As published on independent.ie, Friday 1 July, 2022.
Failure to agree a 15pc minimum corporate tax rate risks reigniting global trade wars, the Finance Minister has said.
Paschal Donohoe said there were “challenges” to finalising a deal, which was agreed in principle last October by 137 countries, including Ireland, but plagued since by delays in the US and thrown into doubt in the EU because of last-minute objections from Hungary.
“The absence of such an agreement and the absence of this agreement will bring us right back to square zero,” Mr Donohoe told an event organised by the American Chamber of Commerce Ireland on Friday.
“Failure to implement and make progress on where we are now actually increases the risks of trade disputes and will increase the challenges that global tax policy will face.”
Hungary’s about-turn last month has infuriated French finance minister Bruno Le Maire, who this week suggested the EU should bypass Budapest’s veto.
He said Hungary was holding the EU “hostage” after previously agreeing to the deal, and said an accord would go ahead “with or without the consent of Hungary”.
Tax matters require unanimity at EU level, but a process known as “enhanced cooperation” allows groups of countries to move ahead alone.
Mr Le Maire said he was in talks with the EU on using enhanced cooperation, and had informed US treasury secretary Janet Yellen of his plans.
The European Commission said this week that it was focused on reaching a unanimous agreement, while a spokesperson for the US Treasury said the US is “optimistic” Hungary will sign up.
Mr Donohoe said he was “optimistic” the EU and US can agree on both elements of the tax deal – a 15pc tax and a shift of taxing rights on large multinationals to other countries.
“I firmly believe that it is in our interest for this to happen. The rest of the world is watching this process,” he said.
The 15pc rate would affect around 1,600 multinationals in Ireland with revenues above €750m a year. The other part of the deal will affect only the 100 most profitable companies in the world, with revenues over €20bn, and could cost Ireland up to €2bn in lost tax revenues, the Department of Finance estimates.
American Chamber President Catherine Duffy said any attempts to broaden the tax base should be done “in a way that does not damage our international competitiveness and our ability to attract and retain jobs and investment in innovation”.
A large majority of companies (79pc) surveyed by the American Chamber expect to create new jobs in the next 12 months, while 74pc said they have hired in the last year.
Almost a third of companies said that housing is the most important challenge for Ireland to overcome in order for their business to expand.
Ms Duffy said Budget 2023 must be “funded sustainably” and should include investment in affordable homes, childcare, healthcare, education, energy and cyber security.
Mr Donohoe said “pragmatism” would be required ahead of budget day, warning again that there are “limits to what any government can do to address the effects of global change which are now unfolding”.
His comments came as Eurostat estimates Irish prices spiked by 9.6pc in June, well above the eurozone average and the highest rate in almost 40 years.
“It’s higher and it’s more persistent than initially anticipated,” Mr Donohoe said of inflation.
“We also recognise the risk that is there that rising inflation begins to erode the real impact of our spending on public services.”
While he said the government “will continue to do our utmost to help”, he warned that a glut of extra spending could risk “adding further fuel to our inflationary challenges and further accumulating public debt”.