12 EU countries against tightening tax optimization rules
Twelve EU countries, including Ireland, have blocked proposed new rules that would force companies to specify how much profit they make and what taxes they pay in each of the 28 EU member states..
The proposed directive was designed to shed light on how some of the world’s largest companies, such as Apple, Facebook and Google, are avoiding paying taxes of around $ 500 billion a year by transferring their profits from higher tax countries like like the UK, France and Germany in zero or low tax jurisdictions such as Ireland, Luxembourg and Malta.
Ireland is one of the largest beneficiaries of the current regulations. The country hosts corporate offices that ensure budgetary returns and profits generated by multinational companies. Ireland allows global tech companies to pay 6.25% corporate tax, which is not comparable to 19% in the UK.
Ireland’s decision to vote against a proposed directive that would force companies to declare their earnings and profits in every country came when Irish analysts warned the country’s economy could collapse if a widespread fight against tax evasion ensued..
The Irish Fiscal Advisory Council (IFAC) has warned that the country‘s economy has become so dependent on taxes paid by multinationals that half of all corporate taxes paid in the country come from just 10 global companies. No specific companies were named, but they include U.S. tech giants Apple, Facebook, Microsoft, Dell, Google and Oracle..
Other countries that have established themselves as low tax economic spaces helping to protect the profits of the world‘s largest companies were also among those who voted against the regulator’s decision. These include Luxembourg, Malta, Cyprus, Latvia, Slovenia, Estonia, Austria, Czech Republic, Hungary and Croatia.
Sweden has also voted against the proposed rule, but only because its government fears that the directive could lower their higher transparency standards. France, Spain and the Netherlands were among those who voted for the proposal, Germany abstained.
The vote came more than three years after the European Commission pledged to expose tax evasion measures by multinational corporations following the exposure of the Panama Papers. This proposal would make reporting on a country-by-country basis mandatory for companies with an annual turnover of over 750 million euros..
Elena Gaita, Transparency International, said: «It is outrageous that member states are again putting the interests of big business ahead of the interests of citizens. Throughout the EU, we see the public disaffected by multinationals like Starbucks and Amazon, who are hiding from taxes they pay in the countries where they operate. National governments have effectively denied people access to this information».
The OECD is trying to force big tech companies like Facebook, Amazon and Google to pay more taxes in countries where they actually sell their products and services.
The corporate tax rate in Ireland is 12.5%, but it only charges 6.25% on profits associated with a company’s patent or intellectual property.
The European Commission ruled that the deal between Apple and Ireland was illegal government aid and helped the American tech firm avoid levying € 13 billion in taxes. The deal lowered Apple’s tax rate to 0.005%. The Commission ordered Apple to pay the full amount to Ireland, but both sides will appeal the decision to the European common court.