Government sounds out business leaders about rise in corporate tax rate

The Government has privately begun to sound out major business leaders on the implications of raising Ireland’s 12.5 per cent corporation tax rate, if the State is left with no choice but to accept a global tax deal.

The pressure on Minister for Finance Paschal Donohoe was shown this week when Ireland was one of only nine countries not to sign an Organisation for Economic Co-operation and Development corporation tax agreement.

Ministers and Government officials are scoping out making major changes to the State’s tax regime, though, publicly, Mr Donohoe insists he will defend the 12.5 per cent rate that has been the bedrock of Irish policy for decades.

He did accept OECD proposals to tax a portion of business profits in countries where sales are made, a move that could cost the Government more than €2 billion, but he baulked at a minimum effective rate on large companies.

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Informal discussions

A formal public consultation on the OECD plan is to begin shortly but private consultations have been under way for months as officials explore how companies might react to any move away from the 12.5 per cent rate.

“They’re exploring all sorts of options at the moment,” one person closely involved in the informal discussions told The Irish Times. “The line they continue to pursue is: ‘We want to stick to 12.5 per cent.’

"Unlike, say Brexit, where the civil servants in the UK did no work on what happens in a No vote. In fairness to the Department of Finance all options are being examined, including what happens if we couldn't keep 12.5 per cent."

Meanwhile, Ministers and officials are discussing whether steps can be taken to continue taxing domestic small and medium enterprises at 12.5 per cent on their Irish profits, or on their profits up to €1 million.

Despite US president Joe Biden’s support, the OECD plan still faces a steep test to pass the US Congress, though one senior Irish business figure said: “Ireland will inevitably have to move in lockstep with the US.”