Paschal Donohoe expects ‘some kind’ of OECD digital tax agreement in 2021

Meaningful talks impossible until after the US elections next month

Minister for Finance Paschal Donohoe said he expects "a level of agreement of some kind" by members of the Organisation for Economic Co-operation and Development (OECD) to reform international taxation in an increasingly digitalised global economy.

Speaking in an interview on Wednesday with Davy executive Bernard Byrne, aimed at international investors, the Minister reiterated that a digital tax agreement will have a negative effect on Irish tax revenues. However, he said that if no agreement is reached, it would likely give rise to double taxation of companies' income or unilateral digital tax moves internationally.

The deadline

The OECD last week pushed out the deadline for almost 140 countries to reach an agreement from the end of this year to the middle of 2021 as meaningful talks will be impossible until after the US elections next month.

The OECD has been seeking to build consensus around two so-called pillars. Pillar one is to reach a unified approach on taxation of the digital economy, and Pillar two is to achieve global minimum tax rate that would redistribute tax revenues.

The OECD’s base erosion and profit-shifting programme (BEPS) to combat tax avoidance in the middle of the last decade resulted in a surprising surge in Irish gross domestic product (GDP) and corporate tax, as companies “onshored” massive amounts of intellectual property from tax havens. However, Mr Donohoe said that this will not be repeated as a result of the next series of reforms.

Mr Donohoe also discussed the latest budget, Government supports for households and businesses as the States moves into Level 5 restrictions, Brexit, banks and green finance as part of a wide-ranging interview aimed at international investors as he continues to raise debt to support the health system and economy through Covid-19.