During this week’s Global Tax Policy Conference in Dublin, Irish Finance Minister Paschal Donohoe called Ireland to implement a new corporate tax policy that will allow the country to remain competitive, while complying with all the different requirements being pushed by the European Union and the OECD.
Donohoe believes jurisdictions are now racing to modify their corporate tax policies to coincide with all the changes occurring in this sector.
The Irish government agrees with many of the required reforms being espoused by the OECD and the European Union, but does not necessarily agree with how the digital tax on large tech multinationals operating in the region is being handled.
Speaking at the event hosted by the Irish Taxation Institute and the Harvard Kennedy School, Donohoe told attendees that “it is very clear that further change is coming to the international tax system” and “this reality must be recognised and managed.”
Donohoe added, “We must be open to considering and developing a broader concept of value creation which recognises that some value may arise from scale, from brands or from access to markets.”
Furthermore, as explained by Sean Whelan of RTE, Donohoe “said the change could come by countries doing their own thing and risking trade wars and disruption to investment flows or they could work together for a "balanced and appropriate reworking" of the international tax framework.”
Donohoe Discuss Ireland’s Stance on Digital Taxation
Furthermore, Donohoe singled out the taxation of digital companies as Ireland’s most important issue.
“The main area of concern to us all as we contemplate the future of corporate taxation involves the current proposals at the OECD on addressing the challenges to the tax system arising from increasing digitalization,” he said.
Donohoe argued that, considering the enormous presence of US tech companies in his country, Ireland is better suited to work with the international community in the development of “a stable and consensus-based international tax framework.”
The Irish government’s plan at this time is to work with the OECD and other interested parties in developing a tax policy that will be to their benefit, particularly in terms of, as suggested by RTE’s Whelan, “a shakeup of the rules on governing who gets to tax a digital company.”
Donohoe remarked that ultimately this initiative “must ensure the bulk of profits remain taxable in exporting countries under the existing corporate tax framework.”
Donohoe was adamant in objecting to “measures, which have as their core objective the end of legitimate and fair tax competition,” such as those being pursued by both France and Germany.
“I believe that fair tax competition is a legitimate tool for small peripheral countries to balance against size, geographical location or resource advantages other countries enjoy, and this is supported by a wealth of economic research,” he added.
“We need a tax system suitable for the 21st century, one which supports economic growth and helps to ensure an equitable distribution of the benefits that come from that growth,” Donohoe concluded.
The Irish Finance Minister’s speech at the Global Tax Policy conference made the news worldwide given the significance of its message.
For instance, Feargal O'Rourke, who heads PwC’s Irish office, called Donohoe’s speech “probably the most substantial Irish tax policy speech for the last 30 years.”
What are your thoughts on these remarks made by the Irish Finance Minister? Let us know with a comment!
Donohoe’s full speech can be accessed HERE.