During the conference held by Ministry of Finance and the International Monetary Fund (IMF) estimates that international tax reform could cost the State €2-€3bn in annual corporate tax revenues in the years ahead. The estimation relate to changes expected to emerge from an OECD reform process due to conclude next year.
With the spirit of fair share of taxation, OECD concern on figure out how to tax digital business to pay equal tax as the traditional business model. Recently, OECD released four proposals on digital economy where the general idea is to shift the profit allocation to the market jurisdiction. While the outcome is still not clear, it looks likely that more tax will be collected in major markets where companies have most of their sales, and less in countries like Ireland, where they have their international headquarters.
Included as one of the proposal, OECD is also examining specific anti-evasion measures, including a possible minimum corporate tax rate. In this regard, based on the study conducted by Copenhagen Economics about 20 per cent of their corporate tax base could be exposed if one of the OECD reforms goes ahead. The result also supported PWC, the changes in the pipeline could cost the Republic €2bn – or about one-fifth – of annual corporate tax revenue. Ireland collected a record amount – more than €10bn – in corporate tax last year, with receipts having soared from €4.4bn in 2014.
In response to such findings, the IMF and domestic bodies like the Irish Fiscal Advisory Council, the ESRI and, most recently, the Central Bank have warned the Government to be cautious in allocating these revenues due to the potential loss. Further The IMF, suggests Ireland to widen its tax base via establishing the local property tax on a sounder basis and reversing reductions of the USC and personal income tax.
Minister for Finance Paschal Donohoe told the conference that the department was concluding work to help forecast and plan the collection of corporation tax in future to mitigate the loss caused by the OECD reform.
Source: The Irish Times
TPA Global provides solutions in the area of BEPS, Value Chain Analysis for multinationals along with variety of tax, business and educational technologies. Let us show you how to improve your operations and move from “staying out of trouble” to “being in control”.