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Pact strengthened

Ireland drops resistance to corporate tax rate


Ireland has benefited from its low corporation tax

Ireland has signed up for a global treaty that would tax multinational corporations’ profits at a minimum tax rate of 15%. 

The Dublin government has been reluctant to surrender its current rate of 12.5% which has been a huge incentive in attracting overseas investors such as Apple and Google who have set up major European bases in the country.

Ireland’s Minister for Finance, Paschal Donohoe, said in a statement Thursday that it was the elimination of two key words that helped change its position.

“We have secured the removal of ‘at least’ in the text,” said Mr Donohoe, referring to the deletion of a stipulation that tax rates should be set at a minimum of “at least 15%.”

Mr Donohoe said the amended agreement “will provide the critical certainty for government and industry and will provide the long-term stability and certainty to business in the context of investment decisions.” 

The proposed rate would apply to multinationals with annual revenues in excess of €750m. In Ireland, that includes 56 Irish multinationals employing approximately 100,000 people, plus 1,500 foreign-owned multinationals that employ 400,000. 

More than 160,000 businesses making less than €750 million in annual revenue and employing about 1.8 million people would still be taxed at 12.5%.

It means that a total of 136 jurisdictions out of 140 who participated in the talks are now signed up. Together they represent more than 90% of global GDP. The four countries that have not joined are Kenya, Nigeria, Pakistan and Sri Lanka.  

Alongside a minimum corporate tax rate, the pact includes provisions to ensure that multinational companies pay tax where they generate sales and profits, and not just where they have a physical presence.

That could have major ramifications for tech companies such as Google and Amazon, which have amassed vast profits in countries where they pay relatively little tax.

OECD Secretary-General Mathias Cormann in a statement: “Today’s agreement will make our international tax arrangements fairer and work better. This is a major victory for effective and balanced multilateralism.”

The treaty will be delivered to the G20 Finance Ministers meeting in Washington, DC on 13 October. At the end of the month, it will be presented at the G20 Leaders Summit in Rome. 

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