The work of the parliament’s special committee on tax is taking place alongside a growing international consensus that aggressive tax avoidance and evasion by multinational corporations is a major contributory factor to the increase in global economic inequality.
Irish government policy on corporate tax is also under intense scrutiny from the European Commission who is currently examining the legality of the various corporate tax breaks across Europe. Special tax rules for multi nationals have also led to an outright backlash from the US Senate in their inquiries into US corporate tax avoidance.
The European Parliament established a special committee (TAXE) on taxation practices in February 2015 following the Lux Leaks revelations. On Monday 26th October the committee published its draft report on achieving fair and transparent corporate taxation in Europe. The final report will be presented to the parliament in December.
Irish Government policy has been to give special tax benefits to very large multi-national corporations arguing that they create jobs. But the corporations pay little or no tax in Ireland, and this is at a cost to the Irish tax payer who is in real terms subsidising these tax breaks. At the very least the corporations should pay the actual corporation tax, which they do not.
In real terms these special tax breaks allow corporations to avoid paying a fair and reasonable amount of their profits back into society to fund infrastructure, services and the incomes of ordinary citizens. It is also particularly counter productive for Ireland’s relations with key trading partners, especially when strategies enable corporations to reduce their corporate tax burden to virtually nothing.
Of course any moves to introduce transparency and fair play will be portrayed as draconian. But what is draconian is the pain felt mostly by the least fortunate members of society in lost essential services, welfare protection and incomes that are exacerbated when the exchequer is deprived of tax revenue, which workers cannot avoid but corporate behemoths excel at. It’s also unfair competition against native SMEs and smaller companies who don’t have means to hire international tax lawyers and have a presence across the globe, including in Caribbean tax havens.
Tax rulings: special committee finalises its recommendations
The TAXE Committee draft report says that corporate tax competition – prompting aggressive tax planning and evasion, without any agreed framework – is harmful.
Recommendations within the report include
- Multinational companies should pay their taxes where they make their profits.
- Introducing country-by-country reporting for multinational companies on financial data including profits made, taxes paid and subsidies received
- Recommends a compulsory EU wide common consolidated corporate tax base (CCCTB)
- Better protection for whistle-blowers
Nessa Childers MEP is a substitute member on the European Parliament’s Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE)