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Ireland ‘not a winner’ as larger countries to gain more from digital tax

Proposals to tax the digital economy being brought to the G20 next month are more likely to favour large economies over small, open economies like Ireland, according to the OECD’s director of tax policy.

In a webinar for the Institute of International and European Affairs (IIEA) yesterday, Pascal Saint-Amans, director of the OECD’s Centre for Tax Policy and Administration, said proposals include taxing use of “user-contributed value creation” – meaning the customer data that is a goldmine for companies like Facebook and Google – in the countries where it originates.

That means large population countries like France, Italy, Spain and the UK – who all favour the idea – will benefit at the expense of Ireland.

“Ireland, I think it is no surprise to say so, is not a winner of this,” Mr Saint-Amans said.

The OECD coordinates tax rules for its members, including most developed economies. It is finalising technical blueprints for the tax plans ahead of a plenary meeting on October 8-9, before forwarding the proposals to be considered at a meeting of G20 finance ministers on October 14.

But any changes to the current international taxation are unlikely to be agreed or implemented quickly, due to the resistance from the Trump administration and delays associated with the US election on November 3.

US treasury secretary Steven Mnuchin has failed to back the position of the larger European countries and instead suggested companies might voluntarily choose to be taxed in so-called “safe harbour” countries that can provide tax certainty, Mr Saint-Amans said.

“The US is not keen on reaching an agreement so close to the election,” said Mr Saint-Amans. “If Trump wins, we will know quickly [where we stand]. If it’s Biden, it will take some time [for him] to decide a position and appoint delegates.”

Discussions have also been slowed due to Covid restrictions, he said.

Nonetheless, Mr Saint-Amans said the OECD believes there is a solid basis for concluding the negotiations once the political questions are settled in the countries sponsoring the reforms.

“Despite the roadblocks put in the way by the United States, the show is still on the road in the push towards harmonisation on international tax rules,” said Dermot O’Leary, chief economist with Goodbody.

“A change in the presidency could mean the Americans are more willing to engage. Ireland will have to be more prepared if Biden is elected.”

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