LAST UPDATE | 5 Jun 2021

FINANCE MINISTER PASCHAL Donohoe has said Ireland could lose up to one fifth of its corporate tax revenue each year – some €2.2 billion – if the 15% rate agreed today at the G7 meeting is put in place. 

Finance Ministers of the world’s seven richest economies agreed to commit to a global minimum corporate tax rate of 15% at the G7 meeting in London.

“We… commit to a global minimum tax of at least 15% on a country by country basis,” they said in a statement, adding that they hoped to reach a final agreement at the July gathering of the expanded G20 finance ministers group.

The news comes as official data showed Ireland’s economy grew almost 8% in the first quarter of 2021, during a harsh lockdown when most shops closed, as multinational firms’ revenues helped it continue to buck pandemic downturn trends.

Paschal Donohoe was among the world leaders who attended the G7 summit of finance ministers in London – as Ireland’s multinational tax practices featured on international front pages.

Speaking to RTÉ News after the summit, he said modelling indicates Ireland could lose up to a fifth of its overall corporate tax revenue. However he said that potential loss of revenue is already built into medium term budgetary calculations. 

Ministers from the US, Japan, France, Canada, Germany and Italy will attend the two-day meeting at Lancaster House in London, with Donohoe attending as President of the Eurogroup. 

The meeting was hosted by the UK’s Chancellor of the Exchequer Rishi Sunak and comes ahead of the G7 meeting of world leaders in Cornwall next week.

He hailed the agreement and said it was a “historic” opportunity to reform the global tax system.

“To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that’s a huge prize for British taxpayers.”

Mr Sunak said he was “proud” of his colleagues, with Japan, Canada, France and Italy also part of the group, for working together to produce a deal that “finally brings our global tax system into the 21st century”.

Under the scheme the companies will be forced to pay taxes in the countries they operate in and not just where they have their headquarters. 

The rules would apply to global firms with at least a 10% profit margin – and would see 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries they operate.

The G7 Governments claim that the taxation will benefit public services. 

Ireland’s 12.5% corporation tax regime has been in the crosshairs of bigger nations for some time.

A report in the Guardian this week said an Irish subsidiary of Microsoft made a profit of $315 billion last year but paid no corporation tax as it is “resident” for tax purposes in Bermuda. 

The report outlines that the profit generated by Microsoft Round Island One is equal to nearly three-quarters of Ireland’s GDP. 

In a statement, a Microsoft spokesperson said the figure relates to: “a one-time event and reflects an inter-company reorganization, not a cash gain.”

Speaking on RTE Radio’s Saturday with Katie Hannon this morning, Minister of State for Business, Employment and Retail defended the Irish Government’s position. 

“Our tax rate is quite competitive and it’s quite fair. It’s at twelve and a half percent corporation tax rate, the effective tax rate is 11% with majority of companies. That is not the same all over the world – the effective tax rate is a lot less.

“I want to be clear, Ireland has been part of this conversation internationally with the OECD for a long number of years now.

“We have made changes to our tax system already. We put in place, plans, recognizing that our corporation tax will be impacted with up to two billion, so we’re ready for this, we are parent of this.

“But it has to happen but on an international level, not to be unfair to Ireland or single us out or any other small trade country because trade and jobs are essential to us here and I think our tax system is sound and it is fair,” he said. 

 The agreement is due to be pored over in further detail at the G20 financial ministers and Central Bank governors meeting in July, the Treasury confirmed.

Additional reporting from Press Association and © AFP 2021