A near-300 per cent increase in tax reassessments by Revenue is threatening Ireland's reputation for tax certainty, the Dublin-based Edmund Burke Institute has warned.
In a pre-budget submission, the free market think tank said upward reassessments of the tax liabilities of large corporates and high-net-worth individuals had jumped from 337 in 2015 to 915 last year.
It is clear from these numbers that Revenue has become “substantially more aggressive” towards reassessment, it said.
"There is a real risk that other corporations will be deterred from investing in Ireland for fear that similar tax demands may be made against them in future," the institute said.
In December last year, chipmaker Analog Devices – which employs 1,200 people at its base in Limerick – was told by Revenue that it owed the tax authorities here €43 million while pharma giant Perrigo was hit with a massive €1.6 billion tax demand by Revenue. Both cases are under appeal.
The institute linked the cases to the EU's crackdown on so-called sweetheart deals given to multinationals, the most high-profile of which was its €13 billion ruling against Apple, which is also under appeal.
“There is a danger that, having been perceived to be too soft on Apple, the Revenue Commissioners now seek to ‘come down hard’ on some corporations in a manner which damages the ability of companies to accurately predict their tax liabilities and, by increasing business uncertainty levels, reduces prospective levels of inward investment,” it said.
The institute's comments come in the wake of stinging criticism from Nobel-prizewinning economist Joe Stiglitz, who accused Ireland of being a "bad citizen" and of "robbing its neighbours" in facilitating multinationals in their aggressive tax-avoidance schemes.
In its submission, which was prepared by economist Cormac Lucey, the institute said Ireland had fought a diplomatic rear-guard action aimed at delaying and reducing the scope of international tax reform.
“But can we honestly be confident that these efforts will prove successful in the face of a united front advanced by a larger and more powerful coalition than ours?” it asked.
Optimal top rate
The group also called for the effective top rate of income tax here to be reduced from 52 per cent to 44 per cent, a rate which the International Monetary Fund (IMF) deems optimal.
It said Ireland's current top marginal income tax rate exceeded the top rate advocated by Jeremy Corbyn's Labour Party in the UK, which it described as the most left-wing Labour Party in decades. The UK Labour Party has proposals to tax those on £80,000 (€90,500) or more at 45 pence in the pound, and those on £125,000 at 50 pence in the pound.
"The income tax practices and policies of [taoiseach] Leo Varadkar's governing Fine Gael party are – viewed dispassionately – to the left of those of Jeremy Corbyn's opposition Labour Party," it said.
Mr Varadkar has pledged to raise the threshold at which the higher-rate income tax applies to €50,000. Currently the higher rate kicks in at incomes above €35,300 for a single person.