The European Commission (EC) has published ‘European Semester Spring Package: Recommendations for a coordinated response to the COVID-19 pandemic’. The recommendations for Ireland include tax specific measures to broaden the tax base and address aggressive tax planning measures. The recommendations also cover areas such as investing in public health, preserving employment, investing people and skills, supporting the corporate sector money laundering.

The EC’s recommendations for Ireland acknowledge that Ireland has taken steps to address aggressive tax planning practices by implementing international and European agreed initiatives and taking some additional measures at national level. However the EC outline that ‘the high level of royalty and dividend payments as a percentage of GDP suggests that Ireland’s tax rules are used by companies that engage in aggressive tax planning, and the effectiveness of the national measures will have to be assessed.’

The EC also outlines that Ireland should broaden the tax base in order to make revenue more resilient to economic fluctuations and idiosyncratic shocks and strengthen the functioning of automatic stabilisers. It says that the high concentration of corporate taxes, with the top ten companies accounting for 45 percent of corporate taxes, their volatility and potentially transitory nature, along with their rising share in total tax proceeds underline the risks of relying excessively on these receipts for the financing of permanent current expenditure.