CCCTB and Corporation Tax is back on the agenda yet again

[censuspro]

It's really only a matter of time before we have corporate tax harmonisation within the EU.

Despite the guarantees given about our corporate tax rate of 12.5%, this was always a bit of a red herring because CCCTB (Common Consolidated Corporation Tax Base) does not affect our CT rate of 12.5%.. A CCCTB merely determines where exactly profits are taxed and who gets to tax them. That means that if a copmany sells and makes a profit in Germany the profits are taxed in Germany even if the company is resident in Ireland. If CCCTB is introduced, our low CT rate of 12.5% is of no advantage and the only remaining reason for large multi nationals to locat in Ireland will be gone.

 

[shnaek]

It was bound to happen sooner or later, and our arguments against it are much weakened now that Europe is bailing us out.

 

[Staples]

Agreed. I think it's significant that the issue is being raised again when we're at our most vulnerable and heavily dependent on the goodwill of our EU partners.

 

[Firefly]

And this:

http://www.ft.com/cms/s/0/13730da2-bc31-11df-8c02-00144feab49a.html?dbk

Eurozone members that break the region's rules on public finances should be excluded temporarily from Europe’s political decision-making, the president of the European Central Bank has proposed

Can't say I blame him on this point though

 

[Latrade]

It's really only a matter of time before we have corporate tax harmonisation within the EU.

Maybe, but the CCCTB as you explain isn't to do with Tax Harmonisation. Even Germany are turning against the principle of TH, after riding the storm better than most, they're really not happy with how they get pulled down by the poor systems of the likes of us, Greece, etc. This has meant a bit of soul searching on just how vulnerable they could be with TH. The French still want it though, but if Germany turns against, I'd say that nixes the TH concept totally.

CCCTB is a bit weird, I suppose we just have to wait to see the proposals. The problem is that we've been told there is much more about Ireland than our corporation tax and that it isn't just CT that makes us attractive for foreign investment. On that basis, if that's true then Commissioner Semeta has a good point, if this "easier" tax system makes Europe more attractive as a whole (I believe it will and that streamlined systems make huge sense for attracting investment), then Ireland benefits. After all aren't we the Gateway? Aren't we the link to the US? Isn't it our Can Do employees, education, flexible workforce (the same flexible workforce who won't go for a job in another county but will ups sticks and leave the country), etc that attracts the companies?

So if the government spin is right, CCCTB puts Ireland at a massive advantage over other states. If the government is full of it and it really is only 12.5% tax that attracts companies, then they're right to be immediately opposed and sceptical because we're screwed.

Given they've gone on the attack before the Commissioner meets Lenhian and months before the report is published, I can only suspect that in fact the only reason we are retaining foreign investment is because to 12.5% tax. My immediate suspicion is that some CEOs of foreign companies have pointed to this proposal and indicated they'd be off if they lose 12.5%.

 

[Purple]

+1 Latrade, great post.

 

[Latrade]

Yikes, also forgot a big problem: our Veto.

There are plenty of states that don't want this system and so will veto. But there are plenty that do want it. The problem then will be that we're at an immediate disadvantage because you'll have these huge markets like Germany and France that didn't veto and who have a simplified system, but it now adds in another layer of complication for companies based here and in the other veto states to do business there. We could be worse off for vetoing than if we accept and competing against cheaper, more stable economies that didn't veto.

We're in a damned if you do damned if you don't position on this (based on what we understand was discussed and proposed 4 years ago as we don't know what the new proposals will be in light of the collapse). If our only attraction is the 12.5% we'll lose and it's a matter of determining which presents the greater loss, veto or not.

My main concern is who is in the ear of the government on this (that and they obviously and openly lie about the reason for foreign investment). I don't doubt (as in it's absolutely certain it's the case but all based on anecdotal conversations) that there are certain big companies who are looking to exit, but are holding the state to ransom to get as much as they can before they eventually pull out. It seems these are holding the Sword of Damocles over our heads even when it's likely they'll be out the country anyway in 2 -10 years. But they want the EU bogeyman/state imposed costs to use as an excuse.

But there are many smaller foreign companies who want to stay here and aren't blackmailing the state, but it seems the small (but significant) minority are being listened to more. It also means that the actual domestic businesses that would be positively affected by CCCTB also don't get listened to. The government would rather have them at 0 growth than have to explain the headlines of "X Company leaves, 1000 jobs go". Well, they're going anyway, they're just waiting for an excuse and in the meantime those that could see huge success from this system are dumped on.

 

[Sunny]

I don't think Europe cares about the 12.5% tax rate. They care about how we recognise profits within a group. Ireland only taxes the dividend of the Multinational holding company and not global profits. which many other Countries do. All you have to do is look at all the insurance and other companies who are now setting up their headquaters in Ireland purely for tax reasons. They don't employ people here and they pay hardly any tax in this Country. I can't blame the UK and other Countries for being annoyed.

Italy have announced serious CFC legislation that could makee it unsustainable for Italian companies to have a presence here.

 

[censuspro]

I don't think Europe cares about the 12.5% tax rate. They care about how we recognise profits within a group. Ireland only taxes the dividend of the Multinational holding company and not global profits. which many other Countries do. All you have to do is look at all the insurance and other companies who are now setting up their headquaters in Ireland purely for tax reasons. They don't employ people here and they pay hardly any tax in this Country. I can't blame the UK and other Countries for being annoyed.

Italy have announced serious CFC legislation that could makee it unsustainable for Italian companies to have a presence here.

The larger European nations have always been upset by our low tax rate. Irish resident companies pay Irish tax on their world wide income not just dividends. My corporate tax is not that up to date and correct me if I'm wrong but my understanding is that certain intercompany diviends are exempt from corporation tax.