THE EUROPEAN UNION’S Economy Commissioner, Deloitte, and Ibec are among those who have praised Ireland for its announcement to sign up to a global deal to increase the State’s corporate tax rate for large companies to 15%.
Charities raised concerns that the deal doesn’t go far enough – questioning whether the new increased rate would actually be paid in full, and arguing that agreeing to a minimum tax rate was not something that should be “celebrated”.
Ireland’s corporate tax rate had been at 12.5% previously, raising international attention for being so low in comparison with its Western peers, and resulting in tech and pharma giants locating their headquarters in Ireland.
Earlier this evening, Minister for Finance Paschal Donohoe confirmed that the decision to increase the rate to the suggested 15% global rate was being made in response to tax developments internationally, plans in the EU, and changes proposed in the US to their tax system.
Ireland didn’t sign up to the agreement in July when 130 other countries did, but due to the removal of “at least” before the rate of 15% in the draft text, Donohoe said it was now “at that point” to back the global proposal.
There are 56 Irish multinationals that employ approximately 100,000 workers, as well as 1,500 foreign-owned multinationals employing 400,000 people.
The EU Commissioner for the Economy Paolo Gentiloni said that Ireland’s decision was “a momentous and hugely positive step for Europe’s collective efforts to build a fairer, more stable global tax system”.
#Ireland joins #OECD International tax agreement. A momentous and hugely positive step for Europe’s collective efforts to build a fairer, more stable global tax system.
— Paolo Gentiloni (@PaoloGentiloni) October 7, 2021
Lorraine Griffin, head of tax at multinational Deloitte, released a statement saying that it would be “a fundamental redesign of key international tax rules”, and said that the fact that the rate would not apply to companies with a turnover below €750 million “reflects the constructive way that Ireland has engaged with the process”.
Griffin also said that “a lot of heavy lifting will be required in 2022″ if an implementation date of 2023 is to be achieved, and that engagement with Irish businesses was needed.
She added: “From an FDI perspective, yes, today’s announcements are significant, but it is important to recognise that even with these developments, Ireland will continue to have a low corporate industrial policy, and a lower corporate tax position compared to many other countries.
“Furthermore, tax is only one of a number of important factors that companies consider when looking at locations. Ensuring that these other factors – access to a trained and qualified workforce, digital infrastructure, availability of housing and schools for example – are also as competitive as possible will be hugely important.”
Tom Woods, KPMG’s head of tax, said that “at 15%, Ireland still remains a very attractive location for FDI from a tax perspective”.
“Applying two levels of corporation tax will mean 99% of Irish companies will be unaffected and continue to pay a 12.5% corporation tax rate, with just 1,500 or so corporates in groups with turnover in excess of €750 million subject to a new 15% effective tax rate.
“Under the proposals, these large corporates would have been paying this additional tax anyway irrespective of whether Ireland signed up to the deal as the tax would be collected by other countries.”
Christian Aid said it had a number of concerns about the deal.
“This deal is far short of what’s needed to really tackle tax avoidance,” its head of policy and advocacy Sorley McCaughey said.
“The crucial thing on the OECD’s proposed global minimum corporate tax rate is whether companies are actually going to pay an effective rate of 15% or if they will be successful between now and when this agreement is finally ready to be implemented, in carving out exemptions for themselves to allow them to continue to pay an effective far lower rate.
This has always been the key issue in Ireland. In many ways the focus on the headline rate, be it 12.5% or 15%, is a distraction. The big controversies, like the Apple Tax case, the infamous Double Irish, and its successor the Single Malt have all relied on allowances and breaks so companies pay far below what’s advertised. That will be crucial here.
“As for a rate of 15%, it’s important to remember that this is at the very low end of ambition. The Cabinet decision today simply aligns us with countries supporting the lowest level of ambition and is not something to be celebrating.”
Ibec said it was the right decision at the right time.
“We had been fully supportive of the Government’s approach of consulting with stakeholders and waiting for further detail and clarity on key questions before making firm commitments concerning our direct investment regime for foreign and Irish headquartered companies,” its CEO Danny McCoy said.
Today’s outcome with a firm commitment to a 15% minimum rate, and no more, is a vindication of the State’s position and will provide welcome certainty for small open economies. We also welcome proposals for Ireland to maintain its 12.5% regime for those companies not in scope of the agreement.
Today marks a watershed for the Irish business model.
The Irish Tax Institute also welcomed the agreement.
“The change in language around the global minimum rate secured by the Government as well as the commitment from the EU that the Commission will hold to that rate, brings much needed certainty and stability to the international tax system.
“This is good news for business and good news for governments as the world recovers from the pandemic,” said Institute President, Karen Frawley.
The American Chamber of Commerce Ireland said the agreement would “provide certainty”. AmCham CEO Mark Redmond said:
“AmCham has always been steadfast in our support of current and previous Governments’ robust defence of our corporate tax regime.
“AmCham believes that today’s announcement coupled with the removal of the wording of “at least” from the proposals, in addition to clarification obtained from the European Commission has ensured that the revised agreement ensures essential predictability, stability and certainty for multinational employers.
“In essence, the Irish government’s clear-headed approach in obtaining clarity, makes this global tax reform package a more predictable and thus better, proposal.”
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