28/06/21

IRELAND: Janet Yellen tells US Senate that Paschal Donohoe will support a global minimum tax.

As published on independent.ie, Sunday 27 June, 2021.

US treasury secretary Janet Yellen believes Minister for Finance Paschal Donohoe will work to help set a global minimum tax, despite it being a “highly consequential matter for Ireland”.

Yellen made the comments earlier this month when speaking at a US Senate finance committee hearing on the US president’s fiscal year 2022 budget.

In response to a question from Idaho senator Michael Crapo regarding pushback from countries such as Ireland, Hungary and China, Yellen said she believed Donohoe would support the move to a global minimum tax – despite the potential consequences for Ireland.

“You mentioned Ireland and a few other countries,” she said. “I’ve had very constructive bilateral conversations with the Irish Finance Minister and believe that he’s going to be working with us... to try to raise the global minimum tax, even though that’s a highly consequential matter for Ireland.

“I believe the entire EU will, in the end, go along with higher minimum taxes,” she added.

In response to questions from the Sunday Independent regarding Yellen’s comments, a spokesman for the Department of Finance said: “Minister Donohoe has met Secretary Yellen on two occasions in recent months, in which they discussed the international tax proposals being examined at OECD.

"These were constructive meetings, and both understand each other’s challenges in respect to the current negotiations.

“Negotiations are ongoing, and Minister Donohoe will continue to make the case for a sustainable, ambitious and equitable agreement – to meet the needs of all countries, large and small, developed and developing – which can accommodate Ireland’s long-standing 12.5pc corporation tax rate.”

In early June, the Group of Seven (G7) nations struck a historic deal and agreed to commit to a global minimum tax of at least 15pc on a country-by-country basis. Ireland’s corporate tax rate is currently 12.5pc.

The agreement was made following talks in London with G7 finance ministers.

Speaking to the media in London, Donohoe, who attended the London meeting in his capacity as president of the Eurogroup, said any changes would have to balance the needs of both large and small economies.

Donohoe said the global tax reforms could see Ireland lose up to a fifth – around €2.3bn – of its overall corporate tax revenue. However, he insisted this reduction had already been built into the Government’s budget figures.

Donohoe described the agreement as “an important signpost in the change that I have always said is coming”.

The Finance Minister also said he would continue to make a case for “the role of legitimate tax competition” before the OECD concludes its Inclusive Framework talks on establishing global tax policy towards the end of this year.

A report from the Irish Independent on June 17 said Donohoe hoped for a deal this summer in talks led by the OECD. He had attended a meeting of euro area finance ministers in Luxembourg.

The G7 arrangement still needs to be approved by G20 nations in July, before it is then put to the 139 countries currently discussing global corporate tax rules in the OECD.

The OECD is working on a new way of calculating multinationals’ taxable profits and sharing them out by country, as well as a 15pc global minimum tax.

Last week, Yellen said the Biden administration hopes to gain endorsement of the global minimum tax at next month’s G20 finance ministers meeting.

It followed a Reuters report that a draft communique being circulated ahead of the July 9-10 gathering indicated the finance leaders would endorse a global minimum tax. However, it did not refer to a specific rate.