EU’s Moscovici says ‘not in Ireland’s interest’ to resist digital tax

Europe's economic and financial affairs commissioner Pierre Moscovici is poised to pile pressure on Ireland to submit to European tax harmonisation, as he unveils detailed plans next months for the taxation of digital giants, buoyed by a resurgent Franco-German axis.

Speaking to journalists in Athens on Friday, Mr Moscovici said German chancellor Angela Merkel's deal this week to establish a new government would provide an opportunity for Berlin to join forces with French president Emmanuel Macron and European officials in Brussels to press ahead with further EU integration.

“Due to our rules, which are not the best in taxation, it’s always possible to resist – because unanimity is needed,” Mr Moscovici said in response to questions. “But I think it’s not in Ireland’s interest by any means to resist when we present proposals on digital taxation, so that the giants of the internet could just pay their fair share of tax.”

“That’s what all citizens expect and I think that Ireland should be in the move. We will try to bring proposals that can create consensus.”

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Warning

The Government is concerned about Mr Moscovici's plans to introduce a digital tax, with a Revenue Commissioners briefing document, released to The Irish Times last month under the Freedom of Information Act, warning that it would lead to a significant falloff in corporation tax and payroll tax receipts and hit the State's ability to attract inward investment.

However, speaking at the World Economic Forum in Davos two weeks ago, Mr Macron pointed to Ireland luring firms through ultra-competitive corporation tax, as he complained about the lack of tax harmonisation in the union.

“I see that France and Germany are really pushing in the same direction of the commission,” Mr Moscovici said on Friday.

A French proposal would see technology giants taxed on revenues rather than profits in various European countries to get around the problem of companies shifting profits from where they are earned to low-tax jurisdictions.

“The Irish problems can be addressed,” the commissioner said. “To me, the mother of all tax reforms is CCCTB,” he added, referring to the common consolidated corporate tax proposals, on the agenda for well over a decade but relaunched last year.

Taxable profits

These call for a single set of rules to calculate companies’ taxable profits in the EU. “Without Ireland we cannot have it, but I’m sure that we can find solutions for Ireland,” he said. “This is the tax system of the 21st century. We are living now with the system of the 20th century. It doesn’t work for modern economies.”

Separately, Mr Moscovici said Greece would be able to exit its third bailout programme in August without a backup, or precautionary credit line.

However, he said that the country would need debt relief, with current discussions centred around providing further repayment extensions for Greece on its EU bailout loans should economic growth fall short of expectations in the future. Debt write-offs, or haircuts, are off the agenda.