EU sub-committee hears evidence on Ireland’s corporate tax regime

A public hearing was held last week by the European Parliament’s sub-committee on Tax Matters and focused specifically on Ireland’s corporate tax policy.  The purpose of the hearing was to gather insights and opinions from experts on the corporate tax reforms implemented or envisaged in Ireland to address tax evasion and aggressive tax planning, as well as their interaction with other national tax systems, mainly in the EU but also with the main economic partners of Ireland outside the EU.  The sub-committee is undertaking case studies of the national tax policies of Member States.

Frank Barry, Professor of International Business & Economic Development, Trinity College Dublin and Seamus Coffey, Lecturer at University College Cork and former Chair of the Irish Fiscal Advisory Council participated in the hearing.

Opening statements were made by both Mr Barry and Mr Coffey, with Mr Coffey focusing on the impact recent tax changes have had on US multinationals in Ireland.  

“Recent years have seen significant changes introduced that impact on the taxation of these companies. These changes include those brought about through the Organisation for Economic Cooperation and Development’s original Action Plan under the Base Erosion and Profit Shifting (BEPS) project, the Tax Cuts and Jobs Act signed into US law in 2017 and changes to corporate tax residency rules in Ireland. These changes have been significant and have triggered significant responses….. The changed pattern of royalty flows from Ireland is now more in line with the economic substance of these companies and the reporting of their profits is better aligned with the function, assets and risks that generate those profits”

Mr Barry acknowledged that Ireland’s nominal corporation tax rate of 12.5 percent is low by European standards however it is a transparent regime.

“The corporation tax regime is also relatively transparent: the gap between the nominal and the effective rate – what firms actually pay when allowances etc. are taken into account – is much lower than for most other EU countries. The other key feature of the tax regime is its stability.”