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Ireland’s tax rules ‘used for aggressive tax planning’

The European Commission has claimed that “Ireland’s tax rules are used for aggressive tax planning”.

The claim is made in a report on the Irish economy published today.

The report is part of a package of reports on all member state economies regularly produced by the Commission.

The Commission makes specific reference to withholding taxes, which it says are “cause for concern”.

It says royalty payments from Ireland in 2018 were worth 22% of the country’s GDP (which would work out at approximately €71bn) and that 45% of these were paid to “offshore financial sectors”.

It says 71% of net dividend payments were paid to offshore locations in 2017.

It also says these payments may end up being taxed at “a very low rate or escaping tax altogether”.

The Commission notes that Ireland is acting “to curb aggressive tax planning through the implementation of European and internationally agreed initiatives, as well as unilateral measures.”

It says the effectiveness of some measures taken in Budget 2020 against aggressive tax planning by Irish real estate funds and real estate investment trusts will need to be assessed.

The Commission noted that economic activity in Ireland remains strong but that the headline figures remain inflated by the activities of multinational companies operating here.

It also notes that reliance on corporate tax revenue from multinationals is increasing. The Commission notes these revenues are “potentially transient in nature” and pose “risks to the sustainability of public finances”.

A spokesman for the Department of Finance said “companies’ ability to engage in aggressive tax planning relies to a large extent on exploiting gaps in the international tax architecture and it is unfair to single Ireland out.  Ireland continues to be supportive of international tax reform efforts that examine where tax should be paid by multinationals.” 

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