Ireland may come on board to support a global deal to reform corporation tax as negotiations develop in the coming months, Minister for Finance Paschal Donohoe has said.
The Irish Government has refused to join the G7 and G20 in backing proposals for an overhaul of company taxation that would set a 15 per cent floor for corporation tax, warning that it may cost the exchequer over €2 billion a year.
But Mr Donohoe indicated that Irish support could be possible after he met with United States treasury secretary Janet Yellen, who was visiting Brussels to pressure holdout European Union member states to back the minimum corporation tax rate and co-ordinate on how to seal the deal along a timetable set for October.
“Ireland will continue to engage in the negotiation and the process within the OECD, all the way up to October,” Mr Donohoe said.
“While the challenges of an agreement are apparent at the moment, equally the challenges of an agreement not being in place are equally or equally real,” he added.
“It is in the interests of stability, and in the interests of the principles that we talked about today with Secretary Yellen that agreement is reached, and I’m going to play my part, to see if Ireland can be part of it and if we can support it later on in the year.”
Mr Donohoe held a breakfast meeting with Dr Yellen before she held a series of meetings with top EU leaders and with the Eurogroup, the group of finance ministers of which Mr Donohoe is currently president.
In an address to the finance ministers, Dr Yellen urged holdouts including Ireland, Estonia and Hungary to drop their opposition, arguing that countries needed dependable sources of revenue and taxation systems that did not worsen inequality.
“We need to put an end to corporations shifting capital income to low tax jurisdictions, and to accounting gimmicks that allow them to avoid paying their fair share,” Dr Yellen told the finance ministers.
“We need to ensure that the globalised economy does not continue to shortchange our middle classes so that it can remain open and free, thereby encouraging economic growth and business certainty,” she added. “This race to the bottom must end, and working together we can ensure that it does.”
In the breakfast meeting, Mr Donohoe discussed issues with Dr Yellen in his capacity as Eurogroup president, and separately the two talked about matters relating to Ireland, as Finance Minister, he said.
“There’s a very clear demarcation between the two topics. We did have an exchange of views on where we stand,” Mr Donohoe said.
“It was really constructive, really positive. Both of us understand how important the agreement is, and both of us understand the work that does need to be done to hopefully get to a better place and to an agreement in October.
“I affirmed to her what I’ve just said here publicly, which is my willingness to play a role in this. So, lots of work ahead across the coming weeks or months, and I’ll play my full part in that.”
Earlier, the European Commission announced it would halt work on a digital tax which had been expected to be proposed this week as a way to raise money to pay back massive borrowing to fund the bloc's €750 billion Covid-19 recovery package, in a sign of growing momentum towards a deal.
Washington has long been wary of any tax that could seems aimed to take a slice of tax revenues from US tech giants, and Dr Yellen persuaded the EU that the levy should be set aside to prioritise the global tax deal and to ease potential trouble for the agreement in passing Congress.
“We fully respect the importance of the challenge that for Ireland, this kind of issue represents, and we appreciate the engagement of the Irish government and of Paschal personally,” EU economy commissioner Paolo Gentiloni said following the meeting.
“For us it’s a top priority,” he added. “This is also the reason why we decided to put on hold our proposal on the digital levy, and that we agreed with Secretary Yellen to work together, the US and the Commission to make this agreement possible, because it is very important after such a crisis to have an important agreement on this.”