Donohoe will be singing a different tune on Tuesday

For the first time in five budget speeches, he won’t be defending the 12.5% rate of corporation tax

Paschal Donohoe will not be defending Ireland’s 12.5% corporation tax rate in his fifth budget speech. Photograph: Patrick Bolger/Bloomberg

Paschal Donohoe will not be defending Ireland’s 12.5% corporation tax rate in his fifth budget speech. Photograph: Patrick Bolger/Bloomberg

 

Paschal Donohoe will rise to his feet on Tuesday afternoon and deliver his fifth budget speech as Minister for Finance. For the first time, he will not be defending Ireland’s 12.5 per cent rate of corporation tax.

Last October, he told the Dáil: “I would like to take this opportunity to again reaffirm Ireland’s commitment to the 12.5 per cent corporation tax rate.” In October 2019, months before the outbreak of the pandemic, he said the rate “has served us well and it will not be changing”.

The previous year’s budget speech in 2018 used almost identical language to 2019. In October 2017, he said: “Our position is clear. The 12.5 per cent tax rate is, and will remain, a core part of our offering.”

His budget speech in October 2016 was delivered as Minister for Public Expenditure and he made no mention of the rate. The Minister for Finance was Michael Noonan, but the message was the same: “The rate will not be changed and nobody is asking for it to be changed.”

But they were.

Every finance minister since the 1990s has reaffirmed Ireland’s commitment to the rate. It became almost a shibboleth of the portfolio. Sometimes things don’t change at all, but then they can change all at once. Ireland this week caved in to at least 15 years of external pressure, and agreed to change the rate to 15 per cent as part of an international agreement to limit tax avoidance by multinationals.

Now that his shibboleth is no more, what will Donohoe say instead this coming Tuesday? Expect him to make some soothing noises towards multinationals. It seems unlikely that he will unveil a major new corporate tax break for foreign investors. But he may wish to send a signal to them, and to the wider world, that Ireland remains open for business and tax will continue to be used as a tool to attract capital.

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