Janet Yellen denies US ‘cajoled’ Ireland into tax deal

Deal brokered in atmosphere of ‘friendship and co-operation’, treasury secretary says

United States treasury secretary Janet Yellen has denied the US exerted pressure or "cajoled" Ireland into signing a new global deal on tax.

On a visit to Ireland, Ms Yellen said she had held a series of "very productive meetings" with Minister for Finance Paschal Donohoe in the lead up to the agreement and that US-Irish relations remained strong.

“We have tried to understand the viewpoint of Ireland about these tax negotiations and its needs in terms of being able to sign on to this,” Ms Yellen said.

The OECD deal, endorsed by G20 leaders at the weekend, will ensure big companies pay a minimum rate of 15 per cent. It will also do away with Ireland's prized 12.5 per cent rate for multinationals.

‘Economic interest’

Ms Yellen was in Dublin for a series of engagements, including a bilateral meeting with Mr Donohoe, who is also the Eurogroup president, before flying out to join other world leaders meeting at the Cop26 climate change conference in Glasgow.

Mr Donohoe said the OECD deal was not about “imposition”.

“This is about the Government making the choice that it is in our long-term economic interest that we’re in an agreement that stabilises global tax policy and brings predictability to a topic that has been uncertain and volatile in recent years,” he said.

Mr Donohoe said he was “absolutely certain” Ireland would continue to be competitive and to attract jobs under the new rules and “we would do so on a strengthened position of legitimacy”.

He said the Government estimated that corporate tax revenue would be – in 3-4 years’ time – €2 billion lower as a result of the deal, but that this had been included in the budgetary calculations since 2019.

He said he and Ms Yellen strongly supported the deal and it had been brokered in an atmosphere of “friendship and co-operation and how we could find compromise”.

Ms Yellen also played down the prospect that the new minimum rate might be increased in the future.

Ireland had reportedly held off from signing the deal until the wording “at least” 15 per cent was removed from the final agreement amid fears it could rise further.

“I think we have agreed that 15 per cent is the global minimum tax. Now, of course, individual countries may choose themselves to establish a higher tax, but I expect many countries to adopt the 15 per cent tax,” she said.

“I don’t think that is something that is going to be reconsidered as a global minimum,” she told reporters.

Ms Yellen, the former chair of the US Federal Reserve, also said she did not think Ireland would be particularly damaged by the deal.

‘Advantages’

“Perhaps once upon a time the low tax rate was important in attracting companies to Ireland but our strongly held view is that Ireland has tremendous advantages as a country with an education workforce and an excellent business environment and that will continue to serve Ireland’s economic interest,” she said.

“We’ve had a race to the bottom in terms of corporate taxation and no country has really won that race. We’ve all been forced to compete with one another and lower tax rates,” she said.

“We needed to establish a minimum level of corporate taxation so that corporations here in Ireland, in the US and around the world are bearing their fair share of the tax burden and it’s not all falling on workers or leading to a situation in which we’re unable to invest in our economies and our people,” she said.

Later, Ms Yellen met executives from US multinationals before addressing an event hosted by the Institute for International and European Affairs in Dublin Castle, where she said nearly 95 per cent of the world’s GDP “has decided that we’re changing how corporations are taxed internationally”.

Ms Yellen said she expected US tech giants to broadly support the reallocation of taxing rights agreed to by nearly 140 countries as part of a broader deal on global taxes, saying the impact on US companies should be minor.