Inside the world of business
Ireland must be ready to argue corporate tax case
HAVING BEEN somewhat off the agenda in recent weeks, the much maligned Common Consolidated Corporate Tax Base (CCCTB) returned to the political forum yesterday as officials from the Department of Finance briefed an interim all-party Dáil committee.
It seems Ireland is not for turning when it comes to the proposal to introduce a common consolidated tax base for companies operating in multiple European countries.
“ [The Government's] key message is that we are totally opposed to tax harmonisation, and based on what we know about the CCCTB, are highly sceptical of it too,” officials told TDs, adding that the Government is willing to engage with the European Commission and other member states on the issue.
The officials again quoted from the department’s economic impact assessment published earlier this year which found that a mandatory or voluntary CCCTB would result in an overall reduction in employment and foreign direct investment in Europe, a reduction in economic activity and the creation of significant winners and losers among member states.
While the meeting elicited a rare show of unity from TDs who repeatedly questioned the rationale behind the proposed CCCTB, the more pressing question is whether Ireland is ready to present a coherent proposal to Europe.
The Dutch have already held a vote on subsidiary compliance issues related to the proposal and sent a reasoned opinion to the European Commission.
The critical role of any changes in tax structures to Ireland’s economic future means it is essential that Ireland engages fully with the issue and presents a coherent and united policy position on the proposal.
As Fine Gael’s Damien English pointed out yesterday, multinationals make investment decisions years in advance. A final ruling decision on a CCCTB could be years away. In the interim, clarity and certainty from Ireland is essential.
Refusing to spread the good news
WITH ECONOMIC good news in such short supply, the Government’s unwillingness to highlight one of the more positive elements in the revised Memorandum of Understanding with our “external partners” is puzzling. In the letters of intent to the EU authorities and the IMF that accompany the revised memorandum, the Government has told them it wishes to borrow less money in the current quarter.
Quite how much less is hard to fathom because the amount that we expected to borrow was never disclosed. The EU has published an indicative drawdown schedule to which the Government merely demurred. It projected that Ireland would draw down €17.6 billion in the first quarter and €12.6 billion in the second. The amount drawn down in the first quarter came to €17.8 billion according to the Department of Finance, but the requirement for the second quarter would be much less than anticipated, it said. It hoped to take €3 billion from the EU and €1.64 billion from the IMF.
The reduced drawdown is attributed in part to the bill for the banks coming in below the €35 billion worst-case scenario built into the original rescue plan. But the main reason is that the Government has indicated that it would rather run down cash reserves before drawing down loans. Reserves have been boosted by drawing down funds in the first quarter for the bank recapitalisation now postponed until the end of July.
Using up this cash – which could fund the State for 200 days – should reduce the overall interest bill for the programme. It still amounts to positive news but the Government has refrained from blowing its trumpet on the basis that the EU and IMF may not agree to the reduced drawdowns as they may prefer Ireland to retain a large buffer. There are also the ongoing “discussions” with Europe about the interest rate being charged on its tranche of the loans due to come to a head later this year.
