The Irish Times view on the digital services tax: Ireland under pressure

Aspects of the State’s tax regime have been important parts of aggressive tax planning by US multinationals for years

The decision by France to press ahead with sending tax bills to major multinationals for its new digital services tax will certainly spark new tensions with the US. Photograph: Alastair Pike/ AFP via Getty Images

The decision by France to press ahead with sending tax bills to major multinationals for its new digital services tax will certainly spark new tensions with the US. Photograph: Alastair Pike/ AFP via Getty Images

 

The decision by France to press ahead with sending bills to major multinationals for its new digital services tax will spark fresh tensions with the US. The Trump administration has held that this plan unfairly targets American companies and is likely to respond by imposing new tariffs on French imports into the US. The move highlights the ongoing tensions about reform plans for global corporate tax. France is impatient that efforts at the OECD to reach an agreement between more than 130 countries is taking so long – and may not even succeed.

The US withdrew politically from the talks earlier this year and the attitude of the incoming Biden administration remains to be seen. Ireland has supported the concept of an OECD deal. It may threaten corporate tax revenues here, but this is seen by the Government as likely to be less damaging than no deal being reached and countries taking unilateral action, as France has done.

Ireland is under pressure in the talks as aspects of its tax regime have been important parts of aggressive tax planning by US multinationals over the years. The Government points out that the rules have been tightened, but with corporate tax revenues soaring here, Ireland’s role in the new structures being put in place by multinationals in response to the first phase of OECD rule changes will again be closely examined.

As the home of key intellectual property assets for many companies, more and more profit is being declared in Ireland. Other countries object – and the second phase of OECD changes, if agreed, are likely to lead to reduced revenues here. Meanwhile tax justice campaigners have succeeded in getting the UN to examine the role of tax in Ireland’s compliance with the UN Convention on the Rights of the Child. Their case is that profits have been shifted from developing countries to Irish subsidiaries.

Ireland has benefited from the first round of international reform, but the extent of the gains is putting the country in the spotlight. Navigating this will be a key challenge for Minister for Finance Paschal Donohoe next year.

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