TaxSource Total

Here you can access summary of the key current tax developments in Ireland, the UK and internationally as reported by Chartered Accountants Ireland

The report of key tax developments are displayed per year, per month, by Ireland, the UK or International and by report title

Ireland-Unfair Competition?

The remarks of the German Finance Minister at the ECOFIN meeting held in June seemed not to warmly endorse Irish Corporation Tax policy, and their wide reporting met with almost equally wide outrage, at least in this country. Perhaps a more appropriate response might be puzzlement?

Parking Mr Peer Steinbrueck's words for a moment, let's remember his own most recent tax action – the introduction of a bill to reduce the German Corporation Tax rate by up to 9 percentage points with effect from 1 January next year. The German Minister would not appear therefore to have a philosophical difficulty with lowering corporate tax rates. Maybe he was briefed badly – to express a view that Ireland might need to have recourse to EU funding for public spending overlooks the fact that we have been running a budget surplus for more years now than we care to remember. Or maybe it's just that he fears a competitive tax regime is harmful to the European ideal.

In practical fiscal terms, the European ideal boils down to the preservation of the four freedoms – to move capital, goods, and services without hindrance and similarly to establish business activity – along with restrictions on State Aids. The State Aids which may be prohibited include direct assistance (grant aid, subsidies and the like), or less direct assistance such as targeted tax breaks. It's the State Aid rules which necessitated a 12.5% CT rate across all industry trading sectors, and they also require the Finance Minister of the day to approach Brussels for permission if the BES is to be extended, or marinas on the Shannon are to be built with tax incentives.

The State Aid rules apply across the board, across all EU Member States. Except for one. Germany has carte blanche to grant aid to compensate for economic disadvantages caused by its former division. Of course there is nothing wrong with having a special case, but it does undermine the grounds for criticising the activities of others where no special case has been claimed.

Irish CT policy may be regarded as unique in some quarters, but an important aspect of its uniqueness is its total compliance with the Treaty of Rome and other important EU norms. As far as our CT policy goes, we tend to seek EU permission rather than beg forgiveness. It is puzzling that the current President of ECOFIN seems not to have taken this into account.