Ireland’s competitive tax offering won’t be affected by US reform

Minister for Finance publishes Government’s corporation tax roadmap

Paschal Donohoe said pan-European tax changes should prevent mismatches among “various countries and gaps in the international tax framework” from arising. Photograph: Nick Bradshaw

Paschal Donohoe said pan-European tax changes should prevent mismatches among “various countries and gaps in the international tax framework” from arising. Photograph: Nick Bradshaw

 

Ireland has nothing to fear from US tax reform and the State’s competitive offering for investors has only been enhanced by Brexit, Minister for Finance Paschal Donohoe has said.

He was speaking in the wake of a decision by US tech firm Afilias to move its headquarters from Dublin to the US on foot of recent tax changes there.

Mr Donohoe said that from his engagement with international investors and employers, it was clear that the Irish offering – of which tax is only an element - will continue to be competitive in the context of US changes.

“And is only reaffirmed by our even larger role as a bridgehead into the EU in light of Brexit.”

Mr Donohoe also noted that while Afilias had made a decision to move its headquarters there was no fall-off in the firm’s employment footprint here.

The US has enacted sweeping tax reforms, which could have implications for US foreign direct investment here.

Mr Donohoe was speaking at the launch of the Government’s corporation tax roadmap, which outlines several actions to be taken in light of a review of the business tax by economist Seamus Coffey while affirming the Government’s committment to the State’s 12.5 per cent headline rate.

Mr Donohoe global tax changes should mean companies will have fewer opportunities to engage in aggressive tax planning.

In his foreword to report he said pan-European tax changes should prevent mismatches among “various countries and gaps in the international tax framework” from arising.

He noted, however, that international tax rules “remain in flux with continued focus on the question of where profits are actually generated and therefore where corporate tax should be paid, particularly by highly digitalised business with new models for revenue generation”.

“There is widespread agreement that this is an issue which requires global consensus so that profits are recognised in the right place, and tax is paid in the right place, for all types of business models,” he added.

Commitment

Mr Donohoe also restated the Government’s opposition to EU proposals for a digital tax, adding there were a number of EU states, which had concerns about the proposals.

Some professional services firms welcomed the roadmap with PwC noting that it builds on a “well sign-posted corporate tax journey”.

“The roadmap continues the trend of Ireland providing certainty and foresight, where possible, to tax players,” said PwC Ireland’s tax policy leader, Peter Reilly.

Meanwhile, EY’s head of tax, Kevin McLoughlin, noted the changes to Irish and international law are “highly significant” and far reaching. “The significance of some of the measures, for example updated transfer pricing guidelines, is acknowledged in terms of the impact on business, resulting in a more considered timeframe to implementation which is helpful,” he said.

The roadmap follows a review of the Irish corporate tax code in 2017 by Séamus Coffey, chair of the Irish Fiscal Advisory Council. Mr Coffey was asked to consider the sustainability of corporation tax receipts, something he found to be sustainable over the medium-term to 2020.

The University College Cork economist also said the State’s corporate tax code meets the highest standards internationally.

The review came in the wake of a series of controversies concerning the Republic’s tax regime, culminating in the European Commission’s ruling in 2016 that Apple should repay €13 billion in back taxes.