FF warns Coalition on corporate tax reform

Government is facing resistance from businesses to phasing out of contentious tax rules

Fianna Fáil finance spokesman Michael McGrath said the Irish tax code was transparent and legitimate. Photograph: Dara Mac Dónaill

Fianna Fáil finance spokesman Michael McGrath said the Irish tax code was transparent and legitimate. Photograph: Dara Mac Dónaill

Tue, Jul 15, 2014, 01:00

Fianna Fáil has called on the Government not to make any unilateral corporate tax reforms as an Organisation for Economic Co-operation and Development review of global tax rules proceeds.

The party’s intervention came after The Irish Times reported yesterday the Government is facing resistance from businesses to any phasing out of contentious Irish tax rules. They were likely to express their opposition in submissions to an public consultation by the Department of Finance.

The department’s consultation comes ahead of non-binding tax recommendations in September from the OECD, whose examination of global business tax rules will not conclude until late next year. The OECD is acting on the instructions of global leaders.

One argument made in private talks in Dublin is that an early signal of change by the Government would be advantageous for reputational reasons and could help maximise the phasing-out period for a contentious tax mechanism known as the “double Irish”. This helps global firms pay less tax by exploiting differences between Irish law and that elsewhere.

‘Legitimacy’ defended

However, Fianna Fáil finance spokesman Michael McGrath said the Irish tax code was transparent and legitimate: “There has been a concerted campaign by a number of other states who would seek to project a cloud over the legitimacy of Irish policy and paint a distorted picture of how the country operates.”

Mr McGrath said the economy and thousands of jobs depend on an industrial policy with the tax regime as a pillar. “The anomalies that are causing understandable frustration in the OECD and elsewhere arise as a result of gaps in the regimes of other states . . .”

In a note online, the director of the Tasc think-tank said Ireland will be carried along by whatever consensus emerges. Nat O’Connor said the likely medium-term outcome of an international agreement on corporation tax was Ireland would need to change part of its industrial strategy. “Currently, we take a little corporation tax from a lot of companies. . . In future, to keep up corporation tax revenues, Ireland may need to take more tax from fewer companies.”