THE LUXLEAKS SCANDAL has been used as “cover” by big European nations to point the finger at the tax affairs of small countries like Ireland and try to push through rules that suit their own interests, according to Fine Gael’s Brian Hayes.
The MEP, who sits on the parliament’s economic and monetary committee, has warned against a move by the eurozone’s three biggest economies to harmonise tax laws across the region following the luxleaks revelations.
“I think there is an attempt by bigger countries to stymie small countries here,” Hayes told TheJournal.ie.
The luxleaks story has just given the bigger countries cover to start looking at tax issues in smaller countries.”
Reams of documents relating to Luxembourg’s favourable tax deals with multinationals were recently published and they showed the tiny European state had helped a raft of companies to pay low single-digit rates on their profits for years.
Since the revelations, new European Commission president Jean-Claude Juncker, who was prime minister of Luxembourg when many of the deals took place, said he wanted to introduce “fair rules among all” on corporate tax.
Germany, France and Italy make their move
The finance ministers of Germany, France and Italy last week called on the commission to bring in an EU directive to cut down on multinationals shifting their profits out of the countries where they were earned.
The commission said it would work on the plan with Common Consolidated Corporate Tax Base (CCCTB) rules, which Ireland, among other countries, rejected when the idea was first brought forward in 2011.
Under the proposal, multinationals would pay their tax for all the EU into a pool and then the money would be doled out to states within the region according to a formula.
But Hayes said there had been a “lot of nonsense” spoken about luxleaks and other countries, like France, also charged some companies single-digit rates.
“I think in this scenario, big countries will be strongly favoured,” he said.
We should make no apologies for the corporate tax business that we have put together in this country. Our actual, headline rate is very close to the actual rate – unlike other countries, like France, where they have so many regional exemptions.”
A recent report from PwC and the World Bank said Ireland’s actual company tax rate was very close to the headline rate of 12.5%, while other countries were charging as little as one-sixth of their advertised levels.
Ireland getting ‘kicked around’
Hayes said small countries like Ireland tended to get “kicked around” when it came to debates on company tax.
He said that lead to incidents like the “pathetic situation” in which UK Prime Minister David Cameron criticised Ireland’s corporate tax regime, without mentioning the generous tax breaks in the City of London or other benefits like its “patent box”, which is currently under EU scrutiny.
Hayes said if the issue of multinationals’ profit shifting was going to be addressed it need to be looked at “in the round” through a scheme like the OECD’s Base Erosion and Profit Shifting project.
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