Friday, July 22, 2011

Ireland to give up some tax sovereignty in Euro deal?

A detail, noted by Tax Research, from the Guardian's summary of the Euro deal:

We are determined to continue to provide support to countries under programmes until they have regained market access, provided they successfully implement those programmes. We welcome Ireland and Portugal's resolve to strictly implement their programmes and reiterate our strong commitment to the success of these programmes. The EFSF lending rates and maturities we agreed upon for Greece will be applied also for Portugal and Ireland. In this context, we note Ireland's willingness to participate constructively in the discussions on the Common Consolidated Corporate Tax Base draft directive (CCCTB) and in the structured discussions on tax policy issues in the framework of the Euro+ Pact framework.

The CCCTB is a European project to institute what is sometimes known as Unitary Tax (or unitary taxation with formula apportionment, for those who are comfortable with ugly language), a radical method of taxing multinational corporations, supported by TJN and a number of academics. It is a method successfully implemented by a majority (and increasing number) of U.S. states with respect to state taxes, but which is virulently opposed by the OECD, supported by the world's biggest corporations, tax havens and tax advisers who make billions in fees from administering the OECD's absolutely unworkable rules on transfer pricing.

Let's make no mistake here - the headlines are all about Ireland's 12.5 percent corporate tax rate, whereas the majority of abusive shenanigans revolve around a quite different thing - Ireland's tax base - that is, what kind of things Ireland decides to tax (or not tax, as the case may be). By exempting all sorts of things from tax, Ireland creates a wide range of possibilities for abuse, such as through the "Double Irish" sham.

If this move towards Ireland actually accepting the CCCTB were to actually happen, it could strike a serious blow at Ireland's beggar-thy-neighbour, who-cares-about-hurting-foreigners attitude to international tax. Read more about unitary tax here.

This is not quite a breakthrough - 'willingness to participate constructively' is not exactly a capitulation.

But we think this is the right direction of travel.

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