Belfast Telegraph

View from Dublin: We'll need the best brains to help sort out corporation tax controversies

Paschal Donohoe (Brian Lawless/PA)
Paschal Donohoe (Brian Lawless/PA)

By Richard Curran

While Paschal Donohoe might want some political cover on banker salaries, he has plenty of cover when it comes to changing our corporation tax system. The Republic's Finance Minister has outlined a road map for future changes to the corporate tax system in response to a changing world and a clamour to end aggressive tax avoidance.

The road map doesn't really say where we will end up or even how we are going to get there. It is really a statement of intent that we are willing to respond to demands for change.

The Republic has thrown in its lot with the Office for Economic Co-operation and Development (OED) process on this issue rather than just the EU. Some of our 'tax competitors' are outside the EU and some of our biggest clients are American multinationals.

The government has had to weather the storm of the European Commission Apple investigation and the heavy criticism from EU partners about facilitating tax avoidance.

The challenge here is to move with the tide of change that is demanding an end to the most aggressive forms of tax avoidance while remaining competitive compared to other countries as a destination for inward investment. It is a tough juggling act.

The government keeps repeating its commitment to the 12.5% corporation tax rate but it isn't really under threat anyway. The real action is on transfer pricing and where digital revenues are booked by tech companies.

Studies have shown that internationally, corporations are paying on average less corporate tax than in the past. How can the Republic fully participate in the movement to fix that without financially shooting ourselves in the foot at the same time by losing significant investment.

In the past, the Republic has relied on some very clever tax experts to advise the government on how to structure tax laws to make this country very attractive for foreign investment. If anything, our experts got too smart at it and we have been often legitimately open to criticism.

We will need the best brains to be smart again, but just not too smart this time.

Belfast Telegraph