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Taxation law ought to be transparent and certain

30 Aug 2016
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In response to today’s European Commission ruling that Ireland should recover up to €13bn (£11bn) in additional corporate taxes, Stephen Herring, Head of Taxation at the Institute of Directors, said:

“The decision announced today by the European Commission on Apple's tax arrangement with Ireland will come as little surprise to many, as Brussels has increasingly sought to apply state aid law to taxation liabilities retrospectively in response to the outcry over the taxation  of multinational companies by certain EU member states.

“The right way to combat tax avoidance by multinational corporations is for each country to implement the OECD’s/G20’s ‘Base Erosion, Profits Shifting’ (‘BEPS’) proposals which should be achieved over the next two years. The BEPS outcomes will, of course, need to responsive to the opportunities for employment growth, increasing international trade, the needs of consumers and, of course, the global economy generally. Nevertheless, BEPS is the right way forward to create a level playing on taxation between SMEs and MNCs, not retrospective taxation brought in through the backdoor such as today’s ruling.

“More generally, we consider the continuing debate concerning the taxation of multinational companies demonstrates the increasingly unsuitable structure of corporation taxes upon profits for these companies. What is needed is a simpler, more certain taxation basis which does not attempt to ‘slice-and-dice’ the global profits to be assessed by each country but focusses upon the local sales and operational presence. Clearly, such a radical tax policy shift would require extensive consultation with business and a sufficient degree of global agreement.

“Businesses with operations across Europe now face the prospect of their agreed taxation treatment in member states effectively being invalidated with hefty, unforeseen tax bills to follow. This will lead to significant uncertainty over their tax compliance position despite it having been settled many years ago. Taxation law ought to be transparent and certain; not a belated clash between domestic taxation law and European legislation.”

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