Ireland has not imposed any fines on tax advisers or accountants for failing to report potentially harmful cross-border tax arrangements since new rules came into force in recent years, an audit has found.
In a report published on Thursday, the European Court of Auditors (ECA) criticised shortcomings in measures that several countries, including Ireland, had in place to tackle corporate tax avoidance and profit shifting.
Reforms introduced in recent years still left holes which could be exploited by corporations seeking to lower their tax bills, the report said.
The audit was critical of the lack of follow up by authorities in Ireland and elsewhere on reports flagging “potentially harmful cross-border tax arrangements”. The mandatory filings, which are required to be made by intermediaries including accountants and tax advisers, are aimed at identifying possible aggressive tax planning schemes.
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The auditors’ report said EU countries carried out few checks on the quality of reports received, and there was no evidence of fines or penalties being handed out for failures to submit filings.
The EU audit agency had examined efforts to crack down on tax avoidance by Ireland, the Netherlands, Cyprus, Malta and Luxembourg.
Its report said apart from the Netherlands and Luxembourg, the other countries performed “no quality checks” on the standard of the cross-border tax reports filed. Ireland and others did not appear to carry out any “systematic” analysis of the filings, but instead examined them on an “ad hoc basis at the request of tax inspectors”, it said.
The auditors stated that none of the five countries examined had imposed any penalties under the rules at the time of the audit. Potential fines for failure to file reports to tax authorities were found to be “manifestly low and risk having little deterrent effect” in some cases.
“An intermediary that has several branches may strategically choose a specific member state to disclose reportable information in order to minimise the risk of higher penalties in case of noncompliance with the reporting obligations,” the report said.
Ireland has been criticised by other EU countries for facilitating profit shifting by large corporations, such as big tech multinationals, and the country was previously targeted over its low corporate tax rate of 12.5 per cent. The government agreed to raise the minimum corporate tax rate for large companies in Ireland to 15 per cent, as part of a landmark OECD deal agreed in 2021.
The ECA report said existing regulations in the EU act as a “first line of defence” against harmful tax regimes and avoidance schemes. “However, there are shortcomings in the way EU measures were drawn up and implemented, and there is no appropriate monitoring system for assessing their effectiveness,” it said.
In a statement, Ildikó Gáll-Pelcz, a member of the auditor body who led on the report, said harmful tax regimes and corporate tax avoidance posed “major challenges”, hampering efforts to make sure taxes were paid in countries where the profits were generated.
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