Dr Brian Keegan participates in IIEA Brussels panel discussion on the future of Corporate Taxation in Europe over the next 10 years

Feb 12, 2021

On Wednesday 10 February, the Institute’s Director of Advocacy and Voice, Dr Brian Keegan joined Paul Tang, MEP (NL, S&D), Chair of the new European Parliament subcommittee on Tax Matters and Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration to debate the “Future of Corporation Taxation in Europe over the next 10 years.” The event was convened by the Institute of International and European Affairs (IIEA), Brussels.

In his comments, Dr Keegan set out his views on Corporation tax from an Irish and small Member State viewpoint. He observed that tax is a constant source of headline news in Europe, something that is not always the case in other parts of the world, and he reflected on the underlying assumption in Europe that the current system is unfair.  Dr Keegan referenced the way in which the Apple case has become a lightning rod of this sense of unfairness in Europe, but he also noted that the world has changed since 2016 when the Commission first issued its findings against Ireland in this case. 

The tax point at issue in the Apple case is no longer an issue, according to Keegan, resolved neither by Irish legislation nor by European Commission activity but by changes in US tax law, namely the US Tax Cuts and Jobs Act of 2017. He argued that future history books will note the Apple case as one of the last tests of an old corporation tax system before it became displaced by a new regime involving where companies generate their sales as well as where they generate their value.  That change will present challenges for small countries like Ireland where the capacity of companies to generate profits here is not matched by the size of the domestic Irish market.

It is not just the US system which has moved on. The underlying rules of the global corporation tax collection system were created over a century ago. The old ways seem increasingly inappropriate in a world where goods are internationally traded and cross-border services are provided, the latter often without need for any physical movement of either people or goods. Now the concepts of company management and control as factors in deciding where tax is paid (and which helped give rise to the Apple conundrum) are the focal point for the international corporation tax reform agenda led by the OECD.

Dr Keegan noted the dampening effect of the COVID-19 pandemic on the OECD negotiating process, but with over 130 countries involved, it has garnered some momentum, and with the Irish Department of Finance estimating that proposed reforms could see the Republic’s corporate tax base shrink by between €800 million and €2 billion, it is a critical reform process for Ireland to be a part of.