‘Reservations’ on EU digital tax plan
The Government continues to have “reservations” over proposals by the European Commission, which are likely to recommend next week levying a 3% tax on the sales of major online companies. However, the Government believes the debate over the plans will be long drawn out, say officials.
Experts have long warned that the digital tax proposals which are being driven particularly by French Finance Minister Bruno Le Maire, as well as by Germany are a significant threat to Ireland’s corporation tax regime which has been based on the principle of taxing company profits on the basis of where they have significant assets.
Those assets include intangible assets such as intellectual property rights. Ireland has instead put its faith in a process called base erosion and profit shifting, which led by the Organisation for Economic Co-operation and Development (OECD) seeks a consensus for global tax reform, and has strongly opposed the Commission’s plan for ‘interim measures’ such as a digital sales tax.
Government revenues increasingly rely on corporation tax receipts, which after rising rapidly in recent times contribute €8bn a year to the exchequer. Ireland has also facilitated the transfer of intellectual property rights by multinationals into Ireland. An OECD preliminary report published yesterday, called Tax Challenges Arising from Digitalisation, was welcomed by Government officials here.
However, the report may not increase by much the leverage of a band of small EU countries, which like Ireland, will likely push against the commission’s digital tax. Le Maire also welcomed the OECD publication. The 210-page report says the digitalisation of the [global] economy is having a widespread impact”.
Digitalised companies rely on intangible assets, including intellectual property, which the report says is key because where such intangible assets are based “can have a material impact on where those business’ profits are subject to tax”.
