Irish Accountants fear for new digital tax rules

Wed 7th May 2014

Ireland’s premier accountancy association, Chartered Accountants Ireland, has sounded a warning that the OECD’s proposals for the taxation of the digital economy will have a major impact on Ireland. The country accounts for 12.7% (via OECD) of all IT and communications services globally, and is second only to India.

OECD looks to shift place of taxation

The Organisation for Economic Co-operation and Development (OECD) issued initial proposals for the taxation of global digital services as part of the sweeping Base Erosion Profit Shifting (BEPS)  tax reform project. One the of suggestions debated including enabling governments in the countries where consumers were buying offshore digital services (streaming videos, music, ebooks, B2B) to raise direct tax from these transactions. At present, tax is done on a origin principle, which means taxing where the service provider is based. The OECD is looking to move more towards a destination principle, whereby direct tax is charged where the customer is located.

The Irish Chartered Accountancy association has warned that this would undermine their country’s whole success in attracting major digital service providers.

Chartered Accountants Ireland Tax Director Brian Keegan said:  “These proposals, which are a key element of a larger project to revise the way multinational companies are taxed, would fundamentally change the business model for companies based in Ireland.  These proposals would move company profits away from where value is created, in countries like Ireland, to locations where products are sold – principally the major European countries”.