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Ireland Taking Steps To Protect Tax Regime's Reputation

By Amanda Banks, Tax-News.com, London

10 July 2014


Responding to questions posed by Deputy Dara Callaeary in Ireland's House of Deputies (Dáil Éireann), Irish Finance Minister Michael Noonan has said that the European Commission's advance tax ruling investigation into arrangements for Apple will take between three to five years, if the investigation moves from an informal to a formal investigation within the next two weeks.

In response to Callaeary's questions, which focused on the impact of the investigation on Ireland's corporate tax regime and reputation, Noonan said: "I assure the Deputy that protecting Ireland's economic interests is foremost in our considerations on this issue."

"It is important to emphasize that the Commission has only opened an investigation at this stage and has not made a final determination on state aid in respect of Ireland. For state aid to exist in this case, less tax must have been charged to the company than should have been applied, and this must have distorted competition within the Single Market. Our response to the European Commission will be clear - the appropriate amount of Irish tax was charged, no selective advantage was given, and there was no state aid."

He restated: "We will provide a detailed, technical legal rebuttal to the Commission's position and, if necessary, defend our position in the European courts."

On June 11, 2014, the European Commission announced that it was reviewing advance tax rulings provided by Ireland (and two other member states in respect of other companies) to establish whether special tax arrangements were being offered in contravention of EU state aid rules. The European Commission said it has reviewed the calculations used to set the taxable basis in those rulings and, based on a preliminary analysis, had concerns that they could underestimate the taxable profit and thereby grant a selective advantage to the respective companies by allowing them to pay less tax.

Noonan said: "There are no wider consequences arising from the investigation in respect of the Irish tax system or foreign direct investment." He continued: "They are [not], and no-one is putting pressure on our rate. There are three issues with our corporation tax: the rate, which is 12.5 percent; the regime, comprising the rules and the system; and our reputation. The concern must be about the reputational issues."

Callaeary claimed that the Government had been "sleepwalking" through the European Commission's investigation and expressed concerns that if a selective advantage is found to have been given to Apple that it could have much a much more significant impact on multinationals present in Ireland, and also Ireland's ability to attract foreign direct investment (FDI).

While Callaeary acknowledged that the EC's investigation is limited to one company, he said it could quickly be expanded to include more. Callaeary added: "Our hands will be constrained in respect of attracting inward investment if this continues for five years. I know these are the European rules but if this is a European Union that says it is pro-enterprise and allows an investigation into one company, as specified, to potentially last that long, that is not pro-enterprise."

Noonan said that Irish authorities have already been taking action to respond to the probe. He said that although it could take up to five years, Ireland will not "stand idly by and wait until the end of the process before doing anything," he reassured Callaeary.

"In last year's Finance Bill we took the first step in regard to changing the status of companies that, from a tax point of view, are not resident anywhere, and we published a discussion paper a couple of months ago which is providing the basis for a discussion," he said. "We have taken the top tax practitioners in the country, who deal with all the multinationals, into our confidence and have briefed them fully, on a confidential basis, on the implications."

Noonan said: "At present we are in a pretty good space but we are not making light of this. I see it as an issue that needs to be dealt with at a policy level, but getting the timing right and matching it to events as they occur, both in the competition authority in Europe and in the Organisation for Economic Cooperation and Development (OECD), is important. It is aligning everything so that we can make the moves that may be necessary without any damage to reputation," Noonan concluded.

TAGS: court | compliance | Finance | tax | investment | business | European Commission | Ireland | tax avoidance | interest | foreign direct investment (FDI) | Organisation for Economic Co-operation and Development (OECD) | corporation tax | ministry of finance | tax authority | agreements | multinationals | forest investment | tax planning | transfer pricing | tax rates | tax reform | standards | regulation | European Union (EU) | business investment | Europe | Tax | Tax Evasion

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