Government to seek ‘certainty’ before signing corporate tax deal

OECD asked to change text of agreement to ensure tax rate will not exceed 15% in future

Tánaiste Leo Varadkar said it was still undecided whether the Government would sign up to the tax deal. Photograph: Dara Mac Dónaill

Tánaiste Leo Varadkar said it was still undecided whether the Government would sign up to the tax deal. Photograph: Dara Mac Dónaill

 

The Government is likely to sign up to an increase in Ireland’s corporate tax rate to 15 per cent, but only if the OECD agrees to limit the text of the agreement to 15 per cent and not “at least 15 per cent”, according to several senior sources familiar with discussions at the highest level.

No decision has been reached yet on what course Ireland should take if the OECD does not agree to remove the “at least” qualification, which Ministers fear could lead to a higher minimum rate being sought by the EU.

It may not become clear whether the Government is successful in persuading the OECD to make the change to the text until the “last moment”, sources said.

Matters could come to a head at an OECD meeting at the end of next week, or at the G20 summit scheduled for the end of October in Rome.

The Government has stressed its need for “certainty” for the future of Ireland’s corporation tax rate, something which it says it cannot guarantee if there is a possibility of future increases from the proposed 15 per cent rate.

Informal contacts between senior Government figures and some US companies have suggested that the multinational sector would be content with a 15 per cent rate, but wants assurances that it will not go any higher in the future.

Intense diplomacy

The Government has been involved in intense diplomacy at all levels on the tax issue in recent weeks and months. Minister for Finance Paschal Donohoe met the EU commissioner for economy, Paolo Gentiloni, in Dublin last week, and also had a phone conversation with the US treasury secretary Janet Yellen.

Recent contacts have given rise to hopes in Dublin that the changes desired by Ireland might be forthcoming, and also that the EU would look favourably on a proposal to have two corporation tax rates here – the higher 15 per cent rate for large multinationals, while maintaining the 12.5 per cent for smaller local companies.

On Sunday night Tánaiste Leo Varadkar said it was still undecided whether the Government would sign up to the tax deal.

“We can’t say at this stage whether we will sign up to an international agreement or not, but we’ll only sign up to it if we believe it’s in the interests of our economic interests in the round,” Mr Varadkar said.

Mr Varadkar was speaking in advance of a visit to Washington where he will meet with senior business and political figures for discussions on trade and economic matters.

Asked about his message in the US in the absence of certainty on the existing 12.5 per cent rate, Mr Varadkar told The Irish Times: “What I’ll be saying to businesses that I meet is that Ireland remains a fantastic place to do business.”

Strengths

He listed four strengths that “set us apart”: a young, well-educated workforce; competitiveness “underpinned by an attractive business environment”; Ireland’s connectivity “with a 70 million diaspora and truly international workforce”; and its position “at the heart of Europe, its single market and euro zone”.

But there are fears among the Irish-American business community about the impact potential changes to the tax environment could have.

Bill McLaughlin, founder of the Irish American Business Chamber & Network (IABCN), said Ireland was “still viable” as a destination for investment for reasons other than tax.

But his advice to companies for now would be “to hit the pause button until it gets worked out”.

David O’Sullivan, executive director of the Ireland-US Council, said his organisation believed an increase in the tax rate “would be a bad thing” and would “absolutely” harm inward investment to Ireland.

IDA Ireland has said it is not its experience that companies are holding off on decisions to locate in Ireland while the debate over corporation tax continues, and pointed to a “strong flow” of investments in 2021 to date.