Multinationals will ‘pay tax where value is generated’

Multinational companies, particularly those in the digital sector, will need to pay tax where they create value

in a new digital single market for Europe, France's minister for digital affairs has said.

Speaking to The Irish Times during her visit to Dublin with French prime minister Manuel Valls last week, Axelle Lemaire said the abolition of the so-called "double Irish" tax loophole had been welcome.

"That was a real source of concern for other European countries and that was an important announcement made by the Irish Government, because it gave not only the impression but the result was an unequal playing field for companies based in Europe," she said.

The European Commission is due to announce its proposals for a digital single market on May 6th. Leaked drafts indicate that it will bring forward proposals to reduce the administrative burden on businesses arising from different VAT regimes and encourage cross-border online trade.

It will also present an action plan on a “renewed approach” for corporate taxation in the single market, under which “profits are taxed where the value is generated, including in the digital economy”.

Major implications

Such a move would have major implications for the US multinationals with headquarters and thousands of employees in

Ireland

.

“The question of taxation for multinationals, probably more specifically for companies in the digital sector, is not necessarily the level of corporate tax but the fact that they need to pay taxes where they create value, and the way we calculate these taxes should be different than for a more classic company with a more traditional business model,” Ms Lemaire said.

"So the value of a Google is not only created at the headquarters, wherever it's based; it's created by the consumers and by the users of Google's services."

Ms Lemaire said Taoiseach Enda Kenny had told the French delegation that Ireland was involved in a working group within the Organisation for Economic Co-operation and Development (OECD) on this issue and was willing to work alongside its European partners to ensure "that there is a fair level of taxation paid where the value is created".

She said, however, that the question of a proposed harmonisation of the corporate tax regime was a different one that did not fall within her remit.

On the current negotiations between the EU and the US on the Transatlantic Trade and Investment Partnership (TTIP), she said France’s position was that there needed to be an agreement and it was willing to find one “that will be to the advantage of both parties”.

But she said it was important not to rush into trying to find a deal that would make some conditions negotiated by the US “not acceptable to France”.

Data protection

Ms Lemaire said the question of data protection was important in the negotiations.

“We do not want to rush into finding a deal that would not follow the same objectives as the ones we are aiming to pursue in the current discussions around the EU regulation on data protection,” she said.

“We are working hard with the commission and with our other EU partners in finding a satisfying agreement, but this shouldn’t come at any price. We have a list of what we call the red lines, and data protection is one of them.”

Ms Lemaire visited Enterprise Ireland as part of her two-day visit.

“I was very interested in hearing about the programmes they have set up to help start-ups grow and accelerate and internationalise,” she said.

"We have a similar challenge in France and across Europe, which is how to make our innovative companies grow, and also create jobs there."

She also met her counterpart, Minister of State for European Affairs and Data Protection Dara Murphy.