The government has undertaken a review of the corporate tax regime to ensure that it complies with international efforts to clamp down on tax avoidance.
It is understood that the move is part of the agreement reached between Fine Gael and Katherine Zappone, the minister for children, after the Apple tax ruling in August.
Ms Zappone was initially reluctant to support a government appeal against the European Commission’s ruling that Revenue must recoup €13 billion from Apple because of a breach of state aid rules.
Michael Noonan, the finance minister, announced yesterday that Seamus Coffey, a member of the Irish Fiscal Advisory Council, would conduct the review and report back to the government by the end of June next year.
Mr Noonan said during his Dail speech that the government remained “firmly committed” to the 12.5 per cent corporate tax rate.
Mr Coffey will review corporate tax policy to ensure that it complies with the OECD’s base erosion and profit shifting (BEPS) project and the EU’s anti-tax avoidance directive.
Kevin McLoughlin, head of tax for EY, welcomed Mr Noonan’s commitment to the 12.5 per cent rate and said the review would ensure that Ireland’s tax regime was fully compliant with the new rules.
Mr McLoughlin added that the length of the review should be shortened because the British government intended to trigger Article 50 of the Lisbon treaty in March, which will formally launch Brexit negotiations. Ireland needs to ensure that it is as attractive as possible to foreign direct investment before then, he added.
Jim Clarken, chief executive of Oxfam Ireland, criticised the government for not doing more in the budget.
“This budget was a real opportunity for Ireland to put its house in order. It is hugely disappointing that no new mechanisms were announced to stop tax dodging by multinational corporations,” he said.
“For example, the budget includes no new rules to tackle aggressive tax planning employed by multinationals. We are also none the wiser after this budget about whether Apple-type deals are a thing of the past.”
Lorraine Griffin, head of tax at Deloitte, said the government should have begun a review of the income tax system at the same time as the review of the corporate tax regime.
“The headline measure was the reduction of the lower USC rates of 1 per cent, 3 per cent and 5.5 per cent each by 0.5 per cent. Unfortunately, the higher rate of 8 per cent remains in place, which means that the marginal tax rate remains at 52 per cent.”
Under the new BEPS and EU corporate tax avoidance measures, companies will be taxed where the bulk of their economic activities take place. Ms Griffin said that if Ireland is to benefit from the change in international rules, then companies based in this country need to be able to attract sufficient levels of talent. “The [tax system] leaves us much less competitive than our main rivals in attracting talent and does nothing to encourage the Irish abroad to move home,” she said.
Vulture funds’ loophole shut down
The government will close a controversial loophole used by vulture funds to minimise the amount of tax paid on billion euro property deals (John Walsh writes).
The details of changes to section 110 of the Taxes Consolidation Act 1997, which deals with the taxation regime for special purpose vehicles established in Ireland to securitise assets, will be announced in next week’s finance bill.
The loophole was criticised this year when it emerged that Cerberus, a US investment fund, paid €2,500 tax on a fund which had €5.6 billion of par value assets by using section 110. Goldman Sachs, CarVal, Lone Star, Oaktree Capital and Mars Capital also paid marginal tax rates on multi-billion euro funds using the process.
Stephen Donnelly, an independent TD and a long time critic of section 110, welcomed the announcement, and said that “many billions in future taxes will be protected” by the move.
Lorraine Griffin said that the government “must not throw the baby out with the bath water”. She added that section 110 has been a key part of the successful securitisation market that has been developed in Ireland over the past two decades.