07/10/21

IRELAND: Donohoe says he is expecting revised corporation tax proposals.

As published on rte.ie, Thursday 7 October, 2021.

Minister for Finance Paschal Donohoe has said he is expecting a revised agreement on proposals to change Ireland's corporate tax rate today.

He said he had further engagement last night with the European Union and OECD and that Cabinet will discuss the revised draft at its meeting this afternoon.

Mr Donohoe said at that point the Government will be able to evaluate the text and his recommendation.

Speaking to reporters in Dublin this morning, the minister said there had been huge engagement with the commission and OECD in recent days.

He said Government would be in a position to see a further text in relation to these issues at its meeting this afternoon.

Mr Donohoe said he was really aware of the profound importance of smaller companies in the economy.

The Cabinet will meet this afternoon to decide whether Ireland should sign up to sweeping global corporation tax reforms that would require the long-standing 12.5% rate to be increased to 15%.

The plan also proposes changes to where companies would pay their taxes, that the Department of Finance has estimated could reduce Ireland's tax take by €2 billion a year.

The draft reforms have been brokered by the OECD among 140 countries, as part of a widespread agenda to modernise global tax rules, make them fairer and reduce the use of aggressive tax planning by some large multinational companies.

The relatively low 12.5% tax rate has been a cornerstone in Ireland's successful foreign direct investment offering for decades and has been fiercely defended by successive governments.

Ireland was one of just nine countries involved in the negotiations who did not sign up to the proposals last July.

While it accepted parts of the plan governing where companies should pay their tax, it objected to the reference to a global minimum tax rate of "at least 15%" being included in the plan, arguing it created uncertainty because the phrasing would mean the rate could be increased further at a later date.

Since then, the Government and officials have been involved in intense negotiations with other countries in a bid to have the draft changed.

Earlier this week, an updated version of the proposals was circulated to states, which had the words "at least" removed.

The removal of the stumbling block has paved the way for Ireland to join the accord, subject to a final decision by Cabinet later today.

However, the Government has also been seeking assurances from the EU that if it does sign up, the union will not seek to try to raise the minimum rate further in the coming years.

This would involve transposing the text of the OECD deal into EU law.

Negotiations have continued through the week on that and other outstanding issues related to the plan.

These include discussions around the level at which the minimum rate would apply, as well as the nature of possible exemptions or flexibility for certain areas like research spending.

The Sinn Féin finance spokesperson has said the party believes Ireland has to be part of the OECD agreement.

Pearse Doherty said that it has made it "very clear we have to be part of this agreement".

He said this "still allows us to be competitive, but less competitive than where we were", so there is a need to focus in on housing, childcare, investment in infrastructure and higher education "to allow us to be competitive into the future".

Mr Doherty said that clarity is needed from the European Commission that Ireland is allowed to run a dual rate, to allow a rate of 12.5% be applied to smaller companies.

He said that the Government needs to focus on getting approval from the commission on state aid rules.