Ireland does not engage in “harmful tax competition” says European Commission

Ireland does not engage in "harmful tax competition" in the European Union, the European Commission has told an Oireachtas inquiry, in a marked change of tone from previous criticisms.

Defending plans for changes to the EU’s corporate tax rules, the Commission officials rejected charges that they would lead, if implemented, to the harmonisation of rates across the Union.

Asked if the plan for a Common Consolidated Tax Base (CCCTB )was a "Trojan horse" for tax harmonisation, a leading Commission tax expert, Mr Bert Zuijdendorp was unequivocal. "No is the short answer," he said.

Such an attempt, if it was made, would be “an insult to the intelligence of the member states,” he told the Oireachtas Finance, Public Expenditure and Reform committee in Leinster House.

Questioned

The Commission officials were questioned by TDs and senators, including the Anti-Austerity Alliance and People Before Profit TD Paul Murphy, who asked if Ireland had engaged in harmful tax competition.

Mr Zuijdendorp said: “Do we consider Ireland today is engaged in harmful tax competition? I don’t think the answer to that is yes. No. I don’t think that is the case. We are in a better place now that we were ten or 15 years ago.”.

The CCCTB plan, previously opposed by Ireland, was re-launched recently by the European Commission and Brussels insiders say there is more momentum behind the plan that when it was first proposed in 2011.

Even previously sceptical countries are now more open to the idea, though TDs and senators strongly expressed opposition. Officials from the Department of Finance and Revenue said that the Government had not yet taken a position.

The CCCTB would first introduce a common tax base across Europe with agreement on exactly what was taxable in corporate profits and what deductions and expenses could be allowed.

The second stage of the plan, if it is eventually accepted by EU states, would divide the tax paid by corporations amongst the member states by reference to labour, assets and sales.

Ireland has long feared that such an arrangement would lead to a substantial erosion of corporation tax receipts paid in Ireland – and suspect this is precisely why other European countries and the Commission want to progress the plan.

Multinational companies

The Commission and several member states, including France and Germany, have always been irked at the relatively low rate of Ireland's corporation tax, and at the activities of multinational companies which channel their profits through Ireland to minimise tax bills.

TDs and Senators were hostile to the plan on Tuesday, with Fianna Fáil finance spokesman Michael McGrath td accusing the Commission officials of "seeking to rewrite our entire corporation tax code".

“This is a serious encroachment on the core competence of a member state,” Mr McGrath said.

Sinn Féin finance spokesman Pearse Doherty TD said that the Commission was engaging in "a blatant attempt to pull the wool over politicians' eyes".

Fine Gael TD Peter Burke said the CCCTB would be "an unmitigated disaster for Ireland", while the committee's acting chairman, Fianna Fáil senator Gerry Horkan said that there were "serious reservations from an Irish perspective".

The Commission officials reminded the committee that unanimity was needed for the proposal to be adopted.