EU big boys make our tax rate irrelevant - Irish Independent

ONE doesn't have to be much of a conspiracy theorist to be seriously worried by last week's twin assaults on US companies Starbucks and Amazon. Will Europe's larger countries squeeze the multinationals, rendering our 12.5 per cent tax rate irrelevant?

On Monday the House of Commons Public Accounts Committee hauled senior Starbucks executives over the coals. MPs were told that, since first opening for business in the UK in 1998, Starbucks has paid a total of just 8.6m in taxes while its total British sales over the past 14 years were 3.1bn.

Then on Wednesday the French taxman slapped a $250m tax demand on online retailer Amazon.

If it had been either Starbucks or Amazon getting a hard time then one might have been inclined to write it off as nothing more than an isolated incident of no major concern to this country but two US multinationals getting the thumbscrew treatment on tax from major European countries in just one week is beginning to look suspiciously like a trend.

When the ECB bounced this country into a bailout two years ago there were fears that we would be forced to give up our low corporate tax rate in return for financial assistance. The Irish Government waged a fierce and apparently successful struggle to protect the 12.5 per cent rate despite our financial woes.

Unfortunately it appears that there is more than one way, many more ways, of skinning a cat. Last April the European Parliament voted in favour of having a "common consolidated corporate tax base".

If the CCCTB ever became law companies operating within the EU would submit a single European tax return with their tax payments being allocated to individual member countries on the basis of the size of their business in each of those countries. This means that the CCCTB would be very, very bad news for Ireland if it ever came to pass.

But will it? Given the events of the past week the CCCTB could very quickly be overtaken by events as Europe's big boys take the law into their own hands. What if Britain, France and Germany crack down on the multinationals' favourite tax-avoidance techniques; Starbucks paying royalties to an overseas sister-company, Amazon exploiting Luxembourg's low VAT rate for e-books and Google's use of the 'Dutch sandwich' and the 'double Irish' to reduce its non-US tax bill to just 2.4 per cent?

Co-ordinated crackdowns on multinational tax avoidance by the larger European countries could very quickly render our 12.5 per cent tax rate irrelevant. If they can find ways of taxing these companies on the basis of the volume of transactions with people and businesses in their own countries, even if those transactions originate in Ireland, then it doesn't matter what our corporate tax rate is.