companies to profit from the interaction of different national tax practices.

The timing of both will be highly uncomfortable for the Government ahead of the imminent announcement by the European Commission of its probe into the Government's tax dealings with Apple. EU sources say the decision could be published within the next fortnight.

The Commission launched a formal investigation into two individual rulings offered by Irish tax authorities to Apple in June 2014.

Among the issues of contention being thrashed out by officials ahead of Tuesday’s discussion on the sharing of tax rulings is the concept of retroactivity.

While the European Commission had initially proposed that tax rulings offered over the last 10 years should be included in the proposal, Ireland is one of a number of countries pushing the EU to reduce this timeframe to five years.

Also at issue is whether the tax rulings will be made available publicly or exclusively to national authorities, with the latter option expected to be endorsed by ministers.

It is understood that the level of information included will also be reduced, with much of the detail redacted, amid concerns from a number of countries – led by Britain and Ireland – about commercial sensitivity.

However, member states who suspect the existence of abuse in tax practices, can request countries to provide more detailed information.

It is also expected that smaller companies with a threshold below a certain level will be excluded from the obligation.

Transparency

The automatic exchange of information on tax rulings is one of a number of measures being proposed by the European Commission in a bid to increase corporate tax transparency across the European Union.

The relaunch of the Common Consolidated Corporate Tax Base (CCCTB), which would harmonise the way tax bases are calculated across the EU, was announced in June.

EU economics commissioner Pierre Moscovici has vowed to prioritise corporate taxation during this tenure as the commission’s economic chief. Larger member states like Germany and France are pushing the clamp-down on corporate tax avoidance at an EU level amid public concern in many member states that large corporations are not paying their fair share of tax.

The European Commission’s anti-trust arm is leading the clamp-down on corporate tax avoidance.

As well as the Apple probe, the Commission's competition division is leading investigations into the tax arrangements of Starbucks in the Netherlands, and Fiat and Amazon in Luxembourg.