THE Government is digging in its heels after Ireland’s low-tax regime was dealt its first major blow this week.
preliminary global deal would reallocate multinational profits to all the countries in which they operate, which Ireland supports, and tax the largest firms at a 15pc minimum rate, which it doesn’t.
But Ireland is digging in against all of our most important diplomatic allies; including US President Joe Biden and the mainstream of EU member states.
It leaves the country increasingly isolated, as 130 others – making up more than 90pc of global GDP – have signed up to the agreement, brokered by the Paris-based Organisation for Economic Cooperation and Development (OECD) yesterday.
After the massive diplomatic effort the Government undertook to get EU states on side after Brexit, it now finds itself in the company of countries such as EU pariah Hungary on tax.
The Department of Finance said Ireland would still participate in the talks, which are expected to continue into October.
“I have expressed Ireland’s reservation, but remain committed to the process and aim to find an outcome that Ireland can yet support,” said Finance Minister Paschal Donohoe.
Read More
The two-track deal targets only the largest multinationals.
Countries will get taxing rights if corporates with a global turnover of more than €20bn and profit margins of at least 10pc book a minimum of €1m in revenue there (or €250,000 for low-income countries).
The rules do not single out Big Tech firms – a US ask – but apply to all multinationals, except for those in oil and gas, mining and logging and financial services.
The OECD estimates the rules will reallocate more than $100bn (€85bn) in profits each year.The 15pc minimum tax rate is expected to generate around $150bn (€125bn) in additional global tax revenues each year, and will apply only to companies with annual consolidated group revenue of more than €750m a year.
It essentially means parent companies paying a top-up tax to their home jurisdictions and forgoing tax deductions, if their foreign subsidiaries are taxed below 15pc.
“If implemented, this would reduce the attractiveness of Ireland’s 12.5pc corporation tax regime,” the Central Bank said in its quarterly bulletin this week.The Department of Finance estimates a €2bn a year loss to the public purse by 2025, although the Central Bank’s director of economics, Mark Cassidy, said he doesn’t rule out an increase to that figure.
It essentially means parent companies paying a top-up tax to their home jurisdictions and forgoing tax deductions, if their foreign subsidiaries are taxed below 15pc.
“If implemented, this would reduce the attractiveness of Ireland’s 12.5pc corporation tax regime,” the Central Bank said in its quarterly bulletin this week.
The Department of Finance estimates a €2bn a year loss to the public purse by 2025, although the Central Bank’s director of economics, Mark Cassidy, said he doesn’t
rule out an increase to that figure.
The Central Bank has also warned that the OECD’s profit reallocation rule could see multinationals fleeing the country, under a more “negative” scenario.
“This second scenario would have more serious implications for the public finances since it would not only reduce corporation tax revenue but also potentially lead to lower revenue from other sources such as VAT and income tax,” it said.
Ireland had been a big beneficiary of globalisation and tax competition.
The US could deal a second blow if its plan to apply a 21pc tax on American multinationals’ global income gets through Congress.