Major US companies have told Minister for Finance Paschal Donohoe that Ireland would be unwise to stay out of a global tax deal if agreement is finally settled on taxing business profits around the world.
The intervention by the American Chamber of Commerce in Ireland comes as the Minister faces international pressure to accept OECD proposals for a global corporation tax rate of “at least” 15 per cent.
The plan is highly problematic for Mr Donohoe because of his insistence for years on defending the Irish 12.5 per cent rate that has long been a source of friction with Europe.
He will today meet the European Commission’s economic chief Paolo Gentiloni, who will pitch that Ireland will still be able to compete on tax even after such a deal is transposed into EU law.
“We will not put an end to tax competition. We will keep huge differences among European member states, and in the global arena. But the idea is to have a stable global framework, predictable and fair,” he told The Irish Times ahead of his visit to Dublin.
“This competitiveness … is not only connected to this difference in minimum taxation, that will in any case remain. It is also connected to achievements that the country reached in terms of skills, education, university, business environment.”
He added: “It’s not based on two percentage points of this-or-that rate.”
Submission to Donohoe
The chamber, which represents all major US groups in the State, said that if a “detailed international tax agreement is reached” it did not believe that “staying outside” of it would be “in Ireland’s best interests”.
Its views were set out in a submission in recent days to Mr Donohoe, seen by The Irish Times, as part of a public consultation on tax policy.
After months of informal discussion behind the scenes between the Government and corporate leaders, the paper comes as business faces up to the potential loss of the 12.5 per cent rate after world powers backed the OECD plan.
The American chamber’s views are significant because it claims 700-800 members, with a board including directors from tech giants Facebook, Google and Intel, financial services groups JP Morgan and Northern Trust and pharmaceutical groups Pfizer and Johnson & Johnson. Some 180,000 Irish jobs are directly attributed to US investment and 140,000 indirect jobs.
Ireland is one of only a handful of countries holding out against the OECD proposals, as Mr Donohoe awaits clarity on whether the US Congress accepts the plan before deciding whether to move.
Aligning with US
A key Irish priority at this point is to pursue alignment with the US if the OECD initiative goes ahead.
With little certainty over the plan’s fate in Washington, however, Mr Donohoe wants to avoid the risk of accepting the OECD proposals only to see them fall apart in the US Congress. That would leave him open to pressure from Brussels to dismantle the 12.5 per cent regime without US alignment.
Mr Donohoe is also campaigning to remove the proposal for a rate of “at least” 15 per cent, fearing that it would prompt the European Commission to push for a higher rate – at an uncertain level – to be applied throughout the EU.
The American Chamber supported Mr Donohoe’s stance,saying it was “sensible” given the absence of detail on matters such as what a minimum rate would be. “An ideal outcome for global trade and business is a global agreement which gives certainty to companies and countries,” it said.