Beps plan ‘won’t alter’ amount of tax paid by multinationals

Proposals to clamp down on multinational tax avoidance are unlikely to alter the amount of tax paid by companies, an Irish tax expert has claimed.

Director of tax at Chartered Accountants Ireland, Brian Keegan, claimed the measures were highly protectionist in nature and designed to favour bigger economies.

“If Beps is about profit shifting, it is also about tax shifting. Many of the Beps rules won’t alter the amount of tax paid by multinationals, but they will change where the tax is paid,” he said.

“The EU Commission may need to reflect on how well they have defended the interests of smaller EU member state economies over the course of the Beps negotiations.”

Mr Keegan also said that while Ireland’s new knowledge development box may be Beps compliant, it would be competing with as many as 16 other special incentive regimes which are not.

The Beps measures are aimed at curtailing aggressive tax planning and multinational profit shifting, which is estimated to cost governments between $100- $240 billion a year in lost tax revenue.

The American Chamber of Commerce Ireland, which represents 700 US companies in Ireland, said it was supportive of global efforts to enhance transparency in international taxation.

However, it said it was important the measures were implemented in a way that enhanced Ireland’s reputation globally.

Employers’ group Ibec said the Beps rules constituted a major change to the international tax code, which was necessary to reflect the modern reality of globalisation and digitalisation.

Ibec’s chief economist Fergal O’Brien said the plan offered Ireland substantial opportunities to attract new investment and jobs provided it adopted a proactive stance.

“The publication of today’s plan further reinforces the need to make the country more attractive for mobile talent. Ireland is currently not at the races,” he said, calling for decisive action in the budget to reduce the State’s relatively high marginal tax rates.

Peter Vale, tax partner at Grant Thornton, said it would be some time before “genuine clarity” over acceptable tax planning emerges.

As a result, he said it was vital that businesses understand the potential risks and are able to justify their decisions.

The Irish Tax Institute said Ireland was likely to see significant changes to its tax law over the next two years on foot of the Beps initiative, starting as early next week's budget.

"The first moves will probably be the launch of a knowledge development box and the introduction of country-by-country reporting," the institute's president Mary Honohan said.

Kevin McLoughlin, head of tax at EY Ireland, said one of the main aims of the recommendations was to better align “taxing rights with substantial people functions”. As a substance-based regime, Ireland was well positioned to be a net winner, he said.

Anders Dahlbeck, ActionAid’s tax policy advisor said the measures had been cooked up by a club of rich countries and failed to properly tackle tax avoidance by large multinationals.

“The global tax system needed major surgery, instead we got a sticking plaster,” he said.

Oxfam Ireland said the proposed measures should mark the beginning and not the end of global tax reform, noting the package did not legislate for companies to have to pay tax where they do "real business" or to stop the use of tax havens.

"A second-generation reform process should urgently tackle a number of key issues which have either not been addressed or have been insufficiently addressed by the Beps process, including putting a stop to overly generous and unproductive tax incentives, ensuring multinational companies pay tax where they do real business and stopping the use of tax havens," the agency's chief executive Jim Clarken said.