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Ireland's scandalous corporate tax regime exposed AGAIN - New approach required

story in The Irish Times (March 7, 2014) shows that Apple paid €36m tax on $7.11bn profits at its Irish unit. This is a scandal that must be addressed now by the Irish Government. Social Justice Ireland sets out some proposals below.

Ireland’s corporation tax rate is now considerably below the corresponding rates in most of Europe. Furthermore, Ireland’s low rate of corporation tax is being abused by multi-national companies which channel profits through units, often very small units, in Ireland to avail of the lower Irish rate of tax. In many cases this is happening at a cost to fellow EU member’s exchequers and with little benefit in terms of jobs and additional real economic activity in Ireland. Understandably, Ireland is coming under increasing pressure to reform this system.

As the European Union expands corporation tax competition is likely to intensify. Already Bulgaria has set their rate at 10 per cent and others continue to reduce their headline rates and provide incentives targeted at reducing the effective corporate tax rate.

Over the next decade Ireland will be forced to either ignore tax rates as a significant attraction/retention policy for foreign investors, which would be a major change in industrial policy, or to follow suit, despite the exchequer costs, and compete by further cutting corporation tax. This is a dangerous situation in which Ireland could end up leading the race to the bottom. The costs of such a move, in lost exchequer income, would be enormous.

Social Justice Ireland believes that the minimum rate should be set well below the 2012 EU-27 average headline rate of 23.2 per cent but above the existing low Irish level.  A headline rate of 17.5 per cent and a minimum effective rate of 10 per cent seem appropriate. This reform would simultaneously maintain Ireland’s low corporate tax position and provide additional revenues to the exchequer. Were such a rate in place in Ireland in 2013, corporate tax income would have been between €1.2 billion and €1.7 billion higher – a significant sum given the current economic challenges.