Ireland’s lower tax rate effectively allows MNEs to develop egregious tax-sheltering methods to shift more of their total EU profits to Ireland˳
Digital Revolution of the Economy
Digitization of the economy continues to create challenges for global taxation˳ EU’s thrust on digital tax is on encouraging corporations to build trust and commitment for social cohesion and environmental protection˳
EU proposed to adopt the Digital Services Tax to protect the taxes of the Member˳ This short-term measure to resolve tax challenges for the digital economy provides a window of opportunity to build consensus while the longer-term tax approach is being sorted out˳
International Tax Reforms
Nearly 130 countries agreed to an agreement aimed at improving international tax rules that have been surpassed by the growth of digital commerce˳ European Commission’s plans have faced very public scrutiny from leading international figures˳ Many countries Many countries see a value creation mismatch for taxation of digital activities˳ A growing number of countries are considering implementation of digital services tax˳
Silicon Valley gets Digital Tax Jolt
Traditional sectors are paying on average 23% tax in the EU˳ To avoid higher tax burdens, global tech giants such as Facebook, Google, Amazon, Apple and other large technology firms set up their headquarters in low-tax countries such as Ireland or Luxemburg to preserve more of their EU profits˳ They pay only 8% or 9% in the EU and book profits˳
Status Quo in Ireland’s Corporation Tax Regime
Ireland blocked EU’s relentless push to end the veto power member states have over EU tax matters˳ The new rules will come into force next year would make it harder for large multinational firms with high international tax burdens˳ This would also make it more difficult for tax havens such as Ireland to attract foreign direct investment˳
Closing the Loop
Although Ireland holds a veto in tax matters, it cannot turn a blind eye to tax reforms particularly as some of this revenue is escaping the tax net entirely˳ The digital tax is a levy on revenue rather on profits, which is perceived by big players as being selectively discriminatory˳
Ireland is Bracing for the New Tax Regime
Ireland has expressed strong reservations over the plans by the European Commission to tax digital companies˳ As the OECD puts forward with global collaboration high on its agenda, Ireland is pulling out all stops to protect its peripherality and moving towards greater transparency and sustainable development˳
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