Targeting large US tech firms “is not what is needed right now”, an Oireachtas finance committee on taxing the digital economy has heard.
Fine Gael MEP Brian Hayes, who is a member of the European Parliament’s committee on economic and monetary affairs, told parliamentarians the risks of a trade war made the climate for targeting the likes of Facebook and Google unpalatable.
“First of all, targeting large US tech firms is not what is needed right now, at a time when trade disputes are surfacing all over the world,” he said.
“Secondly, a digital tax based on turnover deliberately benefits bigger countries because that is where the bigger populations are using services like Facebook, Google or Airbnb.
“Frankly there is no unanimous support for either Common Consolidated Corporate Tax Base or a digital tax at the moment.
“If anything the opposition is growing. Recent comments by the new German finance minister, Olaf Scholz, also made it clear that he has questions about digital tax.”
Mr Hayes acknowledged that taxing the digital economy “is needed”, with the effective rate of tax of large scale digitals below 10 per cent. “Digitalisation has moved at such rapid pace and there are aspects of the digital economy which are going untaxed,” he said.
Significant risks
“But there are significant risks to the commission’s approach to digital tax. The recent proposal in March proposes an interim solution which targets large tech firms and a comprehensive solution which is based on turnover, not profit.”
Referring to the European Commission’s ruling in 2016 that tech giant Apple must pay the State €13 billion of illegal tax aid it received, Mr Hayes said the Republic had suffered “significant reputational damage” from the episode.
“We have a legacy here that’s hard to explain,” he said. “We must always be welcome to investment. There are ordinary Irish people working for Apple and I think we have a responsibility to defend a model that is delivering services and jobs for real people.”
Sinn Féin MEP Matt Carthy, who is a member of the European Parliament’s special committee on financial crimes, tax evasion and tax avoidance, said the dynamic in relation to global tax was “absolutely changing”.
“Certainly governments are recognising they are losing income at a time when citizens are being asked to pay additional stealth taxes,” he said. “There is increasing pressure on governments to make sure corporations pay their fair share of tax.
Injustice
“Globally, a lot of people are asking themselves about the injustice of global tax avoidance. I think there’s really welcome shift in terms of dealing with this.”
In relation to whether or not the Republic is a tax haven, Mr Carthy said: “Lots of people think it. Oxfam has regularly called Ireland a tax haven. Almost every single report, every book, and a majority of people addressing these issues have cited Ireland as a matter of bad practice.
“That’s bad for us on a number of levels, in terms of reputation, withstanding these moves at an EU level, and in terms of harmonising tax. Crucially, it is bad for those of us who want to maintain the FDI in this country and encourage more to come.”
Mr Carthy said the issue of tax avoidance was the “child labour issue our generation”.
“Right across the world, consumers and shareholders are demanding that companies are squeaky clean when it comes to tax avoidance,” he said. “It’s the child labour issue of our generation. Companies do not want to be associated with this.”
