With the Panama Papers and now the French police raid of Google’s offices in Paris, the glare of the spotlight on tax abuse by companies continues to grow even more intense. And Ireland’s role in corporate tax avoidance remains an issue, as demonstrated by the explanation given by the French financial prosecutor for the search of Google’s premises:
The enquiry is focused on verifying whether the company Google Ireland Ltd controls a permanent establishment in France and if, by not declaring a part of the activities conducted on French territory, it has failed in its fiscal obligations, notably regarding taxes on companies and value-added tax.
Various proposals and initiatives have been emerging over the past year or so from organisations like the OECD on how to tackle aspects of this problem. The European Commission’s proposed rules on country by country reporting by multinational corporations have not been universally welcomed. Christian Aid Ireland, who have lead the advocacy work in Ireland on this issue for a number of years, described the European proposals as “woefully inadequate”. According to Sorley McCaughey, they “fly in the face of all that we know is needed to be done to tackle corporate tax avoidance”. In particular, the proposals limit to rules to multinationals of a certain size, those with a turnover of over €750m, while the countries it can cover are those in the EU or tax havens which appear on an EU blacklist. The potential result? Multinational companies “will still be able to hide their profits in tax havens such as Switzerland and the US, which are unlikely to ever appear on any EU blacklist”. In a submission on this, Christian Aid Ireland goes so far as to say that the substance of the proposals cannot even be considered as country by country reporting:
Companies with subsidiaries outside of the European Union, and not on the yet-to-be-defined non cooperative tax jurisdictions, will only be required to report on these subsidiaries on an aggregate basis. Rolling together the jurisdictions where profit is likely to be shifted to, with those where profit stripping may be most egregious, and in particular developing countries of the global south, is of course to negate the entire point of CBCR – which is to understand the disaggregated distributional picture. Those who wish to use CBC reports to help devise policy and understand MNC behaviour will be thwarted, or potentially come to wrong interpretations due to the aggregated nature of CBC reports. An essential benefit of CBCR should be to improve our understanding of how investment decisions are made and how policy affects investment, particularly in developing countries, but aggregated data will impede that understanding- potentially making it worse.
Christian Aid Ireland argue persuasively that “there is little justification for access to country by country reports to be anything other than fully public, and truly country by country”. The full version of their submission on the European Commission’s proposals, which also tackles other aspects, is available here.