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Irish not to blame for Apple et al tax

Tuesday, July 01 15:45:38

Ireland can't solely be held to blame for the overall global tax rate paid by global corporations, according to Cora O'Brien, Policy Director at the Irish Tax Institute.

She added that Ireland cannot be expected to tax a multinational enterprise (MNE) on its global profits just because it is incorporated in Ireland.

O'Brien made the comments while addressing the Houses of the Oireachtas's joint sub-committee on global taxation, which met to assess how best to calculate the effective rate of corporate tax on companies in Ireland. O'Brien said that the debate on Ireland's effective corporate tax rate ties into international debate on international tax rules being led by the Organisation for Economic Cooperation and Development in its base erosion and profit shifting work.

On calculating the effective corporate tax rate of a company, O'Brien said: "There is no single, internationally agreed, methodology in calculating effective rates of corporation tax for a country. As a result we have seen a variety of conflicting answers where different methodologies are applied to different data sources."

"Companies operating globally can have a combined low global effective tax rate, however you cannot attribute that rate to any one country - you cannot say that this is the effective tax rate of that country," she added.

O'Brien said that a company is only liable to be taxed in Ireland on the activities that are subject to Irish tax under rules that have been recognized and accepted not just in Ireland but by other countries internationally, and by the OECD. "Where a company is not Irish tax resident, Ireland can only legally lay claim to the tax that arises from relevant activity in Ireland," she said, besides making the following observations:

"A company may be incorporated in Ireland but the management and control of that company may be located elsewhere, which means that under Irish tax laws the company is not liable to Irish tax on the foreign income. Ireland's residence rules, which have been in place since 1922, would not be regarded as being unusual and would be consistent with many international countries and indeed the model OECD treaties."

"Taking an Irish incorporated company's total global tax bill and dividing it by its total global profit, in an attempt to estimate an Irish based effective corporate tax rate from it, is incorrect and distortionary. Trying to extrapolate an overall Ireland effective corporate tax rate from these company figures is also distortionary and incorrect."

"The effective corporate tax rate of a company is a mathematical computation; arrived at by virtue of the activity of a company and the application of the tax rules that are relevant to that exact activity in each jurisdiction in which the company operates," she concluded.