The latest Assessment Report of the Fiscal Council is available here.
The Irish Fiscal Advisory Council are currently looking to fill an economist role within the secretariat. The closing date for applications is Tuesday 11th of October and full details of the post are available here.
It’s just over a week since Commissioner Vestager announced the state-aid ruling on the tax treatment of Apple in Ireland. We only have the press release and the Commissioner’s statement to go by so it’s still too early to be definitive on what the Commission are actually doing. It could be months before the full ruling is available here but that doesn’t mean we can’t have a stab at what might be going on.
There has been a lot of reaction to what the ruling means for Ireland’s Corporation Tax regime. While there has been massive reputational damage (possibly irreparably so) the ruling does not have any implications for Ireland’s Corporation Tax rate or even for any of the rules that Ireland applies to Corporation Tax.
Unlike previous instances the Commission is not looking for any change in Ireland’s Corporation Tax regime. In this instance looking for changes would likely have been overreach but that is not what the Commission is seeking. Nor is the Commission seeking to retrospectively impose alternative transfer pricing standards which was a central focus of the recent White Paper from the US Treasury. If the Commission’s case required a change of rules or the application of new standards it would have had little hope of standing up to an appeal.
Here is an Analytical Note on the Challenges Forecasting Irish Corporation Tax from staff economists of the Fiscal Council.
€13 billion. Wow! Nothing to do with transfer pricing. All do with the relationship between the parent companies and their Irish branches. The EC position is that as the ‘stateless’ companies have no substance ALL of the profit is allocated to the Irish branches. We really are at the races now.
The press release is here.
The Apple state-aid journey rumbles on. The scene was enlivened somewhat last week with the publication of a white paper by the US Treasury criticising the approach of the European Commission. The paper dishes out a good kicking and provides a useful template for a company or country considering an appeal to an adverse ruling.
We know most of the key points the US are making. They are concerned that the US taxpayer could end up footing the bill (as Robert Stack repeats here) but if the tax payments are legitimately due elsewhere then this doesn’t amount to much. But the risks, functions and assets that generated Apple’s profits were in the US so, under the current system, the tax on those customers is due in the US. Of course, a company may decide to move those assets but that is an issue that the country of departure has oversight of. For the period under investigation in the Apple case it is clear that the main drivers of its profitability were controlled and located in the US.
The US Treasury paper looks at the substance of the EC position – that some transfer pricing arrangements put in place (for mainly US MNCs) were “wrong”. For the EC is this is a competence they do not have nor one that they should be seeking. If you are intent on saying that something is “wrong” you must be able to state what is “right” – but in transfer pricing there are ranges not precise outcomes.
Continue reading “Are we there yet? Are we there yet?”
The recent publication by the CSO of the 2015 National Income and Expenditure Accounts generated a lot of reaction. There is no doubt that a 26.3 per cent real GDP growth is bizarre but it was not farcical, false or based on fairy tales.
Many commentators went out of their way to highlight that the figures did not characterise what was happening “on the ground” in the Irish economy. But this seems like a bit of a strawman. Instead of being told what the figures were we were been scolded over what they weren’t. No one said the economy was growing at 26 per cent. Arguments against using GDP in an Irish context have made for the past quarter of a century. Even as recently as March, when the first growth estimates for 2015 were provided, there were plenty of people who pointed that the underlying growth rate of the economy was probably around half of the 7.8 per cent growth rate in real GDP shown at that time.
But a 26.3 per cent real GDP growth rate is very very unusual. And one that deserves understanding rather than dismissal. However, the discussion of the figures has generated more heat than light. At the briefing it seems three items were identified as having oversized effects on the national accounts’ aggregates. These were:
- aircraft leasing
- inversions and corporate restructurings, and
- asset transfers to Ireland