New OECD proposals on how corporate tax is calculated would put Ireland at a considerable disadvantage in attracting foreign direct investment in the future, according to Chartered Accountants Ireland (CAI).Under these proposals, which have now been put up for public consultation, multinationals would be subject to corporate tax at the point of sale rather than where products are manufactured. The CAI said this would favour big economies with large consumer markets to the detriment of smaller countries.
"These proposals, which are a key element of a larger project to revise the way multinational companies are taxed, would fundamentally change the business model for companies based in Ireland," said CAI tax director Brian Keegan.
"These proposals would move company profits away from where value is created, in countries like Ireland, to locations where products are sold — principally the major European countries."
This would be akin to taxing our agriculture exports where they are sold, rather than where they are grown, he added.
The proposals are similar to the common consolidate corporate tax base guidelines issued by the European Commission on a number of occasions over the past number of years. The Government consistently opposed these proposals.
As it stands, if a multinational develops and manufactures a product or service in this country, then it is subject to a 12.5% corporate tax rate.
However, under the OECD proposal, a multinational would pay corporate tax at the rate of where these products and services are sold. This would undermine Ireland’s attractiveness as a location for foreign direct investment.
The proposals in this report are to be the subject of public consultation, and the OECD is inviting comments before April 14 next, said Mr Keegan.
"It is vitally important for Irish business to engage with this process, and point out the flaws in the OECD reasoning. Fewer than 20 inputs were provided to the OECD following their opening consultations on this matter at the end of 2013.
"We need the commercial point of view to be fed into these proposals, before they become concrete to the detriment of Irish business and Irish taxpayers generally" said Mr Keegan.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.