The government has agreed that Ireland will sign a global agreement on corporate tax reform that will set a minimum rate of 15 percent for large companies.
Under the deal, the long-standing 12.5 percent rate that has been a cornerstone of efforts to create jobs in Ireland will no longer be available as part of offers to attract investment from large multinationals .
Mr Donohoe said he expects the OECD agreement and the new global minimum tax rate to be implemented in 2023.
He said Ireland will be able to keep the 12.5 percent rate in the meantime.
Ireland was one of a handful of countries that refused to sign the OECD deal and opposed language suggesting the new global rate would be “at least” 15%.
The Cabinet, however, agreed that Ireland would now participate after securing changes to the agreement regarding the use of the term “at least”.
Ireland will now join some 140 countries agreeing to set a minimum global corporate tax rate.
Finance Minister Paschal Donohoe said the focus in recent weeks has been on “securing the necessary changes” to bring “certainty and stability” and protect Ireland’s strategic interests.
He said the government had approved his recommendation to join the “international consensus”.
Mr Donohoe said it was the “right decision”, that it was “reasonable and pragmatic” and that it was “taken in the interest of our country”.
Mr Donohoe explained that Ireland was not ready to sign the original version of the deal that many countries reached in July.
He said he has since engaged with the OECD to reach a “fairer deal” that can bring stability.
Mr Donohoe said “above all, we got the deletion of“ at least ”in the text as we requested. “
He said the 15 percent rate would only apply to companies with turnover exceeding 750 million euros.
The vast majority of businesses will not be impacted by the proposed 12.5 percent corporate tax increase, Taoiseach Micheál Martin said earlier on the matter.
Speaking in Dublin ahead of a Cabinet meeting, he confirmed that the government’s intention was still to apply the new 15 percent rate only to companies with turnover above 750 million euros, in accordance with to the OECD proposals in this area.
State aid rules
Although further negotiations are needed on the details of how it works under EU state aid rules, Mr Donohoe has been in contact with EU Competition Commissioner Margrethe Vestager in recent days. , notably during a face-to-face meeting in Brussels on Monday. Ensuring the lower rate for domestic businesses would mean they wouldn’t face an increase in the tax bill to come out of the pandemic.
Tánaiste Leo Varadkar, meanwhile, said the increase in the tax rate would reduce state revenue by around € 2 billion per year based on “existing projections”. However, this was “only an estimate and no one can know for sure.” The assumptions surrounding the company’s behavior “may or may not be correct, and it may well be out of date.”
But he told Labor Finance spokesman Ged Nash that “if we accept a new global minimum rate, there is the advantage that no country can underestimate us.
“And some countries have actually undermined us in recent years. And that’s something we would avoid if we were to adhere to the global minimum wage.
He said they were concerned “to make sure that the agreed rate is certain and will not increase over time.” And we want to make sure that for small and medium businesses, we can continue to charge the lowest rate.
Mr. Varadkar added that “we want to make sure that our R&D [research and development] tax credit is protected. We also want to make sure that if countries buy into this, they actually implement it ”.
But he said, “Our 12.5% corporate income tax has been a huge success. This is a really important part of our industrial policy “which had strong all-party support, which employed over a quarter of a million people and” we want to keep these jobs “.