"The European Union is right to introduce these measures, however it should not stop at the digital economy- the problem of hard to value intangible assets is not limited to the digital economy, but is also a concern in other economic sectors beyond the digital economy where patents, royalties, management fees and other intangible assets are presented by multinational companies as value drivers," said Sorley McCaughey, Head of Advocacy and Policy for Christian Aid Ireland.
While the charity acknowledges that the changes may have some impact on corporation tax receipts, it says that the EU proposals are the latest evidence of winds of change that challenge the very essence of Ireland’s tax offering.
"The proposed changes demonstrate once again the vulnerability of Ireland’s tax model to international changes, and forces the government to engage in an ongoing rearguard action in defence of a tax policy that has, at its core, a willingness to facilitate tax avoidance by multinational companies."
Christian Aid has consistently raised concerns about the gaps in Ireland’s corporate taxation and incentives system, along with its transfer-pricing regime, which helps multinationals to operate aggressive tax dodging schemes that reduce their global liabilities and deny much-needed tax revenues to low-income countries.
Christian Aid considers that establishing significant digital presence would close some aspects of tax loopholes across Europe, including in Ireland. The rule changes also imply renegotiating double tax treaties with third countries including developing countries via the United Nations. The proposed “Digital Services Tax” (DST) further demonstrates how the current tax system is broken, and how fundamental reform is needed.
Christian Aid recently published a report highlighting a number of such schemes, including the Single Malt, that can result in developing countries losing out on taxable revenue.