Yahoo Finance Effective corporate tax rate in 15 EU countries lower than Ireland
Long accused of engaging in a tax “race to the bottom,” Ireland actually has a higher effective corporate tax rate than 15 other European Union countries, including Austria, the Netherlands, and Luxembourg, according to a new report.
Though the country’s 12.5% corporate tax rate is one of the lowest in the EU, and by far the lowest in Western Europe, companies in Ireland pay an average effective tax rate of 15.7%, an order of magnitude higher than the 2% paid in Luxembourg, and above the 10.4% paid in the Netherlands and the 13% paid in Austria.
The findings come in a report released this week by the Greens/European Free Alliance grouping in the European Parliament.
At 30.4%, Italy has the highest effective corporate tax rate in the EU and is closely followed by Greece, at 28.4%. After Luxembourg’s 2% rate, companies in Hungary pay 7.5% in corporate tax on average, while those in Bulgaria pay 9.5% and those in Cyprus pay 9.6%.
The report, however, does not include data related to taxes paid by Apple (AAPL) in Ireland. In 2016, the EU ruled that the country had provided tax benefits to the company that amounted to illegal state aid.
The EU said that one of Apple’s primary Irish subsidiaries paid an effective tax rate of 0.005% in 2014, for instance. Though Ireland is in the process of appealing the decision, it was forced to collect some €14.3bn ($16.4bn) in unpaid taxes and interest payments from the company in September.
READ MORE: Ireland signs deal with Malta to close ‘single malt’ tax loophole
Irish tax laws have been under international scrutiny for many years. Last year, Nobel prize-winning economist Joseph Stiglitz said that Ireland was a country competing in a “race to the bottom” with corporate tax rates.
Separately, the Irish finance ministry was forced to rebuff a study that claimed Ireland was the world’s biggest tax haven.
In recent years, Ireland has moved to close several loopholes that gave rise to certain tax avoidance structures known as the “double Irish” and “single malt,” which allowed certain companies to pay single-digit tax rates.
The effective tax rate in most countries is lower than the headline, nominal tax rate. This is typically because laws provide for tax holidays — which allow for temporary tax reductions — and other provisions that lower the actual taxes paid by corporations.
The grouping’s finance spokesman Sven Giegold on Tuesday called for greater transparency about the tax practices of multinational companies, and pointed to a European Commission proposal that would introduce country-specific tax transparency regulations.
