Digital tax could reduce Ireland’s corporate take

The imposition of an EU-wide digital tax on Facebook, Google and other US technology giants has the potential to reduce Ireland's corporate tax take, a tax expert has warned.

Joe Tynan, the head of tax at PwC Ireland said a tax on sales in big markets could see companies cut the profits they declare for tax in the Republic.

He was speaking in the wake of France’s unilaterally move to push ahead with a 3 per cent tax on the revenues companies earn from providing digital services to French users.

It would apply to digital businesses with annual global revenue of more than €750 million and sales of €25 million in France. The UK and Austria have pledged to adopt a similar measure amid threats from the US to respond with trade sanctions.

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If a groundswell of countries adopt a digital tax, the Irish Government, which has traditionally supported an OECD-led approach inclusive of the US, could be left isolated.

“Foreign Direct Investment (FDI) tends to be a choice between locations. The UK is a big competitor for FDI. Introducing a digital tax is unlikely to improve their position,” Mr Tynan said.

“If it becomes widespread, it could make the EU less attractive but I don’t think it would have a significant impact as it will still be an important market,” he added.

On the likely impact on companies here, Mr Tynan said: "If it operates across Europe, it will reduce the Corporate Tax take in Ireland, if everything else stays the same".