Wednesday, April 23 15:24:09
Today's public consultation session of the OECD on digital economy tax will potentially have huge consequences for Irish tech firms, multinationals operating here and the Irish economy.
According to a recent survey, half of big global and home-grown Irish companies are very concerned about the impact of proposed changes to the international tax regime by the Paris-based think-tank's drive.
Peter Vale, Tax Partner at Grant Thornton, who attended today's public consultation session of the OECD on its 'Tax Challenges of the Digital Economy' Report said today that fundamental changes to the way companies are taxed globally moved a step closer following the public consultation phase today of the OECD's work on the taxation of the digital economy.
"What is slightly alarming given the potential scale of the change is how fast the process is moving and how little time has been afforded either business or consumers to provide input," he said.
The work of the OECD will have a significant impact on an economy such as Ireland which relies heavily on the strength of its exports and which uses tax policy as a means of attracting foreign investment, Mr Vale added.
A change in the tax rules that eliminates some of that tax advantage would have significant negative consequences for employment here, he warned.
What offers opportunity for us is the OECD focus on real substance and the targeting of arrangements involving tax havens. This could play into the hands of a country such as Ireland which has a track record of attracting and retaining jobs. A focus on linking taxation to real economic substance and value creation could incentivize multinationals to either create or augment employment here, he said.
"In the background there is the ongoing threat of linking taxation to where consumers are located, which would damage a small country such as Ireland. However there is a growing sense that if other OECD measures are seen to successfully tackle existing tax avoidance then plans to tax companies based on where their customers are located may be dropped. This is the critical piece for Ireland; provided the new global tax playing field sees a company's substance trump the location of its customers then we can retain our attractiveness for foreign investment."
A survey from Ernst and Young at an event attended by more than 100 multinationals and large indigenous public and private organisations last week concluded that the OECD's so-called "base erosion and profit shifting (BEPS) project" is focused on closing corporate tax loopholes around the world, with the 'Double Irish' also on its radar.
But concerns have also been expressed about aspects of the BEPS project amid suggestions it could have an adverse affect on smaller countries like Ireland.
The EY event was attended by senior management, including chief financial officers, board members and others with responsibility for taxes in their organisation.
"There was a wide consensus in the room that the cost of compliance will increase for business from these changes," an EY spokeswoman said.