(The Times) -- Paschal Donohoe was forced to defend Ireland against accusations of being a “bad player that steals jobs and revenue from other countries” during a debate on taxation in Davos yesterday.
Joseph Stiglitz, a Nobel prizewinning economist, said that Ireland was one of the countries leading the “race to the bottom” in global taxation.
“You have a corporate tax rate of 12 per cent,” he said. “Why not have 10 per cent? Why not have 9 per cent? Why not have zero per cent? Where does this end up?”
Professor Stiglitz, a Columbia University professor, said the European Commission’s finding that the government had enabled Apple to avoid paying billions in corporate taxes was proof that Ireland was a haven. He added that he did not understand why the Irish government was appealing against the commission’s decision when the country “badly needs the revenue”.
In August 2016 the commission ordered the Irish government to recoup €13 billion plus interest in back taxes from Apple following a two-year investigation that concluded there had been a breach of state aid rules in 1991 and 2007. Mr Donohoe said that the government had to register an appeal because there was no breach of state aid rules. Apple denies any wrongdoing and has issued separate legal proceedings against the commission’s decision. The finance minister robustly defended Ireland’s corporate tax regime. “If you look at the OECD’s criteria for a tax haven, Ireland meets none of the criteria,” Mr Donohoe said.
He insisted that Ireland was committed to ensuring that the global tax system was fair and that all companies paid their rightful share. He cited a number of reforms introduced by the government over the past few years, including the closure of loopholes that enabled aggressive tax planning by multinationals.
Mr Donohoe added that Ireland was fully committed to the OECD’s base erosion and profit shifting (BEPS) project, which is an internationally co-ordinated effort by developed countries to clamp down on tax avoidance.
Speaking on the same panel, Pierre Moscovici, the European commissioner for economic and financial affairs, said that the EU had plans that went much further than BEPS. These included harmonisation policies such as proposals for a a new digital tax or common consolidated corporate tax base.
In a warning shot to Ireland, Mr Moscovici said that the EU had to move to a system of qualified majority voting on taxation. The present system of unanimity gives each member state a veto on tax policy. “We cannot have one country holding up policies that benefit the entire EU,” he said. Mr Donohoe said that the Irish government was implacably opposed to moving to such a system because it discriminated against smaller member states. He said that Ireland would continue to offer a 12.5 per cent corporate tax rate “and that is not going to change”.
The finance minister added that Ireland was a small country on the edge of Europe and a low corporate tax rate was one of the most effective levers at its disposal to maintain competitiveness.
Speaking to reporters following the Davos debate, Mr Donohoe criticised comments made by a Dutch MEP to the Oireachtas finance committee yesterday. Paul Tang said that Ireland’s corporate tax rate was akin to “piracy”.
“The MEP in question made the same comment about his own country as well,” Mr Donohoe said.
“We have no objective or intention to change our own rate, it is at 12.5 per cent, and the contention that national tax policy should be set by national governments to allow them to fund national services for their own citizens is a proposition that has support all over the union across many, many finance ministers and member states.”
He said he was “very confident that this is a proposition that will be maintained”.
There have been sustained attacks on Ireland’s corporate tax regime over the past few days. President Macron of France and Angela Merkel, the German chancellor, both called for EU tax harmonisation in separate addresses in Davos on Wednesday.
Leo Varadkar, who arrived at the Alpine resort on Wednesday night, said that Ireland had been subjected to unfair criticism. During a series of media interviews in Davos yesterday, the taoiseach said that Ireland was a global leader in terms of tax transparency.
He said the Apple case had prompted inaccurate and unfair media coverage. “The allegation is that Ireland had some sort of special deal with Apple, and we did not,” he said.
“We believe that we can prove that in the courts. Ireland is a country with a very clear tax policy, we have had it for a very long time now, our corporate tax is 12.5 per cent, it is not going up, it is not going down, and unlike a lot of other countries there are very few get-out clauses and exceptions and credits.
“Other countries have a higher tax rate on paper but actually they collect less and the OECD figures prove that, so certainly it has not been helpful. Ireland has got some bad press as a result of it and I don’t think that is fair. We are one of the most transparent countries when it comes to tax, the fact we have a rate that is low, simple, and transparent.”