Ireland supports the EU review of all patent box regimes – under which certain member states offer tax breaks for intellectual property – and has decided to take a "wait-and-see approach" on the issue until guidance is provided by the European Commission.
This has emerged from briefing documents provided recently by the Department of Finance to its newly-appointed Minister of State Simon Harris.
A patent box is a special tax regime offering a rate that is lower than a country’s standard corporation tax rate. Questions have been raised as to whether it breaches state aid rules, with the UK’s scheme being closely scrutinised by the commission.
The Ecofin council of EU finance ministers recently requested that the commission carry out an assessment of all patent boxes by the end of 2014. It is examining schemes in the UK, Belgium, Cyprus, Spain, France, Hungary, Luxembourg, Malta, the Netherlands and Portugal.
The briefing note to Mr Harris states that “Ireland is supportive of the . . . decision to look at patent boxes”.
“There has been a lack of clarity around the issue of patent boxes for some time, and therefore we believe there should be a thorough analysis of these measures.
“In particular, given the persistent calls on Ireland to introduce a patent box, it would be helpful to get guidance from the commission. Ireland can adopt a ‘wait-and-see’ approach on this issue.”
Harmful competition
The briefing note adds some EU countries consider the patent box to be a “form of harmful tax competition, with Germany’s finance minister Wolfgang Schäuble making comments to the effect that they are contrary to the European spirit”.
The briefing given to the Minister last month also deals with the OECD’s base erosion and profit-shifting (Beps) project, which is seeking to tackle the issue of how much corporation tax is paid by multinational companies and measures they use to minimise their tax payments.
Competitive tax rate
When speaking on this matter, the department suggests that Mr Harris might state that “Ireland has a competitive corporate tax rate, which is applied to a broad base – a policy promoted by the OECD” – and that the Beps action plan, published last year with 15 suggested actions to deal with this problem, was “essentially a roadmap, with a timetable for completion of actions varying from September 2014 to December 2015”.
On US tax reform, the department reminds the Minister that we don’t “generally comment on the tax affairs of other countries”.
“US tax issues are a matter for the US administration and Congress. This is a complex process due to the nature of the US system of government. Progress has been slow to date.”
The note also outlines Ireland’s “many concerns” over the proposed EU financial transaction tax, “not least of which are the potential impacts on, and the trading of, Irish sovereign debt in the secondary market and, in total, the potential negative impact on the liquidity of the financial sector as a whole”.
Ireland’s concerns are “widely shared” among member states.
The proposed implementation date for the financial transaction tax is January 1st, 2016.
