EU competition chief looking into corporate tax loopholes

Tuesday 11 February 2014 10.57
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European Competition Commissioner Joaquin Almunia concerned about 'aggressive tax planning'
European Competition Commissioner Joaquin Almunia concerned about 'aggressive tax planning'
New study challenges figures used to defend Irish corporate tax rates
New study challenges figures used to defend Irish corporate tax rates

European Union regulators are examining corporate tax loopholes across Europe that allow companies to cut their tax bills, to see if they are anti-competitive.

This is according to European Competition Commissioner Joaquin Almunia.

His comments come amid growing criticism of schemes used by Starbucks, Apple, Amazon and others operating within the law to minimise their taxes by shifting their profits into tax havens.

US Internet companies have been especially effective at cutting their overseas tax bills.

This is because weaknesses in European tax rules mean it can be hard for tax authorities there to claim the right to tax online sales revenues.

The Group of 20 leading economies has launched a drive to tackle profit shifting.

Commissioner Almunia said he was concerned about such aggressive tax planning.

"In those cases where national laws or tax-administration decisions permit or encourage these practices, there might be a state aid component involved and I intend to go to the bottom of it," he told a conference.

"This is why in the last few months we have been sending requests for information to some Member States where we have doubts about the consistency of some aspects of their legal framework or of their administrative practices," he said.

As the competition enforcer in the 28-country European Union, Almunia can order governments to recover illegal aid granted to companies.

US firms paid tax rate of just 2.2% - study

A new study claims that US multinationals paid tax rates of just 2.2% in Ireland in 2011. The author of the paper also challenges figures used by the Government to defend Ireland's corporate tax rates. 

The paper was written by James Stewart, an associate professor in finance at Trinity College Dublin.

The research is based on US Bureau of Economic Analysis statistics and compares the effective tax rate here for American firms to noted tax havens such as Bermuda. 

Yahoo's decision to move its European base to Ireland put our tax regime for multinationals in the spotlight again. 

During a visit to the OECD in Paris after last week's announcement, the Taoiseach once again defended the country's tax rates.

Enda Kenny said our effective corporate tax rate, which is the average rate at which pre-tax profits are taxed, is almost 12%, higher than France's effective rate of 8%.

But the new study from Trinity finds that the figures used by the Government, taken from a PwC World Bank Group report, are inappropriate and are based on a hypothetical ceramic company. 

The new study says US multinationals reported paying tax of 2.2% in Ireland in 2011, suggesting that Ireland's actual effective tax rate for American firms is similar to jurisdictions regarded as tax havens.

But this has been strongly contested. Minister Brendan Howlin has said the Irish corporate tax rate is very clear, adding that the country does not have "brass plate companies" like other countries do. 

He said that Ireland is taking part in a survey with the OECD to ensure there is full tax compliance here.