Corporate tax: ‘Significant progress’ in negotiations on global deal - Taoiseach

Taoiseach Micheál Martin has said there has been “significant progress” in negotiations on a new global corporation tax deal and that Ireland will still see a “strong pipeline” of investment from foreign companies.

There are growing signals that the Government will join the Organisation for Economic Co-operation and Development (OECD) agreement on a minimum corporate tax rate of 15 per cent.

Mr Martin said there was progress on the “at least 15 per cent” - which led to fears in Dublin that the minimum rate could be higher - removed from the draft text of the OECD.

“I think it is positive in the sense that we were seeking that change in the removal of ‘at least’, so that represents very significant progress in terms of the evolution of this deal within the OECD. We have been part of the OECD process for quite a considerable length of time.

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“Our challenge as we said at the outset was to maintain certainty around tax for investors and for companies that are located here. This text goes a long way towards meeting those objectives that we set ourselves whilst also remaining competitive in terms of what we have to offer.”

“My experience of FDI [Foreign Direct Investment] companies to date and those I have met over the last six months is still positive towards Ireland, we are still winning a lot of investment. There is a strong pipeline in relation to investments.”

It is understood that the Government has been successful in having “at least 15 per cent” – which led to fears in Dublin that the minimum rate could be higher – removed from the draft text of the OECD.

The Government’s focus is now on securing assurances from the European Commission about how it will seek to enshrine the minimum rate in European law. Minister for Finance Paschal Donohoe, who is in Luxembourg for meetings with European finance ministers, has also had several meetings with members of the commission in recent days.

Sources believe the Government has received encouraging signals from the commission, that it will look to transpose the OECD text into an EU directive without seeking to alter its terms or increase the minimum rate to a higher level for Europe. However, further contacts are expected on this issue on Wednesday.

There is now widespread expectation that the Government will be in a position to sign up to the OECD-led agreement when it meets Thursday, according to several ministers and officials.

Mr Martin is in Slovenia for the EU-Western Balkans summit which is bringing together leaders from EU member states and the six Western Balkans partners. The summit is to focus on the reaffirmation of the European perspective of the Western Balkans and explore areas of further cooperation.

Elsewhere Minister for Foreign Affairs Simon Coveney said Ireland is likely to decide on Thursday whether or not to sign up to a global tax deal that would see it increase corporation tax above 12.5 per cent.

Mr Coveney said on Wednesday he was “hopeful” Ireland would be able to sign up to deal on global tax reform.

Mr Coveney said: “[Finance] Minister Paschal Donohoe will bring forward a recommendation on the basis of the latest text that’s going to be finalised for an OECD meeting that’s happening on Friday.

“The expectation now is that the OECD meeting on Friday will finalise a new framework and basis for international corporate tax.

“I am hopeful that Ireland can be part of supporting this new measure, but we have to wait for for the final text, which hopefully will be available later on this evening.”

Mr Coveney repeated a fear, expressed by other senior Government figures in recent weeks, that failure to back the deal would isolate Ireland in the international community.

“Ireland does not want to be isolated in this space, but at the same time we certainly want to ensure that the view that we have in relation to tax, which is a view that many other small countries rely on us to to make, is properly heard.

“We have asked for some reasonable changes that can provide as much certainty as possible in terms of managing the Irish economy going forward,” he told RTE.

The deal could see Ireland’s highly-prized 12.5 per cent rate increase to 15 per cent. Ireland is one of just a small number of countries not to have signed up to the deal, but has come under increasing international pressure to do so.

Meanwhile in its latest assessment of the Irish economy, the Central Bank warns that a significant public spend on housing over the next few years could run up against capacity constraints, primarily related to a labour shortage, and may fuel further inflationary pressure in the sector.

Mr Martin said there are challenges ahead for the Government in managing inflation.

He said that “globally because of Covid and supply chain issues, inflation is rising. Now the European Central Bank is saying it will be a short term situation. We have to manage that over the next six to 12. months in ensuring we don’t add to that inflationary cycle. That will be a challenging for us as we move to build schools and houses and get out infrastructure programme under way.” –Additional reporting PA