Donohoe says 12.5% corporate tax rate to remain in place for years to come

US leading calls for imposition of minimum global tax rate for big corporations

Minister for Finance Paschal Donohoe: ‘I do anticipate that there will continue to be a place for a rate such as this and for low rates.’ Photograph: Julien Behal

Minister for Finance Paschal Donohoe: ‘I do anticipate that there will continue to be a place for a rate such as this and for low rates.’ Photograph: Julien Behal

 

The Republic’s 12.5 per cent corporate tax rate will remain in place for years to come, Minister for Finance Paschal Donohoe has predicted, in comments that will raise the stakes in negotiations on international moves to a global minimum tax rate.

Asked in an interview with Sky News whether he expects the 12.5 per cent rate to remain in place for the next five to 10 years the Minister said: “ Yes, I do. I do anticipate that there will continue to be a place for a rate such as this and for low rates.”

The US is leading calls for the imposition of a minimum global rate for big corporations with the Biden administration proposing a 21 per cent minimum rate for the international earnings of its own companies, though this still has to be negotiated with Congress.

Mr Donohoe’s interview with Sky was recorded a week ago, on May 18th. Two days later, on May 20th, US treasury secretary Janet Yellen’s officials indicated that the US would be willing to accept a global minimum rate in the OECD talks of 15 per cent, well below the level of its own proposed rate.

Reservations

Subsequently, the US has sought to push for a statement from G7 finance ministers – who next meet on Friday – in support of a global minimum. In the Sky interview the Minister repeated that he had “significant reservations” over the US plan for a global minimum “ at such a level that it means only certain countries, and certain size economies can benefit from that base – we have a really significant concern about that.”

While Mr Donohoe expressed confidence about the future of the 12.5 per cent rate, he did say that he believed a rate “like that – a low rate – should be a feature of an agreement in future”. It is not clear if this form of words was intended to leave some negotiating room in the talks to come. The Minister has said that he expects to discuss the issue further with Secretary Yellen.

Mr Donohoe has argued that smaller countries like Ireland should be allowed to compete for investment using lower corporate tax rates. He said that the Irish rate had played an important part in the State’s economic development, though it was now only part of the offering from the country to foreign investors.

The OECD talks are prompted by a desire to stop big companies moving profits to different locations around the world to try to cut their tax bills.