OECD proposal 'could hit Irish tax revenue'

Tuesday 25 March 2014 10.53
Many multinationals have operations in Ireland, despite the country being a small market for sales
Many multinationals have operations in Ireland, despite the country being a small market for sales

Ireland could suffer a significant loss in tax revenue from multinationals if new proposals from the OECD are agreed, according to the lobby group Chartered Accountants Ireland.

It warned proposals to change the way multinational companies are taxed will benefit large countries at the expense of Ireland.

In a major change in policy, the OECD has proposed applying taxes to products based on the jurisdiction in which they are sold, rather than the location of the company's operations.

This would mean that a multinational that has its European headquarters in Ireland would, for example, pay the British corporation tax rate on the profits of a sale made in England rather than the Irish rate as currently applies.

The proposal forms part of a wider review by the OECD into the way digital products are taxed internationally.

According to Brian Keegan, tax director at Chartered Accountants Ireland, the proposed move would "fundamentally change the business model for companies based in Ireland".

The change would mainly benefit large countries where a lot of sales take place, while disadvantaging small states, such as Ireland, which host a large number of companies, despite being minor markets in terms of actual sales.

"From the OECD's own figures, Irish exports in the sector constitute 12.7% of the world market, and we rank second only to India in terms of market share," said Mr Keegan.

"Accordingly, if these proposals were to be adopted, Ireland could be the biggest loser in terms of our corporation tax take."

Mr Keegan said it was vital for businesses to engage with the OECD process to "point out the flaws" in their reasoning.

The OECD proposals are subject to public consultation until 14 April.