European Union leaders meeting this afternoon (22 May) in Brussels will discuss tax evasion and avoidance, a day after it was revealed that technology giant Apple has avoided paying €34bn ($44 billion) in tax by basing itself in Ireland.
The tax discussion was scheduled months ago and was meant to focus on the savings tax directive. But the timing of the Apple revelations, which came to light in a US Senate hearing earlier this week, has proven an embarrassing distraction for Ireland, which holds the rotating presidency of the EU's Council of Ministers.
Enda Kenny, Ireland's prime minister, is likely to be grilled on the subject by other EU leaders, according to EU officials.
Kenny told the Irish parliament yesterday that Ireland “does not do special tax rate deals with companies, we don't have any special extra-low corporate tax rate for multinational companies”.
The Irish government has instead sought to lay the blame on loopholes in US tax law. Kenny has stressed that direct taxation is a member state competence and that each government should be able to set tax policy.
Ireland's favorable corporate tax rate has long been an irritant for other EU member states. David Cameron, the UK's prime minister, has said he will bring up the topic at the meeting of the G8 next month in Northern Ireland. He sent a letter to Herman Van Rompuy, the president of the European Council, earlier this month, saying:
“As I am sure you will agree, the path to reform starts with the basic recognition that current global tax rules do not reflect the modern and globalized economy that our citizens live and trade in.”
Speaking to the European Parliament yesterday (21 May), Commission president José Manuel Barroso said the EU should take advantage of the growing interest in the tax issue from member states.
The Commission estimates the total loss of revenue in the EU due to illegal fraud and tax evasion to be around €1 trillion per year - roughly the size of the entire EU budget for the period 2014-2020.
"How can we explain to honest households and businesses who are feeling the squeeze yet still paying their fair share of taxes that there are other parts of society and enterprise who are deliberately avoiding paying up?" he said to MEPs.
Note EU-Digest: Apple Chairman Timothy Cook defended his company before Congress yesterday, denying that the technology giant used “gimmicks” to dodge billions in corporate taxes. What he did not say was that his company used legally established tax loopholes by foreign countries such as Ireland to avoid paying higher US taxes."A Rose by any other name is still a Rose Mr. Cook".
Read more: Apple tax avoidance looms over EU summit | European Voice
