Ireland is one of nine countries that did not sign a major agreement at the OECD on Thursday to reform the global corporate tax regime, including a minimum effective tax rate for big companies of at least 15 per cent. The OECD announced that 130 of the 139 countries involved in the talks had signed up to the outlines of what would be an historic agreement, due to be concluded by October.
The Minister for Finance Paschal Donohoe said he is "absolutely committed" to the process of reforming the global corporate tax regime and will work with OECD countries to find an outcome that Ireland could support.
Speaking at Government Buildings on Thursday evening, Mr Donohoe said he could support “many elements” of what 130 nations have agreed to, but he has reservations about a 15 per cent minimum tax rate.
Ireland’s 12.5 per cent tax rate is one of the reasons it has been so competitive over many decades, the Minister said, and he is going to continue to “make the case for our rate”. He is to launch a public consultation programme on the OECD negotiations to canvass views on what is emerging.
The decision by Ireland not to sign is a big political call by the Government. All the major countries are supporting the agreement, though the deal could still face difficulties in the US Congress, where there is significant Republican opposition to some of its terms.
The agreement among the vast bulk of OECD countries follows a deal agreed at the recent meeting of Kg7 finance ministers on a plan to impose a minimum effective global tax rate of at least 15 per cent on the earnings of major corporations, as well as allowing some tax to be paid on profits they make in big markets where they have no physical presence. The other eight countries who have not signed up include two other low tax EU countries – Estonia and Hungary, a number of countries which are tax havens – Barbados and Saint Vincent & the Grenadines,and two African countries , Kenya and Nigeria, who may be making a point about the benefits of the deal to developing countries. However after weeks of difficult negotiations big countries who reportedly had difficulty with aspects of the agreement – including China and India – have signed the deal.
Annual revenue loss
The Department of Finance has previously estimated that the agreement would cost Ireland more than €2 billion in annual tax revenue.
Speaking at the briefing, Mr Donohoe would not be drawn on the changes Ireland would need to see to consider signing up to the agreement.
“Given that this is a negotiation that we are engaging in in good faith, I am not going to indicate at that point particularly today what could be different outcomes that could or could not be acceptable to Ireland,” he said. A key part of Ireland’s tax policy has been “certainty and predictability”, and to stand by these principles it was important for him to indicate partial support but also a reservation. A public consultation on the draft agreement is needed to harness the views of stakeholders with an aim of preserving stability in Ireland’s tax policy, he added.
“We are now going to consider the agreement in the round.. . When we reach October it will even be clearer regarding what an agreement will look like. We will negotiate and engage in good faith up to that point.”