EU seeks to force firms pay tax where profits earned
A fresh drive by the European Commission to ensure companies pay their tax where they make their profits could have far-reaching consequences for Irish corporate tax revenue.
Some new pieces of legislation will be presented over the next few months, but one of the biggest could be the revival of the common consolidated corporate tax base.
By the end of June, the commission expects to report its findings on whether Ireland granted state aid to Apple, and on similar investigation into the Netherlands and Luxembourg.
But next month, Brussels will present its Tax Transparency Package that will aim to have every EU country automatically exchange information on the tax arrangements it makes with companies. The publication of hundreds of such tax rulings given by Luxembourg earlier this year increased pressure for a tightening up of regulations.
It is expected that this will be followed in June by an action plan to take account of the OECD’s work on behalf of the G20 into base erosion and profit shifting — BEPS.
The commission is also expected to relaunch CCCTB which was one of the areas Ireland agreed to play an active role when under pressure to change its 12.5% corporation tax rate during the bailout. This would provide companies across the EU with a single set of tax rules allowing them to fill out just one form to cover their companies in any number of member states. The tax would then be collected and apportioned to the different countries along a single agreed set of principles.
Currently, companies irrespective of the fact that the bulk of their manufacture or sales is in one country can pay much of their tax through their Irish company as it is nominated as their headquarters and because of a number of ‘liabilities’.
Many member states’ appetite for the kind of transparency that this would require cooled during negotiations over the past few years, but the commission is now considering trying again, but possibly without the requirement for one of the ‘Cs’, consolidation.
This would mean that companies could still offset profits in one country against tax liability in another.
