EU Commissioner calls on Ireland to engage with tax harmonisation

EU Commissioner Pierre Moscovici has expressed confidence that Ireland will engage constructively with a proposal to introduce a mandatory common tax base across the European Union.

Launching a proposal to revive the controversial Common Consolidated Corporate Tax Base (CCCTB) today in Brussels, Commissioner Moscovici said he had discussed the issue with Minister for Finance Michael Noonan during a visit to Dublin last month. He said that while it was clear that the current CCCTB proposal announced by the Commission in 2011 was "a non-starter" for Ireland, there "could be room for discussion on the two-step approach" being proposed by the European Commission as it seeks to revive the stalled legislation.

The Luxembourg Leaks scandal - which revealed how thousands of multinationals are slashing their tax bills through the use of specific tax rulings - has increased pressure on the European Union to clamp down on corporate tax avoidance amid mounting public anger in some EU member states about multinationals’ perceived failure to pay their fair share of tax.

But while the CCCTB forms the core part of the Commission’s Action Plan on tax announced today, it is likely to face resistance from a number of member states, including Ireland. Re-launching the stalled legislation today in Brussels, Commissioner Moscovici said the Commission was now postponing the “consolidation” aspect of the CCCTB which deals with how profits and losses are treated across countries, though he stressed that consolidation would be returned to at a later date.

“I think the principle of consolidation in the future is still valid, but I’m also conscious of the opposition and reluctance of certain member states,” Mr Moscovici said. “We wanted to revive the proposal but in a way that could create a consensus , so we are going to take into account the concerns of certain member states, including Ireland. This is why the reasonable approach is to take a two-step approach.”

Asked if he believed the proposal would secure the support of member states given widespread opposition to the 2011 CCCTB proposal, the Commissioner said that “times had changed” and there was now significant public and political support for an EU clampdown on aggressive corporate tax planning.

“It is unacceptable that certain multinationals make large profits in the EU but pay little or no tax inside our borders. This goes against the most basic idea of fairness. There is a strong consensus that companies must pay a fair level of taxes.”

The Commission also announced plans to tighten up rules on transfer pricing and the use of intellectual property tax devices. It also named and shamed 30 non-EU countries over their tax practices, including Bermuda, Monaco and Antigua.

The Commission plans to have the revised CCCTB proposal ready by the beginning of next year to present to member states.

Irish MEP Brian Hayes who is a member of the economic and monetary affairs committee in the Eurpoean Parliament criticised the proposal which he says “will not have the desired effect of curbing tax evasion.”

“Developing a common corporate tax base is not the optimal approach to tackle aggressive tax planning by multinational companies. This will not curb the large divergences between effective corporate tax rates and headline corporate tax rates which exist in many EU Member States,” he said, noting that Ireland’s effective corporate tax rate remains close to the headline rate.

Alain Lamassoure, the chairman of European Parliament's Special Committee on Tax Rulings which visited Dublin late last month, welcomed the proposal and urged the Commission to bring forward the proposal as soon as possible.

“EU citizens expect results and want us to deliver an effective, transparent and fair corporate taxation system. We cannot wait 18 months for proposals to become concrete. The Common Corporate Consolidated Tax Base (CCCTB) is not a green field project. The technical work is already done; it only needs a political kick start,” the French MEP said.

Oxfam Ireland criticised the proposals as a “watered-down” version of previous initiatives, while the One Foundation called on the Commission to press ahead with legislation on obligatory country-by-country reporting for companies before the end of the year.