The Irish Times view on corporate tax: Dublin must confront a long-standing dilemma

Ireland will have to accept reform of its corporate tax regime or continue to frustrate fellow EU member states’ attempts to levy taxes

The US decision to pull out of a key international dialogue on international corporate taxation poses an important renewed challenge to Minister for Finance Paschal Donohoe and the Government.  Photograph: Gareth Chaney/Collins

The US decision to pull out of a key international dialogue on international corporate taxation poses an important renewed challenge to Minister for Finance Paschal Donohoe and the Government. Photograph: Gareth Chaney/Collins

 

The US decision to pull out of a key international dialogue on corporate taxation poses an important renewed challenge to Ireland. Having steadfastly resisted pressure within the EU for corporate tax harmonisation, or even agreement on basic taxation rules, such as where taxes should be levied, the Government accepted a couple of years ago that international agreement was inevitable, not least on the taxing of giant digital companies whose ability to avoid taxation had become politically embarrassing. Ireland had been accused – a claim it denies – of being a tax haven.

The G20 tasked the Organisation for Economic Co-operation and Development (OECD) with brokering a common position on what is known as base erosion and profit shifting (BEPS) which the organisation estimates cost countries $100-$240 billion in lost annual revenue. Some 137 countries are involved and Ireland embraced the process as a way of longfingering EU efforts to agree a common position. These are still being blocked by Dublin and two or three other states in the name of national tax sovereignty.

Ireland’s veto remains in place, however, and renewed pressure to abandon its position is inevitable

On Friday US treasury secretary Steven Mnuchin said the US wants to close down the OECD talks “while governments around the world focus on responding to the Covid-19 pandemic and safely reopening their economies”. But the pandemic excuse does not wash – he also contended discussions had reached an “impasse” and that the US was unable to agree even on an interim basis on changes to global taxation law affecting leading US digital companies. The US is ready to apply sanctions to those who levy such taxes and has opened trade investigations into digital taxes in Britain, Italy and Spain.

France responded that the US move was a “provocation” which would not stop it introducing its own tax. “No one can accept that the digital giants can make profits from their 450 million European clients and not pay taxes where they are,” finance minister Bruno Le Maire said. A Spanish government spokeswoman insisted European countries would not accept “any type of threat from another country”.

“What is very clear is that by end December, either there is a deal within the OECD, and we will implement it, or there is none, and then Europe will present it,” internal market commissioner Thierry Breton said on Saturday.

Ireland’s veto remains in place, however, and renewed pressure to abandon its position is inevitable. Absent the OECD route, Dublin will again have to confront the long-standing dilemma: accept reform of its flagship corporate tax regime and dilute its insistence on taxation as a sole national competence, or continue to frustrate fellow EU member states’ attempts to levy taxes, and to undermine Irish credentials as a reliable pillar of the logic of economic union.

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