26/09/17

Ireland's Donohoe Concerned By Latest EU Tax Moves

Irish Finance Minister Paschal Donohoe has warned that the imposition by the EU of separate tax rules for the digital economy risks double taxation and greater uncertainty, reports Tax-News.

In a speech to an economics workshop in Dublin, Donohoe said that Ireland is committed to global tax reform, supports the efforts led by the OECD through its BEPS project, and "believes that global solutions are needed to ensure tax is paid by companies where value is created."

The European Commission last week adopted a Communication on the "fair taxation" of the digital economy. It believes that the challenges posed by the digital economy necessitate reform of international tax rules on permanent establishments, transfer pricing, and profit attribution.

The Commission is continuing to press for the adoption of its common consolidated corporation tax proposal and, in the meantime, for the consideration of three alternative policy options. These are: an equalization tax on the turnover of digitalized companies; a withholding tax on digital transactions; and a levy on revenues generated from the provision of digital services or advertising activity.

During his speech, Donohoe noted that the OECD is currently conducting research into the digital economy, with an interim report expected in the spring of 2018. According to Donohoe, "it would be best to take action having considered that OECD analysis, as a consistent global approach is needed."

Donohoe stressed that "Any solution must build on a shared understanding of where value is actually created by digital business." He is concerned that "applying different rules within the EU to what is being applied globally is likely to result in double taxation and greater uncertainty."

Donohoe also touched on the suggestion by European Commission President Jean-Claude Juncker that the EU should move from a system of unanimous voting to qualified majority voting on key tax policy issues.

He noted that while there is currently no official proposal for reform of the voting rules, any such change would require a unanimous decision by member states, and the support of the European Parliament.

Donohoe made clear that the Irish Government "will not support any change to existing EU voting rights on corporation tax."