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Ireland out on a limb over corporation tax

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A deal on international corporation tax reached last week by the Organization for Economic Co-operation and Development by 130 countries may once and for all settle ongoing disputes over perceived favourable treatment for certain foreign companies. As Ken Murray reports from Dublin however, Ireland may find itself out on a limb as it attempts to hold on to its own tax rate, one that has given it a beneficial edge over other EU states in recent decades when it comes to job creation.

Since 2003, major foreign direct investors in Ireland have functioned successfully knowing that at the end of the financial year their respective corporation tax hit would only be 12.5% of income and that’s before crafty accounting and local special exemptions are added in to the mix!

The 12.5% rate has attracted some of the biggest US giants in international trade in to Ireland including the likes of Microsoft, Apple, Google, Facebook, Tik-Tok, e-Bay, Twitter, Pay-Pal, Intel as well as mega pharmaceutical players such as Pfizer, Wyeth and Eli Lilly etc.

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Throw in the fact that the Country has a highly educated work force, the standard of living is good, visiting CEOs get a special income tax rate and Ireland [pop: five million] is now the largest English-speaking nation in the euro currency zone, the attraction of setting up a European HQ in the Emerald Isle has been most enticing.

The stock value of FDI [Foreign Direct Investors] in Ireland recently surpassed €1.03 trillion equating to 288 per cent of Irish GDP according to new figures from the domestic Central Statistics Office making the Country the most attractive location per capita in Europe for investment from beyond its shores.

In the encouraging words of the US-Irish Chamber of Commerce website: “Ireland is the gateway to Europe.”

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With an FDI employment figure circa 250,000, it’s not surprising then that Ireland desperately wants to retain a highly lucrative investment incentive policy.

An agreement reached last week by the Paris-based OECD amongst 130 countries to impose a global standard corporation tax rate of 15% caused a few sleepless nights in the Department of Finance in Dublin with some senior staff fearing that the great successful Irish package to lure in big corporations from California’s Silicon Valley and beyond may be about to slow down or worse, come to an end.

According to Mathias Cormann, OECD Secretary General: “After years of intense work and negotiations, this historic package will ensure that large multi-national companies pay their fair share of tax everywhere.”

What was notable from the OECD Agreement aimed at creating an international level playing pitch was that of the nine international States opting not to sign up, were tax havens such as St. Vincent’s and the Grenadines, Barbados, Estonia, Hungary - the EU's least favourite member at present - and Ireland.

Speaking to Newstalk Radio in Dublin, Irish Finance Minister Pascal Donoghue said: “I think it’s important to assess what’s in our national interest and be confident and clear about making the case for what we believe is the best for Ireland and acknowledging the duties we have to the rest of the world with regard to how we manage corporate tax.”

Minister Donoghue, who is also President of Eurogroup which oversees the performance of the Euro currency in the respective participating countries, added somewhat vaguely: “I want to engage in this process in this negotiation but this is a matter of huge sensitivity to Ireland and there wasn’t enough clarity and recognition of the key issues for us in the text that was presented to me.”

It’s believed that a corporate tax rate move in Ireland from 12.5% to 15% on companies with turnover exceeding €750 million annually could cost the domestic economy close on €2 billion every year, a significant sum in an Irish context.

Economics professor Lucie Gadenne of the University of Warwick in England was quoted on RTE Radio 1 in Dublin as saying that with tax havens such as the Cayman Islands also signing up to the proposals, Ireland knows "the writing is on the wall" suggesting the Irish government will have to re-jig its annual budget figures in a more creative way to make up for expected lost revenues should the 15% rate be applied globally.

Irish fears over loss of revenues may however be overstated.

Commenting on the possible implications of the OECD Agreement for the economy in Ireland, respected Irish economics Professor John FitzGerald told Agence France-Presse: "I can see no reason not to adopt it if the US implements it.

"No firm could do better by leaving Ireland, so if 15% is everywhere you might as well be in Ireland and pay.

"If the US implements the rules, Ireland could end up with more [annual] revenue," he said.

The matter is expected to be finalized by the end of next October with 15% corporate tax rates scheduled to come in to existence from 2023 onwards which means the clock is ticking for the Irish Government if it hopes to retain its own successful rate.

The bulk of FDI in Ireland originates from the USA.

With President Joe Biden not shy in telling the world about his Irish roots, it’s believed government officials in Dublin are likely to spend a lot of time in the coming months over and back to Washington DC, applying plenty of sentimental persuasive charm in an attempt to secure deals that not only benefit American corporations looking for a European base but ones that continue to make Ireland as attractive in the future as it has been in the past.

Ireland

Simon Coveney: Irish foreign minister to face confidence vote

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Irish Foreign Minister Simon Coveney (pictured) is to face a confidence vote later when the Dáil (Irish parliament) returns from its summer recess, writes the BBC.

Coveney has been criticized for his handling of the appointment of former government minister Katherine Zappone as a UN special envoy.

He has denied that he was lobbied to appoint her but apologised for not informing cabinet before a meeting in July.

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She has since turned down the post.

Sinn Féin has tabled a motion of no confidence in Mr Coveney, but the government is to put down a counter, confidence motion which will be debated by TDs (members of parliament) and voted on later.

Taoiseach Micheál Martin, of Fianna Fáil, described it as an "oversight" that Coveney had not informed his government colleagues about the appointment ahead of the cabinet meeting, a move which has been reported to have caused divisions.

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Coveney's party, Fine Gael, is part of a coalition with Fianna Fáil and the Green Party.

Katherine Zappone
Katherine Zappone was a ministerial colleague of Simon Coveney and Leo Varadkar

It later emerged that Coveney's party leader Leo Varadkar had not been aware of the appointment of a "Special Envoy to the UN for Freedom of Opinion and Expression" until a week before cabinet, when Zappone texted him about it.

In messages released by Varadkar in September, he showed that he subsequently asked Coveney about the role before the cabinet meeting in July.

Zappone replied that her contract was soon to be finalised.

On 4 August, Zappone announced she would not take on the special envoy position as she believed "it is clear that criticism of the appointment process has impacted the legitimacy of the role itself".

Sinn Féin President Mary Lou McDonald has called for Coveney to be sacked and raised the prospect of a vote of no confidence.

She branded his actions as not being "of the standard expected of a minister".

The Labour Party has indicated that it does not have confidence in the government, but leader Alan Kelly said there were "bigger issues" than the row.

On Tuesday (14 September), Coveney told a party conference that he was "embarrassed" that the appointment had led to a "fiasco".

"It's not been my finest month in politics," he said.

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Brexit

Commission approves €10 million Irish support measure for fishery sector in the context of Brexit

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The European Commission has approved, under EU state aid rules, a €10 million Irish scheme to support the fishery sector affected by the withdrawal of the UK from the EU, and the consequent quota share reductions foreseen in the provisions of the Trade and Cooperation Agreement (TCA) between the EU and the UK. The support will be available to companies that commit to temporarily cease their fishing activities for a month.

The aim of the scheme is to save part of the Irish reduced fishing quota for other vessels, while the beneficiaries temporarily suspend their activities. The compensation will be granted as a non-refundable grant, calculated on the basis of gross earnings averaged for the fleet size, excluding the cost of fuel and food for the crew of the vessel. Each eligible company will be entitled to the support for up to a month in the period between 1 September to 31 December 2021. The Commission assessed the measures under Article 107(3)(c) of the Treaty on the Functioning of the European Union (TFEU), which allows Member States to support the development of certain economic activities or regions, under certain conditions.The Commission found that the measure enhances the sustainability of the fishery sector and its ability to adapt to new fishing and market opportunities arising from the new relationship with the UK.

Therefore, the measure facilitates the development of this sector and contributes to the objectives of the Common Fisheries Policy to ensure that fishing and aquaculture activities are environmentally sustainable in the long term. The Commission concluded that the measure constitutes an appropriate form of support in order to facilitate an orderly transition in the EU fishery sector following the withdrawal of the UK from the EU. On this basis, the Commission approved the scheme under EU State aid rules.

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Today's (3 September) decision does not prejudge whether the support measure will eventually be eligible for Brexit Adjustment Reserve ‘BAR' funding, which will be assessed once the BAR Regulation has entered into force. However, it already provides Ireland with legal certainty that the Commission considers the support measure to be compliant with EU State aid rules, irrespective of the ultimate source of funding. The non-confidential version of the decision will be made available under the case number SA.64035 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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coronavirus

Unmasked: 23 detained over COVID-19 business email compromise fraud

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A sophisticated fraud scheme using compromised emails and advance-payment fraud has been uncovered by authorities in Romania, the Netherlands and Ireland as part of an action co-ordinated by Europol. 

On 10 August, 23 suspects were detained in a series of raids carried out simultaneously in the Netherlands, Romania and Ireland. In total, 34 places were searched. These criminals are believed to have defrauded companies in at least 20 countries of approximately €1 million. 

The fraud was run by an organised crime group which prior to the COVID-19 pandemic already illegally offered other fictitious products for sale online, such as wooden pellets. Last year the criminals changed their modus operandi and started offering protective materials after the outbreak of the COVID-19 pandemic. 

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This criminal group – composed of nationals from different African countries residing in Europe, created fake email addresses and webpages similar to the ones belonging to legitimate wholesale companies. Impersonating these companies, these criminals would then trick the victims – mainly European and Asian companies, into placing orders with them, requesting the payments in advance in order for the goods to be sent. 

However, the delivery of the goods never took place, and the proceeds were laundered through Romanian bank accounts controlled by the criminals before being withdrawn at ATMs. 

Europol has been supporting this case since its onset in 2017 by: 

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  • Bringing together the national investigators on all sides who have seen been working closely together with Europol’s European Cybercrime Centre (EC3) to prepare for the action day;
  • providing continuous intelligence development and analysis to support the field investigators, and;
  • deploying two of its cybercrime experts to the raids in the Netherlands to support the Dutch authorities with cross-checking in real-time information gathered during the operation and with securing relevant evidence. 

Eurojust co-ordinated the judicial co-operation in view of the searches and provided support with the execution of several judicial cooperation instruments.

This action was carried out in the framework of the European Multidisciplinary Platform Against Criminal Threats (EMPACT).

The following law enforcement authorities were involved in this action:

  • Romania: National Police (Poliția Română)
  • The Netherlands: National Police (Politie)
  • Ireland: National Police (An Garda Síochána)
  • Europol: European Cybercrime Centre (EC3)
     
EMPACT

In 2010 the European Union set up a four-year policy cycle to ensure greater continuity in the fight against serious international and organised crime. In 2017 the Council of the EU decided to continue the EU Policy Cycle for the 2018 - 2021 period. It aims to tackle the most significant threats posed by organised and serious international crime to the EU. This is achieved by improving and strengthening cooperation between the relevant services of EU member states, institutions and agencies, as well as non-EU countries and organizations, including the private sector where relevant. Cybercrime is one of the priorities for the Policy Cycle.

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