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Accountants Urge Caution From Irish BEPS Response

by Lorys Charalambous,, Cyprus

21 July 2014

Ireland risks introducing an uncertain tax environment for multinationals if it is overzealous in responding to ongoing base erosion and profit shifting (BEPS) work from the Organisation for Economic Cooperation and Development, the Consultative Committee of Accountancy Bodies of Ireland (CCAB-I) has said, urging Ireland to follow the crowd.

The CCAB warned that "constant changes to [Ireland's international tax] framework or rules that are hard to interpret or subject to post-event reappraisal" will simply add "an environment which degrades entrepreneurship and discourages business." It said that, to support businesses, BEPS measures need to be evolutionary, rather than revolutionary, when dealing with perceived hybrid and treaty abuses, and considering the appropriateness of current transfer pricing standards.

It commended the OECD's work, stating that: "The rapidity of the BEPS process does add some further legitimacy to the work being undertaken by the OECD." Adding: "Too often, the slow pace of reform has discredited otherwise worthwhile international tax initiatives."

"However, early adopters of BEPS proposals will endure at least a year of uncertainty, maybe more, during which time other countries will have more compelling regimes. While some of those other regimes will remain under the spotlight, they will still exist. It may well be better judged not to move too soon on BEPS proposals, perhaps not before 2015, by which time we'd have a better sense of the new parameters and options. Not all of the BEPS outcomes might be clear by Budget 2015 day, nor even by Budget 2016 day," it said.

While urging caution, the CCAB-I warned the government to not become "an outlier within the international rules." Ireland must adopt international standards, but the CCAB-I said the Government must be alert to any efforts from higher tax countries to damage Ireland's appeal: "Fair tax completion is universally accepted. In Ireland's case it is encapsulated in the 12.5 percent corporation tax rate and helps to offset the pull of the center for jobs and economic development against the periphery."

"Harmful tax practices are simply not a feature of the Irish tax landscape. Harmful tax practices, as and when highlighted either by the OECD or by the EU, were changed by successive Irish Ministers for Finance. The Irish system has already been through the mill of good practice scrutiny. That is why concepts such as the requirement to have a substantial presence in Ireland, anti-transfer pricing rules, and exchange of information between Revenue Authorities are features of the Irish system."

"That is not to say that there is not still room for improvement. Tax legislation and best practice can and will evolve, not least because many of the rules which apply not only in this country but in other countries across the globe pre-date the growth in cross-border trade and the pre-eminence of intellectual property on the balance sheets of international companies."

"The BEPS initiative has much to recommend, but it must be careful not to become a vehicle for protectionism and national self interest of just a few larger countries," it said.

"The use of Irish tax policy to foster Foreign Direct Investment has been fundamental to the creation of decent living standards for large numbers of our people. It is worth defending," it said.

TAGS: environment | Finance | tax | investment | business | tax information exchange agreement (TIEA) | Ireland | tax avoidance | interest | law | intellectual property | entrepreneurs | Organisation for Economic Co-operation and Development (OECD) | corporation tax | tax authority | agreements | multinationals | legislation | transfer pricing | tax rates | G20 | tax reform | standards | regulation | trade | mutual assistance agreement | European Union (EU) | services | Investment | Europe | Invest | Investment | Tax | Tax Evasion

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