Ireland needs “to match actions with words” when it comes to tax and the adoption of a new minimum rate for multinationals, Paul Tang, head of the European Parliament’s subcommittee on tax matters (FISC), has said.
With Hungary blocking an EU directive that would impose a 15 per cent rate on big tech companies, he called for greater Irish co-operation while highlighting that up to a third of foreign directive investment (FDI) here was “phantom”, in other words passing through the jurisdiction solely for tax purposes. In a thinly veiled criticism of Ireland’s stance on tax within the bloc, he said Ireland needed to be a “European partner and engage with the process”.
On a two-day visit to Ireland, Mr Tang and other FISC members met senior Department of Finance officials, members of the Oireachtas Committee on Budgetary Oversight and representatives of US multinationals operating here, including Apple, Facebook, Google and Microsoft.
“On the question of where will Ireland position itself (within Europe) on a minimum effective tax rate and vis-a-vis Hungary, we didn’t get a clear answer,” he said.
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The EU had hoped to be first to adopt the new global deal on tax agreed last year under the auspices of the Organisation for Economic Co-operation and Development (OECD) but Hungarian opposition has thrown the plan into uncertainty. Mr Tang described Budapest’s position on the directive as tantamount to “blackmail”.
While noting that Ireland along with Luxembourg and the Netherlands had been labelled as tax havens by the European Parliament, he said the tag was linked to the huge flow of international capital captured by Ireland, highlighting in recent Central Statistics Office data which suggested that up to third was just “pass-through or phantom” investment with no real substance in terms of economic activity.
Mr Tang said that in the meetings with multinationals here they had assured him that their decision to locate in Ireland would not be affected by the introduction of a new minimum rate.
The companies said tax was just one of the factors why they located here “not the determining factor, there is much more to Ireland which makes Ireland a very attractive place for them to invest in, including the language, the access to the European Union and political stability”, he said.
On the minimum rate, he said it would good for Ireland to sign up as it would “lose out anyway” when other jurisdictions applied a top-up rate, over and above the State’s current 12.5 per cent rate. Under the agreed OECD deal,a “top-up tax” would apply on profits in any jurisdiction whenever the effective tax rate is below the minimum 15 per cent rate.
Mr Tang said he had had positive meetings with officials here. “But it’s one thing to say the words, another to do the actions.”
The proposed minimum rate would apply to large companies with annual revenue exceeding €750 million. It has been endorsed by 136 countries, representing more than 90 per cent of global income.
Ireland’s low corporate tax rate is one of the main victims of the deal, which has still to be ratified by the US Congress. The fear is that a minimum rate could undermine Ireland’s offering to potential investment here. Receipts from the business tax are expected to hit a record €20 billion this year.
