Editorial: September Issue
September has been - potentially- a very good month for Ireland on the corporation tax front, and consequently it has been for the economy too. Moody's in upgrading the country’s credit rating to A2 got its timing exactly right in the context.
First, the context was well pitched out by the IFAC and the Coffey Report, which identifies the four pillars of the corporation tax regime, and it's threats, in a report that approaches the 1980s’ Reports of the Commmission on Taxation chaired by Miriam Hederman O’Brien in authority and, potential influence going forward.

The Coffey Report summarises those threats as US Tax Reform, Brexit, the (G12- OECD) BEPS, and CCCTB.
In regard to two of them there have been positive developments in September. The US has settled on its headline tax rate; it is to be 20% - significantly more than the 15% that was mooted at first. After Florence, Brexit looks like it is getting softer, and that just might herald a process of ‘kicking the can down the road’ on that matter by the UK in coming years.

That still will not mean that the UK, like the US, will not offer stiffer tax competition to Ireland and others in the years to come, and not just in relation to corporation tax levels, but personal tax as well.

Neverthelesss, the likelihood that the tax competition challenge will take place on territory that emphasises productive activity as the base for determining taxable income, as distinct from sales (as CCCTB threatens to do) that’s something that is beneficial for Ireland. This is because it places tax competition in a realm that suits Ireland whose tax system is based on a rate based transparent approach that is fair and transparent, and that, above all, rewards and recognises producers, by basing its taxing approach on the supply of services rather than consumption.

While Ireland can be, and is, an enthusiastic participant in the BEPS process, and it has set out its stall on the moral high ground on the issue of CCCTB. The comments on this matter by the Minister for Finance (on RTE earlier this month) are unambiguous: "Our stance on corporation tax of 12.5% and the development of things like a knowledge box and how we manage patents is an entirely legitimate and entirely sustainable policy choice for small open economies like Ireland to take...... I won't participate in any policy agenda that changes that for Ireland," he said.

Allowing the incidence of sales in national markets to be part of the algorithm to determine the taxable corporation tax base, as the proposed CCCTB does, would fly in the face of all Irish corporation tax history, and would usher in an uncompetitive tax regime that would drag down the performance of all 27 EU economies as a whole. This red line issue therefore is one on which Ireland can continue to adopt the moral high ground, and furthermore build an alliance on the issue with like minded members of the EU 27.