The European Commission issued a press release on Friday. I'm usually reluctant to reproduce big chunks of press releases but this one is important:
By a reasoned opinion under Article 226 of the EC Treaty, the European Commission has formally requested Ireland to amend its legislation concerning remittance base taxation. Ireland normally does not tax income received by non-domiciled persons from money invested abroad if the interest is left on the foreign bank account. The Irish legislation excludes from this rule income sourced in the UK and thus treats such income less favourably than income arising elsewhere in the EU. The Commission considers that this is contrary to the EC Treaty and to the EEA Agreement, as it restricts the free movement of capital. If Ireland does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice. At the same time the European Commission has decided to send a request for information in the form of a letter of formal notice to the United Kingdom about similar remittance base taxation rules, which in turn appear to discriminate against income sourced in Ireland.
By itself this challenge will not end the abuse inherent in the domicile rule as applied to taxation (which Ireland inherited from the UK). But it certainly helps that they are being challenged for the obvious discrimination that is inherent within them. This move does, therefore, have to be welcomed even if the response will be, in the first instance no doubt to extend the use of the remittance basis between the UK and Ireland.
Somehow I can't see that being acceptable for long. As EU Taxation and Customs Commissioner L?°szl?? Kov?°cs said:
"The Commission does not advocate remittance base taxation, as it may lead to double non-taxation. Nonetheless, where it exists, the Single Market requires that it is at least applied in a non-discriminatory manner".
His definition of discrimination is too narrow. I have sent the EC the report prepared by Tax Research and the Tax Justice Network on why the discrimination inherent in this rule is much more profound than he seems to realise at present.