DUBLIN – The Irish and Estonian governments yesterday agreed to sign up to a 15% global minimum tax rate on multinational firms, leaving Hungary as the last holdout against the far-reaching deal.
The reform is aimed at stopping international corporations from slashing tax bills by registering in nations with low rates.
“The government has now approved my recommendation that Ireland join the international consensus,” said Irish Finance Minister Paschal Donohoe.
“I’m absolutely satisfied that our interests are better served within the agreement.”
Estonian Prime Minister Kaja Kallas said joining the reform will ensure “we have the best chance of ensuring that Estonia’s business environment and tax policy continue to work in the interests of a better future for all of us”.
Finance ministers from wealthy G7 nations in June endorsed a global minimum corporate tax rate of at least 15% reached in a framework of the Organisation for Economic Cooperation and Development (OECD).
It was approved by the G20 in July and has so far been inked by more than 130 countries, except for Hungary.
Hungarian Foreign Minister Peter Szijjarto earlier this week said there is a “chance” that his country may agree to it as long as the reform “does not damage the Hungarian economy or put Hungarian jobs in danger”.
Donohoe said Ireland has insisted on a change of wording, excluding “at least” before the 15% figure, describing this as an important issue that needed to be resolved due to the “desire of some to seek a higher rate”.
The minister said the reform is expected to take effect in 2023.
Ireland currently has a favourable 12.5% tax rate.
Its tax policy has attracted giants such as Apple and Google, while Estonia had been concerned that joining the reform could threaten its vibrant tech start-up sector.
The reform will affect 56 Irish multinationals that employ approximately 100,000 workers, as well as 1,500 foreign-owned multinationals employing 400,000.
It applies only to companies with an annual turnover of more than €750 million (RM3.6 billion) a year. Smaller businesses will still pay a 12.5% corporate tax.
Kallas said in the case of Estonia, the reform “will not change anything for most Estonian business operators, and it will only concern subsidiaries of large multinational groups”.
Donohoe told reporters that even with the higher rate, Ireland will remain a “very attractive” destination for foreign investment.
While Ireland stands to lose €800 million to €2 billion in corporate tax receipts if companies leave the country, he argued that if it did not sign up to the deal, the country would “lose influence in respect to the critical decisions that will come in the coming months”.
He said there is debate in the United States Congress on changes that would align the nation’s tax system with the OECD agreement, calling this a key factor due to “significant investment by US multinationals here”.
Ireland’s low levy has attracted an outsized number of pharma and tech firms, but also prompted accusations that it acts as a tax haven. – AFP, October 8, 2021
