Ireland has given “smart and constructive assistance” to a developing international plan for preventing multinationals escaping paying corporation tax altogether, according to a senior figure from the tax division of the Organisation of Economic Co-operation and Development.
Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said a proposal for addressing the issue was likely to be published on July 16th and it was envisaged that the measures involved would be implemented over the following two years.
Mr Saint-Amans was in Dublin yesterday for a conference on taxation organised by the Department of Finance.
He said Ireland competed “fairly” for foreign direct investment with its 12.5 per cent corporation tax rate. The objective of the OECD’s plan was to “neutralise” schemes that led to companies not paying corporation tax anywhere.
"In Ireland the corporation tax rate is 12.5 per cent, and that is good. What puts Ireland in jeopardy is the perception that Ireland charges 2 per cent."
There was international controversy recently when a US Senate committee in Washington heard evidence that an Apple subsidiary in Ireland paid just 2 per cent corporation tax as a result of a "deal" it had negotiated years ago with the then government. The Government said in response that Ireland did not do deals with individuals companies.
Speaking to The Irish Times, Mr Saint-Amans said the perception created about Ireland was "a false perception and was not based on a good analysis of the facts".
Minister for Finance Michael Noonan told the conference that the Irish system was open and transparent and that all companies in Ireland paid tax at 12.5 per cent on their profits earned in Ireland.
“Of course, profits earned by these companies that are outside the scope of the Irish tax system are not subject to Irish tax. Incorrectly counting these profits as ‘Irish profits’ is often the reason for the misleading analysis of the Irish taxation system and throws up very low effective tax rates. We can only tax profits that are liable to tax in Ireland.”
He said the issue of aggressive tax planning by multinationals could only be addressed through a co-ordinated international response.
A number of giant technology firms, such as Google and Microsoft, have large headquarter operations here that are taxed at 12.5 per cent. However, their profits are significantly reduced by their paying royalty and licencing fees to Irish-incorporated companies that are managed from places such as Bermuda, which have no corporation tax.
Prof Michael Devereaux, director of the Centre for Business Taxation at Oxford University, told the conference he had predicted 20 years ago that international tax competition would see corporation tax rates fall to close to zero by now. He had been wrong, but the trajectory remained downwards.
He said the OECD’s plan to eliminate devices that allowed for non-taxation was radical.